ECONOMIC SITUATION

HC Deb 11 November 1952 vol 507 cc768-903

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

I should first of all like to thank the right hon. Member for Lewisham, South (Mr. H. Morrison) for his very sympathetic references to me yesterday, and to apologise to the House for my absence, the reasons for which I am sure they will all fully understand. [HON. MEMBERS: "Hear, hear."]

As we enter upon this new Session, I think we can legitimately take heart from the great record of positive achievement that stands to the credit of the Government over the past year. Our economy, besides sustaining a social service system which has been positively improved in the period, has carried a defence programme second to none for a country of our size, thereby maintaining and indeed enhancing our national status in the councils of the nations.

At home, in the face of exceptional difficulties, we have maintained a high level of employment and have killed the story that a Conservative Government would plunge the country into industrial strife, and so that story goes the way of the war scare. The credit is largely due to my right hon. and learned Friend the Minister of Labour for his really magnificent contribution to better relations with industry.

Perhaps the best tribute to the success of our economic policy was contained in the subdued speech of the right hon. Member for Lewisham, South yesterday. At times the right hon. Gentleman could hardly prevent his normal common sense from peeping through. At any rate, the right hon. Gentleman can feel a little more elated today after the result of the recent election. I do not, of course, refer to the American elections. The right hon. Gentleman will be aware that we have all been in a great state of suspense for some time in all quarters of the House trying not to take part in the American elections. The right hon. Gentleman and his friends have now imposed a great extra strain upon us in trying not to take sides in the contest which is going on on the other side of the House.

The only difference between the strain which we have undergone and the strain which we are about to undergo is that we know that the conflict opposite will go on not only for many months but also for several years, and it is very doubtful whether the party opposite will be in a fit state for a very long time to come to consider taking over the government of the country.

It is at least satisfactory that in the face of this we can all register together a great improvement in our overseas finances, and indeed it is refreshing for me and for Her Majesty's Government—and, I hope sincerely, for all hon. Members in all quarters of the House—to register this result almost exactly a year after I had to introduce some very hard and unpleasant measures from this Box shortly after becoming Chancellor of the Exchequer.

From the shadow of an overwhelming crisis we have taken a great stride forward, from a deficit of about £460 million a year in 1951, first to a balance and then to a surplus which, in the first half of this year, was at an annual rate of nearly £50 million; and therefore we have achieved the target which I gave to the House of an over-all balance half a year ahead of time. At least, reserves have now reached some state of stability, and while we must expect ups and downs, the October surplus of £29 million marks a further stage in our progress.

In all this we have, of course, had great support from our partners in the sterling Commonwealth following upon our January Conference which the right hon. Gentleman who is to follow me, my predecessor in office, has tried hard to prove was a failure and which in fact has been proved by events to have been highly successful. So far as we ourselves are concerned in the United Kingdom we have achieved this result by an improvement in the balance of our visible trade, helped—and I acknowledge this—by a favourable turn in the terms of trade and, of course, by American defence aid. But it will be noticed that in October we had a substantial surplus even without aid.

We have had to cut imports drastically, but we hope not to restrict trade with Europe further. Nor have we had to run down stocks of food and raw materials as the hon. Member for Fulham, East (Mr. M. Stewart) suggested last Wednesday. My right hon. Friend the Minister of State for Economic Affairs corrected him at the time, but I think it well to make a further explicit statement.

While stocks of particular commodities have varied considerably over the seasons, as they always do, nevertheless total stocks of imported food and raw materials in this country have been rising steadily ever since we took office. So we have now established a base camp from which we must start the really arduous part of the climb back to security and prosperity, and I think it would be wrong on any side of the House if we underestimated the hard job we have still got before us, and if we sat back at all in contentment even with the achievement which is already ours.

What is the contribution of the Opposition? I hope and I believe more than their tactical Amendment suggests. We certainly need in this task the help of all men of good will, and, as I am convinced that their Amendment is going to be roundly defeated, I hope that, having survived that further disappointment, hon. Members opposite will help us, as many of them have, in this task of restoring national solvency and prosperity.

The Amendment is meant to hurt, and the barb is in this word "confusion." What a word to come from the benches opposite. I do not think that anybody will wonder why this was included in the Amendment, because confusion can hardly ever have been worse confounded than as exhibited on the benches opposite at the present time. There is a complete confusion of rival views and a war of dynasties between rival personalities. With such internal strife, even the appearance of unity in such an Amendment can only be achieved at a price, and the price is shown in the last phrase, which demands that the whole Labour movement shall look backwards into the past.

Evidently it is only by looking backwards that the party opposite can agree. They can achieve a temporary unity in gazing in a distorting mirror of the past, but facing the future involves them in severe and impossible contortions. When the right hon. Member for Bishop Auckland (Mr. Dalton) peers into the future, where does he think we are going? Last Wednesday he said that we are moving towards mass unemployment, to the uprooting of whole communities from their homes, and to great social dislocation of many kinds. If that is how he and his friends see the future, no wonder they lost Wycombe and will lose the other by-elections to come. The truth is that there has been so much exaggeration in the propaganda of the party opposite that the country has learned to discount it. I think that is the best answer to the Amendment, and I will therefore come to the more serious arguments contained in the speeches which have been made.

The right hon. Member for Bishop Auckland talked about a policy of deliberate deflation. He presumably prefers to forget that one of his right hon. Friends who is usually prominently associated with finance—the right hon. Member for Battersea, North (Mr. Jay)—writing soon after my Budget, described it as the first actively and openly inflationary Budget since the war. The truth is that our financial and economic policy, of which the Budget was naturally a major part, was framed to keep a balance between the dangers of strict deflation and runaway inflation. That may explain why the attacks on it have been so contradictory, so ineffective and—to revert to that unfortunate word—so confused.

I now want to review the policy initiated in the Budget in the light of events and to show why I think it has been amply justified both in what it did and what it was unable to do. Many people have been quick to say that everything has not turned out exactly as expected. Such criticisms misunderstand that to be successful a policy must be based more on judgment than on statistics. Naturally a Budget must be founded on the best analysis which can be made of the situation at the time and of possible trends in the future, but even the right hon. Gentleman who is to follow me and who will no doubt have something to say on this subject cannot claim from his own experience that all the detailed estimates will prove to be precisely accurate. Economics is not yet and may never be—I do not want to shock the right hon. Gentleman—an exact science; but it does at least provide a background against which a judgment can be made of the situation as a whole and of what may be required.

At the time of the Budget, some people, especially some writers, thought that I was not severe enough. Now hon. and right hon. Gentlemen opposite claim that we are swinging the economy into a severe deflation. Let me examine various aspects of the situation and give the House all the information I can. The Exchequer deficit is higher now than it was at an equivalent time a year ago. It is true that since the Budget we have had some unexpected additions to our expenditure. One of these—the Danckwerts Award to the doctors—is well known and is no result of the policy undertaken by the present Government.

Another was the accelerated orders for textiles—mainly for the Services—which we announced in April, with the general approval of the House. This was surely an example of our intention to mitigate the danger of severe unemployment, and the success of our policy may surely be seen from the fact that since May of this year the number of people registered as unemployed in the textile industry has fallen by no less than 100,000. Thank God for that. I believe that is money well spent. The Minister of Labour put the unemployment position in its true perspective and answered the speech of the right hon. Member for Blyth (Mr. Robens) in advance.

Returning to the question of expenditure, I want now to inform the House that, partly as the result of the decision about textile orders and partly through the good progress we are making with defence production and its associated research and development, the expenditure of my right hon. Friend the Minister of Supply is likely to turn out considerably above the original Estimate. In due course we shall be presenting a Supplementary Estimate. If the funds of the Department are exhausted before the Supplementary Estimate can be presented, the excess expenditure will be financed from the Civil Contingencies Fund.

It seems clear, also, that the expenditure of the Defence Departments will be at least up to the Budget figures. I am expecting that in the case of the Army, at any rate, it will be necessary to present a Supplementary Estimate early in 1953. I cannot now give the precise figures either for these Votes or for the probable out-turn of expenditure as a whole. At this time of year, with five more months to run, we cannot say with certainty by how much expenditure may in fact outrun particular Estimates, or how far any such excesses can be covered by compensation saving in this or other fields. We are not losing any chances of making this saving and it will certainly, as is usual, be substantial. I thought that I should let the House know of those matters so that they have as much information as I have.

Meanwhile, looking at the Budget as a whole, we must remember that on the revenue side the big increase for which I budgeted from Inland Revenue does not come in until later in the year; so, taking all factors into account, I still believe that the general policy I had in mind in framing the Budget as a whole will prevail. Nevertheless, it is true that our experience this year gives added emphasis to the need for the strictest possible scrutiny of public expenditure and thus of the Estimates for next year. This process is now beginning and it is too early to tell the House how it will turn out. The results will, of course, be laid before the House in the Estimates at the proper time, when the Estimates are published.

I must tell the right hon. Member for Lewisham, South that I cannot today distract him from his own conflicts by engaging in battle with my right hon. Friend the Member for Haltemprice (Mr. Law), who spoke yesterday, or my hon. Friend the Member for Farnham (Mr. Nicholson). We on this side of the House are continually engaged, not in a struggle with each other, but in the joint struggle to reduce Government expenditure. I am entertained to notice that there appears to have been so little copy in the debate hitherto that the newspapers have got hold of an idea that my right hon. Friend the Member for Haltemprice and my hon. Friend the Member for Farnham are rather wild men. From my very close knowledge of them and my friendship with them for many years, all I can say is that I should much prefer to do battle with them than to be in the shoes of the right hon. Member for Lewisham, South and do battle with the right hon. Member for Ebbw Vale (Mr. Bevan).

The House may be interested to know what progress we have made in certain cutting of expenditure which can be announced. In the first half of this year, we reduced the size of the Civil Service by 10,400. In a week or so we shall be publishing figures showing a further reduction in the third quarter of over 4,300. This brings the Civil Service to a smaller size than at any time during the past 10 years.

But valuable though this is, my right hon. Friend was right to refer back to a speech which I made at Scarborough in which I said that major items in our expenditure are covered by major decisions in policy. I hope the House will now pay attention to what I want to say about the major items.

The whole House should never forget that by far the greatest single field of expenditure is the defence programme, with its accompanying civil defence and other expenditure relating to the main programme. No Chancellor—sharing because it is sharing—the undoubted duty of maintaining and developing this defence programme, which is so vital to our own security and that of Europe, the Commonwealth and the whole free world, can be expected to perform miracles.

Indeed, as we are now in the third year since the original £4,700 programme was started, and as our commitments all over the globe are unprecedented in peace-time, surely the only wise course is to proceed as we have been proceeding, seeking to fit our defence programme both to our economic capabilities, especially in the metal-using industries, and to our international needs and commitments.

Economies on forward defence programmes have been and will be effected. The same procedure is being applied to all expenditure, civil and defence alike. But in social expenditure, just as I have illustrated the facts about defence expenditure, we cannot shut our eyes to the growing body of pensioners, to the increased number of children in the schools and to other social needs, including housing, upon which this Government have so magnificent a record.

Therefore, while I do not agree with everything which my right hon. Friend the Member for Haltemprice said, I do agree with him and with the right hon. Member for Lewisham, South that the one way to make sure that we can afford all that we are undertaking is to give first priority to the task of earning our living as a nation. I would put the issue thus; the question we have to face is whether we are to continue to expect to dip freely into the public purse, regardless of the cost to ourselves as individuals and to the prospects of our survival as a great trading nation, or whether we are going to brace ourselves and accept the need for further sacrifices I have no doubt where my duty lies. It is to make effort worth while and expansion of production possible.

A number of hon. Members have referred to the need for reducing taxation. I agree that the present level of taxation weighs heavily on enterprise, initiative and thrift, but the task of reducing it cannot be an easy one, though it still remains a prime objective of the Government. Hon. Members opposite have grown so used to taxation as the only method of countering inflation—

Mr. Herbert Morrison (Lewisham, South)

Before the right hon. Gentleman leaves this broad aspect about public expenditure, can he explain why it was that when, at the Conservative Party Conference, he said that he flatly refused to wield a Geddes axe, the Conference then proceeded to pass a resolution which had the opposite effect, and can he explain why he was contradicted on his policy yesterday from his own back benches?

Mr. Butler

Perhaps the right hon. Gentleman will now realise the absolute freedom of expression which exists in the party on this side of the House. I know that after the Draconian methods employed by his own leaders to keep their position, he will find that extremely difficult to understand, but I assure him that we can both lead and listen in the Conservative Party.

Hon. Members opposite have become so used to taxation as the only means of countering inflation that they have not as yet attuned their minds to the positive value of monetary policy in dealing with any inflation in the system. When the times comes for my next Budget, I shall be able to give the House an accurate assessment of the positive value as well as the negative cost of the policy. Positive benefits will, I believe, far outweigh the negative burden. For example, I am convinced that the increasing strength of sterling, the fact that we are no longer in imminent danger of failing to balance our overseas accounts, is largely due to our new and determined policy.

I shall not bother the House with technical details on the home front, except to say that, while the total net deposits at the clearing banks rose by £13 million between September and October, they were still about £39 million less than a year ago, and the decline in bank advances compared with a year ago amounts to no less than £150 million. This is the clearest pointer to the contribution which the Government's monetary policy has made to restoring internal financial stability. It is, therefore, justifiable to claim that, in spite of the present Exchequer deficit, our monetary situation remains sound. This is also reflected in the success of loan operations launched by the Government and the firmness of the markets for Government securities in recent weeks.

I now come to the cost of living. As I should have expected, the main attack has been on the reduction of the food subsidies. By reducing the food subsidies we have removed some of the artificiality from the price system which we inherited, and events have shown that this move towards realism has been understood and accepted by the people of this country. Many of them have valued the improved benefits in pensions and allowances which coincided with some of the rises.

What, in fact, has happened to prices, and why have we heard so comparatively little about the subject in this economic debate? Let us look at the price of food. When we take account of the increase in food prices announced on 1st October—which I am doing—we find that food prices will have risen by less than 8.5 per cent. between January and October of this year. Between January and October of last year, under the previous Administration, they rose by no less than 10.8 per cent. Despite our policy, the rise in the price of food has been less than it was under right hon. and hon. Gentlemen opposite.

The Retail Price Index for goods other than food has risen by only 1 per cent. between January and September. I regret that, although I made efforts to do so today, I cannot get the final October figure in time for this debate. The prices of several kinds of household goods have, in fact, fallen since the beginning of the year. During the period of Socialist rule, the cost of living rose by about 37 per cent. and food prices rose by more than 50 per cent. It is possible that in the coming months we may get some help from the recent fall in the prices of some raw materials, but it is clear, speaking without exaggeration, that since the present Government took office the upward pressure on prices has already been reduced.

Mr. Douglas Jay (Battersea, North)

Is it not misleading for the Chancellor to say that and not to point out that in 1951 world prices were rising and in this year they have been falling?

Mr. Butler

I made deliberate reference to the prices of raw materials in order to indicate that. If the right hon. Gentleman's intervention can make the matter any clearer, I am sure the country will be greatly obliged, because they have already noticed the improved tendency under our Government.

I now turn to a subject upon which hon. Gentlemen have expressed their main anxiety—that is, the need to maintain production and exports and to safeguard employment. First, I would remind the House of what I said about this in my Budget speech. I did not say that there would be an increase in production equal to last year, but that we must work for a figure of this sort. I foresaw that this would be difficult, and I said this, which it is just as well to remember: Many industries producing consumer goods are already faced with a slack demand at home. I went on to say: They now face further very severe cuts in their exports to the sterling area. And then: They will have to increase substantially their exports to the non-sterling world—in difficult selling conditions—if they are to keep up their production and employment."—[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1284.] These words surely have proved correct, because that is exactly what we have experienced.

The facts about the course of production this year have been given to the House in full by the President of the Board of Trade. The check to production in fact began over a year ago, before we took office. The first factor limiting expansion was the shortage of steel and other raw materials at the beginning of 1951. Then, second, about the middle of that year the world recession in textiles and clothing began to affect United Kingdom output through falls in demand both in the export and in the home markets. The fall in clothing and textiles alone was enough to bring the index of industrial production down by 2½ per cent.—more than sufficient to account for the total fall. The Government's policy can, therefore, hardly be held responsible for things which were already happening when we took office, especially as since we have been in office there have been signs of improvement especially in textiles.

Almost the only new factor affecting production since we took office has been that in the past six months—or about that time—export conditions generally have become more difficult over a widening range of commodities, especially because of import restrictions. The decline in demand for our exports is now a much more important influence than the state of home demand. It is particularly affecting consumer goods. Demand for heavy capital goods and for aircraft is still high, and here, I am thankful to say, exports are increasing

Our experience in the production field during the past year or so has in fact been shared by many other industrial countries. For example, in the first eight months of this year industrial production in the United States was lower than in the same period last year; but in the last month or two we have seen there a marked improvement. There have also been falls in Canada. Belgium, Finland, and Denmark of much the same magnitude as in the United Kingdom, and there has been a small fall in Sweden. France, on the other hand, shows an increase, and so do our growing competitors, Japan and Western Germany.

At home the position has been and still is different for different industries and different markets. We must, therefore, continue with a selective policy of damping down home demand for capital goods for which overseas demand is high, while not depressing home demand for consumer goods for which overseas demand has declined; and our fiscal, monetary and investment policies will be directed, as they have been to date, to achieving these ends. At the same time we shall do all we can to develop our vital home resources, coal, agriculture, and manufacturing potentials, and to push our exports, particularly to the dollar and non-sterling markets.

Taking coal first, it is positively refreshing to think that we are repeating the achievements of the inter-war years—so carelessly referred to in the Amendment—by actually increasing our amounts of coal exported. More men, too, have been joining the band of miners on whose toil and productiveness so much of our economic prosperity depends.

Taking agriculture next, in his speech of Wednesday last, the right hon. Gentleman the Member for Bishop Auckland said that under the previous Government there was a steady rise in the production of British agriculture. He went on to imply that during the last year all this had been affected adversely by this Government's administration. The right hon. Gentleman the Member for Lewisham, South asked for a report, and here are the facts.

Taking 100 as the index figure of net output in 1938 to 1939, the figure for 1946 to 1947 was 127. It is perfectly true to say, as the right hon. Gentleman claimed, that the expansion programme launched by the late Government in 1947 went well for a few years. At first production rose steadily. The target for 1952 to 1953 was 150 compared with the 100 figure I gave earlier, but when my right hon. Friends the agricultural Ministers here and in Scotland took office a year ago, they found that not only was the figure no more than 144 but the programme of expansion had slowed down considerably. Indeed, it showed every sign of coming to a stop, and in some respects it was retracing its steps, in particular in the sharp decline in cattle rearing and in the tillage area. In 1951 the number of calves—our future supplies of beef—had fallen by nearly 300,000 in only two years.

During the last year we have taken steps to reverse this dangerous trend. We have introduced new grants for fertilisers, calf rearing, and ploughing operations, and we have under discussion other ideas for promoting the development of the industry. Farming is a slow process and cannot increase output in a few months, but nevertheless, the latest returns confirm the evidence we have got from other sources that the industry is now setting about the task of expanding output again.

During the last year the number of calves increased, the dairy herds have been maintained, and there has been a significant increase in the number of sheep and pigs. The tillage acreage declined by over 3 million acres between June, 1948, and June, 1951, but in the year ending June this year there has been an increase of roughly 250,000 acres. The Government and the industry are aiming at an increase of 60 per cent. on the prewar production by 1956. We firmly intend to back the industry in following up this encouragingly good start towards a still greater agricultural contribution to the national economy.

Mr. Frederick Peart (Workington)

How, then, does the right hon. Gentleman explain why, if this has taken place, there has been a rapid decrease in the number of regular workers in the industry this year?

Mr. Butler

One quite clear reason, I should say, speaking as a Member who has represented an agricultural constituency for many years, is the great increase in mechanisation.

I want to say a word or two about home industrial production. In his speech yesterday the right hon. Gentleman the Member for Lewisham, South appeared to argue that only through nationalisation could the output of the steel industry be increased. If we look at the recent Report of the Iron and Steel Productivity Team, which has included five experienced trade unionists, we find—nationalisation or no nationalisation—the following words: The British iron and steel industry since 1945"— long before the date of nationalisation— has been engaged on a construction programme to the full extent of the resources available to the plant manufacturers. As to the right hon. Gentleman's second assertion, that development in the industry was now being held back, he knows well that further large expansion has been planned which will bring our steel making capacity up to a level fully sufficient to meet any demands which can at present be foreseen, and I am convinced that the Measure we have before the House, and which is referred to in the Amendment, and referred to in the Gracious Speech, will help the output which we so much need from the steel industry.

In the metal-using industries, engineering, ship building, and electrical goods, production was up by 5½ per cent. in the first half year. The value of output of some more important classes of machinery is up by as much as one quarter over the same period of 1951 and some types even more than that. In the shipyards total completions in the first nine months were rather higher than in the year before, and the biggest yards are fully booked for at least three or four years ahead. These are all matters of fact, whether we take home agriculture, coal, or these industries I have mentioned, where it would be a great mistake to belittle British achievement and activities.

The hon. Member for Fulham, East also alleged that we are attaching declining importance to factory building. This point was made by the right hon. Member for Lewisham, South and many other hon. Members. These are the facts. Owing to the shortage of steel, new building work for manufacturing industry will turn out less than in 1951 by about 17 per cent. Now that more steel is available we are deliberately issuing more licences for factories, and the Government now expect that the work done in 1953 will be nearly 10 per cent. higher than in 1951. That, with the general level of industrial investment—which is high—should prove that we mean business in supporting the fine efforts of home manufacturing production.

We are thus making an all-out effort to increase our production. I have never desired to disguise from the House, or from the country, that we have very great difficulties ahead and that is in selling the necessary amount of this production abroad. But I do maintain that we are now in better shape than we have been for a long time to tackle this severe problem. All interests, whether in the House, the Government, or industry, must now bend their energies to the single task of increasing our overseas earnings, particularly in dollar and other non-sterling markets. I believe that if we were to take panic measures to increase demand at home, we might increase production for a while, but there is a danger that it would not be the kind of production we need, the kind of production to sell abroad so that we may live and prosper, and at prices the world is willing to pay.

Some of the critics of the Government—I do not think the right hon. Gentleman was included among them—seem to be in danger of forgetting the principal threat to employment in the United Kingdom. The point was made by both my predecessors that if we cannot export enough we shall have to cut imports, including the import of raw materials on which employment and our whole stability depend.

I shall not go further into the difficult task of encouraging exports because the President of the Board of Trade described the various different methods of opening up markets, putting more metal-using goods to export, increasing investment and giving further credit. I simply wish to say that my right hon. Friend the President of the Board of Trade will have my support in any sound and practical scheme for encouraging exports in any way.

It is clear that we must not only follow a balanced and flexible policy at home designed to push out our goods into the export markets. We must also strike out, in company with the Commonwealth, with Europe and the United States of America, and aim at the expansion rather than the restriction of world trade. This will be a main topic of discussion at the forthcoming Commonwealth Conference. I can give the right hon. Member for Bishop Auckland the assurance he wants that we have no sinister or secret designs. Why on earth should we have? We are going to work out the future of these questions in company with the representatives of the Governments of the Commonwealth.

The right hon. Member for Lewisham, South asked what is our view about convertibility? We set out our views on convertibility in the statement made as long ago as 21st January at the end of the Commonwealth Finance Ministers Conference, and I will summarise it shortly. He will see that we all there agreed, first, that the recovery of the sterling area will not be complete until the conditions have been created in which sterling can become and remain convertible; second, that we intend to work to create those conditions, and finally, that the conditions cannot be completely realised without the active co-operation of other countries, notably those which are consistently in surplus with the rest of the world.

Surely this is the only sensible way of approaching this difficult matter. Convertibility is not an end in itself; it may or may not be a means to an end, but the end is the maintenance of a sound and expanding world economy. It is for this that we strive and we shall not take any steps, I tell the House, which are not to the benefit of our own social democracy and which are not also to the benefit of the Commonwealth as a whole.

I trust that this wide objective will appeal in a few weeks' time to our friends from the Commonwealth. Out of their common wisdom and experience we can look for ideas and proposals which later can be confidently commended in the consulations we hope to have later with our friends in Europe and with the new United States Administration.

So I maintain that our policy at home of balanced flexibility and our policy of expansion abroad are not only already justified by results, but it is a policy in which the House, the whole country and, indeed, the whole free world can have confidence. I therefore invite the House to reject this Amendment and support Her Majesty's Government in their policy.

4.17 p.m.

Mr. Hugh Gaitskell (Leeds, South)

Perhaps, as the Chancellor's predecessor, I may be allowed to add my personal sympathy to that accorded by my right hon. Friend on behalf of all of us in the great loss that he has sustained. May I say that, of course, we fully understand why he could not be with us yesterday or in the earlier days of this debate?

This debate has certainly been notable for a more than usually large number of platitudinous and vague statements by Her Majesty's Ministers. I thought that the Chancellor was not doing too badly until he came right to the end and introduced this wonderful phrase of a "policy of balanced flexibility." I suppose that means something like tightrope walking on a rope which is not very tight. I am bound to say that, if that is how he feels, I do not envy him his position.

Of course, we had the usual collection of exhortations. We were told that there would have to be a lot of hard work and sacrifice, that we must all work as a team, and we were assured that the Government could not do everything on their own but the ultimate results depended on what happened in the factory and workshop. We were also warned that there was no easy road ahead and that there must be no relaxation or complacency.

I do not, of course, criticise the right hon. Gentleman and his right hon. Friends for talking in this way. No doubt they mean it all, but what puzzles me is to find in that morass of phraseology any real hard and clear lines of policy. It may be, as they say, that it is through all these virtues that we have got where we are and with these virtues we are to get somewhere else, but exactly where it is we are to get is not very clear. The President of the Board of Trade said: the general lines of our economic policy are extension and adaptation of the policy which we have pursued hitherto."—[OFFICIAL REPORT, 5th November. 1952; Vol. 507, c. 168–9.] So we are driven back to trying to discover what policy "we have pursued hitherto." If we can find that, we shall know what is going to happen in the future. So with this beacon light to guide us, let us examine some of the problems which we have had to face in these last few months.

It is well understood that there are two major economic problems which confront us. One is the dollar-sterling problem, and the other the problem of the balance of payments of the United Kingdom. I propose to start with the latter and, indeed, to spend most of my time upon it. The Chancellor of the Exchequer made some reference to this in his speech and to the improvements that have taken place. Indeed, there has been an improvement, and we are all very glad that is so. It seems likely, from what he has said, that in the year 1952 we shall achieve an overall balance in the United Kingdom. But what is the reason for this? I think that we should examine that, and, of course, examine its relationship to Her Majesty's Government's policy.

It seems quite clear that exports have not contributed in any substantial way to this. The Chancellor of the Exchequer anticipated in his Budget statement that there would be an increase of, I think, £50 million in real terms, allowing for any price differences, in the volume of exports So far as I have ascertained, there has been since the Budget a fall in exports, and for the calendar year so far there has been little change. I do not know how far invisible exports have contributed to the improvement. They certainly did not do so in the first half of the year, although I understand that there may have been some improvement more recently.

I am not proposing to bring into this picture American aid, because I am sure that the Chancellor would agree with me that it would be a great mistake to try to balance our accounts on that basis.

What we are left with are two things only which account for the change in the balance of payments position. The first of these is, of course, the improvement in terms of trade. Import prices have fallen and export prices have slightly risen. I reckon that, for the year as a whole, we shall probably benefit to the extent of some £200 million from this change in the terms of trade, whereas last year we lost something in the neighbourhood of £400 million from the adverse terms of trade.

I must ask the Chancellor of the Exchequer and the Government whether they claim that this change in the terms of trade has anything to do with their policy whatever. I do not know whether the Chancellor believes that his monetary policy has in some way or other affected the terms of trade. If that were to be so, it is a very important point, and he must be considering whether he cannot go on turning the terms of trade more and more in our favour, but I do not think he would claim that. In the way in which he put it this afternoon, he implied, I think, that this improvement—a very substantial one—was something which was a bit of good luck for the Government but had nothing to do with their policy.

The second reason for the improvement is the reduction in the volume of imports. Let me say, in the first place, that we have always supported the import cuts that the Government have had to make. As I pointed out in, I think, the first debate after the Election, those cuts were in fact planned during the period when we were still in office, and it would have been very wrong for us to attempt to evade responsibilities for them. We do not. We pressed the Government from time to time to go rather further in making these cuts than they were doing to start with.

If one examines what has actually been reduced in the way of imports, the striking thing, in the first nine months of this year anyway, is the big change in raw material imports. They have fallen some 16 per cent. in value, whereas food imports have fallen about 3 per cent. and manufactured goods about 1 per cent. If we look at the raw material imports and the changes which have been taking place, we can see at once what the large items are. Out of a total reduction in imports for these nine months of £229 million, no less than £200 million is accounted for by the fall in the imports of raw cotton and raw wool. These are very striking and remarkable facts.

If one looks at the quantity figures as shown in the Board of Trade Journal, where there is a comparison for the first nine months with the average of 1951, the quantity reductions are 30 per cent. for soft wood, 40 per cent. for cotton, 42 per cent. for cotton piece goods and 17 per cent. for wood pulp. One can see at once how enormously important these changes are.

How do we explain them? How is it possible to have achieved this reduction in raw material imports? Is it a question of Government policy? Some of these raw material imports coming from dollar areas have been reduced in the dollar imports programme, but I do not think that explains the position properly. The Government have said, and the Chancellor of the Exchequer repeated it this afternoon, that there has not been any running down of stocks. I accept his assurance on that point.

But the point is this: in 1951 we were increasing stocks in this country. [An HON. MEMBER: "Too late."] If we increase stocks in one year and we give up increasing them in the next year, of course it is very easy even with the same rate of consumption, to cut down our imports. In 1951—and I quote from the National Income Blue Book, the new one which has recently come out—the value of physical increase in stocks and work in progress in 1951 rose by no less than £387 million. If one-fifth of our imports were being put to stock in that way, directly or indirectly, we could supply the same consumption in the following year, hold our stocks level and cut our imports by one-fifth.

There is another and even more important explanation. It is, of course, the fall in production. We have not needed so much in the way of raw material imports. We do not need the cotton and wool when there is a reduction in wool cloth and cotton cloth production in Lancashire and Yorkshire. Previously, every year we have had to reckon on a rise in the volume of imports in order to sustain a higher and higher level of production, but of course this year, with production already some 3½ per cent. below last year, in place of 2½ per cent. above it, we have a saving of 6 per cent. there. Perhaps £150 million could be cut off imports in that way. In fact I may say that the net saving on textiles, after allowing for the fall in exports which has also taken place, according to the Board of Trade figures, is some £120 million.

This is a serious issue. We can, I do not doubt, balance our overseas accounts by reducing our production, by increasing unemployment, by reducing our consumption and by going back, in short, to exactly the position we were in before the war. That can be done again. No one ever doubted that that was a way out of our balance of payments difficulty, but it is a way which we on this side of the House are not prepared to travel.

If, on the other hand, the Government also say that they reject this policy—and I think that I heard the Chancellor say, "Nor is anyone else"—he has to address himself to the question of what is going to happen to the volume of imports when production rises again, and what is the position of the balance of payments going to be.

The Minister of Labour, in his speech yesterday, explained to us at some length that production had not gone down everywhere—there were differences. In some industries it had gone down and in others it had gone up. That is usual. The production index is an average, but the fact remains that the average is going down; in other words, the reductions outweigh the increases. He also implied that the unemployment position was not so bad. I do not know what his standards are—I shall come in a moment to something he said about our standards—but today we have, and I do not think the facts can be denied, 140,000 more out of work, three times as many on short time and eight times as many hours lost through short time, 2½ per cent. fewer people working overtime, and 40 per cent. fewer unfilled vacancies compared with a year ago.

These are all the facts of the unemployment situation. None of us has suggested that we have yet got back to the pre-war situation, but I suggest to the Chancellor that they are serious figures, and, although I agree that in the last month there has been some improvement due to the revival of textile demands, they seem to us to give serious cause for anxiety.

I should like to ask the Minister of Labour, who is not in his place at the moment but will no doubt read this, whether, when he said so confidently that he was sure the figure would not be over 500,000 at the end of December—the figures are taken in the middle of the month—he would agree that they are also not likely to be over 500,000 in the peak seasonal month, which is not December, but January, when the figures go up.

The Parliamentary Secretary to the Ministry of Labour (Mr. Harold Watkinson)

Perhaps the right hon. Gentleman will acquit my right hon. and learned Friend of any discourtesy in unavoidably being absent, as he is meeting the Dock Labour Board at this moment. I might also point out that it is the view of my right hon. and learned Friend that, if all goes well, we should not increase that figure. Perhaps when he is making remarks about vacancies the right hon. Gentleman will confirm that there are still more than 250,000 unfilled vacancies in British industry.

Mr. Gaitskell

Of course, but we are comparing the present situation with the situation a year ago. No hon. Member could ever accuse the Minister of Labour of being discourteous to anybody, and I did not suggest that.

There is another matter to which I must refer, because it was mentioned by a number of hon. Members and also by the Minister of Labour and that is the so-called standard of unemployment which we are alleged to have introduced. I must say, in the absence of the right hon. and learned Gentleman, that I thought that on this occasion he fell rather short of his usual standards because he left out of his quotations from what I had said some extremely important and relevant words which I propose to read to the House.

It is an answer which I gave on 22nd March, 1951, about the Government's decision about a full employment standard being conveyed to the Secretary-General of the United Nations. A full employment standard was called for in a resolution of the Economic and Social Council, which we warmly supported, and it indicated the standard at which very energetic action should be taken by the Government. The part I wish to quote is: It must be stressed that the choice of this standard does not mean that the Government would allow unemployment to reach 3 per cent. before taking vigorous counter action. It will be a continuing objective of the Government's policy to counter any unfavourable trend in employment and to take special measures to deal with those areas in which unemployment has persisted at a comparatively high leve."—[OFFICINT REPORT, 22nd March, 1951; Vol. 485, c. 320.] The House will agree that that sentence throws a very different light on the 3 per cent. standard which was thrown at us by more than one hon. Member opposite. If any hon. Members wish to quote that standard in future, I hope they will also quote the words I have used.

Mr. Watkinson

Perhaps the right hon. Gentleman will quote the rest of the statement in which he said that, if export prospects worsened, the 3 per cent. standard might well have to be exceeded.

Mr. Gaitskell

Of course. That is exactly what we are all so anxious about at the moment. The point which the Minister of Labour was trying to make was that there was no call for the Government to take action because, he implied, we should not have taken action. [HON. MEMBERS: "No."] I am sorry, but that is exactly the impression that he created on this side of the House.

Another point which I must make here is the contrast between the fall in production in comparison with the steady expansion that we had before, which is serious, and the comparatively small increase in unemployment. It is obvious that production has fallen faster than employment, and that suggests that a good deal of under-employment is taking place at the present time and that the unemployment figures, though they are serious enough in comparison with last year, are not shown to be as serious as they are in reality.

What is the Government's attitude to the production situation? I find it rather difficult to make out. Do they believe that the fall in production is something which we should tolerate and accept for the moment? Is it something about which they feel they can do nothing? Is it part of a healthy purge or something else which they believe will enable us to re-deploy industry? Do the Government really feel that it is an unfortunate development, and if so, precisely what do they intend to do about it?

We have had very little indication from any Minister about what is to be done. It is all very well for the Chancellor to come along and say, "You see, I said at the time of the Budget that it was all very difficult and that we might have to face this and that." The fact remains that one of the essential figures in the Budget estimate was an increase in production of £250 million in the year, about 2½ per cent. If we are to have a reduction of 3½ or 4 per cent., that will throw the Chancellor's calculation completely out. Is he really satisfied, for example, in that, accompanying the fall in production, there has also been a reduction in consumption of 4 per cent. in the first half of the year? He told us at the time of the Budget that we could afford to consume just as much as before. That was, again, part of his plan. We are now having to pay the penalty; we are having to consume less. Does that give him any cause for concern, and, if so, what does he intend to do about it?

The Chancellor referred, a little surprisingly I thought, to the coal situation. It is true that at the moment stocks of coal are very high, and it is also true that we have been able to increase exports again, but he knows as well as I do what the reason for that is. It is because for, the first time since the war, the consumption of coal has fallen below the previous year's level, consumption this year being 3,500,000 tons below last year's figure.

If he had come to us and said, "Look how well coal is doing; production is rising fast," that would have been a different matter, but I believe I am right in saying that this year production will increase by about 1,500,000 to 2 million tons more than last year's figure whereas each year since the war, except once, the increase has been 5, 6, 7 and, in one case, 12 million tons.

It may be adequate with warm weather and low industrial consumption, but I should like to know how the Chancellor proposes to deal with the situation in coal as soon as production begins to rise again. He has the same problem as in the case of imports, and I do not believe there is any cause whatever for complacency there. If these two factors turn out differently from what they are today, if we run into cold weather and if, as we all hope, production is expanded again, we shall very soon run into difficulties through shortages of coal.

The Chancellor emphasised in his speech today that the major influence upon the decline in production now was the decline in exports. The President of the Board of Trade spoke of the buyer's market having returned. That may indeed be so, but, again, we want to know whether the Government are just satisfied to accept that situation. They speak as if it were a sort of act of God and nothing to do with them at all, something they cannot control in any way. Of course, they cannot control it alone, but they can use some influence in international negotiations to try to restore the level of world demand. We have had nothing from the Government which suggests that they have any serious intentions at all in that regard. I should like to give one illustration of this. The President of the Board of Trade, in referring to the fall in exports, said: This decline"— I hope the House will note these particular words— is essentially connected and associated with the fact that the sterling area is now living within its means, whereas previously it was not."—[OFFICIAL REPORT, 5th November. 1952; Vol. 507, c. 173.] I found it awfully hard to follow that sentence. What did the right hon. Gentleman mean? The sterling area is able to live within its means by cutting down sales within the sterling area? When Australia buys fewer motor cars from us, does that mean that the sterling area as a whole is living more within its means? How can that be so? I can think of only one circumstance where that would be so—let me be perfectly fair—it would be so if those motor cars were automatically diverted to the dollar markets; but they have not been. All the Minister of Supply is proposing is to divert them to the home market, and how that enables the sterling area to live more within its means I fail to see.

One is bound to question the whole policy on motor cars which is being adopted. The industry have had a very fine record since the war and a very large export trade has been built up. It has been built up because—and we must be frank about this—despite what the industry said, the Labour Government of the time insisted that they must cut down their deliveries to the home market. This Government, to begin with, appeared to follow that policy, and fixed a quota of 60,000 cars for the home market. Then they began to get cold feet and, disguising it as much as possible, they replaced that figure by one of 80 per cent. for exports, which meant 90,000 cars for the home market. In fact, 84,000 cars were sold in the home market before the end of August, and now I am told that only 50 or 60 per cent. of the motor car output will be sold abroad and that probably this year we shall have 150,000 sold at home. How that can help the balance of payments, I fail to see.

I found some contradiction in the Chancellor's statement at one point. He was anxious, he said, to encourage home consumption as far as possible while at the same time cutting down on home investments. I do not know where motor cars stand in this respect. They have been rather a borderline case, but is the right hon. Gentleman really satisfied that it is wise to allow this large expansion of home demand at a time when we are told there are such difficulties?

The right hon. Gentleman may say quite fairly. "What can I do about it, how can I encourage exports?" Let me tell him one or two things he can avoid doing. He and other Ministers have told us that we have to be careful to keep our export prices down in a competitive world, and now that there is a buyers' market that is more and more important. How have the Government helped? One of the important items, of course, in export prices is wages. Wages in this country, whether we like it or not, largely depend on the cost of living and on prices. Yet the Government go out of their way through their food subsidy policy to put up prices, drive up wages and make the position in our export trade more and more difficult.

It is all very well for the Chancellor of the Exchequer to come along and say that prices have not gone up as much because the cost of living has not advanced as much in the last few months as it did before that. If the whole of the world situation is ignored, that is perfectly true, but the fact remains—and this is the point we wish to make—that under a Labour Government, given a world situation, prices went up far less here than in any other country, and under a Tory Government, again given a world situation, they are going up far more than in other countries.

I should like now to say a few words about the Commonwealth Conference. We, of course, welcome it. We pressed for it. I must remind the Chancellor that we pressed for it because we felt that the results of the previous Conference, so far as intra-Commonwealth trade was concerned, were profoundly unsatisfactory, and I think that Members on all sides of the House were very worried when Australia first, and then South Africa, within a matter of a fortnight or three weeks of the Conference, announced savage cuts of exports from Great Britain.

What we should like to feel is that the Chancellor and the Government enter into this Conference determined to try to repair the damage done by the previous Conference—in short, to try to build up trade within the Commonwealth. The right hon. Gentleman mentioned it and implied that the Government were going to do just that, but after what happened before we are bound to be rather sceptical about any results which will come out of it.

I should like to say a few words about the dollar situation, about which the right hon. Gentleman has not told us very much. He has not told us how we stand. The gold and dollar position at the moment is relatively stable and we are very glad it is. When I spoke in July, I said I thought it would be, but we all know how very important to the situation is the price of sterling area materials, and I hope that in due course, and contrary to the kind of statements that Ministers make from time to time—I have in mind the Secretary for Overseas Trade—the Government will make a serious effort to reach an international agreement which gives some degree of stability to these raw materials.

I should also like to ask the Chancellor whether he is satisfied that the cuts on dollar imports imposed on other members of the sterling area are not also being made at the expense of stocks because if, in fact, they are running down stocks at the moment, then the right hon. Gentleman is bound to run into trouble later on when imports from the dollar area increase.

I should like to add this about the Commonwealth Conference. The Chancellor has given us some assurance on convertibility, but the fact remains, and it is no use our disguising it from ourselves, that there are broadly two possible lines of action here. One of them is to make the sterling area a more closely co-ordinated, more unified institution, in which we try with our partners to work out common policies—policies of internal finance, of planning our imports from the outside world, and of increasing our trade with each other so as to try to maintain the highest possible level of employment and production. We should certainly try to bring the rest of Europe into such a scheme.

That is one possible development. It will require undoubtedly a change in the present machinery—if, indeed, one can give the present situation any such name—and it will mean a permanent body being set up here in London representing the various Governments in order to reach these decisions quickly, making plans for submission to Ministers, and making changes as and when they are necessary in the light of changing world conditions. I have no hesitation in saying that I regret that we in the Labour Government did not do that. It would have been a great help in 1951 if such a body had been in existence.

If that is one possible line of development—and there is not very much sign that the Government seem to be pursuing it with any energy—the Chancellor will, I am sure, agree with me when I say that there is no doubt that there have been very substantial rumours that the Government were intending to adopt a policy of convertibility. These were mentioned in the Press, particularly last July, and the first thing I want to say about them is that convertibility, if it means anything at all, must mean the end of discrimination against dollar imports. At any rate, that is what the Americans understand by it.

It means, in effect, that you get dollars for pounds and use those dollars as you like without import restrictions other than tariffs. Are the Government seriously contemplating a move of that kind? If so, I can only say, first of all, that it means the end of the sterling area as we have it today. It means the return to the sterling bloc as it existed before the war.

I have heard an interesting rumour on this subject—let me say at once that it did not reach me from the Civil Service or any Government supporter, but from another outside source—that the Cabinet very nearly reached a decision that there should be a return to convertibility, but that—and I must confess I was surprised at this part of it—the noble Lord, Lord Cherwell, intervened very effectively, having, as we all know, the ear of the Prime Minister, and managed to get this policy stopped. In the light of the things I have said in the past about the noble Lord, I feel now like withdrawing all of them. He has really done us a very good service if his relationship to the Prime Minister has enabled him to stop such a disastrous turn in our policy.

I would ask what has happened to the committee over which the Minister of State presides. This is not the first time I have asked the question. I have a strong suspicion that he is being the nigger in the woodpile, and that the real battle was between him and Lord Cherwell, and he was defeated. There has been a committee and we believe that it has met occasionally. What are its conclusions? Are we not to be told at all?

The Chancellor referred to the January statement. I was rather interested in that, because the last time we discussed the matter I again expressed my apprehensions about the return to convertibility and indicated that I thought his statement was a dangerous one. The Chancellor went out of his way to indicate that he himself was by no means solely responsible for it. When a Minister of the Crown says that, we draw our own conclusion. We draw, in fact, the conclusion that he was opposed to it and that he had to give way to other members of the Conference.

I was somewhat reassured by his statements on it then, but his attitude today is worrying, and it fits in with other things that have been said. I quote again from the President of the Board of Trade: A healthy economy is one in which internal fiscal and monetary policy is so arranged that physical control can be scaled down to the minimum and reliance placed upon the more orthodox and preferable means of moderate tariffs."—[OFFICIAL REPORT. 5th November, 1952; Vol. 507, c. 173.] The right hon. Gentleman says "Hear, hear"; in other words, he would like to get rid of controls over dollar imports. This is a fair indication that convertibility is in the mind of the Government.

When the Chancellor says, as he did this afternoon, that monetary policy is the really important matter, one is bound to draw one's own conclusions. My conclusion is that he wants to do away with physical controls—I know a lot of hon. Members believe in that, too—and to rely upon monetary policy. He has never explained exactly how that has an effect on the balance of payments or upon improving the balance of trade, but if he does that, and goes back to convertibility, the inevitable result will be a much higher level of unemployment than with the kind of policy we have pursued, accompanied by physical controls. I admit that this is very much like a detective story, but that is not my fault. I have to pick up what clues I can here and there in trying to discover what the Government's policy is.

I come to the counterpart of the convertibility idea, and that is the very powerful attack which is now being levelled in the Tory Party on public expenditure. The Chancellor and the House are aware of my general attitude upon this matter, which is the same as that of my right hon. Friend the Member for Lewisham, South (Mr. H. Morrison). It is the duty of every Chancellor, of course, to avoid wasteful expenditure, to scrutinise the Estimates with the utmost care and to make such administrative economies as he can. I was at great pains to explain what I had done, as the Chancellor was to explain what he had done this year. When at Scarborough this year he said: If you are going to have big economies you can only have them by big changes in policy, I was ready to pat him on the back. At last he had really understood exactly what I said when I was Chancellor of the Exchequer. It is a very sobering thing being in office. I do not regret that he has come to agree with me at last at all. But what was the occasion on which he said those words? It was a debate on this Motion, introduced by an hon. Member to the Conservative Party Conference: That public expenditure has increased, is increasing, and ought to be drastically diminished. It was moved by the hon. Member for Dover (Mr. Arbuthnot) and it was supported by the right hon. Member for Haltemprice (Mr. Law). His speech is well worth reading. He said that the rise in expenditure was not what they had expected a year ago or what they had led others to expect. We can agree with him on that. He said that there was bewilderment among Conservative supporters. Finally, he said that public expenditure was the clue to everything: economic recovery, social security and national survival. It was in reply to that forthright speech that the Chancellor declared himself as I have indicated. Despite his speech, the resolution was carried by what the Conservative little booklet describes as "a very large majority" against him.

The right hon. Member for Haltemprice had another go yesterday, and I am sorry that the Chancellor was not here to hear him, because he would have been interested. This is what the right hon. Gentleman said about the Chancellor's own speech at Scarborough: My right hon. Friend the Chancellor of the Exchequer may have been right when he said at the Scarborough Conference that in his opinion"— I do not think the Chancellor even qualified it to that extent— big economies were impossible. But if he is right, then I tell him that economic recovery is impossible."—[OFFICIAL REPORT, 10th November, 1952; Vol. 507, c. 637.] The right hon. Member was not the only one on those back benches who spoke in those terms. We had speech after speech. We know that there is a substantial majority there for big reductions in Government expenditure. They have even a target of 2s. off the Income Tax, which means about £400 million, including some reductions in the lower rates of tax. This is to be done during a period of re-armament. We would not accuse the right hon. Member for Haltemprice of wishing to undermine the defence programme. Indeed, he was at pains to explain that he did not want to undermine it.

If these people get their way, we are bound to get another substantial cut in food subsidies and a really big cut in the social services. It is not so much a question of a Geddes axe or a Geddes Committee. I dare say some hon. Gentlemen opposite would like that, because they do not trust the Chancellor of the Exchequer; but there are other ways in which pressure can be brought to bear. We have already seen in this Parliament how very powerful the Tory back benchers can be. We have not forgotten what they have managed to achieve in the de-nationalisation Bills. I see some of them nodding with pride. We have not forgotten sponsored television. It is our considered view that they will win this further battle, and that in the next Budget they will have just the kind of reactionary policy they are demanding.

I would ask hon. Gentlemen who are interested in this subject and who are always searching around for economies, to consider one other sphere of public expenditure, where they will find that we will support them. That is the astonishing increase in Consolidated Fund expenditure, which is already £39 million in the first five months of the fiscal year above what it was in the previous year. That looks like working out as close as anything to the £100 million increase, as the result of the rise in the Bank rate which we indicated once before.

In our period of office we set before ourselves two major aims. We wanted to secure maximum production in this country based on full employment, and a fairer distribution of the national income so that those who were poorer got more and those who were richer got a bit less. In both of these things we achieved great progress, and we are not ashamed of it. We were able to make this progress because we deliberately used powers of economic planning to maintain a high level of demand by monetary policy at home and trade agreements abroad. We used physical controls to prevent inflation and to restrict imports. We do not claim to have solved all the problems of the post-war world—after all, we were faced with some very difficult ones, as we all know; the change in the terms of trade and the failure of our invisible exports to rise cost this country something like £1,500 million to £2,000 million a year. But we made great progress on those lines.

There is now every sign that Her Majesty's Government will reverse these policies, to the great satisfaction of hon. Members opposite. They wish to be rid of these controls. They have no faith in planning. This means, I repeat, that they must expect a higher level of unemployment, perhaps a much higher level of unemployment.

At the same time the pressure for reducing taxation on the wealthy is growing every day. On these benches we see it often enough. Those who are putting forward this policy know perfectly well that such reduced taxation can only be achieved by savage cuts in expenditure which means, in fact, cuts in the social services or the food subsidies, or both. We have had one dose of this already and I think we shall have another one.

This, in essence, is what we mean by a return to pre-war policies, and we believe that it will just as surely lead us back to a pre-war situation. We are utterly opposed to this approach to our economic problems. We believe it is misguided and unjust, and we shall go into the Lobby against it tonight with great pleasure.

5.1 p.m.

Mr. Angus Maude (Ealing, South)

I was extremely interested to discover that the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), the former Chancellor of the Exchequer, having, during a considerable part of his speech, gone from one part of the economy and from one part of policy to another without coming very near to the terms of the Amendment, which no doubt, he was anxious to forget, at last, in the concluding paragraphs of his speech, found some terms upon which he could come to grips with the official Amendment of his party.

The right hon. Gentleman said that my right hon. Friend the Chancellor of the Exchequer had not carried out any of the policies to which the Amendment refers, but that it was perfectly clear that he would soon have to surrender to pressure from his own back benchers and so make the terms of the Amendment a reality.

I shall have a certain amount to say about that question and about the famous cleavage before I have finished, but there are one or two other observations of the right hon. Gentleman with which I shall deal first. He said it was not at all clear what was the policy of the Government or where the Government were going. He said that this debate had been remarkable for a collection of platitudinous statements from Her Majesty's Ministers. He might have considered rereading some of the observations which his own colleagues have been making during this debate.

For instance, his right hon. Friend the Member for Lewisham, South (Mr. H. Morrison) leaped even more ineffectually from a naïve acquaintance with one part of the economy to another than I have heard him do before, culminating last night in the right hon. Gentleman the Member for Blyth (Mr. Robens) who, we can only hope, from mere irresponsible ignorance rather than from sheer mischief, made a speech apparently deliberately intended to exacerbate the very dangers about which he was trying to warn the House.

What else did the right hon. Gentleman the Member for Leeds, South say? He said that my right hon. Friend has assured him that the Government had not been improving our balance of payments by running down stocks of raw materials. He said that was not very much because his Government had considerably increased stocks of raw materials. Yes, and a very silly thing that turned out to have been as events have proved. What we saw was this country building up stocks of raw materials at steadily rising prices and greatly increasing the adverse balance of payments, and so being to a considerable extent responsible for the enormous adverse balance with which we found ourselves confronted when we came into office.

The right hon. Gentleman went on to ask what will happen to the balance of payments when production here begins to rise again and the demand for imported raw materials begins to increase again? Surely the right hon. Gentleman has overlooked two important factors. One, perhaps the least important, is that the terms of trade are moving in our favour and there is reason to hope that they will continue to do so.

Secondly, his very question implies that he expects we shall have some increase in the exports of our manufactured goods, otherwise the demand for imported raw materials would not be likely to increase sufficiently to make this question of stocks important. Both those taken together make it reasonable to suppose that there will be no adverse effects from this at all.

Skipping from the balance of payments to employment, the right hon. Gentleman went on to quote what my right hon. and learned Friend the Minister of Labour had said about his own statement regarding the 3 per cent. full employment standard. He said that was a quite unjustified statement because he himself had made it quite clear that the Government would have to take steps long before we got to a 3 per cent. unemployment rate to see that the movement was stemmed so that in any area where this was developing it could be mitigated.

The right hon. Gentleman forgot to say that this was precisely what Her Majesty's Government have done. When we were faced with a considerable increase in unemployment in the textile areas, not only did the Government accelerate defence orders, not only did they make fairly substantial concessions in Purchase Tax, but they have already scheduled a Development Area. All these movements were precisely the kind of which the right hon. Gentleman must have been thinking when he made his original statement.

Then he flitted on to materials and asked, Did we think that the Government ought to allow this big expansion in the home demand for motor cars? I did not notice his hon. Friend the Member for Coventry, South (Miss Burton), who was sitting behind him, looking over-enthusiastic when he was putting that line across. I have sometimes thought in the last few months that a sellers' market, coupled with six years of Socialist Government, has given us some peculiar ideas of economics.

I noticed not so many weeks ago after the celebrated statement of Mr. Leonard Lord, a headline in the "Daily Mirror." Right across the front page it said, "More cars, grim warning." When we get into a state of mind which makes it possible for it to be a grim warning that more cars are to appear on the home market, we ought to stand back a little, check our ideas, and see just what sort of a madhouse we are moving into, both in industry and in economics.

One of his next observations which struck me as being interesting was that the Chancellor of the Exchequer had never explained to the satisfaction of the right hon. Gentleman how his monetary policy affected the balance of payments. We must do the right hon. Gentleman the justice of believing that he was merely seeking to console his right hon. Friend the Leader of the Opposition, who said rather plaintively much the same thing at about the time of the Budget. We know that the right hon. Gentleman is a very good economist—far better than I could ever hope to be—and he knows much more about these things, so he must know what effect the monetary policy is likely to have upon the balance of payments. We cannot take that sort of observation very seriously.

It must, surely, be obvious to anybody that if steps are taken to make capital investment at home temporarily less easy and less attractive, it must tend to release more capital goods for export overseas. It must, surely, be obvious that if, by a monetary policy, we tend to reduce expenditure at home, we must to some extent be cutting down on the demand for imports. Nobody wants to exaggerate the extent to which that is an important factor in solving the balance of payments, but at least it is nonsense to say that one does not understand what possible effect a monetary policy could have upon the balance of payments.

The right hon. Gentleman was, perhaps, a little less than his usual clear self when he went on to say that the Chancellor of the Exchequer was making nonsense of his own observations by having deliberately increased the cost of living through his cuts in the food subsidies at a time when industrial costs, and especially wages, ought to be kept down in the interests of increasing exports.

The first of two observations which strike me is that, as the right hon. Gentleman knows perfectly well, the deliberate increase in certain prices of rationed foods, which took place as a result of the cutting of the food subsidies, was part of a policy which took account of the compensations, both in the social services and in Income Tax, deliberately aimed at those parts of the working community where that sort of incentive could have the most immediate effect and which taken together, as they must be, were an essential part of the policy which my right hon. Friend has with clear and obvious success carried out since he came into office.

It is not, incidentally, unnoticeable that ever since last March the right hon. Gentleman and his friends have gone out of their way deliberately to exaggerate the extent of the rise in the cost of living due to the cuts in the food subsidies in order to create an opinion in the country which inevitably, they must have known, would make itself felt in demands for wages which bore no relation to the increase in living costs. This has been the policy of almost every hon. and right hon. Member opposite since March. Of course, it has reached some of its most obvious height of folly in the right hon. Member for Blyth. This, coupled with his statements about the probability of there being one million unemployed by the end of this year, reached heights of irresponsibility which, in my political experience, not even the right hon. Member for Easington (Mr. Shinwell) has exceeded.

We know that the Government deliberately budgeted for an increase in the prices of rationed foods of 1s. 6d. a week. We know, despite the gloomy prognostications of hon. Members opposite, that that is the effect which the increases proved to have. But some of the remarks made in speeches, both in the House and in the country, by hon. Gentlemen opposite have encouraged those people whose ideas of economics are even hazier than those of some hon. Members opposite to believe that this was a justification for demands for wage increases which far exceed anything of that order of magnitude.

One of the things which has interested me most in the last few months is the growing bewilderment of hon. Members opposite at the extraordinary absence of the surge of popular disquiet and discontent which all their training had led them to believe must come from the accession to power of a Conservative Government and from the application of a Conservative Chancellor's policy. Hon. Members opposite have chased this great surge of popular discontent further and further into the distance, becoming more mystified at its failure to materialise until, now, the contradictions in their speeches are becoming quite remarkable.

Listening to the debate yesterday, I could not help noticing that there were one of two almost pathetically bewildered observations from hon. Gentlemen opposite. One of them, the hon. Member for Sunderland, South (Mr. Ewart), said—it sounded most impressive when he said it—that only the statesmanship of the leaders of the great trade unions. is responsible for keeping in check a rise and surge of discontent."—[OFFICIAL REPORT, 10th November, 1952; Vol. 507, c. 663.] It is news to me that the leaders of the great trade unions were the people chiefly responsible for winning the Wycombe by-election and reducing the Labour majority at Cleveland, but if one analyses that sort of statement that is exactly what it amounts to.

All through this debate, the thing which has impressed me most clearly was that all that hon. Members opposite see is an extremely limited sector of the economy, one particular set of grievances which each speech is designed to magnify, not merely to its full extent, but well beyond it. A typical speech was from the hon. Member for Ince (Mr. T. Brown), to whose speeches on social service matters I have always listened with great interest and respect because of his knowledge and sincerity.

The hon. Member started with a very fine and high-minded statement that he did not understand all about economics and high finance and was not going to deal with that sort of thing. For one who knows nothing about economics or high finance, he showed a masterly skill in selecting those figures which suited the case that he wanted to make and ignoring all others. The case that he was concerned to make was that only a small 2s. 6d. rise in pensions had been made by the Government to offset the increased cost of living. He did not, of course, mention that, thanks to my right hon. Friends the Chancellor of the Exchequer and the Minister of National Insurance having reversed the policy of the right hon. Member for Leeds, South, in having a dual rate for pensions, which we on this side all thought was an extraordinarily bad thing to have introduced, quite a lot of retirement pensioners were getting considerably more than an extra 2s. 6d. a week.

The hon. Member for Ince carefully overlooked the increases in war pensions, National Assistance and sickness benefit.

Mr. Charles Ian Orr-Ewing (Hendon, North)

Family allowances.

Mr. Maude

My hon. Friend says "Family allowances," but, of course, they do not as a rule affect old age pensioners.

The hon. Member for Ince challenged the fact that the rise in the cost of living of food prices had been only 1s. 6d. for each ration book. He can challenge it if he likes, but the figures are there and that is what they show. He said three times that this bore very hardly on the sick, the unemployed and the old age pensioner.

If the hon. Member cares to go back and look at the records of his own Government to compare the rise in the cost of living with the increases in pensions, unemployment and sickness benefits and National Assistance which accompanied them, he might have the grace to realise that the present Government do not have to take a back seat and apologise to any hon. Member opposite for the record they have shown in this field.

Then the hon. Member went on to say that the index of the cost of living fell temporarily in August and September, and that it was due entirely to a few seasonal reductions, and the cost of fruit and vegetables. Well, it may be that it is temporary, because, after all, there were some more food subsidy reductions and, therefore, increases in rationed food which came into effect in October. It would not surprise me if the cost-of-living index rises by a small amount again, but at least let us see what has happened to it this year compared with what happened to it last year.

Which, after all, is the better, that there should be an increase which the Government of the party opposite were powerless to prevent, unaccompanied by any compensating increases, or that there should be a deliberate increase accompanied by increases in social service benefits and decreases in taxation as part of a monetary policy which has had obvious advantages in helping to solve the balance of payments crisis?

I shall not detain the House much longer. In any case, I could not, because I have a very bad cold and my voice will run out before very many more minutes pass, but I did tell the right hon. Gentleman that before I sat down that I would say a few words about his accusations of a cleavage on this side of the House and of overwhelming pressure against my right hon. Friend the Chancellor of the Exchequer.

It has, of course, always been one of the more noticeable differences between the party opposite and ourselves that we, as a general rule, manage to agree about our policy before we get on to the Floor of the House whereas the party opposite usually fights out its differences in the House. If we are to talk about big cuts in Government expenditure, let us be perfectly clear how far we on this side all agree together and how far we disagree with hon. Members opposite.

I believe that my hon. Friends who have been most active in this matter perform a service of immense usefulness in continuing to chase the Treasury and Government Departments to ensure that every conceivable administrative saving is made. I think that Departments ought continually to be chased in that respect. There is always a danger that we come to think that the things which are nice today, and some of the things which, in a period of post-war inflation and of relief from war-time conditions we thought we could afford, should continue. I think they should be questioned afresh and that we should see whether, in fact, we can afford to do them.

There is a considerable variety of opinion and a considerable range for difference of opinion as to how much can be cut out of the estimates without making big policy changes, and, indeed, about what policy changes ought to be made. I have always thought, and my hon. Friends will know that I have said so to them on certain occasions, that they make one mistake of which they ought to take more account.

Even when a considerable chunk is chopped off the estimates for administrative expenditure, it must still be realised that owing to a number of factors—of which the fact that we are a rapidly ageing population is the most important—there is a natural tendency for all the social service Departments' estimates to rise of their own accord all the time, and that we may take a considerable chunk off administrative expenditure and yet still find that we are where we were before without making any net saving. I also believe that it is possible considerably to exaggerate the savings that can be made without making big changes of policy.

I do not go all the way with some of my hon. Friends in this, but of one thing I am perfectly certain. I have the most immense confidence in the ability of my right hon. Friend the Chancellor to do exactly what he said he would do at our party conference in Scarborough, which is to make every conceivable saving that he can in public expenditure without making changes in policy which he believed would cause unnecessary suffering and hardship. That is what he said, and every one of us who knows him knows perfectly well that he meant it, and that, however much right hon. Gentlemen opposite may try to sow dissension in these ranks by believing that my right hon. Friend is about to be overrun by a rush of wild men, that is what my right hon. Friend will do—exactly what he said.

Listening to economic debates, and, in particular, to the debate yesterday and today, I have thought that the real cleavage is between those who talk about Government expenditure, the balance of payments and economics in general on the one hand and the ordinary people of the country who are called upon to go about their ordinary work, and to vote in General Elections or, from time to time, at by-elections, on the other hand.

I have sometimes the awful feeling that we are developing organisations, systems of government, industries, departments, firms, trade associations, and so forth, operating on a scale so vast and of such an increasing extent that the number of people who can see what they are all about and where they are going is progressively diminishing. But, worse than that, I think that we are getting to a scale of organisation which is almost beyond the wit of the ordinary administrator either to control or to understand. Now, if this tendency goes on—and I fear it is going on—I see very great dangers ahead for everyone.

The hon. Member for East Ham, North (Mr. Daines) made what I thought was one of the most interesting and valuable speeches from the other side of the House yesterday, and I found myself in almost complete agreement with everything he said. We are getting ourselves into a condition now in which it is too fatally easy in a large industry for the employers' side and the trade union side to get together to pass on increases in charges and increases in costs to the consumer, knowing that they have the power to enforce that, and the voice and the choice of the consumer is becoming progressively less and less.

Somehow, we must find some method by which we can reverse this process. We have given the nationalised industries so-called consultative councils, which everybody who has ever had anything to do with them knows are farcical; they offer the consumer no possible method of making his voice really heard or his preferences felt. Many of our people have almost lost the habit of what I would call selective shopping; they have almost given up hope that they themselves can influence prices, quality, and so forth, by their own efforts.

If we are to find ourselves in a sort of managerial revolution in which the ordinary person feels that there is no hope that he will ever comprehend what is going on, that there is no hope that he can by his own efforts or his own voice influence the general direction of economic development, then it is almost impossible to expect that we can get the workers and the management of the country united together behind a Government in order to solve our economic problems.

Though I am only too well aware that I lay myself open to the objection I have made against right hon. Gentlemen opposite, that they were not being very constructive and helpful in our present difficulties, I do put this forward as something beyond the ordinary detailed controversy in which we usually engage on these occasions, as something far bigger and far more fundamental, to which we on all sides of the House will have to turn our attention, or else we may find that the ordinary people will just give up hope, not only of comprehending but of being able to do what only they can do, which is to save the country.

5.30 p.m.

Mr. Roy Jenkins (Birmingham, Stechford)

The hon. Member for Ealing, South (Mr. Maude), in attempting to explain away the cleavage in the Conservative Party, did not so much explain it away as make it clear that it was so deep that hon. Members opposite were taking up their positions on different sides; and that he himself, even though in a rather depressed sort of way, was lining up behind the Chancellor of the Exchequer, in the rather thin ranks behind the Chancellor, rather than the rather thicker ranks behind the right hon. Member for Haltemprice (Mr. Law). On that, at least, I congratulate him.

In another part of his speech, referring to the monetary policy, he ranged himself alongside the Minister of State for Economic Affairs and tried to explain how the new monetary policy has helped the balance of payments. This the Chancellor has certainly never done. The hon. Member did make the attempt, but I thought that the two ways which he chose were unfortunate ones. He said, "How does it help? It is obvious. It cuts down investment and consumption." We sat here throughout yesterday and heard hon. Members on that side of the House saying it was absolutely essential to increase investments. That was what the right hon. Member for Haltemprice meant when he said, though I did not agree with his argument, that without cuts in the national expenditure recovery was impossible, and many other hon. Members took the same view.

Mr. Maude

I do not dissent from that obvious fact at all. But it must be perfectly obvious, as the Chancellor said when he was making these cuts, that when we were faced with a deficit at the rate of about £800 million a year we had to stop it first by cutting investments, because that was the inevitable and inescapable way of stopping consumption. But nobody imagines that in the future we shall help trade by limiting investments.

Mr. Jenkins

Do we understand that, having stopped the drain, the Government are now going to revert to a policy of cheap money? If that is not so, I do not understand the point of the hon. Member's intervention.

The second point which the hon. Members made was that dearer money would help to cut down consumption. But, in his Budget last March, which he was defending today the Chancellor said he was not going to cut down consumption, and he made it possible for more people substantially to increase their consumption. This afternoon he did not go back on that statement.

I am glad to see that the Chancellor has come into the Chamber. I thought he opened his speech with some very stirring political passages. In one of them, which I remember, and wrote down, he referred to the great record of positive achievement which stands to the credit of this Government. I think it important that we should see just what has happened and how far that claim can be justified.

We know that since we had the last economic debate one thing that has happened is that the balance of payments position has turned out to be a little better than we expected. In the first six months of this year the surplus of £24 million was better than we expected. On the other side, we have the rapidly falling trend in production which looks like going on and getting more severe.

My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) analysed the reasons for the improvement in the balance of payments. He gave two main reasons; first, the improvement in the terms of trade and, second, the fall off in imports which, in so far as it has been possible without a decline in stocks, as the right hon. Gentleman says it has, is of course largely due to a fall in production. There is another factor which might be mentioned, and that is that as compared with the last half of last year invisibles turned out to be about £65 million better; but that was almost entirely due to a seasonal factor, as the Chancellor knows, because we do not pay interest or repayment on the American Loan in the first half of the year and we do in the second half.

I should very much like to know which of these factors the Chancellor thinks is due to this great record of positive achievement on the part of the Government. We should like to hear from the Chancellor, or from whoever is to wind up tonight—the hon. Member for Ealing, South had something to say about it which was not very helpful—how the Government's new monetary policy fits in with these changes which have been accomplished. What about his Budget? It was presented to the House and the country as designed to accomplish two main things. The first was by keeping the level of the surplus at about the level which my right hon. Friend the Member for Leeds. South had kept it, to keep the total limit of consumption in the country steady over the next year.

But during the first half of the year the Exchequer returns have deviated from the Chancellor's own estimate to an extent which it never did under Labour Chancellors. Whatever else may be the reason for the improvement in the balance of payments, it can hardly be due to the skilful accuracy of his Budget planning, which has produced a deficit of £300 million more at this stage than he thought it was going to be.

What about the other aspect of the Budget, which was to give incentives to production and to bring about bigger production in that way? I well remember that during the Committee stage of the Finance Bill my right hon. Friend the Member for Battersea, North (Mr. Jay) was saying to the Chancellor that he had produced what was said to be an incentive Budget to production but that it seemed to be much less than in previous years. The Chancellor got up with that expression of righteous indignation which he occasionally assumes, and said that this was most unfair; and that we should wait until his tax concessions came into operation and then see what happened to production.

Well, we have waited, and we have seen what has happened. While his tax concessions were not in operation production, while not buoyant, was at least more or less keeping up with the previous level. If one looks at the figures for May, the last month before the tax concessions came into operation, the index of industrial production was 116 as against the same figure for 1951. But if one looks at the figure for June, the first month that his tax concessions operated—when these great incentive concessions came into operation—the index was 111 as against 122 for the previous year. In July, it was 102 as against 111 for the previous year; in August, 99 as against 104. Therefore what we have had as a result of this Budget is all the unfairness of the Budget but none of the benefits, the incentive benfits, which the Chancellor said would come from it.

One other thing the Chancellor's Budget did I would not have referred to again after the speech by my right hon. Friend the Member for Leeds, South hart it not been for the speech of the hon. Member for Ealing, South, which showed he had taken no account of the points made. The other thing the Budget did was that it produced the most dangerous increase in the cost of living which we have yet had. Not the biggest; we all admit that, there is no dispute about that at all, but much the most dangerous, because it has been against the world trend.

When my right hon. Friend the Member for Leeds, South and his predecessors were in power there were increases in the cost of living, but all the figures show that we were tagging along at the back. We were doing better than other countries. Our increase was less than that of almost anywhere else in the world. But this Chancellor, for the first time since the war, put us at the top of this "league table." That is an extremely dangerous thing, because he knows, he must know, that increases of this sort in the cost of living necessarily mean wage demands, higher costs and higher export prices. I do not understand how he can feel thoroughly satisfied about his Budget at a time when, as he and his hon. Friends, are continually telling us, we have moved from a sellers' market into a buyer's market: when conditions in the world are very competitive and we are suffering from a fall off in exports which is affecting our production. I do not understand how he can feel satisfied that his Budget has not been at least a contributory feature in that direction.

So much for the past. I wish now to turn to say a word about the future, and in particular about the coming Commonwealth Conference. As my right hon. Friend the Member for Leeds, South said, there have been a great number of rumours that a large section of the Government is in favour of a return to nondiscrimination and convertibility. It is pretty clear, too, that a number of Commonwealth Governments are going to take the same point of view. There was, for instance, an article in the "Observer" last week which said: Canadian representatives at the London Conference … will regard the answer to one decisive question as a touchstone of British intentions: Will the United Kingdom allow dollar imports to compete on the same terms as British goods in the rest of the sterling area?' In other words, are we going to do away with all discrimination against the dollar? I very much hope for the sake of this country, for the sake of the rest of the sterling area, and, as I shall try to show, for the sake of world trade as a whole, that the right hon. Gentleman the Chancellor of the Exchequer will not countenance any such suggestion.

How is it proposed that, if such a suggestion were followed, it would right the great imbalance between the dollar area and the rest of the world? We all know how great that imbalance has been in the whole period since the war. What are the main reasons? They are the great self-sufficiency of the United States, the great concentration of industrial power which there is in the United States, accentuated by the fact that two world wars have built up United States industrial power instead of running it down, as in the case of most other countries. That is the basic cause of the imbalance.

Do hon. Members opposite, especially those who strongly advocate a return to an entirely non-discriminatory world, really think that the only reason why the United States does not buy vast quantities of manufactured goods from us and other countries is because we are so inflationary that we cannot spare them for export, or that the only reason that we need great quantities of United States goods—wheat, coarse grains, cotton, tobacco, machinery and all the rest—is because we have an import demand inflated by a soft economy at home and not because there is a real need for these products? Do hon. Members opposite really believe that that is so?

I agree with one comment made by the hon. Gentleman the Member for Croydon, East (Sir H. Williams) yesterday. He said that, of course, if we had a free £, convertibility and non-discrimination and a certain rate of exchange, we should get into a position in which we should not have a balance of payments deficit. I agree. I should not like to hazard a guess as to what the rate would be at present. I am sure that it would be a great deal less than 2.80 dollars to the £.

What would be the effect? If we allowed that to happen, how would the balance be brought about? Would it be by a great increase in exports to the dollar area or by a great reduction of the imports from the dollar area to other countries? I do not think that it would be by the former. United States imports of raw materials are largely determined by the needs of her economy and not by the prices at which they are being sold.

United States imports of manufactured goods are only a very marginal amount in certain rather specialised kinds of goods. I very much doubt whether the increase in the sales of these types of goods which would take place as a result of an enormous fall in the value of the £ and other linked currencies would mean that we should maintain our total revenue in terms of dollars. What would really happen if we allowed the £ to go free and had no discrimination and convertibility is that we should balance, not by increasing our own sales to the dollar area, but by making dollar goods which are badly needed so expensive that nobody could afford to buy them.

Therefore, what is really suggested by people like the hon. Member for Croydon, East who advocate this return to all the devices of a free market is that we should deliberately accentuate the worst of the diseases from which we are already suffering, that we should deliberately turn further against us the terms of trade which have gone so much against us in the past 10 years. We should do it all not in order to build up the volume of world trade, but in order to get the position that, when it was done, the volume of world trade would be smaller than it is now. It is a great mistake to think that all restrictive devices in the case of world trade necessarily reduce the volume of trade. These devices often arise out of conditions in which it is impossible for world trade to flow freely. Their existence, in these circumstances, may keep the volume much higher than it would otherwise have been.

In the sterling area, I think that we are suffering not from too much but from too little discrimination. There is the case of what has happened in Australia following the last Commonwealth Conference and over the last nine months. We can see from the figures which have been published that Australia has cut her imports from this country far more drastically than she has cut her imports from the dollar area. Her dollar deficit was actually bigger in the first six months of this year than it had been previously.

Australia, by cutting too severely against our imports, is helping to produce the troubles in the motor trade, the falling off in exports, and the falling off in production that we are all worrying about. By refusing to cut sufficiently her imports of dollar goods, she is putting us in the position in which our gold figures, although they are improving, are not nearly as good over this year as the balance of payments position of the United Kingdom itself would make them.

Therefore, this basis of experience of the last nine months within the Commonwealth is an extremely bad basis on which to advocate a policy of general non-discrimination. I do not think that that means that, when we come to the meeting of the Commonwealth Conference, there are no changes which ought to be suggested, no reforms within the sterling area which ought to be brought about. It is absolutely essential that if we are to continue what is now one of the most essential features of the sterling area—the common dollar pool—we should have a much closer, tighter form of organisation in the sterling area.

What is happening at present, as of course the Chancellor knows, is that within this common dollar pool we in this country are playing our part moderately well. We are somewhere in the middle. A number of the Dominions are overspending grossly, and they are being financed by the Colonies. It is extraordinary that in recent months the three biggest exporters of capital in the world have been, first, the United States; second, Malaya, and, third, West Africa. That is an extraordinary state of affairs. The colonial part of the Empire has been financing thoroughly uneconomic and undesirable schemes of investment in Australia and elsewhere. That is a position which I think cannot be allowed to continue.

The form of organisation of the sterling area is crazily loose and inadequate to the task. The sterling area is more important to us than the Organisation for European Economic Co-operation for which we have a large permanent expert staff in Paris, whereas there is no such staff to deal with the problems of the sterling area. The only governing body is the Conference of Commonwealth Finance Ministers. The Conference of Commonwealth Finance Ministers never meets until six months after the British Chancellor has found himself in the middle of a crisis. Usually the British Chancellor does not want another conference on his hands until he has got some severe problem to solve. And when there is a problem to solve and he issues invitations the other Finance Ministers usually have crises too. They are too busy to come here until the crisis with which they are called upon to deal is already six months old.

Even when they do assemble they constitute a very odd body to govern the sterling area. They include the Finance Minister of Canada. We are all very glad that Canada is in the Commonwealth, but it is a fact that we must face that Canada is not in the sterling area and that in its present form Canada is in no way a well-wisher of the sterling area. Therefore, it is a curious state of affairs in which we have Canada very fully represented, the dependent territories within the Commonwealth inadequately represented, and the members of the sterling area who happen to be outside the Commonwealth not represented at all. That really is a most haphazard way of dealing with the affairs of this great monetary area.

I suggest, therefore, that we need to associate these member countries much more closely in the detailed working of the sterling area, possibly through the Bank of England. In return, they must accept a more rigid control over their dollar expenditure than they have previously been willing to accept.

We must certainly ask, too, that other countries like Australia should accept more discrimination in the future than they have done in the immediate past, because, if that is not done, the sterling area, so far from being strengthened, will begin to disintegrate. In particular, if the common gold and dollar pool in the rest of the world continues to exist, greater discipline must be accepted among all its members.

When we have done all these things, we have not by any means solved the whole problem which we are facing in this country. Indeed, no trading or monetary devices will do it, because the basic problem from which we are suffering—looking back over the seven post-war years in this country—is that we have moved from a world in which what we had to sell in this country was scarce and therefore dear, and what we had to buy was plentiful and therefore cheap, to a world in which exactly the reverse is true.

What we have got to do is, as far as possible—and we cannot do it completely—to change the shape of our economy at home so as to fit in better with the new world conditions, and enable us to live in the difficult world of the second half of the 20th century. That means pretty difficult changes here at home. It means, I think, rather greater Government control, and I am not clear how it is in any way possible to bring about these changes if we are to revert to all the devices of a free market.

One of our objections to Government policy as outlined in the Queen's Speech, is that in the first place it gives no indication at all—and certainly, the Chancellor did not add to it this afternoon—as to what policy will be adopted by the Commonwealth Conference in the near future. Is the Chancellor in favour of convertibility or not? That passage in his speech today was one in which he was more evasive than in any which I have heard him deliver before. It was almost worthy of Lord Baldwin. It said "trust me" and nothing more.

The Chancellor took up the position of saying that he would do his best for this country and the Commonwealth, and that we must be content with that. Secondly, so far as measures for changing the shape of our economy at home are concerned, there was no indication that the Government appreciated the real urgency of the problem, and certainly no indication as to how they are going to do it.

5.53 p.m.

Captain Christopher Soames (Bedford)

The hon. Member for Stechford (Mr. Jenkins) tried to show that the main cause of the recent fall in production in this country was the incentive Budget. I really do not think that the hon. Gentleman believes that for one second.

Mr. Jenkins

I can hardly believe that the hon. and gallant Gentleman thought that I said that the main cause of the fall in production was brought about by the incentive Budget. What I said was that the Chancellor had presented the Budget to us and had said, "Even if you do not think it is very fair, it will be a great incentive to production." As soon as it came into operation, production fell, and I said that that undermined the Chancellor's argument, but I did not say that that was the cause.

Captain Soames

The hon. Gentleman knows perfectly well that the fact that there was an incentive Budget had nothing whatever to do with the fall in production, and, certainly, the people know that full well, as was shown recently at High Wycombe. I would say that I hope we have another incentive Budget, because there is no doubt at all that taxation relief is much needed, because the present high level of taxation is having a stifling effect on production and savings.

I consider it important to differentiate in savings made in different forms of Government expenditure, and also to differentiate in the taxation relief which can be made as a result of these savings in different spheres of Government expenditure. I would divide Government expenditure into three categories—the social services, subsidies and general Government expenditure.

In the field of social services, the problem is not how much can we save of what we are already spending on the social services, but how much can we afford. The difficulty is in providing the same services year after year without increasing costs. [An HON. MEMBER: "What services?"] I refer to the services which are essential over the whole field of education and health. They should be held at the level at which the country can afford to sustain them.

Hon. Gentlemen opposite know as well as we do on this side of the House that the welfare State would be nothing but a mockery and a mirage unless it be based upon a sound national economy. Any reduction that the Chancellor may be able to make in the sphere of general Government expenditure, outside the social services and the subsidies, should be devoted to a reduction in direct taxation in such a manner as to encourage the further mechanisation of industry, a higher level of production and increased savings.

I now come to the question of subsidies. If the Chancellor is considering a further reduction in consumer subsidies and other forms of Government expenditure which bear directly upon the cost-of-living index, the resultant tax relief should be given in such a way as to reach every home in the country, and especially those which are maintained on small fixed incomes. A relief of direct taxation would not meet this problem at all, for those who would the most require compensation for an increased cost of living are those who pay no direct taxation, and, therefore, would not benefit.

Unless this compensation is provided, we shall be faced, and quite rightly, with further demands for increased wages, based upon a rising cost of living, from the lower paid workers, which will inevitably be followed by demands for increased wages from the skilled workers in order to maintain the wage differential, which will, of course, have the effect of increasing our production costs at a time when we are struggling to enable our manufactured goods to compete in the world markets.

In the last Budget, the Chancellor showed how well he was aware of this problem. It was by far the best Budget which has been introduced since the war, and it struck an excellent balance, not only, as the Chancellor himself said this afternoon, between inflation and deflation, but also between incentive and compassion. What did the Chancellor do to compensate for the rise in the cost of living caused by the reduction in the food subsidies? Increased family allowances, pensions and benefit increases were granted, and 2 million Income Tax payers relieved entirely from the payment of any direct taxation.

It is these 2 million people who were relieved of taxation in the last Budget, and who do not at the moment pay any Income Tax, together with those whose incomes were not on a sufficient level as to make them pay Income Tax before the last Budget, who will have to be compensated as a first priority if any budgetary measures are introduced which have an effect in raising the cost of living in the next Budget.

A reduction in the standard rate of Income Tax will clearly not help them. What compensatory measures can the Chancellor take this time? There are, of course, many factors affecting the cost of living over which the Government have no control at all But there is one matter over which they have control. That is Purchase Tax. There is still a considerable element of Purchase Tax within the cost-of-living index. It is surprising that the Labour Government during their six years of office, when the cost of living was rising month by month, did not face the problem and did not realise that by taking out the element of Purchase Tax they would certainly help to hold the cost of living more stable than it was. They did not do it, and there is still a large element of Purchase Tax within the index.

I can give the House some examples. Here are articles which carry 50 per cent. Purchase Tax—sheets, blankets, curtain materials and towels. Among articles carrying 33⅓ per cent. are electric light bulbs, scissors, toilet soap, toothpaste and razor blades. These are only a few items taken at random. It is towards the removal of these taxes that I consider the Chancellor should devote the monies saved if he reduces subsidies further in his next Budget. I ask the Chancellor to consider carefully whether this would not be the first and logical manner in which to compensate for any resultant rise.

There is one more point I wish to raise. Everybody knows what a great burden even a small increase in old age pensions means to the country's economy. At present they cost £66 million and without any increase at all they will be costing £489 million by 1975. At the same time, everybody knows equally well how hard it is for old age pensioners to make ends meet. It seems to me a great pity that the old age pensioner can only earn £2 a week without having his pension reduced. Surely everybody would stand to gain if this restriction were removed. No old age pensioner would be paid anything unless he was rendering some service to the community. Why should that service be limited? The pensioner who wished to keep on working and provide for himself a higher standard of living would benefit from the removal of these restrictions. I should have thought that the country as a whole would benefit from this, and I trust that the Chancellor will bear it in mind.

Mr. Deputy-Speaker (Sir Charles MacAndrew)

Mr. Willey.

Mrs. Jean Mann (Coatbridge and Airdrie)

On a point of order. Is it not an indignity to the House that this Amendment on the cost of living has been discussed and it is only a minute ago that we have had a representative from the Ministry of Food on the Front Bench? As to the subject of unemployment, there is nobody at all on the Government Front Bench from Scotland, although unemployment is higher in Scotland than anywhere else in the United Kingdom.

Mr. Deputy-Speaker

That, of course, is not a point of order.

6.4 p.m.

Mr. Frederick Willey (Sunderland, North)

The hon. and gallant Member for Bedford (Captain Soames) will forgive me if I do not follow him, because I want to set about the Chancellor. I should like to say how fascinated I was by the right hon. Gentleman's performance. I have always thought that, with his gift for glossing over a hopeless brief and making the most of it, he has mistaken his calling and ought to have gone to the Bar.

I should be a very crabbed partisan if I did not acknowledge the fact that the Government have reason to feel a great deal of satisfaction at the result of the by-election at Wycombe. I feel that the greatest credit for that result goes to the Chancellor. So far he has been just as skilful as he was in the late 30's, when he was probably the most plausible advocate inside and outside the House of the policy of appeasement and Munich. He then used his considerable talents; the same sort of eloquent platitudes that he uses in this Parliament to confuse narrow sectional interests with the national interest. Against the true interest of millions of people in this country he convinced them, by his eloquence and persuasiveness, that the disastrous policy that the Government were then following was in the best interests of this country, when it was no more than a subservience to the cowardly feelings of a minority.

Once again the Chancellor has been called upon to give his great talents to lead Her Majesty's Government. Once again he is doing exactly the same thing under cover of a national crisis. In the atmosphere of a national crisis, he is quite coolly and calculatingly putting forward the interests of the few. He has chosen the present crisis to begin, and it is only a beginning, what he would term the redress of the redistribution of income achieved by the past Government. He is putting before national recovery the reversal of the policy of the late Government of fair shares for all.

His primary purpose is to restore as best he can the unequal society we had before the war. He has put that before our national recovery. Because of that, his present policy is as incompatible with our national recovery as his policy of appeasement was incompatible with our national safety before the war.

I am glad to see the Minister of Food here. Let us take a few illustrations of the policy of the Government. We have been debating food in this House continuously for the past months because we all know—none of us has now any excuse for not knowing—that if we are to make a call on our people generally to make a great productive effort the first thing we must do, and patently do, is to show that we are doing everything possible to ensure that everyone has at least a satisfactory basic diet. It was for that reason that we had during the war, and subsequently, a milk policy.

I need not expound the advantages of that policy. It has been done far better than I could do it by the Radio Doctor. We followed that policy until the present Government came to office. The present Government have increased the price of milk, twice directly and once indirectly. At first they said that this would have no effect on milk consumption. The Parliamentary Secretary to the Ministry of Food said how unhappy he would be if it did. Then they changed their ground. They said, "We admit it affects consumption, but not significantly."

I am not going to argue whether a drop of 20 million gallons in eight months of this year is significant. I am not going to argue whether a return, not to 1951, but to consumption levels below those of 1950 is not a reversal of the Labour Party's policy. But surely it is undeniable that it is quite untenable to pursue such a policy in present circumstances. The consumption of milk products, of butter and cheese, is less in this country today than it has been in any other year in peace or war.

What Government can justify, in these circumstances, reducing the consumption of milk deliberately by a price mechanism? Only a Government that is not concerned with the nutritional needs of the nation. A Government doing this, coolly assuming that the rich will be able to buy all the milk that they need, are a Government who cannot claim, as the Minister of Labour claimed yesterday, that they are entitled to expect from industry the broad co-operation which the Government need.

Let me turn to the food subsidies. I concede at once, of course, that if £410 million is to be spent on social services it is arguable whether food subsidies are the best means of spending that money. That is an arguable matter. But what is quite untenable is to withdraw the food subsidies in present circumstances. That is what the Chancellor recognised during the Election. What he said during the Election, in effect, and what the Tory Party said, is, "We will give you, the people of this country, this guarantee that we will not experiment in returning to Toryism while this country is in difficulties. When we have recovered, then we can afford Toryism." That was the burden of their case. But surely they cannot now cut the food subsidies and again expect the Minister of Labour to get a ready response when he calls for both sides of industry to help us out of our present trouble. The trade unions say, "You have embarrassed us by putting up these food prices."

There is more to it than that. All the skill and eloquence of the Chancellor of the Exchequer cannot persuade us that this money has gone to alternative social services. Of course, it has not. It has gone mainly to the relief of Income Tax, and whatever merits that may have, it cannot be described as a social service. What the Chancellor has done is to take from all equally and redistribute according to wealth. What the housewife is doing is contributing to the Income Tax relief of people who are already by and large far better off than she is.

I see that the Minister of State is highly amused by this. He will no doubt have read this document. The United Nations Economic Bulletin reported that, as a result of the right hon. Gentleman's policy, one-half of the people of this country are worse off and one-sixth are substantially better off—not merely much better off, but substantially better off. How can we expect co-operation from five-sixths of the people when they see as a result of the Chancellor's policy that one-sixth only are better off as a result of his fiscal policy?

Mr. R. A. Butler

May I intervene, because the hon. Member has said several rather extreme things? I do not in any way accept his figures or the source from which they come.

Mr. Willey

I will read the figures. The source, I may say, is Her Majesty's Government. I am not surprised, as hon. Members opposite are a bit confused, that the Chancellor should so express himself. He mentioned pensions and allowances. In respect of increases of pensions and allowances this year we have given to the recipients £49 million. But, as the Minister of Food has told me already, the increases in food prices so far this year amount to £162 million, so that I could hardly be accused yet—I still have some distance to go—of exaggeration.

If we take the question of the cost of living, as has been repeatedly pointed out, it is really no good repeatedly saying to the House, "We are sorry about the increase in the cost of living, but the increase in the cost of living is not as great as it was in the last 12 months of the Labour Government." Circumstances are not compatible. The increase in the cost of living this year is the result of the fiscal policy of Her Majesty's Government. We could have had a very steady cost of living index this year but for the fiscal policy of the right hon. Gentleman.

There is another factor always to be taken into account with the cost of living index, and that is the index of wage rates. The position is that although in the corresponding period of the Labour Government the cost of living ran up more sharply than it has done under the present Government, the wage rates ran two points in advance of the cost of living; so that although the cost of living was going up, the wage rates were operating to redistribute income.

This year it is entirely the reverse. The cost of living so far under the Conservative Government has done what we expected it would do. It has risen two points more than the wage level. Just as we were redistributing income in favour of the many, they are using the mechanism of the cost of living and the wage rates to redistribute against the many. All this has an effect upon industrial production and affects morale in industry. This is one of the reasons why there has been a fall in production. I do not isolate it and say that this is the sole reason, but it is one of the reasons.

If we compare like with like what do we find? This is not the first crisis that we have faced. We faced a similar crisis in 1949. Let us take the key figures. In 1950—the year of recovery—we held imports within the 1949 figure. So far as value went, they only increased by 2 per cent. in value. We increased exports in that year alone by 22 per cent., and in the final quarter of 1950 we were, in fact, running exports 35 points above the previous year. As for production, hon. Members may take either comparison, but the two figures are that we increased production in 1950 by eight or 11 points.

That was a tremendous achievement. It was a year of tremendous recovery. But what has happened this year? [HON. MEMBERS: "What about 1951?"] I am comparing like with like. In this present year the import cuts are just beginning to have an effect. The exports are now running, not less than 1951 but less than 1950, and production is again the lowest that we have had for over two years. The key figures show this, at any rate—and this is why there is no ground for the complacency of the right hon. Gentleman; there is a world of difference between the recovery we made in 1950 and the recovery that the Government are claiming we are making now.

Moreover, these figures are a warning of a grim future. The Minister of Labour said that we may be in for a tough time. If these figures are any guide, we may be in for a very tough time indeed. If I may follow the right hon. Gentleman in what he said today, we may next year have cars instead of red meat. The cars which are not going to Australia will be sold on the home market and, presumably, we shall have less meat. What the right hon. Gentleman will do will be to follow the policy that he is following now. Not only will there be possibly less red meat but by the working of the price mechanism, more of what there is may be going to the few.

I will not go over the figures of unemployment and short-time working. I will merely say that we have not got twice the number of unemployed we had before, but we have got substantially more unemployed than we had before. The case of the right hon. Gentleman until recently was, "Oh yes, but there is the textile industry. Take out the slump in textiles and the figures will be very much better." Now that men are going back to work in the textiles and unemployment is nevertheless still going up, what is their case? In spite of the fact that 18,500 people went back into textiles in the past month, the over-all figure of unemployment went up.

As my hon. Friend the Member for Sunderland, South (Mr. Ewart) said last night, this is very disturbing to those of us who have constituencies in the Development Areas. We feel the cold hand of paralysis coming back again. We look to our major industries, and we see that in the nationalised industries of coal and steel the Government claim credit for increased production. I say to the Government: for goodness sake leave those industries alone. But do not be too complacent about the coal industry, because it is a fact that output per man shift has decreased ever since the present Government came into office. That is a remarkable thing. There may be some technical explanation, but one of the explanations is that this is simply a reflection of the lowering of industrial morale about which I spoke a few moments ago—and is the direct result of the political actions of Her Majesty's Government.

As far as the position of steel is concerned, I read in the Sunday Press that the financial experts are apparently advising the Government that they are too optimistic in believing that one-third of this industry can be in private hands by the next election. Can anyone think of anything more likely to add confusion to an industry than to be put into this sort of state? Why not leave it alone? That is what we say in Sunderland, at any rate, because we depend upon steel.

My hon. Friend the Member for Bermondsey (Mr. Mellish) dealt with the shipbuilding industry. I raised this matter on the Adjournment in the last Session, not so long ago. At the time that I raised the matter I had not the Lloyds Register figures for the third quarter. Those figures are now available and they confirm everything I then said. There are 200,000 gross tons less shipping under construction today than there were 12 months ago. I was very interested to hear the Chancellor refer today to the fact that the biggest yards were fully booked. He used that phrase calculatedly, because the fact is that there are more berths unoccupied today than there have been for years. This is very disturbing to the shipbuilding industry.

My colleague, who dealt with shipping, gave us some figures but, although they were alarming enough, they dealt only with all shipping which was tied up. I shall give the figures for shipping which is tied up for reasons other than repair. In July we had 41,000 tons of shipping tied up otherwise than for repair, but by October that 41,000 tons had become 290,000 tons. This is a sign of a slump. It is very disturbing, and the Government have to do something about it. The trouble is that in the Development Areas, which have a fear of becoming depressed areas again, we see nothing being done.

I have raised this question repeatedly in the House, but what do we see? The North-Eastern Trading Estate Company, who are responsible for the Government factories within the North-East Coast area, budgeted for the present factories at the end of the present 12 months employing at least 10,000 more workpeople than they were when the year began; but what is the position? They are not employing as many as they were when the year began. They are employing over 2,500 less, so that the very industries that were created to provide against redundancy in the essential basic industries are themselves throwing up redundancy, and nothing is being done about it.

I have been prodding the Board of Trade about factory building, a question which has been raised in this debate. The position today is that only one factory is being built. We had agreed in principle to the building of two advance factories. The existing circumstances are such that those factories should be built, but the Government are inert. They will not do anything. Hon. Members opposite can talk about the re-deployment of industry, but we see no signs of it on the North-East Coast. It is not being done. In fact, the party opposite cannot do it or, at least, they can do it only by renouncing Toryism and that, while the right hon. Gentleman is Chancellor, they are not prepared to do. They are following the traditional Tory pattern and are putting that traditional Tory pattern above the demands of national recovery.

I do not wish to exaggerate, but I say that this is not the sort of Britain that will make a recovery from her present economic difficulties. The Government have already shown that they have betrayed their trust. They have put sectional advantage once again above national advantage. We on this side of the House have to resist them at every opportunity. We have to deter their return to Toryism. We have endured Toryism for too long. I should think that national demands today would at least have made them hesitant in returning, or seeking to return, to Toryism; but upon that they have set their face. We must get them out, because the longer they remain in office the harder will be the reckoning and the more we shall be called upon to put right.

I know that it is no good appealing to the Chancellor of the Exchequer. He has to give way to the pressure of the benches behind him; but from these benches we will resist him. I know that this is a difficult position to be in. I know that whilst we resist a return to Toryism we should all work as hard as we can, unitedly, to improve the resources of this country; but we are entitled to say that in present circumstances there is no excuse for their flagrant breach of their election promises. If they go on betraying their trust in this way they can hardly expect us to try to do anything but get them out as soon as we can.

6.25 p.m.

Mr. Julian Amery (Preston, North)

Listening, earlier this afternoon, to the right hon. Member for Leeds, South (Mr. Gaitskell) I was reminded of those 18th century Divines who suited their doctrines to their interests. When he talked about the improvement in the terms of trade and said that things were going better he invoked the doctrine of predestination—it was an act of God or an act of grace. But, on the other hand, when he talked about the end of the sellers' market, and German and Japanese competition, that was all due to the original sin in the heart of the Tory Government. That was all our fault.

I cannot help feeling that the right hon. Gentleman and his colleagues who put down the Amendment might at least have prefaced their criticisms—nobody minds them; nobody could conceivably quarrel with the fact that they are pointing to the decline in production and exports—but they might have prefaced their criticisms by paying some tribute to the achievements of my right hon. Friend the Chancellor of the Exchequer. If he had not balanced the books the hon. Member who has just sat down would really have had something to bleat about.

The main charge in the Amendment to the Gracious Speech is that … it discloses no positive and effective proposals for dealing with the serious economic position of the country which is evidenced by the decline in production and exports … It is a very sweeping charge, but I suggest that it is rather superficial. We all know—on this side of the House as well as on the other—that the creation of new wealth is fundamental to our recovery. We have to increase production to the point where we can either pay for the goods we want to buy abroad or do without them.

But surely we also know that the United Kingdom by itself is too small and that its resources are too unevenly balanced to make it possible for us to solve our production problem alone. The natural ground plan on which we have to find a solution is the Commonwealth, and the Government have rightly taken the initiative in inviting the Commonwealth Prime Ministers to join them in London to sit down together to try to work out a solution to the production problems. We shall no doubt see the results of this conference in the next Budget. It would have been difficult for the Government to come to the House with concrete proposals before they had discussed the matter with their colleagues at the Commonwealth conference and decided what those proposals should be.

The Commonwealth is already largely organised as an economic unit, at any rate as far as the sterling area is concerned. But if we are to secure an overall increase in production we need something more. We really need a Commonwealth development plan. We need to draw up—and I hope the conference will do this, at any rate in outline—the blueprint of such a plan.

The basis of such a plan of development must be investment. By investment I mean not just liquid capital—it is a great mistake to think of investment only in terms of cash—but also skill and capital equipment. From where is this investment to come? Each Commonwealth country must provide a great part of its own development capital. We must, however, face the fact that, if there is to be an overall Commonwealth plan at all, we shall have to be its greatest backer. Despite all our difficulties, in the six years since the war we have invested more money in the Commonwealth every year than the United States are ever likely to invest. Given the right financial and trade policies, I believe we could do even more.

Our capacity to invest, of course, depends very largely on the financial and taxation policies which are pursued here at home. The restriction of credit pursued by my right hon. Friend the Chancellor of the Exchequer has succeeded, with his import restrictions, in righting the balance of payments. If we are to increase production as well as restrict consumption, I believe that we must look at present credit policies again. Dear money is a very blunt weapon. It hampers the investment you want to promote just as much as the consumption you want to discourage.

I am not suggesting for one moment that we should go back to the Daltonian era of cheap money, accompanied by rigid physical controls; but I would ask the Chancellor of the Exchequer whether he would consider the possibility of introducing a policy of differential interest rates. For instance, increased agricultural production would be considerably encouraged if there were something in the nature of an agricultural credit bank, empowered to lend money at less than current interest rates.

If we are to increase production, we shall also have to take another look at our present taxation policy. To increase the rate of investment here and in the rest of the Commonwealth, we shall have to call for even greater restraint than we have demanded so far from the consumer. I deprecate the tendency which has been expressed by some of my hon. Friends to press for further relief for personal incomes. In present circumstances, that is much more likely to lead to increased consumption than to increased saving.

Nevertheless, I do believe that the Government should make a great effort to relieve the burden on industry itself. It ought to be possible to save money on Government expenditure; but, even if it were not, some increase in direct or indirect taxation would to my mind be better than to keep on the Excess Profits Levy or than to go on to refusing adequate allowances for the re-equipment and expansion of industry.

A Commonwealth development plan would, of course, go ahead much faster if United Kingdom capital were matched by capital from outside the sterling area. The United States has the greatest surplus of liquid capital and productive power in the free world, but there are very real limits to the amount of dollar investment for which we can hope. For one thing, North and South America still offer greater security and greater profits for the United States investor than most other parts of the world.

For another thing, the United States Government, and particularly, I think, the new United States Government, are unlikely to favour any increase in aid programmes, even if they agree to maintain them at their present level, of which I am by no means sure. We can get American investment, both private and Governmental, but the condition of getting it, and to my mind the only condition, is to have a development policy of our own which Americans will find it worth while to back in their own immediate interests.

But the United States is not the only external source of investment. The industrial countries of Western Europe still have unemployed skill and unused factory space. These are also a form of capital. Surely we could devise credit policies which could harness the unemployed skill and the unused factories of the Continent to the development of the food and material resources of the sterling area overseas.

Europe's capacity to invest depends very largely on its coal and steel production; and here, if I may, I should like to say a word about the Schuman Coal and Steel Community. There was, I think, a very real danger that that community might become a kind of cartel directed against us. That danger still exists, but to my mind it has been very considerably diminished. At Strasbourg, in the summer, as the House knows, we put forward certain proposals which have the effect of associating us with the Coal and Steel Community at every level. These proposals, which were an attempt to give practical effect to what has been called the Eden Plan, received the virtually unanimous support of the Strasbourg Assembly.

This result was obtained, I think, very largely as a result of the co-operation established between my hon. Friend the Member for Melton (Mr. Nutting), who led the delegation, and the right hon. Member for Blyth (Mr. Robens). Our two parties have not always seen eye to eye about the Council of Europe in the past. This time, I am glad to say that they did, and British influence in the Assembly was greatly increased as a result. It is now up to the Governments, including, of course, our own Government, to see that effect is given to what was done at Strasbourg.

It is important, to my mind, that they should, for British association with the Coal and Steel Community, as I see it, holds the key to securing Continental co-operation in any Commonwealth development plan. The desire for co-operation of this kind is strong on the Continent. There is a feeling over there that neither the Six-Power Continental community nor the Commonwealth can by themselves become what the economists call viable. Over there, they hold that, separate, each must for a long time at any rate, remain dependent on the United States but that together we could form a trading area which might balance its accounts with the dollar world at a much earlier date.

This feeling has been expressed in what has been called the Strasbourg Plan—a conception which owes a great deal to my hon. Friend the Member for Aberdeenshire, East (Mr. Boothby). The central feature of this plan is that there should be a joint investment programme, serving the Commonwealth on the one hand and Continental Europe and its overseas territories on the other hand. This investment programme would be partly financed by a European investment bank and would be supported by a strengthened European Payments Union and by a European preferential system interlocking with our own system of Imperial Preference.

I understand that, in accordance with the Assembly's instructions, this Strasbourg Plan is to be laid before the Commonwealth conference. I hope that its discussion by the Commonwealth Premiers may lead to proposals by the Commonwealth Governments for the establishment of closer economic co-operation between the sterling area, on the one hand, and Western Europe, on the other hand.

So much for available investment potential, both inside and outside the sterling area. The next question we have to consider is this: how is all this investment to be attracted into support of a Commonwealth development plan? Some of it will come, of course, from Governments—from international institutions like the World Bank or large public corporations; and I think there is a good deal to be said for the creation of a Commonwealth finance corporation such as Lord Bruce proposed the other day. The greater part, however, whether from inside the sterling area or outside, will have to come from private sources.

Now, private investors will only come forward if—and even Governments will be well advised to hesitate to invest—they can be sure of a relatively stable market for the goods which their investment will produce. To encourage investment is not only a question of making capital available. It is also a question of securing markets for the end product. You have, in fact, to offer the producer whose capital you want to attract some measure of protection against his competitors. This means, in an economy like the sterling area, that you must be prepared to give priority to the sterling area producer as against his non-sterling competitors.

A good deal of this priority is already given to the sterling area producer by the existing network of long-term contracts, quotas, tariff preferences and sporadic import restrictions. But much the greatest stimulus to inter-sterling trade at the present time is provided by the system of exchange control.

The United Kingdom Government may well be pressed at the conference to move towards a freer convertibility of sterling. The aim is right; but I hope they will be very cautious about how they pursue it. In two essential respects we are in a much worse position today to face an experiment in convertibility than we were in 1947. For one thing, our reserves are much lower. For another, the sellers' market is gone. We have to face German and Japanese competition, not to speak of an American tariff operated by a Republican Administration and a Republican Congress. It would be very foolish, in these circumstances, to believe we can get any spectacular improvement in the country's position. Exchange control is not, of course, an impenetrable form of economic defence. It could not stop the last devaluation. But, then, no form of defence will work for long unless there is built up behind the defence zone the power of attack. We shall not escape devaluation by sticking to exchange control, but if we have a sound Commonwealth development programme exchange control may help to hold the position until the development begins to bear fruit.

Exchange rates reflect a country's trading position far more than they influence it. Our present balance of payments is so precarious that we could only face even partial convertibility if we substituted a much stronger system of tariff preferences and other discriminatory restrictions for the present exchange control. This is what we have already done in our relations with Europe. Despite all our difficulties we have kept the £ largely convertible with Continental currencies through the European Payments Union; but we have only kept it so by imposing rigid restrictions on all imports from Europe.

The conclusion I would draw is that we can move towards convertibility only in so far as our balance of payments improves, or in so far as our partners in the sterling area are prepared to substitute higher tariff preferences and other trade restrictions for exchange control.

I am well aware that this kind of attitude on our part may be a disappointment to some of our partners in the Commonwealth. This raises another very important question—the question of the management of sterling. It has always seemed to me rather odd that the Bank of England, which serves all the sterling area, should be under the political control of only one of its Governments. I wonder whether the time has not come when we should divide the Bank of England into two parts. The one might be a United Kingdom central bank under the control of the Treasury, and the other a Commonwealth reserve bank under the political control of the Finance Ministers of the Commonwealth. The Ministers might meet once or twice a year in conference and might be helped by deputies sitting permanently in London.

We have already arrangements of this kind in N.A.T.O. and in the European Payments Union. I cannot see why we should do less for the sterling area. I do not know whether such a suggestion would commend itself to other sterling area countries. I feel very strongly, however, that the difficulties in the way of any great advance towards convertibility make it all the more important that we should do all we can to give the other Commonwealth countries a greater say than they have at present in the management of our common currency.

While on the subject of currency, may I say a word about gold? Seventy-five per cent. of the gold produced in the free world is mined in the sterling area. Here. I agree with the right hon. Gentleman the Member for Ipswich (Mr. Stokes). It is quite ludicrous that we should continue to accept that the price of one of our most valuable resources should be quite artificially depressed. This question is of great importance to the South African Union and to Australia. It is becoming of increasing importance to Canada. Surely the time has come when we ought to do something to secure an easement, at any rate, of the position.

I come now to the question of Imperial preferences and of G.A.T.T., and I should like at once to pay a tribute to the Colonial Secretary's frank acknowledgment at Scarborough that the "no new preference" clauses in the G.A.T.T. were "embarrassing" to the Government and "crippling" to Commonwealth trade. I was also very glad to read the Chancellor's declaration to his constituents that It would be wrong to let G.A.T.T. obligations stand in the wav of desirable changes. I take it from this statement that the Government have now decided to press for revision of the "no new preference" clauses in G.A.T.T., as far, at least, as the United Kingdom is concerned. I hope that this may be confirmed when my right hon. Friend replies to the debate.

We need such a revision for substantial reasons: first, so that we may raise certain tariffs to protect our farmers without at the same time penalising the Commonwealth farmers; secondly, so that we can convince the investor in the United Kingdom and elsewhere that if he puts his money into Commonwealth development, then he will find a market for his produce, at any rate in this country thirdly—and it is not the least important—so that we can stake out our claim to a share of those raw materials and foodstuffs in the Commonwealth which may well become scarce under the pressure of American buying.

I realise, of course, that other Commonwealth countries are at present rather less interested in preferential policies than once they were. They are confident of finding markets for their raw materials overseas. They think they can secure some capital from the United States and the United States Government. I cannot say whether their confidence or whether their hopes are justified, nor how far they may have been affected by the Republican victory; but whether or not the other countries of the Commonwealth wish to give us increased preferences, we can reasonably ask that they will support us when we come to ask, as we must, for a revision of the "no new preference" clauses of the G.A.T.T.—when we ask, in fact, to be free to give them increased preferences.

In this they would only be following the precedent of Lord Salisbury's Government of 1898. That Government did not depart from the then established policy of free trade, but they denounced their trade treaties with Germany and Belgium—an earlier version of G.A.T.T.—to make it possible for Canada to give preferences to us. We have to maintain the principle that the most-favoured-nation clause cannot be held to apply between the countries of the Commonwealth.

We cannot put pressure on the other Commonwealth Governments to increase their preferences to us, but I hope the Government will not hesitate to point out very frankly to the conference that the rest of the Commonwealth have a very great interest in helping us to find markets for our exports. Unless we can find markets and so balance our accounts we shall run into a further devaluation with serious consequences for all holders of sterling balances. Unless we can find markets and balance our accounts we shall have no capital surplus to invest in the Commonwealth.

Most important of all, unless we can find markets and balance our accounts, we shall be unable to maintain the effective administration and defence of the Colonies—the Colonies whose dollar surpluses so largely cover the dollar deficits of some of the sovereign countries of the Commonwealth. I hope that these points will be put to the other Commonwealth representatives at the conference—and put clearly. There is no need to be unduly diplomatic in the family circle. What is said today may sow a seed that will give us a valuable harvest in the future.

Most of what I have been saying so far applies to the sterling Commonwealth, but there is the special problem of Canada. Whatever the strict logic of economics, we cannot consider Canada as a dollar country and nothing more. We must somehow break down the road block in Anglo-Canadian trade relations. How is this to be done? Increasing United Kingdom preferences may help in so far as it diverts dollar purchases from the United States to Canada. Raising the price of gold would help a little.

But we need something more than that. We need a more imaginative approach on both sides of the Atlantic. I have always felt that our Treasury could be a little more liberal in allowing dollars to migrants to Canada or would-be investors in Canada: and if it were, then we could reasonably ask the Canadians to meet us half way—ask them to agree accept sterling as money, at any rate up to an agreed figure—up to a figure which could be guaranteed against devaluation. That is to say, we could undertake to pay back the sum at the original dollar value.

Many proposals have been made with this end in view. One very generous one recently put forward by Canadians was that Canada should accept United Kingdom investments in Canada in lieu of the repayment of our dollar debt to Canada. Another is that Canada should simply accumulate sterling balances to spend either on investment in the rest of the sterling area or in buying aircraft, liners, and so on for Canada's transport system.

We cannot expect Canada to join the sterling area, but if she would agree to have at least a foot in the sterling area we should have taken a great step towards repairing the broken machinery of international payments. If Canada would act as a bridge economically, as she already does politically, between the United States and the rest of the Commonwealth a solution to the dollar gap would be in sight.

This Commonwealth economic conference may not make final decisions, but it will set the pattern for subsequent approaches to Europe, to the United States, and, perhaps, to a world economic conference. It is very important, therefore, that the United Kingdom Government should go into this conference with a clear idea of where we want to go and how we mean to get there.

We cannot in all this escape our responsibility to give a lead. I have tried in a few minutes to outline what I think that lead should be. I trust the Government are thinking on very much the same lines. How far other Commonwealth countries will follow us we cannot tell. Some may be more inclined to than others. Some may feel more cautious than others. The attitude of other Commonwealth countries sometimes seems rather negative, but for my part I believe that if the United Kingdom Government give the right kind of leadership at this conference they will be astonished at the warmth of the Commonwealth's response.

Here, at any rate, is an initiative worth taking. Here is the kind of policy which could command the support of the Commonwealth, the co-operation of Europe and the good will of the United States. I pray that this is the line the Government will take, for in so doing they would lay the foundations of a grand design to overcome the economic problems which wrack the free world and imperil its unity and strength.

6.51 p.m.

Mr. F. Beswick (Uxbridge)

I am extremely pleased to be able to follow the hon. Member for Preston, North (Mr. Amery). I have listened to every speech that has been made from the back benches opposite in this two days' debate, but his was the first speech that seemed to me at all constructive and to face up to some of the realities of the situation. The Chancellor said earlier that there was no confusion on that side of the House. Certainly he was right in that hitherto there had been a remarkable unity in criticising his policies, or in criticising his apparent lack of economies. So far I have not heard one constructive proposal, until the hon. Member for Preston, North spoke. I should like to follow him on a number of points, and I do intend to follow him with regard to certain aspects of European unity and the development of the Commonwealth.

I should like first, however, to say just a word about his references to taxation. He made two points. He said that industry required cheaper money, and I agree with him about that. He also said that it would not be fair to abate taxation on personal incomes at the present time, although he said he would like to see taxation on company profits abated. I have often wondered whether it would not be possible to combine both social justice and economic needs with regard to these profits. Would it not be possible to do in industry what we have contrived to do with taxation in land in Death Duties, to tax some of the profits but to leave them in the industry as the property of the Government for the use of the industry? I put that forward to the Chancellor as an idea for him to consider.

From the other speeches and statistics with which we have been regaled two indisputable facts seem to stand out. First, in each of the six years after the war the output of real wealth in this country has increased steadily, and at the end of six years the rewards for producing that wealth were shared rather more fairly. The Prime Minister himself, when he went over to the United States immediately on his appointment, was able to boast of that. The second outstanding fact is that in the last 12 months the output of real wealth in this country has decreased and has been shared rather less fairly.

The Government can talk as much as they like about strengthening our financial position, but they cannot deny that our fundamental economic material prospects are not better but worse. Despite what joy or satisfaction they may contrive to gain from the Wycombe result, our people are sick and tired of these continually recurring economic crises.

Mr. Cyril Osborne (Louth)

The party opposite had them for six years.

Mr. Beswick

Certainly, they had, and we have had another one this year. The point I make is that the people know full well that the solution of these crises will not be found simply by cutting the imports of canned food, or making the rest so dear that our people are unable to afford them.

The people of this country—I am not talking about those who speak after great study, but of the ordinary people—realise that some basic and fundamental re-arrangement of our affairs is required so as to give some sense and hope in striving to step up production. There is no sense in increasing production if some man-made financial crisis is going to stop people who need goods from buying them from others who are ready to make the goods they need. It is that sort of feeling which has engendered a rather vague and general sympathy for ideas of federation, or confederation, or functional federalism, and so on.

The mistake that has been made in this country is basing the case for federation primarily upon military forces rather than upon economic needs. The case for some form of federation, which would include our own powerful and potentially even more productive United Kingdom, rests upon the essential economic facts of life and not upon military needs or upon this Communist bogey. One reason why I support this Amendment is that so far the Government have shown no indication at all of recognising this need, this requirement and this feeling for a merger into some wider community.

The question is: What should our next step be towards this wider community, how big a step should it be, and in precisely what direction should it take us? I think the next step should be with other members of the British Commonwealth and our own Colonial Territories. We should concentrate more upon the possibility there rather than talking in such vague terms about other forms of union which have no economic substance at the moment, and which, as the hon. Member for Aberdeenshire, East (Mr. Boothby) said, are only a dangerous form of social escapism.

What does Atlantic union, for example, offer now, apart from a suitable subject for after dinner oratory? It offers military weapons and military personnel which are spreading through Europe, not a sense of security, but a most dangerous form of anti-Americanism. In the economic field, whereas at one time it did offer money which could be regarded as payment for services honourably rendered in a common cause, today that money is regarded as a dole: and when we attempt to send useful articles like bicycles to offset these payments we have the same kind of American people who are complaining of the dole being sent erecting an economic curtain and preventing us from doing anything useful in return.

My first point, therefore, is that we should return to this idea of Atlantic union only when we have achieved economic health elsewhere. We have elsewhere the prospect of some form of union of Europe. I was very interested and very pleased to hear the way in which the hon. Member for Preston, North couched his remarks about the possibility of a federation of six States of Europe. Hitherto it has seemed to me that the attitude of a lot of hon. Members who go journeying off to Strasbourg was that, whilst they were in favour of union in theory, they were against it in practice. They were like men who wanted to marry but were afraid to make love.

Mr. Robert Boothby (Aberdeenshire, East)

That is the wrong way round.

Mr. Beswick

No. In theory they were in favour of legal union but were afraid of the consequences. What is even worse, they appeared to be afraid of the joys of union themselves and were determined to deny them to others. Plausible as some of their arguments may sound against federation of the six States, as proposed by M. Spaak, it seems to me that most of those objections fundamentally were those of the dog-in-the-manger. We should encourage these six nations to find their own destiny immediately in a federation. Let them get on with the job. Let us get all the experience we possibly can of the techniques of federation. Let us, at the same time, see what we can do to strengthen our union within the sterling area.

The hon. Member for Preston, North said that the sterling area was not a viable area, but I think that it is necessary sometimes to remind ourselves—

Mr. Amery

What I actually said, in talking of the feeling on the Continent, was that the feeling over there was that neither the Commonwealth nor the Continent by itself was a viable area.

Mr. Beswick

I am grateful for that remark, for I did not think that the idea fitted in with other parts of the hon. Gentleman's speech. It may be a fact that it is not self-sufficient, but it is a very powerful area, and we have sometimes to remind ourselves just how powerful it is. It is at least as potentially powerful as the other big economic units of the world. One-quarter of the world's people are inside the sterling area and they do one-quarter of the world's trade. They are an extremely well-balanced community economically. Primary products are well balanced with industrial output. They have almost a monopoly of some materials—one-half of the world's wool, 40 per cent. of the world's tin, and so on. Although we are short of cotton and tobacco, nevertheless, it does seem to me ludicrous that we should allow our fear of the dollar economy to hypnotise us as sometimes seems to be the case.

It may be said, not so contemptuously as some people choose to speak sometimes of the British Commonwealth, but rather sadly, that surely I am not suggesting that all these countries within the sterling area would be prepared to come to this closer union immediately. No, of course not immediately. Canada is not able to come even within the sterling area; India and Pakistan may wish to settle down still further before deciding on new constitutional affiliations; South Africa has other constitutional problems on her plate.

But omitting these countries and other non-British members of the sterling area, with the United Kingdom, with Australia, with New Zealand, with the proposed Central African federation and the Colonial Territories—despite what my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) in front of me is saying about there being little left, and I am pained sometimes at the attitude he takes with regard to the Commonwealth in view of the fact that he was once a Minister responsible for their affairs—it is a fact that there are 135 million human beings within that nucleus, and they are living in an area greater than that of the United States and potentially richer than the United States of America.

Those who, like my right hon. Friend, have had experience of these matters, may ask if I imagine, for example, that Australia would be prepared to come into this union immediately? I do not think that she would easily and without persuasion, but what, not frightens but annoys me, is that no one is making an effort at the present time and no one is putting forward the proposals at the present time.

I put down a Question to the Prime Minister recently that we should have economic union on the Commonwealth Conference agenda, and he brushed that aside, and said that there were difficulties. Of course there must be difficulties and doubts, but ought we not to be confronting and overcoming them? Six years ago, the Prime Minister made a great speech to the peoples of Europe. He said then: There is a sovereign remedy which could enable Europe to dwell in peace, safety and freedom. We must, he said, build a United States of Europe. It is surprising to me that the Prime Minister, who speaks from time to time such noble words about the British Empire, should imagine that it is much more easy to get Germans to live with Frenchmen than it is for New Zealanders to come into closer union with Londoners. Why should he and other hon. Members opposite be so confident that the Italians and the Belgians will come together in some form of economic union, while those, who owe the same allegiance to our Queen, will not come into some form of economic union? There are others who say that extension of Imperial Preference is more desirable than economic union, and there are friends of mine on this side who say that quotas and long-term contracts can give us the stability we want.

Mr. Boothby

If the hon. Gentleman rules out quotas and long-term contracts and expansion of Imperial Preference, what does he mean by the extension of economic union?

Mr. Beswick

I am not ruling them out, and if the hon. Gentleman can contain himself I will explain why. I am grateful to him for staying for a few moments longer than he intended.

Mr. Boothby

How do you know that?

Mr. Beswick

I am suggesting that if he has a little more patience he will hear what I propose. I am not saying that we can do without long-term contracts, but I am saying that the long-term contract is not in itself enough. I am making the point that the mere amendment of the General Agreement on Trade and Tariffs or alterations of the Havana Convention and so on, will not give us the stability we want. The Australian experience earlier this year ought in itself to be proof of that. How did Imperial Preference serve us when Australia wanted to slash her imports? There we had the humiliating spectacle of British people who had earned the money and the right to buy articles prevented from buying from this country the useful goods that we were able and willing to supply them with.

That sometimes seems to me as ludicrous as if Yorkshire totted up her separate balance of accounts and said that for the time being she was unable to buy from Lancashire. That seems precisely the same sort of situation which we are now finding in certain parts of the British Commonwealth.

Mr. Boothby

And of Europe.

Mr. Beswick

And of Europe, but I am concentrating on what I consider to be a feasible nucleus within the sterling area on which basis, I think, we can build up something better and greater. There are other reasons why I think Preference in itself is not enough. As the hon. Member for Preston, North stressed, we need a redistribution within the Commonwealth of both capital investment and emigration. We need a redeployment of these, not only as between one type of industry in this country and another type of industry, but as between this country and other parts of the Commonwealth area. But any large-scale emigration or decentralisation within the present Commonwealth, divided as it is into separate self-accounting units, would mean death to the United Kingdom.

How can we employ capital to the best advantage if what we have to consider is not maximum production of wealth for the area as a whole but a favourable balance of payments for one particular part of it? What then are the minimum requirements for which I ask? I ask for a customs union; a common currency; a single balance of payments account for external trading; an agreed policy for emigration and capital investment; and a common defence force paid for by a separate tax on personal incomes within this union.

Within an area of this kind, the only limits to productivity would be the energy and initiative of the people who live within it and not any financial policy which is liable to chop down their efforts at any moment. I accept the design of the hon. Member for Aberdeenshire, East—the eventual design—of an Atlantic union and so on. We can return to that, I think, if we have first done the job of tidying up within the sterling area. If, at the same time, M. Spaak has our encouragement and assistance for his proposals on the Continent of Europe, we then have two big units which talk with the United States on a more equal footing. We then get a chance of a genuine democratic union and not a dollar domination.

Those are the lines on which I should like us to be working. It may not be feasible this year, but I should like to think that the forthcoming Commonwealth Conference will be thinking not simply of short-term proposals but of a long-term design as well. I should like to think that at that Conference proposals of this character were to be put forward with the influence and prestige of the present Prime Minister, but it is because I see no sign at all from the Government Front Bench of that imaginative and radical approach that I believe the terms of the Amendment are amply justified.

7.10 p.m.

Sir Edward Boyle (Birmingham. Handsworth)

The hon. Member for Uxbridge (Mr. Beswick) said one thing with which all of us on this side of the House would wholeheartedly agree, that the British public is sick and tired of these recurrent dollar crises every few years. Nothing is more vital for the reputation not only of the present Government but also of our Parliamentary system that we should rid ourselves of this two-year cycle of crises.

I agree with the hon. Member that we shall not solve our difficulties simply by cutting out a few cases of canned meat. Professor Lionel Robbins said in a pamphlet that there was no greater sign of decadence of our present economic life than the spectacle of high-level businessmen and high-level Ministers flying about in chartered aeroplanes discussing the import of canned sardines. We shall not solve our difficulties in that trivial fashion.

I hope that the hon. Gentleman will pass those views on to some of his right hon. and hon. Friends who have always laid too much stress on what physical control of imports can achieve.

Mr. Emrys Hughes (South Ayrshire)

Does the hon. Gentleman object to high-powered businessmen going about the world selling Scotch whisky?

Mr. Boothby

No.

Sir E. Boyle

My hon. Friend the Member for East Aberdeenshire (Mr. Boothby) has answered that question more briefly and more effectively than I could have done.

The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) was a little unfair for him in suggesting that the Treasury and the Board of Trade were rather ready to wait and see what turned up, and were not taking active measures about the falling off of exports and production. No hon. Member who looks at the latter part of the speech of my right hon. Friend the President of the Board of Trade, especially columns 174–5 of the OFFICIAL REPORT of 5th November, 1952, where he was describing the efforts he had made, can fairly feel that the Board of Trade is being complacent in the present situation.

I was rather surprised to hear the hon. Member for Stechford (Mr. Roy Jenkins), whom we all regard as an expert in this House on economic affairs, talking as though nobody knew quite how putting up the Bank rate affected our balance of payments. When my right hon. Friend the Minister of State for Economic Affairs spoke on this point in the Budget debate he was not saying anything original. What he said was that putting up the Bank rate should induce a more cautious approach to the financing of capital investment, including unnecessarily large stocks, on the part of everybody."—[OFFICIAL REPORT, 12th March, 1952; Vol. 497, c. 1498.] He used the argument that putting up the Bank rate raised the cost of carrying stocks of goods against borrowed money, and that this should slow down replacement orders and thus lessen the burden on our heavy industries.

I myself said much the same thing during the course of the debate, and this argument can also be found in Professor Hawtrey's works and in Mr. Manning-Dacey's recent book on banking. I do not think anybody seriously disputes that, but if any hon. Members opposite still do so, they should look at the slightly pompous symposium on this subject in the Oxford University Institute of Statistics Bulletin for April and May, 1952, which they will find in the reference Library. There they will find that some writers who are not altogether in favour of the policy nonetheless do not at all dispute that it has had a favourable effect on our balance of payments position. If hon. Members will read the speech of Lord Pethick-Lawrence in another place they will find some very good arguments there, also.

I turn now to the subject of the cost of living and to the charge from the Opposition that my right hon. Friend has, in the words of the hon. Member for Sunderland, North (Mr. Willey), been benefiting the few at the expense of the many. My hon. Friend the Member for Ealing, South (Mr. Maude) made a very valuable point yesterday when he said in an interjection to the hon. Member for Ince (Mr. T. Brown) that the cost-of-living index had risen only 4 points between January and September, 1952, as opposed to 11 points between January and September, 1951.

Quite apart from that—this is the point I now wish to emphasise—the present Government has done far more than its predecessors ever did to safeguard the standard of living of those who are most adversely affected by the rising prices of food. On 15th May last the Minister of Food told the House that, on current levels of consumption, during the period between 1st April, 1949, and 31st July, 1951, food prices had risen at an average annual rate of £250 million a year. He also told the House in the same debate that during 1952 the price increases on food would amount altogether to £210 million a year. Therefore, the increases in the price of food this year will be less than the annual rate of increase during two and a quarter years under the previous Government.

Furthermore, when one considers the standard of living, one has to take into account the other measures which the Government has taken, and, whereas the previous Administration, in 1951, spent only £53 million on increased social benefits, the present Government has spent no less than £135 million in this way.

Mr. James Griffiths (Llanelly)

How much of that is derived from increased contributions and how much from Government subsidies? The increases under the National Insurance Act are provided for largely by increased contributions and not by Government assistance.

Sir E. Boyle

I have not the figure, but I do not think the right hon. Gentleman is on a very good point. The money spent on increasing the National Insurance benefits to bring them up to their 1948 purchasing power and on increasing family allowances, disablement benefits and a large range of other social service benefits amounts to £135 million. Quite honestly, the extra contributions will not come to anything like that amount.

In the Budget debate my hon. Friend the Member for Barnet (Mr. Maudling) said: The poorest of the poor are not the people with the lowest wages, with small families and in households where, perhaps, one, two, or three incomes are coming in: the poorest of the poor are the old age pensioners, the war pensioners, people drawing industrial injuries benefits, the sick and the unemployed, the people with large families, the people drawing National Assistance. They are the poorest of the poor and they are precisely the people whom this Budget is benefiting."—[OFFICIAL REPORT, 17th March, 1952; Vol. 497, c 1986.] The Government can fairly claim that we have done more than our predecessors did to safeguard the standard of living of those who are most affected today by the rising prices of food.

Coming now to the question of redistributing the national income in favour of the few as against the many, I noticed that last night the right hon. Member for Blyth (Mr. Robens) said that the policy of the Government was to enrich those who were already very well off. The right hon. Gentleman and his friends must know quite well that the wealthy section of the community was able to gain far more during the months which followed the Budget of the right hon. Gentleman the Member for Leeds, South than they will ever gain from the Budget of my right hon. Friend.

It is significant that the Labour Election manifesto last year included the phrase: We shall take measures to prevent large capital gains. We have not heard anything about capital gains lately from the Opposition side of the House, because hon. Members opposite know well that since we came into power a capital gains tax would yield a negligible amount. It is not sensible for hon. Members opposite to forget the very great difference in the financial climate for investors since we came into power.

Last night my right hon. Friend the Member for Haltemprice (Mr. Law) said that the Chancellor of the Exchequer had given us a breathing space, and I think it is reasonable to compare our position today with our position a year ago. No hon. Member opposite could deny that the Labour Administration left us in a position which was worsening. When I say that the position a year ago was worsening, I am not only thinking of the drain on our gold and dollar reserve—I do not intend to quote figures which are so familiar to this House—but, in addition, the textile recession was well under way.

My right hon. and learned Friend the Minister of Labour made a good point last night when he pointed out that between July and October, 1951, unemployment had risen by 78,000, as compared with an average rise of 40,000 during the three previous years. Furthermore, because the capital investment programme was already overloaded, when we took office one of the first steps my right hon. Friend had to take was to impose a moratorium on new school and factory building.

It was largely the result of the action of my right hon. Friend that it was possible to proceed successfully with the housing programme this year. Compared with the position a year ago, what is the position today? During the first half of 1952 the United Kingdom has succeeded in the task which it set itself for the second half, of eliminating the balance of payments deficit with the world as a whole, and in October, exclusive of United States aid, the sterling area has a dollar surplus.

The overloading in our capital investment programme has been overcome partly because raw material shortages were not so hampering as we feared. It is worth remembering that if it had not been for the textile recession we should, in fact, have secured some increase in production in 1952, because, outside textiles, there have been very considerable increases in production in other industries.

On the subject of unemployment, whereas last year it rose by 78,000 between July and October, this year it rose by only 4,000 from July to October. It says very much for the effort my right hon. Friend made in the textile industry this summer that just as the secondary effects of that recession were beginning to be felt, the recession itself began to lessen so that in four months unemployment in Lancashire fell from 79,000 to 32,000. I could not take seriously the calculations advanced by the right hon. Gentleman the Member for Blyth last night, when he sought to show that there were really 600,000 unemployed and not 400,000. His calculations rather reminded me of some of the efforts made to prove that Bacon was the author of Shakespeare's plays. It was not a very valuable contribution to our debate.

I do not believe that his estimate of 1 million unemployed by the end of the year will prove correct, nor the still more pessimistic guesses of the right hon. Gentleman the Member for Huyton (Mr. H. Wilson). The fact that unemployment has been kept below 400,000 at a time when the sellers' market has ended and competition from Germany and Japan is increasing is, in my opinion, a very considerable achievement, and one of which the Government have reason to be proud.

I think it is well to remember that today there is no easy cure for unemployment if it comes upon us. I have an uneasy feeling that the right hon. Gentleman the Member for Leeds, South is still living in a rather pre-war Keynesian atmosphere, for it is no good thinking that, with our balance of payments problem, we can attempt to spend ourselves out of unemployment by lubricating the economy with purchasing power or by embarking on a large public works programme. That is why the question of the balance of payments underlies not only the standard of life in this country, but the whole question of our employment position.

I want now to suggest one or two directions which our policy should follow in the months to come. I think the Chancellor of the Exchequer would agree that this is the moment when we should avoid excessive optimism or excessive pessimism. There is no short cut at all to get us out of our difficulties. I always listen to my hon. Friend the Member for Aberdeenshire, East (Mr. Boothby) with interest, but when he advocates linking the E.P.U. and the sterling area more closely together, I feel that he is trying to find a short cut which will end our trading difficulties. I am quite sure there are no short cuts in the world today.

At the same time, I do not believe in the gloom of the right hon. Gentleman the Member for Huyton, and I think my right hon. Friend the Chancellor of the Exchequer put the true position very well the other day when he said: What we need is not just production irrespective of what we produce … but production of those things that the world's markets will buy and our industry's growth and progress at home require. It is nothing new for Great Britain to lose part of its export trade after a war. It happened after the First World War and that was one of the main reasons—I concede to hon. Members opposite that it was not the only reason—why we had a hard core of unemployment almost throughout the period between the two world wars. We must acclimatise ourselves to the changing pattern of demand, and I think my right hon. Friend the Member for Haltemprice last night was quite right when he said that our greatest opportunity lies in the field of new inventions. For example, in this country we lead in the design and production of jet aircraft and it is very important for us to keep that lead.

If we are to make the best use of the opportunity in which these new inventions afford us, there must be some reduction in the burden of taxation on industry. This was the field which was covered by my hon. Friend the Member for Farnham (Mr. Nicholson) yesterday, and I do not want to repeat the arguments he used. But I was very impressed by the article in the "Financial Times" by Mr. S. P. Chambers who, I think, everyone will agree is an authority on this matter.

Mr. Chambers points out that undistributed profits in industry have actually fallen during 1951, because to get the figures for true undistributed profits we have to deduct from the gross figure of undistributed profits both the increased value of stocks which are purely due to increased prices, and, secondly, the difference between the figure for depreciation actually allowed and the realistic figure for depreciation calculated on a replacement cost basis. I hope that my right hon. Friend, when he is considering this financial policy for next year, will take fully into account the position in which industry finds itself today.

Yesterday, when my right hon. Friend the Member for Farnham was speaking, he was interrupted by the right hon. Gentleman the Member for East Stirling (Mr. Woodburn). I am sorry he is not here, but I would like to take up the point which he made because it is important. The right hon. Gentleman said: If the State collects savings publicly by taxation and uses them for capital expenditure, how is that not a saving compared with private saving which may not be used for capital expenditure but may be used for expenditure on other private purposes?"—[OFFICIAL REPORT. 10th November, 1952; Vol. 507, c. 656.] In other words, the right hon. Gentleman was suggesting that it does not really matter so much if industry cannot save and build up reserves because we can always obtain compulsory savings by means of a Budget surplus and higher taxation.

The answer is that if we carry taxation beyond a certain point, we are going to have dis-saving by private individuals. And that is what is happening now, which is why I cannot agree with my hon. Friend the Member for Preston, North (Mr. J. Amery) that we should consider in present circumstances an increase in direct taxation on personal incomes.

With regard to imports, I have said before in this House that there is a need for adequate depletion allowances for those who prospect for minerals in this country. Such work is extremely important at a time when we must try to cut down our import bill for raw materials as far as we possibly can.

In conclusion, I want to say this. I listen with great attention to any speech by the hon. Gentleman the Member for Bermondsey (Mr. Mellish). There are few hon. Members opposite for whom I have more respect. He made a very sincere speech yesterday, and I understand the motives which caused him to make it. Of course, he is absolutely right when he says that those who through no fault of their own, have fallen behind should be given assistance, but it will not be possible to do so unless other people are earning and are creating new real wealth. We must earn before we can have the kind of social services which we should all like to see.

I end by reminding the hon. Member of some wise remarks by the economist Marshall: Progress mainly depends upon the extent to which the strongest, and not merely the highest, forces of human nature can be utilised for the increase of social good. We all want to see those helped who have fallen behind in the race, but we shall not see that so long as we penalise success; for only out of success and initiative can real wealth be created.

7.31 p.m.

Mrs. Jean Mann (Coatbridge and Airdrie)

This has been a very interesting debate, and rather amazing in the buoyancy and optimism that have been displayed from the Government benches, beginning with the Chancellor of the Exchequer.

The right hon. Gentleman jibed and poked fun at the Opposition for their dissensions and differences of opinion, but I recall that on the 2nd of this month one of his own hon. Friends attacked him viciously—shall I say attacked his policy? He made statements that are printed in the newspaper which I have, and that would cause alarm. He finishes by saying: There is no escape from it, except to disaster. He also says: Mr. Butler has succeeded in restoring the balance of payments to our trade. … He has been helped by an unexpected turn in our favour of the terms of trade, i.e., we can now buy more goods abroad for less exports. He goes on to say: Everything is overshadowed by the double menace of falling production and falling exports. If this continues we shall be back in the worst economic crisis we have yet experienced. That does not seem to line up with the optimism of the hon. Member for Birmingham, Handsworth (Sir E. Boyle) who has just sat down, or of the Chancellor in opening the debate. Hon. Members may wonder who the gentleman was who wrote so despondently. I almost said that it was the hon. Member for Bretton Woods. It was the hon. Member for Aberdeenshire, East (Mr. Boothby), who has just left the House. He is the Ebbw Vale of the Tory Party.

The hon. Member for Handsworth has been over-optimistic in regard to the cost of living. He continues the old fairy tale. Indeed, the Tory Party will repeat it so often that they will believe it. It goes something like this: "Whereas in one year you, our opponents, raised the cost of living by 12 points, in four months of the year following we raised it only by four points. Therefore, the implication is that we dropped the cost of living. In our hands, the cost of living went down."

Did hon. Gentlemen opposite win High Wycombe by that sort of fairy tale? Is the truth not that the Government have constantly added to the cost of living week by week and month by month since they got into power? Never, since Ananias courted Sapphira has there been such an example of misrepresentation.

Sir E. Boyle

I have never courted Sapphira, but I have courted Handsworth twice successfully. My quotation was related to the standard of living as opposed to the cost of living, and I had an absolute watertight case that we have done more than was done by the hon. Lady's party for those who are most affected by rising prices of food.

Mrs. Mann

Let me take up the last sentence used in that interruption, that hon. Gentlemen opposite have done more than was done by the Labour Government. The hon. Gentleman based his remark on a statement that £49 million was given to the old age pensioners to balance the withdrawal of the food subsidies. I understand—I am not sure that my statement is absolutely accurate—that the withdrawal of the food subsidies meant a saving of £250 million per annum. If the Government gave £49 million of that sum to the old age pensioners, who is getting away with the rest of the swag, with the £200 million? Let it be remembered that of the £49 million given to the old age pensioners the workers have had to contribute 7d. or 8d. per week in stamps to meet that extra benefit, so benignly conferred on the old age pensions. I do not want to be interrupted any more. If hon. Gentlemen opposite feel they want to have it out with me I am prepared to go on to any platform and to address an audience on the lines of the challenge made to me in the interruption.

There have been three attacks from the Government on the cost of living. There is the frontal attack by the Chancellor of the Exchequer, the attack that everyone knows about, on the rationed goods. There has been an underground movement, whereby the Ministry of Food have increased, to my knowledge, 95 different items of food and food products, behind the Chancellor's back. Does the Chancellor know of it? I have every item here surveyed and tabled.

There have been 95 items: beverages including chocolate, grapefruit, pineapple, flour products, breakfast foods, bread, cakes, cereals of all kinds, split peas, lentils and dried peas. There have been increases in every kind of tinned goods, all jams, condiments, sweets, confectionery, meat products—I am not referring to the Budget increases, but to increases far greater that have been taking place—herrings, cod, whiting, all kinds of cleaning materials which the housewife usually uses, and all kinds of toilet necessities. I do not specify them all. Then there are candles, matches, fire lighters, paraffin, electricity, gas and, to go a bit wider, newspapers, postage—

Mr. Emrys Hughes

Municipal rates.

Mrs. Mann

Yes, caused by the increase in interest rates in the Budget, which has consequently raised rents also. The list is interminable. This survey was taken by a group of women in the Midlands. It was necessary because in all the Questions I have put to the Ministry of Food I have been referred to the interim cost of living index and, when I go to the Library and study that, it leaves me as wise as before. It is time that we specified every one of the 95 items that have been increased in price since this Government came into power.

I said there was a frontal attack by the Chancellor. There was also an underground movement by decontrolling item after item, as a result of which prices have gone up. And there is a secret service, in that short weight is now permissible. There is short weight in chocolate bars, short weight in soap bars. I noticed that one firm was advertising a decrease in the price of soap. When I weighed their soap it was a quarter of a lb. short in weight. They were selling it, not by weight, but as a bar which had been decreased in price, and the shortage of weight meant that the soap was increased in price. I have letters from housewives telling me that tinned milk is thinner than it was before and that even vinegar is now diluted.

Prices have gone up steadily in spite of all the silly talk—"We have only put on four points whereas the Labour Government put on 12 points." It is like the husband who on being asked, "Do you beat your wife?" answered, "No, I only beat her on Monday, Tuesday and Wednesday; her first husband beat her every day of the week." The housewives expected a change—the posters' said, "Time for a change"—but they did not expect the change to be a still further increase in the cost of living.

Is it justified? I say it is in no way justified and I shall quote now from the Economic Bulletin for Europe. This bulletin shows that in the last year of Labour Government wholesale prices moved up swiftly and the calculations are based on the year 1948 at 100. In March, 1951, the index figure was 143, in April, 146, in November, 150. That was a steep rise and surely justified a rise in prices which we on this side of the House were most reluctantly compelled to impose.

But how fared the Opposition, the Government of today? In April, 1952, the Economic Bulletin for Europe showed that the wholesale price index had gone back to 150 but, when we suffered 150, our retail price was 119 whereas this Government's retail price was 125. In other words, an increase in the wholesale price justified the Labour Government in increasing retail prices, but a reduction in the wholesale price which has gone steadily on from the month of April has resulted in the Government steadily increasing the retail prices. Perhaps the right hon. Gentleman can explain that?

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

I cannot follow the hon. Lady into the intricate detail of her argument, but she has fallen into one or two fallacies which ought to be noticed. In the first place, I think she quoted as the amount of the reduction of food subsidy the amount of the food subsidy that remained after the reduction. In the second place, she quoted a number of specific increases on foods, some of which were due to the withdrawal of subsidy. That is counting the same thing twice over. In the third place, in putting the other side of the account, she counted the amount paid to pensioners, but omitted to count also the removal of 2 million people from the ranks of lower Income Tax payers.

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

Perhaps the right hon. Gentleman will explain the point which has been put by my hon. Friend—

Mr. Deputy-Speaker (Mr. Hopkin Morris)

Order. Mrs. Mann.

Mrs. Mann

I hope the right hon. Gentleman will have an opportunity to refute my figures from the Economic Bulletin of Europe. They show that the wholesale price has fallen from 150 to 149, and the Bulletin also shows that at that time out of 20 specified European countries the price index either fell or remained stable. During this seven months the United States increased their cost of living by one point whereas the United Kingdom increased the cost of living by six points. What justification is there for a Government, while experiencing a reduction in the wholesale terms, increasing retail prices?

Perhaps right hon. Gentlemen opposite can explain that, and can explain also why we cannot get eggs, cheese or butter. It was said at one time that when a housewife saw a mouse she ran away in fear. Well, if a housewife saw a mouse today she would run away for shame, for she has not even cheese for her family. Yet I notice that Canada has said that Britain can obtain 10 million lbs. of top quality Canadian cheese by Christmas if she wants it. They have cabled the Minister of Food that they can supply the cheese at a price to be negotiated, and have said that if the British Government decide to act upon the offer, we could have the cheese in England in time for Christmas.

Are we going to have the cheese? Are we going to have any more butter? Are the Government going to pass on to the housewives the fall in the wholesale prices, or are they going to continue the record by which they have left undone those things which we ought to have done; And we have done those things which we ought not to have done; And there is no health in us."? I should not like to conclude without referring to the other part of the Amendment. It particularly affects Scotland. Unemployment in Scotland is rising to proportions that become most disturbing indeed. On 13th October, the figure was 68,138, of which Glasgow bore 22,000, equalling 3.6 per cent. of the working population. My own constituency bears a proportion equal to 6.5 per cent.

In my constituency, there is evidence of short-time working. In April, 1951, for instance, the British Tube Works were working three shifts and employing ever 1,000 workers, but in 1952 they were employing only 764, a loss in one section alone of employment to 237 men.

There is a third aspect. The Amendment attacks unemployment and short-time, but there is creeping into these figures something that is extremely disquieting. That is, an increase in the employment of juvenile labour. I am wondering whether it means a return to the social conditions of the inter-war years, when father could not get a job but the young son, the boy leaving school, was engaged. I notice that the Glasgow Trades Council reported at their meeting this week that there were 2,661 more workless men and 205 more workless women, but that in the case of boys and girls the figures were decreasing. I do not want to make an assertion without hearing the Minister of Labour upon this but throughout Scotland, and Lanarkshire in particular, there is the fear of a return to the days when father, and even mother, is thrown out of a job but the young people of 16 and 18 are taken on.

Hon. Members opposite resent it being said that there are some amongst them who want unemployment. I should not like to lay such a serious charge at anybody's door, but people in whom I must have the greatest faith have told me that in conversation with employers of labour, statements have been made that "When we get this crowd out—" that was, the Labour Government—"we will be able to pick and choose." That has been said, and there have been variations of that kind of theme.

I do not say that the Government policy is to have unemployment—that would be sheer economic madness, because this little nation must be set to work; but there is no doubt that some of their followers welcome unemployment, or a certain measure of it, because it allows them to pick and choose.

In the statement that has been made today I find nothing that would help the economic recovery of the country. How does the removal of food subsidies help the economic recovery? How does watering the vinegar and giving short weight in commodities assist our recovery? In the same article to which I have referred, the "Ebbw Vale" of the Tory Party says that import cuts have invited reprisals, and I think that this is true; it has contributed to unemployment. If we do not buy from countries, they cannot buy back from us. The Government well deserve the vote of censure which the Amendment implies, and I have great pleasure in supporting it.

7.56 p.m.

Mr. Nigel Fisher (Hitchin)

I should dearly love to follow the hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann) into the matter of food prices—[HON. MEMBERS: "Why not do so?"]—but unfortunately I am precluded from doing so because I am Parliamentary Private Secretary to the Minister of Food and I have not to make any remarks about food, much as I am tempted to answer the hon. Lady.

I want to return to what I think is the main problem which the debate has posed; our prospects of emerging from the difficult economic situation which the Government inherited a year ago. Some people still seem to think of our troubles as being temporary. Some think that they can be solved by import restrictions or by financial controls, and this was even implied in some of the things said yesterday by the right hon. Member for Lewisham, South (Mr. H. Morrison).

So far, of course, practically all the steps taken by my right hon. Friend the Chancellor of the Exchequer have been restrictionist in character, but that was necessary in order to stem the torrent in which our gold and dollar reserves were disappearing. Since then, however, a year has passed and the first crisis, at any rate, has been averted. Our thoughts are now turning, as they have been during the debate, to the other side of the slate; the positive and expansionist policies which alone can rescue us from our precarious economic position.

Some people pin their hopes on achieving a trade balance with the United States of America, but I believe this to be quite illusory and a hopeless quest. If it could be achieved it would be ephemeral, with no firm basis or hope of permanence about it. We quite delude ourselves if we hope to solve our problems by increasing our exports to the U.S.A.

America has immense natural resources. She has a tremendous volume of primary production. Her industrial output, I think, is equal to that of the whole of the rest of the world put together. Why should we imagine that 150 million people in America will buy indefinitely the manufactured goods made by 50 million people in this country, when she can make all those goods just as well, or better, for herself? I know that the United States needs some of our products, but in value she needs only a fraction of our industrial output. I do not think that any weaker economic units such as our own can hope for long to equal the far stronger American production.

Even if we achieve that miracle, even if we balance our trade with America, in the end what would be the result? As soon as her industries were affected by our exports, we may be quite sure that a prohibitive tariff would at once be raised against us. And then, what would happen in two or three years' time, when the United States re-armament programme has been achieved, when rearmament has reached its peak and is followed, as it may well be, by a recession?

I think that is bound to result in a sharp decline in American imports, and, as we all know very well, often a quite small contraction of trade in the United States can have a totally disproportionate effect on our own very much weaker economy. Since the war, we have simply gone from one crisis to another, but, when the United States completes her re-armament programme, we may then be faced with by far the most serious crisis in the contraction of trade in America, with its effects, which will probably paralyse the trade of the whole sterling area.

That is not in any way to criticise America; far from it. Her great generosity, and her ready acceptance of all the responsibilities as a great Power which we once bore alone, have been the most remarkable acts of imaginative statesmanship since the war that the world has seen, and that is rightly acknowledged on all sides, but it seems to me that we have to save ourselves, and that we cannot really expect the United States to do it for us.

Where, then, should we turn? Where can we turn? This island is too small to be an efficient economic unit in the modern world. Europe, with so much of its agriculture behind the Iron Curtain, is already over-industrialised, and, if we link up economically with Europe, we should merely add to that unbalance. Surely, in the Empire there still lies a very real and bright hope for us, because there is there already, potentially at least, the quantity and diversity of natural resources upon which we really could build up a strong economic unit—a unit as strong and as well balanced as the United States itself.

In the Colonies, we have unlimited opportunities for the creation of new industries and the expansion of old ones. In the Dominions, we have these vast and under-populated territories, whereas here we have 50 million people crowded into this little island. If we stand alone, each one of us, we are weak, but, together, we could create an economic unit which would be as strong as that of the United States. If we negotiate, whether politically or economically, simply as the United Kingdom, we should negotiate from weakness. Australia or New Zealand, trying to do the same, would also negotiate from weakness, but, together, the Commonwealth, as an economic unit, could negotiate from strength and in a way which no one of us individually could possibly attain.

Of course, I do not suggest Empire Free Trade. That would obviously be to oversimplify such a complex trading system as our own. Obviously, the Empire's economic structure has to be just as flexible as the Empire's political structure. We have made this attempt once before. We made it in 1932 at Ottawa, when we tried to create our own imperial trade balance, and we had a very fair measure of success. We recovered more quickly from the 1931 slump than any other nation in the world. I believe that our hope today lies, and must lie, along the same path.

We have a tremendous consumer demand in the Empire for our products. I know that 1951 is perhaps an unfair year to take, from the point of view of what has happened since in Australia, but, if I may give the House the figures for motor car exports for 1951, they show that 107,000 motor cars were exported to Australia in that year, and only 20,000 to the United States. Even little New Zealand took 32,000, and 24,000 went to South Africa. If we were able to multiply our exports of motor cars to the United States by five times, which is scarcely likely, we still would not achieve the total exported to Australia in that year, and the same thing applies to motor cycles, bicycles and many other products which we want to sell.

Joseph Chamberlain, who was the architect of this policy in which many of us so sincerely believe, had in his mind a preferential partnership by which Britain would export industrial products and the Empire would supply the primary production. I think that needs a little modification today, because every large Dominion has, to a greater or lesser degree, gone in for industrialisation, and many of the Colonies may wish to do so in the future.

It is really only natural that they should strive to achieve their own internal trade balance if they possibly can, but, to offset that, we have this world demand for food and raw materials, and, while many Empire countries may seek to balance their own internal trade position by encouraging their industries, we on our side seek to assist our internal balance by encouraging our production of coal and agriculture. In Britain, I am quite sure, there will be fresh seed to sow which may well flower from the inherent inventive genius of our people. My right hon. Friend the Member for Haltemprice (Mr. Law) touched on this point yesterday, when he said that every important modern invention had originated in this country.

Now we are at the beginning of a new reign. Think how weak and distracted we were when the first Queen Elizabeth ascended the Throne 400 years ago. Yet we achieved much glory and renown in the years which followed. Again, at the close of the Napoleonic wars, though victorious, we were poor and depressed, our finances strained and straightened at the end of another world war against another would-be world dictator. Yet, under another great Queen, we had within a few decades, invented the steam engine and undergone the industrial revolution, which enriched Victorian England to a quite unbelievable extent and gave us for generations the leadership of the whole world.

I like to be an optimist, and I am sufficiently of an optimist now to believe that what we have done so often before in our long island story we may yet do again in the new Elizabethan Age, but, to do it, we have to have tremendous faith, especially in the brains and character of our people, and also in the immense resources of our own Empire.

Mr. M. Follick (Loughborough)

Does the hon. Gentleman realise that, for 100 years, with the single exception of the Crimean War, Britain had no wars at all of any importance—no great wars—while all the other nations of the world were fighting great wars?

Mr. Fisher

I appreciate the hon. Gentleman's point, but there were not many world wars during the Victorian era, and of course, it was very helpful to the prosperity of all nations that that condition obtained. At any rate, they were not wars on the scale which we know today.

However, the important thing is that, although we may need our Imperial resources and have faith in them, the really vital factor is that we should use them, and, in many cases, we are not. One of our greatest weaknesses today—and I was glad to hear my hon. Friend the Member for Preston, North (Mr. J. Amery) on this point—is this exclusion of Canada from the sterling area.

As a result, we cannot play our proper part in providing the capital to develop Canada's wonderful resources in nickel, asbestos, uranium, iron ore, copper, lead, zinc and oil. All these things Canada has in such abundance, yet we are not able to try to help her to develop them. There we have limitless opportunities in Canada, with only 15 million people to exploit them and only American capital to foster their development. The reason for that is that we cannot afford the currency, and what a pitiful thing it is. What is currency but a unit of trade which we invented and designed to help trade and bring more trade, but which has yet got us into this ridiculous position?

It may be naïve to say this, but I cannot believe that it is beyond the wit of statesmanship to devise some system by which Canada could take part payment for her exports in sterling and, in return, that we perhaps should give preferences to Canada and so divert some of our dollar purchases from America to Canada. Then there are the other Dominions, all of whom want investment and also the manpower with which we could supply them.

The Colonies need capital investment, equipment, new plants, railways, bridges, harbours, roads, mining and factory and agricultural equipment. All these things are urgently needed while we need the food and raw materials which the Empire could so easily send to us. In all these things we should be helped enormously if we could extend Imperial Preference.

The mutual remission of that duty could be the quickest and most effective stimulant one could think of for our Imperial trade. It is no longer a controversial issue. It is certainly not a controversial issue now between the parties. I recall with pleasure a debate last February initiated by the hon. Member for Wandsworth, Central (Mr. Adams) and the hon. Member for Uxbridge (Mr. Beswick) on the subject. I am sorry that the hon. Member for Uxbridge is not in his place. I was encouraged by his speech earlier in this debate. I hope that we may yet achieve almost a unanimous thought on both sides of the House on a policy which, so far, successive Governments have failed to implement.

We are in a silly position where we cannot increase old preferences or establish new ones. Only G.A.T.T. bars the way and that can be denounced, as we all know, at 60 days' notice. I hope that at the forthcoming conference the Government will do so. I liked the point made by my hon. Friend the Member for Croydon, East (Sir H. Williams) yesterday, when he said that he hoped the Government would give a lead. I hope so, too. If we imagine ourselves to be still the leading nation in the Commonwealth we have no right to be lagging behind. We have a positive duty to give a lead to the other great Dominions. I welcome very much what was said by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) this afternoon when he lent his influential advocacy to the idea of a permanent economic body sitting in London and advocated a closer Imperial economic structure.

Summarising these essentials as I see them, we want an expansionist Imperial policy as opposed to a restrictionist island policy which I think we have followed so far. At home, as the Chancellor mentioned today, we want an expansion of our own agriculture and an increased production of our own coal. As my right hon. Friend the Member for Haltemprice said yesterday, the Chancellor should also encourage by richer rewards the inventive capacity of our people.

We should also develop the iron and steel and engineering industries not only for their great value as exports but for the part they play in the Imperial economy. There should be greater export of capital goods to the Empire, an expansion on a much larger scale than hitherto of emigration, state aided by arrangement with Dominion Governments. There should be an economic link-up of Canada with the Empire, a renunciation of G.A.T.T., and an extension of Imperial Preference.

Each one of these eight suggestions would not do very much good by itself, but all eight put together could play their part in a pattern of permanent recovery on the lines some of us wish to see. I believe that, together, they would give us some hope of solvency and even of prosperity in the future. If that were to happen, through the bonds, light as they are, which still bind the Empire together, we might find that this little island, which taught the world the art of freedom, might teach it too the art of economic unity and expansion.

8.15 p.m.

Mr. S. N. Evans (Wednesbury)

The hon. Member for Hitchin (Mr. Fisher) is in favour of an expansion of agriculture in this country. I am glad to hear it. I shall regard him as a "buddy" henceforth. I want to talk about agriculture, and I realise that it is not a very popular subject in this House. [HON. MEMBERS: "Yes."] Unlike the White House, Korea and Mau Mau, it has no political sex appeal. It is awfully important for all that, because this import-export problem, this balance of payments problem, and the dollar gap will be with us for a long while and it is in this industry, which is such a laggard at this moment, that recovery can commence.

I agree with much of what has been said by the hon. Member for Hitchin. The defence of the £ is as important as military defence today, and, of course, there can be no doubt that what the £ is worth on 1st January, 1954, will depend not least on the activity or lack of activity of the British farmer. The British farmer has been very well looked after in the last few years. The 1947 Agricultural Act, which was introduced by the Labour Government, was intended to create a revolution in British agriculture.

Here I should like to say how sorry I am that the ex-Minister of Agriculture, my right hon. Friend the Member for Don Valley (Mr. T. Williams), is not in the Chamber tonight. I have been talking about agriculture for two-and-a-half years, and it might have been thought by inference that by implication I was being critical of his office. But he has never allowed himself to get sour or allowed the happy relationships that exist between him and me to be disturbed. I hope very much that we shall soon see him with us, greatly recovered in health.

The Labour Government introduced the 1947 Act with the idea that it would bring about a revolution in agriculture. So it has. But it has been a one-sided revolution. It has brought immense prosperity to the farmer, but almost wholly at the expense of the housewife and the taxpayer. Farm profits in 1938 were £55 million. They were £183 million in 1947. For each of the last four years they have averaged £290 million.

The farmers enjoy subsidies, guaranteed prices and a completely sheltered market. None can deny that farmers occupy a privileged position in our national life. Both in peace and war they have financial and physical security. We, the rest of the nation whose competitive force in international markets is tremendously influenced by the cost of British farm products, are entitled to expect a better return than we are getting at the moment. I suggest to the farmers that they should think in these terms—that they have not only the responsibility of looking after their family fortunes, but that they also administer a trust on behalf of the nation. We must have a yardstick. I will take as my yardstick for comparison the Danish agricultural industry, where there is no advantage of soil, climate or wages. To crash through this sound barrier of British agricultural inertia, apathy and inefficiency I am forced to make some comparisons, and I must say that they come out very badly for the British agricultural industry. For example, in 1950 the Danish yield of wheat per acre was 27.9 cwt.—33 per cent. higher than the British yield. Had the British yield been equal to the Danish yield we should have had 860,000 tons more wheat, and that would have saved us 75 million dollars.

My hon. Friend the Member for Sunderland, South (Mr. Ewart) was talking about a shortage of steel in the shipyards. From time to time we in the Midlands experience a shortage of steel. Steel is one of our bottlenecks in this country. How much steel could we have bought with that 75 million dollars? In 1950—I quote 1950 because this is the last year for which authenticated Danish figures are available—the Danish yield per acre of oats was 24 cwt.—26 per cent. higher than the British. If our yield had been the same, we would have had 700,000 tons more home grown oats, and 700,000 tons of American oats represents 47 million U.S.A. dollars.

All the while this industry complains about the shortage of feedingstuffs compared with pre-war. My constituents are having to make motor cars which they would much like to drive themselves, to sell to foreigners to pay for feedingstuffs which the British farmers could, in the light of these figures, be growing for themselves.

I know the House is not fond of statistics, but statistics are very important.

Mr. Anthony Hurd (Newbury)

If you get them right.

Mr. Evans

What they reveal is suggestive; what they conceal is vital, so I will continue with this statistical striptease, if I may. I have said before in this House that the Danes supply us with a pound of butter for 3s. That is less money than we pay the British farmer for a gallon of milk, and, as all the world knows, it takes 2½ gallons of milk to make a pound of butter. I have been puzzling how that comes about. There is no advantage of soil, climate, or wages. How does it come about? They enjoy good living standards in Denmark, as anybody who has been there knows. It is not a backward, illiterate country where people live on a bowl of rice a day.

I have been able to get some figures. I found that whereas the Danish milk yield per cow in the year 1950 was 736 gallons, the British yield was only 594 gallons. That is a difference of 24 per cent. Danish cows gave 24 per cent. more milk than British cows. This is a national average. When I suggested that high prices and subsidies were concealing a good deal of agricultural apathy, inertia and inefficiency, all hell was let loose. The N.F.U. nearly went "barmy." The important thing is this. Had the British yield per cow been equal to the Danish yield per cow, there would have been 452 million more gallons of milk available in this country, and from that milk there could have been made butter sufficient to give 20 million families in this country another 9 pounds.

Mr. Anthony Fell (Yarmouth)

Has the hon. Gentleman got the butter fat content figures for those yields?

Mr. Evans

I have the statistics issued by the Health Department of the City of Birmingham and the City Analyst has reported that in the first quarter of 1952 one in five of all the milk samples supplied were under minimum standards and that these were the worst figures for 70 years. That is the position in regard to the fat content of British milk. It is worse today than it has been for 70 years. These are the figures revealed by the City Analyst in Birmingham. I am rather glad the hon. Member interrupted. Let me repeat that in the first quarter of this year one in five of the milk samples tested by the Birmingham City Analyst were under minimum standards and the figures were, in fact, worse than they have been for 70 years.

Mr. Fell

I am grateful to the hon. Gentleman for giving way and allowing me to pursue this point. I do not think, with respect, that that proves anything. Would it be possible for him to give the butter fat content figures for Denmark and Britain over the period covered by the statistics which he has been talking about?

Mr. Evans

I am only talking about one year. Of course, the Danish milk is immensely better than ours in terms of fat content. They have much higher standards which their Government compel them to keep. Here we keep pouring into this industry vast financial blood transfusions without insisting on those minimum standards of efficiency and quality to which we are entitled.

Mr. Fell

Will the hon. Gentleman allow me to interrupt him once more? I shall not interrupt him again, I promise him. The fact is that the hon. Member has been trying to prove something by statistics regarding the quantity of milk per animal. Those figures prove absolutely nothing without the relative statistics regarding the butter fat content as well. He is not able to give those figures.

Mr. Evans

I am not able to give precise figures, it is true, but I will say this—

Mr. Fell

Those are the only figures we want.

Mr. Evans

I can tell the hon. Gentleman this from memory. Whereas the Danish butter fat content will be in the neighbourhood of 4 per cent. and probably over, the British butter fat content will be nearer 3 per cent. That is the national average. Additional to this extra yield per cow per year, which is 24 per cent., the quality of the milk is immensely higher.

I should like to impress this figure on hon. Members. If the yield per British cow in 1950 had been equal to the Danish national average we would have had 452 million gallons more milk, and from that milk we could have made sufficient butter to give 20 million families in this country 9 pounds of butter each in addition to the meagre ration that they are getting.

I do not mind what the farmers get. So far as I am concerned, they can have the Crown Jewels for the new £250,000 N.F.U. temple in Knightsbridge. They can have Hyde Park for their point-to-point meetings. What I want is a speedy increase in the productivity of these 20 million fertile acres—the most fertile in the world.

May I now proceed to the problem of the balance of payments, the dollar gap? We are all worried about this. We all know that the defence of the £ is important, but it is no good making speeches here about it if we are not prepared to do something. The Labour Government created conditions in which this industry was ready for a marked advance in productivity and efficiency, but we have not had it. We have been very badly let down. We have the best farmers in the world, but it is the overall picture that matters.

Let us take the question of barley. The Danish yield per acre was 26.1 cwt.—37 per cent. higher than the British yield. Again, there is no advantage in soil or climate, and it has nothing to do with wages or mechanisation. If our yield had been the same as the Danish yield we should have had an additional 633,000 tons of barley.

Mr. Hurd

Is the hon. Member giving us comparable figures—one set from the Danish Ministry of Agriculture and the other from the British Ministry of Agriculture—or are they selected figures to prove his argument?

Mr. Evans

The Danish figures come from the Danish Government and the British figures from "The Times." If the hon. Member has any disagreement with the figures, those are the two sources to check up.

The Danish yield of sugar beet was 286 cwt. per acre—19 per cent. higher than the British in 1950. The British yield was 991,000 tons less. If the British yield of sugar beet per acre had been equal to the Danish, 20,000 families could have had another 14 lb. of sugar each during 1950. This is the cost of the inefficiency and inertia that has seized on this industry. This game has gone on long enough and it is high time that this House took a very lively and intelligent interest in this subject. We vote the money. This farming business is our business.

There might be something to be said for those who were standing on their own two feet and who went bankrupt if they failed, but the industry has been spoon-fed by this House. Tens of millions of pounds of subsidies have been given every year and it is our duty to demand that the condition which obtains at the moment should be altered very speedily. This industry is in a very parlous state. It is moribund. The other day my right hon. Friend the Member for Belper (Mr. G. Brown) said, at Morecambe: This is the way we must improve our existing farmlands. He also said: Our production per acre is absurdly low. My goodness, I could hardly get my breath when I read that. I admit that I have been prodding this industry with a metaphorical pitchfork for 2½ years.

Mr. E. G. Gooch (Norfolk, North)

The hon. Gentleman has not done much.

Mr. Evans

I shall do. I have got a lot of recruits. I am the most successful recruiting sergeant since the 1914–18 War. There has been nothing like it since Kitchener's First Hundred Thousand. All sorts of people are climbing on the band wagon. There is going to be a very big field for the Cashing-in Stakes. I hope that nobody gets trampled to death. I maintain that farmers occupy a very privileged position in our national life. Faced as we are with a continuing balance of payments problem—when we are wondering how to feed ourselves and keep our factories going—we are entitled to a better return than we get at the moment for the lavish assistance which has been poured into this industry.

It is about time that the National Farmers' Union hierarchy accepted this and started acting upon it; but they give me the impression that they do not want a discussion of this industry. I was invited to take part in a brains trust in Wolverhampton on 1st December. I went to the Chief Whip and said, "What about it?" He said, "Yes, all right. We will find you a pair." On Sunday I was rung up at my own house in connection with this brains trust, in which I and representatives of the National Farmers' Union were taking part. I was told, "I am sorry; we shall not be able to have you." I said, "Why?" They said, "The National Farmers' Union will not send anybody if you are one of the contestants." I am prepared to be shot down in flames if anything I say is bogus or incorrect. The N.F.U. had said, "If he is there we are not there."

I offered to write an article for the National Farmers' Union house journal "British Farmer." The editor is a journalist, of course, and he was very much intrigued by this suggestion after my talk of the farmers being feather-bedded. He said, "I will put it in front of the committee on Tuesday." On the Wednesday I had a letter saying that the committee did not meet for another month. There was a man who was bursting to print the article, but he was not allowed to. I met the Secretary and we had a little talk, but I was not permitted to write the article. When I was invited to take part in the B.B.C. "In the News" programme, what happened? Because I said something to which they objected the N.F.U. demanded not only that there should be no re-run on the following Wednesday, as is customary, but that at any time I was invited to the B.B.C. again they should be allowed to send someone along.

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

Let us get this right. I have been suspicious of this kind of thing and this is concrete evidence, if I have understood what my hon. Friend has said. Is it correct that the National Farmers' Union intervened with regard to a B.B.C. programme because they objected to what had been said?

Mr. Deputy-Speaker

It would be out of order to pursue that matter in any event on this occasion.

Mr. Evans

Although I am naturally interested in these personal illustrations, it would be unforgivable for me to go into them except to make my point that the National Farmers' Union hierarchy do not want the spotlight of objectivity shone upon this question of agricultural economics. That is the last thing they want.

A month ago I talked to 250 farmers at Guildford. They are all right. I talk the same language as the farmers. There is no bad blood between us. They worship the very ground that is coming to me. The fact is that I can talk to the ordinary farmers. I talked to 300 at Worcester. Dozens of them come up to me after I have spoken to them and say, "You are quite right." It is about time we had an inquiry. The 1947 Act has provided very good conditions—I put it no higher—for the farmers and we need an inquiry to examine the weaknesses of the Act.

Quite obviously, in the light of the productivity figures, the Act is not doing for the community as a whole what it is doing for the farmers. We must ask such a body as is set up to ascertain whether it would not be a good thing to have a farm-to-farm sales return. We ought to know what every farm is producing. In other words, we ought to know what we are getting for the money which this House and the housewives are providing.

There are a lot of other things I should like to know—for instance, whether the 40 per cent. preference to owners of agricultural land in the matter of Estate Duty is any longer in the interest of the nation. I do not think it is. In Denmark, where results are so immensely better than they are here, the size of the average dairy farm is 37 acres. Here, we can read in the papers every day about people owning six, seven and eight farms. Of course, they do not have to farm scientifically and energetically; they can farm at half-cock and still get a fat living.

I am not at all satisfied about the arrangements for getting rid of bad farmers. There are thousands of young men and women coming from the agricultural colleges, and we have second and third sons of farmers—people who cannot get a farm. Farm lands have now reached such a price that only wealthy people who farm as a hobby can afford to buy them.

In particular, I am not satisfied about the arrangement for getting rid of bad farmers. A friend of mine, who farms 400 acres, told me at Morecambe about a conversation which he had with the deputy chairman of his county agricultural committee, who said to him, "Last year my turnover for the whole farm was £25 an acre. What do you think about that?" My friend replied, "£25? If it were double it would be just tolerable." And this is the man who is deputy chairman of the county agricultural committee which has to decide whether a farmer is efficient or not and whether he should be dispossessed.

It is time we had an inquiry into this industry, and I make this plea to the House—that we should now consider the question very seriously indeed. I put to the Leader of the Opposition and to my party this question—is it not time that we, as a party, demanded that there should be an inquiry into this very backward industry?

8.42 p.m.

Mr. A. C. M. Spearman (Scarborough and Whitby)

I had a feeling, when the hon. Member for Wednesbury (Mr. S. N. Evans) caught your eye, Mr. Deputy-Speaker, that we should hear something about agriculture, and I think those of us who do not agree with his attacks on agriculture can at any rate agree that he does it in a very pleasant way.

I want to refer to the Socialist Amendment and to the speech of the right hon. Member for Lewisham, South (Mr. H. Morrison), although the two may not have a great deal to do with each other. The right hon. Gentleman said that he considered economic planning essential as a matter of principle. I am rather glad that he is not here, because I might embarrass him by telling him how much I agree with him. Indeed, in these days it is so clear that any Government must have an economic plan that that part of his speech was hardly necessary.

It seems to me that it is the prime duty of a Government today so to arrange its own expenditure, and so to influence the expenditure of the people and the country by its fiscal policy, that the total demand for goods is roughly in line with the total resources of the country. In the pre-war years, the Socialist Government and the Conservative Government entirely failed to get that balance. I think there were very good reasons why both parties failed. They had not the knowledge or the equipment to deal with the problem which we have today. Their failure to get a balance in those pre-war years led to the horrors of unemployment—and, wherever we sit, I think we can all agree that there is no social evil which is more brutal to the people concerned or more shockingly wasteful for our economy.

What is disturbing to thinking people today is that in their six years of office the Socialist Government failed as completely to get that balance as we did before the war. During those six years, their expenditure and the expenditure of the country was vastly in excess of the resources. Many of the things they did were admirable. I am thinking of the repairing of war losses, defence, improving the conditions of the people, extending the social services.

I entirely support their attempts to put the Welfare State in a bigger and better position. But where so many of us are violently critical of them is, that by their over expenditure, by their methods, they jeopardised that very Welfare State to which they rightly attach so much importance. In each of those years there was an average deficit on the balance of payments of a very large sum indeed; there was not one every year, but there was on the average over the six years.

I ask the Leader of the Opposition—because his words are always listened to with very great respect on this side of the House, and earlier in the year he expressed, as I remember, some doubts as to the effect expenditure at home had on the balance of payments—whether he would not agree with these two propositions, because they seem to me to be beyond dispute. The first is this; if we in this country, Government and people between us, consume more than the resources available there must be a deficit on the balance of payments. The second proposition is this; that when we have exhausted our own reserves and what we can borrow abroad, then we are no longer able to have a deficit at all, which means that we have got to go short of the things we are importing, and that, as we all know, can mean mass unemployment and starvation.

The right hon. Gentleman the Member for Lewisham, South was quite right in saying we must have an economic plan, but surely we must also be able to diagnose the situation before we can prescribe the proper remedy. The Socialist Amendment charges the Government with policies—I presume it means deflationary policies—that … threaten a return to the social conditions of the inter-war years. In 1931 we had a glut of goods which people wanted, but we did not then know how to give them the purchasing power to deal with it—Socialists and Conservatives both.

That is not the position today. Today, we have the very opposite position. We have a balance of payments problem we had not got in 1931. Today, we can no longer spend our way out of a slump because we cannot get the raw materials from abroad with which to do it. It seems to me that Socialist doctrine today is just like the prescription of a doctor who sees a patient with high blood pressure and remembers that 20 years ago the patient was very ill with low blood pressure, and he consequently prescribes the remedy suitable to that disease, which is, of course, quite fatal in the current conditions. I believe that the Socialist inflationary policy would be just as fatal as that doctor's remedy, because it is 20 years out of date.

The Chancellor of the Exchequer has done a good bit better. He has got just about a balance. I think he has reason to be very gratified, and I am quite sure is not satisfied. We have to remember that 1952 has been a rather exceptional year. The terms of trade have moved in our favour. They may not continue to do so. There has been great activity in America. I think that that will go on, but it may not. German competition is likely to affect our exports in the future far more than it does today.

We must not be satisfied with just scraping through. We have to build up a surplus. We have got to release resources which can go to exports and go to build up our factories and to increasing capital investment in our factories, and to make sure that we are in a better position to compete abroad. It is imperative that either we spend less or the Government spend less for us, and I must say that of the two alternatives I believe the country would much prefer the latter.

I am rather sorry that my right hon. Friend the Chancellor has not agreed to set up a committee to see what cuts could be made. I entirely agree with him that quite clearly no sensational economies can be made without a change in policy, and, quite obviously, only my right hon. Friend and his Cabinet colleagues can decide that. I do suggest that in this huge administrative machine which we have today there may be all sorts and kinds of economies which could be got.

Mr. Percy Shurmer (Birmingham, Sparkbrook)

Such as?

Mr. Spearman

Let me give one small illustration. In almost every town of any size there are any number of Government offices, for food, labour, National Insurance, and so on. For all I know it might well be possible to handle all those under one office.

Mr. Douglas Houghton (Sowerby)

Might I remind the hon. Gentleman that the Inland Revenue office in his own town of Scarborough is in slum conditions, in three separate offices several hundreds of yards apart, and that the ban on capital expenditure prevents any remedy for that and other similar bad conditions?

Mr. Spearman

I am so well aware of that fact that in the time of the previous Government I pointed out to the relevant Minister how very wasteful it was to have such conditions under which those offices were working, hoping that they would make an improvement in them.

Sometimes rather a good way of saving money is to spend a bit. I am talking about the need for saving. I believe that might be done. What I am trying to say is that huge economies can only come, I believe, by a change of policy, and that can only come from the Government. I still think that a committee might find great economies. Perhaps I should not say great, but economies which would in themselves make a useful contribution, and which would do something else as well. We can all agree how important it is that the people of the country as a whole should save more. It is extremely discouraging for them to save more when they see all sorts of illustrations of extravagance, even though they do not amount to very much.

I cannot see how my right hon. Friend, with all the burdens he is carrying, can possibly investigate all these matters. Therefore, it is left to the Treasury. Now, the Treasury are rather cute at preventing fresh expenditure; sometimes I think they go too far in that direction. But they are not nearly so good at cutting down existing expenditure where there are vested interests, and that is why I should like to see my right hon. Friend set up a committee of this sort to assist him in this respect.

In the last two days many of my hon. Friends have urged that there should be a cut in direct taxation, and that that cut should come about soon. I am fully aware of the great need for more incentive, the great need for more personal savings, because it is only those sorts of savings which produce what we call risk capital, and it is on risk capital that many of the great concerns of this country have been built up. In my submission, it cannot be done by the State, but only by people who are prepared to take risks, and unless there are more savings that cannot happen.

I do not believe that we can afford any reductions in direct taxation—I am expressing, I know, an unpopular view to many of those who sit beside me—out of savings in Government expenditure. What we must do is to spend less, and in that way produce a healthier economy by which we can make more, and when we have made more is the time for reducing direct taxation.

The vital thing is to increase our reserves so that we may have a cushion against all these jolts that this uneasy world does produce and will go on producing for us, and so that we are not on the verge of a crisis all the time. I believe that it is also vital that we should increase our reserves so that we have the capital available for developments in the Commonwealth. By doing that we make not only them and not only ourselves but the whole world richer.

8.56 p.m.

Mr. C. R. Attlee (Walthamstow, West)

The hon. Member for Scarborough and Whitby (Mr. Spearman) asked me a question about the balance of payments during the years of the Labour Government. He asked me, "Did not we import more than we could afford to pay for after the end of the world war? "We did. During the war we acted in close agreement with the United States of America, we sacrificed all our export trade, and we turned over to war all our assets, and it was quite right that we should borrow money to get going again.

I think that the hon. Member is wrong in thinking that there is something very wrong in that. After all, all the countries of the New World ended up by borrowing. They could not pay back at once. I think that the hon. Member, if I may say so, takes rather too simple a view of international trade. He ought to look further into the whole question of Commonwealth trade and the balance of payments. I only make that statement because he asked me a specific question on that subject; but it is quite true that we did borrow in those immediate years, and I think it perfectly right for us to have done so.

Mr. Spearman

I entirely agree, of course, that we were entitled to borrow from America. I think that I was one of six only in my party who supported the right hon. Gentleman in the Lobby on that occasion. What I am talking about is something quite different. I am saying that throughout the whole time of the Socialist Government there was an enormously greater expenditure than the resources of the country warranted. I think that I remember his saying at the beginning of this year that cuts in Government expenditure had no bearing on the balance of payments, and I hoped that he would correct that and tell me that I was quite wrong in my recollection.

Mr. Attlee

That depends on exactly what the question involves—whether it is purely an internal matter of finance or whether it is something to do with importation from abroad.

We have come to the end of two days' debate on the official Amendment of the Opposition. I do not intend to say anything very much about those extremely ill-judged Measures with regard to transport and iron and steel which the Government are introducing. I think that they are quite irrelevant to the major matter which faces this country. We have had three Government speeches, and we have had no answer yet to the complaint which is voiced in our Amendment that the Government have no positive and effective proposals for dealing with the serious economic position of the country. That is the burden of our complaint.

We had a characteristically conciliatory speech from the Minister of Labour, dealing very largely with the unemployment position. I hope that the optimistic views of the right hon. and learned Gentleman are justified, but the trend is disturbing, and, as he knows, there is a certain amount of concealed unemployment in short-time working. We are particularly disturbed about unemployment at the docks. I take a particular interest in that matter because I met the problem in my earlier days, and I know what it means. I also know what the docks labour scheme has meant to East London, South-East London and Liverpool; it has been a revolution in the lives of the people. I should be very sorry if anything happened to it.

The serious rise in unemployment in the docks indicates a falling off of world trade and a laying up of ships. There is much more in it than the immediate effect; there is also the effect of its bringing unemployment in the future. I hope that the qualified optimism of the right hon. and learned Gentleman—he said, quite rightly, that we have difficult times ahead—about the trend of the unemployment figures may be justified, but he will agree that there was in his speech no suggestion of a long-term policy.

Nor did we get anything more from the Parliamentary Secretary to the Ministry of Labour. I was very encouraged at one moment because he said, boldly, that the Government had a plan to achieve a new and more stable basis for productivity and full employment. The hon. Gentleman was then getting towards the end of his speech and I sat up hoping I was to hear something. But I was bitterly disappointed, for all I got was three platitudes, one about achieving efficiency, another about holding down the cost of living and a third about working as a team. There was no plan at all.

I still had some hopes when the Chancellor of the Exchequer came along, but when he proceeded to devote so much time to attacking the Opposition on irrelevant points I knew that we should not get anything very constructive because it was, clearly, a diversionary attack. The right hon. Gentleman naturally wanted, first, to encourage the spirits on his own side and he wanted to put up a good show because he knew he had nothing very constructive to put before us on major economic policy.

The Chancellor had also to face the fact that practically all the speeches from the back benches had been critical of him. His hon. Friends were disappointed. They had passed a resolution at Scarborough. I understand it is very rare for a resolution like that to be passed at a Conservative conference. I noticed that at Guildhall last night the Prime Minister talked about "the glacial calm of a Soviet election." A Conservative conference generally has something of the glacial calm of a Communist conference in Russia. I believe that in Russia the resolution always goes through with a 98 per cent. majority, but at a Conservative conference it goes through with a 100 per cent. majority and is not discussed at all. Perhaps his hon. Friends were also recalling some remarks by the Prime Minister about Conservative programmes and resolutions.

We were all glad to hear of the better position of the exchanges today, but the Chancellor knows very well that this is only a breathing space. I am quite prepared to give him credit for what he has done, but he knows quite well that this is very largely due to extraneous circumstances. We have had a change in the terms of trade which are favourable to him. In previous years we have had a change in the terms of trade which were against this country. If the right hon. Gentleman had happened to strike particular conditions like that he would have been up against it.

In the time of the Labour Government we had these questions of balance of payments constantly with us. From time to time there were improvements and there were set backs. We also at one time achieved a balance, but the Chancellor of the Exchequer knows quite well that there is still this fundamental weakness of our position, our lack of adequate reserves and our dependence on our foreign trade. He knows, too, how precarious the position is. There is the growth of competition from Germany and Japan, and industrialisation going ahead in the newer countries. These have been mentioned in a number of speeches, and it was recognised by everybody that that would mean competition for our exports.

One has to face the fact that it is going to be more difficult to sell our goods abroad, and there is also the preponderant position in world economy of the United States of America. We all know that a very slight recession in the United States of America may have very serious, wide and deep repercussions in the rest of the world. The hon. Member for Hitchin (Mr. Fisher) made that point in his speech.

How are we to meet it? We have our breathing space it is true, but we have had such a breathing space before. The question is how long will it last and what are our long-term policies to meet the situation. We all welcome the decision of the Government to carry further the policy of the Labour Government in increasing home agriculture. We have got to do that. My hon. Friend the Member for Wednesbury (Mr. S. N. Evans) was speaking about agriculture and about expanding our products. All are agreed that a great deal has been done for agriculture, and we are fully entitled to ask the farming community for full production. The right hon. Gentleman has more or less put a target there to encourage an increase. I should like to know a little more definitely what it is hoped to accomplish in the growing of food for ourselves in this little island.

I do not think that the Government hope to make us self-sufficing. We shall need to import food from abroad, and there is a threatened world shortage. The Chancellor of the Exchequer today did not deal at all with the major problems of where we are to get our food. We heard nothing about developing new sources of food supplies, which, I believe, is vitally important. We have to take a full share in developing the backward areas of the world, and equally important is the development of new markets for our products. I do not know what the Government's policy on that is, but perhaps the Leader of the House, when he speaks, will give us something definite.

There has been running through all this debate a good deal of talk about the Commonwealth conference. I am all for having Commonwealth conferences, but hon. Members must not imagine that it is always so easy to get agreement. One often hears a great deal of talk on the lines of, "Let us all get together and have preferences," and so forth. Other Members of the Commonwealth have their own views and they have to be reconciled to ours if we are to get together.

I do not know how far the Chancellor of the Exchequer is proceeding on the line of development, but one or two Members behind him seemed to me to argue what was almost a kind of closed Imperial Preference system. I do not think we shall ever get that with the Commonwealth, because the Commonwealth have their ties with the rest of the world. Those views were put forward by the hon. and gallant Member for Macclesfield (Air Commodore Harvey) and the hon. Member for Croydon, East (Sir H. Williams).

I should like to ask the Leader of the House to say something about Government policy on preferences, and about the Government's general attitude to the liberalisation of trade. We really have not had anything on those vital points of policy. The Chancellor of the Exchequer today seemed inclined to rest on the position as it is. He said nothing about any concerted policy with other countries and with the United States of America. I would like to know what is being done.

The real danger is not just coming from this country, but from the position of other countries. The right hon. Gentleman was rather inclined to sneer at some of my hon. Friends who had mentioned the danger of deflation. There is a grave danger. The Chancellor of the Exchequer was forced to restrict our imports. I think he had to do it, as an immediate policy, but all the other countries who have these exchange difficulties restrict their imports. We are reduced to the position of all hoping to export more and to import less. That is a hopeless position, and can only lead to a general slowing down of international trade leading to a deflationary position. What is the policy internationally?

In our discussion today, references have been made to the falling off in production and it has been explained that the falling off was more in some industries than in others. There is no doubt that there has been a slowing down of production. In his Budget, the Chancellor stressed the need for an increase of production. His whole Budget was based on that; indeed, it was called "an incentive Budget." It will be very disappointing, when an incentive Budget has been passed, if the result has been a falling off. The incentive has somehow failed.

I say, therefore, that our Amendment is fully justified by the fact that in no speech have we had any clear long-term policy for dealing with the fundamental difficulties of the position. I am not suggesting for a moment that the position is easy. It is a long-term policy. We were not content at any time when things got better. We had to work on long-term policies, always taking short-term emergency action just as the Chancellor of the Exchequer. [Interruption.] If the hon. Gentleman does not want to repeat his interruption, perhaps it was not worth saying after all. I am not in the least disturbed by the suggestion that we had to meet a number of crises. We did, and any Government in those difficult years would have had to meet those crises.

In this discussion what has been very notable has not only been what has been said from the Front Bench but what has been said from the back benches. The hon. and gallant Member for Totnes (Brigadier Rayner) spoke the mind of many hon. Gentlemen opposite. He talked of the massive Welfare State and said that we cannot support this enormous edifice which we have erected. What is the basis of the Welfare State? The basis of the Welfare State is this: that all our citizens should be adequately fed, clothed, housed in sickness and in health and at times when there is not work available, and the children should be educated. We believe that all should make their contribution to the community and all should have the opportunity so to do.

We regard this as the right and necessary basis for a civilised community. The trouble about the hon. and gallant Member and those who support him is that they seem to regard this not as fundamental but as a kind of luxury which can be afforded only by a very wealthy community, as a kind of unnecessary though possibly desirable addition to the normal. I am afraid that is because he has a 19th century mind. [HON. MEMBERS: "Eighteenth."] No, I think it is a characteristically 19th century mind.

In the 19th century we had a highly developed civilisation with a very big, well-to-do section living at a high standard of life with every kind of civilised amenity, and we boasted of the great position of Great Britain in leading the world. But that civilisation and that well-to-do class was supported on a basis of low wages, long hours, sweated labour, foul slums, ill-health, unemployment and destitution.

Brigadier Rayner

May I point out to the right hon. Gentleman that I did not say we could not support a Welfare State, but that we could not support it unless we worked a good deal harder. [HON. MEMBERS: "Tally-ho!"] This is the second time I have been misrepresented by the Front Bench opposite over a simple speech. I was harping on hard work—[Laughter.] Mr. Speaker, this noise comes from a lot of right hon. Gentlemen on the Front Bench opposite who have guilty consciences in that they know that for 50 years it has been—[Interruption.]

Mr. Speaker

Order, order.

Mr. Attlee

The hon. and gallant Member is not now explaining the point, but going off on to some other point altogether. That did seem quite normal to the majority of people in the 19th century.

Mr. Godfrey Nicholson (Farnham)

Including the right hon. Gentleman's ancestors.

Mr. Attlee

I quite agree, but it is my hope that in the 20th century we have got away from those ancestral notions. [An HON. MEMBER: "You have."] Yes, the trouble is that there are some atavistic people who have not. It seemed quite normal to the majority of the ruling classes. I knew those times quite well because in 1931 the same people with the same ideas were in power and they accepted that basis of society.

In our view that basis was wrong, and the Labour Party came into existence to abolish it and to right that wrong. At any time during the 19th century those conditions could have been changed if the well-to-do people had been willing to change their standard of life, but they had a different standard of values.

Today, if we have to retrench, if we have to have lower standards, there are many things that ought to go before we touch the basis of the Welfare State. We have, to quote the hon. and gallant Member for Totnes, a simply enormous edifice of things. Many of them are very desirable, but they are less essential than the standard of life of the masses of the people. In the war we had to forgo many things. Luxuries were unobtainable. We had to make do with old clothes, smaller newspapers, fewer amusements and motor cars, less advertising and duller food. In the war, that Government of all parties put first things first. We put the basic strength of the people first.

When I hear people saying that we must retrench, it so often means that the first thing to be retrenched is the standard of life of the workers. [HON. MEMBERS: "No."] I have seen that happen fairly often. It certainly happened when we had the various reports of all kinds and the Geddes axe. Those people never say that we ought to sweep away all the mass of waste in the private sector. They always talk about waste in the Government sector, and never about whether we ought not to concentrate on more essential things for all of us. There are many people who have never really accepted the new dispensation. It comes rather from what the hon. Member for Orkney and Shetland (Mr. Grimond) said he had—a split mind.

The hon. Member for Totnes was a distinguished soldier. He would never have thought of putting the amenities of the officers' mess before the needs of his men. [HON. MEMBERS: "Oh."] No, he would not. It was always the rule in the fighting Services that the men come first. But there is the split mind. I do not think the hon. and gallant Member does it as a Tory Member of Parliament. He does just the opposite, always hitting at these particular things.

I hope that the Government will resist the suggestion that has been made from many quarters of a Geddes axe. All sorts of follies were committed in the recommendations of the Geddes Committee and, unfortunately, they were accepted. I remember talking in the House—the other speaker in the debate was Lord Courthope—when we were discussing the shortage of timber. There was a very great shortage of timber during the war, and one of the economies of the Geddes axe to save a few thousand pounds was the destruction of several million seedling trees. [An HON. MEMBER: "Fifty million."] That is entirely typical of what happens when one puts in a Geddes and gives him an axe.

We are not in favour of waste—we are all for economy; but the Chancellor of the Exchequer said, quite rightly, that major economies come from policy. The hon. Member for Scarborough and Whitby was not quite up to date in suggesting that we could not do anything without having somebody from outside. There is a very effective division in the Treasury—the O. and M. Division—that is constantly at work pruning and cutting down unnecessary waste, and this ought to go on. But I do not believe in the setting up of spectacular committees, if possible, with a rather narrow-minded businessman at the head, to make all kinds of slashes. It only results in follies in which great waste is made from the point of view of saving a few miserable pounds. I give this warning, because even the Chancellor of the Exchequer fell for this in that ridiculous little saving of two or three people in the British Museum.

The right hon. Gentleman the Member for Haltemprice (Mr. Law) made an interesting speech, in which he said that, wherever there was weakness, it was due to heavy Government expenditure or to the heavy load of taxation, but he did not proceed to give an example. He said that we in this country had attained the peaks of scientific achievement, but that the Americans, the Germans and the Japanese developed them. That is precisely not a failure of Government but a failure of private enterprise, and that was not occurring just when taxation was heavy. The outstanding case was that of aniline dyes, many years ago.

The fact is that Government expenditure on research has been very great, both through the D.S.I.R. and the universities. I think that the Labour Government devoted more to research than anybody else. The trouble has been in getting industry to take up and use the fruits of scientific research. That really was the complaint of the right hon. Member for Haltemprice, who just killed his own arguments.

The money used for Government research would be just wasted if left to fructify in the pockets of unenterprising businessmen. I think we need far more research, and we need far more use of the results of that research. I think we have to turn our minds a good deal to seeing that we do make use of the very expensive equipment that has to be used in industry today.

I come now to the main point of our Amendment, which states that the Government are occupying themselves, first of all, with irrelevant matters, and that no possible purpose is to be served by changing the structure of iron and steel at the present time. It is no pretence that the industry is not going ahead perfectly well. There is all the difference between that and the action of the Labour Government in nationalising the mines. The latter had been crying out to be done through years and years of neglect.

We next say that the Government, while they have obtained a breathing space, have so far revealed no sign of having any clear policy for dealing with the position of this country, and our economic position does not stand by itself. It is bound up with world conditions, but we have not yet found that the Government are taking the lead in dealing with the world problem, because it is a world problem of maintaining supplies of food for the world and of extending the standard of life everywhere, on which this country's future depends as a great trading and exporting nation.

We say—and this is abundantly justified by the speeches delivered from the back benches opposite—that there is a danger that the reactionery elements of the Tory Party will bring us back to the days which we remember so well.

9.29 p.m.

The Lord Privy Seal (Mr. Harry Crook-shank)

The privilege falls to me, for the second time in this Parliament, to wind up the debate on the Address, and to follow the right hon. Gentleman the Leader of the Opposition and to deal with the Amendment which the Deputy-Leader of the Opposition moved yesterday.

I think there is no doubt on one point—that hon. Members on both sides of the House would wish me to pay a small but well deserved tribute to the one maiden speech in this debate, and to congratulate the hon. Member for Dundee, East (Mr. Thomson). I think that one of the most likeable things about the House is that it has a very short memory for bad speeches but a long memory for a good one. The hon. Member will realise that many of us will remember his speech on those grounds, because he was both competent and fluent, and I am quite sure that he will make many other contributions to this House.

It has been indeed a very curious debate on the Address. In fact, I think I might say that the speech of the right hon. Gentleman the Leader of the Opposition hardly sounded like a really all-out aggressive attack against the Government of the day. There may very well be a reason for that. After all, last year's debate followed the significant decision of the electors at the General Election. On this occasion it follows a very much smaller but perhaps significant decision of the electors at both Cleveland and Wycombe. Whatever special local factors may have played some part in those by-elections, one thing is quite clear—that by no conceivable stretch of the imagination could the result represent a vote of confidence in Her Majesty's Opposition.

This has been a long debate over the usual six days, and many subjects have been raised both last week and since we got on to this Amendment. It is perhaps interesting to mark the changes in our Parliamentary life as they occur. I wonder if it occurred to anybody else except me—I expect it did—how strange it is that now we find this great debate of the year mixed up with the inevitable mobility of Ministers. We had a foreign debate on the eve of my right hon. Friend the Foreign Minister having to go to New York. We had a debate on Colonial affairs on the very morrow of the return of my other right hon. Friend the Secretary of State for the Colonies from East Africa. Twenty, 30 or 40 years ago that sort of thing would have been quite impossible—[An HON. MEMBER: "When are you going?"] [Laughter.] I am very sorry, Mr. Speaker. I hope you got that joke, I did not.

All through the debate there really have been no aggressive attacks. This is the great debate of the year in which anyone can raise any topic in which he or she is interested. The rules of order as to what is in order or out of order are practically non-existent as far as subject matter is concerned, and it is very strange to think of some of the things that have not been talked about, which I should have thought would have been prominent in the minds of some hon. Members.

It is quite true that we have had a speech on the agricultural position, as seen by the hon. Member for Wednesbury (Mr. S. N. Evans), but that subject has not been touched upon by many. I thought that corporal punishment was the one thing which was exciting everybody, but we have not had a series of speeches on that subject. Food has been mentioned quite casually. I heard the hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann), and the subject came into other speeches.

Matters of health, and particularly the cuts in the health service, were prominent about a year ago in this House, but they did not come into this debate at all. The right hon. Gentleman the Leader of the Opposition gave us a line on the first day, because he said that there was "not much" in the Gracious Speech. I could not make out the point of that remark—whether it meant that he wanted more Bills and more legislation. If he does, he is the only Member of this House who is panting for that. As a matter of fact, there is a full programme of work before us during the coming year. But Governments are not judged purely by legislative output. I think my right hon. Friend the President of the Board of Trade put it very well the other night when he said: It will be in the field of administration and in the application of economic policies that we shall chiefly affect our national future."—(OFFICIAL REPORT, 5th November, 1952; Vol. 507, c. 168.]

Mr. R. R. Stokes (Ipswich)

Who wrote that one?

Mr. Crookshank

He wrote it himself. He has not got a ghost writer.

One of the changes which we have to note is that a good deal of the legislation which now has to be brought forward, by whatever Government is in office, is what is called of a non-contentious kind but which seems to be extremely controversial. For example, looking back over the last month we had great debates on the Visiting Forces Bill which was, after all, merely an agreement which had been passed by our predecessors and in the party political sense was hardly contentious. But a great deal of the time of the House has been, and I dare say will again be, employed in that way.

The complaint in the Amendment is that we have not got a whole lot of itemised proposals with regard to our economic and financial policy. I would put it in this way. We are building this year—or we are setting out to build, because these are early days yet—on certain solid foundations laid last year. We first of all made a start in restoring freedom. Secondly, there has been a start in the Budget of my right hon. Friend in lightening the tax burden and giving greater incentives to work. Thirdly, in that Budget we helped those hardest hit by rising prices; and fourthly, there has been a marked slowing down in the pace at which the cost of living has been rising. Those are four solid cornerstones on which to build this year after clearing the ground of the nearly bankrupt estate which we inherited.

The mood of the House during the last few days has been to show that the solution of the nation's economic problems is what is really uppermost in the minds of hon. Members. It is true to say that economically—if I may take this analogy—we hold difficult cards. Our whole future as a great people depends on playing a very difficult hand well, and it is not only the Government who have to share in that burden.

It is complained that there is "no positive and effective proposal" to deal with the economic situation. Whether any proposal is going to be effective only time can prove. It is no use using that adjective in this context. We cannot say beforehand that what we do is or is not going to be effective, but I think that what my right hon. Friend the Chancellor was saying this afternoon gives the key, that whatever proposal it is, it has to be very flexible in these days.

I do not want to elaborate, because so much has been said on that subject already, but let the House think back on the textile situation as it has been during the last year. There were "no effective or positive proposals" about that in the late King's Speech this time last year. On the other hand, when the difficulties became serious effective and positive action was taken and, without it having been forecast 12 months ago, there is a very startling drop in textile unemployment, as has been recorded in speech after speech today.

The really big, positive and effective proposal enshrined in the Queen's Speech is the reference to the forthcoming Commonwealth Conference. This is the big thing—to use a colloquialism—because upon it so much depends not only for ourselves but, as my right hon. Friend pointed out, it leads up to further discussions with the other countries in the sterling area and the free world and, from there, to discussions with the United States of America. But at the moment one cannot lay down details. After all, we shall then be dealing with a different Administration to that which is at present in power in the United States, and it would therefore be most premature and unwise to elaborate that matter any further.

I can assure hon. and right hon. Members that the preparations which are being made for that Conference are on a scale and in such detail as I do not think has ever occurred before on such an important occasion. We have had here the officials of all those Governments who are to be represented here at the end of the month, and great study has been given to all these problems. That is the answer to the right hon. Gentleman's question whether we were concerting policies with the Commonwealth and United States. We are leading up to doing that, but what would be the good of having a conference if everybody had settled beforehand what they had to do?

Mr. Gaitskell

May we take it from those remarks that Her Majesty's Government are not going to put forward any positive proposals whatever?

Mr. Crookshank

Not at all. The right hon. Gentleman cannot take anything of the sort; but he can take it that I am not going to announce here and now what those proposals are. As my right hon. Friend said, the objective is to secure the greatest possible expansion of multilateral trade throughout the world. That is the objective to which we are directing ourselves.

We have brought our accounts into balance during the last year. During the debate a great deal has been said in an endeavour, apparently, to make out that this was more or less achieved by a change in the terms of trade. I think it was the right hon. Member for Leeds. South (Mr. Gaitskell) who employed that argument. My right hon. Friend dealt with that point. As far as can be calculated, for the first half of 1952 only about one third of the improvement can be put down to that cause.

The second suggestion which was made by the right hon. Gentleman and others was that the balance of trade improvement was due to a reduction in stocks, or a cessation of stock building. The right hon. Gentleman quoted a figure of £387 million in 1951. On further reflection, I think that he will find that that figure is irrelevant to the balance of payments question, because it includes work in progress as well as stock changes. [HON. MEMBERS: "He said so."] I am saying so now.

Thirdly, it was alleged that a good deal of this improvement was due to that fall in production. The right hon. Gentleman argued that the fall in the production index of 3½ per cent. in place of a rise of 2½ per cent. represented something like £150 million on our imports, but the annual rate of raw material imports in the first half of this year was £1,600 million, and 3½ per cent. of that is only about £50 million. That is nowhere near £150 million. [Interruption.] I am merely pointing out that the right hon. Gentleman's figures were not quite correct and do not account for what he thought they did.

Of course, it obviouly has to be admitted that some part of the improvement in the balance of trade has been due to the fall in imports. That has happened in other countries, with the result that our exports have also dropped. I think one can say that last year has been a period of re-orientation in many parts of the sterling world and a basic consolidation for the future, but one can hope, now, that it has finished and that we can go forward into a more expansive situation. I think my hon. Friend the Member for Spelthorne (Mr. Beresford Craddock) put that quite well the other day when he said there was a limit to the usefulness of a policy of restriction.

Now we have to move on into an expansionist world. I will not repeat the sombre warning which my right hon. Friend the President of the Board of Trade had to give us—that we were not out of the wood and that there were great difficulties still ahead of us—I am glad to say that the fact remains—and again one does not want to exaggerate; I should be the last person to do so—that the trade figures for October are encouraging. We do not want to exaggerate the figures of one month; we cannot base everything on one month; but the trade figures for October are available tonight and it might interest the House to know what they are.

The provisional figures show exports at £218,500,000, an increase of nearly 10 per cent. in the daily rate compared with the third quarter, while the exports to North America in October were higher than in any post-war month—£28,600,000. Do not let us exaggerate those figures, but they are satisfactory for that month.

Mr. Gaitskell

Could we have the import figures?

Mr. Crookshank

I have not got them. [HON. MEMBERS: "Oh."] Because I was dealing with exports. Last night the right hon. Member for Blyth (Mr. Robens) gave us a most interesting speech in which, by a wonderful performance, if I may say so, he tried to build up a series of figures by which he hoped, at the end, to show that his forecast of one million persons out of work in eight weeks time would be proved correct. He knows that production figures are partly seasonal and that they have a tendency to up and down, like a thermometer, sometimes quickly and sometimes slowly. Of course, it is quite true that they have dropped from the high figure of 123 in March this year, but this is not the only time they have dropped from that high figure. The figure of 123 was the figure in November, 1950. There was a dropping away, then the figures went up again, and that became the figure in November, 1951; then it dropped away again, and it once more became the figure in March this year.

The right hon. Gentleman was seeking to bring out a whole series of calculations and figures—as I could on this point. For example, I could say, if I wanted—because it would be correct—that between June and August in 1950 the production drop was 15 points, in 1951 during those months it was 18 points, and this year it was 12 points. But I am not saying that that proves anything at all; I am merely saying that it is rather rash to extend one's researches too far and to try to build up too many arguments upon the sort of figures which the right hon. Gentleman was using last night.

But there are encouraging points. As my right hon. Friend said this afternoon, in October this year, as compared with last year, the production of steel was up by 9 per cent., the production of the engineering, shipbuilding and electrical group was up by 5½ per cent.

Mr. William Blyton (Houghton-le-Spring)

Nationalisation.

Mr. Crookshank

That is the increase compared with this time last year. We must not all be pessimistic all the time. If only right hon. and hon. Gentlemen had seen the faces which we saw during the last two days while the ballot was going on upstairs. I would remind hon. Gentlemen opposite that the most spectacular fall in production took place in the months of January and February, 1947, when it fell by 21 per cent. [Interruption.] Yes. Let us take the moral. We recovered from that. There is no reason in the world to be so gloomy now, and to say that because there has been a production fall in the last two or three months we are not going to recover again.

The decline, of course, in production has not been over the whole field. Oddly enough, where it has increased most, and where productivity has gone up most, has not been mentioned in the debate at all—housing. Last year there were few speakers on those benches opposite who did not mention houses in the six days' debate. There were few who did not deride our target of 300,000. Why this extraordinary reticence now? Are they not pleased? Apparently not. No praise, no thanks—no thanks for anybody. I can quite imagine their not praising or thanking the Government, or the Minister for Housing and Local Government, but they might have spared a word of praise for the building operatives.

September was the best post-war month for the completion of houses. The completion figure was 22,323—5,000 more than in the previous year. The right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) did a broadcast at the end of September. I heard it. I do not know whether anybody else did, but I did—over the radio. I am very glad I did, because I can correct him now. He said of the Minister of Housing and Local Government that he had been lucky because he had had such good weather this year, and that good weather helped building. Yes, that would be all right if it were not for the fact that the weather was not good. I have had the figures about what the rainfall at Kew was, and it turns out that in the month of September, which was the record month for housebuilding, the rainfall was half as much again as the average for any other year. So I think that the right hon. Gentleman must review his next broadcast.

Something has been said about factory building and a cut in that. It is quite true that there was a reduction—

Mr. Gaitskell

What about the schools?

Mr. Crookshank

Schools: the amount of work done this year will be higher than last year. Factory building had to be reduced at the end of last year because of the steel shortage. [Interruption.] Well, if they had no steel they could not build the factories. That is the point.

Mr. Shurmer

The Government preferred houses to factories.

Mr. Crookshank

I suppose the hon. Gentleman would rather have had the men unemployed and doing nothing. The value of factory building under construction at the end of the third quarter last year was £173 million; this year it is £141 million. But the position with regard to steel has very greatly improved—[HON. MEMBERS: "Hear, hear."]—thanks to the Prime Minister's assistance—and there are indications that when the year is out the investment in the industrial field as a whole, which, of course, covers fuel and power and transport and steel and the manufacturing industries, will turn out to be at least as great as and possibly greater than last year's.

Now, I have got very near to the end of my speech, but I will just say this. During this debate there has been made great stress about unemployment and the fear of unemployment, and the right hon. Gentleman the Member for Bishop Auckland, at the beginning of this debate, said it had doubled during the last year. It is not so. It was 1.3 per cent. last year. It is 1.9 per cent. this year. No kind of calculation will make that double. Double 1.3 is 2.6, and I hope hon. Members opposite will realise that 2.6 is very nearly 2½, which is a figure very dear to the right hon. Member for Bishop Auckland.

The trouble about this, of course, is that the Opposition are really not serious in this Amendment. They should not have gone back into the past and tried to raise the bogies of the inter-war years. They are the last people who should be doing that. What was their unemployment record? What is all this talk about bringing down the standard of living? The right hon. Member for Leeds, South himself in his broadcast in March last year said that the standard of living in this country could not possibly go up owing to the defence programme.

Mr. Gaitskell

indicated dissent.

Mr. Crookshank

It is no good the right hon. Gentleman shaking his head because he said so; that it was certainly not going to be possible during the next few years. Their own record in these matters, if we want to dig around, shows what happened when they took office in 1929 and when they left it in 1931. If they want to play that game, we can play it, too. But let me remind them that, whereas at the last General Election they got a great number of votes with this war-mongering bogy, when those right hon. Gentlemen opposite knew at that time that by their own plans the atom bomb was within a few months of being exploded and never lifted a finger to stop the nonsense that was talked on their platforms. The 1950 Election was the one which they tried to fight on this very unemployment bogy, and they lost 194 seats. If we are to start that, we shall have a great deal to say, but not tonight.

Tonight we are about to pass the Address of thanks for the Gracious Speech. That address will go forward unamended. It will be the thanks of this House to Her Majesty for graciously coming to the House of Lords in the way she did and for delivering that speech. There will be no Amendment. But if there were to be an Amendment the one which would be carried in this House and in the country would not be this one, with its red tail going back to what happened between the wars. It would be something quite different.

Were there to be an Amendment it would be that, "neither this House nor this country has any confidence in Her Majesty's Opposition." And why? According to the "Daily Herald" because there is "a party within the party"; and according to "Tribune" because it has not at present got a "dynamic left-wing policy." But according to me because that party brought this country to the brink of national bankruptcy; because that party, to use their own words, neither positively nor effectively have supported the harsh measures which their successors had to introduce to cope with that great inheritance; because that party seeks to magnify all points of political controversy. In short, if as a result of this debate there were to be any vote of censure at all it would not be against those who sit on these benches, but on them.

Question put, "That those words be there added."

The House divided: Ayes, 279; Noes, 313.

Division No. 1.]	AYES	[10.0 p.m.
Acland, Sir Richard	Gaitskell, Rt. Hon. H. T. N.	Mitchison, G. R.
Adams, Richard	Gibson, C. W.	Monslow, W.
Albu, A. H.	Glanville, James	Moody, A. S.
Allen, Arthur (Bosworth)	Gooch, E. G.	Morgan, Dr. H. B. W.
Allen, Scholefield (Crewe)	Gordon Walker, Rt. Hon. P. C.	Morley, R.
Anderson, Alexander (Motherwell)	Greenwood, Anthony (Rossendale)	Morris, Percy (Swansea, W.)
Anderson, Frank (Whitehaven)	Greenwood, Rt. Hn. Arthur (Wakefield)	Morrison, Rt. Hon. H. (Lewisham, S.)
Attlee, Rt. Hon. C. R.	Grenfell, Rt. Hon. D. R.	Mort, D. L.
Awbery, S. S.	Grey, C. F.	Moyle, A.
Bacon, Miss Alice	Griffiths, David (Rother Valley)	Mulley, F. W.
Baird, J.	Griffiths, Rt. Hon. James (Llanelly)	Murray, J. D.
Balfour, A.	Griffiths, William (Exchange)	Nally, W.
Barnes, Rt. Hon. A. J.	Hall, Rt. Hon. Glenvil (Colne Valley)	Neal, Harold (Bolsover)
Bartley, P.	Hall, John T. (Gateshead, W.)	Noel-Baker, Rt. Hon. P. J.
Bellenger, Rt. Hon. F. J.	Hamilton, W. W.	O'Brien, T.
Bence, C. R.	Hannan, W.	Oldfield, W. H.
Benn, Wedgwood	Hardy, E. A.	Oliver, G. H.
Benson, G.	Hargreaves, A.	Orbach, M.
Beswick, F.	Harrison, J. (Nottingham, E.)	Oswald, T.
Bevan, Rt. Hon. A. (Ebbw Vale)	Hastings, S.	Padley, W. E.
Blackburn, F.	Hayman, F. H.	Paget, R. T.
Blenkinsop, A.	Healey, Denis (Leeds, S. E.)	Paling, Rt. Hon. W. (Dearne Valley)
Blyton, W. R.	Henderson, Rt. Hon. A. (Rowley Regis)	Paling, Will T. (Dewsbury)
Boardman, H.	Herbison, Miss M.	Palmer, A. M. F.
Bottomley, Rt. Hon. A. G.	Hewitson, Capt. M.	Pannell, Charles
Bowles, F. G.	Hobson, C. R.	Pargiter, G. A.
Braddock, Mrs. Elizabeth	Holman, P.	Parker, J.
Brook, Dryden (Halifax)	Holmes, Horace (Hemsworth)	Paton, J.
Broughton, Dr. A. D. D.	Houghton, Douglas	Peart, T. F.
Brown, Rt. Hon. George (Belper)	Hoy, J. H.	Plummer, Sir Leslie
Brown, Thomas (Ince)	Hubbard, T. F.	Poole, C. C.
Burke, W. A.	Hudson, James (Ealing, N.)	Popplewell, E.
Burton, Miss F. E.	Hughes, Cledwyn (Anglesey)	Porter, G.
Butler, Herbert (Hackney, S.)	Hughes, Emrys (S. Ayrshire)	Price, Joseph T. (Westhoughton)
Callaghan, L. J.	Hughes, Hector (Aberdeen, N.)	Proctor, W. T.
Carmichael, J.	Hynd, H. (Accrington)	Pursey, Cmdr. H.
Castle, Mrs. B. A.	Hynd, J. B. (Attercliffe)	Rankin, John
Champion, A. J.	Irvine, A. J. (Edge Hill)	Reeves, J.
Chapman, W. D.	Irving, W. J. (Wood Green)	Reid, Thomas (Swindon)
Chetwynd, G. R.	Isaacs, Rt. Hon. G. A.	Reid, William (Camlachie)
Clunie, J.	Janner, B.	Rhodes, H.
Coldrick, W.	Jay, Rt. Hon. D. P. T.	Richards, R.
Collick, P. H.	Jeger, George (Goole)	Robens, Rt. Hon. A.
Corbet, Mrs. Freda	Jeger, Dr. Santo (St. Pancras, S.)	Roberts, Albert (Normanton)
Cove, W. G.	Jenkins, R. H. (Stechford)	Roberts, Goronwy (Caernarvonshire)
Craddock, George (Bradford, S.)	Johnson, James (Rugby)	Robinson, Kenneth (St. Pancras, N.)
Crossman, R. H. S.	Johnston, Douglas (Paisley)	Rogers, George (Kensington, N.)
Cullen, Mrs. A.	Jones, David (Hartlepool)	Ross, William
Daines, P.	Jones, Frederick Elwyn (West Ham, S.)	Royle, C.
Dalton, Rt. Hon. H.	Jones, Jack (Rotherham)	Schofield, S. (Barnsley)
Darling, George (Hillsborough)	Jones, T. W. (Merioneth)	Shackleton, E. A. A.
Davies, A. Edward (Stoke, N.)	Keenan, W.	Shawcross, Rt. Hon. Sir Hartley
Davies, Ernest (Enfield, E.)	Kenyon, C.	Shinwell, Rt. Hon. E.
Davies, Harold (Leek)	Key, Rt. Hon. C. W	Short, E. W.
Davies, Stephen (Merthyr)	King, Dr. H. M.	Shurmer, P. L. E.
de Freitas, Geoffrey	Kinley, J.	Silverman, Julius (Erdington)
Deer, G.	Lee, Frederick (Newton)	Silverman, Sydney (Nelson)
Delargy, H. J.	Lee, Miss Jennie (Cannock)	Simmons, C. J. (Brierley Hill)
Dodds, N. N.	Lever, Harold (Cheetham)	Slater, J.
Donnelly, D. L.	Lever, Leslie (Ardwick)	Smith, Ellis (Stoke, S.)
Driberg, T. E. N.	Lewis, Arthur	Smith Norman (Nottingham, S.)
Dugdale, Rt. Hon. John (W. Bromwich)	Lindgren, G. S.	Snow, J. W.
Ede, Rt. Hon. J. C.
Edelman, M.	Lipton, Lt.-Col. M.	Soskice, Rt. Hon. Sir Frank
Edwards, John (Brighouse)	Logan, D. G.	Sparks, J. A.
Edwards, Rt. Hon. Ness (Caerphilly)	MacColl, J. E.	Steele, T.
Edwards, W. J. (Stepney)	McGhee, H. G.	Stewart, Michael (Fulham, E.)
Evans, Albert (Islington, S. W.)	McInnes, J.	Stokes, Rt. Hon. R. R.
Evans, Edward (Lowestoft)	McKay, John (Wallsend)	Strachey, Rt. Hon. J.
Evans, Stanley (Wednesbury)	McLeavy, F.	Strauss, Rt. Hon. George (Vauxhall)
Ewart, R.	MacMillan, M. K. (Western Isles)	Stross, Dr. Barnett
Fernyhough, E.	McNeil, Rt. Hon. H.	Summerskill, Rt. Hon. E.
Field, W. J.	MacPherson, Malcolm (Stirling)	Swingler, S. T.
Fienburgh, W.	Mainwaring, W. H.	Sylvester, G. O.
Finch, H. J.	Mallalieu, E. L. (Brigg)	Taylor, Bernard (Mansfield)
Fletcher, Eric (Islington, E.)	Mallalieu, J. P. W. (Huddersfield, E.)	Taylor, John (West Lothian)
Follick, M.	Mann, Mrs. Jean	Taylor, Rt. Hon. Robert (Morpeth)
Foot, M. M.	Manuel, A. C.	Thomas, David (Aberdare)
Forman, J. C.	Marquand, Rt. Hon. H. A.	Thomas, George (Cardiff)
Fraser, Thomas (Hamilton)	Mayhew, C. P.	Thomas, Iorwerth (Rhondda, W.)
Freeman, John (Watford)	Mellish, R. J.	Thomas, Ivor Owen (Wrekin)
Freeman, Peter (Newport)	Mikardo, Ian	Thomson, George (Dundee, E.)

Thorneycroft, Harry (Clayton)	Wells, William (Walsall)	Williams, W. R. (Droylsden)
Thurtle, Ernest	West, D. G.	Williams, W. T. (Hammersmith, S.)
Timmons, J.	Wheatley, Rt. Hon. John	Wilson, Rt. Hon. Harold (Huyton)
Tomney, F.	White, Mrs. Eirene (E. Flint)	Winterbottom, Ian (Nottingham, C.)
Turner-Samuels, M.	White, Henry (Derbyshire, N. E.)	Winterbottom, Richard (Brightside)
Ungoed-Thomas, Sir Lynn	Whiteley, Rt. Hon. W.	Woodburn, Rt. Hon. A.
Usborne, H. C.	Wigg, George	Wyatt, W. L.
Viant, S. P.	Wilcock, Group Capt. C. A. B.	Yates, V. F.
Wallace, H. W.	Wilkins, W. A.	Younger, Rt. Hon. K
Watkins, T. E.	Willey, Frederick (Sunderland, N.)
Webb, Rt. Hon. M. (Bradford, C.)	Williams, David (Neath)	TELLERS FOR THE AYES:
Weitzman, D.	Williams, Rev. Llywelyn (Abertillery)	Mr. Bowden and Mr. Pearson.
Wells, Percy (Faversham)	Williams, Ronald (Wigan)

NOES
Aitken, W. T.	Darling, Sir William (Edinburgh, S.)	Horobin, I. M.
Allan, R. A. (Paddington, S.)	Davidson, Viscountess	Horsbrugh, Rt. Hon. Florence
Alport, C. J. M.	Davies, Rt. Hn. Clement (Montgomery)	Howard, Gerald (Cambridgeshire)
Amery, Julian (Preston, N.)	De la Bère, Sir Rupert	Howard, Greville (St. Ives)
Amory, Heathcoat (Tiverton)	Deedes, W. F.	Hudson, Sir Austin (Lewisham, N.)
Anstruther-Gray, Major W. J.	Digby, S. Wingfield	Hudson, W. R. A. (Hull, N.)
Arbuthnot, John	Dodds-Parker, A. D.	Hulbert, Wing Cdr. N. J.
Ashton, H. (Chelmsford)	Donaldson, Cmdr. C. E. McA.	Hurd, A. R.
Assheton, Rt. Hon. R. (Blackburn, W.)	Donner, P. W.	Hutchinson, Sir Geoffrey (Ilford, N.)
Astor, Hon. J. J. (Plymouth, Sutton)	Doughty, C. J. A.	Hutchison, Lt.-Com. Clark (E'b'rgh W.)
Baker, P. A. D.	Douglas-Hamilton, Lord Malcolm	Hutchison, James (Scotstoun)
Baldock, Lt.-Comdr. J. M.	Drayson, G. B.	Hyde, Lt.-Col. H. M.
Baldwin, A. E.	Drewe, G.	Hylton-Foster, H. B. H.
Banks, Col. C.	Dugdale, Rt. Hn. Sir Thomas (Richmond)	Jenkins, Robert (Dulwich)
Barber, Anthony	Duncan, Capt. J. A. L.	Johnson, Eric (Blackley)
Barlow, Sir John	Duthie, W. S.	Johnson, Howard (Kemptown)
Baxter, A. B.	Eccles, Rt. Hon. D. M.	Jones, A. (Hall Green)
Beach, Maj. Hicks	Elliot, Rt. Hon. W. E.	Joynson-Hicks, Hon. L. W.
Beamish, Maj. Tufton	Erroll, F. J.	Kaberry, D.
Bell, Philip (Bolton, E.)	Fell, A.	Keeling, Sir Edward
Bell, Ronald (Bucks, S.)	Finlay, Graeme	Kerr, H. W. (Cambridge)
Bennett, F. M. (Reading, N.)	Fisher, Nigel	Lambton, Viscount
Bennett, Sir Peter (Edgbaston)	Fleetwood-Hesketh, R. F.	Lancaster, Col. C. G.
Bennett, Dr. Reginald (Gosport)	Fletcher-Cooke, C.	Langford-Holt, J. A.
Bennett, William (Woodside)	Fort, R.	Law, Rt. Hon. R. K.
Bevins, J. R. (Toxteth)	Foster, John	Leather, E. H. C.
Birch, Nigel	Fraser, Hon. Hugh (Stone)	Legge-Bourke, Maj. E. A. H.
Bishop, F. P.	Fraser, Sir Ian (Morecambe & Lonsdale)	Legh, P. R. (Petersfield)
Black, C. W.	Fyfe, Rt. Hon. Sir David Maxwell	Lennox-Boyd, Rt.- Hon. A. T.
Boothby, R. J. G.	Galbraith, Cmdr. T. D. (Pollok)	Lindsay, Martin
Bossom, A. C.	Galbraith, T. G. D. (Hillhead)	Linstead, H. N.
Bowen, E. R.	Garner Evans, E. H.
Boyd-Carpenter, J. A.	George, Rt. Hon. Maj. G. Lloyd	Llewellyn, D. T.
Boyle, Sir Edward	Glyn, Sir Ralph	Lloyd, Rt. Hon. G. (King's Norton)
Braine, B. R.	Godber, J. B.	Lloyd, Maj. Guy (Renfrew, E.)
Braithwaite, Sir Albert (Harrow, W.)	Gomme-Duncan, Col. A.	Lockwood, Lt.-Col. J. C.
Braithwaite, Lt.-Cdr. G. (Bristol, N. W.)	Gough, C. F. H.	Longden, Gilbert (Herts, S. W.)
Bromley-Davenport, Lt.-Col. W. H.	Gower, H. R.	Low, A. R. W.
Brooke, Henry (Hampstead)	Graham, Sir Fergus	Lucas, Sir Jocelyn (Portsmouth, S.)
Brooman-White, R. C.	Gridley, Sir Arnold	Lucas, P. B. (Brentford)
Browne, Jack (Gevan)	Grimond, J.	Lucas-Tooth, Sir Hugh
Bullard, D. G.	Grimston, Hon. John (St. Albans)	Lyttelton, Rt. Hon. O.
Bullock, Capt. M.	Grimston, Sir Robert (Westbury)	McAdden, S. J.
Bullus, Wing Commander E. E.	Hall, John (Wycombe)	McCallum, Major D.
Burden, F. F. A.	Harden, J. R. E.	McCorquodale, Rt. Hon. M. S.
Butler, Rt. Hon. R. A. (Saffron Walden)	Hare, Hon. J. H.	Macdonald, Sir Peter (I. of Wight)
Campbell, Sir David	Harris, Frederic (Croydon, N.)	Mackeson, Brig. H. R.
Carr, Robert (Mitcham)	Harris, Reader (Heston)	McKibbin, A. J.
Carson, Hon. E.	Harrison, Col. J. H. (Eye)	McKie, J. H. (Galloway)
Cary, Sir Robert	Harvey, Air Cdre A. V. (Macclesfield)	Maclay, Rt. Hon John
Channon, H.	Harvey, Ian (Harrow, E.)	Maclean, Fitzroy
Churchill, Rt. Hon. W. S.	Harvie-Watt, Sir George	Macleod, Rt. Hon. Iain (Enfield, W.)
Clarke, Col. Ralph (East Grinstead)	Hay, John	Macmillan, Rt. Hon. Harold (Bromley)
Clarke, Brig. Terence (Portsmouth, W.)	Head, Rt. Hon. A. H.	Macpherson, Maj. Niall (Dumfries)
Clyde, Rt. Hon. J. L.	Heath, Edward	Maitland, Comdr. J. F. W. (Horncastle)
Cole, Norman	Henderson, John (Cathcart)	Maitland, Patrick (Lanark)
Colegate, W. A.	Higgs, J. M. C.	Manningham-Buller, Sir R. E.
Conant, Maj. R. J. E.	Hill, Dr. Charles (Luton)	Markham, Major S. F.
Cooper, Sqn. Ldr. Albert	Hill, Mrs. E. (Wythenshawe)	Marlowe, A. A. H.
Cooper-Key, E. M.	Hinchingbrooke, Viscount	Marples, A. E.
Craddock, Beresford (Spelthorne)	Hirst, Geoffrey	Marshall, Douglas (Bodmin)
Cranborne, Viscount	Holland-Martin, C. J.	Marshall, Sir Sidney (Sutton)
Crookshank, Capt. Rt. Hon. H. F. C.	Hollis, M. C.	Maude, Angus
Crosthwaite-Eyre, Col. O. E.	Holmes, Sir Stanley (Harwich)	Maudling, R.
Crouch, R. F.	Holt, A. F.	Maydon, Lt.-Comdr S. L. C.
Crowder, Sir John (Finchley)	Hope Lord John	Medlicott, Brig. F.
Crowder, Petre (Ruislip—Northwood)	Hopkinson, Rt. Hon Henry	Mellor, Sir John
Cuthbert, W. N.	Hornsby-Smith, Miss M. P.	Molson, A. H. E.

Monckton, Rt. Hon. Sir Walter	Robertson, Sir David	Taylor, William (Bradford, N.)
Moore, Lt.-Col. Sir Thomas	Robinson, Roland (Blackpool, S.)	Teeling, W.
Morrison, John (Salisbury)	Robson-Brown, W.	Thomas, Rt. Hon. J. P. L. (Hereford)
Mott-Radclyffe, C. E.	Rodgers, John (Sevenoaks)	Thomas, P. J. M. (Conway)
Nabarro, G. D. N.	Roper, Sir Harold	Thompson, Kenneth (Walton)
Nicholls, Harmar	Ropner, Col. Sir Leonard	Thompson, Lt.-Cdr. R. (Croydon, W.)
Nicholson, Godfrey (Farnham)	Russell, R. S.	Thorneycroft, Rt. Hn. Peter (Monmouth)
Nicolson, Nigel (Bournemouth, E.)	Ryder, Capt. R. E. D.	Thornton-Kemsley, Col. C. N.
Nield, Basil (Chester)	Salter, Rt. Hon. Sir Arthur	Tilney, John
Noble, Cmdr. A. H. P.	Sandys, Rt. Hon. D.	Touche, Sir Gordon
Nugent, G. R. H.	Savory, Prof. Sir Douglas	Turner, H. F. L.
Nutting, Anthony	Schofield, Lt.-Col. W. (Rochdale)	Turton, R. H.
Oakshott, H. D.	Scott, R. Donald	Tweedsmuir, Lady
Odey, G. W.	Scott-Miller, Cmdr. R.	Vane, W. M. F.
O'Neill, Phelim (Co. Antrim, N.)	Shepherd, William	Vaughan-Morgan, J. K.
Ormsby-Gore, Hon. W. D.	Simon, J. E. S. (Middlesbrough, W.)	Vosper, D. F.
Orr, Capt. L. P. S.	Smiles, Lt.-Col. Sir Walter	Wade, D. W.
Orr-Ewing, Charles Ian (Hendon, N.)	Smithers, Peter (Winchester)	Wakefield, Edward (Derbyshire, W.)
Orr-Ewing, Ian L. (Weston-super-Mare)	Smithers, Sir Waldron (Orpington)	Wakefield, Sir Wavell (Marylebone)
Osborne, C.	Smyth, Brig. J. G. (Norwood)	Walker-Smith, D. C.
Partridge, E.	Snadden, W. McN.	Ward, Hon. George (Worcester)
Peake, Rt. Hon. O.	Soames, Capt. C.	Ward, Miss I. (Tynemouth)
Perkins, W. R. D.	Spearman, A. C. M.	Waterhouse, Capt. Rt. Hon. C.
Peto, Brig. C. H. M.	Speir, R. M.	Watkinson, H. A.
Peyton, J. W. W.	Spence, H. R. (Aberdeenshire, W.)	Webbe, Sir H. (London & Westminster)
Pickthorn, K. W. M.	Spens, Sir Patrick (Kensington, S.)	White, Baker (Canterbury)
Pilkington, Capt. R. A.	Stanley, Capt. Hon. Richard	Williams, Rt. Hon. Charles (Torquay)
Pitman, I. J.	Stevens, G. P.	Williams, Gerald (Tonbridge)
Powell, J. Enoch	Steward, W. A. (Woolwich, W.)	Williams, Sir Herbert (Croyden, E.)
Price, Henry (Lewisham, W.)	Stewart, Henderson (Fife, E.)	Williams, R. Dudley (Exeter)
Prior-Palmer, Brig. O. L.	Stoddart-Scott, Col. M.	Wills, G.
Profumo, J. D.	Storey, S.	Wilson, Geoffrey (Trure)
Raikes, H. V.	Strauss, Henry (Norwich, S.)	Wood, Hon. R.
Rayner, Brig. R.	Stuart, Rt. Hon. James (Moray)	York, C.
Redmayne, M.	Studholme, H. G.
Remnant, Hon. P.	Summers, G. S.	TELLERS FOR THE NOES:
Renton, D. L. M.	Sutcliffe, H.	Mr. Buchan-Hepburn and
Roberts, Peter (Heeley)	Taylor, Charles (Eastbourne)	Mr. Butcher.

Main Question put, and agreed to.

Resolved, That an humble Address be presented to Her 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.

To be presented by Privy Councillors or Members of Her Majesty's Household.