Commons Sitting of 3 February 1953

Preamble
The House met at Half past Two o'Clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  MINISTRY OF WORKS

    Battersea Pleasure Gardens
    Mr. Doddsasked the Minister of Works what action is contemplated to ensure the maximum possible attendance at the Battersea Festival Pleasure Gardens in Coronation Year.
    The Minister of Works (Mr. David Eccles): This is a matter for the Board of the Company in whom I have confidence. If the hon. Gentleman has suggestions to make I shall be glad to arrange for him to see the Managing Director.
    Mr. Dodds: As the right hon. Gentleman has stated in this House that the transport facilities were totally inadequate and that people were unable to get to the Gardens, would he now tell us what steps he proposes to take to see that the transport arrangements this year are more satisfactory?
    Mr. Eccles: I understand that the L.C.C. members of the Board are forming a sub-committee to look into this matter of transport, and again I say that I have every confidence that these gentlemen will do the best they can.

    Requisitioned Buildings (Government Purchase)
    Mr. Vaneasked the Minister of Works his policy where the owner of property which was requisitioned during the war, and is still occupied by a Government Department and is likely to be so occupied for a number of years, is anxious to sell to his Department.
    Mr. Eccles: Normally I am willing to buy requisitioned buildings when they
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    are in sound condition and are suitable for official use, provided they are offered at a reasonable price and are likely to be used long enough to justify the cost of purchase and adaptation.
    Mr. Vane: Can my right hon. Friend tell me why his Department have consistently refused to buy the house near Kendal about which I have had certain correspondence with him?
    Mr. Eccles: This property, which is, I think called "Underfell," is unsuitable and uneconomic for permanent office purposes and the local planning authority objects to its use permanently for offices.
    Mr. Vane: If it is sufficiently suitable to be occupied by a Government Department indefinitely, why is it not suitable for them to buy? They can sell it again if they get better premises instead of leaving the owner in the unfortunate position in which he now is.
    Mr. Eccles: I should very much like to have the money to buy everything, but the right thing to do if we had the money would be to build more suitable offices.

    Palace of Westminster (Open Fires)
    Mr. K. Robinsonasked the Minister of Works if he will remove the sham log fire recently installed in the Lower
    Waiting Hall.
    The Parliamentary Secretary to the Ministry of Works (Mr. Hugh Molson): No, Sir. This fire was placed in position in response to a request from the Authorities of the House.
    Mr. Robinson: Does the hon. Gentleman not agree that a fire should generate heat as well as light, and does he not think that this object is better suited to a mock Tudor tea room than the Palace of Westminster?
    Mr. Molson: The Palace of Westminster is now heated by central heating. It is part of the scheme for doing away with all open fires. At the present time there are only about six open fires left, whereas the extraction plant was put in at a time when there were 1,000 fires in the Palace. The actual cost of running the extraction plant is now £2,000 a year. It is for that reason that we are intending to do away with all open fires as a matter of urgency.
    Viscount Hinchingbrooke: Is it not the duty of all hon. Members, particularly those on this side of the House, to see that nutty slack is burned?

    Ancient Monuments, Scotland (Custodians)
    Major Anstruther-Grayasked the Minister of Works how many men he employs in Scotland as custodians of ancient monuments, and in similar duties; and, of these, how many are partially disabled.
    Mr. Eccles: The number of men employed in Scotland as custodians of ancient monuments and in similar duties is 102, of whom 10 are partially disabled. In addition, 63 custodians are employed on a part-time basis.
    Major Anstruther-Gray: Will the right hon. Gentleman give an assurance that where the work is not too heavy, and other things being equal, he will try to employ partially disabled men wherever possible?
    Mr. Eccles: Yes, Sir. We have to recruit these men through the employment exchanges, and I will bring to their notice the point raised by my hon. and gallant Friend.

    Trafalgar Square (Trading Licences)
    Lieut.-Colonel Liptonasked the Minister of Works whether he has now decided to increase the number of licences to trade in Trafalgar Square.
    Mr. Eccles: No, Sir. I am satisfied that the number of licensed photographers is at present adequate to meet public demand.
    Lieut.-Colonel Lipton: Now that some 1,000 police summonses have been disposed of, will the Minister reconsider whether, particularly during this Coronation year and the summer season, it is reasonable to expect three photographers and three corn sellers to cope with the demand that is likely to be made upon their services?
    Mr. Eccles: I think that the hon. and gallant Gentleman is wrong. It is true that the appeal case has been decided against the photographers, but the 500 summons have not been dealt with, and I would not like to say how they will be decided. With regard to the visitors,
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    we shall see how they get on. With regard to the pigeons, I see no reason why they should increase during the Coronation period.

  CORONATION

    Stands (Charges)
    Mr. J. T. Priceasked the Minister of Works how far, in calculating the charges of £6 and £4, respectively, for seats on Coronation stands, credit has been given against the costs of erection for all the seats which will be earmarked free of charge to respective persons.
    Mr. Eccles: The prices of £6 and £4 per seat were calculated on the average cost of construction and, in fact, are below the costs as now known. The cost of the free seats to Members of both Houses of Parliament who do not go into the Abbey and to members of the Diplomatic Corps and other distinguished guests will, therefore, be met out of Voted money.

    Filming Facilities
    Lieut.-Colonel Liptonasked the Minister of Works the cost of the facilities he has provided for filming the Coronation ceremony and procession; and what financial arrangements have been made with the film companies concerned.
    Mr. Eccles: The cost of all constructional work in the Abbey and on the route of the processions to provide facilities for newsreels, Press and B.B.C. is estimated roughly to be £11,000. It is proposed to recover this expenditure from the interests concerned, but the apportionment between the various publicity services has not yet been determined.
    Lieut.-Colonel Lipton: Can the right hon. Gentleman be a little more forthcoming in saying how many film companies have been given the right to operate in the Abbey itself, and what steps he has taken to insure that the actual film, or the monopoly of the film, of the Coronation ceremony is not exploited for private gain?
    Mr. Eccles: That is quite a different question, and in any case the facilities in the Abbey are not my responsibility.
    Mr. Hector Hughes: Can the Minister say whether the cost to which he referred includes the cost of the distribution of films throughout North-East Scotland to which the Postmaster-General so contumaciously refused television facilities?
    Mr. Eccles: I am referring only to the cost of placing the cameras in position to take the films.

    SCOTTISH STONE BUILDING INDUSTRY (REPORT)
    Mr. Patrick Maitlandasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, when he expects the report on the Scottish stone building industry, prepared by the Department of Scientific and Industrial Research, to be published.
    Mr. Molson: It is expected that the report will be available on or about the 13th February.
    Mr. Maitland: While thanking the Minister for that information, may I draw his attention to the Scottish stone building industry and the eagerness with which this report will be awaited?

  NATIONAL SERVICE

    Medical Grading (Personal Case)
    Mr. Chapmanasked the Minister of Labour why, in a case sent to him, a National Service man who had been operated on for a meningocele in the lower dorsal region, was originally classed in medical Grade I; why no effort was made to verify the medical evidence, despite sources being provided by the man's parents; why he has now been placed in Grade III; whether he will accept responsibility for the effect of military training on this man; and whether he will suspend the man's call-up until a full investigation has been made.
    The Parliamentary Secretary to the Ministry of Labour and National Service (Mr. Harold Watkinson): The medical board that first examined this man was aware of the operation he had had in infancy and, before grading him, had available a report on his present condition from a consultant. It is not the case that no effort was made to verify the
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    father's evidence by reference to the source indicated by him. The second board attached greater importance to another condition than did the first board, and for that reason placed him in medical Grade III. Men so graded are called up only if suitable employment is available in the Forces, and after discussion with the War Office it has been decided not to call this man up.

    Agricultural Workers
    Mr. Emrys Hughesasked the Minister of Labour if he will make new inquiries in the South-West Scotland area into the complaints by farmers that the call-up of agricultural workers for National Service is likely to have an adverse effect on the Government's plans for increasing food production in that area.
    Mr. Watkinson: No, Sir. My information is that the position in the South-West area is no worse—and indeed, as regards the proportion of deferments granted is rather better—than for Scotland as a whole.
    Mr. Hughes: Is the Minister aware that this is in direct contradiction with the views of the responsible farmers' organisation in the area, and in the recent annual review the agricultural correspondent of the "Scotsman" pointed out that this is having a serious effect on small farms with only one or two workers?
    Mr. Watkinson: The hon. Gentleman asked me the position in South-West Scotland, and perhaps he would like to know that for the period 1951 to December, 1952, which includes two complete age classes, the total call-up from Scotland as a whole was 1,406. We have tried to keep separate figures for the South-West, but we can only form an approximation, and the number is approximately 140 men only from that area.
    Mr. Fortasked the Minister of Labour if he will recommend hardship tribunals when they defer agricultural labourers from National Service to do so for a minimum period of 12 months.
    Mr. Watkinson: I take it that my hon. Friend is not referring to the statutory Military Service (Hardship) Committees but to the National Service Deferment

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    Boards which deal with applications for the deferment of call-up of agricultural workers on food production grounds. The boards are already instructed that the period of deferment should normally be 12 months for stockmen and in any other case where it seems unlikely that a change of circumstances will occur earlier. I think this adequately meets my hon. Friend's suggestion.

  EMPLOYMENT

    Remploy Factories
    Mr. Padleyasked the Minister of Labour for what reasons the Remploy factory at Maesteg has been closed; and what plans he has for securing employment for the seriously disabled persons in the district.
    Mr. Watkinson: The small factory at Maesteg has been found uneconomic to operate and the 11 workers concerned have been transferred to the larger factory at Bridgend. I cannot offer any immediate prospect of an expansion of Remploy activities in the area.
    Mr. Padley: Is the Minister aware that in the district there is a strong suspicion that the imposition of charges upon surgical boots is leading to this unfortunate occurrence, in so far as the workers concerned were employed on the making and repairing of surgical boots; and is he further aware that the latter part of his answer means that something like 60 seriously disabled persons in that area have virtually no opportunity of getting jobs in the near future?
    Mr. Watkinson: I think that the hon. Gentleman will admit that this is really the end of an experiment which was started about four years ago to try to use local village halls and local buildings for very small Remploy units. Unfortunately—and my right hon. and learned Friend regrets it as much as I do—that experiment has not proved a success. I think that the hon. Gentleman will know that the Ferndale factory had to be closed in April, 1951, for the same reason, and that it had nothing to do with the reason which he has advanced to the House
    As to the second part of his Question, I am afraid that we must face the facts that the immediate task in front of
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    Remploy is to re-organise and consolidate its position in order that it may start in a proper manner and give reasonable employment to the people which it now employs. My right hon. and learned Friend did say, in answer to a Question in this House recently, that there was no opportunity for increasing the factories engaged in Remploy until that reorganisation and consolidation had been carried out.
    Mr. Fernyhough: Does the answer mean that where Remploy is not self-supporting it will be closed down?
    Mr. Watkinson: No, it means nothing of the sort. In the interests of Remploy and of all those who work for it, we look most carefully into these matters and try to make it as efficient as possible for the sake of the men who work for it.
    Mr. K. Thompsonasked the Minister of Labour how many disabled persons are at present employed in Remploy factories on Merseyside; how many suitable men and women are waiting appointment in such factories; and what increased facilities are planned in the near future.
    Mr. Watkinson: The number of severely disabled persons employed in the two Remploy factories on Merseyside at 15th December, 1952, was 164. At the same date, the number of unemployed severely disabled persons on Merseyside who would be eligible for consideration, but not necessarily suitable, for employment in a Remploy factory, was 332. I am afraid I cannot hold out hope in the near future of any increase in the number of Remploy factories.
    Mr. Thompson: Will my hon. Friend bear in mind that this figure of 332 is really a serious one, and is only part of the general problem of unemployment on Merseyside? May we have his assurance that he will constantly bear this figure in mind?
    Mr. Watkinson: I shall be very pleased to do that, and I do not want anything that I have said to imply that my right hon. and learned Friend and I do not look on Remploy with the greatest sympathy, but we must have some priority, and, unfortunately, the first one is to try to put the organisation as a whole on a rather more efficient footing.
    Mr. Ellis Smith: Does the Minister agree that there is a certain amount of works development within a reasonable radius of Merseyside, and, if so, will he give special attention to that in the hope of providing employment in these factories for disabled men?
    Mr. Watkinson: I should like to thank the hon. Member for that suggestion, and I will bring it to the attention of Remploy.

    Industrial Disputes Order (Professional Organisations)
    Mr. Morleyasked the Minister of Labour when he will introduce an amendment to Statutory Order, No. 1376 to make its use available to professional organisations.
    Mr. Watkinson: I regret that I am not at present in a position to add to the answer given to the hon. Member on 28th October last year.
    Mr. Morley: Can the Minister say when he will be able to make this arrangement? Is he aware that there was more or less a conditional promise given a year ago that an Amendment of this Order would be brought in to enable it to be used by professional organisations? Why this long delay?
    Mr. Watkinson: I am well aware of the point which the hon. Gentleman raises, and so is my right hon. and learned Friend. I am afraid that I must say to him that the difficulties which have arisen are still there and are still under examination, and I do not think that it is for me to go further than that, otherwise I think that we might tend to make the difficulty worse rather than better.
    Mr. Robens: Will the Minister give an undertaking that there will be no question of altering this Order until he has consulted both the T.U.C. and the employers' associations?
    Mr. Watkinson: I think that the right hon. Gentleman knows that this would come in front of the N.J.A.C. in the normal course.

    Water Schemes, Ross and Cromarty
    Mr. John MacLeodasked the Minister of Labour how much the progress in the construction of water schemes
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    in Ross and Cromarty is delayed by the shortage of labour.
    Mr. Watkinson: There has been no delay due to shortage of labour.

    Dock Workers Release Scheme, Cardiff
    Mr. G. Thomasasked the Minister of Labour how many dock workers at Cardiff he expects to release under the Dock Workers Release Scheme; and whether he is satisfied that there is sufficient alternative employment in the city to prevent an increase in the number of registered unemployed.
    Mr. Watkinson: Present indications do not suggest that the number of dock workers who may be released by the National Dock Labour Board under their voluntary Scheme will make any material difference to the employment position in Cardiff.
    Mr. Thomas: Will the Minister be kind enough to answer the first part of the Question, which asks how many he expects to release?
    Mr. Watkinson: I can tell the hon. Gentleman how many have been released. I think he already knows the number. It is five.
    Mr. Thomas: There is, no doubt, a difference between the number that has been released and the number the hon. Gentleman expects to release. Has he any idea at all what his target is?
    Mr. Watkinson: We cannot have a target in this matter. Generally over the country releases have been smaller than we expected because, most fortunately, the work in the docks has increased rather more rapidly than we expected at this time of year. It is only fair to the hon. Gentleman to say that, unfortunately, Cardiff Docks have not gone ahead as rapidly as most docks have, and that is why I cannot give the actual figure.
    Mr. Gower: Is my hon. Friend aware of the need for caution in this matter? The South-West ports generally, including Cardiff, have been in a depressed condition ever since the end of the war, but with increased exports of coal it is hoped that more labour will now be required there?
    Mr. Awbery: Is the hon. Gentleman aware that there has been a general deterioration in the labour position in most of our ports? What is he doing to provide employment for the men trained in this work instead of transferring them elsewhere?
    Mr. Watkinson: The hon. Gentleman will know that the Dock Labour Board has recently modified its scheme so that only a three-months' period is required. It is felt that for the moment that may meet the case until we see how the current volume of work in the docks is panning out.

    Local Office, Kirriemuir
    Captain Duncanasked the Minister of Labour what arrangements will be made for persons in Kirriemuir when the local office of his Department closes on 30th May, particularly as regards claims for assistance and registration for military service.
    Mr. Watkinson: After 30th May persons who have been dealt with at the Ministry of Labour's local office in Kirriemuir will be dealt with at Forfar Employment Exchange. I assume my hon. and gallant Friend's reference to assistance was intended to refer to unemployment benefit.
    Captain Duncan: Although I agree with the idea of closing down the office on economy grounds, is it not possible to retain an office or a room for one day a week to deal with disabled people and old age pensioners?
    Mr. Watkinson: Unfortunately, if we do that we shall not make the full saving of about £550 a year, but I will certainly keep that matter under review. If my hon. and gallant Friend has any severe cases which he would like to bring to my notice, we will look at the matter again.

    Birmingham
    Mr. Chapmanasked the Minister of Labour how many unemployed were registered in the Birmingham area at the latest convenient date; and to what extent this figure shows a change over the last 12 months.
    Mr. Watkinson: Eight thousand eight hundred and forty-seven at 12th January, 1953, compared with 3,390 at 14th January, 1952.
    Mr. Chapman: Is the Minister aware that that is not the whole picture in Birmingham? In addition to a considerable rise in unemployment, which is at an increased rate at the moment, there is an enormous amount of short-time working, there being a four-day week in many factories. Will the hon. Gentleman say what prospects he holds out for that area, or what his Department expects in that area?
    Mr. Watkinson: To answer the first part of the supplementary question, the hon. Gentleman might like to know that I have a weekly report from the whole of the Birmingham area and am versed not only in the unemployment figures but in every kind of short-time working, possible redundancy, and everything else. The present level of unemployment in the Birmingham area—I am not minimising the problem in any way, but am merely trying to keep it in proportion—is still only 1.4 per cent. of the total number of employees in the area, which is well below the national average. I am not trying to ride off on that; that happens to be the figure. As to future plans, these are primarily for other right hon. Friends of mine, but the Government as a whole are keeping the matter closely under review, as I have indicated, and we are doing whatever we can within the framework of our economic policy to meet the difficulties.

    Agricultural Workers (Coal Mining)
    Mr. Fortasked the Minister of Labour how many agricultural labourers of call-up age have left farming to take up jobs in coal mining.
    Mr. Watkinson: I regret that this information is not available.
    Mr. Fort: Is my hon. Friend aware that this drift from an industry where no deferment is granted to one where deferment is granted is causing grave disturbance and unhappiness on the part of people who are trying to increase production? Will he use his powers of persuasion with the National Coal Board in urging them not to take agricultural workers who apply for jobs?
    Mr. Watkinson: My hon. Friend was kind enough to write to me about this, and I undertake to look into the whole question and perhaps get in touch with him again.

    Scotland
    Mr. Hamiltonasked the Minister of Labour if he is aware of the disturbing continuation of the increase in unemployment in Scotland; whether he can state the reasons for this increase; and what remedial steps he proposes to take.
    Mr. Watkinson: Yes, Sir. The reasons are in part the normal seasonal decline in employment which occurs in certain industries at this time of year and in part a recession in the trade of certain industries. My colleagues concerned are making special efforts to increase employment in Scotland within the general framework of the Government's economic policy.
    Mr. Hamilton: Is the Minister aware that the figure has increased from 60,000 in December last year to 73,000, and that the percentage rate of unemployment in Scotland consistently remains higher than that for the rest of the United Kingdom? Can the Minister indicate what special steps have been taken in the case of the North-East of Scotland?
    Mr. Watkinson: That would be for my right hon. Friend the Secretary of State for Scotland rather than me to answer. It is our duty in the Ministry of Labour to ascertain the facts as clearly as we can—the hon. Gentleman was kind enough to help me to do that when I was in Scotland some little time ago—and it is then for us to try to state the case. It is, unfortunately in some ways, usual for other Departments to provide the remedy, but, within the general framework of our economic policy, we are doing everything we can to meet what is a very difficult situation full of very human problems.
    Mr. Ross: Will the Minister treat this as a matter of urgency, because there has again started something which we deplored in the past, a drift of people out of Scotland into England? Can he hold out any hope of something being done more quickly?
    Mr. Watkinson: I did not go further into the detailed plans because there are some Questions on the Order Paper immediately following these which deal with that matter and I thought it would be wiser to leave it to the appropriate Minister to answer.
    Mr. Woodburn: With regard to the hon. Gentleman's analysis of the situation, is he aware that the latest figures published show that, although unemployment has increased considerably over the whole of Scotland, it has actually decreased in the main towns, which means that the unemployment in the outlying areas is even greater than it appears from the percentage figures? Has his analysis given any explanation of that? Is it the result of changes in the agricultural policy?
    Mr. Watkinson: My analysis gives me, first of all, the information that the Scottish Development Areas have come off much better than any other area of the country, and they do not show anything like the same increase. That is perhaps some guidance. Otherwise the general position is not so much distributed between the towns and the countryside as between certain industries. For example, the distributive trades, food, drink and tobacco, transport and communications, and building and contracting, lead the field, and there are many seasonal reasons why that should be so.

    Austin-Morris Merger (Redundant Workers)
    Mr. Edelmanasked the Minister of Labour what action he took, arising from the Austin-Morris merger, to ensure that men made redundant were promptly absorbed in suitable employment.
    Mr. Watkinson: My officers paid an advance visit to the factory so that workers declared redundant might have an opportunity of registering for alternative employment with the employment exchange before their present employment finished.
    Mr. Edelman: Is the hon. Gentleman aware of the intense resentment felt among Coventry workers at the callous manner in which this redundancy was declared? Is it not the case that there was no consultation at all with the trade unions before the redundancy lists were drawn up? Is this not an improper way of dealing with redundancy, and will he reprimand the firm for the manner in which it has taken place?
    Mr. Watkinson: I have the pleasure of knowing the parties on both sides, the

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    trade unions and the employers, and I think it is rather unfair to describe what has happened in that way when the employers are trying, to our knowledge, to meet a very difficult situation as reasonably and as humanly as they can.
    Mr. Chapman: Since there is this considerable redundancy, will the Minister represent to the Minister of Supply that there should be some adjustment in defence contracts in this whole area in order the more quickly to absorb these men?
    Mr. WatkinsonI am very glad to be able to tell the hon. Gentleman that we have, as from now, decided to take off from the Coventry area the ban which has been on it for the placing of certain Government contracts. We hope that will be a contribution towards meeting the undoubtedly difficult situation in that area.
    Mr. Ellis Smith: Will the hon. Gentleman have a look at Clause 12 of the National Agreement, which provides for systematic short-time to be worked in preference to discharging men; and, in these special circumstances, would it not have been a good policy to have applied that National Agreement?
    Mr. Watkinson: I will certainly have a look at that.
    Mr. Edelmanasked the Minister of Labour what action he is taking, in view of the dismissals which have meen made, following the amalgamation of the Austin-Morris motor firms and the rationalisation of their production, which constitute a threat of a dispute in the trade.
    Mr. Watkinson: The redundancy at the Morris engines factory at Coventry has been the subject of consultation between the management of the British Motor Corporation and the trade unions concerned. As a result, arrangements were made which had the effect of substantially reducing the original redundancy, and I understand that consultation is still continuing as regards their detailed application.
    Mr. Edelman: Is the hon. Gentleman not aware that a major industrial dispute because of the manner in which this redundancy was declared was only narrowly averted; is there any reason—and he has not said this—why, when
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    redundancy was about to be declared, consultations did not take place with the trade unions before the redundancies were declared?
    Mr. Watkinson: My Ministry were given the opportunity of having advance registration, to which we always attach the greatest importance, and we did that. We have been very closely in touch with the situation. Whatever the past may have been, I think the hon. Gentleman will agree that at present—which is the thing I am concerned about—the maximum of consultation is taking place between the two sides to try to solve what is a very difficult problem, and I hope the hon. Gentleman will not try to raise the temperature, so that those negotiations may succeed.
    Mr. Edelman: In order to help to reduce the temperature, not only in Coventry but elsewhere, will the hon. Gentleman, as a guide to the future, urge firms which are engaged in amalgamations or mergers where such redundancies may be declared to enter into consultation with the trade unions before the redundancies are actually declared?
    Mr. Watkinson: I quite agree. As a general principle we always do that, and I will see that it continues to be done.

  SCOTLAND

    Slaughterhouses (Siting)
    Captain Duncanasked the Secretary of State for Scotland what progress has been made in his plans for the siting of slaughterhouses in Scotland.
    The Joint Under-Secretary of State for Scotland (Commander T. D. Galbraith): Following the statement made by my right hon. Friend the Minister of Food on 5th November, the Secretary of State for Scotland is setting up a small committee to advise him, after consulting the interests concerned, on the siting of slaughterhouses in Scotland.
    Captain Duncan: How is that committee getting to work; when is it likely to report; and will the report be published?
    Commander Galbraith: We hope that it may be set up shortly. As I indicated in my reply, it has not yet been set up.

    Agricultural Holdings (Evictions)
    Mrs. Mannasked the Secretary of State for Scotland if he is aware that members of the Sheepbreeders' Association have lost their holdings for lodging complaints against Scottish landlords on account of depredations by deer; and what action he intends to take to protect these food producers against such action.
    The Joint Under-Secretary of State for Scotland (Mr. McNair Snadden): I have no knowledge of any case of the kind suggested by the hon. Lady. The Agricultural Holdings (Scotland) Act, 1949, gives ample protection to the tenants of hill sheep farms and other agricultural holdings against the termination of their tenancies by their landlords without good reason.
    Mrs. Mann: Does the hon. Gentleman not think that he ought to have some knowledge of what is going on in Scotland, particularly when it is freely reported in such a reliable Scottish newspaper as the "Glasgow Herald"; is he aware that if he looks at the "Glasgow Herald" report of 10th January his knowledge will be considerably improved, and that it is to be hoped he will do something about it?
    Mr. Snadden: I have seen the report to which the hon. Lady refers, but my Department has no evidence whatsoever to support the statements that were made at that meeting. I repeat that in the Agricultural Holdings (Scotland) Act, 1949, ample safeguards are contained against any victimisation under its provisions in respect of notices to quit, or anything like that.

    Heather Burning
    Mrs. Mannasked the Secretary of State for Scotland if he is aware that Scottish landlords are failing to burn one-tenth of their heather areas annually and thereby are failing to give support to the food production drive; and what action he proposes to take.
    Mr. Snadden: I have no information to suggest that the position is as implied in the hon. Member's Question, but if she cares to supply me with particulars of any specific cases she may have in mind I shall be glad to have inquiries made.
    Mrs. Mann: Is the hon. Gentleman not aware that if he follows the reports of the Sheepbreeders' Association, as reported in the Scottish newspapers, he will get all the information he requires?
    Mr. Snadden: I must again remind the hon. Lady that both landlords and tenants have their responsibilities under existing legislation, and steps can be taken within that legislation to deal with heather burning.

    Unemployment
    Mr. Hamiltonasked the Secretary of State for Scotland what consultations he has had with the Minister of Labour during the past year on the problem of the continued increase in unemployment in Scotland; and what steps he proposed to remedy the situation.
    The Joint Under-Secretary of State for Scotland (Mr. Henderson Stewart): Consultation with my right hon. and learned Friend and my other colleagues about the employment position in Scotland is continuous and close. Action is being taken to encourage development of industry and to provide employment by the building of factories, placing of defence contracts and in other ways, and we shall continue our efforts.
    Mr. Hamilton: Is it not a fact that the amount of factory building completed or started last year in Scotland was very much less than it was in 1951; is the hon. Gentleman aware that the monthly average rate of unemployment in Scotland was 53,500 in 1951 and 69,300 in 1952; and what specific steps are the Government prepared to take to deal with this very serious matter?
    Mr. Stewart: The figures for new factory building are pretty clear, and are not unsatisfactory. Last year 1,750,000 square feet of new factory space was completed.
    Mr. Hamilton: How much was started?
    Mr. Stewart: As the hon. Gentleman knows, we are doing a number of things to deal with unemployment, such as armaments work, the distribution of industry and Highland schemes. We are doing everything feasible and practical to improve the situation.
    Mr. Grimond: What successful steps are the Government taking to introduce new industries into the Highlands; are they going to schedule any of the Highlands as Development Areas; and, in particular, what steps are being taken to reduce the very high rate of unemployment in the Highlands?
    Mr. Stewart: There is another Question, which I propose to answer, dealing with the first point. The hon. Gentleman knows the answers to the other questions as well as I do. There is not yet a new Development Area, and I am not persuaded that it is the right thing to do.

    Light Industries, Fife
    Mr. Hamiltonasked the Secretary of State for Scotland what discussions have taken place between himself and the local authorities in Fife concerning the recommendations of the Cairncross Report on the need for the establishment of some light industry in the county.
    Mr. Henderson Stewart: It would be premature for my right hon. Friend to discuss this Report with the local authorities while it is still under consideration by the Government.
    Mr. Hamilton: Am I right in assuming that one of the functions of the Minister of State is to consult with local authorities on various local problems; and can the hon. Gentleman indicate whether the Minister of State, or any other official in the Department, has had discussions with the local authority in Fife on this very serious problem?
    Mr. Stewart: As the hon. Gentleman knows, if we were to carry this Report into effect it would mean new legislation, creating an entirely different situation from that which now exists. Until that decision has been taken, it is not profitable to speculate, but very soon we shall be having consultations with the Fife local authority arising out of the general development plan of the county, which may offer an opportunity.
    Miss Herbison: Does the hon. Gentleman not realise that many hundreds of miners and their families have been transferred from Lanarkshire to Fifeshire; and surely it is not premature for the local authority to be discussing what is to be done to find work for the families of these miners?
    Mr. Stewart: As I said just now, we shall be discussing the general development plan in Fife with the Fife County Council and other authorities in the very near future, and, while we shall not be discussing the Cairncross Report, we shall be discussing the problem the hon. Member has in mind.

    Tuberculosis (Women)
    Mr. Hector Hughesasked the Secretary of State for Scotland if he is aware that in Scotland the death rate for young women is higher than the death rate for young men; that Scotland is the only country in Europe where this is so; if he will state the reason for this disparity; and what steps he will take to reduce the high mortality among the young women of Scotland.
    Commander Galbraith: Yes, Sir. I am aware that for the 15 to 35 age group in Scotland, contrary to the usual experience elsewhere in Europe, the female death rate was higher than the male death rate in the years 1948–50. This was due to an excess of female deaths from respiratory tuberculosis, and the steps taken to combat that disease have frequently been described. With the greatly reduced tuberculosis mortality in 1951, the latest year for which detailed figures are available, the female death rate fell below the male rate.
    Mr. Hughes: Does the Minister realise that this problem has now reached dimensions which make it both urgent and grave? What is he doing to diminish it?
    Commander Galbraith: All possible steps are being taken, as the hon. and learned Member knows.
    Mr. Woodburn: Can the right hon. and gallant Gentleman say whether he has had any report from the committee which I set up during my tenure of office to investigate scientifically whether the causes of this situation could be found? Has there been any further report since the right hon. and gallant Gentleman last mentioned this matter to the House? I should like to say how glad we are that the rate came down last year so satisfactorily.
    Commander Galbraith: I should like notice of that question.
    Mr. Hector Hughesasked the Secretary of State for Scotland if he is aware that the death rate from tuberculosis for women between 15 and 35 years of age in Scotland is much higher than that for women of comparable ages in England; what is the cause of this disparity; and what steps he is taking to remove the causes of this high mortality among young Scotswomen.
    Major Anstruther-Grayasked the Secretary of State for Scotland whether he will give up-to-date figures to show how the death rate from tuberculosis among women in Scotland from 15 to 35 years of age compares with that in England.
    Commander Galbraith: The death rate from respiratory tuberculosis among women between 15 and 35 years of age in Scotland has fallen from 149 per 100,000 in 1948 to 56 in 1951. The corresponding rates for England and Wales were 68 and 28. The precise reasons for the continuing disparity between the two countries are not known, but I see no reason why the measures taken in recent years to combat the disease should not result in this disparity being further reduced in the near future.
    Mr. Hughes: Will the right hon. and gallant Gentleman answer the last sentence of my Question and say what specific steps he is taking to deal with the problem?
    Commander Galbraith: I have already answered the hon. and learned Gentleman. I have told him that every possible step is being taken.
    Lieut.-Colonel Elliot: Is it not rather belated of the hon. and learned Gentleman to be taking this interest in a problem which his own Government during their term of office did nothing whatever to cure—[Interruption.]
    Mr. Speaker: I did not hear a word of that.

    School Meals (Charges)
    Mr. Hector Hughesasked the Secretary of State for Scotland to state in detail the reasons for recent increases in the normal charge for children's school dinners in Scotland; what reasons will be considered sufficient to justify adjust-
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    ments in these charges to avoid hardship to parents; who will hear and determine the validity and cogency of these reasons; how many children will be affected by the increases and the adjustments, respectively; and what financial savings will result from these increases and adjustments in Scotland.
    Mr. Henderson Stewart: The increase was made after a full review of all the circumstances in which account was taken of the rise in the cost of providing the meals and the need for economy in public expenditure. The arrangements for the granting of remissions are for the education authorities; and my right hon. Friend has asked them to ensure that they are adequate to remove any financial hardship that may be caused by the increase. According to the latest returns, 295,000 pupils were taking midday meals, and the charges were being remitted or reduced in over 65,000 cases. It is estimated that the financial saving in Scotland will be about £250,000.
    Mr. Hughes: In regard to that part of my Question which asks for the cogency and validity of the reasons to be advanced, will the Minister arrange for these questions to be decided by the mothers of the children in each area?
    Mr. Stewart: I am well aware of the spirit behind that Question, and I share it. I do not want to see one child who needs a meal being deprived of that meal.

    Highland Settlement
    Lord Malcolm Douglas-Hamiltonasked the Secretary of State for Scotland what steps he is taking to encourage further settlement in the Highlands.
    Mr. Henderson Stewart: The policy of the Government is to encourage settlement in the Highlands through the development of Highland resources and services on the lines of the published programme of Highland development.
    Lord Malcolm Douglas-Hamilton: Does my hon. Friend's office bear in mind the whole time the Land Settlement Report which came out at the end of the late war? Will he disassociate himself from what the Minister of State was reported as saying in his speech at Islay last month, to the effect that the numbers who once lived in the Highlands would never be fully restored?
    Mr. Stewart: We are very fully aware of the desirability of economic and sensible land settlement, and we are eagerly awaiting the report of the Crofting Commission, which may help us in that direction.

    East Kilbride (Factory Space)
    Mr. Patrick Maitlandasked the Secretary of State for Scotland the total area of factory space for which manufacturing companies have made inquiries at East Kilbride since the development corporation was formed; and the total area of factory space now being used, or prepared for use, within the new town designated area.
    Commander Galbraith: Inquiries have been received from 30 firms, with a gross demand for 3 million square feet of factory space. The total area of new factory building in use or approved for building is 496,000 square feet.
    Mr. Maitland: Is my right hon. and gallant Friend aware that this great disparity between the volume of inquiries for factory space and the number of successful decisions to take factory space in the new towns is a matter for anxiety, in that it represents a serious disparity of social development? Will my right hon. and gallant Friend look into the whole balance of industrial development at East Kilbride and the danger of East Kilbride becoming simply a dormitory town?
    Commander Galbraith: Yes, Sir.
    Mr. Woodburn: Would the right hon. and gallant Gentleman consult with the President of the Board of Trade and convey to him that there is a very strong feeling in Scotland about the evident reluctance of the Board of Trade to allow firms to come to East Kilbride and about the reported insistence that they go elsewhere in the United Kingdom?
    Commander Galbraith: I think the right hon. Gentleman is mistaken, but I will certainly take the matter up with my right hon. Friend the President of the Board of Trade.
    Mr. Maitland: Further to the last supplementary question, is my right hon. and gallant Friend aware that a number of these firms which sought factory space
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    at East Kilbride voluntarily withdrew their applications because they found the site unsuitable?
    Commander Galbraith: That is a very good reason.

    Private House-building, Lanark
    Mr. Patrick Maitlandasked the Secretary of State for Scotland how many applications for a licence for the building of a private house were received in 1952 by the county council of the county of Lanark; how many were refused; and of those granted how many were returned by the licensee or not proceeded with.
    Commander Galbraith: In 1952 the council received 113 applications for building licences, of which 42 were refused. Of the 71 licences issued four have been returned. No information is available as to how many houses have not been proceeded with
    Mr. Maitland: How many were refused on the ground of being unreasonable applications, in view of the terms of the Department of Health circular sent out last September by the Secretary of State, urging that all reasonable applications should be accepted?
    Commander Galbraith: As my hon. Friend knows, this matter is one for the decision of the local authority.

    Living Accommodation (Density)
    Mrs. Mannasked the Secretary of State for Scotland the number of persons per room in Scotland and a comparison with the similar position in England, as at the last census.
    Commander Galbraith: I would refer the hon. Lady to Part I of the one-percent. sample tables of the 1951 Census, which shows that the number of persons per room in Scotland was 1.04 (compared with 1.27 in 1931) and in England and Wales 0.73 (compared with 0.83 in 1931).
    Mrs. Mann: Does the right hon. and gallant Gentleman not think this disparity is related to the disparity in the rate of tuberculosis in Scotland?
    Commander Galbraith: Well, I can think that it might be.

    Water Schemes, Ross and Cromarty
    Mr. John MacLeodasked the Secretary of State for Scotland when he will give his approval for a start on the Loch Glass water scheme.
    Commander Galbraith: The objections lodged against the draft Water-Rights Order under the Water (Scotland) Act, 1946, have now been withdrawn, and the Order has been made today. My right hon. Friend is asking the county council to invite tenders for the work and he hopes to be able to authorise a start in Mid-April.
    Mr. John MacLeodasked the Secretary of State for Scotland to what extent progress on the construction of water schemes in Ross and Cromarty is delayed by the Treasury restriction on capital investment.
    Commander Galbraith: So far as I am aware the schemes have not been delayed by restrictions on capital investment. Since these were imposed the county council have not in any year carried out work to the full value of the amount allocated to them.

    Civil Service (Scottish Educational Qualifications)
    Mr. Grimondasked the Secretary of State for Scotland if he will ensure that in advertisements for Government posts it is made clear that Scottish educational qualifications will be accepted from candidates as well as the English equivalents.
    Mr. Henderson Stewart: My right hon. Friend has arranged that this will be done in advertisements of posts in the Civil Service
    Mr. Grimond: Can I take it that it applies to all places and not merely to Scotland?

    Crofting Counties Scheme
    Mr. Grimondasked the Secretary of State for Scotland if, as action on the Crofting Commission's Report cannot be taken before the middle of 1954 at the earliest, he will take steps forthwith to meet the salient needs of the crofting counties such as land development, roads, reduction in freight and the development of subsidiary industries.
    Mr. Snadden: Pending the report of the Crofting Commission the Government are pressing ahead with the published programme of Highland development as fast as the resources of the country allow.
    Mr. Grimond: Can I ask the Minister if he will look through the many recommendations, made by the panel and other bodies, which are still outstanding, and see if he cannot press on a bit faster with the implementation of the various recommendations?

    Closed Schools, Roxburgh and Selkirk
    Commander Donaldsonasked the Secretary of State for Scotland how many village schools have been closed in the counties of Roxburgh and Selkirk during the past five years; for what reasons they have been closed; and what plans he has in mind for their re-opening.
    Mr. Henderson Stewart: No schools have been closed in Selkirk, three have been closed in Roxburgh. In each case the roll had fallen to five or six pupils. The education authority would reopen the schools if the number of pupils became large enough to justify their doing so.
    Commander Donaldson: Whilst thanking my hon. Friend for his answer, may I ask him and his right hon. Friend to keep in mind the necessity for retaining the village schools in Scotland wherever possible, since they greatly reflect the agricultural background of the country?
    Mr. Stewart: Yes, Sir, most certainly.

    Fishmeal Factories, Western Highlands
    Lord Malcolm Douglas-Hamiltonasked the Secretary of State for Scotland when it is proposed to establish further fishmeal factories in the Western Highlands which are needed for development of agriculture in the area.
    Mr. Henderson Stewart: The Herring Industry Board were recently refused planning permission to convert a disused building at Ullapool for herring oil and meal production and are now exploring alternative arrangements. The Board propose to instal additional equipment at their Stornoway factory for the production of herring meal and have recently

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    submitted proposals for other factories in the Highlands which are now being examined.
    Lord Malcolm Douglas-Hamilton: Will my hon. Friend bear in mind that the sooner this is proceeded with the better? Recently fishmeal was unobtainable in many parts of the west of Scotland while, at the same time, one was reading reports that the fishmeal factory at Stornoway was glutted.
    Mr. Stewart: Yes, Sir, we are anxious to proceed with this as quickly as possible.

    Advisory Bodies, Highlands
    Lord Malcolm Douglas-Hamiltonasked the Secretary of State for Scotland to publish the names of all the Government-sponsored advisory bodies in the Highlands of Scotland, showing which of these have any spending powers.
    Mr. Henderson Stewart: Apart from two advisory bodies concerned with health services and technical education, the only advisory body which is specially concerned with the seven Highland counties is the Highlands Advisory Panel. Advice on particular matters affecting the Highlands is obtained also from bodies covering other areas. Advisory bodies are not, of course, concerned with the spending of money.
    Lord Malcolm Douglas-Hamilton: May I ask my hon. Friend if he does not think it a good idea for the Government to bear in mind in future that what the Highlands want is more action and less advice?

    Salmon Gifts (English Close Season)
    Mr. J. Taylorasked the Secretary of State for Scotland if he is aware that the salmon fishing season ends in England on 31st August and in Scotland on 31st October; that a fine of £10 and 10 guineas costs was recently imposed in London on a Montrose man who sent two salmon to London during the Scottish season on 23rd October; and if he will take steps, in conjunction with the Secretary of State for the Home Department, to ensure that salmon may be sent from Scotland during the Scottish season to friends or relatives of the senders without let or hindrance.
    Mr. Henderson Stewart: Under Section 30 of the Salmon and Freshwater Fisheries Act, 1923, it is illegal to sell in England between 31st August and 1st February any salmon caught by rod and line, even if it was caught lawfully. My right hon. Friend understands that the charge referred to, to which the accused pled guilty, was brought under this provision. It is not an offence to send for sale in England fish legally caught in Scotland by means other than rod and line or to send to friends or relatives in England, for their own use, fish legally caught in Scotland by any means.
    Mr. Taylor: Is the Under-Secretary aware that this gentleman who was fined sent the two salmon to a relative who, in turn, sent them to the market? Should it not be the relative who was fined and not the unfortunate sender?
    Mr. Stewart: That is a matter for the lawyers, not for me.

    Shortage of Teachers
    Mr. Malcolm MacPhersonasked the Secretary of State for Scotland his policy with regard to the shortage of teachers, in the light of the Second Report of the Departmental Committee on this subject.
    Mr. Henderson Stewart: My right hon. Friend proposes in the first instance to have discussions with the representative bodies concerned.
    Mr. MacPherson: Is it not clear to the hon. Gentleman that this question is a great deal wider than the bodies immediately concerned? Is it not quite clear also that one of the greatest economic assets of the country is the skill and competence of our people, and should he not confer with the Minister of Labour and his colleagues in the Government in order to make sure that this skill and confidence is nursed and maintained by a full and proper educational service?
    Mr. Stewart: Yes, I do not disagree with that. All I said was that in the first instance we shall have the discussions I mentioned.

    Leasehold Legislation
    Mr. Wheatleyasked the Secretary of State for Scotland why he does not propose to introduce during the current Session legislation to give effect to the

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    recommendations of the Scottish Leases Committee as adopted by Her Majesty's Government in the White Paper, Leases in Scotland, Command Paper No. 8714.
    Mr. Henderson Stewart: As there is unlikely to be an opportunity this Session of passing permanent legislation about leases either for England or Scotland, it is proposed to extend the existing temporary legislation until Martinmas, 1954.
    Mr. Wheatley: As the Scottish Grand Committee has not sat since the beginning of July and appears to be falling into desuetude, and as the only other Bill affecting Scotland is in another place, would the hon. Gentleman explain why it is not possible to introduce permanent legislation on this subject during the present session?
    Mr. Stewart: I think the answer is that in deciding on a temporary Bill the Government took account of the legislative programme as a whole.

    ATOM BOMB
    Sir H. Williamsasked the Prime Minister if he will now state the terms of his agreement with the late President Roosevelt over the use of the atom bomb by the United States of America; and when this agreement was abrogated.
    The Prime Minister (Mr. Winston Churchill): The time has not yet come to make a statement on these matters.

    EUROPEAN DEFENCE COMMUNITY (BRITISH ASSOCIATION)
    Mr. Wyattasked the Prime Minister the nature of the discussions he had with General Eisenhower on the subject of British association with the European Defence Community.
    The Prime Minister: I have nothing to add to the answer which I gave yesterday in this connection.
    Mr. Wyatt: Would the Prime Minister tell the House that he has not forgotten that it was he himself who thought of the idea of the European Army and that Britain should be a full member of it, and does he not realise that the whole of this scheme is now in danger of collapse and that all Europe is looking
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    to him and his Government to put Britain into the European Army so that his own idea may survive?
    The Prime Minister: I have nothing to add to the statement which I have made.
    Mr. Shinwell: Are we to understand from the right hon. Gentleman that Mr. Eisenhower made no reference to the subject of the European Defence Community, when only the other day he expressed very strong views about the need for boosting it up? Was not that a subject which might properly have been discussed between the right hon. Gentleman and the President and, indeed, was it not discussed.
    The Prime Minister: I have already said that I do not propose to give any account of my discussions.
    Mr. de Freitas: Can the Prime Minister tell us—not about the European Army —that he urged upon President Eisenhower the need for an Atlantic Army with components not only from this country, Canada and the United States, but from Germany, so that we could thus have adequate defence against Russia without risking German domination on the Continent?
    The Prime Minister: I have already answered the Question which is on the Paper so far as one negative on top of another can do it.

    CORONATION DATE (MAYORAL ELECTIONS)
    Mr. Chapmanasked the Prime Minister what representations he has received from mayors of British towns for special legislation to enable their term of office to be extended until after the Coronation, in order that they may preside at celebrations which have been prepared under their supervision.
    The Prime Minister: I have received only one representation from civic authorities, and I do not in these circumstances need to add to the answer which I gave on this subject on 28th May last.
    Mr. Chapman: Does not the Prime Minister think it would be appropriate to acknowledge the work that these mayors are doing?

    MINISTRY OF PENSIONS (PERSONAL CASE)
    Sir D. Robertsonasked the Minister of Pensions whether he is satisfied with his Department's treatment of the Sutherland ex-soldier he knows of, who was wounded in 1918, his right leg amputated above the knee and discharged from hospital over 30 years ago with an unhealed wound on his left thigh, requiring two surgical dressings a day; who does the dressings; and how many visits were made by his Department's doctors and welfare officials in all the years to 1952.
    The Minister of Pensions (Mr. Heathcoat Amory): In 1922 the ex-soldier in question was awarded a pension at the 90 per cent. rate for life. At this time the wounds on his left thigh were reported to be healed. In June, 1952, a member of the local War Pensions Committee reported that the pensioner's condition had considerably deteriorated within the previous three months. He was examined at his home by a medical officer who reported that he was suffering from an ulcer on the left thigh which required daily dressings and could be better treated in hospital. The pensioner was unwilling to attend hospital and preferred to remain under the care of his own doctor who was said to be seeing him regularly. The daily dressings were carried out by his wife acting on instructions from the family doctor. Pension was raised to the 100 per cent. rate with effect from June, 1952. A welfare officer has recently visited the pensioner whose only complaint was that he had not been found eligible for a constant attendance allowance. I am arranging for a special visit by one of my chief medical officers and, when I receive his report. I will write fully to my hon. Friend.
    Sir D. Robertson: Since my hon. Friend has not answered the Question on
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    the Paper as to whether he is satisfied with the treatment accorded to this courageous soldier, may I point out that the sole reason why I put down this Question was to ensure that no other soldier suffers as this man has done because nothing can be done for him?
    Mr. Amory: I am very sorry for the sad state of this pensioner, but I cannot accept the strictures implied in the Question either on my own behalf or on that of my predecessors. If my hon. Friend will look more closely at this case I think he will see that my Department has done everything it could with the knowledge at its disposal.
    Sir D. Robertson: How can my hon. Friend say that when there was failure to graft new skin on to the wound and this man was left for over 30 years without any visits from medical or welfare officers, and it is only due to his devoted wife, who has done the dressings seven days a week for all those years, that he is alive?
    Mr. Amory: I remind my hon. Friend that, as my answer mentioned, to the best of the knowledge of my Department this pensioner was healed 30 years ago. My predecessors and I have taken a good deal of trouble to invite any pensioner who has any trouble whatever to get in touch with the Department. Unfortunately, in this case no one contacted the Department. As we have nearly a million pensioners to see to, my hon. Friend will realise that with the best will in the world we cannot make personal visits to them all.
    No mention was made that this pensioner was in any difficulty whatever until we heard of it last June, when prompt action was taken. I am looking into the question of the constant attendance allowance and if I find that this pensioner can be made eligible for it, no one will be better pleased than myself.

EAST COAST FLOOD DISASTER
Mr. Dodds(by Private Notice) asked the Minister of Housing and Local Government why plans to requisition 20 empty houses for flood victims in the area of the Erith Borough Council have been cancelled on the orders of his Department, and in view of the urgent need for these houses to accommodate some of the 350 people who are homeless in Erith if he will reconsider his decision.
The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Ernest Marples): My right hon. Friend, who is touring the flood areas, has asked me to reply. As my right hon. Friend has informed the hon. Member, he does not agree that there was any cancellation. In any case, in the first stage of such an emergency the immediate problem was a welfare one, for which other action was thought more appropriate.
Mr. Dodds: If the Parliamentary Secretary's right hon. Friend knew the town clerk of Erith he would not doubt the statement that between 10 o'clock and 10.30 yesterday morning, from the Minister's regional officers at Caxton House, the town clerk was given approval to go ahead with requisitioning, and that it was not until 3.30 that a telephone call was received from the Ministry of Housing and Local Government to state that a meeting had been held at the highest level and a decision taken that none of these empty houses had to be requisitioned for people who were homeless because of the floods. [HON. MEMBERS: "Shame."]
Does the hon. Gentleman appreciate that there are hundreds of people—men, women and children—in church halls and that this type of accommodation is not suitable for more than 24 or 48 hours? Is he aware that in the last hour I have had information that more and more people are being taken from houses that are now untenable and that the position is getting desperate? We ask that without any further delay these 20 houses, which are now empty, will be used.
Mr. Marples: I am aware of the tragic circumstances all through the flood areas. I spent yesterday afternoon at Canvey
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Island, and it was quite clear from my visit that two problems are involved: the first is short-term, and the second is long-term. The short-term problem is to get these unfortunate people into furnished accommodation, because when a person is wet through and has lost his possessions he does not want an unfurnished house. He wants a kitchen, with pots and pans, furniture, sheets and blankets, and warmth. The long-term problem is after the people have been given temporary accommodation in furnished homes, and in some cases in schools which are furnished but which may not always be comfortable—but we hope that there will be furnished homes for them—to assess the housing need on a permanent basis. When that is done, my right hon. Friend will not exclude requisitioning and many other items from his consideration.
Hon. Members: Answer the question.
Mr. Pannell: Is the Minister aware that I not only reside in the area of this local authority, but am still a member of that authority? As the one who had full responsibility for all civil distress in that borough during the war, I telephoned the town clerk yesterday morning and asked whether there was any way in which I could assist. The town clerk assured me that he had received categorical consent from the Minister's Department to requisition 20 properties, and he named to me the civil servant who had given that consent, and who is known to me as a result of my negotiations with his Department. It cannot, therefore, be in doubt that this consent was given.
What the Minister has to answer is why, in the light of this tragedy, he cancelled that consent. He also has to answer whether this sort of thing is being done up and down the country. Will the hon. Gentleman appreciate that it is quite impossible to keep people in rest centres, in which over 400 people are now housed, for more than 48 hours?
Mr. Dalton: Surely, in view of what has been said by my two hon. Friends, the Parliamentary Secretary will look into this matter again very urgently. Is it not clear that a mistake has been made somewhere and that homeless people—[HON MEMBERS: "No."] I am asking a question, Mr. Speaker. Is it not clear that a mistake has been made—[HON. MEMBER: "No."]—and will the hon.

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Gentleman be so kind as to take the matter up with his right hon. Friend and get it rectified?
Mr. Marples: There are two points. First, my right hon. Friend has denied that there was a cancellation. [An HON. MEMBER: "He made it himself."] The second is that he has written to the hon. Gentleman explaining that there was no cancellation of these requisitioning notices, and I think that the hon. Gentleman has a letter to that effect.
In any case, the requisitioning of property is not the answer to the problem. [HON. MEMBERS: "0h."] No. Generous householders from all over the country have made many offers to take in these homeless people, and it would be unhelpful and unwise to overburden the existing organisation, which is already hard pressed, by asking them to take other unfurnished accommodation when they have all the furnished accommodation that they can cope with.
Mr. Bevan: Do not the two statements of the Parliamentary Secretary contradict each other? If the requisitioning of empty houses is not at present taking place, in order that there might be a sifting out of the applicants so as to give the most urgent cases the empty accommodation, how does it come about that the hon. Gentleman denies that the requisitioning has been cancelled? He cannot have it both ways.
Either the requisitioning has been cancelled in the meantime in order to carry out the principle which the Parliamentary Secretary has announced, or the requisitioning is still alive and, therefore, the houses are available immediately. Will the hon. Gentleman tell us the truth? [HON. MEMBERS: "Oh."] Is it a fact—this is what we want to know—that permission to requisition was given and has been withdrawn? That is the first point that we want to know, and the hon. Gentleman has dodged it three times.
Mr. Marples: If the right hon. Gentleman thinks that I have dodged that question three times, I will read the first sentence of the answer I have written here to his Question:
"As my right hon. Friend has informed the hon. Member, he does not agree that there was any cancellation."
Lieut.-Colonel Elliot: Quite apart from the question as to the nature of the
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instructions given, surely the important thing is that the people should be dealt with at the earliest possible moment. Surely in that the Minister has stated that requisitioning of empty property is by no means excluded from the ultimate step—[HON. MEMBERS: "No."]—that seems to me the important thing at the moment. We are told that the Minister is reviewing the matter and, if that is the case, surely the House could agree that the Minister should be given time to work out plans, no methods being excluded, including that of requisitioning which is being asked for.
Mr. Marples: At the right time the requisitioning of unfurnished premises and the difficulty of furnishing them might be a solution or help towards that solution. At the present moment it would be unsuitable and unnecessary.
Mr. Bevan: This is a serious matter because it affects a very large number of people and there are very many empty properties in various parts of the country. May I ask if there is any real difficulty in finding furniture and everything for these houses? In that Department we had plenty of experience of floods before and we found no difficulty. [An HON. MEMBER: "What is the question?"] Will the hon. Gentleman assure the House that, despite the fact that it might put an additional charge on the Treasury—[HON. MEMBERS: "Oh."]—requisitioning of property does —there will be no reluctance to requisition property wherever required and to put furniture in at once?
Mr. Dodds: The Parliamentary Secretary has read the first sentence of my letter from the Minister, but there are two more sentences, and it goes on:
"I have ascertained from the Ministry of Health that everybody in Erith has been found temporary accommodation by the Kent County Council as welfare authority. I am sure you will not think that I am unwilling to do what is needed, but it is far better if we possibly can to avoid all the complications which will result from the requisitioning of individual houses for individual families."
Is the Parliamentary Secretary aware that the town clerk has said that the people are coming in faster than the rate at which furnished accommodation can be found? These houses are required and there is furniture and other things to

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be put in. What we want is to do that before others put in furniture in order to stop the houses being requisitioned.
Mr. Marples: The limiting factor at the moment is the powers of emergency organisation to cope with the offers of accommodation. The first sentence I read out was the first sentence of my answer and not the first sentence of my right hon. Friend's letter.
Mr. Shinwell: May I ask a simple question of the Parliamentary Secretary? He agrees apparently that all the officers in his Department agreed to the requisitioning and he said subsequently that that consent was not cancelled. Will he state what is the actual position? Was there any agreement for requisitioning and, if so, has it been cancelled? He has said there was no cancellation, what does he actually mean?
Mr. Marples: Again I will read the first sentence—[HON. MEMBERS: "No."] My right hon. Friend wrote to the hon. Member and said there was no cancellation. If there was no cancellation it automatically follows that no permission was given in the first place.
Several Hon. Members rose—
Mr. Speaker: There seems to be a complete conflict of evidence here and we cannot carry it any further. The Home Secretary.
Mr. Dodds: I beg to ask leave to move the Adjournment of the House under Standing Order No. 9 to call attention to a definite matter of urgent public importance—
Mr. Speaker: There are two statements to come before that; I will give the hon. Member an opportunity of doing that at the proper time.
The Secretary of State for the Home Department (Sir David Maxwell Fyfe): With your permission, Mr. Speaker, and that of the House, I shall make the following brief statement in regard to the position of the areas affected by storm and floods.
A meeting of Ministers under my chairmanship was held this afternoon to consider reports from the damaged areas. The most up-to-date information is that
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there are 220 reported dead but there is no exact information as to the number of missing, though several hundred are believed to be missing. Some 30,000 people are believed to have left their homes, of whom some 6,000 are in rest centres, the remainder having found accommodation of their own. It is reported this morning that the floods are slowly subsiding except in the case of Lincolnshire.
The police report that no persons are now in danger in Canvey and Foulness Islands.
The local measures for relieving distress are proceeding satisfactorily. The Government are concentrating their attention primarily on co-ordinating measures for repairing the breaches in the sea and river defences as quickly as possible and according to a system of priorities. The important thing is to get the emergency repairs carried out as quickly as possible and the cost of work which can properly be regarded as emergency work will be met by the Exchequer. Financial control appropriate to these serious circumstances will be instituted as soon as possible.
The greatest use is being made of members of the Armed Forces, who are being deployed as and when use can be made of their services. I should like to take this opportunity of expressing my appreciation of the help which has been given by the United States Service authorities in this country and of putting on record our sympathy with the relatives of the United States airmen who lost their lives.
The various civilian services of this country to whom tribute was paid yesterday are continuing to give most efficient help. So far as can at present be foreseen, there is no shortage of the necessary labour. Many offers of help have been received from Commonwealth countries and from France, for which Her Majesty's Government are very grateful.
Except in a few cases the essential services, such as gas, electricity, water and fuel, are working and all possible steps are being taken to make good any deficiencies. Food supplies are adequate. The Government have decided to make no charge in respect of parcels of clothing sent through the post to the depots named in the public announcement and similar arrangements have been made in respect of bedding sent by rail to such depots.

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The Government recognise the importance of repairing the damaged houses so as to enable people to return to their homes, and the matter will be tackled as soon as the flood conditions permit and as soon as the necessary repairs to the sea defences are in a more advanced state.
Mr. H. Morrison: I am much obliged to the right hon. and learned Gentleman for the statement he has made. I presume that he may be regarded as the co-ordinating Minister in this matter. May I put two points to him in regard to the Private Notice Question put by my hon. Friend the Member for Dartford (Mr. Dodds)? Will he undertake to look into the matter urgently with the Minister of Housing and Local Government, particularly taking into account the points raised by my hon. Friend and my right hon. colleagues on this Bench, because it is a matter of importance on which obviously there is feeling?
The other point is whether the right hon. and learned Gentleman is aware that on 27th June last the Minister of Housing and Local Government issued a circular, "Coast Protection," in which this occurred:
"Coast Protection Works in general are costly in money, labour and materials, particularly steel, and only work of exceptional urgency can be allowed to proceed at the present time. Those local authorities who now have major schemes under way or about to start will already know from correspondence with the Department that it has not been possible to release more than a very limited amount of steel for this purpose during the last few months. The Minister hopes to be able to set aside a small quantity of steel for coast protection in future periods, but while the current shortage persists, and more urgent demands have to be met, it is inevitable that many schemes using substantial amounts of steel will have to be deferred or slowed down."
May I ask the Home Secretary whether, in the light of these very tragic events, about which we are most unhappy and about which we sympathise with the people concerned, it was not unfortunate that such a circular should have been issued a few months ago, and will he take steps to see that the circular is withdrawn in this respect?
Sir D. Maxwell Fyfe: With regard to the first point put by the right hon. Gentleman, as my right hon. Friend endeavoured to make clear, the matter
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that has been raised is one which has received and is receiving the most careful consideration. With regard to the second matter, the right hon. Gentleman will appreciate that that circular was issued at a time of acute steel shortage, when there was a particularly large number of competing claims, supported from all quarters of the House, as hon. and right hon. Gentlemen will remember. The importance of the point is, of course, clear in our minds, and the importance of sea defences is, as I have said, the most urgent matter in our present consideration.
Mr. Bevan: The right hon. and learned Gentleman will be aware that one of the disadvantages of not proceeding to deal with coast erosion is that the damage is so progressive that the ultimate cost becomes very heavy indeed, and that a small amount of expenditure at the beginning might save a large amount of expenditure at the end. In point of fact, is it not also correct that the party opposite failed to bring in any coast protection Measures during the whole of their experience, and that the first coast protection Measure was introduced into the House of Commons by the Labour Government, and is now being sabotaged by the present Government? Will the right hon. and learned Gentleman give an assurance that this circular will be withdrawn and work immediately proceed? Will he also inform the House of the expenditure which has been saved under the circular, and will he set it off against the expenditure now incurred by reason of the floods?
Sir D. Maxwell Fyfe: With regard to the first of the number of statements of the right hon. Gentleman, I do not accept his premises, but I shall be glad to look into the facts. With regard to the second series of statements, I should like to say that coast protection must be regarded as a serious matter, but in the perspective of the circumstances of the time; and I think that on reflection the right hon. Gentleman himself will deprecate using exceptional, terrible and tragic circumstances of storm and flood as a stick with which to beat his political opponents. As I said in my statement—and I do wish the House to appreciate this, because, to my mind, it is the most urgent matter—the primary things we have to deal with are the present gaps in our defences, and

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to deal with those urgently within the next few days.
Mr. Bevan: Is it not within the recollection of hon. Members on all sides of the House, that when we were faced with natural visitations in 1946–47, the party opposite took every possible advantage of every one of them? Is it not therefore obnoxious humbug to try to run away from the administrative obligations of the Government in these circumstances? What we want to know from the right hon. Gentleman is this: the machinery for co-operation between the Minister of Housing and Local Government and the local authorities under the Coast Protection Act involves the preparation of schemes some time ahead; and will he now give the House an assurance that the circular which my right hon. Friend has mentioned will be withdrawn and the local authorities in these areas encouraged to proceed with coast protection in order to prevent a recurrence, if we can, of the misfortunes which these people have suffered?
Sir D. Maxwell Fyfe: With regard to the first point of the right hon. Gentleman's question, such a recollection will not be within the memory of those who look back with clear and unbiased minds. As to the second point put by the right hon. Gentleman, a new situation has arisen, and I have given the fullest undertaking that it will be dealt with as a matter of urgency. I say to the right hon. Gentleman—I wish to answer his point—that the long-term connotation of that situation will of course be borne in mind.
Several Hon. Members rose—
Mr. Speaker: We have carried this matter as far as we can.
Mr. G. M. Thomson: On a point of order. May I respectfully ask you, Mr. Speaker, whether we are to have a statement from Her Majesty's Government about the effect of the storm damage on the East Coast of Scotland and about the action which the Government propose to take to repair it?
Mr. Speaker: I have received no notice of such a statement.
Sir D. Maxwell Fyfe: Further to that point of order, Mr. Speaker. I wish to assist the hon. Member. The Secretary
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of State for Scotland and I are in close touch on the matter. My right hon. Friend is collecting the information but I do not think there is anything in our hands today which would have been of assistance to the hon. Member. I hope very much that it will be dealt with tomorrow.
Mr. H. Morrison: Will the right hon. and learned Gentleman state whether the Secretary of State for Scotland is a Member of the Cabinet Committee?
Sir T. Moore: On a point of order. We on this side of the House are very deeply concerned about this tragic disaster. Without casting any reflection on you, Mr. Speaker, or on anyone else, may I say that we have not been allowed to put one supplementary question?
Mr. Speaker: I am sorry about that. I was anxious, so far as I could achieve it, to prevent what is a great national disaster from becoming a party matter.
Sir T. Moore: Further to that point of order. It was not our desire to make this a political issue. The political issue was raised by the right hon. Member for Ebbw Vale (Mr. Bevan).
Mr. Woodburn: Is the Secretary of State for Scotland likely to make a statement in the near future about the disasters in the Moray Firth and on the East Coast of Scotland, which have been almost as tragic as those in the South?
The Secretary of State for Scotland (Mr. James Stuart): Perhaps I may be allowed to intervene. The Secretary of State has said that he is charged with dealing with this disaster, and I certainly do not want anything I say to raise party feelings on the subject. I will merely state that I am glad that the damage in Scotland is not, so far as the reports which I have received up to date go to show, so concentrated as it has been in this terrible occurrence in England. There has been widespread damage, but I am not yet in possession of sufficient details to make a considered statement to the House. The House will, however, be informed as soon as we are in a position to do so.
Mr. Fell: The Home Secretary may be assured that the whole country will be very much behind him in his resistance to any attempt on the part of anybody

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to turn this tragedy into a political issue. I want to ask a specific question regarding requisitioning. I know for a fact that certain areas have already been given permission to requisition. [HON. MEMBERS: "Oh."] I am only asking for the assurance that where permission has been given in a specific area, that permission is not going to be withdrawn.
Hon. Members: Answer.
Mr. Wigg: Surely, Mr. Speaker, the House is going to be given an opportunity of hearing an answer to that question?
Sir D. Maxwell Fyfe: I have not, of course, got the details of what has been done in every place. I do not think the House can expect me to have them. but—
Mr. Shinwell rose—
Sir D. Maxwell Fyfe: If the right hon. Gentleman will just possess himself for one moment, I think he will be quite satisfied—but I have given this answer, and I repeat it, that requisitioning is one of the methods of dealing with this matter and it will, as I said to the right hon. Gentleman, receive the most urgent and careful consideration in every case.
Mr. Shinwell: We have just been informed—
Mr. Pannell: On a point of order, Mr. Speaker. With great respect, you have thought fit to admonish the whole House for making this great national disaster a matter of party controversy. We accept that. Will you also indicate—[Interruption.]—of course we accept it. It has happened in towns in which we live. There is no controversy among the people on the spot, but only in this place. May I ask, through you, Mr. Speaker, that the Government shall so behave in this matter that they appear to put public and not private interests first?
Mr. Fell: Further to my Question, may I put this small point? This is a matter on which a decision has been given, and therefore all the assurance for which I am asking is that where permission has been given it shall not be withdrawn.
Mr. Shinwell: Mr. Speaker, may I now ask the Parliamentary Secretary to the Ministry of Housing and Local Government, who previously answered questions on the subject, whether it is true that con-
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sent has been given to certain local authorities to requisition houses?
Mr. Marples: In this particular case, which is one I had notice of—[Interruption.] The right hon. Gentleman must remember that since this emergency started, my right hon. Friend has been out in the flooded areas, and so have I, and it has not been easy to find out what has been happening in every area. In the particular case of which I was given private notice, that is, Erith, the information we have is that permission was not given and therefore no cancellation took place —[Interruption.] I hope hon. Gentlemen will not think I am deliberately trying to mislead the House. I would say to my hon. Friend that if he has any particular case in mind, perhaps he will give me the particulars and I will look into the matter.
Several Hon. Members rose—
Mr. Speaker: Order. In answer to the point of order raised by the hon. Member for Leeds, West (Mr. Pannell), I should like to say this: the Government indeed have responsibilities in this matter, but we all have responsibilities in this House, every one of us, no matter where we sit, and I hope we shall try to discharge them here.
At the end of Questions—
Mr. Dodds rose—
Mr. Fenner Brockway: On a point of order, Mr. Speaker. I gave you notice that I intended to raise a point of order at the end of Questions. If related—
Mr. Speaker: Order. In order to preserve the rights of the hon. Member for Dartford (Mr. Dodds), I must take his Motion at the moment. The hon. Member was rising, I think, to ask leave to move the Adjournment of the House to deal with the matter on which he asked a Private Notice Question. Perhaps I might shorten the proceedings by saying that the Motion would be out of order today because the business of the House is to be discussed on the Motion for the Adjournment and we cannot have an Adjournment upon an Adjournment.
Mr. Dodds: I thank you for that Ruling, Mr. Speaker. I also think it is unnecessary, because the Government have already been exposed in this matter.
Mr. Benn: On a point of order, Mr. Speaker. Might I ask for guidance on your Ruling in relation to Adjournments under Standing Order No. 9? It seems to me that it would be a very grave thing if the House were prevented, on a day when it is agreed through the usual channels that there should be a debate on the Adjournment, from discussing a matter of great urgency should one arise. If you would give further enlightenment on the matter, I am sure it would be very much welcomed by hon. Members.
Mr. Speaker: The House would not be precluded from discussing any matter of that sort. On the Motion for the Adjournment any subject proper for the Adjournment can be raised. It is merely for the convenience of the House that an agreement is made to take one subject or another, but if some emergency occurred justifying recourse to Standing Order No. 9, it could equally easily be arranged for that matter to be taken. It would be in order if the subject were in order under the Standing Order. It would be in order on the ordinary debate on the Motion for the Adjournment.
Mr. Bowles: Would it be in order for the Adjournment to be continued for three hours?
Mr. Speaker: No.
Mr. Pannell: On a point of order, Mr. Speaker. Are we to take it that you do not think the matter raised by my hon. Friend the Member for Dartford (Mr. Dodds) comes within the definition of a definite matter of urgent public importance, so that consideration might be given to it?
Mr. Speaker: I did not proceed to consider that. I merely ruled against it because, if I accepted it, when 7 o'clock came the Adjournment would be sought to be moved and we should already be speaking on the Motion for the Adjournment, so that it would be impossible.

FORMOSA (UNITED STATES' DECISION)
The Secretary of State for Foreign Affairs (Mr. Anthony Eden): The President of the United States announced yesterday in a State of the Union message that the United States 7th Fleet, which has been enforcing the neutralisation of Formosa since the outbreak of the Korean war, would no longer be employed to prevent Chinese Nationalist attacks against the mainland of China. Her Majesty's Government were informed in advance by the United States Government and at once made known their concern at this decision which, they feared, would have unfortunate political repercussions without compensating military advantages. This continues to be the view of Her Majesty's Government.
It is important, however, to keep this matter in its correct proportion and perspective. The neutralisation of Formosa was a unilateral act of policy, with which Her Majesty's Government were not associated. It was made before Chinese intervention in the Korean war. President Eisenhower has now decided that "there is no longer any logic or sense in a condition that required the United States Navy to assume defensive responsibilities on behalf of the Chinese Communists." He has therefore issued instructions "that the 7th Fleet no longer be employed to shield Communist China." "This order," Mr. Eisenhower went on to say, "implies no aggressive intent on our part."
The step announced is in consequence a unilateral decision by the new United States Administration to amend a unilateral decision taken by their predecessors.
Mr. H. Morrison: The House will be obliged to the right hon. Gentleman for his statement, and I am sure we are all glad to know that Her Majesty's Government have caused the United States Government to be informed—I gather before President Eisenhower's statement —that we did not agree with the proposed action of the United States in withdrawing the 7th Fleet in the circumstances indicated in President Eisenhower's Message to Congress. I should be glad if the right hon. Gentleman would state

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when the representations of our Government were made to the United States Administration, and through what channel they were made.
Mr. Eden: We were told of the United States Government's decision on 30th January and we made our views known to them on the following day. But I think it only fair to add that these topics had been discussed with the previous United States Administration and with the new Administration, that is to say, the neutralisation policy in general, and certain infringements which seemed to be taking place. As long ago as last November we asked whether the policy had been modified in any way. We were told that the incidents which had taken place were not regarded as an infringement of that policy. We followed that up on 28th January, after the change of Government. We again drew attention to these raids, which we said seemed in our view inconsistently with the neutralisation policy, and made certain further comments on the matter.
Mr. Morrison: The right hon. Gentleman has not stated—I did ask him—through what channels the latest representations were made. I think this latest matter is more important than the incidental minor raids that happened earlier on.
Mr. Eden: There were continuing discussions on the same topic. I think the last representations were made in Washington and not here. [HON. MEMBERS: "By whom?"] Of course by Her Majesty's Ambassador.
Mr. Morrison: I asked that question, not because I was alleging anything— [HON. MEMBERS: "Oh."] Really, it is rather foolish for hon. Gentlemen opposite to adopt that attitude before they are in any trouble. But there have been reports that the representations were made by a humble officer, and I am glad to know it was done by the Ambassador personally.
Mr. Eden: No. I am sorry, I cannot give an absolute assurance that they were given—[Interruption.] I really think the House is a little hasty. What we did was to send on the next day instructions that representations should at once be made in Washington. I cannot charge my memory as to whether they were in fact made by
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the Ambassador himself or by a member of his staff. What I do know is that they were at once made by a representative of Her Majesty's Embassy. Let me add that I do not grade the importance of the representations by the particular officer who happens to deliver them.
Mr. Morrison: I wanted the information and I thought the earlier statement was perhaps a little misleading. I think it is far better if a matter of this great importance is dealt with personally by the Ambassador, the highest representative we have there. May I ask the Prime Minister whether, having regard to the Foreign Secretary's statement, he can now give us, or will give us, any information as to what took place between him and President Truman and President-designate Eisenhower, as they were then, with regard to this matter, if anything, on the occasion of his recent visit to the United States?
Mr. Eden: I checked as rapidly as I could which officer delivered our representations. As I understand it, our Ambassador himself delivered the representations on 28th January, and as to the representations which were hurriedly delivered on 30th January, I am instructed that they were delivered by a member of the staff. I do not know which particular one it was, but I will find out and inform the House.
Mr. Morrison: It surely is permissible, on a matter which is very relevant, that we should ask the Prime Minister what happened, if anything, in connection with this matter on the occasion of his recent visit to the United States, and that he should reply?
Mr. Eden: May I be allowed to add one word? [HON. MEMBERS: "No. The Prime Minister."] I was asked a question and I wanted to answer the point raised by the right hon. Gentleman because I have further information on it. Mr. Dulles was not in Washington on the day of the second representations, and that is why, in addition to the representations delivered by a junior officer, a telegram was at once sent, quite rightly, by our Ambassador to catch Mr. Dulles where he was in Europe.
The Prime Minister: On the subject of my private and confidential conversations with various important people in the

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United States, I have nothing to add to my statement yesterday. I feel at the same time that I ought to say that I am in full accord with the statement made by my right hon. Friend.
Mr. Bevan: On a point of order.
The Prime Minister: Address the Chair.
Mr. Bevan: Keep your temper, please. In view of the fact that the Prime Minister has on several occasions refused to tell the House the purport of his conversations with President Truman, as he was then, and the President-elect, may I ask whether the right hon. Gentleman's visit was a State visit?
Mr. Speaker: That is not a point of order. It may be a matter of investigation for the House, but it is not a point of order.
Mr. Bevan rose—
Sir T. Moore: I have a real point of order to raise.
Mr. Speaker: There cannot be two points of order at the same time. The hon. and gallant Gentleman the Member for Ayr (Sir T. Moore) thinks, no doubt, that he has a real point of order, but the right hon. Gentleman the Member for Ebbw Vale (Mr. Bevan) is convinced he has, too.
Mr. Bevan: May I ask, in view of the fact that the Prime Minister has been treating this as an entirely private matter, whether his visit was financed out of public funds?
Mr. Speaker: That is not a point of order for me. I have nothing to do with that.
Sir T. Moore: This is a real point of order. May I ask whether it is in order for the right hon. Gentleman the Member for Ebbw Vale (Mr. Bevan) to tell you, Mr. Speaker, to keep your temper?
Mr. Speaker: I have no recollection of the right hon. Gentleman addressing me or of his using such language to me, nor have I of my own conduct any remembrance which would justify such a remark.
Mr. Strachey: Will the Foreign Secretary and the Prime Minister now take the
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opportunity of assuring Mr. Dulles that in their opinion and in the opinion of this House, Chiang Kai-shek's troops on the mainland of China will be an incomparably greater political liability than they can ever be a military asset to anyone?
Mr. Donnelly: Reverting to the question of the representations which were made by Her Majesty's Government to the Government of the United States, may I draw the attention of the Foreign Secretary to a statement in this morning's "Manchester Guardian," which quotes a statement by the spokesman of the State Department in Washington, Mr. McDermott, in which he said he was not aware of any representations which had been made on behalf of any of the Governments concerned, and what observations has the right hon. Gentleman to make on such an humiliating position?
Mr. Eden: I do not know who the hon. Gentleman thinks is in an humiliating position, but I have given the House an account of the representations that have been made, and it is, of course, for other people to decide how much they tell within a Department of these representations.
Mr. Paget: Will the Foreign Secretary agree that the spread of the war into the Formosan Channel and on to the Chinese coast endangers Hong Kong and injures British interests? Will he also agree that we have a Fleet to maintain British interests, and if the American 7th Fleet is not going to keep the peace there, can he consider ordering our Fleet to do so?
Mr. Eden: What we have said before the event expressed in measured terms the view of Her Majesty's Government and most of the House. Since this matter is of not inconsiderable delicacy between us and our principal Ally, whose Secretary of State is arriving this afternoon, I should have hoped that the House would have shown some reticence in further comment on the matter.
Mr. Gaitskell: Will the Foreign Secretary agree that one of the most regrettable features of this decision is the damage that it may do to Anglo-American relations, and will he bring this danger to the attention of Mr. Dulles? Further, will he agree that,

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whatever Her Majesty's Government have submitted or will submit to the United States Government, in view of the danger of the spread of the fighting which may result from this decision, it would have been more appropriate to have brought it first before the United Nations?
Mr. Eden: We did, in fact, in the representations which were made on 28th January by Her Majesty's Ambassador. state the fact that the ending of the neutralisation policy would have important political repercussions. We asked that we should be fully consulted in advance, and we hoped the United States Government had no intention of allowing their policy to go by default. These were the representations made on 28th January.
What we do not yet know, and I think we should be wise to suspend judgment about it, is what action, if any, will follow from this decision. There have been small raids taking place already, as I informed the House, since last November. Whether or not there is to be any departure from that policy remains to be seen. That is clearly a matter which we shall discuss, and I think we can most usefully and most quietly discuss these things if we do not further raise the temperature on the matter at this stage.
Mr. Bevan: Does the right hon. Gentleman realise that hon. Members in all parts of the House have the most grave responsibilities in this matter? Hon. Members will find that their constituents may not take the view that they do about it. When he meets Mr. Dulles, will the right hon. Gentleman ask him this question, for the information subsequently of the House? It is well known that Chiang Kai-shek's troops on Formosa have been armed by the United States. Now that the Fleet has been withdrawn, and therefore raids will be made by Chiang Kai-shek's troops on the Chinese mainland, is it the intention of the United States to continue to supply arms to Chiang Kai-shek? If that be so, then a very grave situation indeed will have arisen, because not only will Chiang Kai-shek have been armed in the past by the United States, but he may also be armed by the United States in the future, and nothing can do more damage to Anglo-American relations than that.
Lieut.-Colonel Elliot: Might I again repeat the suggestion which was made by the Foreign Secretary, with a very great sense of responsibility, that, in view of the fact that the American Secretary of State is to meet our Foreign Secretary this afternoon, any attempt to dictate in advance the subjects of their conversations would be highly injudicious and that nothing could do more harm than to pursue this discussion today?
Mr. Wyatt: On a point of order, Mr. Speaker. Surely it is not in order for us to have addressed to us homilies of this sort which are not questions?
Mr. Eden: I should have thought that the statement which I gave the House showing the representations which we made in advance of events made quite plain what were the views of Her Majesty's Government on this subject. It is on the basis of what we have said that I shall, naturally, have discussions with the Secretary of State in the course of the next few days, but I would ask the House to bear in mind that we have no information whatever as to what intention may follow from this action, and I do not think we ought to take extremist views about this until we have evidence on which to base them.
Mr. H. Morrison: May I ask the Leader of the House to take note that we would wish to have a day's debate on this matter and on the Far Eastern situation in general? We suggest that it is desirable for the House on both sides to express its views about this important development. We should like him to arrange, if he would be good enough to do so, for us to have the debate on Thursday of this week in order that the House may be in a position to express its views.
The Lord Privy Seal (Mr. Harry Crookshank): Of course, if the House is prepared to see the business rearranged, the Government would not stand in the way of that suggestion for an early debate. I think the actual method might well be discussed through the usual channels.
Mr. Morrison: I am much obliged to the right hon. Gentleman.
Several Hon. Members rose—
Mr. Speaker: Order. I would remind hon. Members that there is no Question before the House.

QUESTIONS TO MINISTERS
Mr. Fenner Brockway: I gave you notice, Mr. Speaker, of a point of order which I intended to raise at the end of Questions. It related to a Question which was addressed to the Minister of Housing and Local Government. As he is absent visiting the flooded areas today, ha asked me to postpone the Question, and I therefore ask you also to postpone the permission which I have asked to put the point of order.
Mr. Speaker: I am obliged to the hon. Gentleman.

TRANSPORT BILL (ALLOCATION OF TIME)
Report [27 th January] of the Business Committee to be considered forthwith. —[Mr. Crookshank.]
Considered accordingly.
That—

(a) the Proceedings on Consideration shall be divided into the parts specified in the second column of the table set out below;

(b) the three days which, under the Order [24th November], as amended by the Order [21st January], are given to the Proceedings on Consideration, and portions of those days, shall be in the manner shown in that table; and

(c) subject to the provisions of paragraph 7 of the Order [24th November], each part of the Proceedings shall, if not previously brought to a conclusion, be brought to a conclusion at the time specified in the third column of that table.

TABLE

Allotted Day

Proceedings

Time for conclusion of Proceedings

P.m.

First day

Recommittal, if any, and new Clauses

5.0

Clauses 1 to 3

10.30

Second day

Clauses 4 and 5

5.30

Clauses 6 to 13

8.30

Clauses 14 and 15

10.30

Third day

Clauses 16 and 17

5.30

Clauses 18 to 23

7.30

Clauses 24 to 28

9.30

Clauses 29 to 35, new Schedules, Schedules and any other Proceedings necessary to bring the Proceedings on Consideration to a conclusion

10.30

Question, "That this House doth agree with the Committee in the said Report," put forthwith, pursuant to Standing Order No. 41 (Business Committee), and agreed to.

ORDERS OF THE DAY
  CONSOLIDATED FUND BILL
  Considered in Committee; reported, without Amendment; read the Third time, and passed.

  COMMONWEALTH ECONOMIC CONFERENCE
  Motion made, and Question proposed. "That this House do now adjourn."—[Mr. Buchan-Hepburn.]
  4.29 p.m.
  The Chancellor of the Exchequer (Mr. R. A. Butler): We now come to the rather cooler atmosphere of the Commonwealth Economic Conference. Hon. Members will be aware that the communiqué was laid before the House on 15th December in Command Paper No. 8717. I shall endeavour, in as reasonable a compass as I can, to give some account of our deliberations so that the House may consider the matter this afternoon.
  This was the first full conference of its kind to be held at Prime Ministerial level for more than 20 years. The policies which we had adopted following the meeting of Finance Ministers in January, 1952, enabled the Conference to meet at a period when we had a little time, having stabilised our own affairs, and we therefore used the time to consider the future without constantly being burdened with immediate decisions to deal with an impending crisis. Certainly, the January Conference had played its part.
  We also owe very many thanks for the full and thorough preparation by officials from all parts of the Commonwealth, whose work was beyond praise. The House will realise that I am speaking with the advantage of their help of the findings of the Conference. I hope my words will go to them in their various countries because, as the right hon. Member for Leeds, South (Mr. Gaitskell) will know from his experience, we have in the past been most grateful to those officers for their help and work.
  When the Ministers met they were really able to get down to fundamentals and to give some careful and not too hurried thought to the whole range of
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  our economic problems. It was particularly gratifying to us in the United Kingdom to realise what a great degree of unanimity was reached on the broad and important questions of policy which were discussed. In my opinion, the free world has spent far too little time and thought on building up the future economic strength which is the foundation of all the policies, military, political, social and foreign, which we so often discuss together. There is still a great deal more work to do but nobody could say that the time of the Conference was not well spent.
  Economic instability would not only undermine the defence effort that we have to undertake in the Commonwealth and in Europe as well as N.A T.O., but would also provide an easy and happy hunting ground for Communist agitation. Since the war much has been done, with American aid, to rebuild what was then broken down. Now we must look forward and set in train positive policies which will ensure independence from extraordinary outside aid. That is why I have always advocated the policy of "Trade, not aid," for it is on this basis, and I believe this basis alone, that we can fulfil our own destiny, gain our own independence and be really valuable allies to our partners in the North Atlantic Treaty.
  Let us have a look at the communiqué itself. First of all, as hon. Members will realise, this is the joint work of the representatives of nine Governments. Despite what has been said about the communiqué, anybody who really wants to get an idea of what we were about can make a really shrewd analysis, and I sometimes suspect that those who criticise the communiqué have, in fact, found in it more than they like to let on. At any rate, I will try to let on a little more
  First, we had to ensure that the Commonwealth and the sterling area should continue to live without continual upsets. Our first attention was given to the short-term outlook of the balance of payments of the sterling area. Our second object was to seek an expansion of our activities and a growth in our future economic strength, and therefore we had to look to a development of our resources on an economic basis. The third part of our work deals with the establishment of international conditions in which freer

  1683
  trade and currency arrangements could be firmly established.
  The Conference considered, as it was bound to do, the basic question of the direction of our external economic policies. The question was whether we should look outward or inward, whether we should aim at autarchy, self-sufficiency or whatever we like to call it, or multilateralism or widening of trade, whether we should look for the solution of our problems in restrictions or in expansion through freer trade and commerce.
  I am glad to say that a unanimous and a decisive answer to this question was given in paragraph 3 of our Report. I am convinced that this was the right answer. Any other decision would have run counter to the professed aims and international obligations of our country under successive Governments, from the Bretton Woods Agreement to the Agreement for European Economic Co-operation, and it would certainly have weakened the solidarity of the Commonwealth, which was so remarkable a feature of our discussions. It would have tended to formalise and perpetuate the division of the free world into discriminatory currency and trade blocs, and it would have been a source of weakness and division. So the Commonwealth Governments have decided not to seek safety in economic isolation.
  Just as we live in a changing world, we are living in a changing Commonwealth, and I am not at all sure it is not a stronger one than we have ever known before. At the beginning of this century it was natural for our own family of nations to have ideas of self-sufficiency and to attempt to apply them. It is not surprising however, now that our family have grown up into the independence of sovereign countries, that they should look as much outward to the great world as inward to what I might call the domesticity of family life. But in doing so nobody need be under any illusion that the Conference forgot our historic tradition of developing our own Commonwealth and our own Empire production, and expanding our own earning power and family trade on a competitive basis.
  Before I come to give a short description of the short-term outlook of the balance of payments of the Common-
  1684
  wealth that we discussed, it must have been recognised by everybody who studied the reports and the communiqué that we all appreciate that there is a very close connection between inflation at home and imbalance—which I believe is the correct economic term; if not, the right hon. Member for Leeds, South will correct me—in our accounts overseas. It was in recognition of this that we all agreed to persevere in our efforts to curb inflation. It is certainly a delusion to imagine that we can insulate external and internal economies one from the other.
  I am far from regarding—and I speak for Her Majesty's Government—the determined resolution of the other Governments at the Commonwealth Conference as a mere pious hope. I am sure they mean business when they talk about their own internal economies. It is for us by our examples to lead the way in curbing inflation here, and thus and in other ways to attain a stable balance of payments. It remains, in fact, the intention of Her Majesty's Government to pursue the steady economic course which I described at Leeds on Friday last. I would like to remind hon. Members that the real menace to our level of employment, to our standard of living and to our general happiness will arise if we do not keep our exports competitive and if we do not continue to pay our way in our overseas accounts.
  Perhaps hon. Members would like to hear a short account of the short-term outlook as we see it, because if we can gain a certain confidence in that we shall have the time and opportunity to build for the longer term. A great transformation occurred in our affairs in 1952. From a deficit of over £700 million sterling with the rest of the world, in the second half of 1951, the sterling area as a whole, of which I am speaking, reached a surplus of round about £150 million sterling with the outside world. These are the results of the provisional calculations which I feel entitled to give the House. Our reserves have risen from the low point of 1,700 million dollars at the end of last March to 1,978 million dollars at 31st January. I am giving the House this afternoon the latest January figures.
  Mr. Hugh Gaitskell: Will the right hon. Gentleman please repeat that last figure?
  Mr. Butler: Yes, 1,978 million dollars —very nearly 2,000 million dollars.
  In January alone the gold and dollar reserves increased by no fewer than 132 million dollars. Of this, 44 million dollars was Defence Aid from the United States and 58 million dollars receipt of gold in respect of our E.P.U. surplus in December. We now have provisional figures for our E.P.U. position in January. This shows a surplus of é9 million in respect of which we shall receive gold equivalent of about 18 million dollars during this month.
  The second feature of the outlook is the strength of sterling. There has been a steady rise in the value of sterling in the exchange markets up to the level of 2.82 dollars, at which rate of exchange the Exchange Equalisation Account has officially to intervene in the market. Forward sterling is also in general demand, and the rise to a premium has already taken place in relation to some important currencies. So, whatever, some right hon. and hon. Gentlemen may have said or thought about the outcome of the Finance Ministers' Conference in January, of the Commonwealth Economic Conference and of the general economic policies of Her Majesty's Government, there is no doubt from these figures what foreigners think about these matters, and what they are thinking about sterling at the present time.
  At the Conference of which I am speaking, the Commonwealth countries agreed to carry forward into 1953 the internal policies which they followed in 1952. We may, with reasonable good fortune, look forward—and I say this with deliberation—to a period of at least relative stability. That means that we have, in fact, the time in which to look ahead, but our position is not so secure that we can afford to go in for any significant import relaxation, nor is it so secure that we can afford to sit back or relax in any degree whatever.
  We have only to look at the general size of the reserves in relation to the transactions to realise that. We have an opportunity to move forward and to create world conditions in which it may be possible to avoid panic and emergency decisions which, while they are sometimes necessary, do not lead towards our ultimate goal of expanding world production and world trade.
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  Let me at this stage pay a tribute to the courageous way in which all the Commonwealth Governments have tackled and continue to tackle the problem of economic recovery, and to those colleagues, many of whom the right hon. Gentleman and other right hon. Gentlemen on all sides of the House know, who took their part as statesmen of the sterling area in this Conference. In particular may I pay a tribute in passing to the one to whose death we had to refer only recently, that is, the Finance Minister of Northern Ireland, who attended as a member of the United Kingdom delegation.
  Looking at the position of the United Kingdom apart from that of the sterling area, this position has also been radically improved. I will not go back over the past figures very much except to say that, excluding defence aid, after a deficit of £394 million in the second half of 1951 we had a surplus of £24 million in the first half of 1952. It is too early to say precisely what our out-turn was in the second half year, but we have good hope that the target of overall balance without aid will be attained.
  Again, satisfactory as that is, it is not really good enough. We have very large overseas commitments; there is the repayment of debt, the release of sterling balances already agreed upon and often required in relation to development projects, investments abroad by our export industries so that they can expand in foreign markets, and so forth.
  We take the realistic view that our external capital commitments have to be paid for in exactly the same way as our imports, and to enable us to do so and to continue to build up our reserves we need a surplus on current external account. I dare say that some hon. Members have read the report which we put in to O.E.E.C. where we refer to the very high figure of the sort of surplus at which we ought to aim, namely, between £300 million and £350 million. All I can say is that we shall have to work very hard and we shall be very hard put to it, at any rate in 1953, to attain that level.
  It is a formidable task—and the more the country realises this the better—requiring from British industry competitive prices and delivery dates without which we shall not achieve the great expansion of exports which we must have.

  1687
  This task will be much more difficult unless we can create the right conditions in the world for our exports, namely, conditions of expanding trade.
  I want to refer for a moment to one feature of our discussions which has come up from time to time in the House, and that is certain restrictions that particular countries of the Commonwealth have had to put on our trade. Our export trade has, of course, not been made easier by certain restrictions, some extensive, that some countries of the sterling area have had to impose on imports from the United Kingdom.
  We discussed this problem frankly with our Commonwealth colleagues, and the countries particularly involved agreed that these restrictions would be relaxed as soon as their external financial position improved. But I must say to the House that it would not be in our interest or that of the countries concerned if we insisted that they should take steps which they cannot afford. The Commonwealth countries who have had to impose these restrictions fully realise—I am sure they realise it fully after our discussions and by seeing the impact on public opinion here —the hardships which these restrictions have entailed for British industry, and I am confident they will relax them as soon as in their judgment it is safe to do so. Meanwhile, we have to go on finding alternative markets.
  There is another matter which has been raised by the right hon. Gentleman opposite and with which I will deal here. It has sometimes been suggested that we should have a permanent council of the sterling area to watch over the dollar situation and to agree in good time what sort of remedial measures should be taken to counteract, for example, serious losses in the reserves. It has been suggested more than once that if we can have bodies like this for Europe, why not for the Commonwealth.
  All I can say is that there is no general support for this idea in the Commonwealth. I found that when I attended an informal Commonwealth Relations Conference in 1949, in Canada, but I found it just as much in the formal Conferences which I attended twice this year with my fellow Ministers in the Commonwealth. Such permanent machinery really
  1688
  does not seem to fit in with the sort of way our Commonwealth works.
  Any such council or organisation, if it had executive power, would imply a surrender of national sovereignty which sterling area countries would not accept. If it were purely consultative, it would be much less efficient than the existing machinery through which in the sterling area we are keeping each other, and have kept each other, thoroughly informed of the course of our fortunes. I go so far as to say that I do not honestly believe we could improve the contacts or the information we have at the moment.
  We have representatives there; we have perpetual contacts. They have their most efficient representatives here and their High Commissioners, to whose efficiency I should like to pay a tribute. I do not believe there has been greater contact or unity of purpose than there is now. Now I come to the question of Commonwealth development. This is obviously a subject which excites the sympathy and stirs the imagination of us all. It has, of course, social and economic aspects, and to some extent there was a slight difference of opinion in the Conference, as I shall point out later, as to whether all developments should be based absolutely on economic grounds with a view to helping the balance of payments, or whether in under-developed countries a degree of social development should be permitted to help the people of those countries.
  Development, of course, has a special attraction for what have been described as under-developed countries. It struck me, when this plea was raised, that every country thought itself under-developed, but this, significantly, was not a cause of division. We in the United Kingdom, and perhaps also in some other parts of the Commonwealth, have on occasion in the past allowed our hearts to rule our heads in this matter of overseas development, with the result that—not to put too fine a point on it—we have sometimes been led into the most grandiose and expensive failures. I am glad to say that on this occasion discussion of development in the Commonwealth Economic Conference was prudent and realistic, and there was no disposition to regard development as a quick and painless panacea which would absolve us

  1689
  from unpleasant exertions in other directions.
  The Conference examined the question of how to find the resources that are needed. We agreed on the following principles: first, that the great bulk of money spent on development must be found domestically by the country concerned; secondly, that the resources available are, and must of necessity be, severely limited; thirdly, as was said in the communiqué, that the development in the sterling area countries should be concentrated upon projects which, directly or indirectly, contribute to the improvement of the area's balance of payments with the rest of the world.
  I should like to give the House further information on the part which the United Kingdom can play in developing the resources of the Commonwealth. We made it clear to the Conference that our major contribution must come from the development of our own resources. In fact, Commonwealth and Empire development begins at home, and it was generally accepted that to develop the resources of this island, whether in industry or in agriculture, is just as good a source of development as any other, particularly if it enables us to increase the resources from which we can provide money for overseas. It is important to make that clear, because that does not mean that we are solely making sacrifices for our family overseas, but that we are also very wisely developing our own resources in the interest not only of people overseas but of our own people.
  We accepted fully in the United Kingdom the need to develop projects to help our balance of payments, that is noticeably the export trade; and here, of course, agriculture comes in to the extent that it saves us from buying overseas food. We undertook to do everything possible to maintain and improve the capacity of British industry in these respects and to care for the defence and capital development of the sterling area. We also made clear our special responsibility for the Colonial Empire, whose representatives we welcomed and met in these discussions. We also expressed our determination to play as full a part as our dollar resources would allow in the expansion of development in Canada.
  In this connection, I should like to express my admiration and that of Her
  1690
  Majesty's Government for the most practical part played by the Canadian statesmen in our discussions and the obvious encouragement they gave to us in the direction in which we proposed to travel. It has been really almost a tragedy of the modern Commonwealth that for various economic reasons we have not been able to have in this sphere closer ties with Canada. This is a subject which must appeal to all hon. Members in all parts of the House.
  My friend and the friend of right hon. Members opposite, Mr. Jayawardene, the Ceylonese Finance Minister, defines resources for development as "men. machines and money." I have not the time to go into the first two very much this afternoon, but I should like to tell the House about the extent to which the United Kingdom can provide finance for development in other Commonwealth countries. Though, alas, too limited, this is more or less what we are proposing to do. We are already making a very substantial contribution by the release of sterling balances, which constitute a major source of external finance available to other members of the Commonwealth. We undertook at the Conference to make a further real effort and I am glad to announce that discussions with the International Bank for Reconstruction and Development, foreshadowed in the communiqué, have now been satisfactorily concluded.
  We have agreed to make sterling available for lending by the International Bank to other Commonwealth countries in the sterling area. Our intention is that sterling for such loans should come from our subscription to the capital stock of the Bank. While this will not require a specific issue on the market, it involves a real burden on our resources. I would hope, and, naturally, so would hon. Members that these loans would open further opportunities to the United Kingdom exporters and would increase the production of the raw materials on which our industries absolutely depend. I cannot at this stage estimate precisely the scale of sterling lending by the International Bank under this proposal. It depends on how much the United Kingdom can afford, the number of suitable projects coming forward, and how many are financed in other ways.

  1691
  Our aim, however, is to make up to £60 million sterling available to the International Bank over a period of about six years and we have advised the Bank that it may plan its operations accordingly. It is specially gratifying that through these arrangements we shall be able not only to help the Commonwealth, but to demonstrate confidence in and to assist the good work of the International Bank. Whatever may be said about international institutions, we can say that the Bank has made and is continuing to make, through dollar loans, a significant and welcome contribution to the capital required for the development of the Commonwealth.
  These arrangements for sterling lending by the Bank must not usurp the normal functions of the London market, to which, traditionally, Commonwealth countries look for finance for development. I therefore welcome on behalf of Her Majesty's Government the public-spirited action by a group of leading concerns in finance, industry and commerce in forming themselves into a company to further sound development throughout the Commonwealth. Work on this project is going forward rapidly and I hope it will be possible for a more detailed announcement to be made within the next few weeks. Meanwhile, I have written to the Chairman of the Capital Issues Committee asking him to take our undertaking to the Conference into account in considering applications to raise capital on the London market.
  But, however successful the United Kingdom may be, we must also look outside the Commonwealth and particularly to the United States of America. The Conference realised that it was incumbent upon countries seeking United States investment to do everything possible, consistent with their own political and economic policies, to create conditions likely to attract the United States investor.
  Before coming to the final portion of what I want to say about trade and payments, I want to say that we considered at great length commodity policy, the special measures necessary to avoid violent fluctuations and conditions in which prices which primary producers get for their products are uneconomic. This will come up on the general discussion
  1692
  which we hope to have on the subject of trade and payments.
  Before coming to the general question of trade I want to say one word about preferences.
  Mr. Harmar Nicholls: I take it that my right hon. Friend is now leaving the point on development. Do I understand that he is not intending to say anything on emigration and manpower?
  Mr. Butler: I did mention men, but I do not think that I can add very much now to the fairly full statement which I am making on this occasion. That does not mean that a statement cannot be made on another occasion.
  Now I want to say something about preferences. I must say, in passing, that the words "Imperial Preference" are not altogether accepted on every side in the Commonwealth. The Conference, having firmly decided to widen and not to restrict world trade, had to reconcile this with the particular object of fostering Commonwealth trade. I daresay that my right hon. Friend the Foreign Secretary will deal with any points that arise in connection with this matter.
  I will simply say that there was a general recognition by the Conference of the value of existing preferences, and it would be a great mistake to think that there was not; but, as will be seen from the final communiqué, the representatives of other countries considered that a collective effort to secure general freedom from the operation of the "no new preference" rule would not advance the agreed objective of restoring multilateral world trade and the Conference was therefore unable to support it.
  However, there was general understanding and, indeed, co-operation, with regard to the proposal to deal with the particular difficulties of the United Kingdom. In fact, if hon. Members look at the communiqué, they will see that it says that:
  "All Commonwealth Governments agreed … to co-operate with the United Kingdom in an approach to the other contracting parties to the G.A.T.T. to meet particular difficulties arising on the United Kingdom tariff. The object would be to enable the United Kingdom, consistently with the basic provisions of the G.A.T.T., to continue duty-free entry for Commonwealth goods, notwithstanding any increases that might from time

  1693
  to time become necessary in duties designed to protect domestic industry and agriculture in the United Kingdom."
  I am sure that hon. Members will welcome the proposal that this should be a joint approach by the Commonwealth partners, working together, and I am sure that they will follow with some interest and anxiety what success we have in this approach. I feel it is a reasonable and valuable approach which will be of benefit to our industry and agriculture.
  Major H. Legge-Bourke: While being sympathetic to the last remark made by my right hon. Friend—about the need for working together if possible—may I ask whether, before this Conference took place, Her Majesty's Government considered the possibility of taking unilateral action on the "most favoured nation" clauses?
  Mr. Butler: Her Majesty's Government have considered every aspect of this question. If we can go forward together with the Commonwealth countries in this matter, while yet retaining some of the benefits which we obtain from G.A.T.T. I should think we were doing pretty well and that that is the right course to pursue in future in this matter. Although it is an important subject I cannot go into it as fully as I should like, but I can say that special attention was given to the particular position of the Colonies.
  I now come to the main section, which deals with international action designed to create international conditions suitable for freer trade and currencies. Before I go further I should like to set out one objective that we did not have in mind. It has been suggested that as a result of any bilateral discussions there may be with the United States of America we shall be presenting European and other countries with a cut-and-dried scheme. Later, my right hon. Friend the Foreign Secretary will be referring in a little more detail to the procedure we have in mind; but let me say here and now that no cut-and-dried scheme exists and, even if it did, we could not put it into effect without the co-operation of other countries, particularly in Europe, and this co-operation we certainly intend to seek.
  Mr. Julian Amery: Would my right hon. Friend tell us whether there will be prior consultations
  1694
  with the Governments of countries in Western Europe before any approaches are made to the United States of America?
  Mr. Butler: It is a little difficult to have prior consultations before one knows whether the discussion one may have on a particular plan is likely to be carried forward. While contact is being maintained not only with the United States of America but also with European countries I think it would be wrong to go as far as the hon. Member suggests. He can be quite satisfied that the Foreign Secretary has this point in mind and that it is our desire to work with the countries of Europe—being Europeans ourselves—with the United States of America, and, indeed, the whole free world. I do not think that an approach on the basis suggested by the hon. Member would be either sensible or likely to succeed.
  We can see no solution for our problems which does not include a major expansion of our exports and, this being decisive, it must be of fundamental interest to bring about a world in which trade can move as freely as possible and in which traders are not subject to discriminatory trade restrictions.
  We must also look at the international organisations—the excellence of one of which I have described this afternoon—which were set up after the last war and see, if necessary, how they can work better. It is clear from our experience since the end of the war that the problem of the lack of balance between the United States and the rest of the world has been one of the main sources of our economic difficulties, if not the main one. While that lack of balance continues—even though what is called the dollar gap is not quite so large as it used to be, partly owing to the action of the United States themselves—it will be difficult to establish the sort of freely trading world we want.
  In considering this matter we must bear in mind all the time that there are two sides to the question. One finds a tendency at times to blame the Americans for that lack of balance and sometimes also to blame the debtor countries exclusively; but it is a two-sided question and a problem that can only be solved by action by both creditors and debtors,

  1695
  and one of the main objectives we are making for in the negotiations we have in mind is to secure this effective joint action.
  I should like to say how much we welcome the reference which President Eisenhower made in his message to Congress yesterday to the part which creditor countries can play. For example, there is the revision of the United States Customs regulations; the extension of reciprocal trade agreements; an increased flow of investments from the dollar area to the rest of the world; the purchase of military equipment abroad by the United States, and larger sales of raw materials to the U.S.A. at fair prices. These measures would all help significantly in the establishment of balance between the United States and the rest of the world on what I described earlier as a "Trade, not aid" basis, and would create conditions for wider markets and freer currencies.
  We certainly hold the view that the existence of import restrictions is contrary to the best interests of the United Kingdom, and the time has come to seek much more vigorous action to remove them than has been taken in the past. Our long-term aim must be the removal of discrimination, and, while maintaining the open door policy for the sterling area, we have taken some steps in recent months which have made our own restrictions somewhat less discriminatory and have given our export industries better access to raw materials on more favourable terms.
  I would not say that it would be possible for the United Kingdom or many other countries to remove those restrictions by any single step or immediate operation, but I am quite clear that our ultimate interest lies in their removal and our intention is to work steadily in this direction both in the framing of our own policies and the proposals we make for international action.
  As for the prospects with regard to convertibility, this is an aim which successive Governments have put frequently in international documents, such as the Bretton Woods Agreement, the 1945 Loan Agreement, and the Convention of O.E.E.C. We certainly do not intend to act in the financial field alone without
  1696
  being able to move forward solidly also on the trading side, because they are obviously so interconnected.
  There are three major pre-conditions to that advance. The first is the continuing success of the actions self-imposed on their own economies by the countries of the sterling Commonwealth. The second is the prospect that trading nations will adopt policies leading to the real expansion of world trade and a curing of the lack of balance, and the third is adequate financial support, through the International Monetary Fund or otherwise. Progress towards freer trade on a world-wide basis involves a consideration of corresponding action, and suitable action, on currencies on all our parts, so we intend, by degrees, to undertake discussions in the international field to prepare the way for practical results in both fields, of trade and of currency.
  Meanwhile, our task here at home, and the vital task of the Commonwealth, is to place our economies on a sufficiently sure foundation so that any progress we make may be crowned with success. We, here, must have a growing production and a growing export trade. I cannot speak with sufficient emphasis of how much our people must try to achieve this extra effort, otherwise, in the many responsibilities which I have described and in the effort which we may make, we shall fail. Others, too, must act, whether they be creditors or debtors or institutions such as the International Monetary Fund.
  The choice, therefore, is either to continue on the same lines as at present, with inconvertible currencies, with restrictions of trade, with underlying frustrations in our economic life and under the perpetual threats of crises and disturbances, or to move forward hopefully with our friends to an expansion of world production and trade with institutions which provide for greater freedom and a greater opportunity for all nations. The latter, surely, is the right course. Only thus can we underpin the policies, military, economic and social, to which we are committed.
  I do not think it is unreasonable to ask hon. Members on all sides, however much they may differ on details, to join with us in this great adventure in which,

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  after the freest discussion, the Commonwealth found fullest agreement; and that we should proceed in it as a united team.
  Mr. F. Blackburn: Will the right hon. Gentleman clarify a figure which he gave about discussions with the International Bank? He said that it had been agreed to make loans available for £60 million over a period of six years. Is that £60 million a year or an average of £10 million a year?
  Mr. Butler: It is the latter. The average will be £10 million a year over the six years.
  5.12 p.m.
  Mr. Hugh Gaitskell: I should like to associate myself with what the Chancellor said about Major Sinclair. Many of us had the privilege of knowing him over the past five or six years, and I know that I speak for all my colleagues when I say how deeply we regret his tragic death. He was an exceptionally delightful colleague. He was always friendly, always co-operative—a man about whom one always felt, even if there were some disagreement, that you would eventually reach an agreement. We mourn his death most sincerely.
  We on this side of the House pressed for the Commonwealth Conference a long time before the Government finally decided to call it and we therefore welcomed their decision and took the greatest interest in the proceedings. I can only wish that our interest had been better rewarded by the information supplied. I want to associate myself with what the Chancellor said about the officials; I have no doubt that they did admirable work—not only officials from our own Civil Service but those from the Commonwealth countries.
  Nevertheless, it is still very difficult for the Opposition to understand exactly what results have been achieved. It is six weeks since the Conference. We attempted, immediately after it, to extract at least a statement from the Government. We wanted a debate. We were refused both. The Chancellor even advised me not to read the papers, because he thought I might be misled by them.
  Mr. Butler: Could the right hon. Gentleman give the reference to that remarkable statement?
  Mr. Gaitskell: It was an answer to a supplementary question in which I quoted from "The Times."
  In answer to another supplementary question, the right hon. Gentleman informed me that further discussions were taking place on some of the details. We might, therefore, have supposed that, six weeks afterwards, we should have been given rather more information but, although I listened very carefully to what the right hon. Gentleman said this afternoon, and although he said it in his courteous and calm way, I do not think he has told us anything new at all.
  I noticed that during the Recess he gave an interview to an American newspaper, and, hoping that our darkness would be lightened by something which he said to them, I procured a copy of the paper; but I am sorry to say that the remarks about the Commonwealth Conference, even there, did not get us very much further. Mr. Kline, whom some of us know as a most well-informed correspondent, asked the Chancellor:
  "You were content, then, with the Commonwealth Conference? Do you feel it pointed to genuine co-operation for economic recovery?"
  The Chancellor replied:
  "I was more than content. I was heartened and fortified. Think of the variety of race, of development and of circumstances among the 600 million people of those nine countries and their dependencies."
  I am sure it is valuable to inform United States on that point.
  "Yet on the fundamentals of policy they were as one."
  When I got to that point I hoped that we were going to hear more about them, but the Chancellor went on:
  "I do not want to say too much about it. The proof of success and of achievement does not lie in any words of mine. It depends on our actions."
  We can certainly agree with that, even though we have still to search for what the actions are to be.
  Fortunately, some other statesmen have made comments. Mr. Menzies has made a number of statements to which I shall refer later and the British Press have certainly not been backward—I am afraid I disregarded the Chancellor's injunction here—in indicating what they thought had been decided at this Conference; and I shall also have something to say about that a little later.

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  The Chancellor referred this afternoon to the purposes of the Conference. I should like to tell him, if I may, what I think those purposes should have been, I hope in rather more precise language than that which he used. It seems to me clear that this Conference, meeting, as he said, under rather calmer conditions, should certainly have centred around the dollar-sterling problem, and it should have done three things in connection with that problem.
  First, it should have reviewed the stage which we had reached in solving it and to what extent the gap still remained and was likely to remain. It should, secondly, have decided on the next steps to secure that the gap should be permanently closed without American aid—and here, of course, we entirely agree with the Chancellor about the desirability of closing the gap permanently so that we may regain our economic independence.
  In that connection, incidentally, the Conference should have borne in mind the importance not merely of the current balance between the sterling and the dollar areas but the size of our gold reserves. Thirdly, it should have considered measures to protect us against the next storm which may hit the sterling area, and, in that connection, I think it should have paid special attention to the working of the sterling area.
  I think it is very important at this point, right at the beginning, to clear our minds about the stage we have reached, because upon the analysis we make of that situation depends to some extent, at least, what we think our future policy should be. Perhaps, if the House will bear with me, I will spend a little time on this matter. The Chancellor has given us some figures today—some heartening figures—about the dollar position; and, of course, we are all glad that the gold reserves have risen again.
  The right hon. Gentleman told us that there was now a gold and dollar surplus of £150 million or thereabouts. I was not quite clear whether he meant in 1952 or whether the rate of the present surplus, the annual rate of the surplus, was at that level; but we can, perhaps, let that pass. The point is that we are now in some surplus. I presume that that is after taking into account the economic—that is to say, the dollar—aid which we have
  1700
  been receiving. Perhaps the Foreign Secretary could clear up that point later so that we may know exactly where we stand.
  I think, however, that we should ask ourselves why we have got into this position. We were, after all, in a substantial surplus in 1950. In that year the sterling area had a surplus, quite apart from any dollar aid, of 800 million dollars. We then had a substantial deficit, running, I think, at about 1,200 million dollars in 1951, most of it, of course, or a great part of it, in the second half of the year. We have now moved out of that into small surplus again, solely, I think, because of the reduction in dollar imports that has taken place, together with the increase in economic aid. Those are the two factors which have enabled us to improve our position.
  Now we have to ask ourselves this question. In these circumstances, with a modest surplus, can we really say that the problem is solved? Does it look as though we are now in balance, and will go on being in balance? I venture to say for a variety of reasons, for six reasons in fact, that I do not think the situation is a stable one. The Chancellor—I do not know what period he was talking about—said he considered that we could look forward to a period of stability, and I would admit that in the immediate future the prospect is not too bad, but I think, as I say, that there is a number of reasons why the outlook in the longer run is not nearly so satisfactory.
  In the first place, we have to remember how extremely low our gold reserves still are. Even at 1,978 million dollars they are still below what they were at the end of 1951, when they were 2,335 million. They are, of course, far below the high figure reached in June, 1951, when the figure was 3,867 million, and even in the autumn of 1951, at the end of September, immediately before the Election, the gold and dollar reserves still stood at 3,269 million. We are right down, and still at 1,978 million, and the significance of that is that the slightest change in the situation which affects the sterling area adversely is going to be profoundly dangerous for us.
  I said, I think, at the time that the accumulation of those reserves in 1950 and 1951 had given us time to get over the crisis, and that, I think, was of very

  1701
  considerable value. This time, should further deterioration take place, there will be no time in which to recover. The reserves would run out—indeed, more than run out—within a period of six months, if they are as low as that when the crisis hits us.
  The second point I should like to make is this. Part of our recovery has been due to the fact that we have been getting gold back from Europe; and that is satisfactory; but the Chancellor will, I think, agree that we cannot hope—nor should we expect—to draw more gold from Europe than the amount that we have lost to Europe. Quite apart from the undesirability of this country seeking to solve its dollar problem at the expense of Europe—a policy which I should strongly deprecate—we are already being pressed by the European countries very strongly to lift the restrictions on European exports to this country.
  It is quite clear that, as soon as we approach the position where we are more or less at the middle point, where we have, in other words, paid back the credit we have had from them, as well as the gold, we shall have to lift those restrictions. We shall, in other words, have to give up any hope of further gold supplies from that direction. We may get—I do not know the exact figure—£100 million or £150 million, but not more than that.
  The third reason why I think the present situation is worrying is that the balance has been achieved, as I said earlier, by restricting dollar imports. I should like to ask the Foreign Secretary this. Is he satisfied that the restrictions which were imposed here, first of all last autumn, and then in the rest of the Commonwealth, following the January Conference, are likely to be maintained? Is the rest of the Commonwealth prepared to go on importing at the low level at which, presumably, they are now importing, or are we to be faced with the situation that occurred in 1951, when, undoubtedly, the restrictions which had hitherto been imposed—imposed originally in 1949, in that case—were dropped, particularly in the rest of the Commonwealth, as soon as our gold position began to improve?
  In other words, can he tell us whether it is the intention of the rest of the Commonwealth—and was this matter
  1702
  raised?—to go on discriminating against dollar imports? The Chancellor told us they were likely to lift restrictions on imports from this country, and, of course, we all welcome that, but what I also want to know is, are they going at the same time to maintain the low level of purchases from the dollar area?
  The fourth reason is that even if these restrictions, these extra restrictions that were imposed in January, are dropped —and that alone would make a very substantial difference to the dollar situation —we are still left, of course, in a situation where we are discriminating against dollar imports, broadly, over a very wide field. The Chancellor has spoken of the need to get into a position of nondiscrimination, of dropping these controls altogether. I would only point out to the House that if that were to be done it would at once mean a considerable increase in the total amount of dollar expenditure.
  The fifth point is, of course, that the United States at the moment is enjoying an unparalleled period of prosperity and expansion. Her production is at record levels, and her imports march very closely with her production. Even a slight recession in the United States, as we know from bitter experience, can have the most tragic consequences for her imports from the sterling area, and, therefore, for our whole dollar situation.
  Finally, of course, the balance is achieved at the moment only with the assistance of United States' aid—economic aid and off-shore purchases; and we certainly cannot assume, nor should we assume, that this will continue indefinitely. I have always taken the view that it was fair and right and proper that the United States should make its due contribution to the common defence, but I am bound to say that, so long as these sums of economic aid are treated as though they were charitable gifts to us, we shall none of us feel very enthusiastic about them, and we shall welcome the day when they can be dispensed with altogether.
  There is one other point which I must mention, and it is this. It is not only a question of the sterling area. We have to consider what the whole dollar world situation is—the dollar world balance is. I would describe it roughly as follows. Although at the moment, with the

  1703
  assistance of the various forms of aid and military expenditure taking place, gold is, I think, actually moving back from the United States, that is only because of these extraordinary circumstances.
  If one disregards them, the United States still has a true surplus on current account of at least three billion dollars a year. It may be a little larger or it may be a little smaller, but it is at about that level, and that is still happening, while the rest of the world, broadly speaking, is discriminating against dollar imports. Therefore, for all these reasons I must say that I cannot feel that we are in the least in a stable situation. I think that the outlook is something like this: we may have for a few months relative stability, but, otherwise, we are simply in another of those phases of calm which may well precede another storm.
  I think that this situation, if that analysis be accepted, should have led the Conference to consider ways and means of closing it permanently, first, by earning a continuous surplus with the dollar area and, secondly, by building up our reserves in some form or other.
  I suggest that those aims should have involved two considerations. First, that should be action by us and in the Commonwealth and, secondly, action by the United States. I say with great respect that the Chancellor is rather taking us off the point when he talks about whether we are going to look inwards or outwards, whether we are to have autarchy or a lot more trade. I do not think that that is relevant. That is not the point at all.
  What we have to ask ourselves is whether we are now to try to replace dollar goods by goods from the Commonwealth. That is not in the least restrictionist. Indeed, curiously enough, it is what is recommended by that American body, the Council of Economic Advisers, who expressed the opinion in their last report to President Truman that the chances of equilibrium being reached were far greater if the rest of the world did a bit more trading with itself. That is precisely what we believe.
  My first criticism of the Conference is that I believe—although, as I shall concede later, some movement was made in
  1704
  this direction—that instead of really getting down to this problem the conference was drawn aside on to the question of convertibility. I was surprised that the Chancellor did not say a little more about that. He hardly referred to it except at the very end of his speech, yet he must know perfectly well that since the Conference there has been a great deal of discussion on this subject in the newspapers and statements have been made by various persons including Mr. Menzies himself.
  I should like to remind the Chancellor what Mr. Menzies said in his broadcast in this country. I quote from the "Listener" of 18th December. Let me say at once that we all hold Mr. Menzies in the highest personal regard as a Commonwealth statesman even though we do not always agree with his policies. Mr. Menzies said:
  "What we have done is to agree in some detail on the procedures to be followed to reach an intermediate stage."
  An intermediate stage towards convertibility—
  "They depend not only on the success of our own efforts, bur also on close and specific co-operation with European nations and the United States of America…"
  He went on to speak of "delicate negotiations being required," and indicated that meanwhile it was impossible to publish precise terms or even an outline. On 14th January he said that
  "the first move towards the convertibility of sterling and freer world trade would follow discussions soon to be held with Western Europe and the United States."
  I think that the Chancellor will agree with me that these are fairly precise statements.
  I understand the difficulties of disclosing in advance of negotiations exactly what the Government intend to put for ward—we all know the difficulties. This is reasonable when the aim which the Government have in mind is one which is supported by the Opposition as well and it is not in question that there should be successful negotiations. I would not complain if the Foreign Secretary said, "I cannot talk about the discussions with Egypt on the Sudan or the Canal Zone because this is a delicate moment and it might upset things," because we all want to see a satisfactory settlement there.
  But when it comes to a question of convertibility where we frankly take a

  1705
  very critical view, it is not good enough for the Government to hide the whole thing and say that they will tell us nothing whatever about it. The Chancellor must know that the United Kingdom Press—the "Economist" and the "Financial Times" in particular—have been writing very freely about this question. There has certainly been a good deal of back-room briefing going on in the Treasury.
  I hope that the Foreign Secretary will deny this if, by any chance, I am wrong, but it is clear to me that a plan for convertibility exists and it is not a plan for a very distant future either. It is a plan which it is intended to discuss with Europe and the United States. In the light of the analysis I have given of the broad sterling dollar situation, we really are entitled to know what this plan is.
  I propose to say what I believe it to be, but, of course, we have not had any official statement from the Government and I may be wrong in details. The plan, as I understand it, is that what is called non-resident sterling is to be made convertible. There could hardly be a more misleading phrase. What it means is that sterling belonging not to the United States and Canada, because that is already convertible, not to the other members of the sterling area, because in theory, at any rate, that is already convertible, but to the rest of the world—any sterling that they may hold here at least as a result of current transactions—is to be convertible into dollars.
  That is the plan discussed in the newspapers, and it is that plan that I want to analyse. I should have thought that most people would agree that in present circumstances of the world dollar shortage there is bound to be a strong desire on the part of individuals and Governments holding balances here to convert them into dollars if they have an opportunity of doing so. It may not be quite so strong as it was in 1947, but I think that it will be quite strong enough.
  The first reaction to any move of this kind would, therefore, be a strong speculative movement into dollars. Secondly, although it may be said that this is only to apply to sterling area current transactions with this country, the fact remains that it will be very difficult to prevent existing balances from coming into the
  1706
  picture. I do not know the latest figures; perhaps the Foreign Secretary will be able to give them. But at the end of June, 1952, there were still £800 million of sterling balances held by the countries who come into consideration here—that is to say, O.E.E.C. and the rest of the non-dollar world in the non-sterling area —of which about £350 million were the balances of the O.E.E.C. countries. I should have thought that there was a very grave danger that some, at least, even if it was only £50 million or £100 million of these balances, would be converted, with a corresponding drag upon our dollar situation.
  In the second place, if we are to allow this sort of convertibility, we are providing the maximum incentive to the countries concerned to achieve with us a surplus on their current account. They will do that by restricting imports from the United Kingdom and the sterling area in order to achieve a surplus here which they can then convert into dollars. The repercussions of this policy might be extremely serious for our export trade. I believe that this happened in 1947. The hon. Member for Aberdeenshire, East (Mr. Boothby) is entitled to claim credit for having attacked that proposal, and for my part I willingly concede to him that he was a good deal more right on that subject than many people on this side of the House and also on his own side of the House. But I think that that will happen again.
  Let us consider what will happen in the case of Europe. Suppose that the European Payments Union continues for the present—and even that is uncertain. It is surely clear that the other countries of Europe can immediately convert any sterling they have here into dollars, leaving us to get credit, and credit only, from the European Payments Union. That would be the case, at any rate as soon as we have got out of the position where any balance of ours is partially payable, in gold. It is very likely that we shall get out of that position within a month or two.
  Mr. Robert Boothby: Does the right hon. Gentleman seriously suggest that this convertibility scheme is contemplated in the absence

  1707
  of any new international payments union at all—any successor to Bretton Woods—and that it is just to be in a vacuum?
  Mr. Gaitskell: There has been discussion about some new stabilisation loans in connection with the wider objectives of non-discrimination. But, as I understand it, the plan of which I am speaking is regarded as a stage on the way to something else, and I have not heard that it is a stage dependent upon any new international arrangement. I ask the Foreign Secretary to tell us something about this. It is not my fault if we do not know the full details. I can promise hon. Members that I am not trying to paint this picture in too gloomy a fashion. This is the kind of thing which is being discussed in this form in the Financial Press at the present time.
  It seems to me, therefore, that any such movement of this kind means that either we should have to suspend it in a few weeks, as was the case in 1947, or be obliged to impose the most drastic counter-restrictions on trade all over the field, and the consequences would be extremely damaging.
  I have sometimes heard answers made to this argument by people who apparently take the point of view that it would be a good thing to introduce this sort of convertibility. The first answer is that it would be all right if British exports were competitive. Then people will not wish to convert into dollars; they will Wish to spend their sterling. I beg the Chancellor of the Exchequer to appreciate that that argument is based on a misunderstanding.
  We could have perfectly competitive exports with the United States in the sense that our prices were competitive with theirs—even our deliveries—though that is just not the case at the moment. Nevertheless, if there is a world dollar shortage and people want dollars to buy sulphur, tobacco or cotton, or whatever it may be, they will take the opportunity of converting their sterling into dollars. Therefore, do not let us be misled by that sort of argument.
  The second argument put forward is that convertibility will assist the invisible exports of this country—that the City of London will earn various commissions and, therefore, there is an advantage. That argument is being put forward very
  1708
  strongly in connection with the proposals, again much discussed, for freeing the commodity markets and allowing people to buy American commodities through London quite freely. There may be some gain—one must concede that at once—to the invisible exports from this, but surely we have to ask; how much is it going to be?
  From all the information which I have at my disposal, I would have thought that at the very most the kind of advantages we would get in extra commissions would not amount to more than £5 million —it may be as much as that or it may not. I have heard lower figures given, but it is absurd to compare that in importance with the other consequences of this policy. One has only to consider what the position would have been when the Bank of England permitted the free purchase of commodities last summer for resale to Europe—and what our losses would have been—if at that point we had not happened to be paying 100 per cent. gold to Europe. Because we were, it did not matter very much. We paid dollars for the commodities and got gold back from Europe, but as soon as we get out of that situation we shall be paying dollars and getting credit, which is profoundly unsatisfactory.
  Finally, it is said that we shall discourage people from converting their pounds into dollars by freeing the exchange rate, by allowing the £ to drop. What rate of exchange is likely to be reached in those circumstances? Does anyone know? I venture to say that a free convertibility and a free exchange might very well involve us in a serious decline in the value of sterling.
  What it means is this: that we shall be paying more because of the rise in import prices for United States cotton and tobacco and Canadian timber and all the other things we get from the dollar area, so that we may help Italy, France, Chile, Egypt and any of those other countries to solve their own dollar problems. That seems frankly to be a crazy policy, and I hope that the Chancellor of the Exchequer does not agree with it, and that we shall have a statement from the Government saying that there is no truth whatever—and I hope that it will be categorical—in the rumour that there is to be a move of this kind, and that we shall be told that the financial Press and the economic Press are quite wrong in even discussing it.

  1709
  Only a very strong statement from the Government will get rid of these rumours. I venture to suggest to the House some reason why this policy—and it is not for the first time, because it was pushed last summer and, as I said in my last speech on this subject, it was overturned in the Cabinet by a very narrow margin, according to my information—has now cropped up again since the Commonwealth Conference.
  What lies behind it? First, there are some people who believe, frankly and honestly, that it is the right policy, and all the implications should be accepted. Some financial writers take that view. Secondly, there are people who obviously stand to gain from it. I say this in no accusing spirit—I merely state it as a fact. There are any number of firms in the City of London who would do a much bigger turnover if there was convertibility. It is greatly in their interests, and it is perfectly natural that they should support it, but it is not natural that the Government should be persuaded by this, or even the Bank of England.
  The third reason is that there is a certain mystique about making sterling an international currency, which underlies a lot of the talk and confused thought on this subject. I do not know whether anyone here has tried to define what they mean by that. It is not so easy to do so as it seems. I would ask the House not to be taken in by this kind of absolute aim. It may or it may not be a good thing to make sterling an international currency, but in these circumstances all the phrase seems to mean is, "If we had no dollar problem it would be nice, so let us behave as if it did not exist."
  I have already said, and my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) has made it quite plain, that he believes that he made a mistake, in 1947, over convertibility, but let me remind hon. Members that he was bound to do it in the Loan Agreement made with the United States—and the Government are not tied by any such agreement at present.
  The Chancellor of the Exchequer referred later in his speech to the fact that he was not going to have any advance to currency convertibility without a simultaneous movement on the trading side. I do not know what he has in mind. I
  1710
  put our position quite plainly, and it is this. We regard convertibility and nondiscrimination as aims to be achieved when the supply of dollars is adequate. and not as a means to attempt to force us into dollar equilibrium. That is the essential difference. I hope that the Chancellor of the Exchequer will tell us, or that the Foreign Secretary will tell us, that he agrees with us on that—that is to say, that convertibility and nondiscrimination are not to come into the picture at all until we have built up our gold reserves and see a continuing surplus over the dollar area.
  I believe that the House and the country would be relieved a great deal if we could be told that, and if he does not tell us that, I say that he will be misleading the United States. It is better to tell them in advance where we stand on this, rather than to start a conference with them when they believe that we have come to talk about convertibility and when, in fact, we have come to talk about something quite different.
  I say, lastly, that I hope that the Chancellor of the Exchequer will not be led astray by talk of a stabilisation loan. It is all very nice to have a loan and to spend it. We did it, but we did it in circumstances in which, in my view, Europe and the rest of the world had to have the things which we bought with that loan. We are not in that situation today. This is no answer from that angle, and if we have a stabilisation loan, the price of which is currency convertibility and non-discrimination, and there is no fundamental solution to the structural dollar problem, all that will happen is that we shall run through the loan and be faced once again, when it is all over, with the necessity of reimposing the restrictions.
  Briefly, I should like to say a few words on some less controversial parts of the Conference. I shall say nothing on the Imperial Preference issue, and nothing about commodity policy. My right hon. Friend the Member for Huyton (Mr. H. Wilson) will, I hope, deal with those subjects. I want to say a few words about development. As I understand, the Conference spent some time on development, and there are some phrases in the communique which are encouraging, in particular a reference to the recognition of unsound development

  1711
  in the past and to the need for projects which save and earn dollars. I do think that the Chancellor should have told us a good deal more about this subject, and I should like to put my ideas to him in the form of a question.
  Did the Conference come to the conclusion that it was necessary that, in the Dominions, there should be a far greater concentration on primary production and agricultural production? Did they agree that that was necessary, and did they also agree that a corresponding transfer of resources from manufacturing industries to agricultural and mining would be necessary? I must ask that question because Mr. Menzies gave a rather different impression when he said, on 28th December:
  "For example, any suggestion that Australian manufacturing is to be cut back or that the search for improved living standards is to be modified or abandoned is quite untrue."
  Therefore, will the Government please state what was agreed on that? Is there anything specific at all, or is it just a vague idea that it would be so nice to have a whole lot of development that we do not mind much what it is? If it was agreed that we are to have more mineral and agricultural development in the Dominions and the rest of the Commonwealth, and, perhaps, correspondingly increased exports of capital equipment from here, which has been referred to very often, I must ask: How this is to be done? Did the Conference even begin to consider how it was to be achieved? If the aims which I have indicated were accepted, was there any discussion on how investment was to be directed into those channels? Was there any discussion of the desirability of setting up some kind of investment board for the sterling area?
  The Chancellor referred to World Bank loans of £60 million for six years. Is that intended to be an additional amount to what otherwise we should be sending in the way of capital exports to the Commonwealth, or is it simply another way of investing in the Commonwealth? I should also like to know whether, in agreeing to this £60 million for six years, we are to take it that the sterling that will be made available will be unconvertible or will be convertible into dollars
  1712
  It is known to everybody with experience of these matters, I think, that capital exports from this country to the Commonwealth have been very high since the war, and I confess that, as the figures have become clearer, I have felt increasingly that this was one of the factors—the free movement of capital from this country to Australia and South Africa in particular—which certainly aggravated the difficulties of the sterling area, for it raised the level of their sterling balances here and encouraged them to go in for deficit policies.
  This free movement of capital was not unassociated with the development of secondary industries in certain countries, and with the unsound developments, I presume, which are referred to in the communiqué. Therefore, I must ask whether the Government will reconsider the decision—because the Chancellor announced that he is exercising no control whatever over capital exports to the rest of the sterling area? If he says that there is to be no control, what is the sense of talking in the communiqué about providing additional capital? Additional to what level? What, indeed is the purpose of the Finance Corporation if, in fact, people can raise the money that is desirable without permission, not only in the market, but through the banks or in other ways? How, if no control over export capital is to be exercised, are we to prevent that unsound development which has taken place in recent years?
  The truth is that, if we need this structural change, and I personally believe we do, it cannot be brought about without Government action and guidance and stimulus and control. How are we to get Australia to agree to more agricultural production without an adequate understanding about prices? How are we to bring about a movement of labour on the substantial scale that will be required?
  There are many implications in all this for the United Kingdom which we cannot stop to discuss today, but I hope that we shall have an opportunity of doing so before long, for very grave questions are involved in the Chancellor's announcement that we are to aim at a surplus of £350 million. On this side of the House. we are in broad agreement about the need for that surplus, or one of that kind, but very important difficulties arise on how we are to attain it. We cannot start to discuss them this afternoon.

  1713
  I would, however, make one comment on the organisation of the sterling area. The Chancellor said that he thought there was no support for the proposal which we have put forward for something like O.E.E.C. or E.P.U. so that we could control more adequately from the centre—all of us—the dollar expenditure. I was well aware that there would be opposition to this, but, whether the idea is accepted or not does depend, after all, upon the force, vigour and enthusiasm with which it is put forward, and I have not heard from the Chancellor that he actually proposed that there should be such a change and that there should be greater co-ordination.
  Surely, he would agree, looking back over the past few years, and particularly over 1951, that it was extremely unfortunate that the actual decisions to cut dollar imports over the Commonwealth as a whole could not be made until January, 1951. I have said previously why that was so, and all I am asking is that there should be better arrangements for consultation and the timing of specific measures to deal with a difficult situation more swiftly than has been the case in the past.
  Mr. R. A. Butler: Without entering into controversy with the right hon. Gentleman, may I say that I said at the time he was in office that such measures could not be taken, but I now maintain that it is quite possible to alter the policy of the sterling area very quickly in an emergency, and that surely proves that the position will be quite satisfactory. We had an absolutely clear indication that the alternative suggestion would not be acceptable to the majority of members of the sterling area.
  Mr. Gaitskell: I do not know whether this was discussed at the Conference and whether the matter was argued out. If the right hon. Gentleman believes that swifter action can be taken, I should like to know what changes have been made. It is simply a difficulty of getting the Finance Ministers together to make the decisions.
  I have deliberately tried to confine my remarks to the Commonwealth Conference itself, and I have avoided the problems of the United Kingdom altogether, and left out of account what we may or may not say in future conferences to the United States. I should, however, like
  1714
  to say this on the subject of future conferences with the United States. I do not know whether we are to understand that the Government have made any approach to them, and whether they expect that the Chancellor and perhaps the Foreign Secretary will go over there in the near future, but I should like to ask whether it is intended that we should approach them on our own or with the European nations.
  This is a difficult issue, as everybody knows. I would tell the Foreign Secretary, speaking from my own experience, that we shall not get very far in this unless we satisfy the European countries first, and satisfying them will mean at least that some representatives from them should be present during the discussions with the United States. If we do not do that, I think that, quite frankly, the Americans will be looking over their shoulders and will be extremely reluctant to come to any agreement with us, or even to carry the discussions very far.
  I therefore hope that what I understand to be the Government's view of this matter will be reconsidered. I know that it is sometimes difficult to settle who shall attend, but we have had these difficulties in N.A.T.O. and have overcome them. Quite frankly, the situation that existed during the last war has passed away. At that time we could freely discuss everything alone with the United States and perhaps Canada. The other Governments were all exile Governments and did not matter. That is not the position today, and we must recognise it and take it into account.
  We welcomed this Conference. Indeed, we pressed for it many times before the Government decided to hold it. No doubt it has been of some value. A meeting of Prime Ministers and Finance Ministers of the sterling area does at least enable the Governments to understand each other better. No doubt some information was made available, and some beginning made—at any rate, I hope so—with the great task of dollar saving and dollar earning development. But though, because we all are believers in the Commonwealth, and because we on these benches recognise that the other countries are autonomous, that they are nations which cannot be driven and must be persuaded, I have tried in this debate to keep my criticisms as moderate,

  1715
  reasonable and cautious as possible, nevertheless, from what I have heard of the outcome of this Conference, including what the Chancellor told us today, I cannot help feeling anxiety, misgiving, disappointment and scepticism.
  My anxieties and misgivings arise from the plan for convertibility, which seems to be premature and dangerous; which, at best, may make us ridiculous and, at worst, might involve serious setbacks to our production, our employment, and our standard of living.
  Mr. R. A. Butler: The plan as defined by you?
  Mr. Gaitskell: No, as defined by newspapers like the "Economist" and the "Financial Times," and not contradicted by Her Majesty's Government.
  My disappointment and scepticism spring from the absence of any real positive drive to close the dollar gap. In this field, after all, it is not the ends which are interesting, because we all accept the ends, but the means. In my view, there is no sign that the Governments concerned have begun to consider how the new pattern of development can be achieved. It is our firm belief that the dollar problem will not be solved except by the active intervention of the Commonwealth Governments, in part acting on their own and in part acting together.
  It seems to us that, only through the deliberate control of investment and its assistance and guidance into the right channels can we hope to achieve, both here and in the Dominions, the changes which are called for—the big increase in agricultural and mineral production there, and the expanse of the metal industries here—so that together we may play our part in introducing a better balance into world trade.
  Unhappily, the whole trend of the present Government's policy seems to me to be turned in the contrary direction. Their very philosophy makes it impossible for them to forge and use the instruments of control which are called for. For the time being we are, of course, in calmer waters, and very glad to be there, and we must all hope that this will continue. But we shall be deluding ourselves if we think we can avoid future storms, and I cannot help feeling that a great
  1716
  opportunity has been lost of setting our course in the right direction, and of preparing ourselves to meet and overcome the storms that lie ahead.
  6.4 p.m.
  Mr. A. C. M. Spearman: I thought that the right hon. Member for Leeds, South (Mr. Gaitskell) was in one of his more mellow moods today. Having known him a long time, I know that these gentle moods can occur. It seemed to me that he was putting up the most vulnerable plan for convertibility and then using it as an Aunt Sally to attack, but he did not seem to be rejecting the whole idea of convertibility. I should like to ask him whether he does reject the whole idea of convertibility, because that is what I had feared from previous writings and speeches of his.
  Mr. Gaitskell: My position on this has never changed, as I explained in a recent letter to "The Economist." When we were in Government, and since, I have always taken the view that convertibility was something we achieve gradually after the dollar gap has been permanently closed and our gold reserves adequately built up. It is something into which we shall move almost automatically when those circumstances develop, but we should not use it as a weapon of forcing ourselves into equilibrium.
  Mr. Spearman: I am very glad to hear that, because certainly the impression I had was that at any rate some of the right hon. Gentleman's hon. Friends did reject convertibility, and I think that if that ever became official policy it would be quite disastrous; the sterling area would disintegrate. After all, customers are not encouraged to put money into a bank if they are warned beforehand that there is precious little chance of their getting it out.
  There seems to me to be two ways of approaching convertibility. One is to try to impose it regardless of world conditions and hope that it will of itself spontaneously create so much confidence in sterling that the system will work. I believe that would be most dangerous, and I must agree with the right hon. Gentleman there. It might have to be buttressed by all sorts of restrictions on trade, and our European friends should be reassured that it is not our purpose to

  1717
  achieve convertibility at the price of cutting down trade, but rather that it is essential that before convertibility we should withdraw restrictions on trade.
  The other approach is that we should wait until we have created such a demand for sterling that convertibility could follow without any difficulty. Then there would be no difficulty in keeping the sterling area together. I believe that the process of achieving the conditions that are ripe for convertibility are, perhaps, almost more important than convertibility itself. When I say wait, I do not mean that we should be passive. The Government should be taking the most vigorous steps, and it will not be an easy task.
  We are all, wherever we sit, thankful for the great improvement in our position over last year, and I think all fair-minded people, of whatever party, must appreciate how much this is due to the wisdom and vigour of the Chancellor. When the right hon. Member for Leeds, South expresses hesitations about the present position, perhaps I might remind him that under the last Government we had a deficit, in 1946 of £348 million, in 1947 of £558 million, in 1948 of £26 million, in 1949 there was a balance of £6 million, in 1950, when we ran down stocks so much, there was a balance of £258 million, and finally in 1951 there was a deficit of £465 million.
  So certainly the present Administration have got a great deal to congratulate themselves on in comparison with that. At the same time, I am bound to agree that our present surplus has been achieved by measures, some of which may not be permanent and some of which cannot be permanent. I am sure we cannot safely approach convertibility or attain security until our reserves are far higher than the present level. I believe they are still only equal to about 10 weeks' of our imports.
  While I agree with the right hon. Gentleman there, I am afraid there is little hope of his agreeing with me in the steps that ought to be taken to reach that end. We have had very little constructive suggestion of that sort from hon. Members opposite. We must spend less in this country to release resources for exports. We must not only make more goods available for exports, but we must see that they are the sort of goods, not
  1718
  that we think other countries ought to want, but what they actually do want. That will be a very painful process, because it means a transfer of activities from some of the old industries on which we depended in the past to some of the newer industries making the goods which are more required in world markets. That is going to mean a loss of profits to many and, more seriously, it will mean temporary unemployment while men and women move from one job to another.
  Wherever we sit in this House we all know the appalling calamity of mass unemployment and we are all agreed that it shall never come again, provided we can get the raw materials. It should never come from conditions of a glut of goods, which we know how to deal with. We can spend our way out of a slump of that sort, but we cannot do it unless we have the reserves with which to buy raw materials.
  We are facing a choice of evils today. Shall we undergo a transfer of activities, followed by some temporary unemployment and considerable unpopularity for the Government for a few months? Or shall the Government, as they always can if they so choose, inflate, and maintain the home demand for goods? If they do that, I believe all our hopes will go of building up our reserves and having protection against the sort of storm that the right hon. Member for Leeds, South said might overtake the sterling area.
  Mr. Ivor Owen Thomas: Is the hon. Gentleman seriously arguing along the lines of a planned economy? Does he not agree that that inevitably means a controlled economy with Government planning, which runs directly contrary to the present Government's policy of a free economy with everybody doing the best for himself?
  Mr. Spearman: Of course I agree that there must be planning. No Government composed of sensible people could believe anything else. My constant criticism of the last Government was that they did not plan to balance demand with supply and consequently we had inflation.
  The right hon. Member for Leeds, South, suggests that we should try to insulate ourselves from the fluctuations of the American economy by buying less

  1719
  from America. I think we now get about 9 per cent. of our imports from there, and about 35 per cent. from the sterling area.
  Mr. Gaitskell: I was talking about the sterling area as a whole and not only the United Kingdom.
  Mr. Spearman: That does not alter my point. I believe that the right hon. Gentleman is right and that it would be perfectly possible for us to become largely independent of dollar goods, but that there would be considerable unemployment here and an appalling degree of austerity. We should have to do without a lot of things and pay much more for others.
  Mr. Gaitskell: Of course, I never suggested that we should be completely independent of America. All I am saying is that it would be desirable to try to replace, to carry on further, if you will, the policy of replacing, some dollar goods with goods produced from the sterling area. I should have thought there would have been support for that view. For instance, why should we not supply a large proportion ourselves of the 400 million dollars' worth of imports from the United States which now go to the sterling area?
  Mr. Spearman: We are surely discriminating as strongly as possible against American goods already. To do without them altogether would mean great austerity and a good deal of unemployment. We might make ourselves independent. but we could not be, and do not wish to be, independent of the sterling area. The sterling area cannot become independent of the United States of America. If there is a drastic cutting in United States imports, and if there is a slump there, we must all be affected, whatever we do. The sterling area would no longer be able to buy from us many things that she is buying now. There is no way of protecting ourselves absolutely against fluctuations in the American economy.
  If the right hon. Gentleman really fears so much a drastic cutting of all imports from America, the more reason there is for us to have the closest possible consultation upon economic matters with them. The one thing that would be fatal would be if we were in the position in which we had no influence over what they did and they had no disposition to
  1720
  co-operate. I believe that these fears of the right hon. Gentleman and of most hon. Gentlemen opposite, which they so often express in this Chamber are tremendously exaggerated. It makes complete nonsense of their foreign policy, as the Chancellor of the Exchequer told us that President Eisenhower had given us the greatest encouragement about what the United States are going to do to reduce, and perhaps what is more important to simplify, their tariff procedure.
  If we look at their record, we see that in the last 20 years they have cut their tariffs by 50 per cent. Between January, 1946, and January, 1951, the United States Government had a favourable balance of trade of 40,000 million dollars. They gave and lent 37,000 million dollars of it, and invested another 4,000 million. That does not suggest a narrow-minded country that takes no account of world conditions. They might have another slump like the one of 1929, but the position in America today is entirely different to what it was then. There is no speculative position, no weak Bank position, there is a huge unemployment fund, and surely there is clear recognition in Washington that the Government could spend their way out of a slump, that they must have some responsibility for maintaining demand.
  People who suggest that production in the United States will get so far ahead of income, and so of demand, that there will be a swamping of the world with American goods they cannot absorb seem to forget entirely the existence of trade union leaders, who are not entirely passive. I cannot see my friend Mr. John Lewis being backward in pushing the wages of the coal miners up as hard as he possibly can, in proportion to production. The United States must import in order to export, whereas we have to export in order to earn the essentials of life.
  Hon. and right hon. Gentlemen opposite are terribly defeatist about our position sometimes. I have often heard them say in this House that the position has been deteriorating over the last 50 years. [An HON. MEMBER: "The present Chancellor of the Exchequer said that."] I do not remember the words of the Chancellor of the Exchequer, but I remember that at the time of the last Budget he went out of his way most generously and

  1721
  in the national interest, to avoid attacking hon. Gentlemen opposite. I never thought that his generosity in that respect was very fully rewarded.
  It may well be that before 1914 the Welfare State was not up to our modern standards, but there was a larger degree of inequality of wealth than we would tolerate today, but our trading position was most buoyant. In the five years before 1914 we were able to import into this country £200 million worth more goods than we exported. At the same time, on average we invested abroad nearly £200 million every year, which was equal to about £1,000 million today. There is not much wrong with a country that could do that. We should remember that this country still has a great vitality, and perhaps we should remind some of our American friends who sometimes forget it; but let us remind them not by words but by deeds.
  6.20 p.m.
  Mr. John Strachey: I cannot ask for the indulgence of the House in addressing it for the first time, even though I am addressing it from a new angle, but I think that all of us who take part in this debate can ask for the indulgence of the House because of the subject, which is one of the most difficult and many faceted of all the subjects we discuss. The subject we are debating, and on which surely the Conference concentrated its attention, and of which the Chancellor spoke earlier, is how the sterling area and the Commonwealth can live and pay its way, which means essentially today how it can achieve a dollar balance.
  If I may begin with a positively blinding flash of the obvious, there are only two ways in which it can be done. The one is to get more dollars, the other is to spend less dollars. I shall not speak about the more attractive way of getting more dollars, which is to earn them by trade, by their being lent to us, or by any other way. Of course we all wish to do that to the maximum possible extent, but I think we should all agree that when we have done our utmost in the sphere of earning the maximum number, dollars will still be fairly scarce and, for as long ahead as we can see, there will be the necessity for economy in their use.
  1722
  Therefore, it is to the issue of how we can economise in the number of dollars we spend and thereby prevent ourselves from running into a crisis again that I address my remarks. There are two ways in which we or any other member of the sterling area, or indeed the sterling area as a whole, can economise in the use of dollars. I want to contrast those two ways. I shall call them the financial way and the planning way, or, if you will, the socialist way. I shall overstate the contrast, for there is really a subtle interplay between the two and no Government or country could rely wholly on one or the other. However, it is important to see the contrast of the two ways.
  To put it at its crudest, the financial way works by proceeding to limit the money incomes of our citizens to such a point that they will not be able to buy too many dollar goods. There is no doubt that if that can be done sufficiently one can sweep away any discriminations, import controls, exchange controls and the like, secure in the knowledge that our citizens will not over-spend on dollar goods because they have been deprived of the means of doing so.
  What is the objection we feel to that way—the deflationary way to give it its obvious name? Our objection is a double one. It is an indiscriminating way of doing the job in two different senses. It is indiscriminating in that by this method one cannot concentrate our purchases of dollar goods on the essentials such as Canadian wheat to feed the people or American cotton to keep them in employment.
  Mr. William Shepherd: Would the right hon. Gentleman say which political party is taking the view that it is possible to squeeze out the dollar gap by deflation?
  Mr. Strachey: I was careful to say that no Government could rely exclusively on that way. The question is on which method emphasis is put. That is the important question. We object to the predominant use of that way because it is indiscriminating in the way I have just defined. One cannot concentrate purchases on the essentials. There will always be a margin of income in the hands of the better-off citizens, the high income brackets, who will make dollar

  1723
  purchases not of wheat and cotton but of Cadillacs and Packards. That may or may not be an important factor quantitatively, but it is an important factor psychologically, and that should be borne in mind.
  There is a far more important indiscrimination in the financial way than that. If one takes the financial way, relying exclusively or even predominantly upon it, one has to cut the money incomes of the population down to the point where they cannot buy not only too many dollar goods but, pari passu and equally, where they cannot buy goods and services from the sterling area which possibly they could well afford; where they cannot buy adequate quantities of the goods and services which they themselves produce in the factories and on the farms in this country. That is the indiscrimination of the financial way to which we object most of all, because the deflationary method, if relied on predominantly, must have, and always has had whenever it has been tried, the effect of throwing out the baby of full employment with the bath of economic solvency.
  Those are the essential objections, as it seems to every one of us on this side of the House, to predominant reliance on the financial way. What is the planning way of doing the same thing? Again, to put it at its simplest and crudest, under the planning way, in order to make dollar purchases, or acquire dollars for any other purpose, our citizens must first get the permission of the Treasury, or the Bank of England acting for the Government—and permits are only issued to the extent to which we can afford to pay for those dollar goods.
  That is the way in which on the whole we have relied predominantly during the post-war years. Whatever its disadvantages may be, it has the great advantage that one can discriminate, can concentrate purchases on essentials and, what is far more important, can allow trade with the non-dollar world to go on undiminished. In other words, the ability to pay for dollar goods ceases to be the limiting factor of trade with the rest of the world and of the level of employment and industry. Therefore, I submit that Governments which have been in charge of this country since the war have, on
  1724
  the whole, relied on the planning method of controls to deal with the matter.
  That is, after all, the method which is still in existence today. It involves, of course, a fairly complete control of what I call the foreign transactions of our citizens. There must be complete control, ideally, of the purchases from abroad of our citizens, of the import of goods, and of the export of money of our citizens—of their foreign transactions as a whole. That is still the method which is in existence in this country today.
  The question which we want, surely, to ask the Chancellor, and which was asked him by my right hon. Friend, comes down to this: Did or did not the Commonwealth Conference decide to depart from that method of using positive controls over the foreign transactions of British citizens and to embark on attempting to control the level of our dollar expenditure predominantly by the financial method? I was quite unable to detect from the Chancellor's speech whether he intended to change the emphasis from the one method to the other. I very much hope and trust that he does not mean to do so.
  We have been rather critical, and with some cause, that the Commonwealth Conference did nothing, but in this respect, at any rate, that would be very much the best thing that it could do. If it did anything in this respect, it would quite certainly be the wrong thing, and I should have thought that the Chancellor would be very wise—he has not been unfamiliar with this attitude, at any rate—to bear in mind the old and perhaps hackneyed words of W. S. Gilbert in describing a Whig Administration of the last century as a Government which "Did nothing in particular, and did it very well." [HON. MEMBERS: "That was the House of Lords."] Whatever it was, I suggest it as the model for the Chancellor in this respect. Be that as it may, I emphasise, because it seems to me the essence of the matter, that this factor of control over the foreign transactions of our citizens—the import of goods and the export of money and the changing of money into dollars—is the very basis of planning in this country.
  We were glad to hear that the hon. Member for Scarborough and Whitby (Mr. Spearman) is a convert to planning,

  1725
  upon which the whole structure of social democracy in this country rests. That is not simply my own opinion. I should like to quote certain words, not from a member of my party, but from a man who had as great a part as any other in the setting up during the last war of the planned economy. I refer to Sir Oliver Franks. I quote from his well-known lectures "Central planning and control in war and peace," which he gave at the end of the war and in which he discussed the question of whether we would go on with our planned system. This is how he put it:
  "If the State gave general direction to the national economy through any general plans, these would have to include an import programme and an export programme… If central planning and control were to become permanent features of the British economy, these in the first place would be the means by which they were effected."
  He adds:
  "Positive central planning … implies a deliberate and successful attempt to assert the control of reason over the march of events. That is the function of the general plan with its import and export programmes as cutting edges."
  For a country as dependent as ours on its foreign transactions, Sir Oliver Franks goes to the root of the matter. He does so, at any rate, if he has in mind not only what he states in that passage—control of the import and export of goods —but also control of the import and export of money.
  I am not unaware of the orthodox answer to all this. I think that the essence of it was put very well, as always, by Professor Robbins, for example, in the current issue of Lloyd's Bank Review, in which the gist of his article was that there must be some level of money incomes in this country, if we could only get down to it, which would bring our balance of trade with the United States into balance. I think that that is true; as a matter of pure economic theory I do not dispute it. I say nothing of the contortions which the economy would have to undergo to bring money incomes down to that level—in the words of that graphic American phrase, "putting the economy through the wringer."
  That is not the issue with which I want to deal, because I think it is possible, and will ultimately, by the use of controls, be quite possible, to bring about a balance of trade between this country and
  1726
  the dollar world and between the sterling area and the dollar world. I am not a defeatist, despite what the hon. Member for Scarborough and Whitby says on that issue.
  The orthodox Professor Robbins, I think, would say, "Once you have done that, all this elaborate structure of controls and discriminations can be swept away." That is the real issue which I want to put to the House. I am convinced that that is not so. It is not the case in the present world and in present-day conditions that even when we have achieved a balance of trade between the sterling area and the dollar area, we could sweep away our system of controls and discriminations.
  The reason for that is suggested very well in two phrases in those notable articles in "The Economist" entitled "Living With The Dollar," which, I am sure, we have all read, however much we may have disagreed with them. Those two articles have a phrase in them which is extremely revelatory. They talk about American foreign lending. They notice that
  "after 1934 the United States began to import one billion dollars a year of foreign funk money."
  That is "The Economist's" phrase, not mine. Speaking of the present situation. they go on to add:
  "America's distance from Soviet Russia lends such powerful support to the attraction of the dollar for capital."
  That is the real issue here. We are in a world in which the balance of trade, which should more or less automatically bring a balance of payments in its train, would in practice do nothing of the sort. The balance of payments would continue to be completely distorted by the whole world situation, because it is much wider, of course, than the considerations which "The Economist" mentions. It is not merely the distance of America from the Soviet Union. Let us put it quite frankly and face it: it is the political distance of the United States from social democratic Britain also.
  All the things which we have done—when I say "we" I include both sides of the House—in the last decade and a half in building up what I can only call British social democracy, the trade union strength founded on full employment, the high re-distributory taxation and high

  1727
  taxation in particular on profits, must of course, quite automatically, have a repellent effect upon capital. Other things being equal, it must have an effect of tending to move capital away from where a type of planned social democratic, relatively equalitarian society is being built up.
  Therefore I am putting it to the House that it is on those considerations that the absolute imcompatibility of the decontrol of foreign transactions arises. Who can really doubt that—to take the extreme case—if we swept away all controls on the import of dollar goods to this country and into the sterling area as a whole, and all control of the export of money, whether on current account or on capital account, and restored completely the pre-war system, an ungovernable flood of money would go to the United States from the sterling area and the rest of the world? The resulting situation could not be controlled and our reserves would be exhausted in a few weeks.
  That is taking the extreme case and we shall be told that no one dreams of doing anything of the sort, and, of course, they do not. The Chancellor was very careful to say that. But what we want to know, and we hope the Foreign Secretary will tell us, is this: Is he or is he not, are the Government, or are the Government not, flirting with these small and relatively cautious steps in that direction which were defined by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell)? We shall be told, "What is in question? It is only some innocent method of making the currencies of third countries convertible" and the like.
  I would ask two questions. What is the meaning of a move of that sort; what can its result be except to make a situation already difficult a little more difficult and to make dollars which are already scarce enough a little scarcer? What can be its meaning except as a step—that undoubtedly is how it would be interpreted all over the world—in that direction, which must lead to disaster for a community organised for good or ill—and I think good—as we have been organised in the past decade and a half?
  In this issue of what the Commonwealth Conference really did and did not do we face something of the utmost im-
  1728
  portance; something which if it is moving in what seems to us the wrong directions, undermines the very basis of the system we have built up in this country and which can only lead this country and the sterling area as a whole into disaster.
  I will say a final word to my right hon. and hon. Friends and a word to hon. and right hon. Members opposite. I say, to those on this side of the House, that if when we return to office we find that these controls over the foreign transactions of British citizens have in any way been weakened or undermined, it will be our imperative duty and necessity to re-establish them in every possible way. We shall not be able to advance an inch towards Socialism, we shall not be able to advance an inch even to a more just distribution of income in this country, nay, we shall not be able even to maintain the present position unless we re-establish and strengthen those controls in every possible way.
  I say to hon. and right hon. Members opposite—especially to the Chancellor—that while of course I agree that these considerations are especially important for us on this side of the House because we do mean to go further along this road, they are important to him too. After all, the Chancellor has told us—and I am glad of it—that he, too, is a defender of social democracy. We were all very much struck, I am sure, by the declarations of the Chancellor in the debate on the Address in reply to the Gracious Speech last autumn. I wish to quote his words, because they were good words. He said:,
  "…we shall not take any steps, I tell the House, which are not to the benefit of our own social democracy…"-[OFFICIAL REPORT, 11th November, 1952; Vol. 507, c. 783.]
  It was quite a moment when we heard a Tory Chancellor of the Exchequer use those words.
  What I say to him is that if he goes down this road of convertibility, however cautious and small he thinks his first steps are, he will take steps which will utterly undermine that social democracy in this country which he says he wishes to defend. I say to hon. and right hon. Members behind him who might wish to urge him along that path that, if they succeeded in doing so, the effect would not be to restore the inter-war world and the inter-war system for which they nostalgically long, but the effect would be disaster to this country. The beneficiaries

  1729
  of it would only be the extreme movements, whether of the Right or the Left, whose excesses we unite to deplore.
  6.45 p.m.
  Mr. Robert Boothby: I shall deal with the interesting point raised by the right hon. Member for Dundee, West (Mr. Strachey) in the course of my speech, but I should like at the outset to take up two points raised by the right hon. Member for Leeds, South (Mr. Gaitskell). I think the first of great importance.
  The right hon. Member pressed that we should not take unilateral action by consulting with the United States of America without first consulting European countries. I do believe that that is right and most important. European countries were much upset by our unilateral action in 1949 when we devalued the £ without previous consultation with them; and, I think, with
  justification. They were also upset—and I am glad that my right hon. Friend the Minister of State for Colonial Affairs is here, because he has a sort of nostalgic affection for Strasbourg—they were not altogether pleased by the fact that when the European countries submitted a policy to the Commonwealth Conference, a policy which they thought quite good and which I must say I thought quite good, they were not even allowed to explain it; and, in the final result, not the faintest attention was paid to the plan they submitted and apparently nothing was done about it. They might as well have not submitted it at all.
  I know that the European countries are grieved, and I think that at least a courteous mention might have been made in the communiqué to the effect that they had submitted a plan, and that it had been considered. If we now go to the United States of America and start building up multilateralism without them, they will be very upset. As we are by way of being after multilateralism, they should be surely included from the beginning instead of only when the general lines of policy have been settled. I therefore think the right hon. Member for Leeds, South was justified in his request, and I re-inforce it.
  Another part of the speech of the right hon. Member caused me considerable
  1730
  apprehension. That was the extra-ordinary scheme he outlined for convertibility. I do not know what are his sources of information. I hope they are quite inaccurate, because I must say that it terrified me.
  Mr. Gaitskell: I imagine that the hon. Member reads "The Economist."
  Mr. Boothby: Yes, but I do not necessarily believe that.
  Mr. Gaitskell: The whole of the first article on the Commonwealth Conference in a series of articles was devoted entirely to this particular plan and on the clear assumption that it was Government policy.
  Mr. Boothby: "The Economist" may have made out that it was Government policy, but I thought at the time it was "Economist" policy; and, believe me, the two are not the same at all. I am sure the right hon. Member will agree with me when I say to Her Majesty's Government that we really must not have another convertibility scheme sprung upon us. We have had that once already, and once is quite enough.
  I am rather sorry that the Foreign Secretary is not here now because he would remember the long agony of Bretton Woods in 1945. It was the only time that our personal relations were rather bleak. My right hon. Friend was still a Member of the National Government of that time. I remember that he was so cross with me for what I was doing about Bretton Woods that he "cut" me in an elevator in San Francisco. We made it up the next day, but that incident shows the height of feeling that existed at that time. Not so very long afterwards the Labour Government, of whom the Chancellor was the right hon. Member for Bishop Auckland (Mr. Dalton), flung the American loan, based on the Bretton Woods Agreement, at our heads and said "Take it or leave it in 48 hours." We took it, and I still regret it.
  I hope that the Secretary of State for Foreign Affairs will, in his reply to the debate, give us a categorical assurance that whatever plans may be considered, whatever briefs may be being written in the back rooms of the Treasury, this House of Commons will not once again

  1731
  be confronted with a convertibility scheme presented like a bomb, and be told that we have to accept it or reject it. That would not be fair to anybody. I do not believe myself that there is the slightest possibility of that happening but there is no harm in expressing apprehension or indeed in issuing a warning.
  I agree with all the previous speakers in the debate that the Conference must be considered against the background of the dollar gap, which is the basic economic problem of our time. Nobody foresaw it. The assumption underlying the Bretton Woods Agreement was that there was an underlying economic equilibrium in the free world, which was only temporarily distorted by the war and which could easily and quickly be put right. Even Keynes said that the dollar shortage would be gone within a year or two after Bretton Woods. There is in fact no basic or underlying economic equilibrium in the free world. There was none then, there is none today, and I think it will be a long time before we get it. That, and practically every other assumption which governed the proceedings at that ill-fated conference, has been invalidated by events and proved wrong in practice.
  There are one or two facts I wish to give the House about the problem of the dollar gap which are interesting and significant and not generally recognised. The first is that between the outbreak of the Second World War and 1951 production in the United States very nearly doubled, exports more than doubled—in some years they went up by 150 per cent.—but imports—and this is the significant point—never rose by more than 26 per cent. in spite of this gigantic increase in production and exports. That should give us food for thought. Since the war we have had more than £2,000 million worth of dollar aid in one form or another. Most of this—I think it is a fact with which the House is not generally acquainted, because it is not often said—has gone to the Dominions.
  Between 1947 and 1952 the United Kingdom deficit was 600 million dollars, and this was covered by borrowing from the Colonial Empire. During that period the external deficit of the Dominions was 2,500 million dollars. This was also covered by colonial borrowing and by United States aid, of which they took
  1732
  five-sixths. These figures are extremely important. I have carefully checked them. It is against the background of these figures that the Conference was held.
  I turn to the Conference itself. I have been through the conclusions pretty carefully, and there are five important ones. I will enumerate them quickly. The first says that no discriminatory bloc is to be formed. It sounds as if a discriminatory bloc was a very shocking thing. But in truth we have not practised discrimination just, as the Americans would say, "for the hell of it," but because we did not have the dollars to buy the things we wanted to buy. There is no other reason. In passing, I should just like to ask what is the United States of America if it is not a discriminatory bloc, but that is perhaps another matter. I do not think that in itself the term "discriminatory bloc" should be used as something repellant, terrible and horrible, something to be got out of the light. It is not in itself a shocking thing; it is a fact imposed by events and realities.
  The second point is that there was no agreement to seek an amendment of the restrictive clauses of G.A.T.T. Therefore, there can be no extension of Imperial Preference. Indeed the Chancellor told us today we are no longer to be allowed even to use the word "Imperial," it must be just "preference" in future. I think that is a pity, because preferential tariffs are the easiest and most flexible form of discrimination. We shall be bound to discriminate to some extent against the dollar area for many years to come. This decision was not the fault of the Chancellor of the Exchequer or of Her Majesty's Government; he pressed the idea as strongly as he possibly could, but the Dominions rejected it.
  The alternative to Imperial Preference is the kind of control advocated by the right hon. Member for Dundee, West. I regret this lack of agreement about the restrictive clauses of G.A.T.T. because it removes from our hand a weapon for flexible discrimination which would, in my opinion, have been infinitely preferable to the rigid controls so dear to the heart of the right hon. Gentleman. Further, there is to be no Commonwealth bank or Investment Board. I regret that.

  1733
  I come to the point dealt with exhaustively by the right hon. Member for Leeds, South. There is to be no permanent machinery to co-ordinate the policies of the sterling area countries, or to limit their joint dollar expenditure to the level of their joint dollar earnings. Here again I believe that the Chancellor did press for some more permanent kind of machinery, even if it was only a secretariat. Again I think it was the Dominions who objected to it.
  I was delighted to hear from the Chancellor that the methods of exchanging information are working so well; but I cannot help thinking that it is rather odd that O.E.E.C. and the European Payments Union, in both of which we are concerned, have a wonderful secretariat permanently sitting in Paris, full of statistical information which can be and is called upon at all times, and that the sterling area, which is vital to our existence, infinitely more important to us —let us face it—and responsible for the currency in which three-quarters of the trade of the world is now conducted, has no central machinery of any kind. It is odd; I will not put it higher than that.
  Finally, I come to the proposal to create
  "by progressive stages and within reasonable time…an effective multilateral trade and payments system covering the widest possible area."
  That is pretty good, but the area itself is not defined, it is not even indicated. Does it include the dollar area or not? That seems to me to be of the highest importance. We are not told in the communiqué. It would not be altogether unfair to sum up the results of this Conference in a single sentence—" Let us all try to behave better, and then go to Washington." That is really not unfair, although it is perhaps a little terse. Roughly speaking, however, that is what they did decide to do. I think they will try to behave better; and I think they will go to Washington.
  It means, of course, that the attempt to build an economic unit in the free world capable of standing on its own feet and restoring equilibrium and balance by its own efforts has for the time being been abandoned, not by the wish of Her Majesty's Government, but by the wish of the nations of the Commonwealth gathered in Conference in London. I
  1734
  regret that; I must do so. It is the negation of the policy which I have been advocating in the House for the last 25 years, so I am bound to feel slightly disappointed. However, if one has a policy which is rejected one has immediately to look for an alternative; and take as rosy and optimistic a view as one can. I propose to consider an alternative, saying only that I think that a system which denies all defence against the instabilities of an economy as dynamic as that of the United States, and so far out of proportion to our own, is a dangerous system.
  Various Members have pointed out the effect on this country of the slightest change in the United States economy, and indeed upon Europe as a whole. We cannot altogether forget that in 1949, when a temporary fall in output of only 5 per cent.—caused in the main by not much more than a levelling of the books—imposed a devaluation of 30 per cent. upon this country, and upon Europe. Just conceive what a recession in the United States could do to us, if it really got under way. At the moment we have practically no defences.
  The other thing which is rather alarming is the steadily increasing economic dependence of the remainder of the free world upon the United States. I think it aggravates them as much as it does us. I am sorry about it and I am sorry that a more constructive drive was not agreed upon to see if we could produce more, and make more of the sterling area as a whole, to help us to re-establish an economic balance in the world, so that we could look the dollar in the face.
  I do not wish it to be thought that I am making any party point. But I want to repeat that I do not think the Chancellor of the Exchequer or Her Majesty's Government were in any way to blame. I think they put forward the right policies and advocated them very strongly, including some permanent machinery for the sterling area and everything else. It was the Dominions who rejected them; and I say that the Dominions are still very interested in dollars. I must also say that when one sees them—and I saw one or two the other day—they are a most engaging sight.
  I said just now that we must make the best of it. I must however beg the Government, if they are going into this

  1735
  conference—and clearly they are—not to repeat the mistakes of Bretton Woods. A radical reconsideration of the optmistic assumptions upon which all our post-war economic plans were based at Bretton Woods, and later, has long been overdue. From that point of view, nothing but good can come from the conference in the United States, provided we have really learned the lessons of the last seven years, and seize the opportunity to drive them home, and do not get led up the garden path again.
  I have made many mistakes in this House, but I have not always been wrong. Without boasting at all, I must remind hon. Members that I did oppose the first American loan on the ground that we could not carry out the terms, and we did not carry them out. I opposed the Bretton Woods Agreement on the ground that it would not work, and it has not worked. Finally, I opposed very strongly convertibility in 1947 on the ground that it would not last, and it did not last—it lasted, in fact, for only five weeks.
  So if I may, I would like to read six lessons to the right hon. Gentleman before he goes into this conference, lessons which I believe have to be learned as a result of the events of the last seven years. If nobody pays any attention to them, at least they will be on the record; and then I can quote them again to the House in the year 1963.
  The first lesson is that the illiquidity of the free world outside the dollar area is the primary cause of the recurrent economic crises that afflict us. It is the lack of gold and dollars everywhere except in the United States which is at the root of all our troubles.
  The second lesson is: an increase in world trade can only take place concurrently with an increase in world currency reserves. The theoretical price paid at Bretton Woods for fixed exchange rates was adequate gold and dollar reserves. They were not, in fact, provided; and that has been the real cause of the trouble.
  The third lesson—and here we come to what was said by the right hon. Member for Leeds, South, and I think that what he said about convertibility was quite sensible—convertibility is not an end in itself. Nor is it a cure for anything. Convertibility is the outcome of conditions which have produced, first, a
  1736
  balance of trade, and, second, adequate reserves. Those conditions do not at present exist. When they do we shall have convertibility. There really cannot be any dispute about this; and therefore I do not think there is any real danger of a convertibility bomb being sprung upon us, because we cannot contemplate it until our reserves are three or four times the size they are now.
  The fourth lesson is—and this is the point raised specifically by the right hon. Member for Dundee, West—that the dollar gap, now running at the rate of five billion a year, and which could easily be increased if there was a recession in the United States, could be closed by deflation. But that would be quite intolerable, and therefore it is not a method which either side will use. It would involve at least a million unemployed and great misery and no real good would be done in the long run, because it is not the right answer. Equally, I think, we have to bear in mind that it cannot be closed—not a gap of this size—by an increase in exports to the United States alone. I have said this so often that I am not going to repeat it. Let us go on concentrating on tweeds and whisky, but do not let us think we are going to export manufactured goods in vast quantities to the United States, because there is one simple objection to that—they do not want them.
  I come to the fifth lesson, and I have nearly finished. I apologise for the time I have taken, but they are good lessons. Free multilateral trade, unco-ordinated monetary policies, non-discrimination and fixed exchange rates cannot be made to mix. If and when we do get convertibility I am absolutely convinced that we must have swinging exchange rates, within certain limits, to allow the necessary degree of flexibility. The fact is that the fixed exchange rates established at Bretton Woods, and non-discrimination can never be made to work.
  My final lesson is this. Obviously an international payments system is in the wind, and not what was said by the right hon. Gentleman for Leeds, South. There must be some scheme which envisages the possibility of a new international payments system to supplant the one created at Bretton Woods which has completely broken down. If any international payments system is going to work it must provide adequate reserves—

  1737
  which Bretton Woods did not do—and it must also put equal obligations upon creditor as well as debtor nations. Under any such scheme central banks must be prepared not only to co-ordinate credit policies, but also to hold a very large part of their currency reserves in the form of deposits in the international clearing union. There is no hope of any international clearing system working unless these points are borne in mind. That is all I want to say, and that is the end of the sixth lesson.
  I conclude, therefore, on a note of hope—I hope. I have been a little despondent. I could hardly help being so today, because, through no fault of his own, the Chancellor of the Exchequer did jettison a lot of my most cherished hopes and dreams in a comparatively short space of time. But there is a note of hope to be struck, and it is this. Whatever happens at the forthcoming conference, whether it succeeds or fails, I am sure the most vital things to be done by this country are, first, that there must be an increase in production at home, and second, a much more intensive development of the Colonial Empire overseas.
  I think it is a pity that more of us do not go out to that Colonial Empire—but we cannot find enough people willing to "pair." It is a very exciting experience. I had not been for some time—but I have just visited the West Indies. To go to the Colonial Empire is an exciting experience. The possibilities are absolutely limitless, and here at least is something within our own hands, subject to our own control. I do not wish to offend the right hon. Member for Dundee, West, but I must say this. Do not let us be deflected to any extent by the groundnut scheme from realising the absolutely limitless possibilities of colonial development. We all forget that Britain and the Colonial Empire together have never been in a serious deficit to the dollar area since the war. Together we have been able to balance our trade. As a matter of fact, West Africa and Malaya have largely financed the sterling area. They will not go on doing that for ever.
  Therefore, if the Dominions will not play to any great extent in the economic field—let us stick to them like glue in the political field—let us get cracking with the Colonial Empire. I believe that we can
  1738
  do tremendous things. There is no permanent defence for this Island against the winds of competition which are rising from Germany, the United States and Japan. Our economic survival depends, ultimately, upon our productivity, our efficiency and our supplies of raw materials from our own Empire. Fortunately the Empire depends very largely upon our markets so that this is a reciprocal business.
  Production is stationary at the moment in this country, and so to a very large extent is labour. If the preservation of the existing structure of industry, and of jobs people are already doing, becomes the primary objective of our domestic economic policy, then I believe that sooner or later we shall be sunk.
  To increase exports by repressing industrial development at home is a policy of desperation. But industrial development no less than economic development demands massive capital investment, and this in turn demands savings. This is a wide theme and I certainly will not embark on it now beyond saying that it alarms me to think that there is no man in this country today who can really save out of earnings. I am sure that in the long run that is bad. Something must be done about it.
  So my conclusion is quite unoriginal. It is simply that if we want to achieve economic independence and retain our standard of living we have to develop the Empire—and that means having an export surplus of not less than £400 million a year—on a far more extensive scale than we have been doing. We have also to produce more coal, more steel, more capital goods and, above all, more food.
  7.12 p.m.
  Mr. Richard Adams: I was interested to learn from the hon. Member for Aberdeenshire, East (Mr. Boothby) that the Foreign Secretary had managed the difficult task of "cutting" a man of his substance within the confines of an American elevator. After the Foreign Secretary and the Chancellor have read the hon. Member's speech tomorrow there is a grave danger that they will be "cutting" him in the corridors of this House.
  If it is any consolation to the hon. Gentleman, many of us on this side of the House agreed with most of what he

  1739
  had to say. I found especially acceptable his suggestion that Europe should be consulted before the conference in Washington. Also, I agreed with him in his condemnation of this convertibility scare. We enjoyed his harrying of the Government very much indeed and we hope that he may long continue his activities.
  As my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) said, we welcomed this Commonwealth Conference. In fact, we had pressed for it. About a year ago I had the privilege of initiating a debate on this subject on a Private Members' day. We were not surprised when we found that the communiqué issued at the end of the Conference was couched in vague and general terms. As the Chancellor said today, with, I thought, a rather diffident smile, it was a joint effort and there had to be a marrying of divergent views to maintain unanimity. I thought that this was especially true in the phrasing used about convertibility and G.A.T.T.
  Although the communiqué had necessarily to be vague, general and wide in its terms, that was no reason why the Chancellor today should have continued along precisely the same lines. We had hoped that he would be much more specific in what he had to say about Governmental plans in the next few years. We can only hope that the Foreign Secretary will take heed of what has been said by my right hon. Friend and that when he winds up the debate he will be more forthcoming.
  The hon. Member for Aberdeenshire, East said that the most pressing problem was that of the dollar gap. I would not disagree with that, but I would say that there are three vital problems which the country must help to solve in the next few years if we as a nation are to survive, and indeed if the world itself is to be led into any kind of prosperity at all. The first two are essentially economic and relevant to this debate, and the third is more political in its implications. The first is the problem of the relationship between the sterling and the dollar areas. There have been very few indications that we are anywhere near solving that problem.
  Side by side with that is the second problem of the relationship between the developed and the under-developed areas.
  1740
  Unless that relationship can be settled satisfactorily we are not likely to get a peaceful world. Although the Chancellor said today that in discussing that problem the Conference had concentrated upon the economic aspect rather than the social aspect, I think that it is the social problem in the under-developed areas which must receive our consideration if we are to win through to a lasting period of peace and prosperity.
  Thirdly, there is the equally important political problem of the strategic relationship between Asia and Europe. Since that is political and not relevant to the other two points, I would only say, in passing, that time may show that the recent visit of my right hon. Friend the present Leader of the Opposition to that part of the world was perhaps more significant than the activities of the Prime Minister during the Christmas Recess.
  In dealing with these problems far more imagination and courage are required than were displayed this afternoon by the Chancellor. I should like to consider what can be done in tackling what is perhaps the joint problem of the relationship between the sterling area and the dollar area and the relationship between the developed and the underdeveloped areas of the world. First, I should like to consider the Commonwealth as a whole. A great deal has been said about convertibility and I should like to stress what I feel is the unanimous attitude on this side of the House towards convertibility. In view of what has been said by others we cannot stress it too much.
  I agreed with much that the hon. Member for Aberdeenshire, East said on this subject, namely, that convertibility may come in due course when the situation has been created in which it becomes possible. It is not an end to strive for and it is certainly not a means towards an end. We can have a regulated convertibility only if we have established an equilibrium in international trade and built up sufficient balances to weather any sudden storm that may blow up. I do not think that we shall ever again see the convertibility that existed in the 'thirties.
  Nobody in his senses could suggest that the time is right now for consideration of any kind of convertibility. I hope that the Chancellor will push it on one

  1741
  side. I hope that he will forget about it and concentrate his efforts, with those of his colleagues in the Cabinet, upon other much more necessary objectives such as the development of our export trade, the improvement of our balance of trade position and the building up of our reserves. I was pleased to see that the communiqué made reference to the need for the members of the Commonwealth to give attention to co-ordinated industrial development.
  It is most important if the sterling area as a whole is to make itself more independent of dollar sources and to build up the mutual trading mentioned in the document, that more consideration should be given to the development of mineral and agricultural resources in parts of the Commonwealth. Less attention should be paid to the building up of the secondary industries in those countries.
  At the same time, this country should concentrate in particular upon engineering products and other capital projects, which will be required to maintain and improve the primary industries in other parts of the Commonwealth. In other words, we must work out common plans in which we can all take part. Food production in Asia is so vitally necessary that it alone should be stepped up, almost magically as it were, if we are to maintain the position of the people in that part of the world, let alone improve their lot.
  I should now like to consider what we in this country must do. It has been said that we are interested both as a banker for the sterling area and also as a consumer of food and raw materials, but we have another part to play, and that is in the investment of resources in the underdeveloped parts of the Commonwealth and Empire. This has recently been running at between £150 million and £200 million, and the Chancellor said, in his report to O.E.E.C., that the aim of the Government was to have an export surplus of between £300 million and £350 million in the year 1953–54.
  The Chancellor himself admitted today that he was perhaps being rather ambitious, because such an export surplus means that we would need a 20 per cent. increase in exports over 1951, and that certainly will want a bit of doing. Such a programme means withdrawing millions
  1742
  of pounds' worth of goods from the home market, with the increasing possibility of inflation. While this exportable surplus is needed for investment within the Commonwealth and Empire, such an investment, to my mind, can only come, as I think most hon. Members who have spoken have agreed, from savings, and what we should have liked to have heard from the Chancellor today was how these savings are to be achieved.
  We of the Labour Party have always insisted that production should be increased so that these savings could come out of increased productivity, and could be put on one side without destroying the standard of living of our own people in this country. The other two possibilities are: first, increased taxation, and most people would probably agree that the limits have already been reached in this direction; and, secondly, a saving such as that which the Chancellor in his last Budget showed anxiety to use—decreased public spending.
  I should like to warn the Chancellor that the result of such a policy, whereby the food subsidies are removed, health charges are imposed, and so on—a policy of decreased public spending—means that this burden of investment in the Commonwealth and Empire, which we admit must be undertaken, is to be borne, not by the wealthier sections of the community, but by the poorer sections, who suffer as a result of that internal policy. It may not have been very apposite today for the Chancellor to go into these details, but, certainly, if he is to follow up the policy he outlined, it will have to be reflected in his internal policy, and we shall look with interest to the speeches he makes during and after the Budget in order to see what his plans are.
  Again, though we may deliberate at length on what our policy ought to be to close the dollar gap, and on what we ought to do to help to improve the backward parts of the Colonies, and so on, all that is so much empty talk unless we pay attention to the dominant position of the United States of America. We are, as it were, in the grip of a new 20th century colossus whose decisions can affect life in this country without our being able in any way to divert or alter the results of that intervention. An alteration of 5 per cent. in the imports into America can

  1743
  make all the difference to the dollar gap being closed or open. It was the rise in prices following the re-armament programme that helped to close the dollar gap, and it was the fall after the spring of 1951 which led to the sterling crisis of that year.
  I should like to quote one or two figures which are significant in this connection, and I will take two Commonwealth commodities—Australian wool and Malayan rubber. In the case of Australian wool, the value of imports into the United States in 1949 was 80 million dollars, in 1950, 116 million dollars, and in 1951 306 million dollars. In the case of Malayan rubber, the value was 126 million dollars in 1949, 229 million dollars in 1950 and 436 million dollars in 1951. It is figures like these which have helped to ease the dollar situation today, but it would be just as easy for a reversal of American policy next month to throw us back once again into a sterling panic.
  I will mention my next point in only one sentence, and it is the importance of a revision of the price of gold. The Americans could make a great contribution to this problem by such action as I think the Foreign Secretary mentioned during the course of the Commonwealth Conference.
  It is quite hopeless for this country or the Commonwealth, acting in unity, to do anything to deal with this problem of the sterling-dollar gap without reference to the 5,000 million dollar export surplus of the United States. No plans and no arrangements have yet been made to deal with that disequilibrium which occurs as a result of that fact alone. Until a plan is made to spread these surplus dollars over the rest of the world, until America herself realises that that is the price she must pay for maintaining her own internal high standard of living and full employment, that disequilibrium is bound to continue and there is little or nothing that we in this country or the Commonwealth can do to deal with it.
  So I say, in conclusion, that a plan is needed to deal with the dollar gap, which is created by causes easily recognised, but concerning which there has so far been no agreement on the action that should be taken. It would
  1744
  be a mistake, when this plan is being formulated, for this country to go to Washington on its own. I think it was a great mistake for the Prime Minister to drop off at Washington on his way to Jamaica during the Christmas Recess. Whatever may have been the personal benefit from an intimate conversation with the President-elect, I am quite sure that the effect upon the rest of the world was not good. They had the impression that here was Great Britain trying to jump the queue again, and trying to make arrangements with her powerful American ally which would secure private benefit.
  I would say that, before we go to Washington to discuss what is to be done to deal with this problem of the dollar deficit and the problem of getting public works going and investments made in the under-developed areas of the world, there should be consultation between the British Commonwealth and Western Europe.
  I should prefer to see a meeting in Washington between the American Administration and our own Chancellor of the Exchequer and Foreign Secretary, together with, say, a Minister from Canada or Australia, and a Minister from, perhaps, France, to put the Western European point of view. It is only when we get a complementary plan which takes into account the trade problems which exist for Western Europe, for the Commonwealth, for this country in its own special position, for America and for the whole of the free world—it is only when we have the imagination to grasp the need for correlating all these problems that we may eventually solve them.
  So far our approach has been too insular and piecemeal. I hope that as a result of this discussion today—although, naturally enough, such discussions are always on a very friendly basis because of the significance of unity in the Commonwealth—we shall have gone some way towards persuading Her Majesty's Government of the vital need of using more imagination and drive in tackling these twin problems of the dollar gap and the under-developed areas. I hope also that very soon the Chancellor will be more definite and specific in his plans for tackling problems the solution of which alone can ensure peace with prosperity in the next few years.
  7.31 p.m.
  Sir Albert Braithwaite: This afternoon we have had a very lucid explanation from my right hon. Friend the Chancellor of the Exchequer of the outcome of the recent Conference. All through this debate there has been too much dwelling upon our dependency on the dollar. I am one of those who believe that the sterling area can work out its own salvation if we only apply ourselves to the problem properly.
  We sit upon 60 per cent. of the known resources of the world, and it is in that respect that I want to address myself to the problem of colonial development. This is probably the most important part that we can play in getting a satisfactory balance of payments both with the United States and throughout the whole of the sterling area. It has been estimated that the British Commonwealth calls for a minimum requirement of £500 million per annum of capital development to keep pace with modern times. That £500 million may, in modern conditions, be an under-statement.
  Before the war we were in a substantial position to carry that operation through because we had then a minimum revenue on interest and dividends coming from abroad of £175 million a year. Owing to the difficulties of war finance, that has been cut to £40 million a year, and very large commitments have been incurred on our external debt which has made it impossible for us to carry out those great operations which we should have done.
  The Colonial Empire and the Dominions as well are coming to depend more and more upon America for their capital development. We have got to put a stop to this in some way, otherwise we shall find that the Commonwealth will disintegrate. I have travelled and worked in most parts of the British Commonwealth, and I can assure the House that it is a very definite factor in Commonwealth relations that the capacity of this country to finance those commitments which we formerly financed has been taken away from us for the time being. Some new plan must be devised.
  I have been presumptuous enough to prepare a plan which has had some little publicity. I wish to see imposed upon all the materials below the ground inside the
  1746
  British Commonwealth a tax of 1 per cent. that would be free of all national taxation. I wish to see the establishment of a Commonwealth Development Bank run by bankers in the proper way. I should like to see the product of this 1 per cent, paid into that bank. As I calculate it, we should have an immediate revenue, if this were possible, of £50 million a year. I would ask the Commonwealth Bank to raise on long-term Commonwealth development loans on that sum of £50 million, borrowing on the collective security of the Commonwealth. In that way I believe that up to £1,000 million a year could be spent on Commonwealth development.
  We have to face a lot of things in the future. A prospect that all of us would enjoy would be the calling off of the cold war. If that happened tomorrow, what should we turn our energies to in order to keep our people busy? What would the United States do to keep their people busy if such a thing happened? These great plans have got to go on. I hope that full consideration will be given to some plan of this sort when the Commonwealth Ministers meet in London again.
  There may be—there probably are․growing difficulties about carrying out an operation of this sort, but one thing is certain, and that is that we in the British Commonwealth sit upon a veritable treasure house, if only we know how to use it. We can work our way out through this avenue with the independence of the sterling area, without being so dependent upon the dollar, and we shall then find that the sterling currency will be as valuable and as much sought after as any currency in the world.
  I have had the opportunity recently of visiting the Dominion of Canada. Here is a strange anomaly. We require in this country more coarse grains for feeding our animal stock in this country. Canada last year had the richest harvest they have ever known in their history. One-fifth of their total crop is lying in stacks on the ground with all the elevators full of corn. Is it not most ridiculous that some machinery cannot be conceived to bring that corn to this country and to improve our agricultural production when it is there in surplus and is going to rot unless something happens to it?
  Mr. Ellis Smith: Would the hon. Gentleman be prepared to carry the story a stage further? Are there not rich iron ore deposits in Canada for which they require coking coal from this country, which is lying in the seams in Staffordshire? Does not the need for a reciprocal arrangement of that kind show how correct it was to put forward proposals for a Commonwealth plan?
  Sir A. Braithwaite: I agree that some arrangement to enable us to get those things which are necessary ought to be brought about. I had opportunities in the Canadian Parliament of talking with many of the Ministers, and they are all very anxious for us to take their products. There are some things which they point out clearly do not satisfy them. First, we have got to get better deliveries on articles for which we contract. I am talking of major items of public equipment. Then we have got to make arrangements in that Dominion to set up a proper system of spares and supplies. The Canadians are not going to buy capital goods unless they can be serviced properly. If we wish to supplant American products by British products we have got to be in a position to provide proper servicing of that capital equipment. I am perfectly certain that the Canadians are going to help us in every way they can, but they have very definite ideas of their own, and their economy is very tightly tied to the American dollar.
  As the representative of the export group for the constructional industries of this country, I went to Canada to discuss primarily our participation in the St. Lawrence power scheme. I found Canadians most receptive and helpful, and wanting to do everything they could to give our equipment manufacturers and constructional engineers every opportunity to take part in that scheme. I wish through this House to pay a tribute to the courtesy and kindness of the Canadian Ministers who went to very great lengths to give us all the encouragement they could to take part in that very valuable and very important project.
  I would emphasise once more that we in the sterling area have got to fight our own battles. America is not going to fight them for us. Inside the Commonwealth we have all the resources we need for doing that. As the hon. Member for
  1748
  Aberdeenshire, East (Mr. Boothby) said, we have in the Colonial Empire alone tremendous reserves and resources which could get us out of our mess and put us on a sound economic basis if only a proper plan can be devised to that end.
  But let us not give up the idea of a Commonwealth bank, because I believe that with the loans that such a bank would be required to raise on the collective security of the resources of the British Commonwealth we could get all the capital needed. I earnestly hope that when the Ministers meet again they will give long and careful consideration to these proposals in order that we may get out of this morass of incapacity to service and finance those projects which we in this House know are important and essential to the preservation and well being of the British Commonwealth.
  7.43 p.m.
  Mr. Gordon Walker: I am sure we have all listened with very great interest to the speech of the hon. Member for Harrow, West (Sir A. Braithwaite), and I for one found myself in agreement with a good deal of what he said. I am sure he is right about Canada. In Canada are most of the things of which we in this country are in need, but which we cannot get because of the dollar gap. That gap is digging a dangerous trench across the Commonwealth; it is dividing Canada from the rest of the Commonwealth. I am convinced that we should have a conscious and deliberate policy of giving preference to the Canadian dollar instead of just thinking in terms of America when trying to earn dollars. We have a much safer market in Canada for our goods, and such a policy would also tend to heal and breach this gulf in the Commonwealth.
  I believe that the proposal for a Commonwealth bank is one to which careful thought should be given. The hon. Member was quite right in saying that we have tremendous resources in the Commonwealth. I should not have thought that the problem was a shortage of actual money, but rather the difficulty of getting all the Commonwealth Governments to do the right thing. It is really a question of directing development; of all Commonwealth countries, including this country. But that can only be done if there is the will to plan.

  1749
  That brings me to what I want to say about an aspect of this Conference which I do not think has yet been touched upon. It will lead me to say one or two hard things. In my view, this Government did not handle the Conference at all well. The Chancellor, of course, has a very great and deep understandng of the Commonwealth, as he has often shown us in the past and showed us again in his speech this afternoon. But it seems to me quite clear from the communiqué that he was not in complete charge of our Government's conduct of this Conference because things were done which were blunders and which tended to make the sort of agreements we ought to have more difficult to achieve. Things were done which raised suspicions, and made it more difficult, for example, to get this better machinery for running the sterling area.
  The hon. Member for Aberdeenshire, East (Mr. Boothby), who made a very brilliant and entertaining speech, said that, on the whole, the other Governments of the Commonwealth were to blame for the shortcomings of this Conference. In my view, the main blame rests upon the Government of this country and not on those of the other Commonwealth countries. The second reason why I think we have not done well is that the Chancellor's own economic policy which he is now developing in this country is in conflict with the objectives set out in the communiqué and with the things about which he told us this afternoon. And because of that the very fine sentiments contained in the communiqué are, I am afraid, going to remain merely pious platitudes.
  The communiqué says some very good and wise things; that, in fact, we cannot get out of our difficulties by tricks and juggling, but only by proceeding along planned lines for the development of the resources of the Commonwealth. But at the heart of the communiqué lies a great contradiction, because it presupposes that if we are to get those things the United Kingdom will be a planning economy. In fact, of course, we have at present a Government which hates planning and which it dismantling all the machinery for planning. That makes nonsense of the communiqué.
  I can well understand that Conservatives are not affected or influenced by
  1750
  domestic arguments in favour of planning, but what I cannot understand is why they are so indifferent to the Commonwealth argument in favour of planning, because if we in this country do not plan, the Commonwealth will go to bits. There is an overwhelming case to be made out for planning, both in the interests of the Commonwealth and of ourselves as part of it, which every Conservative ought to understand. I cannot understand why with the exception of the hon. Member for Aberdeenshire, East so many Conservatives are deaf to this powerful argument.
  If we are going to develop the Commonwealth and play our part in it, there are two things we must do. We must succeed in diverting a good deal of our production and economy to the production of the right sort of capital goods for export to the Commonwealth so as to develop dollar earning and dollar saving commodities. I quite agree with the hon. Member for Scarborough and Whitby (Mr. Spearman), who said it would involve a very considerable readjustment of our economy, but it cannot be done without planning. It will not be done by nature or by the play of economic forces. If that were possible, why does the communiqué lay such emphasis on it? If it will be done by nature, all those words in the communiqué are wasted words. The communiqué means that it will not be done by nature, but has got to be made to happen by the collective actions of the Governments of the Commonwealth.
  Mr. Ellis Smith: I hope we shall do it the next time we are in power.
  Mr. Gordon Walker: Yes, we must do it in our own interest as much as in the interest of the Commonwealth.
  Secondly, we must keep up agricultural planning in this country, because, however much food we produce at home, we cannot produce enough. We are faced by two great difficulties. The first is that there is going to be a great world shortage of food because many of the food producing countries are eating the food themselves, and, secondly, we must save dollars. The only way to do that is by gearing the Commonwealth farmer into our economy. But he will not be geared in any more than will our own farmers unless we give him long-term agreements and guaranteed markets.

  1751
  We cannot do that while we are throwing away guaranteed markets for our own farmers in this country. We cannot throw away the guaranteed markets which we had under the old Agricultural Act, and at the same time give Commonwealth farmers the long-term guarantees which we must give them if we are to divert them from the wasteful investment in secondary industries which has been going on into producing primary goods which will benefit both themselves and us.
  And for the Chancellor to make the sort of speech he made at the very time when he is dismantling all the machinery for planning and throwing away guaranteed markets is to make complete nonsense of all that he said. He ought to make up his mind what he is going to be, whether it is someone who really believes in the Commonwealth and carries out the things which he mentioned, or a Tory Chancellor who tears up the machinery for planning and thus cannot do the things which he urged us all to do in his speech today.
  I thought that the Chancellor was also very cavalier and very casual about what I regard as a major defect in the work of this Conference. The major defect about which he was very casual was the total failure to develop any new method for the joint conduct of the sterling area. I do not agree with the Chancellor that it is impossible to make any improvement, I think, as I hope that I shall show, that this Government went about it in the wrong way and that that is one of the reasons why we did not secure any success.
  We must have an improved, new method of running the sterling area. The stark fact is that our reserves are much too small. Far from withstanding the storms of world economy we could not stand a small breeze at the moment. We have not the cushion of reserves that could withstand the shocks of a slight movement of world trade. It is vitally necessary, therefore, for us and the Commonwealth to find a substitute for adequate reserves; and the only substitute is a new method which will enable us to act more quickly, jointly, and with greater firmness than has been the case in the past.
  I admit that when my party were in office we did not travel all the way towards building this machinery, but we
  1752
  were getting nearer and the Government today are further away from it than we were. I freely admit that it is a most difficult problem. The United Kingdom is not alone to blame. This can only be done by agreement, but I maintain that the Government have made agreement more difficult by their doctrinaire and, in many ways, old-fashioned approach to these problems.
  We have to remember that Her Majesty's Government start in this matter with a great disadvantage, of which I am sure that the Chancellor is aware because he understands the Commonwealth extremely well. The disadvantage is that the Conservative Party produced "Britain Strong and Free" to win votes at home, but that publication contains things that have been closely studied in the Commonwealth and have caused alarm and concern. One has only to read the newspapers of the Commonwealth and talk to those who know to realise that. On page 11 of this publication one reads about things like a Combined Staff, a Commonwealth Defence Council, and a Commonwealth liaison staff.
  These are the things that have reawakened in the minds of the Commonwealth the old fears, that were slowly being buried, that this country wants to create a central organisation in the Commonwealth. That suspicion was being buried but is now being revived, partly by this document. One would have thought that, knowing this fact, Her Majesty's Ministers would have gone out of their way to get rid of that bad impression. But they do the very opposite. In those circumstances they go out of their way to force on the Conference in public—for a communiqué was published—the consideration of increasing Imperial Preference.
  Everyone who knows anything at all about this knows, that that idea was a non-starter, that it had no hope of being accepted, and that it was calculated to re-awaken the fears that exist in the Commonwealth about the desire of this country to create some form of Imperial federation, a central organisation and all the rest. The Chancellor knows this better than anyone else, yet apparently he has assented that in these circumstances this project should be put forward and publicly referred to in the communiqué.

  1753
  The hon. Member for East Aberdeenshire said that he was sure that the Chancellor pressed with great earnestness for Imperial Preference. I am quite sure that he did not. We had only to listen to him today to know that he knows that it is nonsense, that the Commonwealth will not have it, and that it would do no good and would not work if they did have it; but he has allowed this idea to be put forward and it has unquestionably caused the revival of the suspicions to which I have referred. The motives of the Government are quite clear and
  they are discreditable. They have not the courage to stand up to their own back benchers and they put other members of the Commonwealth to the embarrassment of pulling their own chestnuts out of the fire.
  Mr. Ronald Russell: Can the right hon. Gentleman explain why a plea for Imperial Preference should produce any fear in the Commonwealth that we want Imperial federation?
  Mr. Gordon Walker: Because it has been closely connected with that from the beginning. [HON. MEMBERS: "No."] Of course it has. It creates a single unit of the Commonwealth and that is the basic idea of Imperial federation and it is the idea which every member of the Commonwealth, except some people here, rejects. In the minds of people in Canada, Australia and certainly in India they are very closely connected indeed.
  I am sure that the solution can be found for this problem of creating new machinery for the sterling area. It certainly must be found. If we do not find means of acting quickly and collectively so that we are not almost knocked out by any crisis that comes along, the sterling area will go to bits. It is down on its uppers now. There are no more reserves on which to draw, and the next time that there is a run on reserves they will disappear.
  I am sure that we can find a way, because every member of the Commonwealth, including Canada which is a dollar country, fully recognises the vital importance to all of us of the sterling area. It will be difficult to find the right sort of machinery. We must certainly put out of our heads any ideas of councils or bodies with any executive
  1754
  authority, secretariats, even 0.E.E.C.— which would not work in the Commonwealth with its collective joint decisions. It is a silly idea to put up that kind of thing at all. If there is the slightest suspicion that we in this country have in our minds the intention to create some sort of central organisation for the Commonwealth, we shall not get anything at all.
  That is why I think that the Government went about this thing in the wrong way. We must find new methods in accordance with the nature of the Commonwealth and the very well-established principles of consultation. I thought that the Chancellor was too defeatist about this. Developments can occur and have occurred in the organisation of consultation. There have been very important developments since the war. This thing is not static. I am quite convinced that if we set about it the right way very important developments, which will give us what we want, will come about.
  The basic assumption on which all Commonwealth consultation rests is the assumption that if we succeed in securing a common picture of the facts we will achieve a common policy. Without that, all machinery is mere machinery. Unless one obtains a meeting of minds before policies are decided, one will not secure co-ordinated policies. All our machinery is a device to get a meeting of minds before policy becomes firm and rigid.
  There has been a great extension in this field since the war. This idea of regular frequent meetings of corresponding Ministers—Finance Ministers, Foreign Ministers and so on—is quite new. Nobody thought of it before the war. It has led to very important meetings of minds in the Commonwealth before policy is settled. But that is not enough in the case of sterling area problems because Ministers can only meet about once a year, in December or January, owing to the varying seasons in the Commonwealth. They cannot meet frequently enough to cope with the problems of the sterling area. But in the same line and in the same sort of way we have to find an extension of the idea that if we get an agreed picture of the facts we will agree on policy.

  1755
  What we have never used to the full in the Commonwealth—and I regret it—is the fact that we not only have the same sort of Ministers who can meet together freely and easily but the same sort of Civil Service, which fully recognises that its job is to advise whereas the job of the Ministers is to decide. It is quite different from the American Civil Service, which has a quite different role in the Constitution. The Commonwealth countries have the same sort of Civil Service, and the right way to approach this problem is not only to co-ordinate the Ministers but to co-ordinate the substructure which underlies the decisions that Commonwealth Governments come to.
  We must work towards the establishment of a standing group of high-level civil servants connected with economic matters and capable of discussing all the problems of the sterling area. We do not want them to reach joint decisions or to give joint advice but to go on serving their own Governments and giving them advice; but none the less working together and getting the basic facts agreed. They should keep in constant touch with the development of the facts and they should have a common picture of the problem to a very considerable extent.
  This would give us what we want, if we are not too ambitious and go in for all sorts of councils and such like. This would give us a meeting of minds at a very early stage, long before policy became rigid, so that all the Governments would know at a very early stage of policy making what was in the minds of other Governments and the sort of considerations they were taking into account. They would form a common body having up-to-date statistics so that the Commonwealth Governments would not be caught out by crises suddenly coming upon them. Because a common background of advice would be given to all the Governments they would be in a much better position to act together.
  I believe some such arrangement would be acceptable. It would not be an infringement of sovereignty. It would be nothing but an extension of the meeting of officials before the recent Conference, which was one of the best things about it. I wish we had thought of it. It was a
  1756
  most admirable idea. They would be able to reach a very broad measure of agreement on statistics and take into account all the various possibilities. Even Canada, who are very suspicious of these things, could hardly regard this as an infringement of their rights because it is only an extension of the already existing continuing committee set up by Canada and this country, to do this very thing.
  This will, I am convinced, be the next great step forward in the ever evolving system of consultation. It can be extended to other fields of policy. But it must first be established in this field of the sterling area because this is the most vital one. I believe that the chances of getting it have been set back by this Conference because of the general behaviour and conduct of this Government. We may have to pay very dearly for it, because time is precious. I hope the Government will do all they can to get this development because I am sure it is the right way to get the sort of machinery which is needed for the sterling area.
  I want to make a last plea about convertibility. I hope that the hon. Member for East Aberdeenshire is right in saying that there is no question of convertibility. I admit that I am filled with fears about it. The reticence of the Chancellor today really scared me and if the Foreign Secretary is equally reticent I shall be gravely disturbed. I hope that we are not on the point of taking the risk of convertibility. I beg Her Majesty's Government not to take that risk. If they do they may destroy and smash the whole sterling area. Our reserves now are so small that if a mistake is made and there is a run on sterling the sterling area will finish and no doubt the Commonwealth too, because the sterling area is a material manifestation of the Commonwealth.
  We should remember the calamitous consequences of going back to the gold standard too quickly, when all the theorists said it was all right to do so. The Prime Minister himself should hesitate about this now. I beg the Government to think about this matter and, if they are committed to it, to reverse their decision. It would be a foolhardy step to take with the Commonwealth, when the highest aim of all of us is to defend and to preserve it.
  8.5 p.m.
  Mr. Douglas Dodds-Parker: We have seldom listened to such a gloomy series of speeches as those of three of the four right hon. Gentlemen who have spoken from the other side of the House. It may be that as they see the policy of Her Majesty's Government beginning to work, after having cleared up the mess in which they found the country 15 months ago, hon. Members opposite are becoming depressed and want to spend their time in this debate in putting up Aunt Sallies to knock down.
  I agree with the last point mentioned by the right hon. Member for Smethwick (Mr. Gordon Walker), about setting up some sort of continuing committee within the Commonwealth; but it seemed to me that in his previous remarks he was criticising the Chancellor of the Exchequer for getting rid of central machinery and then criticising him for proposing to set up central machinery.
  It comes back to this word "planning." In the past few years, having listened to hon. Members opposite, it has become clear that to them planning means detailed physical control by a large staff of civil servants. To me it means rather the use of the monetary weapon. If we can get an agreed definition of the word "planning" it might make these discussions somewhat more profitable.
  It is not my purpose to raise the temperature of this House, but to put my points as quickly as I may. I am one of those who welcome this communiqué. There was some criticism that it consisted of platitudes, but to me it indicated that we have got back to some first principles after six and a half years of trying other new methods, with disastrous results in so many cases. It has proved necessary to state certain immutable economic principles, almost down to the fact that "one cannot get more than a pint into a pint pot." It is the fact that we have had such a declaration of principles after this Commonwealth Economic Conference that puts heart into many of us who have been interested in getting co-operation throughout this still considerable area of the world.
  I feel that it is a great declaration of faith. I welcome the juxtaposition in paragraph 5, of the internal anti-inflationary policy with the external balance of
  1758
  payments policy. As "The Times" pointed out recently, that is the sort of thing about which the right hon. Member for Bishop Auckland (Mr. Dalton) was expressing surprise some six years ago, when there was a good position internally and he could not understand why the dollar balance was still rather difficult.
  With regard to paragraph 15 of the communiqué, which deals with commodity policy, what we all agree we need is an increase in primary production, both in materials and in food. The views set out in paragraph 15, leading to paragraph 16 on Imperial Preference, are very much those of a former Colonial Secretary, the late Mr. Oliver Stanley, who used to support Imperial Preference as one of a series of instruments for ensuring production. I still use that term because it distinguishes it from some other forms of preference. I regard it as one of the policies to ensure stability of production in the territories of the Commonwealth.
  The last four lines on page 4 include the phrase,
  "and prices at an economic level."
  Obviously, one does not want to make such communiqué too long, but I should like to change that to "with reasonable prices at an economic level to the efficient producer." I think there has been a tendency in the past few years to be prepared to pay over-high prices to inefficient producers and I believe that, with the return of a certain amount of competition, the more efficient producers will find rather better returns.
  Under paragraph 15, for instance, we welcome the Commonwealth Sugar Agreement, which, I believe, has done a lot to establish markets for the production of an essential basic food within the Commonwealth. That is a form of discrimination which I, for one, welcome, just as I welcome the United States Sugar Act, which is another type of discrimination and which, equally, has produced stability in production and marketing for the United States.
  I should like to support the principle of paragraph 16, on Imperial Preference, because I believe it is easy for producers to assess and easy to administer. Other forms of planning and control are much more difficult for the primary producer

  1759
  to estimate when planning increased production and for the Government of the day to administer. I know that preference to be a valuable instrument of policy, and I think that as time goes on the Governments concerned will hear expressions of support for preference from their primary producers which had not reached them at the time when these decisions were taken. They will find a check to the development of primary production in the Commonwealth if they say they are not prepared to support the principle of preference.
  I do not blame Her Majesty's Government. I know only what I read in the newspapers, but I understand that Her Majesty's Government attempted to secure an increase in the principle of Imperial Preference; and I have been told that, too, by my hon. Friend the Member for Aberdeenshire, East (Mr. Boothby). If the Commonwealth continues to mean something, as I am certain it does, then I believe we should still have the right, within the family, to give preference if we see fit, and I should like to have regained that right. Whether we use it on any occasion must, in my opinion, be left to the discretion of the Government of the day; they must decide when playing the hand. But I should have liked to find a declaration about it, and I hope that in due course we shall find it—a declaration that we should notify those concerned that we still feel ourselves enough of a family to be able to make mutual arrangements within the family without having to seek anybody else's by-your-leave.
  Like my hon. Friend the Member for Aberdeenshire, East, I voted against the first American Loan because it sold out this right. I know there are many hon. Members opposite who believe, as I believe, that we should regain this right. I also voted against the American Loan because, while I felt the Loan was necessary, I was certain that the great generosity of the United States would have let us have that Loan without that paragraph in the agreement.
  Mr. M. Follick: Two paragraphs.
  Mr. Dodds-Parker: There are two points which I should like to put to Her Majesty's Government for consideration
  1760
  at the time of the next conference. I believe, as the right hon. Member for Smethwick believes, that there is value in having a standing group, whatever it may be called, on the lines of the Import Duties Advisory Council after "Ottawa" or the Inter-State Commerce Commission in the United States. The aspect in which I am particularly interested is that of internal trade within the Commonwealth. I believe there is such complexity of export taxes, import duties, subsidies—fiscal policy—that it is only by constant study that these can be kept under proper consideration.
  I know that there are fears within the Commonwealth that any advisory committee or group such as this will become executive, but I believe we can make a start somewhere and see what results follow. As had been pointed out, we already have O.E.E.C., the European Payments Union, and—what I understand is one of the most interesting developments—the defence estimating committee of N.A.T.O. where there is the closest co-operation between the powers of the North Atlantic Treaty Organisation in constant communication about their internal fiscal policy as far as it affects armaments.
  The right hon. Member for Smethwick suggested that they should consist of civil servants. This is my feeling—that it should be for this body to consider and to recommend. I do not think they should have the power of decision; nor has that been suggested, because decision must remain the political decision of the Government of the day. Nevertheless, there are a large number of points of such complexity that no Minister has the time to go into them all in detail for an area as large as the Commonwealth.
  If all will not join such a committee, surely we can start with some—with those territories who will agree to cooperate with us. For instance, we could start with the less independent territories at present administered through the Colonial Office. I am sure that a number of them, and at least one or two of the Commonwealth countries, would agree to co-operate in such a standing committee, and if we could start with that, I believe more would follow as time went on.
  There is one point, for instance, which I feel should be considered urgently—the

  1761
  duties on heavy Empire wines. No doubt in weather such as this the subject will appeal to many hon. Members. Sir Stafford Cripps took a bold decision, I think it was in 1949, to halve the duties on light wines. The next 12 months saw three times the quantity imported; everybody was pleased—the producer, the Exchequer, and, above all, the consumer. I suggest that that is the sort of point which goes beyond merely a physical decision of the Chancellor of the Exchequer of this country and which also affects a large number of producers overseas within the Commonwealth.
  Many hon. Members have said that this country must give a lead, but, obviously, a great deal can be done by the North American countries to help, if we, first, are prepared to make the sacrifices. I have never believed—and I have expressed this disbelief in the House—that the dollar gap can be closed by the import into North America of manufactured goods. We must bear in mind the tremendous demand which there will be in the United States in the next 25 years for minerals and raw materials as the Paley Report sets out.
  Another great dollar earner is the tourist trade, and, although hon. Members opposite may not agree, I feel that the reopening of the commodity markets in this country will also earn quite a lot, as will the development of shipping insurance, merchant banking and other traditional forms whereby we hope, and believe—those of us who work there—to restore the City of London to its place as the finance centre of the world. Hon. Members opposite may not agree with me on this, but I believe it can play a very large part.
  Mr. F. Beswick: Would the hon. Gentleman care to provide my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) with a figure of what he thinks the commodity markets can earn?
  Mr. Dodds-Parker: No. I think it is more that merely the earnings of the City of London. I do not pretend to be an expert on these things, but this point has been put to me: when the commodity markets centred on London in 1931, and when there was devaluation, the world commodity prices followed sterling, whereas in 1949, when these free markets
  1762
  did not exist, those prices followed the dollar. It has been of such vital importance to this country to have commodity prices which we can afford to pay that it is of the greatest importance to maintain —not control, for that is too strong a word—that tendency to keep commodity prices on a sterling basis centred on this country.
  It is these intangibles, these imponderables, which are so important, just as confidence and good will in business are important; and, with great respect, and not being offensive, those points did not seem to me to be clearly understood, at least in the speeches of the first two right hon. Gentlemen who spoke from the benches opposite this afternoon.
  I should like to end by quoting a speech which Mr. Winthrop Aldrich, whom we shall all welcome soon as the new United States Ambassador to this country, made on 19th November, 1952, at the Foreign Trade Convention in the United States. He made four points. The first three were on convertibility, existing restrictions in key commodities in world markets, and the existing restrictions on imports into the United States. It is his fourth point that I want to stress particularly. He says, on the necessity for encouraging investment abroad of American private capital:
  "Immediately after the war it was assumed that private risk capital would flow from the United States to develop world resources, much as British private capital went abroad in the 19th century. However, investment opportunities at home have been so great and the return so tempting that private capital, with the notable exception of the oil industry, has been reluctant to take risks abroad.
  Moreover, crippling exchange controls, tax regulations, and, above all, growing nationalism, with its tendency to confiscate private property, have discouraged private United States capital from moving outside our borders.
  Obviously, the United States alone cannot correct this situation. More than in any other field, we must have the full co-operation of other countries in creating common agreement on private rights and the integrity of contracts, if private capital is to be tempted into international investment."
  The suggestion I should like to put to the Government is that some lead should he taken by this country—and I should like to see it followed up at the next economic conference of the Commonwealth—to support the code of the International Chamber of Commerce for fair treatment for foreign investment. I believe

  1763
  that if we could get substantial support for the rules laid down there we could do more to encourage dollar investment in the Commonwealth and the sterling area than by any other method, and I would put this point to Her Majesty's present advisers.
  I welcome what was said in the communiqué, and I should like to think that these principles would be supported by the other countries, to whom, if I may say so, in the past we have given a lead —countries across the Atlantic and in Europe. We could then once more have set an example which the whole of the rest of the free world can follow.
  8.23 p.m.
  Mr. Anthony Crosland: One phrase, at any rate, in the speech of the hon. Gentleman the Member for Banbury (Mr. Dodds-Parker) that I found particularly poignant in the context of this debate was that in which he said, "I only know what I read in the newspapers," for it was precisely because all we knew about the Commonwealth Economic Conference was obtained from the newspapers that we on this side of the House asked for this debate to take place and for the Chancellor to make a statement. However, at the end of it we still know only what we read in the newspapers. I am bound to say that the Chancellor's speech tonight in no way came up to the level of what one would have expected on an occasion like this, and we have no more information now than we had before he spoke of what exactly was decided—if anything—at this Conference.
  The Chancellor spoke for a brief half hour. I am not in general against short speeches, but in this particular case I think the speech could have been longer, because in that half hour he really said nothing except rather obvious platitudes —that it was better to march forward together than to march forward alone, better to export more than import less, better to have a strong currency than a weak one: admirable sentiments, no doubt, which the hon. Member for Banbury, who made a textual criticism of the communiqué, would probably call "immutable economic truths." But they do not help us very much.
  However, apart from the Chancellor's disappointing opening speech I think the debate has been encouraging, because
  1764
  there has been a surprising measure of agreement amongst those who have spoken on both sides of the House. There has been very little—virtually no—purely party disagreement, and a great measure of agreement, I think, on what should have been done. Most of those who have spoken have taken the view that the present situation is still a very precarious one.
  We are all, naturally, extremely glad that the improvement of last year has taken place. But we all recognise that there is no sort of certainty that this improvement will persist. Dollar imports into the overseas sterling area are now at an unusually moderate and self-restrained level, by reason of the fact that there has recently been the Economic Conference, and after the 1949–50 experience, there cannot be any guarantee that this self-restraint will last, while, on the other hand, American imports from the overseas sterling area are also held up at a quite abnormally high level; and there is not, therefore, most hon. Members will, I think, agree, any sort of assurance that the present position of bare balance will persist indefinitely into the future.
  The question which we are all asking ourselves, considering this matter, is, what requires to be done by the United Kingdom Government? I am very glad, personally, that almost every hon. Member who has spoken has insisted that what is necessary today is action by the sterling area itself, and that we are moving away from the idea, which a lot of people used to have, that it is just a matter for the United States to do A, B, C, D, and that if only America behaves in a certain way we shall have no sterling area problems, and there is really no need for anybody else to do anything about it. The Chancellor, I think almost alone of the people who have spoken in this debate, slightly tended to encourage this extremely dangerous view, that we could, perhaps, rely on the Americans to take a number of steps which would alone solve the problem for us.
  He talked about President Eisenhower's "State of the Union Message" in terms which, I must say, seemed to me to be exceedingly optimistic of what was likely to come out of that. I should have thought that President Eisenhower's

  1765
  "State of the Union Message" was highly disappointing from the point of view of the world dollar problem and the sterling area's dollar position. After all, the President mentioned only four things which, taken together, really do not, I think, add up to very much. First, simplification of Customs procedure. Naturally, we all appreciate that, but it really cannot be expected to make some sensational difference. Secondly, rather higher off-shore purchases. Again, that is a thing which everybody in this country would welcome, but which, in view of the quantities involved, cannot possibly make any very large difference.
  Thirdly, he mentioned the further encouragement of American private investment abroad. But everybody who has referred to this subject—on both sides, I think—has taken the view very strongly that there is no hope of a sensational expansion of American private capital investment abroad. I agree with what the hon. Member for Banbury said about this. It is just not the kind of world that is going to tempt American capital abroad in large amounts. Dr. Moussadeq, after all, was hardly a bullish factor in the capital markets of the world, and there is no reason to believe that he is the last of the long line of nationalist leaders who take the view, naturally enough, that attacks on foreign capital are the best way to get popular support amongst their own peoples; and in this sort of world, particularly considering the disagreeable memories which American private investors have already of overseas investment in the 20's I do not think there is very much to be expected from that.
  The fourth point in President Eisenhower's speech was higher American purchases of raw materials. This was the most promising of the four points, but it is not something which can possibly make very much difference in the short run. In the long run, everybody who has read it must have been exceedingly impressed by the findings of the Paley Commission, which shows that the United States, hitherto so largely self-sufficient for raw materials and food supplies, is going to become in some 20 years' time an importer of raw materials on a huge scale. This is highly important to the dollar problem of 10 or 20 years' time,
  1766
  but there is no sign that this move towards becoming a major importer will make much difference in the next five years. It is therefore very unwise of us to rely upon any quick change here which will produce some automatic solution of the dollar problem.
  I therefore cannot find very much reassurance in the four points mentioned in President Eisenhower's message. And one omission which seems to me to outweigh seriously any minor encouragement that there was in the four positive points is the total omission of any mention of American public investment abroad. Many of us had built up considerable hopes of an expansion of American public investment in the under-developed areas, because that seemed a very hopeful way out of the dollar situation and of many of the social problems which exist in those areas. It was extremely disturbing not to find in the "State of the Union Message," which spent a considerable time discussing international trade problems, any mention whatsoever of public investment.
  Weighing these things against each other, it seems clear that there is no prospect of the natural trend of events outside the sterling area producing in the next few years an enlarged supply of dollars. It comes back again to what we in the sterling area can do to shore up this precarious balance and to try to make it more secure. Can we do anything on the side of dollar imports into the U.K.? Hon. Members are pretty much agreed that there is little we can do in direct substitution of home-produced goods for dollar goods, but that there is considerable scope for replacing dollar imports into Britain by goods from the overseas sterling area. One theme running through almost every speech has been the necessity for increased British investment in the overseas sterling area in order to enlarge the supply of such dollar substitutes. There is no disagreement about the need for this extra investment, but there is a great deal of disagreement as to how it is to be channelled into the overseas sterling area.
  My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) mentioned that there had been in recent years a very large, in fact an enormous, export of capital from Britain to the overseas sterling area. Many critics have said that

  1767
  it has been so large as to impose an unbearable burden on the British economy. I think there is a lot in that, but the burden, however heavy, would have been worthwhile had the capital going abroad from Britain gone into investment of an obviously useful and productive kind.
  But it is very alarming to look at the figures and to find out how large a proportion of this capital export was pure flight money. It has been shown in articles in the "Banker" that an alarmingly high proportion of it has consisted of money which was not intended for any particularly productive or economic enterprise in the sterling area but was the result of currency speculations or was connected with political factors or non-economic factors generally.
  The question arises whether there is not a serious danger, if we succeed in getting a very much larger flow of capital into the overseas sterling area, that the whole object of the exercise might be partially frustrated, if this flight money is permitted to move as freely as hitherto. There is only a limited amount of capital that we can afford to export, and if part of it is purely flight capital there is so much the less that can be spent on developing productive enterprises within the Colonial Empire. It is true that at the moment this is not as urgent a problem as it has been in some of the last few years.
  The policies of the Chancellor appear to be less repugnant to wealthy owners of capital in this country than those of his predecessor, and Dr. Malan in South Africa has largely cured any problem of the export of British capital to the Union. For the moment, therefore, it is not an urgent question, but if there should again be any risk of large scale export of flight money of this kind, the Government must reserve the right to take up this matter with the other sterling area countries and consider whether there is not some case for a more organised channelling of what investment is to go abroad in order that it should be productive.
  So far as dollar exports from Britain are concerned, again there has been a surprising amount of agreement. Most hon. Members have taken the view that there is no likelihood of a large expansion of British exports to the United States itself. However, I would suggest that
  1768
  in considering British dollar exports we concentrate much too much on the problems of the American market. After all, there are other dollar countries besides the United States. A good deal has been said in this debate about Canada but nothing has been said about the dollar countries of Latin America.
  There was a series of articles in the "Times Review of Industry" for example, and all such reports suggest that neither in industry nor in the Government is sufficient attention being paid to these other dollar markets outside the United States. There was a Board of Trade mission to the Latin American countries headed by a namesake of mine, but no relative, which made a preliminary report about a month ago and it was a highly disturbing one. It would be useful if we could have an assurance from the Government tonight or on some other occasion that there is not an excessive concentration on the American market but that there is at least an equal concentration of attention on the other dollar markets, whether American, Latin American, South American or any others.
  So far as the rest of the sterling area is concerned, clearly again the problem largely comes down to one of a higher export of British goods. Hon. Members must all, I imagine, have been struck by the detailed breakdown which one or two recent publications have given of the constitution of dollar imports into the overseas sterling countries. Probably many of us have imagined before, as I certainly did, that an enormous proportion of dollar imports into the Commonwealth must have consisted of, say, wheat to stave off starvation in India, and generally of essential foodstuffs and materials. We now find, when we see breakdowns of these figures, that on the contrary an enormously high proportion of them consists of machinery, vehicles, oil and consumers' manufactured goods, about 50 per cent. of the whole coming into those categories.
  It has been pointed out already this evening that a good many of these imports are related to the process of developing secondary industry in countries such as Australia. There is little we can do in this country to discourage the Australians from expanding their secondary industry. If they want to produce an all-Australian car, we cannot stop them, though we may think it

  1769
  is foolish when they can import perfectly good cars from Britain and when world demand for Australian wool and dairy produce will rise over the year by about 200 or 300 per cent. However, what we can and must do is to make sure that as high a proportion as possible of the vehicle and machinery imports which they must have come from British and not from American sources.
  This underlines the necessity, which every consideration of our economic problem points to, for a much larger volume both of engineering output and of engineering exports than we have achieved at any time since the end of the war. It is the most important single economic task facing the Government on the home front. Of course there have been difficulties over the last year connected with the arms programme which are perfectly well known to everyone, but if the Government take the view, as apparently they do, that the international situation is somewhat improved and that the burden on the arms programme need not be as great on the engineering industries as was supposed a year or two back, then it must be recognised that the first economic responsibility is, by increasing investment in the engineering industries, to build up their capacity to enable the larger exports on which alone Britain will survive. Clearly we shall not survive by a larger export of whisky, tweeds, boots and shoes, pottery or anything like that. It is either metal and engineering goods or nothing.
  I should like now to say a very brief word on two subjects which have been mentioned before. First, convertibility. I do not want to go into the argument in any detail, because it has been covered, and everybody in the House, it seems, with the possible exception of the Chancellor, whose views are still quite unknown, despite his 45 minutes' speech, agrees that convertibility just like that would be a most dangerous course of action. But there is a risk that if convertibility is tied up in the public mind with the idea of a great stabilisation loan, or even an Atlantic Payments Union, which has been discussed or written about recently, it will get by.
  It does not seem to me to make any difference whether there is a stabilisation loan plus the convertibility, because if
  1770
  the conditions are not suitable for convertibility the loan will simply get run through in a given time. If there is a world dollar shortage, eventually, however big the stabilisation loan, the world will run through it. I hope, therefore, that we shall not be deceived by finding convertibility associated with some such ambitious sounding scheme.
  It is extraordinary how little detailed argument there ever is for convertibility. Apart from a little talk about financial earnings, the phrases that are used are a curious revelation of the lack of detailed argument—" We must make the £ a virile currency," "We must enable the £ to look the dollar in the eye," and "We must restore the old virtue to sterling" —a lot of anthropomorphic slogans which suggest that the old diety needs aphrodisiac; and very little detailed argument is forthcoming.
  The last point which I want to mention is the question of a possible American recession. I am not one of the alarmists on this subject, and I agree wholly with the hon. Member for Scarborough and Whitby (Mr. Spearman) that much too much has changed in the United States to make any repetition of 1929 to 1933 at all likely. I do not believe that we shall have a catastrophic American slump of the pre-war magnitude. Nevertheless, I think it quite certain that we shall have an American recession, of however slight a magnitude, after the arms programme has begun to tail off; and this may be only a year or so away. Considering the effect which the 1949 about-turn in America had on our fortunes in the sterling area, the prospect of even a very slightly larger recession is highly disturbing and frightening. I should have thought that one of the first necessities today was for the sterling area countries to be concerting some line of action against this likely eventuality.
  Of course, a lot of things are not in our power at all but depend upon American action; but some things are in our power, and it is in our power, above all, to make certain that if and when the recession comes, the sterling area countries do not all act in a quite unorganised fashion, cutting each other's imports in a quite discriminatory fashion, but that they concert together as far as possible to maintain trade within the sterling area

  1771
  however much trade is falling outside the sterling area. I hope that at the official level, at the very least, discussions are going on now with a considerable sense of urgency to this effect.
  The sense of urgency is what I should like to stress, because there was no idea from the Chancellor's speech today that there was anything really urgent about the dollar problem. It could, apparently, all be covered by a series of platitudes about higher exports being very desirable, and all the rest. The right hon. Gentleman's only constructive suggestion this afternoon was one which suggested that in his mind the problem was hopelessly out of perspective.
  We were told that £10 million a year was to be invested through the International Bank—£10 million a year in relation to a balance of payments which goes up to £3,000 million a year. I do not say that the magnitude of the problem had escaped him, because, clearly, he is capable of grasping it, but the fact that he thought an investment of £10 million a year was important suggested that he was adopting an altogether much too complacent attitude to the whole problem.
  8.45 p.m.
  Mr. Julian Amery: I find myself in almost complete agreement with the hon. Member for Gloucestershire, South (Mr. Crosland), more particularly with his rather more pessimistic assessment of the significance of the economic sections of Mr. Eisenhower's message on the state of the Union.
  The real difficulty I feel about our debate this afternoon has been that the Chancellor has given us very little to go on. I do not think we can criticise him unduly for concealing his hand on the eve of important international negotiations; but I must say that I was rather dismayed by the quite exaggerated genuflections which he made before the idols of non-discrimination and multilateralism. I hope he will forgive me when I say that I think there was also a note of complacency about the general position of sterling which has caused some suspicion that there might be a real intention on the part of the Government to move towards some convertibility scheme
  1772
  which I for one would regard as premature.
  We cannot pass any final judgment on the Conference because in the nature of things, it was an interim conference. But though there are a number of criticisms I should like to make of it there are also a number of points in the communiqué which deserve our full approval. For the first time since the war it has been stated in black and white that the recovery of the sterling area depends on a major increase in the production of goods which will earn or save dollars. For the first time there is a recognition that the goods in question are food, raw materials, minerals, engineering products and communications.
  It is no small thing to have got the leaders of countries like India or Australia, beset as they are by powerful lobbies representing secondary industry to underwrite a document of this kind—a document which says, in effect, that they must concentrate on primary production. No less important to my mind is the recognition that investment capital will not fall out of Wall Street like manna from Heaven, but that it is up to us and the other countries of the sterling area in partnership together to find the necessary capital for sterling area development.
  I agree that these are simple truths. They sound almost like platitudes. Yet if we had made them the foundations of our economic policy since 1945 I suggest that there would not be a dollar gap at all today. The foundations of the communiqué are sound but I am rather less happy about the super structure. My right hon. Friend the Chancellor told us how excellent the provisions are at present for consultation between the different countries of the Commonwealth and I accept what he has said on the subject. I regret, however, that no provision has been made for setting up some kind of joint machinery to co-ordinate the investment policies of the different members of the Commonwealth.
  I regret that no effort has been made to associate our partners in the sterling area more closely with the management of sterling and the Direction of the Bank of England. Suspicion of central machinery no doubt played its part in this.
  It may be that some of the Commonwealth countries believe that they are

  1773
  more likely to get dollars on their own than through some collective operation with ourselves. All the same, I would urge the Government not to abandon the idea of some central machinery, but to return to the charge later on and see whether the other Commonwealth countries are still as suspicious of it after the talks with the United States and Western Europe have taken place as they seem to be today.
  I should like to join with others in welcoming the decision of the City of London to put into operation Lord Bruce's conception of a Commonwealth Finance Corporation. This Corporation can do most valuable work in helping to select those development projects for the Commonwealth which are really worth while. I hope particularly that it will be empowered to advance money at less than current interest rates. The point is of some importance. If we are to undertake development projects in the sterling area and to expand our industries here so that they can play their part in such projects, we shall have to look at our credit policies again. Greater monetary discipline has played an important part in improving our general economic position. It is still very necessary.
  Dear money is a blunt weapon. It hampers the investment you want to promote just as much as the consumption you wish to discourage. I would therefore once again ask the Chancellor to consider a policy of differential interest rates. In the United States the Reconstruction Finance Corporation has a discretionary power to make advances to nationally important industries and undertakings at special rates. It has played an important part in the continuing expansion of United States productivity since the war. I believe we could learn from the United States in this field, and that we should set up, as well as the Commonwealth Finance Corporation an agricultural credit bank and an industrial finance corporation empowered to provide cheap money for those enterprises which serve our main economic aim of earning or saving foreign exchange.
  There is perhaps something even more important than the expansion of productive power. There has been a good deal of argument recently in the financial Press on the importance of creating conditions in which capital formation can
  1774
  begin again. I am not quite so optimistic as the writers of some of those articles. The first task, as I see it, is not so much to create new capital as to stop the exhaustion of existing capital. The depreciation allowance is at present determined by the original cost of plant, not by its replacement value. As long as this goes on every firm in the country is in effect paying its taxes and dividends out of capital, at any rate to a very considerable extent. Far from gaining ground we are losing it; not creating capital, but eating it; feeding the dog with bits of its own tail and hoping for the best. I recognise, of course, the difficulties of effecting a reduction in expenditure in the middle of a re-armament programme; but if economics cannot be made I believe it would be better to make some increase in direct or indirect taxation rather than go on refusing an adequate allowance for the re-equipment of industry.
  Our ability to finance Commonwealth development does not depend only on our credit and taxation policies. We can only provide capital for investment on an adequate scale if we earn a surplus on our general trading account. The Chancellor has recognised this simple economic truth in his slogan "Trade not aid." I must say, however, that, like many others who have spoken tonight, I remain very sceptical of the possibility of balancing our accounts, let alone building up a surplus by the mere pushing of exports to dollar and non-sterling markets.
  I very much doubt whether the new United States administration will dismantle the American tariff system; and even if they did, it is by no means certain that the results would be as favourable to us as is often suggested. I may be wrong, but in face of the likely attitude of the United States and the strong and growing competition from Germany and Japan, I do not believe that we can hold our own unless a proportion of our trade—at least our trade with the Commonwealth and some of our trade with Europe —continues to enjoy a measure of protection against outside competition.
  This brings me to the question of preference and G.A.T.T. I should like to congratulate the Government on having come out at the conference for the revision of the "No New Preference" Clauses of the G.A.T.T. I do not know

  1775
  how far they pressed the case; whether they raised is as a separate issue or made it an integral part of their economic argument. But the important thing is that it has been raised and has received support at least from some countries of the Commonwealth. Like many who hold the same views as I do I regret that this United Kingdom proposal did not command the support of the majority of Commonwealth countries. But I am not altogether surprised.
  The world situation has changed radically since the Ottawa Agreements were concluded. Then preferences were of much more value to the primary producers in the Commonwealth and of much less value to us. Today with the change in the terms of trade, they are much more valuable—to Lancashire textiles for instance—and much less interesting to the primary producers of the Commonwealth, who can sell their food and raw materials without great difficulty.
  I believe that the Commonwealth leaders were wrong, in their own interests, to reject the United Kingdom proposal. For one thing, we cannot play our full part in Commonwealth development unless the Commonwealth helps us to earn a surplus by providing markets for our exports. For another it is the United Kingdom which bears the whole burden of the defence and administration and the Colonies, and it is the Colonies whose dollar surpluses have so often covered the dollar deficit of some of the sovereign members of the Commonwealth.
  We are after all entitled to point out that if we could separate economic from political interests and other bonds—and that we cannot do—the United King lom and the Colonies would be in a stronger trading position without the sovereign countries of the Commonwealth than with them.
  No doubt the Conference was against pressing for a revision of G.A.T.T. from a feeling that it would be impolitic to challenge the United States on this issue when their help was to be sought in other directions. I would urge the Government, therefore, not to regard the answer of the Conference as final, but to raise the matter again after the talks in Washington have
  1776
  taken place, when the attitude of the Commonwealth leaders may be very different from what it is today.
  Meanwhile I welcome the decision of the conference to support the United Kingdom in recommending that Commonwealth goods should continue to enter this country duty free as and when we raise the tariffs protecting our agriculture and domestic industries. I have no doubt that some increase in our tariffs is required, if only to offset the enormous excise which the present level of taxation represents on British Production. I have no doubt too, that British agriculture and horticulture will welcome the opportunity to escape from the cumbrous system of quotas. I therefore trust that the Minister of Agriculture, with the Chancellor and the President of the Board of Trade, will work out new tariff schedules for inclusion in the Budget. These will, of course, have to be submitted to the G.A.T.T., but, there, we can presumably expect to receive the same favourable consideration for the special position of the Commonwealth as was recently accorded to the countries co-operating in the Schuman Plan.
  The final passages of the communiqué deal with the problem of convertibility. To judge from the text and what the Australian Prime Minister has said, there seems to be a definite plan in existence which is to be put to the Government of the United States and to the Governments of Western Europe. The communiqué lays down three conditions for the achievement of convertibility. But there is one significant omission. Nothing is said about a revaluation of gold. Professor Williams, the American economist, who delivered the Stamp Memorial lecture last year has expressed the opinion that
  "a rise in the price of gold equal to that of prices generally would have wiped out the (British) dollar deficit completely."
  I find it difficult to believe that we could embark on an experiment in convertibility without a substantial increase in the price of gold. An essential concommitant of any experiment in convertibility would be to preserve the European Payments Union in a form that would ensure that only the net and not the gross sterling earnings of other countries could be converted into dollars. Even then the goal of convertibility would have to be approached with extreme caution. If we

  1777
  could substitute a network of Commonwealth preferences and inter-European preferences for exchange control, convertibility might be attempted without too much risk. But as long as increased preferences are barred, as is implied in the Conference communiqué, it is difficult to see how any experiment in convertibility can be shored up except by a continuance and even an intensification of the present import controls and domestic financial discipline. There is indeed considerable anxiety on the Continent at present time that the Government are contemplating such a course. That we may make the £ theoretically convertible but only by turning our backs on any liberalisation of our trade with Europe. I am bound to say that if we were faced with a choice of making the £ convertible or liberalising our trade with Europe behind the shelter of exchange control, I would hope that we would choose the latter course.
  In all these matters I trust that we are working in the closest co-operation with the Governments of Western Europe and particularly with the Government of France. I was rather worried by what the Chancellor said in his speech, indicating that no preliminary consultation was taking place with the Western European Governments before we put our proposals—because plainly they are cut and dried—to the United States. After all, we are in very much the same boat economically as well as politically as the countries of continental Western Europe, and though our interests are wider spread than theirs, it would be folly to believe that we could find any lasting advantage in separating our course from theirs.
  The decisions of the Conference are only interim decisions. They cannot become final until consultations have taken place with other interested countries. This explains the apparent contradiction between the sound, constructive approach in the communiqué to the problem of Commonwealth development and the pious expressions of faith in multilateralism and non-discrimination.
  A direct issue between make-believe and practical action has been postponed. I can only hope that after the forthcoming talks in Washington the remaining illusions which are still in some minds will fade away, that the reality will become plain and that the sterling area can
  1778
  then go forward, together with our partners in the free world, on the road to recovery.
  9.0 p.m.
  Mr. Harold Wilson: I think that the whole House would agree that this has been an extremely good debate on a most important subject, but that many of us, on both sides, are left with the feeling that we still have not got the remotest idea of what was decided at this Conference. As the hon. Member for Preston, North (Mr. J. Amery) said, the Chancellor this afternoon did not give us very much to go on.
  We on this side are torn between believing one of two theories. We are forced to believe one of two things: either that the Commonwealth Conference did not decide anything at all, that its conclusions were limited to the bag of platitudes that we have in the communiqué which was issued afterwards, or —and I must confess that this is what I suspect—some sinister goings on were decided on at that Conference, such as those hinted at by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) in relation to convertibility, and that the Chancellor has not seen fit to communicate these decisions to the House.
  It may well be, as my right hon. Friend said, that the Chancellor feels that he ought to discuss these matters with the Government of the United States before the House can be told about them. I want to emphasise what my right hon. Friend said, that if these negotiations are to begin with the United States, with no clear statement on behalf of the Commonwealth, and especially on behalf of this country, that convertibility is not an immediate possibility, then there is a very serious danger of the United States Administration being misled and of charges and allegations of bad faith when the discussions are all ended.
  There are one or two questions which we have to put to the Foreign Secretary. I have just referred to the dangers which my right hon. Friend envisaged about convertibility. I hope that the Foreign Secretary at least will be frank with the House. I hope that he will tell us whether the stories which have been printed, with a vast amount of circumstantial evidence, in the financial Press have any foundation or not. As my right hon. Friend said, the impression has been

  1779
  created, not least by broadcasts and speeches by certain Commonwealth Prime Ministers, that a plan emerged from the Conference which was not published in the White Paper, but which is to be taken up with Washington.
  The "Financial Times," which seems to be fairly well informed on the intentions of the Government from time to time, said only two or three days ago:
  "Mr. Butler is anxious to see Mr. Humphrey as soon as possible in order to put before him the proposals worked out by the Commonwealth Conference."
  What are those proposals? There are no specific proposals in the White Paper. The Chancellor of the Exchequer is not intending to cross the Atlantic merely to discuss with Mr. Humphrey the proposal to make one or two minor adjustments in the United Kingdom horticultural tariff. I hope that the Foreign Secretary will tell us tonight. He has had ample notice of the question. I hope that he will announce whether all my right hon. Friend's anxieties, which, I must say, are shared not only on this side of the House but by many hon. Gentlemen opposite, as has been made clear from some speeches, are justified.
  Apart from those specific anxieties, one of the matters that worries me, especially after the Chancellor's speech today, is the whole attitude of the Government to the Conference. They have, apparently, approached this Conference with this new feeling, which they have been putting about very assiduously in the last few months, that our main economic difficulties are solved, that we are starting from a more favourable position than before, and that we have only to go forward along the road marked out by the Government and we shall at last come through to real solvency and independence.
  My right hon. Friend, and also one or two of my hon. Friends, notably the hon. Member for Gloucestershire, South (Mr. Crosland), have exposed the hollowness of these claims. There was no real economic recovery over the past 12 months. The most important thing that happened was an improvement in the terms of trade—the ratio of the prices we have to pay for our imports, compared with the prices we get for our exports—and they have improved, certainly, by some 14 per cent.
  1780
  over the past year or 18 months. But the Government cannot claim a farthing's worth of credit for that improvement in the terms of trade, and such measures as they have taken, such as cutting imports, are to some extent in the nature of oncefor-all operations. We cannot go on living on stocks.
  Looking at the real factors affecting the strength of the British economy, we see that there was a real weakening over the past few months. For instance, the Government's restrictions on capital investment are weakening the competitive power of British industry. I know that estimates vary, but there is no doubt that the Americans in 1952 were putting in anything from six to ten times as much capital equipment per worker in manufacturing industries as we were doing in the United Kingdom. When we consider the amount which we have to catch up in terms of industrial efficiency, then, of course, the ratio ought to be the other way round.
  The Chancellor is still preening himself on what he called, last week-end, our "new-found solvency." I think he used that phrase in Leeds.
  The Secretary of State for Foreign Affairs (Mr. Anthony Eden): Hear. hear.
  Mr. Wilson: It seems that the Foreign Secretary shares the optimism of his right hon. Friend, and it is perhaps necessary to tell the Foreign Secretary what is really going on. A great deal of the improvement in our balance of payments position in 1952 was simply a reversal of speculative movements—a flight of capital—which had drawn on our reserves a year ago. This was hardly surprising. It happened after this Government came into power, and, a year ago, in this House on 30th January, I remember advising the Chancellor not to panic unduly about this speculative movement because it might be quite quickly and dramatically reversed, to the tune of some hundreds of millions of pounds. We have to warn the Chancellor tonight that it might be just as dramatically reversed again, and in the opposite direction, if there is the slightest change in the balance between the dollar and the non-dollar world.
  When the Chancellor talks about our new-found solvency, and about what foreigners think of sterling, this newfound solvency is in no way different from

  1781
  the improvement that we had in 1950, even in the first half of 1950, before Korea and before the world scramble for materials. The plain fact is that, as hon. Gentlemen opposite know, the world has been faced, since the end of the war, with a two-year cycle of recovery and crisis, depending very largely on the state of economic activity in the United States.
  In the past few months, the demand for sterling area goods has been maintained at a pretty good level by a record American boom, and I am sure that the Chancellor, when he really considers this matter carefully, will have to admit that nothing that has happened in the past year has in any way placed us in a stronger position in which to meet the results, shall we say, of quite a small recession in the United States.
  Recent reports published in the United States, the Paley Report, particularly, and others, have shown that even the slightest recession in American activity, 2, 3 or 4 per cent., which might quite easily happen this year, can have a devastating effect on our sterling area dollar earnings through the sale of sterling area primary produce.
  When I was in the United States two or three weeks ago I certainly could not find anyone who had confidence that they were going right through 1953 without at any rate a small recession, and there were some who expected quite a major recession, if not in 1953 at any rate fairly early in 1954. When that crisis comes—we must all be very anxious about it—the result of the past year's restrictions on capital investment will mean that we shall be in a weaker position to face the competition of American industry as well as, of course, the competition of German and Japanese industry.
  The Chancellor referred for a few moments this afternoon to the problem of trade with Canada, and other hon. Members have spoken about it tonight. We in this House are all one in our agreement on the vital importance of that trading link between Canada and this country. I hoped for one moment that the Chancellor would tell us something of the discussions which may have taken place between himself and the Canadian Ministers about the future of AngloCanadian trade.
  I have just returned from Canada where, from talks with a very wide and
  1782
  representative section of opinion, especially in the chief exporting districts—British Columbia, the Prairies, and so on —I was made only too well aware of the anxieties with which Canada faces the future. I am sure the Chancellor is well aware of those anxieties, and I hope that the right hon. Gentleman has already initiated discussions on these problems.
  The hon. Member for Harrow, West (Sir A. Braithwaite) talked about the ludicrous state of affairs which exists in Canada today whereby vast quantities of feedingstuffs are rotting there at the present moment, feedingstuffs which, as we all know from yesterday's debate, we should be only too glad to have in this country in order to expand our agricultural production.
  Anglo-Canadian trade is particularly vulnerable to the operation of this two-year boom and crisis cycle to which I have referred. As the sterling area's balance of payments improves, we find, whatever Government are in power, Labour or Conservative, it is possible to allocate more dollars for one or two marginal purchases of this or that Canadian product—newsprint, timber, Ontario cheese, Nova Scotia apples, British Columbia salmon, bacon, pulp, and all those other things—and then, when crisis descends upon us, we have to cut these imports once again and thereby throw whole areas of the Canadian economy into confusion and depression. That is why Canadian export districts, even more than Ottawa, are watching the level of activity in the United States with anxious eyes at the present time. They know the effect that a slight recession in the United States would have on our ability to purchase goods from Canada.
  I put it to the Chancellor that the time has come for discussions with our Canadian friends on the basis of a new approach to our mutual trading problems. We must face this fact. I think that eight years' experience of this since the war has taught all of us that the whole pre-war financial basis of Anglo-Canadian trade has gone and is not likely to return.
  Before the war, our exports to Canada paid for only a relatively small proportion of the goods we were then buying from Canada. We bridged the gap, of course, with American dollars earned from the sale of sterling area primary products to the United States. But, since

  1783
  the war, these sales have not been anything like big enough even to bridge our direct gap with the United States, let alone to provide any surplus to finance trade with Canada.
  We can all understand, of course, the nostalgia of our Canadian friends for that pre-war quadrilateral system of trade and finance, and it is this nostalgia which naturally strengthens their desire for the convertibility that they once knew. But, as my right hon. Friend the Member for Leeds, South said, and as I have had to say many times in Canada, convertibility is one of the things that one gets once one removes the dollar problem in the world; it is not one of the means of achieving a solution of the world's dollar difficulties.
  Indeed, I believe that if there were to be an attempt—if some of the rumours proved true—to solve the sterling area problems by unwise steps towards convertibility, then the first casualty would be Anglo-American trade, and many of our Canadian friends realise that, too. If dollars are to be made more freely available to third countries, such as South America or wherever else it might be, with all the temptations that they would provide for blocking imports from Britain, that would mean immediately fewer dollars for financing purchases which we want to make from Canada, even—and the Minister of Food will know about this—to the point where we could not go on paying for wheat from the prairie provinces.
  Obviously, we must go on doing all we can to export British goods to Canada. As we have said on all sides of the House, the development of Canada's natural resources, oil, iron ore and other minerals, represents one of the most exciting and encouraging things happening anywhere in the Commonwealth or even in the world at the present time. We should all like to be much more closely identified with these economic developments.
  I came back from Canada three and a half years ago convinced that while we must continue to do all in our power to increase the export of consumer goods to Canada the real hope lay in engineering exports, and in that respect some firms have since done excellent jobs. I was excited to hear of their success. Others,
  1784
  of course, have not done so well. I thought, three and a half years ago, that we could achieve a tenfold increase in engineering exports to Canada. I think that possible still, but it is only possible if changes are made in our present arrangements.
  I believe that we are certainly more than competitive on price and quality of our engineering goods, and over a wide range we are fully competitive even in the matter of spares and services. But. of course, all this is useless if our delivery dates are too long and, even worse, not only too long but uncertain or dishonoured. Even if an importer can save 100,000 dollars by buying a key piece of equipment from Britain compared with the price for the same equipment from the United States, the whole saving is wiped out if it takes us two, three or four years to deliver it, when the United States can quote delivery in six, nine or 12 months. That is because the delay means that the plant or factory are losing earning power and revenue while they are waiting for that delivery.
  I was horrified to learn when I was in Canada that there are cases of long delivery dates and, worse still, failure to honour the delivery dates promised. Two years ago the late Government announced that engineering exports to Canada would rank as being of equal priority with defence. I hope that the Government will tell us tonight whether that undertaking has been honoured and is still being honoured, because it is certainly the impression in Canada that great harm is being done by some of the instances which I have mentioned.
  If it is a fact that we cannot hope to earn Canadian dollars by our direct trade—and in the first nine months of last year we were still paying for less than 40 per cent. of our imports from Canada by our exports—is there not a case for entering into negotiations now with Ottawa to see whether that trade could not be at least partly put on a different basis? There is widespread interest in Canada in the suggestion that some of our Canadian purchases should be paid for in sterling and any surplus which might develop should be held in the form of sterling balances on Canadian account in London.
  That suggestion has been put forward by many Canadians, and while I was

  1785
  there I read a very constructive and realistic article by Mr. Elmore Philpott, a noted Canadian columnist, in which he worked this out in some detail. It would not be necessary now to decide what would be the fate of those balances if they continued to increase; but we should not rule out investment in the sterling area; we should welcome it. We should not rule out the possibility that after a time the Canadian Government might want to take action or influence purchasing authorities and private consumers in favour of British rather than American goods, because they are concerned at the extent to which they are becoming tied up with United States economy.
  If there is another depression or crisis in Anglo-Canadian trade within the next year or two we shall all come to realise the need for this kind of policy. What we have to ask tonight is whether it is necessary to learn all this the hard way, and whether thousands of decent people in Canada as well as this country have to be ruined before we decide to make trade the master and finance the servant, instead of the other way round. I hope the Foreign Secretary will have an encouraging word to say about the future of Anglo-Canadian trade.
  The other main subject with which the debate has been concerned is Commonwealth development. We can find no evidence, either in the White Paper or the Chancellor's speech, that Commonwealth development is to be pushed either in the directions or at the speed required. In the White Paper there is some mild criticism of over-development of secondary industry. Presumably that is a reference to Australia. But what we still want to know—and I hope the Foreign Secretary will tell us—is whether machinery is going to be set up both in terms of Commonwealth consultation and control over capital movements to ensure that our scarce capital resources are going into those developments which will make the most direct contribution to the solvency of the sterling area.
  Reference has been made to the committee in the City of London. The hon. Member for Preston, North (Mr. Amery) was saying that this will be valuable in deciding which are the projects that will get the capital and steer the capital towards it; but it is monstrous to suggest
  1786
  that an independent committee in the City of London should have to decide which are the projects which should get capital. These things should be decided only by Her Majesty's Government in the United Kingdom and by all the Governments of the sterling area working together.
  It is still possible for a lot of money to be raised and sent to South Africa to build a brewery and it is still possible to find really urgent development schemes held up through lack of capital. I wonder whether the Foreign Secretary can tell us tonight whether there is a real drive for some of these dollar-earning and dollar-saving schemes. We know all about the Gold Coast aluminium scheme and very much welcome it; we started it. But I wonder whether the Foreign Secretary can tell us anything about the work of the committee presided over by the Under-Secretary of State for Commonwealth Relations, which is supposed to be pressing on with Commonwealth development.
  Perhaps the hon. Gentleman has forgotten about it; but it might be a good thing to stir him into action. There are very many schemes that can earn and save dollars and we want to know about them. There is copper in Rhodesia and Uganda; zinc and lead in Nigeria and tin in Uganda and British Honduras. We have to face the working out of the tin reserves in Malaya, before many years are over. There is, too, bauxite in Jamaica, manganese in India and South Africa, tungsten in Uganda, beryllium in India and columbium in Uganda. I am sure that these things are being considered by the Foreign Secretary, and what we should like to know at some convenient time—I would not press him to answer in detail tonight—is what is being done to press on with these schemes.
  Perhaps the most important step in the Commonwealth development would be for the Government to work out now a wide-ranging geological survey of Colonial Territories. 1 agree with much which was said by the hon. Member for Harrow, West (Sir A. Braithwaite); I do not think that anyone in the House would deny that the answer to all our dollar problems may well be found 200 or 1,000 feet below the soil in the Colonial areas, and a really imaginative geological survey

  1787
  might possibly solve a lot of our problems over rather a long time.
  There is talk in the White Paper of this committee in the City to help to finance development. It may have a part to play —a very small part, I suggest—but, of course, it will be useless unless there is a system of priority in selecting development schemes and pushing on with them. There are one or two things about Commonwealth development which I believe the Government have still not realised, and the first is that their own policies have dealt a body blow to essential schemes of Commonwealth development over the past few months.
  I remind the Chancellor of the Exchequer of the Report of the Colonial Development Corporation on this very point. They referred, for instance, to a loan to the Malayan Central Electricity Board negotiated when the Government rate of interest was 3 per cent., and they said:
  "With increases of rate since this deal was settled, Corporations return on a loan of £3,750,000 will be reduced from £37,500 to £6,425—an ad absurdum 0.2 per cent.; and what becomes of that if there be another rise in rate."
  They go on to say that, with interest rates as they are now,
  "Earnings must average 6¾ per cent. after payment of colonial tax to meet interest; or more with overheads; more still if advances are to be duly repaid; and that, on average, is asking a great deal from the kind of jobs the Corporation has to take on."
  They conclude:
  "The result must be to deflect Corporation from its primary purpose of opening up new fields of development until times—and rates —change."
  They mean, of course, "until times and Governments change": because it is quite plain that the Chancellor's increase in the interest rates was an entirely ill-considered measure. After all, almost the first thing he had to do was to come to the House and produce a means for dealing with its consequences in terms of housing rents. The second result has been to kill a great proportion of important Commonwealth development schemes.
  Mr. Beresford Craddock: Many previous schemes were stupid.
  Mr. Wilson: If the hon. Gentleman judges that some of the schemes going on at present are stupid he has not begun
  1788
  to understand the needs of Commonwealth development.
  Mr. Craddock: What I said was that many schemes started by the previous Government were stupid and were proved to be so, with consequent large amounts of wasted money.
  Mr. Wilson: All I heard the hon. Gentleman say was "stupid schemes," referring to schemes which were being cut out by the increased interest rates.
  The second point which I do not think the Government have fully appreciated, although I know some hon. Members opposite appreciate it, is that although private enterprise and self-liquidating development schemes have their part to play in Commonwealth development, the major task will have to be done by public authorities and Governments in the provision of the basic economic and social overheads of development—roads, railways and other essentials.
  The last point I should like to make about the White Paper concerns the commodity schemes. I think it is encouraging to all of us that the Commonwealth Prime Ministers have announced their acceptance of views, which for a long time have been put forward from this side of the House, about the importance of commodity stabilisation schemes, but we are bound to ask what the Government intend to do about it, having made this announcement.
  The first test will be in the discussions now going on in Washington about the future of the International Wheat Agreement. Of course, Britain wants to buy wheat as cheaply as she can get it within reason, but neither we nor anyone else has anything to gain from the collapses of grain prices or the agricultural depression of the kind the world knew in the 'twenties and 'thirties. We ask the Government: Are they going to resist the siren voices of the City and the grain trade who want to bring this Agreement to an end?
  Further, what about the wrecking activities of the Minister of Food himself? Does his new policy of setting the grain speculators free mean that this country could not enter into a further long-term wheat agreement? We had experience, when we were in power, of the grain interests wanting to sweep away these long-term price agreements. The

  1789
  advice they gave us was almost invariably wrong. It is no use for the Government to preach the virtues of commodity agreements if they then go right over and wreck the only kind of arrangement which could make them work.
  It is no secret that when we were in office our attempts to reach international agreement on these long-term commodity schemes were fought not only by some of the commodity interests and by the Tory Party, but were also opposed by certain elements in the American Administration. Now, I think, there are signs of a change of attitude in the United States. I think the Chancellor will have received reports of that.
  The Paley Report and other important surveys, and the statement of the American Chamber of Commerce, seem to suggest that there is a growing realisation there that long term commodity schemes are necessary in the interests of the Americans themselves, and now we hear that, as a result of abundant harvests, the American Administration are facing the "danger"—as they put it—of a wheat surplus this year. It is fantastic to use a phrase like that when millions of people are starving, but from their point of view there it is a problem, and there will be strong pressure to continue this international scheme.
  We must ask the Government, when the Americans are prepared, apparently, to enter into this commodity scheme, whether they are to be responsible for wrecking it by this new move to set the grain trade free. Obviously, we ought to show our willingness to enter into a new wheat agreement—and, perhaps, a cotton agreement, and agreements on other things that the Americans are interested in—in return for agreements to deal with the future of wool and rubber and tin, and other things.
  I hope the Foreign Secretary will tell us whether, on balance, he thinks, as a result of this Commonwealth Conference, we are as a nation economically stronger or weaker. Certainly, the links in Commonwealth trade over the past year have been rather seriously weakened, and the real strength of our economy has been badly hit with declining production, declining exports, restricted investment, and with a loss of confidence on behalf of our people in the full employment
  1790
  policy. Does the Foreign Secretary think we are more or less vulnerable to outside shocks? I think that there is a real danger of the Government, and, under their influence, the Commonwealth Prime Ministers, basking in the sunshine of this temporarily favourable exchange movement, and of not getting right down to the problem.
  If there is actually a recession, do the Government think that we are strong enough to weather its consequences? If we are not, then the whole legend of this new found solvency will go. The Government will go, too, but we can spare them. But, at the same time, there will perish in this disaster the hopes for the security and the livelihood of millions of people in this country and in the Commonwealth which, as far as we can see, the Commonwealth Conference has done nothing to help.
  9.35 p.m.
  The Secretary of State for Foreign Affairs (Mr. Anthony Eden): I have enjoyed, and I think the House has enjoyed, the speech which the right hon. Member for Huyton (Mr. H. Wilson) has just read. We have had from the Opposition benches a galaxy of oratorical talent, especially from Privy Councillors. which is very impressive for ordinary people on the Government side of the House like myself.
  I am rather reluctant to award a prize amid such a galaxy of talent, but I really did think—I hope the former Chancellor of the Exchequer will not be upset if I say this—that the right hon. Gentleman who has just spoken did, on the whole. make the most constructive speech of the whole debate from the Opposition benches. I hope that I am not offering an apple of discord. Perhaps it was because I could understand it better. The speech of the former Chancellor was very erudite, and at times, for the ordinary amateur, almost incomprehensible.
  Mr. Gaitskell: Even the Chairman of the Commonwealth Conference?
  Mr. Eden: I could understand the references to the Conference. but I was worried when he was straying across more abstruse economic fields.
  We have had, on the whole, a very constructive debate. I felt some sympathy for the right hon. Member for Dundee.

  1791
  West (Mr. Strachey) when he said he had never spoken in a debate like this before. Nor have I. Long ago when I used to read certain classics at Oxford, I remember one which taught me about economics. I say, with great respect to the House at this moment, that it was a publication written about 900 years ago. It was advice from a father to his son as to what he should do if in economic difficulties. The father said to the son: "Should deficiencies appear in your economy, plan to increase your income so as to prevent the occurrence of these deficiencies, and if you are unable to increase your income then, my son, reduce your expenditure." There is something horribly familiar about it, although it was written by an Eastern prince some 900 years ago. When I found that the heading of the chapter was "On being a merchant," I thought it was fairly topical to our problems at the present time.
  I would say one word of cheer, if I may, to the right hon. Member for Dundee, West. He took a very gloomy view indeed about this country and about the possibility of anybody investing money in this country. He seemed to say, it if I got his words aright, "You could not expect capital to flow Into an area where there is a social democratic programme at work," because the capitalist would, of course, fight shy of this country. I do not think that is what has happened at the present time, if I am to understand my right hon. Friend the Chancellor aright. Just recently, the Treasury have had to intervene to stop the rate of the £ going above 2.82, not because people do not want to put money here but, apparently, despite the right hon. Gentleman's terrible foreboding, because they do.
  Mr. Strachey: If the right hon. Gentleman will forgive me for interrupting, I said that if all controls on the import of goods into this country and the export of money from this country were swept away and we had complete convertibility, that is what would happen.
  Mr. Eden: I thought the right hon. Gentleman was glooming a little about the present situation. If he was only glooming about what would happen if right hon. Gentlemen opposite were returned to office, I should not take any
  1792
  exception to that and he would be absolutely correct in his diagnosis.
  Mr. Strachey: I can assure the right hon. Gentleman, and I think I can speak for every hon. Member on this side of the House, that we shall not restore convertibility if we are returned.
  Mr. Eden: That was not exactly the issue. [HON. MEMBERS: "Yes it was."] What the right hon. Gentleman was telling us, and I am within the recollection of the House, was that owing to the fact that we were what he called a social democracy nobody amongst the great capitalists would want to invest here. [HON. MEMBERS: "No."] Yes, he did. The right hon. Gentleman said they would rather go to other places where, presumably, there is not a social democracy. If, however, he thinks they want to come here, I have no quarrel with him, because that is exactly what is happening at the present time.
  The great, the serious factor that militates against investment in this country at present is not our political system or the fact that we are a social democracy, but the fact that we are one of the most heavily taxed nations in the world. That is due not to our social programme in particular or to social reforms but to the immensely heavy armament burden which we are carrying. That is a factor which all sides of the House have to recognise.
  Mr. Gaitskell: The tax situation was not much lower before the defence programme began.
  Mr. Eden: I do not know why the right hon. Gentleman should gratuitously condemn himself in that way. I was not trying to blame him or the late Government. I was saying that this was an international phenomenon from which we were suffering. Of course, if it was the fault of the late Government, far be it from me to exculpate them.
  Mr. Gaitskell: The Welfare State.
  Mr. Eden: No, with all respect to the right hon. Gentleman, the problem is not due to the Welfare State. The main problem at the present time is due to the excessive burden of armaments which we have to carry. It is important that the House should realise this. If we add our actual armaments expenditure to such

  1793
  additional factors as the atomic bomb research and so forth, we reach a total of something like 40 per cent. of our national expenditure which is directly or indirectly due to armaments. Nobody is to blame for that. We have to shoulder it, and I agree with the right hon. Gentleman that it is much better we should shoulder it than face a conflict, but it is a factor of vital importance in assessing the problems which now confront us and it should be recorded.
  My right hon. Friend gave a survey of the results of the Conference in the practical field. In view of what was said by the right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker), I want to say something about the atmosphere of those meetings. It was my privilege to preside over a number of them, and the prevailing impression which was left upon me, as I think it must have been upon anyone who was present at the meetings, was the eagerness shown by all the delegations to co-operate in making those consultations a success.
  The right hon. Gentleman was rather severe in his strictures upon Imperial Preference and said that in raising this topic my right hon. Friend and I and others had greatly disturbed the Conference and that we had created a resentment among the delegates. I want to assure the right hon. Gentleman that was not true at all. I have never seen delegates more patient or more receptive to a statement of what they well knew to be the position of Her Majesty's Government in the United Kingdom, and he need have no anxieties on that score.
  We stated our position clearly to them, as the Conference expected us to do. They accepted as much as they could accept of our case and argued what they could not accept of our case, but there was really no question of resentment of any kind. In fact, the whole mood of the Conference was exactly the reverse. I did not see anybody expressing resentment of any kind at any time, and having been at a great number of international conferences, that experience for me was both agreeable and unique.
  Mr. Gordon Walker: Why was it felt necessary to create the precedent of recording a disagreement on this matter
  1794
  in a communiqué after a Commonwealth Conference, for the first time, I think, that it has ever been done?
  Mr. Eden: I think it is rather a good idea. If at a Conference we happen not to agree about something and we are friends about it, I do not see why we should not set down the fact that we do not agree. That damages nobody, and as far as I am aware nobody has returned home either bruised or battered as a result of that phrase in the communiqué. If I may suggest it, it is quite a good precedent to follow in international communiqués also, but there it is a little more difficult to do than in a partnership such as ours. I think that the right hon. Gentleman was unnecessarily exercising himself in that respect.
  I believe that part of the reason for the spirit which animated the Conference was the feeling, if I may say so to the former Chancellor of the Exchequer, of comradeship in adversity which was shared by all the Finance Ministers. They had been through so much together before. I am not saying that in any personal spirit, because they went through it not only when the right hon. Member for Leeds (Mr. Gaitskell) was in office, but when my right hon. Friend was in office, and they met at a meeting over which my right hon. Friend presided.
  I say in all seriousness that our Conference last autumn was only possible because of the success of the Finance Ministers' meeting last January. They agreed then to provisions to confront our difficulties and they enabled us all to meet later in the year with a sense that their action had met with a measure of success beyond what it had seemed possible to hope for 11 months previously.
  The right hon. Member for Leeds, South—I will try to answer a number of his points—referred to the extent and rapidity with which our gold and dollar reserves had run down in 1951. That is perfectly true, but I do not think that the right hon. Gentleman gave enough credit to my right hon. Friend for what he has achieved and for what the sterling area has achieved in the control of inflation.
  Hon. Gentlemen opposite are attached to physical controls—that was also very evident from the speech of the right hon. Member for Dundee, West. We do

  1795
  not suggest that these physical controls can be thrown overboard, but we do claim that much has been achieved by our monetary policies to control inflation. The right hon. Gentleman, I know, will have observed the section of the communiqué from the Conference which referred to internal measures.
  We in this country, and, I may add, a number of countries of the sterling area—I do not think this is an unfair criticism of previous Administrations—have suffered in the past because we have thought it possible to follow inflationary internal policies without their having any effect at all on our external position. What was important in the communiqué was that all the countries—each one of them —represented at the Conference accepted the primary responsibility to get their internal position right if we were individually and as a whole to achieve a sound external position. That was one of the major achievements of the Conference.
  Mr. Gaitskell: That was done in January.
  Mr. Eden: The right hon. Gentleman says that that was in January. I need not complain as long as he gives the credit to my right hon. Friend. I do not mind whether it belongs to January or to November.
  Then, the right hon. Gentleman asked the meaning of the figure quoted by my right hon. Friend of the £150 million surplus. I admit that that was not quite clear in his original statement. That figure refers to the surplus of the sterling area as a whole with the rest of the world for the second half of 1952 and it does includes the United States aid, which I think is about £50 million out of that total.
  Mr. H. Wilson: Was it £s. or dollars?
  Mr. Eden: It was £s, £150 million, of which £50 million was United States aid. The right hon. Gentleman also raised the question of ensuring that other Commonwealth countries directed their development to primary production. He asked what we had done about that. Of course no one knows better than the right hon. Gentleman that development policy is the sole responsibility of each of the independent members of the sterling area. It would be quite impossible, and con-
  1796
  trary to the whole tradition and programme of Commonwealth development, for us to seek to control all that development centrally here in London. What we did at the Conference was to obtain agreement that countries within the Commonwealth—and that includes ourselves—would seek to direct their development to projects which would be of benefit to the balance of payments of the sterling area. The application of this policy lies with individual Governments themselves, but we have confidence that they will fulfil their undertakings.
  I now come to another point raised by the right hon. Gentleman, the question of money. There is no control over the right of a citizen of this country to transfer his own money to any part of the sterling area. There never was under the previous Government and, indeed, this freedom of transfer we regard as being one of the fundamental points in the working of the sterling area. It could only be controlled by the imposition of a full system of exchange control between the United Kingdom and the rest of the sterling area, and none of us wants to do that.
  But the position is very different in the case of a resident of some other part of the sterling area who comes here and wants to borrow money in this country. In the first place, the increase in the interest charge for such borrowing is bound in itself to have—if I may use the phrase —some weeding effect on the kind of projects for which the money will be borrowed. In the second place, we have made it clear in our communiqué that we follow this up with instructions to the Capital Issues Committee and that when there is any question of borrowing in this country for development in the rest of the Commonwealth certain tests have to be applied. The main test is whether or not in our view the project for which the money is being borrowed is sound and capable of producing on an economic basis, and therefore likely to contribute to balance of payments in the sterling area. The same tests apply to anyone who wishes to make use of the sterling we have put at the disposal of the International Bank.
  The right hon. Gentleman asked about dollar import restrictions of the sterling area. He asked whether they were likely to be maintained. The answer is that

  1797
  these matters were discussed, and discussed at considerable length, at the Conference. As the Chancellor himself indicated earlier this afternoon, we have confidence that as a result of that discussion the sterling area as a whole can look forward to being in balance with the dollar area, at least during the first half of 1953. May I say the results of January in this respect are distinctly encouraging.
  I come to the position in so far as it concerns particular policy. The whole purpose of our policy and of the Conference and what we now contemplate in co-operation with other countries is to try to create conditions for expanding world production and trade. What my hon. Friend the Member for Aberdeenshire, East (Mr. Boothby) said, with his knowledge of these matters, is perfectly true—
  Mr. Gaitskell: Would the right hon. Gentleman deal with one other very important point. That is what is the principle of the attitude of the Government and the Conference to convertibility, particularly in regard to non-residents?
  Mr. Eden: I shall be dealing with that, if the right hon. Gentleman will wait a few moments. I am dealing with what we are trying to do. I will then deal with what we are not doing, in accordance with his own prescription.
  Our whole purpose in this plan is to create conditions for expanding world production and trade. This is a very difficult thing to do, I admit. We quite realise that we cannot do it by ourselves alone, we cannot do it by the Commonwealth alone, Europe cannot do it by itself alone, nor can the United States do it by itself. So, if we are to make a success of our endeavour, there are three essential elements it the negotiations which we have—the Commonwealth. the United States and Europe.
  The problem of the order of approach was mentioned by the right hon. Gentleman. That problem can easily be exaggerated. I know it is difficult, but the most that we contemplate in regard to the United States is an exploratory discussion. We have certainly no intention of leaving our European partners out of the serious business of negotiations. On the contrary, we will keep them informed stage
  1798
  by stage, even during the first exploratory discussions. After all, we have to make a start somewhere, and it seems to us that the right quarter in which to make our first exploratory sounding is the United States, if only because that allows us to carry discussions further with others on a realistic basis. Moreover, the fact that there is a new Administration in the United States emphasises the need for such contact.
  I can assure the House, as Chairman of O.E.E.C., that I shall not for a moment forget the responsibilities that lie on me to deal fully and fairly with our European partners. If further proof were needed that our discussions in the United States are purely exploratory, it is that further talks will be necessary with the Commonwealth countries themselves. We shall, of course, want to keep them in touch at every stage. I will only say further about these exploratory talks that we realise, and in this I agree with the right hon. Member for Leeds, South, that any progress we can make is bound to be slow.
  I come to the right hon. Gentleman's point about convertibility. He set out many of the difficulties and dangers which are bound to surround any movement towards a system of freer trade and currency. Of course we are well aware of this. He set them out very well, if I may say so. In our view, and I think in the view of the House as a whole, there can be nothing worse than to embark on a convertibility operation and then have to retreat. That is what happened in 1947. I am not making any reproaches, I am merely stating facts. That is certainly not the position which exists now, and it is not a position which we shall allow to exist in our discussions and negotiations on these matters.
  The right hon. Gentleman very rightly pointed out the direct and damaging effect that convertibility might have on trade relations with various countries. It is precisely because we are so well aware of this that our communiqué stressed that finance and trade must go hand in hand. It is for similar reasons that we want to have and will ensure we shall have very full discussions with the major trading countries concerned and with international institutions.

  1799
  I sum up my view of the Conference, not in my words or the words of any Member of Her Majesty's Government, who may be suspect to hon. and right hon. Members opposite, but in the words of Mr. St. Laurent, who ought not to be suspect. He said:
  "The Conference was very successful…Certainly all of us worked towards the objectives of wider trade and less restrictions, but how soon the objectives will commence to operate is difficult to forecast. You cannot remove restrictions at a trade conference. All you can do is to work towards their removal, but I am sure we can hope for something within a measurable time."
  That is the Government's objective, and we go forward to try to achieve it.
  It being Ten o'Clock, the Motion for the Adjournment of the House lapsed, without Question put.

  BICYCLE SIDECARS (TAX)
  10.0 p.m.
  The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): I beg to move,
  That the Purchase Tax (No. 10) Order, 1952 (S.I., 1952, No. 2254), dated 19th December, 1952, a copy of which was laid before this House on 23rd December, 1952, be approved.
  The object of this Order is to put beyond doubt the liability to Purchase Tax on the chassis of motor-cycle sidecars. The present position is, as the right hon. Gentleman the Member for Battersea, North (Mr. Jay) is I think aware, that sidecars designed to take passengers are liable to tax, and so remain; that sidecars designed for the carriage of goods are free of tax, and so remain, but this Order simply puts beyond doubt the position of the chassis without body. Some doubt has apparently arisen on this matter, and although in general the tax has been levied, in a certain number of cases the liability to tax has been doubted, and in view of the misunderstanding and the slight difficulty which has arisen, it has been thought desirable to put the matter beyond doubt.
  10.2 p.m.
  Mr. Douglas Jay: May I ask the hon. Gentleman two brief questions? Am I right in understanding the Order to mean that as far as the sidecar and the body without chassis is concerned the article has to be for the purpose of carrying passengers in order to attract tax; but when we come to the chassis it attracts tax whether or not it is for the purpose of carrying passengers. If that is so, perhaps the hon. Gentleman will explain why?
  My second question is this, and perhaps the hon. Gentleman would convey the point to the Chancellor of the Exchequer, who, happily, is with us. I know that on the rather wider question of the Purchase Tax on motor cars the Chancellor has been taking refuge in the doctrine that he cannot alter the Purchase Tax except at the time of the Budget. I would ask the hon. Gentleman whether, so far as the legal position is concerned, if he can alter the Purchase Tax on sidecars before the Budget he can also alter the Purchase Tax on motor cars.
  Mr. Boyd-Carpenter: The right hon. Gentleman will be clear that motor cars and sidecars are different vehicles. But, on the point which is perhaps of greater substance, the whole point of this Order is to put the issue beyond doubt. In practice, tax has been levied in general on the chassis, and it will continue to be under this Order. But some doubt had arisen, and the trade association concerned admitted the position was not clear and desired that the matter should be cleared up.
  The answer to the right hon. Gentleman on the first point which he put is that the complete passenger sidecar, chassis plus body, is liable to tax. The complete goods vehicle, chassis plus bodywork, is free of tax. The chassis, naked and unashamed, will be subject to tax. One of the reasons for that, of course, is that a chassis, until the bodywork has been put on it, might be put to one purpose or to the other. If the matter is to be clear of doubt it is essential that the tax liability should be established on the chassis.
  Question put, and agreed to.

  R.E.M.E. WORKSHOPS
  Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Kaberry.]
  10.4 p.m.
  Mr. Michael Stewart: On 9th December of last year, the Secretary of State for War gave a Written answer to a Question which I had put to him. That answer showed that there had recently been received into the workshops of the Royal Electrical and Mechanical Engineers at Greenford, as many as 46 guns in need of repair. These guns had previously been sent to a private contractor for repair. After the supposed repair by the private contractor they were then, I believe, sent to Korea, and it was then discovered that, despite the supposed repair by the private contractor, they were totally unfit for use.
  They therefore came ultimately to the R.E.M.E. workshops at Greenford, where the repairs that should previously have been done were, in fact, carried out by War Department labour and under War Department auspices at a cost of some £8,000. I am sure the House will agree that in a matter of this kind the cost is really the least consideration. There is also the question of our security and of the lives of the men whose safety might have depended on these guns having been properly repaired in the first place.
  The Secretary of State for War, in his reply said that the matter was being investigated. The first question I want to put is whether it is now possible to tell us any of the results of that investigation or, failing that, whether that information will be made available at a later date. I realise that when it is decided that a piece of work like this shall be done by private enterprise, the decision where the contract is to be placed is made not by the War Department but by the Ministry of Supply, but it is, of course, the responsibility of the War Department to see that full use is made of the facilities which they have in the R.E.M.E. workshops.
  I have raised this important matter of the guns because it raises in all our minds the question: is full use even now being made of the publicly owned facilities in
  1802
  the R.E.M.E. workshops? Since this repair work was ultimately done, and properly done, in the R.E.M.E. workshops, possibly it could have been done there in the first place.
  I leave that question, important though it is, because I wish to raise the general question of the proper use by the War Department of the facilities under its control. There is one field in which I do not think that we can be satisfied that they are making proper use of these facilities, a field in which I believe there has been a tendency to use private firms, where, with greater advantage, the publicly employed civilian employees, of R.E.M.E. workshops could have been better used. I refer to the movement of vehicles.
  When a vehicle is being moved from production, when it is first brought into use, that is a Ministry of Supply responsibility. But when it is being moved from ordnance depots to other places under War Department control, or when it is being taken out for use, say, in a training programme, that is a matter for which the War Department is responsible. On 9th December I addressed a Question to the Secretary of State for War on this matter, and he then said, about vehicles being moved from ordnance depots, that the work was normally done by Army drivers. He added that recently, during the period of Territorial Army training, the War Office had been obliged to enlist the help of private firms for the movement of vehicles because of the volume of work to be done.
  My information is, however, that the private firm of Car-Collection, Limited, was taking vehicles from the War Department depots at Feltham and Laleham at a time when War Department civilian drivers were available for the work. I do not see why that should be done. We have to remember, first, that it is desirable to give the civilian drivers employed by R.E.M.E. a sense of security. We are more likely to get better service from them if they think that the work is so planned that the fear of redundancy does not always hang over them.
  We have also to remember that when these vehicles are being driven either by Army drivers or by civilian employees of the War Department then those vehicles are in the care of somebody who is familiar with War Department vehicles, who

  1803
  knows the kind of care that they require and the regulations that should be observed when they are being moved. There is less certainty of that when the task is being carried out by a private firm, which has an obvious incentive to carry through the job speedily, without too much regard to whether the vehicle is being run at excessive speed.
  I would therefore ask the Under-Secretary—and I am obliged to him for being here to deal with the matter—why, in the first place, a job of this kind should be given to a private firm when War Department civilian drivers were available to do it; and, secondly, if it ever is necessary to give it to a private firm, what precautions are taken to see that the private firm is fully acquainted with such matters as the speed at which the vehicle should be run and such other regulations that ought to be observed for the safety and proper care of the vehicle. Could he also say when any complaint has been subsequently received as to the condition of vehicles so driven.
  I turn from that particular question of the use of R.E.M.E. civilian drivers for vehicles to the more general question of the planning of work at R.E.M.E. workshops, and, in that connection, I want to refer more particularly to the R.E.M.E. workshops at Ashford. I have referred to one or two particular workshops, but only by way of example on the general question of policy with which we are concerned, and it so happens that the workshops at Ashford particularly illustrate the point I want to make.
  It is always desirable, were it at all possible, to see that the R.E.M.E. workshops are used to the full extent of their capacity. Two obvious advantages flow from that. First, if they are being used to full capacity, overhead costs are proportionately less and are spread over a greater number of jobs; and, secondly, the men working there have the assurance of security of employment and are not threatened with redundancy. I believe I am right in saying that in recent months, a number of civilian employees of the War Department have been declared redundant, and I hope the Under-Secretary may be able to confirm or deny that, and perhaps give figures of the number of men declared redundant in recent months. Perhaps he could also give an indication, for.
  1804
  at any rate, the immediate future, whether further redundancy is likely to threaten men in R.E.M.E. workshops.
  If R.E.M.E. workshops are used to their full productive capacity, we reap two advantages—removal of the fear of redundancy and a reduction in the burden of overhead costs that have to be borne on each particular job—but that situation, where the workshops are used to full productive capacity, can only be realised granted two conditions. One is that the work they are to do is carefully planned. and, more particularly, that there shall be at any workshops of considerable size more than one programme of work running at a particular time, so that, if anything unforeseen happens to interfere with the progress of one programme, the other can be immediately accelerated and regular employment can be assured.
  The Secretary of State for War, answering another question of mine, mentioned that at present the R.E.M.E. workshops at Ashford were engaged on a programme of 400 vehicles, and that another programme of 450 was being planned. Can the Under-Secretary tell us now whether that planned programme of 450 vehicles is being put into operation. and will that result in there being two programmes at the workshops at Ashford. so that regular work can be assured? The other condition necessary to a regular flow of work at the R.E.M.E. workshops is that there should be a regular flow of the necessary spare parts.
  I believe, particularly in recent years. one of the more serious difficulties in ensuring a regular flow of work has been the problem of seeing that the spare parts needed for the work are always there when required. There, again, the Ministry of Supply bears some degree of responsibility for the actual provision of the spares, but I am sure the Under-Secretary will agree that since that flow of spares is something that affects the good working of R.E.M.E workshops under the control of his Department, it is a matter to which he must give some attention. I hope he will be able to say something which will give us ground for belief that R.E.M.E. workshops can in future look forward to an uninterrupted supply of spare parts so that there may be an uninterrupted flow of work.
  There is one other point I wish to make about spares, and that is their condition. I understand that there has

  1805
  recently come to the R.E.M.E. workshops at Ashford from the War Department at Chilwell a number of spare parts in extremely poor condition which makes it impossible for them to be used for the work. They are spare parts of various types, such as, for instance, front axle beams, engine pistons, distributor brushes, parts of the clutch assembly and other spares of very considerable range and variety.
  If that is the case—as I believe it to be—it is a serious matter. If articles in this condition, which are unsuitable for the work which is supposed to be done with them, are made available to R.E.M.E. workshops it will be impossible to carry out the work either at Ashford or at other R.E.M.E. workshops in a satisfactory manner.
  I believe I am right in saying that there is no shortage of work for R.E.M.E. workshops to do, although one of my hon. Friends drew the attention of the House a little while ago to the fact that men turning up for Territorial training were asked to bring their own cars with them for repair in order to provide work for the R.E.M.E. to do. I am bound to say that astounds me, because I understand that quite recently work has been withdrawn from the R.E.M.E. workshop at Ashford and given to private contractors—work, for example, connected with 25-pounder guns and Lister generators.
  If work is shunted from the R.E.M.E. workshops to private contractors, then, clearly, there cannot be any shortage of work to do. What is needed is the careful planning of the work with regard to the matching of programmes at the workshops and the ensuring of supplies of spares in proper condition so that as much of the work as possible can be done in the War Department's own workshops, and thus secure greater security and regularity of employment for the men employed and better value to the taxpayer for his money.
  10.19 p.m.
  The Under-Secretary of State for War (Mr. J. R. H. Hutchison): May I at the outset thank the hon. Member for Fulham, East (Mr. M. Stewart) for having sent me in advance a synopsis of the points he proposed to raise this evening which enabled me to make some investigations, which in turn, I hope.
  1806
  will enable me to give him satisfactory replies.
  Before we enter into the more detailed explanation of the points raised, I think it important to get the question of general policy in its proper perspective. Indeed, I think from what he said, that the hon. Gentleman recognised this. As I think he will know, the general policy is that there should be a reasonably steady flow of work constantly going through these workshops, because it is clear that if there is a peak in demand—the sort of thing that at once made itself visible at the beginning of the re-armament programme —then one has to try to rush and employ large numbers of men for a temporary period—skilled labour which often is not there—and set up an expansion of the supervisory staff.
  All that is in fact uneconomic, particularly if, shortly afterwards, the graph of the demand upon the workshops falls and one has to get rid of these people and one sets up a general labour disturbance all round. So the policy of the War Department has been for some time to try to anticipate a reasonably steady flow of work through these workshops which will keep men more or less permanently employed.
  In addition to that, as I think the hon. Member will know, it was not our policy to tackle excessively heavy repair jobs. We have not the plant. It would involve our buying special plant, and we consider that it is more economical that these very heavy jobs should go to outside factories. It is true that there is extra space, that is floor space, available in a number of these workshops, but that is part of the policy; because if we crammed them full for a couple of months and then found that they were quite empty it would cause distress among labour. One would have to buy extra plant which would then become unused and the whole thing would become uneconomic. We think it wise, indeed necessary, to have spare room for expansion against the possibility of an emergency.
  I think that it is true to say that, as long as one sticks to that type of policy, most of these repairs can be carried out generally more cheaply in our workshops than they can be carried out by outside contractors. But I would start to disagree with that as soon as the policy was changed so that one chased demand

  1807
  up and down. In the long run, everybody will be better off and the country will benefit if we try to keep a reasonable flow.
  Against that background I turn to the detailed question of the guns which the hon. Member for Fulham, East mentioned. A large non-recurring demand for repair and overhaul of guns arose as a result of the original re-armament programme, and therefore we immediately came up against the question of policy. Were we going to expand in order to handle this large number or to follow the policy which I have outlined and hand them out to civilian firms? We decided on the latter course. Consequently, guns of varying calibres were handed to civilian firms under the aegis of the Ministry of Supply. It is true that 46 of these guns were found to be defective on return from eight civilian firms to one of our establishments in Greenford.
  Mr. M. Stewart: Could the hon. Gentleman say what firms were involved?
  Mr. Hutchison: I am informed that it is not customary to name firms, but if the hon. Member wants to pursue the matter further he should pursue it with the Ministry of Supply who place these orders.
  These guns had to be re-treated at Greenford and were overhauled at a cost of £180 each. This immediately gave rise to the investigation which the hon. Member for Fulham, East mentioned. The matter was gone into very carefully by the Minister of Supply and the War Office jointly. It led to the following decisions being taken: firstly, that the system of inspection of equipment overhauled by private contractors would be tightened up—that is the inspection in the contractor's works; secondly, that further precautions would be taken before guns were despatched by rail. I say quite frankly that there were some defects in preparing for the transport of these guns. It was also decided that preservation and protection methods in the case of this equipment and guns whilst they were in the hands of the contractors would be tightened.
  That is all that I can say. Investigation took place and it gave rise to certain steps which we hope and think will
  1808
  improve the situation. As the hon. Member for Fulham, East recognises, if he wants to probe more deeply I am afraid that he has to go beyond me, because the War Office is not responsible for carrying out these contracts.
  The next question which the hon. Gentleman raised was that of the delivery of vehicles. Almost invariably movements of vehicles between units and depots, depots and workshops and vice versa are carried out by military or by War Department civilian drivers. Our general policy—and in this we agree with the hon. Gentleman—is to use these drivers to the fullest possible extent. I have learned of only one recent instance where we departed from that policy, and it was during the peak of the training period last year, when so many vehicles were moving that we should have had to have taken on a large number of extra civilian drivers for a short time in order to cope with that short rush period. On that occasion we resorted to outside drivers.
  I am bound to say that I had not heard of this story about Car-Collection Limited moving vehicles from Feltham. If the hon. Gentleman would give more particulars about that I should like to go into it further; but it is certainly not our custom to use outside contractors in that way. Sometimes we send vehicles by rail. It depends on the journey and the type of vehicle; but sometimes that is the most economical way.
  As regards repairs by outside contractors, the recovery and the delivery is also carried out under War Department arrangements. We have not had any evidence of carelessness or any complaints about the condition of the vehicles or of their handling by these civilian drivers on these occasions. If the hon. Gentleman has any evidence to the contrary I should be glad to have it; but when I inquired into that matter I was told that the results had been satisfactory from that point of view.
  The next point raised by the hon. Gentleman was that of idle time at the R.E.M.E. workshops at Ashford, which specialise particularly in the repair and handling of "B" class vehicles. These are soft vehicles—not tanks or fighting vehicles. Last autumn I admit that the idle time there was rather high, and we were concerned to try to get it put right. The Ashford workshops are rather unique

  1809
  in that they are the only ones on piece rates, and that perhaps tends to emphasise the idle time and to make people more critical of the situation.
  My right hon. Friend has taken up this question. We have been into the whole story on account of a number of representations made to us, and when we received those representations an investigation was carried out by the appropriate branch of the War Department—the hon. Gentleman will know which one it is—to see what could be done in order to improve this idle time situation. I should say that the average percentage of idle time in all the R.E.M.E. workshops in the country is about 6.5 per cent. Until the investigation took place the percentage at Ashford was higher, but it is now down to the average and we do not think that it is excessive. As a matter of fact it compares quite satisfactorily with the percentage in similar private concerns.
  What are the causes of idle time? The hon. Gentleman has given one example which I will come to in a moment; but it is a difficulty with which we are faced in keeping the balance of skilled labour employed at the same tempo in each of its sections all the time. It is a very difficult problem, because one almost invariably has a period of time in which one's body makers, trimmers and painters, who finish off a vehicle, are waiting for the vehicle mechanics and fitters to do their jobs on the engines, and to be able to synchronise this perfectly the whole time would be an ideal which could be rarely achieved.
  But we are trying, and I think we may help to put that aspect of idle time right by sending representatives from the workshops to the depots so that they can advise the depots in advance when they see a bottleneck arising and a possible shortage of work for certain men, and these representatives order forward some other vehicles to the depots a little earlier than they would otherwise have come.
  Thus, at the present time there are 500 motor cycles which have been moved to Ashford and are waiting there as a kind of reserve for people to work on who otherwise would be unemployed. They are used as a sort of buffer to take up part of this idle time.
  The hon. Gentleman also mentioned the shortage of spares. This is another difficult problem which cannot always
  1810
  be solved in any industry. It must be recognised that these spares are in demand in Korea and in units, as well as in the workshops. From the point of view of there never being a delay at all, the ideal would be for every one of these units and workshops to hold 100 per cent. of the potential demand—the demand which might arise at any one time; but I think the hon. Gentleman will agree that that would be very expensive. It would immobilise an immense number of spares which, at the end of the day, would prove never to have been needed, and, at the end of a re-armament programme, it would leave us with several times the number of spares we needed.
  The solution is to try to use the centralised pool of spares in such a way that they flow, first, to the place which most needs them and which first needs them. We have therefore introduced a system—it has been going on for some time—of what I might call super-priority, priority and normal demand, so that spares will first find their way to places where they are most urgently required. I must admit that I have no information about spares arriving in a bad condition, and, if the hon. Gentleman will permit me, I should like to look into that matter before replying, because it would be a serious problem if it were at all extensive.
  Finally, on redundancy, I would point out that the R.E.M.E. workshops all over the country have some 16,500 civilian employees. In the financial year 1952–53, the total redundancy in all those workshops was only 188–188 out of 16,500. I submit that, although it causes pangs in 188 hearts it is relatively trifling. There was no redundancy at Ashford, there were 21 redundant at Greenford. Without committing myself to a pledge, because it is difficult to pledge oneself in these days about what the future will bring, I would say that we see no danger in the immediate future of redundancy at Ashford or in R.E.M.E. workshops in general.
  I think I have covered all the ground, except for the two points which I leave unanswered. On one of them, I look to the hon. Gentleman to reinforce me with information, and the other I will take up myself.
  Question put, and agreed to.
  Adjourned accordingly at Twenty-Seven Minutes to Eleven o'clock.