ECONOMIC SITUATION

HC Deb 06 November 1953 vol 520 cc459-559

11.5 a.m.

Mr. Hugh Gaitskell (Leeds, South)

The sentences in the Gracious Speech on which today's debate is based are, I suppose, the platitudinous and pious aspirations set out at the top of the second page: It will be the constant aim of My Ministers to strengthen the national economy and thereby to safeguard the high standards of the social services and the stability of employment. To this end they will strive for a further improvement in the balance of overseas payments by encouraging the expansion of exports and of services earning income from abroad. Even if we had not been presented with those suggestions, I think the House will agree that it is high time that we had a comprehensive review of the economic situation. We have not had a full debate of this kind since the Budget debate, more than six months ago, and since then quite a lot has happened and even a number of Blue Books and White Papers have appeared.

We have, for instance, for those who can stomach the rather indigestible fare, the Blue Book on National Income and Expenditure, 1946–1952. For those who prefer lighter reading, there is the balance of payments White Paper, which also contains a good deal more information than we have hitherto had. For those who cannot bear White Papers or Blue Books at all, there is the Mansion House speech of the right hon. Gentleman the Chancellor of the Exchequer; and for completely frivolous and frothy fare there is his speech at the Margate Conservative Conference.

I do not propose to worry the right hon. Gentleman with many quotations from these speeches of his but, as he knows, I always take a very great interest in his metaphors, and I have noticed a certain change in the metaphors recently, on which I feel I must comment. There are three sets of metaphors that the Chancellor normally uses. One is a mountaineering metaphor, another is a medical one and the third is a nautical one. The mountaineering and medical ones have been abandoned for some little time. I presume the mountaineering one has been dropped because the Everest achievement makes it seem rather impertinent to refer to climbing mountains at all, and the medical one has clearly been dropped because it would be in appallingly bad taste in view of the state of health of his colleagues.

We have, however, had quite a lot of nautical metaphors. In the Budget speech itself he said: We must get out of the slack water, lighten the ship and give her way."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 50.] In the Mansion House speech, after this classic sentence, We shall adjust our policies at all times to national needs, he went on to say: Nevertheless, liberty is sweet and will yield big rewards. So it will, I would add, to some people. He went on to say that there were many who were beginning to forget a wet sheet and a flowing sea, a wind that follows fast. Worse than this was to come. After a few more remarks about sea-girt nations and the like, he went on, with a brutality which must have shocked his audience, to say: We have made many moves. Indeed, colleague after colleague has walked, or is prepared to walk, the plank. We have seen some of them disappearing into the ocean. The "Overlords" have gone, sunk without trace. But we look with interest to see who is to be the next victim of the right hon. Gentleman's Stalinesque ardour.

It follows naturally from all this talk of the sea that I should look first at the dollar situation, which concerns a great many other countries in the sterling area as well as our own. I shall begin by looking at the brighter side. The sterling area, in the first six months of this year, had a small surplus on current account. Excluding aid, this consisted of a surplus by the rest of the sterling area of £79 million, partially offset by a United Kingdom dollar deficit of £21 million, and buttressed by a joint surplus of £52 million in dollars from non-dollar areas, giving a true current surplus of £110 million. When one adds in £55 million for defence aid and £21 million for the import of capital from dollar territories, one gets the £186 million which was the increase in the gold reserves over this period.

So far as it goes, we should all agree that that is not unsatisfactory. I would particularly draw attention—because we have all been in this—to the continued rise of dollar exports from the United Kingdom. They have risen steadily since 1950. Indeed, they rose earlier, but they have risen particularly steadily since then, from £187 million in the second half of 1950 to £219 million in the first half of 1953. Not only should we all rejoice at that, but one cannot help feeling how delighted Sir Stafford Cripps would have been about it, in the light of all the tremendous efforts which he made to build up a real drive in this cause.

I feel less satisfaction on the dollar import side, because I do not know how far the much more substantial decline of dollar imports into the United Kingdom—and, I suspect, into the rest of the sterling area—is to be regarded as permanent. My first question to the right hon. Gentleman is to ask him if he will throw some more light on that question. There is a possibility, indeed a certainty, that part of the decline in the value of imports from the dollar area is the result of lower prices. We cannot tell how long these prices will continue to be low.

Part of the decline, on the other hand, may be associated with lower stocks here or in the rest of the sterling area, and part of it—and far more satisfactory if it is so—could be associated with the replacement of dollar by non-dollar supplies. One obvious example of that, which is also very gratifying to hon. Members on this side of the House, is the saving of petroleum imports resulting from the great refinery programme which was carried out for the most part, and certainly initiated, under the Labour Government.

I now come to another doubt in my mind. I should like to ask the Chancellor some further questions on this. The South African Government have recently announced that they will not continue—I think it is after the end of this calendar year—to discriminate any further against dollar imports and in favour of sterling imports. My first question is whether this announcement by the South African Government followed upon negotiations with Her Majesty's Government. Was it the result of some agreement reached with them? If not, did it come simply out of the blue, without consultation with us? The reason I ask these questions is that the discrimination which has been exercised, I think only on non-essential goods, in favour of sterling imports into South Africa, was part of a trade and monetary agreement which we made with that country.

It is a complicated agreement, and I shall not weary the House with its detail, but, although we naturally always wish to be on the friendliest terms with other members of the Commonwealth, there is certainly no point in disguising the fact that this agreement was reached after some fairly hard bargaining. The South Africans had certain things which they wanted from us, and we had certain things which we wanted from them, and so, by a compromise, both sides were able to reach agreement. It appears, however, that one very important part of this agreement has been abrogated, and I must ask Her Majesty's Government whether they are satisfied with this.

After all, we have now got to the stage where, apart from the guarantee of £50 million in gold which will be made available to us, whether or not we earn it, South Africa is to all intents and purposes a dollar country. If she is a dollar country we naturally have to ask ourselves two questions, namely, can we afford freely to import less essential articles from South Africa, and can we afford to allow the free export of capital to South Africa? I do not wish to suggest the answer to these questions, but we must ask them and expect some reply from the Government.

There is one last point about South Africa. What, exactly, is the position if we fail in trading to earn the £50 million in gold? Do the South Africans then simply accumulate sterling balances here? If so, do they continue to give us a guarantee of £50 million of gold in the following year, or will they use up the sterling balances in paying for exports from this country? If they do, the prospect of earning as much gold as we have in the past—which has been of the order of £60 million or £70 million—is a pretty gloomy one.

My third ground for anxiety arises from the recent concessions to O.E.E.C. announced by the Chancellor in Paris. How much does he think these concessions are likely to cost us in a full year? Would he agree with the estimate, I think, in "The Times," which amounted to as much as £40 million? I appreciate that this is a matter almost of guess-work, because we do not know exactly what advantages we may get. If he could tell us whether there has been any sign of other countries reciprocating—we are aware of the small relaxation made by France—we should be somewhat relieved. We all wish to see a high level of intra-European trade, but equally we wish to see our gold reserves high, and we cannot afford to make concessions which would be contrary to the whole understanding when E.P.U. was set up, and which would cost us dollars.

My next ground for anxiety concerns the rate of United States Government expenditure abroad. First, there is defence aid. In his speech at Margate the Chancellor spoke of defence aid tapering off and said: We are emphatically regaining our economic independence of outside help. Just to put the facts on record, it should be noted that since the end of 1951 we have had just twice as much in the way of aid from the United States as we had in the previous 18 months—£166 million in the last 18 months, as against £76 million in the previous 18 months. There is certainly no ground here for saying that aid has tapered off, nor have the last figures so far published shown any signs of it. We do hear mutterings and, indeed, worse about future cuts from the United States Congress, but we know that there is usually a lot in the pipeline, and I should like the Chancellor to give us some idea of what he expects in this field.

Could he, further, throw some light on the question of the sale of agricultural surpluses for sterling? There is a statement about it in the newspapers this morning, but I am still a little uncertain what it means. We are told that, having purchased tobacco, wheat and other things for sterling, the sterling which United States agricultural authorities, or whoever it is, acquire will then be given back to us. If so, it is a clear case of aid. I am certainly not saying that it is a bad thing. Whether we are more entitled to it than other nations which are admittedly in a very much worse state so far as the standard of living is concerned is another matter, but the general principle that wealthy countries with surpluses should give them away to poorer countries is one which we should welcome. We are a little nervous, however, whether that grant of sterling to us is really a true addition, or whether it is going to take the place of other defence aid which might have been available. Can we have that point cleared up?

While still on the general subject of United States expenditure abroad, we must not overlook the fact that we are now enjoying the benefits of a high degree of offshore procurement by the United States, and if the Chancellor could give us some details about that it would be helpful, because those are not available in any way in the White Paper. Then, of course, there is the United States expenditure abroad on troops and supplies and so on, which has been at a very high level in the last two years, and, last of all, of course, there is military aid.

I think it is time we had a full statement showing exactly what, so far as we are concerned, we are obtaining from the United States in these various ways, because without that we really cannot judge the long-term situation; I hope that the Chancellor will give us this information today, for I understand he will wind up the debate, or, if not, that he will make the information available in some other form to the House.

It is, however, looking at the dollar situation, evident that all this vast United States expenditure, not only here but in other countries—and now, I think, at absolutely record levels—will not be likely to continue indefinitely. Economic aid, at any rate, we know is going to tail off. How long expenditure abroad will go on nobody can tell. There is talk of the United States withdrawing forces from Europe, for instance, and concentrating more on atomic weapons and things of that kind. That would have quite considerable economic consequences and, of course, we do not know even how long the military aid will continue.

But dwarfing all this as a source of anxiety in the dollar situation is the trade outlook in the United States. I have been careful, when speaking on this subject, not to overpaint the picture in too gloomy a fashion, and I think we all appreciate the difficulty of economic forecasts here. Nevertheless I am bound to say that recently, for the first time for about three years, there have been some signs of a deterioration.

The United States Federal Reserve index of production in September, for instance, fell, and was 3 per cent. below what it was in March after rising steadily for a good many years. There is some reduction of Government expenditure taking place there, and there is certainly less expenditure in stock accumulations, and there are signs that the rate of new orders is falling rapidly. All these things are bound, if they develop into even a minor recession, to affect the sterling-dollar outlook in what, I am afraid, must be a thoroughly adverse manner.

I come finally to the gold reserve situation. We all of us know how enormously important that is. How totally different the history of the last three or four years would have been if we had had adequate reserves. It is now perfectly plain that the crisis of 1951 was overwhelmingly due to two things, and to two things only so far as the United Kingdom was concerned. One was the tremendous deterioration in the terms of trade, and the other was the movement into stocks in 1951. I think one must expect some fluctuation in stocks. We can try to control them, but I would not be so bold as to say we could be sure of preventing any variation here; and if that is so, the only sensible way of dealing with this is to have adequate reserves. We must have them. There has, of course, been an improvement, and the level now is £900 million compared with £600 million a year ago, but the rate of increase is somewhat slowing down, and we must not forget that that £900 million has to be compared with the peak reached in mid-1951 of £1,380 million. We are indeed still not half-way back to that peak level.

It is true that the sterling balances are also not so high now as they were in the middle of 1951, but they, too, have been increasing. In a sense, one has to look at the gold reserve situation not on its own but in relation to the short-term liabilities against it, and they, I repeat, are increasing. I remember how the Colonial Secretary, when we were in power, used to charge us with great vigour with allowing the colonial balances in particular to rise, as they did rise, over that period. I do not wish now to enter into a long argument about that matter, but I would point out to the right hon. Gentleman and to the Colonial Secretary himself, since he has charge of this important office, that in the last year those colonial balances have gone up another £100 million.

That leads me to the question of what exactly the Government's policy is. Would the Chancellor say whether he has any particular proposition to put forward now on the subject of convertibility? There was such a plan worked out at the Commonwealth Conference last year. We have never had it very exactly. We have had to pick it up in bits and pieces from Mr. Menzies' speeches and from articles in the newspapers and things of that kind. But there was such a plan. It seems to have been pretty well buried by the United States Government, but does the right hon. Gentleman expect to resuscitate it?

In particular, apart from convertibility, and taking what I would regard as the more important aspect of the last Commonwealth Conference, what exactly is happening about the Commonwealth Development Plan? After all, the right hon. Gentleman did make great play with this. It is not a matter on which there is any disagreement on this side. We are all for it. But, nothing has happened at all to suggest there is any such plan. Has there been a committee? Has there been a working party? Perhaps the Economic Secretary has been in charge of this and could tell us something later on in the debate? What about, for instance, the Development Corporation? Has that lent any money yet? Has it, indeed, even got started yet? The Chancellor talked a lot about this new conference, but what is the good of having conference after conference when nothing happens between them?

I think it is appropriate at this stage to refer to the proposal of the Government to bring the Raw Cotton Commission to an end. It is appropriate at this moment because one of the considerations which surely must be in our minds in looking at this question, and was indeed in the mind of the Hopkins Committee, is what dollar expenditure we can afford, and how far we are prepared to remove all the controls over dollar expenditure in relation to cotton. I must really ask the right hon. Gentleman to throw some light on this. Why have the Government decided to wind up the Cotton Commission? Curiously enough, the Bill, which has just been published, does not commit the Government or the House, to the final winding-up, but I take it that this is just a way the lawyers have of drafting these things and that in fact there is no doubt about it. It seems to be clear enough in the Queen's Speech.

Let me recall that we have had two Reports by the Hopkins Committee. The first proposed to give an option to the traders to trade privately, and some 30 per cent. of them took advantage of that. We did not oppose that. The unions concerned accepted it. It was a compromise solution, but one everybody was prepared to try out. In the second Report the Committee recommended that the same situation should continue. Why has a change been made without referring this back to the Hopkins Committee again? Has the Chancellor consulted the cotton trade unions on this matter? I think he has. I think he knows their answer. He knows very well that they were bitterly and strongly opposed to the abolition of the Raw Cotton Commission.

Reading the words in the Gracious Speech, and reading the two Reports of the Hopkins Committee, and reading the last Report of the Raw Cotton Commission, I could not but be struck by these words in the Commission's Report: Probably the most serious disadvantage the Commission has to suffer…lies in the field of propaganda. Indeed there has been the most vicious propaganda against it, and there is every sign that the Government have simply given way to it without regard to a peaceful solution from the point of view of the industry, and without regard to the needs of the country at all.

I turn now to the United Kingdom situation, and I should like to ask the House to recall for a moment what the Chancellor's case was at the time of the Budget. The Chancellor came to us then pointing to the improvement in the balance of payments, admitting the fall in production, and urging on that account that there should be tax remissions. Our reply to this was that the improvement in the balance of payments position, to quote my own words: …has come wholly from the favourable terms of trade and from the fall in investments."—[OFFICIAL REPORT, 15th April, 1953; Vol. 514, c. 220.] That is to say, a decline in the build-up of stocks and a small actual decline in stocks.

We went on to say that we recognised that a stimulus was needed because of the fall in production but we thought that as far as possible it should be a stimulus to investment; and that if it were to be a stimulus to consumption, then it should benefit the consumption of those living at the lowest living standards. Unhappily the Government did not take our advice on this, and everything which has happened, and the latest proposals put forward presumably for a further substantial cut in subsidies and a further substantial rise in food prices, only confirm that they are again going to do what they have done in the last two years—encourage consumption not among the poorest—on the contrary, discourage consumption there—but encourage consumption among the well-to-do.

I do not wish to continue for the moment on that aspect of Government policy, not because it is not of great importance but because it is being discussed next week. But as for the rest, first of all we know, from the new figures, two changes which I have mentioned in passing—that the balance of payments surplus in 1952 was not £170 million but only £148 million, and that the value of the physical increase in stocks and work in progress in 1951 was £610 million. That is what hon. Members opposite called leaving the cupboard bare.

Furthermore, the decline in 1952 of the physical stocks and work in progress is now admitted to be £123 million, so that between those two years there was a drop in investment of no less than £733 million. With the improved terms of trade accounting for £330 million, according to the Economic Survey, that makes a net benefit of over £1,000 million. In the light of that advantage it was not very surprising that we should have transformed a balance of payments deficit into a small surplus and at the same time balanced the fall in production, but it is certainly clear now, as we said at the time, that that kind of thing cannot go on.

What has happened in the first six months of this year? There have been two favourable developments. There has been a rise in production and there has been a continued improvement in the terms of trade. As far as I can see, production is running—or perhaps I should say, has run—something like 4 per cent. above the low 1952 level. It is, of course, only in the last month that it has passed the 1951 figure. It still remains true that we have lost two years' progress, two years' expansion, but there it is: I am glad to see some recovery at last and I recognise that probably the stimulus given by the Budget is partly responsible for it. We are in agreement on that. Whether the recovery in production is recovery in the right kind of production is another matter to which I will come in a moment.

The terms of trade have improved even more than last year and as a country we have certainly had remarkably good fortune in this field. Whereas in 1952 there was a fall in import prices of 3 per cent. and a rise in export prices of about 5 per cent., in 1953 the fall in import prices was no less than 12 per cent. compared with the previous year and a fall in export prices of only about 2 per cent. If I may put a gloss on the figures given by the President of the Board of Trade the other day, we can now buy what we bought in 1951 for over £500 million less—these are minimum figures—and sell what we sold last year for over £100 million more, simply on account of price changes.

I do not think the Government would claim to be responsible for this. It is, as we all know, the result of the changes in world markets, and here let me say, in passing, how immensely important is this business of the terms of trade to all of us. If we look at the balance of payments in country after country in the last few years, we find that again and again the situation depends enormously on what has been happening to the terms of trade. Whether we take Germany or Holland or Scandinavia or ourselves, it is the same story, although not always at the same time.

With these remarkably favourable conditions it is extremely disappointing that our surplus in the first six months of this year, apart from aid, is only £26 million, and one is bound to compare this with the figure of £300 million a year given by the Chancellor—"year in, year out" was the phrase he used—as our target. He gave it in public at O.E.E.C. and the figure is repeated in the Economic Survey, only more precisely. This is what we read on page 44 of the Survey: But over a period of years it is estimated that the annual surplus on current account needed to provide for commitments and for some increase in the gold reserves may amount to something like £300 million to £350 million. Is that the target still? Does the Chancellor still hope to achieve it. Personally I hope he will say, "Yes" to that, because I think we cannot escape the fact that we ought to be aiming at that surplus. The debt repayment alone amounts to somewhere between £50 million and £100 million a year, if we include the sterling balances. Then we need to build up the gold reserves without additional liabilities. And, of course, our desire to invest abroad, particularly in the Commonwealth, is accepted by all. But what is happening now is that even with this surplus of £26 million, in fact we invested abroad £62 million. That is one of the reasons the sterling balances have gone up on the other side.

I say this in no party spirit, for it is a point of which we have all had experience: there is great danger in expanding overseas investments at a time when we have not got the surplus to do it, because the only effect will be a rise in short-term liabilities which may have very dangerous consequencies to us in the dollar situation. Does the Chancellor of the Exchequer still believe that the surplus of £300 million to £350 million is what we ought to get? If so, what is he going to do about it? What is the Government's policy for achieving it? Evidently a policy of drift or hoping has not produced the best results. The surplus is falling, not rising.

Why is it falling despite these extraordinarily favourable conditions? I do not think there is much doubt about the reason for that. It is undoubtedly due, first, to the failure of exports to rise with production. They fell with production, but now production has gone up again without exports going up. The second reason is, of course, the increased volume of imports.

The stagnation of exports, which are running physically at about the same level as in 1952, and therefore about 4 per cent. below 1951, is due to a number of different factors. Let me at once concede one of them as being beyond the Government's control. It is partly due, probably, to the very fall in commodity prices which has helped so much on the import side. I have no way of measuring it, but we would expect some repercussions, and I am not sure that we have yet had the full effect of them and whether there may not be some time-lag involved which is likely to make the export market position rather worse.

Then in some instances we have failed because our delivery dates have been too long. Let me say that in the short term there is no reason for surprise that when Germany and Japan came back into the market there was—let me be frank—bound to be to some extent a redistribution of orders, but of course it is a process which we cannot afford to allow to go on very far.

Thirdly—and now I come to matters which I think are much more the con- cern of the Government—there is developing quite a serious shortage of sterling in certain countries. I warned the Government about this at the time of the Budget. We have Japan very short of sterling and trying desperately to earn more sterling. We have Pakistan coming to us for a loan. Then, of course, we have the well-known case of Brazil, and there are one or two other countries as well. Once again I ask the Chancellor to remember that in his efforts to strengthen sterling he can strangle our export trade.

Next there is the effect of the Commonwealth cuts, which I think are still quite serious, and I hope it will be the hon. Gentleman's endeavour at the Commonwealth Conference to get some more effective relaxations introduced. The rest of the Commonwealth seems to have had during this period a surplus on its current account. That is all very well. But if we are supposed to be investing in the Commonwealth—and that is what is wanted—they ought in fact to be running a deficit. I hope that the Chancellor will make clear that the plan which we hope to see developed will involve more exports and greater investments in the Commonwealth.

Then there is the problem of prices and costs. Here I must say once again that a Government which deliberately goes out of its way to put up the price of food is simply asking for trouble. We cannot expect to exercise a complete wage freeze or wage restraint in such conditions. I have no doubt that one of the biggest incentives to rising costs is precisely the policy of the Government.

As to the rise in imports, it is obvious why they have gone up. The rise in production itself and the restocking which necessarily went with it has involved a higher demand for imports, exactly as we forecast at the time of the Budget. There has also been something else—higher consumption at home. Let me turn to the home aspect of this.

The failure to invest abroad, which is in fact what has happened, and to provide the surplus which makes possible investment abroad would not matter so much if we were investing more at home, but apart from the necessary expansion of stocks which goes with rising production, there is no sign of any increase in investment. The expansion which has taken place, so far as I can understand it, and from the published figures, is predominantly in the consumer goods industry—in clothing, leather goods, glass and paper particularly—but the engineering industry as a whole seems not to have expanded its output at all.

I do not want to weary the House with figures, but I would refer hon. Members to the Board of Trade Journal with the latest production index and the Statistical Digest which gives the earlier figures in greater detail. Factory building is still far below what it was in 1951. Completions have fallen to a deplorable level. When one sees that the value of completed factory buildings was in the final quarter of 1951 nearly £50 million and that in the second quarter of 1953 it was not £50 million but £7 million, and that the figure for July is only £1½ million, it does show what a terribly small trickle is now coming out. It is true, of course, that the Government, very belatedly, have made some alteration in their policy, but the total value of buildings under construction was still in July only about £153 million as against £183 million in the same period of 1951.

When one looks outside the building industry and at shipbuilding, for instance, although at present the level of output is high, the prospect there is certainly quite sufficient to cause the gravest anxiety. New orders for the last twelve months have been given for 160 ships and just over 500,000 tons, compared with orders in the previous 12 months of 1952 of 310 ships and 18 million tons, and compared with the 1951 orders of 730 ships and nearly 4 millions tons—a drop from 4 million to 500,000. I should not be surprised if some of my hon. Friends who have experience in Tyneside and other shipbuilding areas are beginning to get extremely worried.

While there is this fall in investment and decline in orders in these vital industries, consumption is, according to the "Banker," heavily up. The estimate there—I think it is based on the Digest—is that the rate of consumption is running at about £400 million a year more than last year. We are all glad to have the opportunity of consuming more—if we can afford it, if the country can afford it. I must, however, ask the Chancellor, and I hope that he will answer, this question: Is he satisfied with this situation— with this lull in investment and boost in consumption? Is not that really just what we would expect from the tighter credit policy and from the easier budget policy? Was the Chancellor wise to ignore our plea, repeated, I am afraid, so often, for higher initial allowances to encourage investment?

Now I come to the President of the Board of Trade's recent speech. He spoke to the Bankers' Club on 2nd November, and he referred, quite rightly, to the low level of investment and to the need to expand exports. He also spoke about wage restraint. I am not quite sure whether a dinner of the Bankers' Club was quite the right occasion for it. I should have thought that it would have been better if he had spoken about dividend restraint. I do not know why the President of the Board of Trade made no reference to this subject. Was he aware of what has been happening here? If not, let me remind him.

In 1951, when we were still in power, dividends began to go up. They caused me a good deal of concern, and I then said that if this went on we should have to introduce dividend limitation. We carried that policy some way and worked out a plan for it. Why did I do that? I was described as a class war-monger and other things of that kind. I am not a class war-monger, but I was determined to do everything I could to stop a general inflationary condition.

What has happened since? In the latter part of 1951, there was some lull and the increases for a time did not continue. But they went up again in 1952, and the latest figures show that in 1953, following the rise in 1952, they are now running at about 10 per cent. above those of last year. When it comes to the point that the city editor of "The Times "' has to begin an article with these words, Hardly a day seems to pass now without at least one important company raising its dividends and as often as not issuing a credit bonus as well it is a particularly serious development, especially when he goes on with words of warning about this.

These increases in dividends have mostly taken place at a time when profits were falling, so the consequences on the amount of money ploughed back into industry can be deduced clearly enough. I ask the Government to make their position clear on this matter. They are undoubtedly facing an awkward, and, as the President of the Board of Trade states, a dangerous situation in industry. Unless they are prepared to tackle the dividend problem, I do not think that they will get much response from the unions.

Finally, I must make further reference to the United Steel issue. I want to ask the Government exactly how much more will be paid out to shareholders as the result of this issue and the de-nationalisation that goes with it in respect of this money than would have been paid out had the United Steel shares continued to be in the hands of the Iron and Steel Corporation; in other words, if nationalisation had continued. According to my reckoning—and I ask that the figure be corrected if it is wrong and the true figure given—in this company alone where the shareholders will receive a 7 per cent. yield—which is covered three times over by the expected earnings—about £500,000 gross more will be paid out than would have been paid under nationalisation. That is not the way to get—

Mr. Ian Horobin (Oldham, East)

It is only because the party opposite robbed them in the terms that were paid under nationalisation.

Mr. Gaitskell

The hon. Gentleman will have to think of a better answer than that if he wants to appease what undoubtedly will be an increasingly anxious public opinion on this matter. The truth is that this £500,000 a year is the cost of restoring, in this one firm alone, the industry to private enterprise. If anybody can tell me exactly what contribution those shareholders are to make, I shall be most interested to hear it.

The truth about these last two years is that, with immense help from lower import prices and with far less investment in stocks, we have just achieved a balance that we must agree is totally inadequate. This year we have a rise in production which has gone, as far as we can see, overwhelmingly to higher consumption and not to higher investment. At this moment the Government's policy seems to be to drop our defences all round, abandon all purposive direction of our affairs, and hope for the best.

I can only say that I believe that this policy, as shown in agriculture, in cotton and in industry generally, will mean greater insecurity for producers, higher prices for consumers and grave risk for the nation. I know that we may survive for a time with good fortune, if the terms of trade go on in our favour, and by living on our future, but the basis of our economy will be weaker and not stronger, and when the storms which are looming ahead burst upon us we shall have cause to regret bitterly this experiment in doctrinaire Toryism.

11.52 a.m.

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

We have always listened with interest and pleasure to the former Chancellor. From my long experience of the right hon. Gentleman, I have noticed that when he starts off in a witty and jubilant frame of mind he very rarely has any destructive criticism to make or any constructive measures to propose. Today he told us that we ought to be investing more abroad and at home, and that we ought to have cheaper food and a bigger surplus, and, if I understood him aright, he thought we ought to be selling more to some of the Dominions than we bought from them; these are all excellent propositions, but he did not explain where the money was to come from to finance them.

In the last few months, I have found in the country widespread praise for the Chancellor of the Exchequer, and it has not come only from Members of the Conservative Party. The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) has told us that the improvement was due to the fact that we had been buying our imports much cheaper. I do not believe that the country as a whole takes that view. I believe it is widely realised that we could not have taken advantage of that opportunity if the Chancellor had not given us a wise and vigorous policy 18 months ago. But I do not believe that the Chancellor is in the least complacent about the present situation, however gratified he may be justly at the improvement which has taken place. Our reserves are still only about two-thirds of what they were in June, 1951, and at the rate at which we lost them between then and March, 1952, the present reserves could be wiped out within 10 months.

Therefore, it must be right for us to do everything in our power to get the surplus up to the £300 million mark at least, which is what the Chancellor has himself advocated. It is right, because we need the money to develop the Empire, where valuable projects await investment, and because we need reserves as a protection against fluctuation in world trade.

Hon. Gentlemen opposite say that we are in danger from fluctuations from trade depression in the United States. I agree that any reserves we could acquire in the next few years could protect us from the major slumps that have occurred in that country, but the fear of those slumps coming again is vastly exaggerated. The position in the United States today is entirely different. There is no speculation on Wall Street and there is no weak bank position. There is a huge unemployment fund and a widespread recognition in the United States of the extent to which that deficit financing and public works can take up the slack. It is very easy and tempting for politicians to run into inflation when they cannot afford it. There is no reason to suppose that in the United States, where they can afford it, they would not save themselves by doing that. The difference between their position and ours is that they, with their huge reserves, can afford to spend their way out of a depression and we as yet cannot.

In 1937, in that sort of minor slump that occurred then in the United States, our reserves protected us; if we could get back to a reasonable figure we should be protected against any ordinary fluctuation in the American economy. Today, as the right hon. Gentleman opposite has said, we have a surplus, but a very small one and the conditions are particularly favourable. There is a very high rate of activity in the United States and we have cheap import prices, that is a double event that we cannot rely upon at all times.

Why is it that though the position is so much better we are not doing better still? I think it is partly due to adverse external reasons, such as the growing competition of Japan and Germany. Indeed, the possibilities of competition may be greater than we realise. I am told that our prices are roughly in line with those in European countries but our exports are handicapped by our much longer date of delivery. If we can get over these long delivery dates, as we must, I am afraid that when Germany loses that advantage she will be able to cut her prices. Although today our prices compare with those of Germany, prices in that country can go lower than they are today.

Mr. J. Grimond (Orkney and Shetland)

This is a very important question, and I would ask for further information on it. I agree that our delivery is much longer than that of Germany, but surely that is because our order books are much fuller, which is a healthy condition. It is important not to exaggerate the position, but it is right to point it out. No doubt in time delivery dates from German industry will lengthen.

Mr. Spearman

What I would point out to the hon. Gentleman is that when we get over the handicap of delivery, as I suggest we shall, we may have to meet greater price competition than we are facing today. Those who are urging wage increases in the engineering industry would be well advised in their own interests to bear in mind that possibility.

There are also developments at home. There has been a very considerable loosening of the financial curb in the last few months, and there are many good arguments in its favour, but I think the Chancellor has always been aware of the risk of its leading to excessive domestic spending, which might endanger our balance. The expansion that has taken place has meant increasing consumption to something like £400 million this year. That is good in so far as it has meant a very high level of employment. It is good because it has meant some contribution towards greater production. It is good—and this is no small reason—because it is very agreeable, but it would be bad if it were causing us to import more than we could afford, or if it were causing industrialists to divert their goods to the home market when they should be exporting. It is, after all, inevitable that some industrialists would prefer to sell at home than to take the greater risks and difficulties of exporting abroad. I think that may be one of the reasons why our deliveries are so long.

In 1947, 1949 and 1951 we had financial crises, in spite of enormous aid from America, because we were buying a lot more than we were selling. We got over those crises in one case by devaluation, in another by wise and stern measures taken by a new Government in whom there was more confidence. But those remedies may not always be available, and in any case there is always the danger that they cannot be taken in time.

Therefore, I think we cannot stress too much the fact, as was said by the right hon. Gentleman for Leeds, South that we must build up that surplus. We have got in this country to save at least £300 million more than we invest. That means we have got either to consume less, or we have got to invest less, or we have got to produce more. It can only be one of those three. Let us remember that it is not only a question of increasing production. It is not going to help our balance of payments if we increase production unless we produce those things which can be exported—those things at a price and a quality and a variety that foreigners will buy.

I would make no criticism of the financial policy of the Chancellor of the Exchequer. It needs no defending by me, or even by those more qualified to do so. The results achieved speak for themselves, but so far as the future is concerned we are surely entitled to make our suggestions. Under the changing conditions of today it is, I think, very difficult for any of us who have no access to official information to make concrete proposals. But I should like to ask my right hon. Friend three questions, because I believe that on his answers to those questions depends what our policy should be.

I should like to ask him whether he really thinks there is a good prospect of an increase in exports next year; secondly, if he thinks there is reason to hope that the terms of trade will improve further—that is to say, shall we get even cheaper imports next year?—and, thirdly, whether—and this again may well be the case—the buying spree of this year is nearly exhausted and that next year there will be an automatic reduction in consumption and a greater saving. If any of those three things can be reasonably depended upon to come about, then there will be a great release of national resources. If we cannot depend on any of those three, then I should like to say with all the force that I have got that there is danger ahead. I realise that the measures to deal with that position would be difficult.

The Chancellor could relieve the strain upon our resources if he could cut Government expenditure. I believe that if that is practical it is the method that would be liked, not only by the 14 million who voted Conservative at the last Election, but by the vast majority of the 14 million who did not on that occasion vote that way. My right hon. Friend might revert to the stricter monetary measures which were so effective last year, or he might later on have to take fiscal action.

Any of those measures would create hardships and difficulties, but I would say that any Government which was afraid to risk temporary unpopularity was a poor thing and a great limit to what could be achieved in the public interest. Unless we can quickly build up our reserves, we must remain at the mercy of events abroad over which we have no control. That means our standard of living and level of unemployment will remain in peril

12.7 p.m.

Mr. Harold Finch (Bedwellty)

I hope the hon. Member for Scarborough and Whitby (Mr. Spearman) will forgive me if I do not follow the line of his argument. I would prefer to turn to certain aspects of the coalmining industry. I recognise that within the last fortnight a review of coalmining took place in this House during a fuel and power debate, but it was a power debate in that it covered gas, electricity and coal. It is noted that in the Gracious Speech reference is made to the efforts the Government intend to take to strengthen our national economy. Any debate on that subject must take into consideration the coalmining industry.

Coal is the foundation of our national economy. Any weakening in the coalmining structure will have disastrous results on the nation and, therefore, I shall certainly be forgiven for returning to the present situation in the industry. I recognise that its nationalisation has resulted in an increase in output and in the pooling of its resources. It has improved labour relations to some extent, and it has assisted our country generally in the struggle for economic survival.

But there is no room at all for complacency, and in certain respects deterioration is taking place. Manpower is declining. The present position is that for the week before last manpower declined to 711,700 men. Since then there has been a further decline in manpower of 1,200. What does this mean? It must result in a reduction in output in the future, however efficient the industry may be. In addition, it will certainly result in imparing the future developments and reflecting on exports.

I agree with the hon. Member for Scarborough and Whitby when he asked whether the Government had a policy in regard to exports. Coal is a valuable commodity for export in our national economy, but unless there is some check upon the reduction in manpower in the mines, then the export of coal will continue to decline.

The House has to ask itself why it is that there is this reduction in manpower in this very important industry. I submit that it is largely due to the fact that the wages offered are not sufficient to attract young men into the industry. I appreciate that the piece-work rates have increased, but I would remind the House that 60 per cent. of those working in this industry are on a day rate, and that 80 per cent. of those men are on the minimum rate which, for an underground worker, is just over £7 a week.

Is that a sufficient attraction to men to enter this great industry? The time has passed when the sons of miners clamour to enter it. Recruitment is becoming more difficult and we have to look to places outside the mining valleys. Therefore we must have some extra attraction to get men into this industry, which is an arduous one. What prospects does it hold for the young man who wants to get married? It is an industry where there are many accidents. Although there have been improvements in safety and other regulations, the fact remains that it is a dangerous industry. In 1952 there were 236,297 accidents as a result of which men were idle for over three days.

A great deal is being done to lessen the number of pneumoconiosis cases due to the inhalation of dust. In South Wales we are happy to know that this disease is on the decline thanks to the efficient methods adopted by the Coal Board, but in other districts it is increasing. Therefore, when a young man looks at the industry, he is bound to ask himself if it is worth while entering it and there is little chance of his doing so unless the wages are exceptionally attractive. We say, as the National Union of Mine Workers are saying at this moment, that something should be done at least to increase the minimum rate.

When we ask for an increase in the minimum rate we are met with the fact that it means increasing the price of coal to the domestic consumer. Should that be the situation? Why should there always have to be an increase in the price of domestic coal if the miner get, an increase in his wages? The fact is that the bulk of our inland coal is sold to industry and we cannot get any information as to the price at which that coal is sold. We cannot get this information even in regard to steel and my right hon. Friend referred to the profits made in the steel industry. Surely we are entitled, as Members of Parliament, to know the price of inland coal, but we do not know it.

What are the figures? Over 206 million tons of inland coal were consumed last year in this country. I would remind the House that only 36 million tons of that is for the domestic household, the rest is for industry. As far as we can ascertain, coal is being sold to many industries at less than the cost of production, and this is bound to involve the coal industry in a loss.

I am sorry that the Minister of Fuel and Power is not in his place, because I informed the right hon. Gentleman that I would raise this matter and I understand that he is on the premises. This point will become an important issue in the near future. If it is the policy of the Government to say, "We think it is far better to sell coal to some of these industries at less than the cost of production," then let them say so.

Mr. James Hudson (Ealing, North)

On a point of order. My hon. Friend has announced to the House that he indicated to the Minister of Fuel and Power that he would raise this matter and we hear that the right hon. Gentleman is on the premises. Can you do anything to bring the right hon. Gentleman here?

Mr. Speaker

That is beyond my power. The debate on the Address in reply to the Gracious Speech covers a vast variety of national topics, and it is often impossible to predict which facet of the problem will be raised by an hon. Member. In those circumstances, I think we must not be too censorious.

Mr. Finch

I was saying, Mr. Speaker, that the price at which coal is being sold to industry is something we should know. There are merits and demerits attached to this matter, and if it is the policy of the Government to say, "We believe that in the national interest coal should be sold to the steel, electricity and gas industries at a lower price than the cost of production," then let them say so, and the mining industry will immediately be regarded, as it should be, as a great social service. If, on the other hand, it is the policy of the Government to say, "We want this Coal Board to pay"—and we have heard that argument time and time again—then surely we should know what industry is paying for its coal? The Minister of Fuel should give us a definite reply on these points. After all, we are calling upon the domestic consumer of coal to subsidise the industry.

Mr. Peter Roberts (Sheffield, Heeley)

Is it not a fact that the hon. Member's own party, when they were in power and when the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) was the Minister of Fuel and Power and was assisting in that Government, produced the Nationalisation Act which decided that the industry must pay its own way? Is that not the policy of right hon. and hon. Gentlemen on that side of the House?

Mr. Finch

I do not quarrel with that point, but if it is the policy of the Government to make the Coal Board a profitable undertaking, then coal should be sold to industry at a price at which some profit, at least, is made by the Coal Board. It should be sold at an economic price. I submit to the Minister of Fuel and Power—who I am glad to see has just come in—that, in the main, coal is not being sold to industry at an economic price. For instance, it is not being sold to the steel industry at an economic price. I am not saying something which should meet with the antagonism of any hon. Member of this House when I say that the Government should inform us of the price which is being charged for coal supplied to industry. The coal industry is owned by the nation, it is a great national undertaking, and we are entitled to an answer on that point.

Let me give the House the position in Durham where a high grade of coal and coke is produced. The production for the county in 1952 was over 26 million tons and the loss to the county was 3s. 5d. a ton. This meant that the Coal Board lost in Durham £4½ million because the bulk of its production went to industry. In those circumstances we are entitled to ask for a reply on the point that I have raised.

I would remind the House that coal is the only commodity imported into this country which is sold for far less than we pay for it—of course, certain other commodities are imported at a loss but they are subsidised by the National Exchequer. We have been importing American coal into this country, it has been sold at a loss, and the National Coal Board has had to pay that loss. Now we are importing French coal. I do not know the exact quantity, but a considerable amount of it is being imported, and I want to ask the right hon. Gentleman the price at which we are selling that French coal. If we are doing it on the same basis as American coal, then the Coal Board will suffer a further loss. Over the years it has already accumulated a deficit of £14 million, and £8½ million of that is in connection with the sale at a loss of coal imported into this country. If the real objective is not to secure a profit but to help other industries, let us say so. But that argument and the present deficit of £14 million should not be used to deprive the men of the industry of the opportunity to press for an increase.

The Gracious Speech refers to the intended introduction of additional safety regulations and health schemes in the mining industry. Miners will welcome that, and so will this House. There have been great changes in the mining industry since the passing of the 1911 Act. The adoption of machinery, the increased danger from dust, and other developments all call for a new Mines Act. I am glad to know from the Gracious Speech that we are to have a Bill on those lines.

I am also glad to know that the Government are to do something about industrial diseases. We on this side of the House look forward with considerable interest to what may be done by the Minister of National Insurance when he introduces legislation to deal with industrial diseases in certains sections of industry. When there is so great a need for production I submit that the greatest incentive is for men and women to feel that there is security in the event of illness, unemployment, disablement and old age. A firm foundation on those lines can be a great incentive to the people of this country. It is a great encouragement when men and women know that in the event of sickness or old age they will have adequate subsistence.

I had hoped that some reference would have been made in the Gracious Speech to an increase in old age pensions and sickness benefit, having regard to the increased cost of food. If we could obtain an assurance from the Minister of National Insurance that something could be done on those lines it would be of great importance to the miner employed as he is in an industry where the accident rate is so high. Any young man who enters the industry wants to be assured that he will have adequate security in the event of his becoming disabled from winning coal. I know that a great deal has been done in this respect, but having regard to the cost of food it is insufficient. I hope that the Government will act on the lines that I have suggested, and I also hope that the Minister of Fuel and Power will give us definite information about the selling price of coal to industries in this country.

12.22 p.m.

Mr. Peter Roberts (Sheffield, Heeley)

I am glad to be able to follow the hon. Member for Bedwellty (Mr. Finch), because I listened to his argument very carefully and there was in it a great deal with which hon. Members on this side of the House will agree. We have always felt that nationalisation must stand on its own feet and that if the cost of the commodity rises that will have to be reflected, unfortunately, in a rise in the price to the consumer. I have never been one who thought that a nationalised industry should hide behind a subsidy from the Government. I have always advocated that point of view in this House.

There is the difficulty at the moment in the coal industry that one section of the industry is subsidising another. The hon. Member for Bedwellty comes from Wales and I come from Yorkshire and, as he knows, the Yorkshire division are making profits whilst, unfortunately, that is not so in Wales; and the profits from Yorkshire are subsidising the losses in Wales. That means that the miner in Yorkshire is really subsidising the miner in Wales. I have always felt that to be wrong in principle. If there is to be a subsidy of some kind or another, the workers or managers in one section of the industry should not be asked to subsidise another section. If there is to be a subsidy, it should be a straight subsidy, and then we shall know what it is.

I feel that the nationalised industries should show a proper cost. A speech from this side of the House last week put forward very forcibly the view that the proper cost of coal should be reflected in the price. I am glad that the Minister of Fuel and Power is here. He will have heard the debate and no doubt will have taken note of what has been said. I want to come back later to the question of coal because I want to speak on the import and export of coal, and particularly on the difference between large coal and small slack coal and coke, since I think that there are opportunities in connection with those commodities which the Government may well be able to take.

Before dealing with that subject, I want to refer to the interesting speech of the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell). One of the things that I like about him is that he always states clearly to the House the issues in which he believes and the differences which lie between his side of the House and ours. In the days of the Gas Bill and the nationalisation of coal, he did it, and he has done it again today. I am grateful to him for that.

Again the right hon. Gentleman has underlined the difference. If I may follow him in a nautical metaphor, in the question of control, the part which the Government can play is regarded by the right hon. Gentleman and other right hon. and hon. Gentlemen on that side of the House as the motor or the engine in the boat, whereas I, and I think my hon. Friends, look upon it as the rudder which can guide the boat in one direction or another but cannot of itself make progress and speed.

Mr. Frank Tomney (Hammersmith, North)

One has to get the boat going first.

Mr. Roberts

I hope that the right hon. Member for Leeds, South will not be too gloomy. The greatest benefit which the present Chancellor and the Government have conferred has been the resurgence of confidence in industry and commerce over the last two years. Whatever the right hon. Gentleman may say about the stock position, there was a slipping away of confidence towards the end of the Labour Government.

Mr. M. Follick (Loughborough)

Let the hon. Member look at the Stock Exchange share prices and he will see that that was not so.

Mr. Roberts

There was a slipping away of confidence not only in the Government but in industry. The present Government have brought that confidence back and have built it up. I am satisfied that that is appreciated by the vast majority of people in this country. We must be careful to maintain that confidence.

The greatest danger facing us in the coming winter and in the next six or eight months is the difficulties which will be faced by both sides in industry as a result of plans which have been and are being made in certain Communist circles to try to disrupt our industry. We have seen the results of the conference of the World Federation of Trade Unions and have seen what their policy is. Not only in this country but in other parts of the world we are seeing those results, and near this place yesterday hon. Members may have seen something which has the beginning of unofficial action which to my mind will be led by Communist agitators in order to upset the industry which at the moment is the lifeblood of our country. That is a grave danger which has to be faced by hon. Members opposite, as well as by those on these benches. The attack is on the Labour Party and on the Conservative Party, and it is one which we shall have to watch with very great care.

I wish to refer to the question of exports. One of the most important things is to overcome the export lag mentioned by the right hon. Member earlier today. The rise in exports has not followed the graph of production. As far as possible, we must create the incentive for people to export. The possibilities are there: the markets are there. The danger is that there may not be the incentive for a manufacturer to capture the export market because of all the difficulties, and in some cases frustration, which he has to meet.

I think there is no doubt that we are moving into a period of what we might call a buyers' market and passing out of the period of the sellers' market. But that will have a beneficial effect on the consumers of this country. The trend of world food prices is vitally important to us, particularly in the industrial areas. It has always been the policy of the towns so far as possible to have cheap food. I have put that over in Sheffield. in my constituency, but at the same time I have said that it is necessary for the towns to have a prosperous agriculture around them. It is important that we should have those two things.

In the recent White Paper on agriculture, dealing with meat and grain, I think that Her Majesty's Government have produced a scheme which will be satisfactory to the farmer and also to the consumer if the President of the Board of Trade can see to it that the imports of food—I hope cheap imports of food—are imported in an orderly fashion. The danger which faces the Board of Trade, the Ministry of Food—so long as it exists—and the Ministry of Agriculture is that unless they see that there is an orderly import of cheap food they will again break the confidence of the farming community at home. Prices at home would fall and the difference would have to be met by the Chancellor of the Exchequer out of taxation. Therefore, the consumer would not get the benefit because what he got by way of cheap food he would have to pay for in higher taxation. The clue to the problem is orderly imports of grain.

In this respect I am interested in statements and arguments which we have seen recently in the newspapers about the idea of buying food for sterling from the dollar areas. If that is necessarily tied up with aid—if, in other words, sterling will be remitted as a form of aid—it can apply only to the United States. If, however, it is extended, I hope my right hon. Friend will remember that Canada has equally large surpluses of food. If there is a possibility of having sterling trade not only with the United States but with Canada, it would be possible to give some of the benefit to Canada by taking some of her surplus food.

Not only must we give an incentive to direct exports but also an incentive to the services which bring dollars in their train. In this respect, I would utter a word of warning. In order to get investment, particularly in the dollar area, and in order to create the services that we require, one has to go through various channels and controls of the Bank of England, and so on. What we want is a vigorous, adventurous and expansive policy in laying out investment so as to bring the dollars back again. Unless we can get that vigorous policy, we shall not get the benefit of the services. I am a little doubtful whether the machinery of the Bank of England and elsewhere is sufficiently adventurous for this purpose. I hope that our whole investment programme overseas, particularly in the dollar area, will have that amount of encouragement and a chance of taking some sort of risk, because unless we do this we shall not in future be able to obtain the dollars we require.

I end on the question of exports, particularly the export of coal. I deplored, as much as anyone in this House deplored, the necessity to import large coal earlier this year. I think the Minister was quite right in doing so, but to a certain extent it was a psychological blow to us all to find that it was necessary to import large coal. On the other hand, there is building up inside the coal industry at present a surplus of slack. Hon. Members from mining areas will know that the National Coal Board are putting down large quantities of slack at present. Hon. Members will also know that coke ovens, which use such slack to a large extent, are not in full production. If that is so—I believe it is, but if I am wrong the Minister will correct me—we are losing a valuable asset; that is, the possibility of exporting—particularly to the Scandinavian countries—not only slack but, what is far more important, coke.

I was glad that the other day the Minister announced that he was lifting the ration of coke by 10 cwt. so far as the inland market is concerned. I think that will particularly help the domestic consumer during the coming winter. I congratulate my right hon. Friend on that decision, but I should like him to consider further the possibility of using some of this slack in order to gain valuable money which we could get by its export. At present the export of coke is in the hands of a Government committee under his Ministry. I am a little doubtful whether that is the best machinery by which to get these markets which we so badly need, and I should like my right hon. Friend to look into that problem. If a certain amount of coke were allocated to export, I believe that those in the trade could deal with it better than those in my right hon. Friend's Department.

To my mind, Her Majesty's Government have done a great service to the country in restoring confidence to industry. It is the duty of us all, in whatever part of the House we sit, to see that confidence is maintained. The basis of our prosperity is in two industries; one is coal and the other agriculture. I sincerely hope that the efforts made by the National Coal Board and the National Union of Mineworkers in exhorting men in the various districts to produce the necessary amount of coal this winter will have the effect we desire. The Minister of Fuel and Power said last week that he had confidence that the industry would produce the coal. I believe that is the right approach. We have that confidence.

We know that nationalisation of coal mining is still being watched by the vast majority of the people of this country. We have—here I have to express a certain amount of disagreement with the hon. Member for Bedwellty—given the mining community an increase in wages quite recently—within the last year. When that was given, a promise was given at the same time that there would be an increase in output and in production. That is what we are working for and working to. I am satisfied that the mining community will give that increased production, but I rather wonder whether this is the right time, in relation to the giving of that increased production, for the hon. Member to talk once more about an increase in wages.

On the question of confidence, I congratulate the Government on what they have done, and with that confidence I am quite certain we shall go forward to prosperity.

12.41 p.m.

Mr. H. A. Marquand (Middlesbrough, East)

When the hon. Member for Heeley (Mr. P. Roberts) was called upon to speak, I hoped that we should hear something from him by way of comment on the terms of the sale of the shares of the great United Steel Company in Sheffield to which my right hon. Friend referred. It is unfortunate that he did not do so. I suggest to him quite seriously that the terms of that sale are far more likely to supply ammunition to the Communist Party than are the students at the University of London. It would be tempting to continue to discuss that particular sale, especially as I know that its terms are of great interest to my constituents who are engaged in the manufacture of steel.

I rise today, however, particularly to make some remarks about the reference in the Gracious Speech to the Raw Cotton Commission. I have a very special interest in that because nearly seven years ago I moved the Second Reading of the Bill to establish the Commission, and I subsequently piloted the Bill through the Committee stage and talked a great deal about it in the House during the other stages of its progress.

It is sometimes suggested that when that Bill was passed we closed the Liverpool Cotton Market. That, of course, is not so. The Liverpool Cotton Market was closed by wartime events and circumstances in 1941 and 1942. What we did, finding a situation in which that market had disappeared, and in which there was grave scarcity and shortage in dollars and other foreign currencies with which we bought our imported cotton, was to establish at that time what we thought was the best possible instrument for satisfying Lancashire's needs for abundant cotton of good quality at stable prices.

We set up a Lancashire institution, in Lancashire, staffed by Lancashire men, and we did not do it for doctrinaire reasons. Before the Raw Cotton Commission was established, before I intro-troduced the Bill into this House, we had already announced the return of the trade in rubber to private hands. Later, after the establishment of the Raw Cotton Commission, my right hon. Friend the Member for Huyton (Mr. H. Wilson), as President of the Board of Trade, returned the trade in timber to private hands.

We showed by these and many other examples, which I could quote if I wished to take up the time of the House in doing so, that we were prepared to judge this question of the nature of the import machinery not upon the basis of ideological prejudice, but simply by the criterion of what was the appropriate means, in the particular circumstances of the industry at the time, by which business was to be done. I still feel that we were right in setting up the Commission at that time, and I still feel that not only was it the best instrument to use then, but that it would be the best instrument to use now.

The Government, however, are going to destroy it. Why? Because it has worked badly? No such allegation has been made so far, and I note that the Chancellor of the Duchy of Lancaster, who is also the Minister of Materials, said in another place the other day: I should like to pay tribute to the way in which the members of the Raw Cotton Commission have served their country and their industry in the very difficult transitional period of the last two years. I am not quite sure why he confined it to the last two years; he might well have said, "The last five or six years." In fairness to the noble Lord, I think he would have done if he had not been thinking particularly of the special difficulties which the present Government imposed on the Commission during the last two years.

I think that the Commission has done its job admirably throughout, despite grave difficulties. It has, after all, had to go through a succession of major economic difficulties, greater than any of us on either side of the House anticipated when the Commission was established. The difficulties of the initial period of scarcity of cotton the world over, the special difficulties consequent on the revaluation of the £ as against the dollar in 1949, the difficulty of the stockpiling period during the Korean War and the difficulty of the subsequent slump have really been major and formidable difficulties. Yet throughout that time the Commission has supplied the needs of the industry for good cotton in adequate quantity and it has done so at a low cost.

Even last year, as the latest Report of the Commission shows, the administrative costs were less than £500,000. Does anyone really believe that a collection of merchants and exchange dealers, with all their offices and apparatus set up now under a system of private trade, would be able to do the job more cheaply? I do not believe that for a moment. The right hon. Gentleman may say, "Yes, but they will bring in some foreign currency by their market operations." Maybe they will, but I suggest that it would be far better to continue to administer this trade really cheaply by an administrative organisation which can be watched, controlled and run economically, rather than by a system which might bring a little more in terms of foreign currency but by the use of which we should have to pay a much larger price for the service of buying and selling cotton.

Not only has the Commission provided good cotton with no complaints to speak of from the industry, but it has given substantial financial assistance to the Shirley Institute and the Empire Cotton Growing Association, especially in the development of East African cotton production. I shall not weary the House with detailed figures, they are all set out in the Report of the Raw Cotton Commission, but one of the outstanding features of the last five or six years has been the steady growth in quantity of good cotton which we have been able to obtain from East Africa and, to a lesser extent, from Nigeria, India and Pakistan.

The Cotton Commission has undoubtedly fulfilled one of the tasks set it by the Government—developing Commonwealth cotton production. I wonder very seriously whether those in countries like the East African and the West African Territories who are fully aware of the wider implications look forward with confidence to what is to happen now? A guarantee to those Commonwealth producers of a continued and assured market at stable prices is literally worth its weight in gold to this country. No wonder that the "Manchester Guardian," which is anything but a Socialist newspaper, said in its issue of 4th November: The Raw Cotton Commission has done its work admirably. This action of deliberately destroying an organisation which has done its work admirably has been explained by the Minister of Materials in the other place, in this way: since this Government came into office it has been our consistent policy to eliminate State trading in commodities wherever this could be done."—[OFFICIAL REPORT, House of Lords, 4th November, 1953; Vol. 184, c. 101.] So regardless of the circumstances, State trading in commodities must be eliminated. That is, surely, the application of doctrinaire prejudices. I do not blame a man who holds a principle very strongly for standing up for it, but I do say that it is a Government's duty, looking at the circumstances of the time, to decide whether the application of their principles in detail is appropriate in that particular place, to judge it by the interest of the nation as a whole, and not by their belief in some particular doctrine.

Certainly, I think it has been wrong to take the course suggested in the present circumstances, and in the light of the general economic situation described so admirably this morning by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell)—the precarious situation in which we undoubtedly still are in relation to our earnings of dollars and to our dollar reserves. This is a gamble with the hardly earned dollars that the workers of this country have been making for us.

Obviously, there cannot be an adequate futures market unless it is a completely free market. How can it be a completely free market unless those who operate in it are free to buy and sell dollars as they wish at any time? We really should like, as soon as possible, information from the Government as to whether they have, in some sort of way not yet revealed, special guarantees from the United States of America about the availability of dollars for this purpose.

We should also like to know what is to happen to the stocks of cotton which the Commission now holds, and on what sort of terms are those stocks to be sold. We certainly hope they are going to be sold at a good market value to those who buy them. I should like to know also whether the new futures market it is proposed to set up will provide hedging facilities in growths other than the American and Egyptian types. That is all the futures market used to provide before the war, yet today these types, to a very considerable extent, have been replaced by others, and I should like to know whether it is conceived that the futures market is now going to provide hedging facilities in several other growths which have now become of almost equal importance.

In any case, I believe it is an illusion to suppose that anything which is going to resemble the pre-war Liverpool market can be created, in view of the present size of the Lancashire cotton industry. That industry is nothing like as big as it was, and the quantities of cotton in which it deals are thereby inevitably smaller. I doubt if this market is going to stand up very much more successfully than the Alexandria market has done. I read some remarks of the President of the Board of Trade in "The Times" of 3rd November: We were at a time of great peril in the export field. Immediately underneath that report of his speech, I noticed that the Federation of British Industries export sales conference concluded that: Britain's interest lies in an expansion of world trade as a whole rather than in all countries competing together for larger shares of the existing volume of trade. How true that is, and how important it has been in all this post-war period to sustain the demand for our exports.

One of the major methods of sustaining demand has been the provision of guaranteed markets at guaranteed prices for overseas producers, but the Government have got rid of the guaranteed market of these overseas producers in foodstuffs already, the most important of these, like wheat, and they are going on with meat. Now they are going ahead to get rid of the guaranteed market in cotton, and according to the information given by the right hon. Gentleman the President of the Board of Trade, I say that thereby the Government is imperilling, even worse than it has already imperilled the prospects of our exports.

In short, both the farmers and the cotton workers today are at risk as a result of the doctrinaire policy now pursued by Her Majesty's present advisers. Let there be no doubt about it, the cotton workers do believe they are now at risk, and do object to the proposals of the Government. Though leaders of these unions participated in the work of the Hopkins Committee, they have, nevertheless, written to me to say that they are quite opposed to the present development of policy. I have a letter here from the Amalgamated Association of Operative Cotton Spinners and Twiners, whose secretary is Mr. Charles Schofield, as the right hon. Gentleman knows very well. He says: I am writing on behalf of my Association to inform you of the grave misgivings we have about the Government plans to wind up the Raw Cotton Commission. As seen from the workers' view point, as distinct from the commercial angle, the proposal is a retrograde one and might very easily bring chaos, if not permanent injury, to the industry. After making further points, which I shall leave out in order to be brief, he goes on: In the present conditions, I think it is a gamble which the country, and the industry, will pay for very dearly. I have a similar letter from the United Textile Factory Workers' Association, whose secretary is Mr. Bradley. He writes: I have to request the Parliamentary Labour Party to oppose the proposal to wind up the Raw Cotton Commission, in the strongest possible language. During recent months the question of buying of raw cotton and cover for the 1954 season has been under active consideration by a subcommittee of our Legislative Council and in interviews with permanent officials from the Board of Trade who have sought our opinion upon this matter. We have advised in no uncertain manner that we desire to retain the Raw Cotton Commission. We believe the Raw Cotton Commission has given good service and more than justified its operations during the difficult post-war years. It is very doubtful whether the private buying of raw cotton will in case of adversity have the necessary stocks of raw cotton available if we should experience dollar or curtail American supply difficulties. It will, if buyers are tied to American contracts, curtail and adversely affect colonial development, which may spell retardment and contraction of our overseas trade to Africa and similar markets. We believe that the proposal to wind up the Raw Cotton Commission and permit private buying will please speculators and commercial interests, but it will not assist development or expansion of trade. Let there be no doubt, therefore, that this proposal is opposed not merely from this side of the House, by those who might be thought to have a prejudice about it, but by the great trade unions of the cotton industry itself.

12.58 p.m.

Mr. Lawrence Turner (Oxford)

The right hon. Gentleman the Member for Middlesbrough, East (Mr. Marquand) will forgive me, I hope, if I do not follow him in his remarks on the Raw Cotton Commission. There has been such a spate of Bills this week that I have not got round to that one.

I want to refer to one or two things that the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) said in his extremely interesting, and at times very witty, opening speech. He referred, first, to the reference in the Gracious Speech to the strengthening of the national economy, and the safeguarding of the high standards of our social services and the stability of employment. I am sure that all hon. Members, wherever they sit in this House, will find all those things desirable and in no way controversial.

The Gracious Speech went on to say that to this end the Government will strive for a further improvement in the balance of overseas payments by encouraging the expansion of exports and of services earning income from abroad. It seems to me that all those things in the Gracious Speech which followed that particular sentence, such as the raising of judges' salaries, and the embarking on slum clearance schemes, which we debated on Wednesday, are all entirely unable to operate until we basically pay our way. It is, I suppose, a commonplace to say, as successive Chancellors have said, that we must export or die. There was a reference just now to the late Sir Stafford Cripps in that connection and certainly the right hon. Member for Leeds, South, is no exception. The whole tone of his speech this morning pointed to the gravity of the situation. I suppose it is equally a commonplace to say that competition from Germany and Japan is growing rapidly, and there is no decline in competition from the United States, in just those very classes of goods, such as heavy engineering, in which we specialise.

How, then, can we compete? How can we not only maintain but increase the volume of our exports, especially in hard currency areas? Reference has been made to the Bankers' Club dinner, and I am glad to see my right hon. Friend the President of the Board of Trade here. In the course of his speech he said: If we cannot compete in price, we cannot compete at all. Surely that epitomises the whole situation at present. Have we not this very week lost one of the world's largest contracts to Krupps in Essen? I refer to the Turkish contract for what may prove to be the longest bridge in the world. Have we not again only this week lost in India a very valuable locomotive contract?

What, then, are the reasons for our failure to obtain in a friendly country like Turkey and in India, which, after all, is a part of the British Commonwealth, these contracts which we badly need and which we would be well able to fulfil? I want to put forward four suggestions, and, although two different points of view have been expressed on this subject, I suggest that it is a problem, in the first place, of delivery dates. We seem to be slow to realise that we are not just moving from a sellers' market to a buyers' market; we are right in the thick of a buyers' market. The sooner we can speed up our promptness in delivery, the better shall we be able to compete. I am not in any sense blaming the Government here because the Government, mercifully, are not, in the main, a trading concern, but I do draw their attention to this situation.

Secondly—and here I do criticise the Government—in industry we are still suffering from continual interference, however well meant this interference may be, from Government Departments; and it is interference to which our chief competitors in the export market are not similarly subjected. If I may give one example, in the Indian contract to which I have just referred, the greatest possible difficulties were put in the way of importing prototypes of some essential greasing equipment, and long delays occurred while the inevitable wrangle took place as to whether such a prototype should attract Import Duty. In fact, such was the delay that this piece of equipment had to be made in Philadelphia.

I am sure that the position with regard to Government Departments has improved, but whereas a few years back we could afford the luxury of officialdom in business, we certainly cannot do so today, and I urge Her Majesty's Government to consider, as a matter of urgency and not just as a matter of political theory, the more rapid removal of many of those remaining controls which still operate at any rate in the export field.

My third point is this. I have no interest, even indirect, in the world of advertising, but I have recently been studying British advertisements in United States periodicals, and I find that a high percentage of these are inserted by Scotch whisky distillers. It might be thought that in England we spend all our time drinking whisky and doing football pools, but the fact is that these advertisements are good and effective, and are the means of bringing into this country a matter of £20 million worth of hard currency per annum from the U.S.A. alone. I should like to see, in addition, organisations like B.E.A.C. and B.O.A.C. greatly extend the advertising of the excellent and vital services that they offer.

I should also like to see the British motor industry doing likewise. We, and especially those Members who represent motor manufacturing constituencies, know that the U.S.A. and Canadian markets are by far the most valuable markets in the world. The British car that sold best in the past 12 months, reaching the 3,000 figure, was the M.G., which is a great tribute not only to British design and craftsmanship but also to British salesmanship. In view of the forthcoming competition from the United States factories in smaller-powered cars, besides the German Volkswagen and Opel, if we are to maintain our motor export sales we must extend our whole system of advertising, publicity and salesmanship.

My fourth point is one with which I am certainly not qualified to deal, but I hope very much that when my right hon. Friend the Chancellor winds up the debate this afternoon he will make some statement about the availability of sterling, even if he resists the temptation to tie it up with the question of convertibility. He was pressed to do this by the right hon. Member for Leeds, South, and I hope he will do so, because there is a very genuine case of a lack of availability of sterling affecting our export markets.

May I make one point on rather more delicate political ground, and that is the question of East-West trade. We have, I think, primarily to consider the Japanese potential, backed, as it may be, by American capital and operating in the Far Eastern market. It can be argued that our own commercial representatives suffer great hardship, financially and even physically, in Peking; and we continue, rightly, to recognise the Peking Government, in spite of rebuffs. I would urge that a very high-powered delegation representing the industries concerned, headed if possible by the new Minister of State at the Board of Trade, be sent with the least possible delay to Peking in an official capacity, with a view to resolving whatever political deadlock there may be, regardless of whether China is a Communist State or not, and to negotiate at that level trade agreements with China. Unless we can maintain an outlet for our goods in China, we shall find the whole Far Eastern market filched from us.

I put these few points to the House, stressing that whatever the extent of our enthusiasm, or lack of it, about the measures proposed in the Gracious Speech regarding the home front, their success must depend on what we can do on the overseas front.

I conclude by quoting one sentence which was spoken exactly 100 years ago, in 1853, by that strange but very brilliant person, the Prince Consort. He said: If peace is maintained it will be through the voice of England, but if England has nothing behind her she will not be listened to.

1.10 p.m.

Miss Elaine Burton (Coventry, South)

I hope the hon. Member for Oxford (Mr. Turner) will forgive me if I do not follow him in what he said, because I want to deal with one particular aspect of the economic situation and to regret an omission from the Gracious Speech about it. Primarily it concerns the Board of Trade. The President is not here, but I know that he has been in his place all the time up to now. As what I shall suggest later on will require a little money, if I can convince the Chancellor of the Tightness of my case he may be good enough to pass on the suggestion to the President.

In the Gracious Speech there is no mention of something which I regard as most important to the ordinary people. By "the ordinary people" I mean all those of us who go to the shops and buy various types of merchandise. It seems to me that there should have been some mention of this question of consumer research as it affects quality control. I would ask the Government one very elementary question, which I should first like to answer myself. Do the Government think that it is important that goods which people buy in the shops should be satisfactory in use? I imagine that every hon. Member would answer "Yes."

Going on from there, I want to deal with the question of quality control, particularly in regard to textiles, because I believe, and shall hope to show to the House, that this matter is not being covered at present. During the past 12 months I have tried to find out more about this problem of textiles and the standards of textiles as sold in the shops. I have talked with many ordinary consumers, many industrial organisations, retailers, manufacturers, and, most important of all, people who are specialists in research. I have also been to the British Standards Institution. But I must absolve them from what I am going to say today because they did not even know that I was hoping to catch the eye of the Chair.

It is my belief that the British Standards Institution have been given an impossible task. My contention is that they have been asked to secure voluntary agreement among so many manufacturers, that when that agreement is reached it is often just not worth having. The position concerning the set-up of the British Standards Institution and the Board of Trade as it is today leads me to put forward five points which might be noted.

First, quality must be decided before price. Secondly, the quality standard should be a standard which is worth having, as judged by the ordinary consumer who buys the goods. Thirdly, if this standard is to be worth having, some manufacturers will have to be excluded because their standards are too low. Fourthly, I should like to see such a standard mark of quality made compulsory on all goods attaining or bettering it, or, if compulsion is not looked upon favourably, a voluntary agreement among all manufacturers in the textile industry that such a mark should be used. Fifthly, if this were done, it would be necessary for the British Standards Institution to launch a big pubilicity campaign to get over to the people the fact that all textiles without this mark did not come up to the publicised quality standard.

I may say here that such a campaign could not be lanched without a further grant from the Government. The British Standards Institution say that they just have not the money to make bigger publicity of these matters. Having said that, if I am to convince the Chancellor and the House that this work should be done, I first have to prove that it is not being done at the present time, and also that it is necessary.

My first proof that the work of the British Standards Institution is not covering the quality control necessary for the consumer is contained in a quotation from the 14th annual report of the Silk and Rayon Users' Asociation, for 1952–53. I shall quote only two paragraphs from this report. On page 12 there is the heading, "British Standards for Woven Rayon Fabrics." The report says: The council"— that is, the Council of the Silk and Rayon Users' Association— has given careful consideration to the draft standards for woven rayon apparel fabrics prepared by the British Standards Institution. These draft standards followed upon an undertaking given by the rayon industry when the utility scheme was abolished that it would do its utmost to give the public at least the same assurance of quality as was provided by the utility scheme, and that it would work with the British Standards Institution to this end. The Merchant Converters' Executive Committee, and subsequently the Executive Committee and Council of the Association came to the conclusion that the proposed standards did not in fact give the public the protection which had been intended. On the contrary, it was felt that these draft standards, relating only to colour fastness and resistance to shrinkage, might lead the public to believe that certain fabrics possessed qualities which in fact they lacked. That is the first proof that I would advance to the Chancellor, that in regard to this matter of woven rayon fabrics the Association concerned with the industry does not believe that the standards produced by the British Standards Institution are sufficient to give the public the necessary protection which had been intended.

I lead up to my second proof by asking the House if they will consider the background to the selection of goods when people go into the shops to purchase them. Why do people choose certain types of goods? The first answer is, obviously, because they need them. But why do they choose one type as against another? Here we have the problem of appearance, price, and, as I mentioned before, the need of the consumer for the goods, and the performance of that particular type of goods.

Appearance and price we can decide for ourselves, but what about the performance of the goods that we buy in the shops? It may be that friends of ours have had the same type of goods and have told us how well they wear. It may be that we are dependent upon advertising to tell us the merits of the goods, or dependent upon the retailer or the distributor, but here we come to the point which I want to stress today—the question of the standards of performance. It is my contention that these are not covered by any research carried out today. The first standard necessary in the case of textiles is for some specification of the goods. In other words, people should have some idea of what is in the goods which they buy in the shops.

Mr. F. A. Burden (Gillingham)

That is completely covered in the Bill which was presented to Parliament just before the Recess. The Bill states categorically that such information must be given and wool textiles now do possess exact qualities of wool and/or fibre, rayon and other extraneous matter.

Miss Burton

The hon. Member is misinformed. One of the things about which I shall be dealing another time is the fact that in the "Wool Glossary of Terms" recently published there is no reference to the exact quality. If the hon. Member will look it up he will find that it gives qualities for "all wool" and for "over 50 per cent. wool," but it does not give qualities between "50 per cent." and "all wool." A specification of what is contained in the material is not necessarily associated with suitability for use, but it gives us a general level of quality.

Now we come to another type of grading—the performance standard. Here we should have a classification related to the conditions of use. For several years I worked in the goodwill department of a large organisation, and we probably all realise that if we take a sufficient number of users' complaints about any article over a period of time it is obvious that practical standards for those goods can be formulated. I would not presume to come to the House today merely to talk of the experience I had, but during the past few weeks I have had the benefit of discussions with a very well known expert on this matter of research in the textile industry. I have permission to give his name, and I propose to do so. He is Mr. Guilfoyle Williams, who is head of a very large testing laboratory for a large group of stores with headquarters in London.

Mr. Williams tells me that over this period of years which, I think, is some 25 to 30, he has evolved five gradings of textiles. The quality that gives a normal degree of satisfaction in ordinary conditions of use he calls Grade 3. Goods which withstand the most severe conditions of use he calls Grade 1. Any goods reaching this grade he would sell as "guaranteed." Grades 2 and 4 are obviously intermediary ones, and Grade 5 is of the type of goods which will be satisfactory only in most careful conditions of use.

The point I wish to stress to the House is that in the opinion of this expert any goods which do not measure up to his Grade 5 he believes are usually unfit for sale. Obviously, there is no one grading that would cover the whole of textiles, but I think anybody with any experience would agree that the performance of standards of fabrics is much the same over a wide range of use. The particular point I wish to come to now is colour fastness, which is of great importance to us all.

In colour fastness gradings we have to find how coloured materials will stand up to use, and this brings me back to the British Standards Institution. The British Standards Institution has adopted for its colour fastness standard to light the standards published by 1934 by the Society of Dyers and Colourists. But in 1934 this Society gave no definition of the degree of fastness to light of different fabrics such as those used for lingerie, for dresses, suitings or furnishings.

I shall ask a question, to which I imagine, the Chancellor of the Exchequer will not know the answer, but it is important. It is whether the Institution, in adopting these standards of 1934, has rectified that omission and made any test of these colour fastness standards in relation to performance. I ask that because for a British standard, in which many of us take a great interest in this House, the British Standards Institution proposed that, so far as blouse fabrics were concerned, the minimum fastness to light should be the No. 3 Grade of the Society I have just mentioned. The Society took its gradings from 1 to 8, 1 being the lowest and 8 being the highest or best. So the standard adopted by the British Standards Institution is No. 3, in other words the third from the bottom end.

I have asked various people connected with the trade what they feel about the suitability of this standard, and I have been very alarmed because they tell me that people who buy materials of this grading will have a very severe shock when the blouses are washed or when they are cleaned. I went to my expert, Mr. Williams, and he told me that for his purpose the minimum grading that he would expect for colour fastness to light of these blouse fabrics was his own Grade 4. Without muddling the House with any further comparisons of grades, I would put it simply like this, that the grade that he would adopt as a minimum takes twice as long to fade as the grade which has been adopted by the Institution. In his opinion the grade proposed by the British Standards Institution is one that is not fit for sale.

I come, I am afraid in a rather roundabout way, my second proof, and that is that the wholesale and distributive trade themselves have proved to be very unenthusiastic about this proposed quality standard of the Institution. So, quite simply, I say to the Government that from these examples of woven rayon and of colour fastness I believe that the British Standards Institution is not providing a worthwhile standard of quality.

I have to try to prove to the Chancellor that it is not being done elsewhere and should be done, and I want to give three examples. My first example is in 1943. Mr. Williams in 1943 tested the whole range of utility rayon fabrics at the request of a Government official and gave an unofficial report. No tests were done for colour fastness, but 61 fabrics were examined with this result: fabrics sure to be satisfactory in use numbered 19; of good average quality for ordinary use, 18; of low average quality for ordinary use, 17; unsuited in quality for ordinary use, seven. So this means that these fabrics, made at a time when there was great necessity for savings in material and labour, contained over 10 per cent. which should not have been produced at all.

In 1950 many fabrics were tested for goods which were to be put on sale to the public made up into a branded line of clothing. Exhaustive tests were made, including colour fastness. They were put into four categories. Of cotton fabrics, 17 were tested and 17 were found excellent; of woollen fabrics, 37 were tested, 11 were found excellent, six good, 12 ordinary, eight poor; of rayon fabrics, 202 were tested, 80 found excellent, 28 good, 69 ordinary, and 25 poor. Over 12 per cent. of rayon, and over 20 per cent. of wool had to go into the "poor" group.

If somebody asked me, who was to blame for that, the producers or the Government, I should say the public were to blame for being too lazy to go to the retailers and protest when they had been sold goods that were not satisfactory. In my belief every person who buys goods which are not satisfactory and who fails to complain about them is failing in the task of getting better quality standards.

I am sorry if I have wearied the House, but I am coming right up to date, to 1953, and the last example is one which raises a very serious consideration. In 1953 this expert to whom I have been referring, with stores all over the country, tested the suitability in use of something in every day usage, ordinary cotton bed sheets. I should like to explain how this was done. Various grades of cotton bed sheets were tested. The price of the bed sheets was given and also the value in service quality of the sheets to the consumer.

Sheets of the first price of 30s. had a service giving value of 16s. Sheets selling at 36s. had a service giving value of 25s.; those at 40s. had a service giving quality of 37s.; those at 46s. a service giving quality of 46s.—the same; those at 50s. a service giving quality of 49s.; and those at 60s. a service giving quality of 53s.

This is the point. Why is it that people who have to buy in the lowest price range—and this question applies not only to sheets—get the very worst value? I cannot stress it sufficiently—and I think the Economic Secretary agrees with me. This is not the fault of the Government but it is something we wish to amend. If one can afford only 30s., which was the lowest price, then it is essential that the service giving quality should also be 30s., and not 16s.

I shall not detain the House by considering shoes or anything else, but I am sure all of us agree that quality is needed in the lowest price range more than anywhere else. I do think that the British Cotton Industry Research Association should have got around to this question of the value of cotton sheets by now. And now, firstly, I contend the examples I have given of woven rayon standards and colour fastness standards show that the British Standards Institution is not able to deal with this problem of quality control. Secondly, from the three tests given by Mr. Williams I think we can see the necessity for consumer research to bring about this quality control. Thirdly, I believe that until this is done the public will be price conscious and not quality conscious, and until the public is quality conscious we shall continue to have these poor goods foisted upon us. Money, manpower and materials will be wasted.

In conclusion, what do I suggest might be done? Who should carry out this consumer research so vital to quality control? Should it be the Board of Trade or the British Standards Institution or the Department of Scientific and Industrial Research? I suggest that it should be the Department of Scientific and Industrial Research, because the research will be successful only if the end product—the product which comes at the very end of it all—is satisfactory. I have tried to find out what research would be necessary to ensure that the end product, as far as textiles is concerned, was satisfactory. I am told that we should have a recognised and efficient system of grad- ing which would be applied first to the fibre, then to the yarn, then to the fabric, and then to the dyed and finished material. That is not simply a dream of mine, because the experts to whom I have spoken, and who do not agree with me politically, say that it can be done.

The Committee which deals with that research, which I should like to see under the Department of Scientific and Industrial Research, should include representatives of the distributive industry, of the dyeing, cleaning and laundry industries, and of the consumers, with this important rider: the consumers should have the benefit on that Committee, either as observers or delegates, of people with expert knowledge. They must have the benefit of expert opinion. I say this in passing, because the Economic Secretary may not be aware of it, that one of the drawbacks of the consumer representation on the British Standards Institution today—despite the very hard work they do—is that there is not this technical advice available. When this Committee send suggestions to other Committees they are informed by the experts there that such things cannot be done because they are impossible.

I believe that to run this sort of research for the first year would cost about £50,000 and I suggest that where the investigation is primarily for the benefit of the industrialists, they should pay part of the money and the Government should pay part, but where the investigation is primarily for the benefit of the public, the Government should foot the bill. I hope the Economic Secretary will look into this problem and will see that consumer research is applied to all prices of commodities so that we may have quality control at all grades.

1.33 p.m.

Mr. Cyril Osborne (Louth)

I hope the hon. Lady the Member for Coventry, South (Miss Burton) will forgive me if I do not delve into the details of the textile industry in the way in which she has done. My only comment is this: had I not waited in this debate, I should have been in a textile mill of my own today. There are vastly greater researches in the textile industry than she has suggested.

The only other point I would make is that I do not believe that "the boys in Whitehall" or anywhere else know best. I believe the consumer is the best judge of whether goods are good or not, and furthermore, from my experience in the textile industry, limited though it may be—but I think it is greater than the hon. Lady's experience—I would say that the majority of companies produce good goods. We know that if we do not produce good goods they will not sell, and we are not in business to go into the bankruptcy court. We are there to serve our people and to make money, and the only way to make money is to produce goods which people will buy at satisfactory prices. Without saying what I ought not to say, I would add that industry gets a little tired of being lectured by people who have no experience of running industry.

Mr. A. G. Bottomley (Rochester and Chatham)

I think the hon. Gentleman is right when he says that industry desires to produce the best goods, but in these days of rationing by the purse, would he not agree that many people with little money have to buy the cheapest goods, which encourages shoddy production?

Mr. Osborne

One of my companies sells an immense amount of goods to the greatest distributor in this country. I will not give the name of the distributor. The quality of the goods they sell is the finest that can be bought throughout the country, bearing in mind quality and price. They do not sell rubbish, but they sell the cheapest goods in this country. The problem the hon. Lady wants to tackle is that of the distributive costs. The distributive costs of the firm I mentioned are by far the lowest in the country. They insist on cheap goods but good goods. May I add, again I hope without offence, that we get rather tired of being lectured on how we should run our trade by people who have never had a go at it themselves?

In what I thought was an admirable speech, if I may say so, the right hon. Member for Leeds, South (Mr. Gaitskell) said that he was delighted with the increased dollar exports since 1950. He said that U.K. exporters had done a fine job. This, I believe, is the very heart of our economic problem. Can we or can we not continue to sell to the dollar markets? It is not often that I agree with the right hon. Member for Ebbw Vale (Mr. Bevan), but I agree with him in this: the economy of the whole free world is tied up with the dollar economy. He once said America was like the father of a family; when the father turned, everybody was thrown out of bed. According to whether we can sell in the dollar markets or not, we shall be prosperous or we shall not be prosperous, and in so far as the dollar economy continues to prosper, so, I believe, will the economy of the whole free world prosper.

I make that point because only on Tuesday I returned from a two months' visit to the United States, and I thought I would give hon. Members one or two impressions which I received from the traders there. Although I have been four times since the end of the war, I was particularly struck this time by the immense prosperity and wealth of the country. All their great modern factories have car parks like football fields, and the workers come to work in their cars—a heartening sign and something which I should like to see repeated in this country. They have so many cars that they do not know what to do with them and the tendency is for the great distributive units to build their stores out of the cities in order to build parking accommodation for their customers.

Another thing which struck me was the immense building activity. All around their great cities—and I visited about a dozen—there were huge new estates, of the colonial type, with wonderful houses, almost exclusively privately built and privately owned. There was an air of prosperity everywhere.

But everywhere I found a gnawing fear that this prosperity was coming to an end. The most common saying I heard was that in which each sector said of the others, "They have never had it so good for so long." Employers said it of labour and labour said it of employers. All sectors feared that it would not go on, and many fear there will be a trade setback next year.

I want to put to the Economic Secretary the problem of what is likely to happen to us if that setback comes about. One distributor—and a very important distributor—said to me that he was hoping for a bumper Christmas trade and that afterwards he wanted the lowest possible stocks. He is typical of many with whom I spoke. In the motor trade I saw that they had just started their most intensive advertising campaign since 1939, which in itself was evidence of their fears for the future.

Incidentally, I think that the American economy has far too much at stake in the motor industry. They have too many eggs in one basket. I was speaking to the editor of "The Saturday Evening Post"—and he gave me permission to use this—who told me that the advertising capacity of his paper was a fair indication of the prosperity of his country. He said that so far his advertising capacity was greater now than it had been in the previous year, which would rather belie any suggestion that there was to be a trade slump or set-back in the country. He added that in recent months there had been much more advertising by the motor industry. This had helped to push up his figures, but again was indicative of the fears of the motor industry.

One other straw in the wind was this. I met a number of investment bankers and insurance chiefs and asked them what would be their future investment policy. I met them separately, some hundreds of miles apart, and almost on every occasion the answer was that they would invest 60 per cent. in bonds and 40 per cent. in common stocks—again indicative of the restlessness and nervousness over the coming 12 months. They told me that even the common stocks which they would buy would be in the utilities and foodstuffs. That is all evidence of the various attitudes in the country.

To all these bits of evidence I could pick up, I had this reply from my American friends. They said, quite reasonably, that their national income could not for ever be increasing and that there must be sooner or later a temporary set-back. They reminded me that 1950 was at that time regarded as a great year. They said that if they were to return to the 1950 figure for the national income it would not be a slump, it would still be a good figure.

But I should like to remind the House that in 1949 there was a set-back in the American economy of only 5 per cent. and the repercussions over here were so great that the late Sir Stafford Cripps, for whose integrity and honesty I always had the highest regard, was compelled, despite the seven times that he denied that he would do so, to devalue the £ sterling. He was compelled to do so by forces over which he had no control. If a 5 per cent. set-back in 1949 could compel Sir Stafford Cripps to take such a drastic step then, what would be the effect next year if we had a set-back of twice or three times that amount? May I remind hon. Members that in 1929 when the American economy had a set-back of 40 per cent., which incidentally gave to this country 3 million unemployed and gave to Germany Hitler, we could not resist the forces that were then liberated?

It is true that my American friends say that 1929 could never come again. I believe that is true. In 1938 they had a set-back of 15 per cent. and the effect over here was not felt so greatly because Europe was then re-arming fiercely. But most of the experts to whom I talked expected that the set-back next year would be greater than that of 1949, if not as great as that of 1938. I should like to give my hon. Friend these figures to show what would happen, and then ask him just half-a-dozen questions.

Mr. Follick

Only half-a-dozen?

Mr. Osborne

I hope that they will be sensible ones. In 1947 the United States national income amounted to 198 billion dollars, in 1948 it was up to 223 billion dollars, but in 1949 it dropped to 216 billion dollars—a drop of 3 per cent. and it had a disastrous effect in this country. The index of industrial production in the United States in 1947 was 187 per cent., in 1948, 192 per cent., and there was a fall in the next year to 176 per cent. It is true that in the following year, 1950, the national income was up from 216 to 240 billion dollars. In 1951, the national income was 278 billion dollars, and last year it was 291 billion dollars. If, as many expect, there is to be a bigger fall in their national productivity next year than there was in 1949, what is to be the effect upon our economy?

May I ask my hon. Friend these questions? Are discussions now actively taking place between our Treasury and the United States Treasury as to what could be done to mitigate the influence of any slump that may take place? It is useless waiting until it starts. This has got to be done now. I want to know whether anything is being done now. If I am told that we should wait until the set-back is here, I would remind my hon. Friend that in the tragic year of 1929, the break in the New York Stock Exchange occurred in the first week in October, but there were no industrial figures to show a reduction in production until the following December. Then it was too late. Is anything being done now?

Secondly, could a 1954 American slump adversely affect commodity prices as severely as they were affected in 1949? Thirdly, have we any plans—and if not, I think that we ought to have them—to protect the rubber, tin and lead producers in our Colonial Empire, who would suffer very severely indeed if this sort of thing were to happen? If we do not protect these people, we shall be throwing them into the arms of the Communists. I ask, therefore, that something should be done.

Fourthly, if there were an American slump next year, would it compel another devaluation? Many of my friends over there rather thought that it would. I should like to know something about that, and so would all the traders. Lastly, I should like to ask my hon. Friend what effect, if a slump came—I am not saying that it is certain that it will come, but I always like to get ready against the storm instead of waiting for the storm to hit me—it would have on the possibility of sterling convertibility?

When I put these problems to business men and politicians in the United States, many of them said to me that by July next year the Republican Party will be getting ready for the mid-term elections and, like all political parties—including those in this country—they do not want to lose. If, therefore, their economy is such as I have envisaged, then they say that the political pump will be primed, even though their own budget is not balanced and an "honest dollar" is not restored.

This is my last point. If the political pump is primed in Washington, as seems likely, it must inevitably put up the cost of production in the United States and it must put up their selling costs not only in this market but in a third world market in which we compete' with them. That will give us a chance. I make this appeal to the Chancellor. I ask him whether he will do what Sir Stafford Cripps tried so hard to do in 1948–49—will he preach the gospel of dividend and wage restraint? And I put them in that order. It is useless asking for wage restraint unless we have dividend restraint. The example should always come from those who have the most privileges. If there is a set-back in the United States economy, and if we could peg our own costs in the coming year, we should be in an infinitely better position to maintain our exports in the world markets, as well as in the dollar markets of the United States.

I hope I have not said things with too great a degree of certainty, or suggested that I know what is going to happen. It may not happen; but these are my fears, and I should like to feel that the Treasury are taking steps to meet them should they materialise.

1.51 p.m.

The Rev. Llywelyn Williams (Abertillery)

It is now almost a commonplace feature of our debates on the Queen's Speech for each speaker to inform the hon. Member who preceded him that he does not intend to follow the same line of argument. I am sure that the hon. Member for Louth (Mr. Osborne) will forgive me for not following on the lines of the arguments which he so interestingly brought before us.

There cannot be much complacency on the Treasury Bench today, particularly after the most revealing speech of my right hon. Friend the Member for Leeds, South (Mr. Gaitskell). The Chancellor of the Exchequer must have been shaken completely out of every vestige of complacency which he might have had. If there are any signs of complacency left in regard to our economic and financial position, I am sure that the House will forbear—I am certain that my hon. Friends will do so—if I read a very striking quotation from the September issue of the "Times Review of Industry," by the London and Cambridge Economic Service: In itself the rise in production after last year's recession is, of course, very welcome. But with stagnant exports, rising imports, credit expansion, essentially for fixed capital (houses), and a threat of rising wage costs, the position as a whole suggests dangers ahead of an all-too-familiar kind. Furthermore, it must be remembered that the general movement was well under way before the Budget could have any expansionary effect on internal demand; that effect is still partly to come, and has only recently begun to have much influence on the available statistics, which inevitably appear after the period to which they relate. The inflationary movement has acquired considerable momentum. In this type of debate we have a variety of perspectives. We have the telescopic vision of those who see the economic trends that influence the whole world. Of course it is very important to have that wide orbit or perspective. Then we have the microscopic analysis like that of my hon. Friend for Coventry, South (Miss Burton), in regard to certain detailed aspects of industry and business. I may not have the necessary academic training to contribute very usefully to the former of those two perspectives, but I yield to no one in this House in my claim to have a real, first-hand knowledge of what is happening in the more intimate economic life of this country, the economic life of the ordinary people amongst whom I live and with whom I have very close contacts—indeed, whose homes I have visited hundreds of times. I would therefore ask the House to follow me, as it usually does, with patience and understanding as I seek in my own way to reveal certain tendencies and dangers in the economic domestic life of many of the people whom I know personally.

We are well on the way into the month of November and we have already had the incipient signs of winter. I must confess that in many senses I dread a winter in Britain, not only because of the obvious climatic inconveniences which we experience, but because of the deaths caused by the harshness and the exigencies of modern life. I hope I shall not exaggerate anything I want to say this afternoon. I am referring particularly to the old people. Their case has been put before the House very eloquently already by my hon. Friend the Member for Ince (Mr. T. Brown) and my hon. Friend the Member for Kirkcaldy Burghs (Mr. Hubbard), and I reinforce the appeals that they made.

When I try to survey the economic position of our nation and of any nation, the question I ask myself is: Who is finding it most difficult to ensure some sort of economic security? There can be no difference of opinion in this House this afternoon about the category of persons for whom life, particularly in a grim winter, must be desperately difficult. These are the old people, who have made this country what it is because they have given their best in physical and other kinds of labour. What do these people really want in life, and what are their chief needs? We may get into some sort of misunderstanding on that point, and when we discuss their welfare we should at all times remember that there is no party line on this matter. All of us are concerned about the old people.

I submit that the chief want of the old people is food. When we think of food we are immediately alarmed by the increases in food prices. I do not think that old people demand anything exaggerated in the way of food because their wants and their choices are very limited. They will expect butter, not regularly but occasionally, but I believe that we are fast approaching the stage when butter will be completely unattainable for thousands of people in this country. That will be a social tragedy of great dimensions.

The second priority is warmth. Youngsters run about and indulge in exercises and keep themselves warm, but old people must live fairly close to a source of warmth, such as a fire. How many of my people are able to purchase coal at the price it is today is something beyond my imagination. They must have coal. With the advent of winter, and those terrible months of January and February, which really are killer months—they have proved themselves to be that in the history of Britain in the last three or four years—how they can face them without warm fires, and not with fear and trepidation, I do not know. I suggest, and I say this quite sincerely, that we should devise a method by which at least the old people who deserve to receive some concession for fuel should be given it. The Government would be well advised—I am not speaking in terms of political expediency—in the highest sense of that word to think out possible ways and means to meet that particular problem.

Clothing is the third consideration, but it is far below the other two that I have mentioned. As for luxuries, the old people know little about them. An occasional cinema show and tobacco for the old man sums up their idea of luxuries. I speak on their behalf not in any virtuous sense—God forbid that anyone on either side of the House should speak in that way at all—and I say that any stable economy must pay regard not only to the larger economic issues like the balance of payments, convertibility, imports, exports, heightened productivity and all the rest of it, but to these things to which I have referred.

The other point is an alarming one. Over 1,700,000 people, not all of them old age pensioners, now have to go to the National Assistance Board for some form of supplementary benefit. I want to be careful what I am going to say at this juncture, because up till recently I have had every reason to compliment the National Assistance Board and their administrative officials on the humane way in which they did their work. But latterly—and it is right that I should say this—I have heard in my own division and in other divisions certain reports that there is a perceptible tightening up, a perceptible rigidity of approach, and a lack of elasticity which, after all, should be part of any body like the National Assistance Board.

These portents are there, but I should not like to exaggerate them; I should like to examine them more carefully before speaking more dogmatically about them. But if these signs link up with signs in other areas, then we on this side of the House will have some serious things to say about this humanitarian service of our national life.

The last point concerns the people for whom I am proud to speak, who come into the category of those who find it most difficult in these admittedly difficult days to face the future with any calm or with any sense of dignity at all. Here I must refer to the Minister of Pensions and National Insurance. I immediately absolve myself from any charge of dereliction of Parliamentary etiquette or convention. I could not inform a busy man like the right hon. Gentleman that it would be better if he were in attendance on Friday for my speech, because I would not know whether I would be called or not. I want to address some remarks to him, and perhaps the Economic Secretary to the Treasury and the Parliamentary Secretary to the Ministry of Fuel and Power, who are on the Government Front Bench, may convey to their right hon. Friend not only what I say but the spirit in which I say it.

Though we had a debate towards the end of July on the termination of Section 62 of the National Insurance Act, 1946, that is not the end of the matter by any means. The Minister and Conservative speakers generally saw a tactical advantage in what they were doing, and they made great play with it. I suppose in party politics they were perfectly entitled to do so. They had our people, if I might use the expression, on a sticky wicket, because it was the Labour Government who inserted that particular Clause in that Act.

I should like to think that on reflection the Government would prove themselves to be made from a nobler mould than that, because it has now been proven that about 3,000 people in my part of the world in South Wales will suffer serious financial disadvantages because of the lapsing of that Section. The Minister himself used these words in the winding up speech: There will undoubtedly be some cases of diminution of income, but I can assure the Committee that there will be no cases of hardship."—[OFFICIAL REPORT, 23rd July, 1953: Vol. 518, c. 653.] But those words can be very relative words. The word "hardship" may have one application here, but it may have another application somewhere else.

In the same speech the Minister referred to the diminution of his own salary from £5,000 to £4,000. I applaud the nobility of that act, and if there is any depreciation of the incomes of right hon Gentlemen who sit on the Treasury Bench I sympathise with them, but never compare the diminution of a salary by £1,000 with the diminution I find in my division of £1 5s. or £1 10s. in the princely sum of £5 or £6 a week. Take £1 from a person—who is receiving only £5 a week—as a result of the lapsing of this Section 62 and I suggest to the House that that is an injustice unworthy of any party here or of the British House of Commons in 1953.

I want to finish on this note. I was proud to take part in a demonstration a few weeks ago with 50,000 miners from all the valleys of South Wales, from the Eastern valleys of Monmouthshire right down to the Western valleys of Carmarthenshire. They all converged on the city of Cardiff. Possibly Members in this House know very little about that demonstration. The Press saw to it that it was played down either deliberately or unconsciously; it is not for me to interpret motives. But seemingly very little notice was taken of it, and little attention was paid to that demonstration.

I hope the Economic Secretary is prepared to believe the word of a man who is sincere, and who does not want to bluff, cajole or frighten anyone. That is not my approach to any political problem. But that demonstration was much more eloquent than anyone on the Conservative benches can possibly realise. These miners were not demonstrating for themselves, as they used to do in the 1930s. They were all able-bodied miners who had voluntarily given up the Saturday shift with overtime rates. They totalled 50,000 or half the miners employed in the South Wales coalfields. They went silently but determinedly to Sophia Gardens where the mass meeting was held.

I want to tell the Economic Secretary that these miners are linked indissolubly with those who have fallen by the wayside in their own hazardous industry. I would ask at this juncture that this matter be taken up again, so that, in considering the economic problems which affect everyone and affect some more than others, at least we may make a concerted and united attempt to meet them squarely, fairly, and with justice and with decency.

2.10 p.m.

Mr. F. M. Bennett (Reading, North)

In view of the way the previous speaker began his contribution to the debate, I am sure he will forgive me for repeating the same accustomed phrase, that I hope he will not think it discourteous if I do not follow him in his argument. For a few minutes I want to tell the House about one or two narrow points which I believe are constructive and which I picked up on recent tours that I was fortunate enough to make during the long Recess, both to European countries and to Canada and America. I was particularly concerned with the question of our exports, both visible and invisible, and the possibilities for the future.

Dealing mainly at this stage with America and Canada, I found the usual complaints being made, about which we have heard earlier in this debate. Sometimes they were about quality, often they were about the delivery date. Others were about lack of local advertisements, catering for the taste of the people concerned, and packaging to suit countries whose people have different ideas from ours. Others were about servicing, which apply particularly to some areas of the United States where we are sending our cars at the moment. All those have been mentioned before, and there is not much point in going through them again, because they are more a matter for the manufacturers to cope with than the Government.

I wish particularly to bring to the notice of the Treasury the following feature which is the most serious that I discovered. I am referring to the reappearance almost everywhere of hidden subsidies by Powers competitive with ourselves. We all remember only too well the old days of open government-subsidised dumping before the war. The only difference now is that the devices are much more hidden and therefore much more difficult to check. There are literally scores of them. I should weary the House by going through them, but among the most notable are perhaps certain tax remissions and percentage dollar incentives to those firms which can export to those areas. Another one is of goods being sold at exceptionally low prices abroad and afterwards, to compensate for any loss, government departments buying the home production at excessively high prices. Japan has been guilty of this practice.

The chief one, however, is surely that of unduly extended credit terms. When I was in Spain I found our export situation by no means as happy as one would like. There was plenty of evidence that not only Germany, but France too, was going in for what we would certainly regard as unduly long credit terms to enable their exports to compete unfairly with ours. That trend is growing in every country I have visited recently, and I am sure that both the Board of Trade and the Treasury must be aware of it.

My narrow point on that aspect is that as we have managed to get a fair measure of agreement internationally on tariffs in the past few years, is it not worth while the Government considering whether something could not be done by international agreement to delimit and define the relationship between the real price of goods and those at which they are exported? I believe that a lot of countries do not want to get into a race for unduly long credit terms. Some, although they have gained temporary advantage in the past, have learned later that it is not so satisfactory in the long run. I believe there is a field here for international negotiation to try to reach a proper relationship between the home cost of goods and the price at which they are sold abroad.

Mr. G. R. Mitchison (Kettering)

Would the hon. Gentleman not agree that one of the practical difficulties about giving longer credit from this country is that money is now dearer than it used to be?

Mr. Bennett

I shall touch on the question of money in a moment. I was simply saying that I wanted the Government to direct attention to the possibility of international negotiations on how export prices should compare with internal costs. It is true that loopholes may even thereafter exist. I accept that straight away. As there are so many ways of getting round hidden subsidies in any agreement reached, some might still find loopholes in them. We could, however, advance that argument of lack of faith on any international commercial agreement into which we entered, so that alone should not deter us.

It may be, too, that some of our own manufacturers are not keen on my idea because, if we did sit round the international table, I have no doubt we should find that some aspects of our policy might be questioned as to whether they could be regarded as some form of hidden subsidy. But even with those two disadvantages I have mentioned, I still believe that it would be well worth while to consider whether we could not reach some international agreement.

Now I come to the point mentioned by the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison). The second aspect of this problem of credit is undoubtedly where we are to find the money. I do not accept the contention that it may be harder now to find money than it was before because, while that may be true on the face of it. our money now may be worth more in the markets of the world now than when it was perhaps more plentiful but softer. Of course, I appreciate that the problem of this country being able to compete in longer financial credit for our exports overseas has to rank fairly with other calls on our monetary resources.

The E.C.G.D. is doing extremely good work when it comes to guaranteeing what it regards as good export risks for longer credit; but, as the President of the Board of Trade would be the first to agree, that simply provides a guarantee, not the money. Out of our existing London bill market and the clearing banks we cannot provide the sums of money necessary to enable us to compete fairly in reasonably extended credit terms, without competing with other needs, as for instance, Treasury bills.

I am not here pleading that we should go in for some of the almost ridiculously long credits which some other countries have adopted in the helter-skelter competition for export. I am suggesting, however, that we should be able to do more than we are doing at the moment to enable longer credit for our exports of capital, not consumer, goods. I believe that there are ideas in the City of where and how this money could be provided in connection with E.C.G.D., and it would be well worth while the Government considering whether those ideas should be studied further.

Now a word or two on invisible exports. From my own researches I have found that there are a number of small firms over here who, because they are small or for other reasons, are unable or unwilling to enter directly into the competitive export field of the United States. Yet there would be a demand for their products if they were on sale there. Here there may be an opportunity for such firms which cannot enter into direct export to come to arrangements with American firms under a licensing scheme which would bring dollars to this country for those goods to be produced locally in America. It could be done also by a greater degree of association between British firms and, for instance. Canadian ones. I know a certain amount is going on, but there is a field for further advance there.

Finally with regard to invisible exports, I want to say something about the role of London as a financial centre. I do not pretend to know a great deal about the Liverpool Cotton Exchange, but I was glad to hear from the other side of the House the admission made by a previous speaker that one probable result of freeing that Exchange would be that we should get some accretions of foreign exchange, which I imagine must be one of the priority tasks of this or any other Government. I welcome that step from that point of view alone.

Recently we have had a freeing of the discount rates on commercial bills with extremely beneficial results on the position of London as the financial centre of the world and the issue of our commercial bills which, in their turn, bring in much-needed foreign exchange. We have also had recently an extension from 90 to 120 days of the maximum tenor of commercial bills. That is a step in the right direction. I would now ask the Government whether it would be worth giving a further extension on such bills for genuine transit of goods from four months to six months. There are, I am informed, still cases where 120 days is too short a period. I am not making that plea with any idea of getting round restrictions on medium-term credit, but I think that the condition should be more elastic in relation to bills covering genuine transit of goods and thus enable us to obtain maybe even a little more foreign exchange from this source, without running unjustified extended credit notes.

I hope that when the Government reply to this debate we can be told something about the Commonwealth Finance Corporation of which we heard a great deal earlier. We have not heard very much about this recently. I believe that there, too, without drawing unduly on Government resources, we have a field from which to provide more investment overseas from this country in precisely those territories which, as a result, we can expect to increase their imports from us in the years to come. I should appreciate some guidance from the Government on how the plans for the Commonwealth Finance Corporation are proceeding.

2.22 p.m.

Mr. Frank Tomney (Hammersmith, North)

The problem of long-term credit is one which, with my scant knowledge of commerce and banking, I do not propose to pursue. Its effect on our complex system of day-to-day finance, on the Stock Exchange, on the central clearing houses and banking institutions generally is one which requires very careful thought by experts. It is not a subject on which I can reasonably follow the hon. Member for Reading, North (Mr. F. M. Bennett) with any hope of providing anything like the correct answers.

When discussing economic matters, I am conscious, as I am sure many hon. Members are, of the fact that we are dealing with time, whether it be political or industrial time, or the time that we assume we can secure for ourselves as a means of getting out of the economic morass into which we were driven by the last war.

I think that the whole House will agree with me when I say that today, again, we have been treated to an exposition by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) which showed a brilliant grasp of all the arguments that prevail in industry, commerce and banking today. The arguments that he advanced and which the Chancellor must attempt to answer are based on the point whether, in the day-to-day battle for economic survival, it is not always helpful to focus one's gaze on the long-term target and what one intends to do for the economy of the nation on a long-term basis.

I want to deal with some problems as they affect our future. Whatever we do here as a Parliamentary institution—whether we nationalise and the next Government de-nationalise and whether we keep on with that process from year to year as Governments change—eventually, with the gradual settling down of economic forces in the world and the revival of individual nations like Japan and Germany with economic plans of their own to develop, we must make up our minds that we must do something on an over-all national basis to protect ourselves. If Britain is to acquire a minimum with which she can survive in 20th century conditions, it is of paramount importance that we become less dependent on imports of raw materials and food.

We cannot go on, as we have gone on for the last six or seven years, merely asking industry and men employed in it to produce more and to work harder in existing conditions in order to try to get us out of our difficulties. There is a limit beyond which we cannot push people with the existing capital investment in industry and in industrial equipment. Many of our workpeople are working very largely with obsolete equipment or on obsolescent jobs.

We have failed repeatedly to balance our imports and exports. Imports run at roughly £4,000 million a year, which is a tremendous sum. If we could reduce imports by £1,000 million or more, we would be able to plan longer-term developments by which we could hope to survive. That might need a switch of capital and labour to definite channels. It might mean that there would have to be more positive direction of capital into industries which, owing to the extensive research involved, would not earn the high dividends which could be earned in other directions.

I am tempted to digress at this point and to refer to the arguments which we heard the other day about the proposed increase in housing rents in respect of repairs. When one examines the development of housing in this country, the number of house owners and the interest and capital which have accrued to building societies, one is tempted to ask why some of that reserve capital which the societies have drawn for themselves could not be directed specifically by the Government to the solving of such problems as slum clearance and development, which would not give the ordinary rates of dividend which new property provides. I believe that the country is entitled to ask that of the societies. The societies cannot continue to pick the plums of interest from owner-occupiers when their reserves are being accumulated by that process as they are today. That is only one aspect of the national economy which I think requires careful examination.

In the field of investment for the future we have undertaken a terrific programme. We have gone to great expense in the development of education so as to provide us with the best technical brains that the educational system can ensure. We may be a little overloaded in regard to certain sections of effort in that direc- tion. At the moment more effort is needed in the direction of technical schools and the results which accrue. There are two types of education open to the people of England. One is the classical, which tells us how to live, and the other the technical, which tells us how to earn a living. The second will have to become more and more important than the first. At present, I think the first is overloaded, and that we shall have to devote more material and resources to the latter.

The whole trouble in relation to other countries, especially in relation to the U.S.A. and the U.S.S.R., is the question of raw materials. An hon. Member has spoken of his American journey and opinions gathered from American manufacturers and investors. It is a fact that in this country we have only one primary raw material. We all know what it is and we all know that it is wasted. We all know that of every ton of coal used, 87 per cent. passes away in pure waste, either from use in railway engines, in power stations or in domestic grates.

But there are one hundred and one byproducts we can derive from coal which, given proper long-term, long-sighted capital development, would benefit this country tremendously in a situation in which raw material supplies are becoming scarcer, and in which the United States alone consume more than 50 per cent. of available world raw materials. When we look at that figure and also at the fact that Germany is again getting on her feet and all the backward countries are now becoming capable of entering manufacturing and secondary industries, the position becomes rather frightening and we have to ask ourselves what we are to do about it.

What are the Government to do about it? Are they to go on de-nationalising industries, or is it part of the doctrine of hon. Members opposite that only industries which are in acute difficulty are to be left nationalised while others, such as iron and steel and transport, are to go back to private ownership? The problem now is not that of today and tomorrow. We have to look ahead 50 years. We have a population of 50 million who constantly want feeding and who have achieved a high standard of living and have every right to expect that high standard to continue. That is the problem.

In that case, what do we do about raw materials? Are we to go on wasting coal, or should we derive from it the one hundred and one substances which it will give us and develop other synthetic substances, which have been coming forward in the last two decades? There has been a scientific and industrial revolution in synthetic materials in the last two decades. It may be that as the age of steel passes—as it will pass—there will be an age of oxide, silicates, carbides and nitrides to follow. If we go about it in the right manner, we can harness these forces, and it may be that we shall become exporters of manufacturing raw materials. Given the right type of development and the right type of backing, with technical brains obtained from the technical schools, there is a great field open to us.

As usual, the time factor is the biggest factor with which we are concerned. It was not until 1946, I believe, that we ever attempted to do any real prospecting in regard to mineral deposits in this country. I believe that a report was submitted in 1949, a report which I read but the contents of which I have forgotten. It did not show much progress, but by prospecting, the use of synthetic production and improved methods of marketing we can get ourselves out of the rut. But this has to be done on a long-term national plan. We cannot kick about from a five-year period to a five-year period with each successive Government undoing the work of its predecessor. The things we did in regard to gas, electricity and coal were things on which the economy of this country is built. It is no good if the Government, due to pressure from outside or otherwise, give those industries back into private hands.

There are many examples of what can be done with synthetics such as rayon, which is derived from wood pulp and has made tremendous strides, and the production of nylon from coal which also has made great progress. We derive plastics from coal and oil. As the House will remember, we built a very big refining station at Fawley and did work on a smaller scale elsewhere. It is by the employment of those things provided by the chemical revolution which has taken place that we can go ahead on these lines and get abreast of our competitors.

It is very difficult, as has been proved this year, to break into the American capital goods market. The only big contract which came to this country in the last 18 years was immediately turned down by the Americans. It went from us, and that is a remarkable thing when we remember that a 45 per cent. increase was obtained by the United States in the capital goods market in two vital years, 1949 to 1951, while our industry was getting on its feet. We can give a lead and we have a lead in certain fields, with jet planes in particular. I believe that jet planes can give a greater measure of value per ton than any other article we export. I believe the price is about £20,000 a ton against £600 a ton for motor cars. That is the kind of thing in which we can keep the lead if we have the right planned policy.

At the turn of the century we were the most highly industrialised nation in the world. We got the lead and others could not catch us. That lead was progressively run down between the two wars. We were on the point of catching up again when this Government was returned. My submission is that if we want to maintain the momentum which we have gained in certain fields, long-term planning is the only solution. Design and durability come into the question. It is not always right, feasible, or possible to make the entire product of the finest quality. Sometimes it pays to concentrate on those parts which do the actual performance. For instance, we have seen a remarkable advance in prefabricated buildings, which I believe are now earning a considerable amount of foreign exchange.

Apart from anything else, I feel that we should concentrate on these things and we should not only have a fiscal Budget but a raw materials budget with a Minister in charge of the problem in order to keep us abreast of countries which are competing with us at prices with which, owing to lower standards of income, we cannot compete. It is not only a question of what Britain can make; it is a question of what Britain can sell. We should concentrate upon those things which have made us a great industrial nation—capital goods.

It may be said that that is a once-and-for-all policy and that if we sell capital goods and manufacturing plant, others will begin to manufacture. But. if we do it on a large enough scale and our goods are of the right price and quality, we can make sure of return orders, replacements and recurring work to secure for ourselves an increasing and expanding market. No one would have thought, for instance, 40 years ago, when the motor trade was just starting, that by 1950 it would be worth in foreign trade more than four times the total amount of railways and shipping combined.

We must keep our eye on those targets, and that is what makes me so much afraid that this Government, who are dealing from day to day with items of finance and commerce, have not got their eye on long-term development as the target which concerns us for the next 50 years. It is not now or in the next few years that the problem will be brought home acutely to us, although one can see the beginning of it here and there. It is especially in a period when the world has settled down internationally that the scramble for world markets by capital producers will become most acute.

2.41 p.m.

Mr. John Maclay Renfrew, West)

The hon. Member for Hammersmith, North (Mr. Tomney), in a very thoughtful speech, has said a number of things with which I think the whole House will agree. He insisted throughout his speech on the need for thinking a long way ahead. I agree with that. Subsequently he said that long-term planning was an absolute essential to this nation's economy. I can only refer in that respect to the excellent speech of my hon. Friend the Member for Heeley (Mr. P. Roberts), who said earlier today that the trouble with the previous Government was that it really misunderstood the proper functions of planning.

In a nautical metaphor—these are not his exact words—he said that the previous Government held that planning should be the engine power, the engines of the ship, whereas our view was that planning should be the rudder. I could not agree more than I do with that remark, and I hope that the hon. Member for Hammersmith, North will in time agree with it, if he does not do so now.

Mr. Tomney

I had intended to ask the hon. Member for Heeley a question. The essential point is that there must be an engine before one can drive the ship.

Mr. Maclay

I could not agree more. This leads me straight to the speech I propose to make, which I confess is to be one on particular subjects, not general ones.

I intend to refer to the industries of shipping and shipbuilding, so a nautical metaphor is not out of place.

Mr. Gaitskell

Before the right hon. Gentleman leaves the nautical metaphor, will he say whether he means that the Government have no responsibility for the general level of production?

Mr. Maclay

Far from it, and nothing could be further from my remarks or that of my hon. Friend. One can do some effective steering without getting planners all mixed up with the works, or, still worse, with the engine room, which is what did happen under the former Government.

Before going on to speak about shipping and shipbuilding I must declare an interest. I have done so before. I hope that it will not be felt wrong that I should speak on these problems, because I happen to have an interest in a shipping company. The right hon. Member for Leeds, South (Mr. Gaitskell), in his interesting opening speech, referred to certain problems now facing the shipbuilding industry in particular. He did not develop his remarks, and I rather wondered if any of his hon. Friends would do so. As that has not happened, I hope I may be forgiven if I analyse what has been happening in this industry.

It is, along with shipowning, the most international of our industries. Its problems are international and the competition it must meet is international. It is protected in no way; it stands up to the full blast of the heaviest international competition. Accordingly, if there are some lessons to be learned from the history of this industry since the war and from its present problems, those lessons may have a wider application, as there are few industries which have not to face international competition in some form or other.

That is my excuse for developing my argument briefly. Where I feel that the previous Government went wrong in applying planning to this industry was that they frustrated the potential output which was there and which has not yet been achieved, at a time when there was the demand and need for the maximum output. The shipbuilding industry never achieved a rate of building beyond about 1¼ million tons a year, although it had an optimum peacetime capacity of about 1¾ million tons.

I have never understood how that situation was allowed to develop. It was no fault of the management or men. They simply could not get delivery of the raw materials and semi-finished materials which they had to have if they were to achieve full production in their yards. It was not just steel plates which were involved. There was faulty delivery, and unsteady flow to the yards of all the component parts that go to make up a ship. Shipbuilding is, after all, very largely an assembly industry that needs bits and pieces which it puts together, and if there is an uneven flow it means bad sequence and deliveries must suffer. That has been happening.

Take the case of steel plate and consider it in the light of the theory that the effective working of industry can be planned in detail. If that is so, surely the arch-planners in the arch-planning period might have foreseen with a little more accuracy the rolling capacity needed. [Interruption.] These schemes were under a Labour Government. In 1946 decisions were made which are still affecting the yards. We are not yet getting proper delivery of plate into the yards, and the mischief was done a long time back, as I have already said. I do not think that the planners got the estimates of shipbuilding requirements much wrong; what they forgot was the conflicting demands for plate. I think the trouble has largely been oil—pipeline and refinery.

All I am trying to say is that, with the best will in the world, if the driving power, the engine, is to be the responsibility of the planners, then we shall go terribly wrong. I am saying that at this moment, having had the benefit of six years detailed planning, industry in Britain is still giving bad delivery and we have to study what can be done about that now and for the long-term future.

We are now seeing a difficult position developing in the shipbuilding industry, but that is inevitable. I should like to give some reasons, first of all from the point of view of British shipowners who would normally be placing orders for new ships. The placing of orders has undoubtedly at the moment slowed down. The trouble is simply that before the Korean war broke out we were facing a very similar position. Orders were beginning to slow down, yards were beginning to quote fixed prices and delivery dates were a little better. We are now getting the full force of what was coming in a more gentle way before the Korean war. That war produced a very unhealthy upsurge in freights, costs and everything else. Demand now has eased off.

The British shipowner is faced with freight rates at a very low level—almost at rock bottom; the marginal ship is nearly laying up; he is seeing the value of second-hand tonnage falling rapidly; he knows that taxation is at a very high level. Next there is a subject which I think the Front Bench may have guessed might be reached before long. The shipowner knows that his depreciation allowances are utterly inadequate and based on a system which I do not think really stands up to examination if we want to keep the industry healthy. Naturally he is becoming very cautious about placing orders. He does not see how on present prices, with the uncertainty of future trading and with taxation as it stands, he can make a profit, and if he cannot make interest and depreciation he cannot build a ship—nor can the State if that is supposed to be a solution at any time.

Shipbuilders, on the other hand, are facing sharply increased competition from the foreign yards. Continental yards, quite apart from the Japanese yards, are back in full operation. Many have been fully reconditioned since the war in a way scarcely possible for ours to have been with the restrictions which have applied to our yards. Some of the continental yards have been reconditioned with American counterpart funds.

Some Continental yards are now, in many ways, in a much stronger position than British yards to compete for international orders. One nation, Sweden, has a capacity for building far in excess of their own national needs. Delivery dates are still with us as a problem, from the shipbuilders' point of view, and it is most distressing. Certain yards in my own constituency, even today, with the order book dropping off a bit, are still running nine or 12 months behind with delivery, because of problems connected with steel plates.

I know special efforts have been made by the Government Departments concerned to overcome that. I believe the position is improving, and I hope that it may improve substantially, because, without delivery dates comparable with other nations, we will lose orders to them even though their prices are higher. Not only that. Another aspect is that owing to bad delivery dates shipbuilding yards in other countries have been kept at work which would otherwise have stopped working by now. They have seen our yards not able to give the delivery and, instead of closing down, have kept themselves in existence and are getting business, even at higher cost, because of closer delivery dates.

I neither claim nor believe that any British Government can solve these problems on its own, but certain things can be done. I do not include amongst them producing a development council for the shipbuilding industry. It is very nice to have a committee, but I do not think such a council would begin to solve the problems the industry faces. Nor do I believe in subsidies, either for shipbuilding or for shipowners. That would be a most dangerous policy for this nation to follow. The industry have always opposed it, knowing full well that if, of all nations, Britain starts it, such action merely sets off a series of competive subsidies.

Having said that, one has to face the fact that foreign nations are giving assistance to their own shipping industries in various ways. In Norway, Sweden, Holland, Germany, Belgium, France, Italy, Portugal—a pretty formidable list of nations—there are now institutions, or special Government arrangements, whose sole or main purpose is to finance shipbuilding. In the United States, shipowners can go to the Maritime Commission and get specially low rates of interest. I point that out to show that we have a very special problem to watch and face if we are to have a sensible policy without getting caught up in the whole business of subsidies.

I will now suggest some of the possible actions that might be taken. The present Government, if I may say so, have already taken far and away the most important action a Government can take to improve our competitive position, simply by freeing the various commodity and metal markets and letting the normal functions of merchanting, marketing, and competition play their proper part in industry. The effect of doing so has been immediate. It is not that there has suddenly been a great improvement in supplies.

In the immediate post-war period of shortages certain allocation and control schemes had to continue, but I believe that that period of allocation and control was kept on too long. It began to create artificial shortages, inevitably, of its own accord. One result was that excessive quantities of various commodities were kept in stock. Those possessing them hung on tightly to them, even though they might not be immediately wanted. No one wanted to let them go down to the next yard.

That is why I say the most important thing that has yet happened is that this Government's policy is allowing much greater flexibility. There is already a more even flow of materials into the yards than before, and I do ask hon. Members, particularly those opposite, to remember that a general Government policy which allows flexibility throughout the whole range of industry is of immense importance to all industries and particularly to this ship-building industry, because I repeat—it is an assembly industry. I know for example of a ship that was held up for three weeks because one tiny piece of material for the stern tube was missing. That sort of thing is most disheartening for the men in the yard. They put out a special effort to get the vessel out by a certain date and then see it lying there for want of a small piece of material which the system of control has not made available at the time, although, possibly, it is sitting in someone else's yard not far away and they will not let it go.

I turn to the next of the more detailed suggestions I wish to make, which is this question of initial allowances. The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) touched on this in his speech. The moment is coming when the full 40 per cent. initial allowance must be of great importance to the shipowner. I do not say that that moment is absolutely on us, but it is coming near, when the 40 per cent. will have a very material influence on decisions. The reason for my qualification is that, up to now, delivery date has been so bad that I have not felt that, in the last 12 months, the 40 per cent. allowance was necessarily the determining factor in placing a ship, but I do ask the Government to realise that the moment is almost upon us when that 40 per cent. will be of vital importance to the industry.

There is another technical point on which I am not very expert. I gather that if we are going to keep our yards in full capacity in the months and years to come we have to look very carefully at the restrictions on borrowing, on the financing, first of British tonnage, but also, if we are to retain our international position, of foreign orders. Competitive pressure from other countries is getting very heavy, and we must not put anything in the way of capturing foreign orders.

I suggest that the right hon. Gentleman, the President of the Board of Trade, might note the next point. We are, unfortunately, as between the wars, once again faced with a state of flag discrimination internationally. Other nations are taking artificial steps to foster their own maritime marines of straight discrimination with regard to ships of their own flag. A most unfortunate case arises, I am afraid, in the United States, a nation which has done a lot of preaching of freer trade, the necessity for lowering tariff barriers and so on. The United States, most unfortunately because it has been copied elsewhere, has advocated that 50 per cent. of their foreign trade shall be carried in their own bottoms. I suggest to the President of the Board of Trade that, if he is worrying about tariffs and quotas, possibly one of the nastiest forms of quota is determining a fixed amount of a nation's trade to be carried in a nation's own ships.

Then I come finally to my main point—depreciation allowances. The position here is becoming acute, if we are to maintain our proper share of the world's tonnage. The facts are as follows. A ship which in 1938 cost £145,000 is today costing £570,000. With a 5 per cent. depreciation allowance on the original cost the allowance per anum is £7,250. On replacement cost the figure is £28,500, a difference of no less than £21,250. If that argument is applied to a more specialised and faster ship the figures become appalling. The difference between the 5 per cent. allowance on the original cost and on the replacement cost of a 17½-knot liner is something like £53,750. That is the money which the shipowner has got to find out of taxed profits if he is going to replace his fleet. He cannot do it at today's level of taxation.

I do not care to suggest special treatment for any industry, but I doubt whether this can be called asking for special treatment. It is asking for treatment which is applicable to the special needs of a particular industry, and the main point I would make is that, unlike most other industries, a shipowner cannot keep the individual unit up to date year by year. He can make minor improvements, but his big replacements will come every 15 to 25 years, when he has to contend all at once with the change in the value of money. He has got to replace his unit in one fell swoop, and contend with the full force of the change in the value of money at that moment.

It cannot be right that an industry which is absolutely vital to this nation in war and peace should be denied some special consideration or study. I know that the Government and various committees have been studying this problem. I hope that they will be sympathetic to it. I trust that they will find some solution which will be acceptable to industry as a whole, and which will enable shipowners to surmount this appalling problem which is threatening the future of shipowning and must have a serious effect upon the shipbuilding industry of this country.

I have dwelt heavily on this industry, and I repeat that if there are found general rules the application of which will assist the wise conduct of this industry, I hope that they will provide good parallels for many other industries which are faced with similar international competition.

3.3 p.m.

Mr. Wilfred Fienburgh (Islington, North)

I know that the right hon. Member for Renfrew, West (Mr. Maclay) will forgive me if I do not follow him in his remarks, because I prefer to follow the remarks made by the hon. Member for Heeley (Mr. P. Roberts). He was good enough to give a warning to this side of the House. He pointed to the demonstration which took place in London yesterday—I assume that he was referring to the fairly orderly demonstration of the engineers who were demanding higher wages, and not to the idiotic and very dangerous demonstration of the youngsters from London University—and from that he drew attention to the possible dangers of Communist infiltration, pressure and agitation throughout the trade union movement backing up demands for higher wages.

The agitators who are active in demanding higher wages in the engineering and other industries at this moment are not red-handed, vicious or misguided Communists. They are tens of thousands of housewives persistently agitating in tens of thousands of back kitchens all over the country. They are the chief agitators for higher wages, and the main responsibility rests upon right hon. and hon. Members at the Treasury. When they came into office they were immediately aware of the dangers inherent in the ration book. They themselves had exploited the ration book for some considerable period. They had indicated that it was the fault of the Government that rations were not higher.

The ration book, therefore, stood in front of every housewife as a constant reminder of something which she disliked. When she went into a shop and was unable to buy at the then subsidised prices all she wanted, she came out of the shop and said, "Why do not they give us a higher ration? Why do not they let us have more?"—meaning, of course, the Government. Being anxious to avoid that kind of criticism, the Government sought very adroitly to shift the weight of the housewife's ire from the shoulders of the Government, where it properly belonged, on to the shoulders of her husband.

When there are plenty of goods in the shops and the housewives cannot buy them simply because, at the new unsub- sidised prices, she has not enough money in her purse, her reaction is not so much to say that the Government are at fault as to go home and nag her husband for a bigger housekeeping allowance. When the husbands of Britain are nagged for bigger housekeeping allowances, knowing full well that they have not the money in their wage packets to provide them, one of their immediate reactions is to nag and agitate for higher wages, as they are now doing. The obvious result is this present spate of wage claims.

That is why I say that the hon. Member for Heeley must not claim that this is all due to the wickedness of Communist agitators. It is due to the natural and inevitable agitation on the part of a large number of housewives.

Mr. P. Roberts

I hope that my warning was not taken as being against the constitutional action which any trade union should take in this matter. I was not arguing that. I was arguing against the danger of unconstitutional Communist agitation within the whole of industry.

Mr. Fienburgh

I am perfectly well aware of that danger, and I am sure that hon. Members on this side of the House have done a great deal more to avoid it than hon. Members opposite. One of the most serious mistakes which this Government made, right at the beginning of its term of office, was to throw away a golden opportunity to stabilise costs for some considerable time. World prices were coming down, yet the removal of subsidies at that time produced the effect which I have just outlined.

Neither the Government nor the President of the Board of Trade has any moral right to ask for any degree of restraint on the pattern which was so successful when the Labour Government were in power. This type of wage restraint is quite out of phase with the Tory economic doctrine, which subscribes to the law of supply and demand. If there is a shortage of supply of labour, labour is entitled to demand more wages.

Secondly, in a capitalist society, where every trade association from the National Farmers' Union downwards is seeking to use organised pressure in order to maximise returns, there can be no complaint if organised labour seeks to do the very same thing. The great thing which has saved this community is that in its demands organised labour in the past has shown a greater sense of restraint than organised capital, or the shareholders who own the capital.

The significant thing is that economy can, for a short time, carry the cupidity and greed of the shareholders, but if organised labour were to show the same degree of greed and cupidity the economy would collapse practically straight away. I said that there was no moral justification for this Government's demand for any degree of wage restraint. Earnings and profits of industry this year are down by some 18 per cent., but distributed dividends are up by 9 per cent. Out of a smaller pool of earnings the shareholders have already obtained a higher return, to the extent of 9 per cent., in the course of this year.

Yesterday the engineers had their pay claim turned down. The spokesman of the engineering employers, in turning it down, stated that increases in wages would inevitably lead to higher costs, which would inevitably damage our export possibilities and consequently, damage employment possibilities. How right he was; his statement was very wise and very sound; but he of all people had no right to make that statement, speaking as he did on behalf of employers in an industry which has shown a decline in profits in the past year and, at the same time, has handed out more money in the way of distributed dividends.

If anybody has the moral right to make that kind of appeal to the workers it is the Trades Union Congress. How stupid hon. Gentlemen opposite have been, and how wicked the employers and directors in industry, by refusing to respond to the lead given by the Trades Union Congress this year by inciting this wave of wage demands, and by failing to undertake a certain degree of sensible restraint on their own part.

There is a theory, of course, that in the public company the balance of power has moved away from the shareholder towards the director, that the shareholder really does not govern the public company at all. In fact, during the past few months the balance of power has shifted back again. When companies accumulate large reserves, in the main due to past restraint on the part of the workers in those industries, the assets of the companies increase. They become a much jucier plum for speculators. Speculators attempt to move in, in order to buy the assets by offering higher prices for the shares, and the immediate result is that directors, in order to preserve their own directorships, have to boost up dividends. The City Editor of "The Director" put this issue in a nutshell when he wrote some time ago: Directors of industry are subject to conflicting loyalties if they are obliged to choose between maintaining a company's assets by being wary in dividend policy or maintaining their jobs by being spectacular in dividend policy. There are some types of economy, the lush type of economy of the sort, if I may so describe it, of Canada and the United States of America, where it is possible at the same time to increase consumption, to increase dividends, to increase wages and to increase investment. There are other economies where it is possible to keep wages down by political pressures, and to increase dividends and increase investments as a result. However, we are in neither of these situations. We are not a lush kind of economy and are not the kind of social structure in which it is possible to keep wages down by political pressures. We are an economy in which labour as well as the owners of capital have needs, aspirations and appetites, and if capital will not restrain its demands upon the annual product of the community as a whole, then there is no hope that labour will show any greater restraint.

What is the result of this higher consumption and this extended and advanced distribution of dividends? I want to address my remarks upon this particular matter in the main to the Economic Secretary to the Treasury. He is a man who has a great deal of similarity with me. We were both research back-room boys of our respective political parties, and we are both now enjoying the heady delights of making speeches of our own instead of writing them for other people, and we are both more or less of an age. The economic results of the present Government's policy are going to weigh particularly heavily on our generation. The time will come—I do not want to hasten it—in 20 or 30 years, perhaps, when, if our electorates are loyal to us, we shall still be locked in political debate across this Chamber. By that time the Chancellor of the Exchequer will have been translated to another place, laterally or upwards or downwards, but we shall still be here battling over the economic problems of this country.

What sort of heritage are we going to have, what sort of industrial economy, what sort of capital equipment are we going to have in 10 or 20 years' time if the present decline in investment continues for very much longer? I want to quote one or two figures. If we compare the April to June quarter of 1951 with the April to June quarter of 1953, we find that factory buildings under construction are down by 15 per cent., that factories completed are down by 73 per cent. These are factories which should be built now, which should have been in production within the next year or so, and which should have been providing the next generation of economists, and the next generation of the people of this country, with the machinery to organise the production it needs in order to feed 50 million people.

The dilemma of this Government is that they quite simply cannot restrain the demands of private capital upon the resources of the nation. I have already explained that directors, from their own point of view, in order to increase the value of their assets, in order to increase the political power of the board room, may be willing to restrain dividends; but in a system of society based upon the cupidity of shareholders the director himself nowadays has very little choice in the matter. Either he pays big dividends or he has to get out.

It is no good in future demanding voluntary restraint. The example of the directors of industry in the last few months has taught labour a lesson. If labour restrains its wage demands and thereby, in a particular year, does not extract more from the product of that industry or factory, then it has lost its opportunity for all time. It has given up that reward. If at the same time, by labour giving up its reward, company assets are increased, and if, by a change of policy from one of voluntary dividend limitation to one of increased dividends, those reserves, accumulated by the restraint of the employees in industry, are dissipated, willy-nilly, in enhanced dividends to the shareholders of that industry, we cannot logically expect the labour in the industry to agree to the acceptance of voluntary restraint in the future.

The answer must surely be that we must establish a proper balance in the community—a proper balance of reward between those who labour and create the wealth and those who provide the capital. I am using old-fashioned terms, I know; I am using clichés and phrases which were very popular when the Socialist movement first began to propagandise in this country, but they have not lost any of their validity or strength because of it. If we are to get the degree of investment which is needed in order to create the industrial wealth of Britain and to recreate that industrial wealth in ensuing generations, if we are to attain the stability of costs and prices which the economy of this country needs if we are to make our way among the exporting countries of the world, then there must be a radical overhaul of the Government's policy towards increased dividends and increased rewards to shareholders.

3.17 p.m.

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

We have had a very useful debate and I should like to pay tribute to the various speeches which have been made by right hon. and hon. Members. In the course of my remarks, I shall attempt to answer the arguments of the hon. Member for Scarborough and Whitby (Mr. Spearman), but I shall not be able to do justice to the speech of the hon. Member for Bedwellty (Mr. Finch), although I shall refer to coal. The right hon. Member for Middlesbrough, East (Mr. Marquand) made representations about the Raw Cotton Commission, and I am afraid I shall not have time to go fully into that matter if I am to answer even a part of the questions put to me by the right hon. Member for Leeds, South (Mr. Gaitskell) who opened the debate.

The hon. Member for Oxford (Mr. Turner) made a useful contribution. The hon. Member for Louth (Mr. Osborne) referred to the possibility of a United States recession. A general reference to the ups and downs of public and private life will come in my general remarks. The hon. Lady the Member for Coventry, South (Miss Burton) referred to some technical matter which is now being examined by the President of the Board of Trade, and we shall do our best to give her an answer. There was a useful contribution on shipping by the right hon. Member for Renfrew, West (Mr. Maclay), and in the course of my observations I shall have something to say about shipping.

I come finally, without being able to mention speeches by the hon. Member for Heeley (Mr. P. Roberts) and other hon. Members, to the speech of the hon. Member for Islington, North (Mr. Fienburgh). I sympathise with him in having had to write speeches for the right hon. Gentlemen on the Front Bench opposite. I hope that now he is able to make his own speeches he will make a mark in this House which they have so far been unable to make.

The right hon. Member for Leeds, South ranged over the whole of the state of the nation, and it has always been part of our political history that debates should take place upon the state of the nation. It is very useful that we should examine the state of the nation. In the days of the younger Pitt, that right hon. Gentleman used to speak for between three and four hours. Mr. Gladstone, in his day, spoke for at least two or three hours. When we come to Sir Stafford Cripps we find that he spoke for approximately two hours. Today, the right hon. Member for Leeds, South was content with just under an hour.

I will, however, pay him this compliment and say that certainly the quality of his speech was in no way below those which have come down to us in the English tradition. I will say this, too, because I may have to knock him about a bit later: I should like the House and the country to know that every anxiety which he expressed is already present in my mind and, while I may have to put on a genial appearance—I think that is the only way to do the heavy job which I have to do—I am fully aware of the anxieties and difficulties which face our country and our people.

I am fully aware all the time of the need to be ready to deal with any eventuality that may arise. I am equally aware of something of which the right hon. Gentleman does not appear to be aware or, at any rate, carefully concealed from us in his remarks, and that is the remarkable improvement which has taken place in the internal position of this country, the dangers from which we have been saved and the radical improvement in our balance of payments situation.

When we come to examine his concluding remarks, I find that I disagree with every single word he said. He said that our basis is weaker and not stronger. In fact, instead of the dangerous inflation and the sliding into disaster which was apparent when he and his right hon. Friend the Leader of the Opposition so appropriately and wisely from their own point of view left office, that basis is now definitely stronger, and we have the opportunity really to build up something better for the future.

Secondly, he said that there was greater insecurity for producers and higher prices for consumers. That is not the case. We are offering producers their first real opportunity of expansion. I shall deal with that problem of investment in the course of my remarks. We are giving the farmers the stability they need, and we are giving a general opportunity to the producers to look for some security in the future.

At the same time, this theory that there are higher prices for the consumer will no doubt be dealt with on Monday, but the right hon. Gentleman and his hon. Friends should be aware that we are not only holding the cost of living index comparatively stable, which is exactly contrary to what happened under his régime, when it went up, but even in the case of food prices, taking the period October, 1950 to October 1951, the percentage increase under the Socialist Government was 14½. If we take the period from October, 1951, to October, 1952, owing to the deliberate reduction of the food subsidies we have a figure of about 13½ per cent., and already we have got over that hump. Between October, 1952, and September, 1953, there has been a percentage increase under the Conservative Administration of only 2½ per cent., which is surely some indication that on this point the right hon. Gentleman's oration, like a large part of his speech, was more oratorical and selective than it was accurate.

The right hon. Gentleman went on further to say that we were pursuing a doctrinaire Toryism. This is a new phrase which is creeping into Socialist propaganda, and I add it to the collection of clichéss of the hon. Member for Islington, North, so that he can use it in all his speeches. What does this mean—moving into a period of doctrinaire Toryism? It means this, that we are deliberately carrying out a policy which is sanctified by ancient usage and which has been passed down to us by the wisdom of our ancestors, namely, that we have decided deliberately and definitely to move towards the restoration of market mechanisms and the freedom of initiative and to give the individual the opportunity of expansion and development without which this little island cannot be saved. That is our policy. It is not doctrinaire Toryism.

The right hon. Gentleman says that that means two million unemployed. Does it mean that? What are the employment figures today? The employment figures today are perhaps more favourable than they have been at any recent time in our economic history. When the right hon. Gentleman talks of doctrinaire Toryism, why, if he is so keen on doctrinaire ideas, did he make no mention of employment at all, so far as I remember, in the course of his address?

The fact is that we can all of us in this House—apart from the natural need to sustain a certain amount of political antagonism which the right hon. Gentleman tried so hard to do this morning—feel that we in this country should take a certain pride in the burdens that we are carrying. We are carrying a defence effort without precedent in the history of our country, which is running this year at the enormous level of £1,637 million. We are carrying that at the same time as we maintain a social services programme which has been widely extended and for which we have made a provision of some £1,264 million, an increase of £80 million on last year. So much for the critics opposite who say that it is the Tories who are destroying or cutting down the social services.

We are not only doing that, but we have cured the terrible risks and danger of inflation, which was threatening our country and the very bases of those social services on which the standard of life of our people depends. We have further maintained the employment of our people, which we regard as such an important feature of the stability of the whole economy of our country. I do not think that is a bad record for two years, and I am not ashamed to stand at this Box and speak about it.

The right hon. Member for Leeds, South referred to the balance of payments, and he complained, among other things—I have no objection to his analysis—that we had not achieved as big a surplus as we ought to have done. I would remind him of a statement of his own in his own 1951 Budget speech—and I have a similar quotation from his right hon. Friend the Leader of the Opposition—that his aim and the aim of the Socialist Government of those days was, broadly, to balance on current account. What the right hon. Gentleman said at that time was: Our objectives … are to carry through the defence programme as swiftly and smoothly as possible, and to maintain a level of exports sufficient, with the expected surplus on invisibles, to pay for our current import needs, excluding strategic stockpiles."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 827.] The right hon. Gentleman was not able even to achieve that objective, whereas we have been able not only to put right the position which he bequeathed to us but to make substantial surpluses, and this year still to balance, with adequate reserves; still further, we intend to maintain our target and to work towards the surplus which I have announced.

Mr. Gaitskell

I am glad to hear that the right hon. Gentleman intends to maintain the target, and I hope that he will go on to tell us how he proposes to get there. He quoted from my Budget speech. That was a year when import prices rose by one-third and when we were carrying an increase in defence expenditure of £500 million.

Mr. Butler

I fully appreciate all those points. I also appreciate that in the previous year there was a run-down of stocks and that the stocks had to be made up by the Socialist Government in a period of rising prices. Let us study the position of the balance of payments as I see it.

The sterling area's reserves as a whole have risen by £300 million between the low point last year and the end of last month. Instead of one of our two-yearly cycles of crisis we had a sufficient gold and dollar surplus in the third quarter, which is usually regarded as the sterling area's off-season. This reflects very creditably upon the sterling area as a whole. We must go forward from this, and I have never denied that that should be the case.

My hon. Friend the Member for Louth and other hon. Members, and the right hon. Gentleman opposite, made reference, in the case of my hon. Friend the Member for Louth directly and in the case of the right hon. Member for Leeds, South a little more obliquely, to the possibility of trouble rising in world economy or in the United States of America. I do not think it is for me to comment upon the economic affairs of another nation. I have never done so and I do not propose to do so today. I will only say that I, too, have had the opportunity of going to the United States of America and having a look, and that I, too, have had the opportunity of hearing from the Administration and others exactly what they think of the situation.

The only general observation I would make in reply to those Members is that this Government have taken care that they will be ready for any eventuality that may arise and that any legitimate consultation that should take place will take place; but that we have confidence in the future, and that it is quite impossible and unwise to surmise in that way, about what may turn up. The only thing we can say is we are going on the right course by strengthening our economy. Without knowing what may arise, the forward outlook is not exactly "set fair" but is settled from the point of view of the balance of payments, and we have every reason to go forward with hope, provided that we can go forward without conceit and with full preparation for any course we may have to take in the future.

The right hon. Gentleman asked me the latest figures of American aid. I think the House deserves these figures, and I shall attempt to give them the information which I do not think they have had before. I was glad to discuss this matter with Mr. Harold Stassen himself in Paris a few days ago, and I should like to thank Mr. Stassen not only for his sympathy, but for the particular interest he showed in our problems and for his great knowledge of this subject. In particular he made a contribution to our debates at O.E.E.C. which indicated that he understood the problem in Europe and in particular our own problem.

The position about aid is broadly as follows. For 1953–54 we are being allocated perhaps rather less than half of the amount of aid that we had for 1952–53. As this last figure for 1952–53 was about 400 million dollars, the House can take it that we can look forward to a figure of about 200 million dollars of defence aid resulting from the 1953–54 Appropriation. That is what I meant by defence aid tapering off and that is what puts this country and this House on their mettle.

We have every good reason to hope that at any rate a large part of the deficiency can and will be made up by our own exports, mostly of military material and aircraft in what are called offshore procurement orders. So while defence aid is tapering off, we are, in fact. likely to get an equal amount of dollars by our own efforts and by the aid of what we can export in the way I have described. This will, I think, be of value to our own production and to our own assembly lines, and I think it will put our relations with the United States on a healthier basis than they have been before. At any rate, it gives us every opportunity of surviving by our own efforts. As I say, the outlook in this sphere is somewhat hopeful.

The right hon. Gentleman referred back to certain figures of American aid at a certain period, and I notice from looking at the table that he chose the period just in between the ending of Marshall aid and the beginning of defence aid. It is true, if we take the figures selected by the right hon. Gentleman, that we then were passing through a transition period, but the figure that the House must remember is that the average amount of American aid, whether by loan grant or military aid, from July, 1945, to October, 1951, was 1,000 million dollars per annum: whereas in the period since our Government took power, that is, from October. 1951, to October, 1953, the average was running at less than 400 million dollars per annum.

I want the House to see and to realise what we have done on this less American aid and the manner in which we have avoided the dangers of unemployment, so definitely suggested by certain right hon. Gentlemen opposite, if there were to be a run-down or stoppage of American aid. I think that all Members of the House must feel sincerely that even though there is reduced aid we have made a very good showing with our high defence programme, and the workers of this country as much as anyone else in management or elsewhere should be thanked for the effort they have made.

Mr. Gaitskell

Will the right hon. Gentleman say something about the pipeline position which I mentioned?

Mr. Butler

I do not want to complicate the pipe-line position. I made inquiries during the short interval since the right hon. Gentleman spoke but it is impossible to get an absolutely accurate account on the matter. There are dollars in the pipe-line which continue to supplement from time to time, but which in the end will run out. I was unable to get or to agree an accurate figure with those who know about these things, but if I get an accurate figure I shall give it to the right hon. Gentleman.

There are two outstanding features of our recent balance of payments position. One is the surplus on invisibles, excluding Government expenditure abroad, which was £243 million in the first half of this year compared with £419 million for the whole of 1952. So that is an improvement, and long may it continue, because that is a fundamental feature. Whether it will continue I can give no assurance, but I register pleasure that we have had it so far.

I shall now deal with the question of exports which is, of course, at the basis of all the problems of this country at the present time. This leads me to answer, I hope, all that the right hon. Gentleman put to me about Europe. The decision of Her Majesty's Government to liberalise up to 75 per cent.—which was the decision we took on our visit to the O.E.E.C. this autumn—was done with a full awareness of the reasons; but it was done also with the full realisation that, had we not taken this step, in my opinion the Organisation for European Economic Co-operation and the European Payments Union, which has been of such considerable value to us, would not have held together.

To begin with, the rules of the club demand that a member like ourselves should go up to a 75 per cent. liberalisation of imports, and secondly, that we should raise the tourist allowance to £50. It was for those reasons that I thought it inevitable that we should take this step. The right hon. Gentleman asked if we had received any response. Well, we have had the beginning of a response from the French Government, who, from a level of 8 per cent. liberalisation, have gone so far to a level of 20 per cent., and I certainly hope they will go further.

We have also had an indication from the creditors that any tendency that there was before for them to retaliate against our goods has been very much removed by our own action. May I say that when we assessed the position we were aware of the danger that, if we did not liberalise, there might well be retaliation against our own exports. Therefore, we took an action which, though a risk, is I am sure worth taking and, in fact, has already revivified the O.E.E.C. and greatly re-established the position of this country in Europe.

May I say, in passing, what an honour I found it to take the chair of the European nations on behalf of the United Kingdom. This is a position in which I think we have the right to take the lead. We did take the lead and I think I can tell the right hon. Gentleman in all sincerity that our move will pay good dividends. Liberalisation and reciprocity must go together.

The right hon. Gentleman asked what the latest news was about convertibility. The answer is that it still remains an objective of the sterling area. Sterling is a currency which finances half the world's trade, and it is a currency whose strength can only really be complete when it is able to be converted. There are, however, certain definite conditions which I have frequently put before the House that are not yet fulfilled. And while the European nations have agreed to start studies on this matter with us and with the aid of the Council of the O.E.E.C, I cannot make any further report on this matter today. I would remind the House that the German Minister for Economic Affairs himself was even keener on making the running in this matter than the Ministers of the United Kingdom.

Now I come to exports as a whole. The position of exports is by no means yet satisfactory, nor can I give a complete reassurance to the hon. Member for Scarborough and Whitby. He asked whether I could give an assurance that exports would rise. The position about exports is this: On a close examination I found that it was as early as 1950 that the world trend began to turn against us in the export trade. That, combined, as remarked by the right hon. Gentleman, with the fact that the very improvement in the terms of trade itself had some adverse effect on exports, has resulted in the export market being extremely difficult for this country. But when the right hon. Gentleman, as he perpetually does, says up and down this country that this Government have had luck in terms of trade he ought to remind his audiences that the deterioration in exports had set in under his own Government, just as the textile recession, to which he did not draw attention, had set in.

Germany and Japan had re-entered the export market, and just as we have had good fortune in the terms of trade, which I always freely acknowledge because I want to be straightforward in these matters, so we have had a difficult time in the export market. Every device is being used by Her Majesty's Government to improve the situation and I am glad to register that the monthly average of exports to the United States has risen from £12 million in 1952 to £13 million in the first quarter and £14 million in the second and third quarters of this year. That is a very desirable development indeed.

Now we must push into the other markets where we are not doing so well. I can assure the House that the President of the Board of Trade, who has been present throughout this debate, with some of us in the Government and the whole machine has been perpetually at work in pushing into the markets where we must make progress. Whether by means of the Crosland mission in South America, the pending new mission to the Middle East, the new British Trade Fair in Bagdad, up and down the world we have to push and create conditions under which industry can take advantage of this necessity to export at the present time. I assure the House that this is the major activity and anxiety of the Government today. I come now to the home front.

Mr. Gaitskell

Can the right hon. Gentleman say something about the South African position?

Mr. Butler

I cannot say very much about that because South Africa is an independent country, and I cannot undertake to give descriptions of the policy of the South African Government. But I will say that not one of my colleagues in the sterling area has been of more assistance to this country than Mr. Havenga, the Minister of Finance. He found it necessary to take the action which he took on the subject of dollar discrimination in his recent budget. While I was receiving information about it, I could not regard the matter as one which fell within the sovereignty of my own jurisdiction to interfere.

Mr. Gaitskell

rose—

Mr. Butler

No doubt the right hon. Gentleman is going to refer to all sorts of agreements. My answer is that I cannot regard the action of the South African Government as having gone against any understanding whatsoever of any sort that has been made. Nor am I prepared to make any other observation at the present time, except to say that it is necessary for this country to be thoroughly competitive, and I see no reason why we should not be, from the information at my disposal. If we are, I think that we shall be able to gain that goal which can be of such value to us.

Mr. Gaitskell

Can the right hon. Gentleman say whether he was consulted at least by the South African Government before this step was taken and. if so, whether he made any representations about it and pointed out that it was part of an agreement between these two countries?

Mr. Butler

I am not prepared to interfere with the sovereignty of the South African Government or of the Minister in the action which he has taken, and nothing that the right hon. Gentleman says will draw me. I did say that I was informed of this matter but I did not regard it as a breach of any agreement, and I said that I cannot interfere with the position taken by the South African Minister except to say that it will mean that we shall have to work harder in competition to achieve the goal which we so need to achieve. I cannot go further.

Mr. Gaitskell

Do I understand that the right hon. Gentleman was not consulted? Nobody is suggesting that he should interfere with the sovereignty of the South African Government or any other Government. I asked two simple questions—was the right hon. Gentleman consulted and, if so, did he make representations? Were there no discussions? This is extraordinary.

Mr. Butler

I have told the right hon. Gentleman that I was informed beforehand.

Mr. Gaitskell

What was the reply?

Mr. Butler

The relations between myself and the South African Government had better remain confidential, which is I think the usual manner of conducting affairs between sovereign Governments. If the right hon. Gentleman wants some further assurance in trying to make something particularly sinister out of this, he can be assured that in the case of the South African or any other Government, whether within the sterling area or outside it, the point of view of Britain is always put strongly and firmly and is understood by our opposite numbers. I cannot go further than that.

The position about production is one which I think the House will be glad to hear. My first Budget was introduced in order to improve the balance of payments and my second Budget in order to improve production. It is at least satisfactory to see in politics some relation between cause and effect, an improvement in the balance of payments resulting from the first Budget and a distinct improvement in production resulting from the second. I now propose to justify the second Budget by some figures about production.

The index of industrial production as a whole is provisionally estimated at 125 to 126 points for September. That is a record figure. This brings the average for the first nine months of 1953 to 118 —the average—and that is 4 per cent. or 5 per cent. higher than during the corresponding period of 1952 and 1 per cent. or a little more above the level of 1951. I am not taking credit for the trend revealed in September, but if we took credit for the trend revealed in September the level of production would turn out to be significantly higher than in 1951. Surely the right hon. Member will show some gasp of pleasure at this as it is precisely what he asked for at the time of the Budget.

Mr. Gaitskell

I have already said so.

Mr. Butler

The position as regards individual industries works out something as follows: an increase of something like 5 per cent. or 6 per cent. in building output—that has made a significant contribution to the all-industries index—the output of food, drink and tobacco has risen by about 6 per cent., vehicles by about 6 per cent., textiles output by more than 30 per cent., clothing about 15 per cent., and chemicals about 14 per cent. Taking the shipbuilding and engineering industries to which my right hon. Friend the Member for Renfrew, West referred, the shipbuilding, engineering and electrical goods industries show a relatively small increase but remain above the 1951 level. That is not too bad, but we want to see an improvement.

The position about the shipbuilding industry, to which so much reference has been rightly made, is that, as my right hon. Friend the First Lord of the Admiralty told the House on 28th October, the order book of the shipbuilding industry today is 5.8 million gross tons, and this is more than four times the current annual rate of shipyard output. Whilst some of the smaller firms have anxieties about their order books, of which we are well aware, I cannot feel that a figure of that sort should lead to too great pessimism on our great shipbuilding rivers or in the yards.

In any case, such anxiety as there is is well in the mind of Her Majesty's Government and I undertake to watch every device mentioned by my right hon. Friend the Member for Renfrew, West and the right hon. Member for Leeds, South. But the figure I have given is to some extent satisfactory. If one of the difficulties of British industry is the speed of delivery dates, it surely is not bad to look at a figure like that which is four times the current annual rate of shipyard output.

Crude steel was a record for the month. Passenger car production returned to the levels of earlier in the year and rayon came to within 2½ per cent. of the July record. That indicates that the production we so much wanted has been started, at any rate, in the direction we intend to go. That has been done largely by the increased incentives given by the Budget and the new spirit we have infused into the economy.

The right hon. Member asked about investment, and that perhaps is the most important question he asked—the level of factory building and investment. What about this investment story? What did we find when we took office? We found a great overloading of the programme. We found that the right hon. Member had himself decided to end initial allowances. [Interruption.] Temporarily, at any rate, he decided to end them. Now he is pressing me to put them back. We found that there was a shortage of structural steel, we found inflation, which was rapidly getting out of hand. We took severe steps, by monetary discipline and by finding some more steel from America, for which we were indebted to my right hon. Friend the Prime Minister, by introducing in this Budget initial allowances and reallocating the burden between defence and the material-using industries, that most vital sector of our economy.

We did all these things. Now production is beginning to creep up. In the course of doing that we had a severe effect upon industrial investment. Now investment is beginning to creep up. The right hon. Gentleman really cannot have it both ways. These things in the economy are rather like a medical story—they take a year or two to work out. We are now getting the fruits of our labours, which are the results of dealing with the difficulties which we inherited from the right hon. Gentleman and his friends.

In order to show how industrial investment is creeping up again, as indeed it should, I will give the House these figures. In the six months following the Budget, licences for industrial building up to a total value of £85.7 million have been issued. These compare with £58.3 million in 1952, an increase of 47 per cent. That is the answer to the serious charge made by the right hon. Gentleman. The right hon. Gentleman will now see that if we had not inherited so difficult a task we would not have had such difficulties to deal with in the investment field. We are now beginning to see the fruit of policies which I believe will be in the national interest, and that we may have increased investment and greater production, no inflation and. I hope, greater investment overseas.

I must answer one question put by the right hon. Gentleman and others on the subject of the level of consumption. The question has been asked whether the Budget was too lenient and whether there is now too much consumption. Of course I undertake, as I have always undertaken, carefully to watch the level of home consumption. I can say to my hon. Friend the Member for Scarborough and Whitby that if I think the level of home consumption has become too high and is endangering either our export trade or tending to re-create an inflationary situation I shall be quite firm in dealing with it. I must honestly say, as I did at the Mansion House, that I do not think that that state has been reached.

I am surprised that the right hon. Gentleman never once referred in his speech to the fact that it is by handling the economy as this Government has handled it that we have maintained full employment and increasing production. If he wants the screw turned, and a return to deflation and unemployment, it can be done. The right hon. Gentleman used no words to show satisfaction at the level of employment which we are maintaining at the present time.

Investment is something which goes hand in hand with better production. As production increases so does investment—and production cannot increase without increasing consumption because that is a part of the way to encourage an increase in production. The three things therefore go together, and I shall watch developments in the three with a view to seeing that we get the proper investment we have now authorised in our industrial structure—investment and modernisation.

The right hon. Gentleman cannot complain of the efforts we have made to give a spur, which I am glad to say are having an effect, and we are getting back to the situation which he desires.

Mr. Gaitskell

Will the right hon. Gentleman give the figures for the increase in consumption?

Mr. Butler

They are approximately those which the right hon. Gentleman gave.

Mr. Gaitskell

About £400 million?

Mr. Butler

I would not usually differ from the right hon. Gentleman's statistics, although I differ from him so often in ideas.

The remaining things I have to say relate, quite shortly, to the Budget and primarily to this question of the expansion of overseas development.

Mr. Finch

And coal prices?

Mr. Butler

On the subject of coal prices I really must ask indulgence, because there is not time to deal with everything in the course of this debate.

The position about the Budget is that the figures for the half-year had definitely favourable features. Above-the-line revenue was up to expectations and expenditure has run even. Below the line, the outlay in the first six months was £50 million less than in the same period last year. I would therefore say that the present position, budgetarily, is normal, but I must warn the House that there are bound to be big expenses arising out of defence in one way or another.

We shall also shortly be putting down a large Supplementary Estimate for the Ministry of Food, of which I wish to give advance notice. It is partly due to the purchase of Cuban sugar, which related to the derationing of sugar. Also, the sale of the Ministry's stocks of cereals is proceeding more slowly than was originally forecast, and the fall in the world prices of cereals has led to unexpectedly large expenditure in supporting the home harvest. So there will be a burden. There is, at present, other expenditure I shall have to meet in regard to Purchase Tax and Income Tax concessions.

All I would like to say to the country generally, and to those who speculate about the Budget is, first, that I think they would be wrong to take too hopeful a view, just because we have reached a normal and satisfactory half-year. I do not want anyone to underestimate the very heavy burdens we are carrying, and if they think we are to get magic reductions of this order in direct or indirect taxation, they will be making a big mistake. The country must realise things are not yet easy. The burdens remain almost intolerable. We are doing our best, but they cannot expect magic.

In relation to all that has been said by the right hon. Gentleman about business profits, dividends, wages and so forth, I am not going to give any lectures to the country, but only to say that the utmost moderation should be used and practised by all.

I conclude with a reference to overseas investment. As the House knows, the United Kingdom is taking part in the meeting of Finance Ministers in Sydney in January. I shall be leaving about Christmas time and shall spend the Recess in this most important task. This will be the third of our major economic and financial discussions. I want to assure the right hon. Gentleman, who, I thought, spoke with right feeling on this matter, that overseas investment is vital. I can give no details about the Corporation, which will shortly be announcing its own developments.

I want the House to conclude its discussion of this important aspect of our economic affairs today by just thinking of the great wealth we can produce at home, in agriculture and industry, by the right development and scientific spur, and of the magnificent openings there are in the Central African Federation; in developments under the Colombo Plan—from which my Friend the Economic Secretary has just returned and where he had so successful a mission; in the hydro-electric projects in the Snowy Mountains range in Australia; in the timber project in New Zealand; and in the £37 million to be spent on the Damodar Valley scheme in India under the five-year scheme; and indeed the romance which is taking place in the expansion and development of the wealth of our own sterling area and our own people.

The message I want to leave with the House is that this little country has never before been so burdened, and seldom before been so gallant. The only way we can maintain our standard of living and of employment is by striking out with initiative, by expanding and not restricting. That is the policy of the Government. My conclusion is, therefore, simple, but firm. We are proudly and successfully carrying unexampled burdens. We intend to continue carrying them for as long a time as may be necessary by increasing and expanding our national wealth both at home and abroad.

Debate adjourned.—[Mr. Studholme.]

Debate to be resumed upon Monday next.