HC Deb 26 November 1964 vol 702 cc1477-84
The Chancellor of the Exchequer (Mr. James Callaghan)

The House will recall that in my statement on Monday I said that the Bank of England was in close touch with other Central Banks with the object of maintaining co-operation. Yesterday evening the Bank announced the result of these endeavours.

Three billion dollars—£1,070 million—have been placed at their disposal by 11 Central Banks to defend sterling. This massive support, the promptness of which we appreciate, demonstrates the vital importance of the strength of sterling not only to ourselves, but to the monetary and trading systems of the world. These credits are separate from the assistance already received which will be repaid from the drawing of 1 billion dollars—£357 million—which we intend to make next week from the International Monetary Fund.

This concerted action of the monetary authorities of the Western world will demonstrate to those who have been influenced by rumours about the future of sterling that their fears are groundless.

A stable currency is the product of a strong economy. The value of these credits is that they give time to press forward with the Government's longer-term plans to strengthen the economy.

The Government intend that we should be seen to be paying our way overseas as well as at home. First, therefore, priority is being given to increasing our exports through measures that are being urgently worked out as well as those already announced. Secondly, a strict review is taking place of the whole range of Government expenditure including overseas defence commitments in order to secure a reduction in the burden on our balance of payments. Thirdly, we intend that resources of skilled manpower and of capacity should be released in order to put them behind the export effort.

The Government are confident that these measures, together with others already announced and begun, will enable us to pay our way.

The new credits announced yesterday are a measure of the confidence which has been shown in Britain and in our ability to achieve our objective.

Mr. Maudling

This must be the biggest financial operation since the North American loan. May I ask whether the right hon. Gentleman is aware that there will be general relief that the international monetary co-operation built up in recent years has been once again effective and that the Government will have an opportunity—a brief opportunity—to repair the damage to confidence done in the last 10 days?

May I ask the right hon. Gentleman two questions: first, what are the lengths of these credits, which I do not think is mentioned in his statement—three months, six months, whatever it is—and on what conditions, if any, have they been granted? Secondly, may I ask whether it is still the view of the Government, in the words of the Prime Minister on 3rd October, that you cannot go cap in hand to the central bankers in Europe—as they have now been forced to do—and maintain your freedom of action whether on a policy of maintaining full employment here in Britain or even on social policies?

Mr. Callaghan

I have always taken the view—I take it now—that whatever has happened in the last 10 days is the product of failure to act in previous months. It really is astonishing that the previous Government should have failed to work out export incentives at a time when they had been drifting down and left the new Government to take over this responsibility when their own policies in relation to exports had obviously failed a long time ago.

Secondly, I must say that I think it a little impertinent of hon. Gentlemen opposite to adopt this self-righteous air when they have embarked on prestige projects which have imposed a heavy burden upon our—[HON. MEMBERS: "Oh."] I think that most hon. Members have been in the House long enough to know that whoever stands at this Dispatch Box eventually has the right to speak.

The previous Government embarked on a number of projects which have imposed a heavy burden on our balance of payments. They should have reviewed them long ago. We now intend to do so, and it will have to be done quickly. The rot that they started is reflected in the words I carefully chose, and I used, and I repeat, that a stable currency is the product of a strong economy and that there need be no disturbance provided the economy is sound.

The period of the credits is for three to six months. There are no conditions attached, except one or two minor technical conditions that the right hon. Member for Barnet (Mr. Maudling) will probably be aware of in his experience, that relate to drawing.

As to whether one has freedom of action when one goes cap in hand to central bankers, the answer is, as the right hon. Member for Barnet knows, that that is not a posture which any Chancellor enjoys. It is one which I trust the whole House and country will want to see us escape from at the earliest possible moment. I believe that with the measures which are being taken to review the burden on our balance of payments, the additional incentive that will now be given to exports, and the strict review of Government expenditure, we shall put ourselves in a position where we can pay our way. This will have the biggest possible influence upon our position in the world.

Mr. Grimond

While I welcome what the Chancellor has said about the use of the time we have bought to strengthen our economy and boost exports, may I ask whether he could be a little more specific about what is meant by the phrase that the Government "intend that resources of skilled manpower and of capacity should be released"?

Secondly, is he aware that the Leader of the House seemed to indicate that a statement might be made by him now about the corporation tax? Does he intend to make any further statement this afternoon about that?

Mr. Callaghan

The particular point to which I referred, namely, the release of "resources of skilled manpower," will follow from the Government's review of their defence commitments, including those overseas. That, I believe, will ensure that additional effort can be placed behind the export drive.

As to the corporation tax, I shall certainly make a statement on that as soon as I am able to do so.

Mr. Shinwell

May I ask my right hon. Friend whether he detected a note of disappointment in the questions asked by the right hon. Gentleman the Member for Barnet (Mr. Maudling), who, apparently, is disturbed because the strength of the £ has been maintained? Will he be good enough to challenge the right hon. Gentleman the Member for Barnet to say what, if he had been faced with similar circumstances arising out of the failure of the last Government, he would have done in those circumstances?

Mr. Callaghan

I must say I notice that while hon. Gentlemen opposite consistently give lip-service to the objectives we have, they neither support the measures we put forward, nor propose any alternatives.

Sir Harwood Harrison

Is the Chancellor of the Exchequer aware that while we welcome his efforts to improve exports, we think that the best way to improve exports is to have happy and contented customers? When is he going to stop his colleagues on the Treasury Bench being rude to so many of our best customers?

Mr. Callaghan

That, I think, is an example of the sort of helpful question we are asked.

Mr. Loughlin

I wonder whether my right hon. Friend could say how much of the 1,000 million dollars stand-by credit—[HON. MEMBERS: "Pounds."] The figure I am going to use is the correct one in the context in which it is used. How much of the 1,000 million dollars stand-by credit which applied before the new stand-by was to be used or is to be used to repay the borrowings in recent months by the Tory Government?

Mr. Callaghan

I would prefer to make a full and complete statement on that at an appropriate moment later.

Sir Godfrey Nicholson

Is not the right hon. Gentleman deluding himself rather dangerously if he refuses to recognise, either in his own mind or publicly, that there is some connection between the loss of confidence in the £ and the actions of the present Government?

Mr. Callaghan

I think that there is some truth in the point that the announcement of the possible deficit for this year did cause considerable shock to others, as it did to me. That, I think, is a fact that cannot be disputed. It has had an impact on world opinion, but the country and the world should judge whether it is better to face the truth of the position and try to put it right, or to go on pretending that there is nothing wrong.

Mr. Carol Johnson

My right hon. Friend will no doubt recall that in the autumn of 1957—[HON. MEMBERS: "Speech."] I am just prefacing my question—under a different Administration, the country was also faced with a severe financial and economic situation, with severe pressure on the £. At that time there was evidence of large sales by British companies of sterling securities, though it was recognised at the time, in the words of one financial adviser—

Mr. Deputy-Speaker

Order. The hon. Gentleman must come speedily to his question.

Mr. Johnson

This is a most important question, Mr. Deputy-Speaker.

Mr. Deputy-Speaker

Every hon. Gentleman's question is a most important question to the hon. Gentleman who puts it.

Mr. Johnson

Is my right hon. Friend aware that in the crisis of 1957 there was one financial adviser who said that although it was anti-British and derogatory to sterling for British companies to sell sterling securities, it made sense in the light of their own interests? Is there any evidence of similar activities by British companies in recent days?

Mr. Callaghan

I have no direct evidence of such activities, but I would say that any British company, or, indeed, any foreign holder of sterling, who sells at present is doing himself a disservice and not a service.

Sir Alec Douglas-Home

If I understood the right hon. Gentleman aright in his answer to the right hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond), he gave rather vague hints that there were defence commitments which would be given up, saving, apparently, large quantities of manpower. I must impress upon him that if he makes this kind of vague statement this will cause grave disquiet in many parts of the world and also among our allies. I should like to know, first, why these decisions have been taken and when we can expect a statement. This kind of vague statement should not be allowed to stand. We should know one way or another.

Mr. Callaghan

The words are clear enough, I think: A strict review is taking place of the whole range of Government expenditure including overseas defence commitments in order to secure a reduction in the burden on our balance of payments. It is the responsibility of any Government to make a strict review of the actions of their predecessors in these fields in order to try to relate the defence commitments to the expenditure. That is what we intend to do.

Sir Alec Douglas-Home

Is the right hon. Gentleman talking about prestige expenditure?

Mr. Callaghan


Sir Alec Douglas-Home

I must remind him that if it is not a matter of prestige expenditure it is a matter of grave importance to our allies and our military set-up in this country. Can he tell us something more definite about when we can expect a statement, because uncertainty is not at all the thing we want in this matter?

Mr. Callaghan

I thank the Leader of the Opposition for his helpful questions. We will do our best to provide him with the information he is seeking as soon as the review has been concluded and the necessary negotiations have taken place.

A strict review of these commitments is now being made, because a country's influence cannot depend upon anything but a strong economy. That is the basis of any country's influence, no matter what else it may try to do.

Mr. Maudling

If the right hon. Gentleman is not in a position to make a statement about the corporation tax, can he explain how it was possible for such firm guidance to be given to the Press this morning about how it was intended to act?

Mr. Callaghan

I think that the right hon. Gentleman who has had recent experience of administration, and all those sitting beside him on the Front Bench, have plenty of experience of what happens.

Mr. F. M. Bennett

On a point of order. This situation is not at all satisfactory. Back-bench Members have a right to ask for the protection of the Chair. In an earlier remark on the same subject the Leader of the House made the observation that he had no knowledge at all—he said that he was speaking for himself and not for anyone else—of any previous information having been given to the Press. Now we have another statement being made clearly implying that, in fact, some such information was given. May I ask, Mr. Deputy-Speaker, what measures we can take to make somebody on the Front Bench opposite speak the truth?

Mr. Deputy-Speaker (Dr. Horace King)

In view of his opening statement I assure the hon. Member for Torquay (Mr. F. M. Bennett) that I have been endeavouring—perhaps nobody has noticed it—to protect back-bench Members during the fortnight in which I have held the responsibility of the Chair. But the point which the hon. Member raises is a point of argument and of disagreement between him and the Government Front Bench. I cannot intervene in the political battles which I understand take place in this House every day and which have always been so. There is, therefore, no point of order in what he said.

Mr. Maudling

Further to that point of order. It is quite clear that the reports in this morning's Press were designed to encourage people to take certain action on the assumption that this was official Government policy. Should not this be made clear to the House?

Mr. Deputy-Speaker

Again, and with all respect to the right hon. Member for Barnet (Mr. Maudling), this is not a matter for the Chair. This is part of the battle between the two sides of the House.

Several Hon. Members


Mr. Deputy-Speaker

Order. We might continue debating the Chancellor's statement all day, but I have to protect the business of the House. The Clerk will now proceed to read the Orders of the Day.