INTERNATIONAL MONETARY FUND (LETTER OF INTENT)

HC Deb 05 December 1967 vol 755 cc1142-204

Mr. Michael Foot (Ebbw Vale)

I beg to move, That this House do now adjourn.

Mr. Speaker

Before I call on the first speaker in the debate, I wish to point out that it ends in exactly three hours. I have already more than 25 hon. Members who wish to take part in it and I shall be grateful if right hon. and hon. Gentlemen will speak briefly.

Mr. Michael Foot

May I, first, thank you, Mr. Speaker, for the decision which you made yesterday about Standing Order No. 9? But in doing so I apologise to my hon. Friends from mining constituencies for the inconvenience which is caused to them by this intrusion. May I say to my hon. Friend the Member for Derbyshire, North-East (Mr. Swain), who is one of my oldest friends in the House, that after this intrusion I shall be quite happy to leave to him the conduct of the rest of the month's Parliamentary proceedings.

Some of us sought to press this debate in the belief that it raised issues of the utmost gravity for the conduct of the British economy. It is in that spirit that I wish to raise the matter. But I should like, first, to make one personal reference to the Chancellor of the Exchequer. I do not think that it is really necessary for me to say this, but I should like him to understand that my hon. Friends and I who have raised this matter do not do so in any personal spirit of ill-will towards him—indeed, we might be able to assist him.

When one of my right hon. Friend's predecessors, Disraeli, was appointed Chancellor of the Exchequer, he was momentarily bashful because he did not know much about finance. He approached his leader, Lord Derby, Leader of the Conservative Party at that time, and explained the position. But Lord Derby replied, "Oh, don't bother; they give you the figures". I am sure that whatever might have happened in years gone by, or days gone by, that does not apply to my right hon. Friend. I assure him that we raise the subject because we wish to discuss the Government's whole attitude to the policy issues involved.

I want, first, to recall the sequence of events which has led to this debate. On Monday, 20th November, the then Chancellor of the Exchequer, in his devaluation statement, referred only briefly to the subject of credit facilities, saying: They have been assembled as an indication that the international monetary centres of the world are united with us in their determination to put an end to speculation against one of the world's key currencies."—[OFFICIAL REPORT, 20th November, 1967; Vol. 754, c. 938.] And he went on to refer to the stand-by credit in that sense.

The following day we had a speech from my right hon. Friend the President of the Board of Trade, who did not refer directly to credit facilities but who spoke of a loan in more general terms, saying: Another alternative might have been a further massive long-term loan, designed to give us the extra time required for our longer-term policies to work. But there were two over-riding objections to this course. First, it would almost certainly have been accompanied by unacceptable conditions as to our domestic policy, and these we were not prepared to accept."—[OFFICIAL REPORT, 21st November, 1967; Vol. 754, c. 1144.] Then came the reference to the matter by the Prime Minister in the debate on 22nd November, when, in reply to an intervention by the hon. Member for Chigwell (Mr. Biggs-Davison), my right hon. Friend, referring to the previous Chancellor of the Exchequer, said: My right hon. Friend made it clear on Monday that we were not borrowing for the purpose of living on the sum borrowed, but that it was what might be called a deterrent, to make it absolutely crystal clear, if it was not clear already, that speculation at the new parity was not worth the gain—and with no strings. The loans from the central banks have no strings whatever, as was stated clearly on British television by Dr. Emminger on Monday night, in the same programme in which the right hon. Gentleman took part"—[OFFICIAL REPORT, 22nd November, 1967; Vol. 754, c. 1335.] That was the Prime Minister early that afternoon. Later that evening the Chancellor of the Exchequer made the most extensive reference to the question of standby credit facilities. I will not read the whole of what he said, because it takes most of a column. He later insisted that the standby credit—not a loan—was for us to use to repel speculation. Previously, however, he had said, because of the rumours that were prevailing: I therefore want to say now that I have seen the staff of the International Monetary Fund this morning and they are themselves discussing the matter with Dr. Pierre-Paul Schweitzer. There are regular procedures, as will be known, for going through before a standby credit is established. I want the House to know that on this occasion these procedures are being dealt with much more quickly than on a normal occasion. There is no delay." —[OFFICIAL REPORT, 22nd November, 1967; Vol. 754, c. 1435.] He went on to describe the standby facilities that were being provided.

That was on 22nd November. On 23rd November, the previous Chancellor of the Exchequer sent the Letter of Intent to the Managing Director of the International Monetary Fund. After the ball was over he sent his billet doux to the managing director. At that time we did not know what was in it. The first hon. Member who understood the implications of what was in it was my hon. Friend the Member for Penistone (Mr. Mendelson), who had seen reports in the newspapers, and he raised the matter last Thursday. But the full document was not published until that night. My right hon. Friend the Chancellor, however, in his replies to questions, insisted that no conditions attached to the standby credit.

I thought that my right hon. Friend went too far in saying that, and I believe that that is the view of many people, and not merely Members of the House. For example, there is the statement in the Sun, two days ago, by Mr. Paul Bareau, who is not generally unfavourable to the Government's policies. He refers to the I.M.F.'s book of rules. It seems that they have books of rules as well as some other people. He refers to the book of rules and quotes from it, saying: Members may enter into standby arrangements with the Fund … if the Member observes the conditions; for example, specific policies which the Member has indicated it intends to pursue in the fields of exchange, monetary and fiscal matters. When is a condition not a condition? I do not believe that we can be fobbed off with a conundrum.

Mr. Bareau goes on to state the matter quite fairly. I shall be interested to know whether my right hon. Friend the Chancellor thinks that this is a fair statement. Mr. Bareau says: The point is that the standby would not have been secured without assurances of correct economic behaviour. That is what he says is the meaning of the Letter of Intent.

Now let me come to the letter itself. I shall not refer to all the Articles, but Article 9 sets out the numerous occasions on which consultations are to take place between the Chancellor of the Exchequer and representatives of the British Government, and the Managing Director of the I.M.F. The first is to take place in February, 1968—quite a significant date. The review is to take place of the balance of payments situation of the country and consultations are to take place with the managing director at that time, in February. They are also planned for July and November. The insistence upon actual times of negotiation is very precise and regular.

Mr. Bareau suggests that Article 10 is the most important in the whole document. I presume that he is referring to the paragraph which says: So far as can be seen at present, this entails holding down the borrowing requirements to not more than £1 billion—the appropriateness of which estimate and the measures necessary to ensure that it is achieved will be reviewed with the Managing Director in accordance with the timetable specified in paragraph 9. Some people, including Mr. Bareau, say that that paragraph and that figure involves an extra £300 million either in extra taxation or extra cuts in Government expenditure, over and above the one announced to the House. [HON. MEMBERS: "£400 million."] Some say that it is £400 million. That is the view published in the Sunday Times on Sunday, and reported to be the view of people in Washington who are in close association with the International Monetary Fund. If that is true Article 10 is an extremely important one.

Article 12 is also important, referring to wages and prices and the new vetting arrangements that the Government are to seek to secure. Article 13 is in some respects the most offensive of the lot. It deals with exchange control. It seems to me a quite gratuitous thing to have to make a general statement of policy about exchange control when we are only supposed to be securing a standby credit for a short period. The Article says: The Government is determined to maintain the new parity without resort to any additional restrictions on currency payments or intensification of the present restrictions. The Govern- ment, moreover, intends to abolish all remaining restrictions on current transfers and payments as soon as the balance of payments allows. Similarly, as the balance of payments strengthens, the Government will consider what relaxations can be made in the present restrictions on capital transfers. Hon. Members opposite may approve that doctrine, but it seems strange for Members on this side to do so. One of the main arguments is that the difficulties that we have got into arose because of the free movement of capital allowed in 1964. We have heard a lot about the £800 million deficit. Part of that was due to the lax way in which exchange controls were operated. We have also had a situation where there has been a considerable increase in the capital taken out of the country—some going to South Africa—in recent years, when we have been most hardly pressed.

It is a shocking thing that the Government, in this Letter of Intent, should have told the International Monetary Fund that they would ensure that we get back to the kind of absence of any exchange control which we know is what the bankers have always wanted. Indeed, we should be putting things into reverse. This is part of the poison that has caused the trouble. In the letter we say that we shall commit ourselves to taking extra doses as soon as possible.

Mr. Woodrow Wyatt (Bosworth)

My hon. Friend is making a powerful case against the Government, but rather inaccurately, because the letter says: Similarly, as the balance of payments strengthens"— that is all right, is it not?— the Government will consider what relaxations can be made in the present restrictions on capital transfers". It predicates a strengthening of the balance of payments. If we join the Common Market—and the majority of the House agrees with that proposal—we shall have to allow capital transfers as it is.

Mr. Foot

That is one further disadvantage of joining the Common Market. I am glad that my hon. Friend has the point at last. It has taken us about 10 years to get it into his head. The whole House knows the appalling extra burden on our balance of payments problems which entry into the Common Market would entail. But I should be out of order if I proceeded with that argument.

There are other objectionable Articles, but I want to quote only the final one. The right hon. Member for Wolver-hampton, South-West (Mr. Powell) thinks that part of this document is translated from the French. He is quite wrong. There is a deflationary bankers' language, which is the same the world over—a kind of excruciating Esperanto. Article 16 says: The Government believe that the policies here outlined are adequate to achieve the economic goals described in this letter. If, however, present policies should turn out to be inadequate, the Government is firmly determined to take such further measures as may be necessary to achieve these goals. If, in the opinion of the Government of the United Kingdom or the Managing Director of the Fund, the policies are not producing the desired improvement in the balance of payments, the Government of the United Kingdom will consult with the Fund, during the period of the standby arrangement and as long thereafter as Fund holdings of sterling exceed 125 per cent. of quota, to find appropriate solutions. When I read that document I was amazed and shocked. I could not believe that, after all the undertakings we had from the Government Front Bench about the absence of strings and conditions, the Government would have entered into such an elaborate labyrinthine commitment as that. I could not believe it.

I know that there are some hon. Gentlemen opposite who perhaps will say that these are quite normal matters, that this is regular procedure—that is what the Chancellor said—that it is common form, and that this is the kind of document which has to be signed if we borrow money from international bankers. If that is the case—against what I am arguing—there are some preliminary questions which follow. I will come to the major questions later.

First, if that is the position, can we have all these Letters of Intent published? I think that my right hon. Friend set a proper example. If the document has been signed and dispatched it is right that it should be published. Therefore, we should have published the document signed by the right hon. Gentleman opposite and the previous one signed by this Government, because they might tell us a lot about the economic history of the last few years. It would be interesting to co-ordinate these documents with the arguments that we have had about prices and incomes policy.

The first thing I ask the Chancellor to do, then, is to get the agreement of the Government that we should have all these Letters of Intent published so that the people will know exactly what is the relationship between this country and the foreign bankers, because, in my opinion, this goes to the very core not merely of our financial structure, but even of our democracy.

The second question I put to my right hon. Friend—although maybe it is the Prime Minister who should answer it and not him—is: was the approval of this Letter of Intent unanimous in the Cabinet? The Prime Minister went out of his way—breaking convention in some degree, though I do not complain about that—to tell us that the package that was presented to us on Saturday, 25th November, was unanimously agreed. Did they all agree to the Letter of Intent? We would like to know whether there was unanimous agreement. I would be surprised to think that the whole of the Cabinet had agreed to the letter.

The third question is: if this is the regular procedure, and if it had all been agreed by the Cabinet, why did they not tell us? Why did they not tell the House of Commons and why did they not tell the country? Why did they not tell us during the debate, when references were made to the credit facilities? It would have been open to the Chancellor to say, "I cannot read the whole letter, but I would like the House to know that whenever we borrow money, even on a standby basis, we have to write a letter to the managing director in the same terms which we did not mention before, but we will this time. These are the terms that we have to sign, terms which affect the whole range of economic policy"—because that is what they do affect.

Those are preliminary questions. The main question is: what are the economic consequences for this country of this Letter of Intent? Let us take, first, how it affects the very considerable section of the community which some of us think should most of all be protected by a Labour Government—the section of the community which will be most adversely affected by devaluation and the consequent increase in prices.

The Government, in their statement to the House—upon which we voted—said that they were absolutely committed to introducing measures in the spring or at an early period for increasing social benefits. That is what they must have meant. That was included in the statement made to the House, but it was not included in the Letter of Intent to the bankers. Nor is it mentioned in the addendum to the Letter of Intent of the measures introduced.

That is very strange. Do the Government think that they will deceive the bankers about it? Even bankers can read. Do the Government think that they will deceive them, because the bankers will be able to discover this. It may be that bankers can add up as well as react and they might make the addition and say, "If the Government are committed"—as they are—"to introducing measures for increasing social benefits of a very considerable character, that must add to the Government expenditure". Quite rightly so, in my opinion. But what is the point of concealing it or attempting to conceal it or not including it in the letter or not putting a figure on it? If the Government want to convince the bankers, they should put a figure on it so that we should be able to see what is involved.

Many hon. Members will remember very well that in October, 1964, when we were seeking to secure an earlier payment to old-age pensioners, we were told by my right hon. Friend the Member for Sowerby (Mr. Houghton) how it was not possible for the Government to go ahead as fast as they wished because of the international pressures to which they were subjected then.

What will happen? When the Government do proceed to carry out the pledge which they made to the House and the country as part of their devaluation package of increasing social benefits, all the bankers wake up and say, "No, we are not in favour of that." Very often they have been opposed to it and they might protest, so it might have been better to include it in the Letter of Intent if that is what was intended.

Mr. Wyatt

Does my hon. Friend think that the letter goes far enough?

Mr. Foot

The letter should state the fact that the Government is committed.

I turn to the other matter that is governed by the letter—the scale of deflation that we will have in this country over the coming months. The scale of deflation will be partly determined by that letter, partly determined by the commitments in that letter, and partly by the calculation of how much more money has to be taken out of the economy to satisfy the bankers that we are proceeding to carry out the policy that they approved. Or are we to be told that that is no problem, because the British Chancellor will always agree with the head of the International Monetary Fund about these matters?

I would not make such an accusation against my right hon. Friend. I do not think they will always agree. For if they do, why change Chancellors, or why even change Governments if they will always agree with what the Managing Director of the International Monetary Fund has to say about how our economy should be run. That concurrence would remove from the field of politics most of the major issues. Some of us are determined that they shall not be so removed. Some of us are determined that we shall not accept the doctrines of the bankers in these matters. We say that partly on moral grounds.

What Mr. Bareau describes as correct economic behaviour or what the bankers like to regard as correct economic behaviour some of us regard as being an outrage against humanity; that is, the maintenance of a higher level of unemployment than is required in any sense whatsoever. So we do not accept the bankers view about that and we are not prepared to have somebody in the International Monetary Fund dictating to this country what should be the level of unemployment.

Over and above that, we know that this country has been operating for considerable periods under these Letters of Intent. Look where it has led us; look at the policy that they have prescribed to us. In all these great crises the bankers have always thrown their influence on the side of a severe deflation. If we were to add up the total wealth that this country has squandered in 1953, 1957, 1961, 1965 and 1966, with its deflationary policies, if we had not carried through those policies throughout those years, huge amounts of wealth would have been added to this country. Nobody knows that better than the Front Bench, because this is what they preached prior to 1964. They said that the paramount aim of our policy must be to secure expansion so that there shall be no such wasted resources. We say that, unfortunately, this document appears to put us back to the position in which we were before.

The Prime Minister said that we had escaped from the straitjacket. Here he is putting us back into it. What the country has suffered from more than anything else over the past 15 years is continuous doses of sound Conservative finance, and this is a prescription for another dose.

That is the situation. We therefore believe that it is essential to make our view clear to the Government, and to let them know what we think of the commitments into which they have entered in this document. We believe that this is not necessary. Many hon. Members who have stated their views to the House on many occasions over the years have presented an alternative policy to the one prescribed by the Government. We believe that it is not necessary for the Government to show their obeisance before what the bankers require. There is a whole combination of measures which can be devised and employed to enable this country to secure swift economic independence. This is what we want to secure, and when we see the indignities to which we are being subjected, we want to secure it all the more swiftly.

We say that the way to do it is to break out of the conventional framework of the last 15 to 20 years, the framework of a crushing military burden, the frame-work of allegiance to laissez faire economics and the framework of an acceptance of terrifyingly orthodox financial policies. Many of us hoped that the Government's decision at last to accept devaluation was a sign that they were beginning to move towards these fresh policies. We hoped that they would move faster in that direction, but the publication of the Letter of Intent showed that there were still those who were wedded to the old policies. And it was not necessary for us to accept such dictates. This country is extremely rich with great productive resources and inventive genius, and if the Government would only plan to use them, would only plan to mobilise our resources, we would not have to borrow a penny from moneylenders. We would not have to borrow from those who are seeking to impose on us policies which have led us to such difficulty and disaster.

In the view of many of us, this document is an ignominious letter which should never have been signed by a member of a British Cabinet, and should never have been despatched by a British Labour Government. Therefore, many of us will work for policies and for a Government which can save us from these humiliations.

4.12 p.m.

Mr. Nigel Birch (Flint, West)

The hon. Member for Ebbw Vale (Mr. Michael Foot) and I have taken part in many debates together. We have never succeeded in agreeing on the fundamentals of any problem. We have quite often agreed about the conduct of the Government, and I profoundly agree with the hon. Gentleman that for some wholly incomprehensible reasons Ministers have been guilty of trying to deceive the House.

The hon. Gentleman quoted what the Prime Minister said at col. 1335. He said much the same at col. 1334. I defy anybody to read those statements and not to draw the firm conclusion that the Prime Minister was not going to take a loan with any strings or conditions attached to it, and that is certainly what hon. Gentlemen below the Gangway opposite thought he meant.

I thought that the new Chancellor of the Exchequer went even further in the key answer which he gave to the Leader of the Liberal Party during his statement on the Letter of Intent. The Leader of the Liberal Party asked whether the Chancellor's freedom of manceuvre in his Budget would be affected, and the right hon. Gentleman gave the firm answer that it would not.

How can anyone say that freedom of manceuvre will not be affected when a promise has been made that we will not borrow more than £1,000 million, and when we have promised to show the Budget to Mr. Schweitzer before introducing Why, in the name of God, did the Chancellor of the Exchequer not read the heards of agreement, or say that every report in the Press was true? To tell a lib when one is bound to be found out within 10 minutes is pathetic—childish.

I will not pursue the Prime Minister's part in all this. To accuse the Prime Minister of a lack of truthfulness is surely a work of supererogation. He might think, that, with his record, the only way to tell the British public that he is going to accept a loan with strings is to deny it. The matter is not worth pursuing. I think that a lot depends on the Chancellor. The last hope of getting things right depends on the new Chancellor, and he cannot afford to show a lack of candour.

There has been no general revival of confidence in the £ since devaluation. This was true before the latest rail strike. There has been no real revival, and I think that people's minds are being confused to a certain extent because so many financial commentators were in favour of devaluation, and therefore when it came they felt it necessary to have a celebration and to talk about the British economic miracle, and so on, but they have not talked about some of the senior aspects of devaluation, which are of desperate importance.

One is the way in which this adds to our indebtedness. A simple way to illustrate this is to consider what has happened about the American loan which was negotiated by Lord Keynes under an earlier Labour Government. We borrowed £931 million from America. We have been repaying it, with only three breaks, for 20 years. As a result of two Labour Government devaluations, instead of being less than £931 million, it now amounts to £1,287 million, finally payable in the year 2005, and, therefore, everyone in the House will spend the rest of his working life paying off that loan.

There is, next, the effect on sterling balances. I think that the present Home Secretary was right, in his resignation letter, to put the fact that he had to break faith with the holders of these sterling balances as his real reason for going. We have assured these people again and again that we would never devalue. They did not altogether believe it. Many have started pulling back, and they do not feel any confidence now.

What the effect on them will be of the speech of the President of the Board of Trade I hardly like to think, because he said that the holders of sterling balances had no reason to complain because they had been getting interest on their money. This will put them into a cold fury, and if this starts breaking up the sterling area, or is the death agony of it, it will wash away any other efforts that we can make.

Lastly, there is the question of our reserves. Today, we saw an increase in our reserves, but what do they really amount to? The only figures which we know are those of the money from the I.M.F. and the Swiss loan, but in addition to these there are enormous sums from foreign central banks. On top of that, for many months now we have been putting off the evil day by operating in the forward market. This means that we say to people, "All right, we will give you dollars for your sterling, but not just yet. We will do this in three months', six months', or a year's time ". The Government have never been willing to disclose the sums involved, but I believe that they are large.

At the height of the crises in 1966 we had borrowed more than our total visible reserves. I can believe that that is the case now, and, therefore—and this has to be faced by hon. Gentlemen below the Gangway opposite—we are in a pretty tight corner. The Chancellor cannot afford to show a lack of candour. One can lead the people of this country in difficult times, but to do so one must tell them the truth. The Chancellor will have to do a lot of difficult and unpleasant things, far more difficult and far more unpleasant than they need have been if they had been done in time, and far more difficult and unpleasant because the former Chancellor's consumer boom is now under way, which makes the situation far more complex and difficult.

We know we can do it, and that the Chancellor could do it, but will he? I do not know. I think that we must all, in our own interests, pray that he will succeed. The real difficulty about Labour Governments is that they do not get out of financial crises. In 1931, they split. In 1947, they broke the conditions under which we received the American loan, and spent the money. In 1949, there was a 40 per cent. devaluation, and in 1951 they ran for it. This crisis has been going on and intensifying for three years.

If the Chancellor of the Exchequer is to get out of these difficulties he must show candour, courage and political strength. It he can show them, well and good. If he cannot, he had better run for it now.

4.20 p.m.

Mr. Joel Barnett (Heywood and Royton)

My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) made a number of good points, but I cannot help feeling that, while one could understand and appreciate what prompted them, to read into the Letter of Intent the sort of indignity which he read into it and to say that our freedom of manoeuvre, referred to by the right hon. Gentleman the Member for Flint, West (Mr. Birch), is being restricted is to be blind to the situation. Our freedom of manoeuvre is restricted not by the Letter of Intent, but by our financial and economic situation. I therefore cannot help feeling that my hon. Friend had more an emotive point than a practical one.

The far more valid and more important point for the House to consider is that if we do not improve our balance of payments situation we will need to consult many more people than simply the Managing Director of the International Monetary Fund.

There are two issues facing us: whether we should take the loan and, if we take the loan, whether we should have accepted the strings and conditions attached. The first poses the question whether there was an alternative to taking the loan. In my view, once we had accepted a 14.3 per cent. devaluation, rather than a bigger devaluation something else was needed. I wanted a rather bigger devaluation, but because of the necessity and the importance of getting international agreement, we could not go further than the 14.3 per cent. It was, therefore, necessary to take other action.

Some of my hon. Friends suggest that there was an alternative, for instance, to reduce our defence expenditure. I have made it clear in the House that I agree with them entirely about cutting massively and speedily our defence expenditure, but we should be deluding ourselves if we imagine that in the immediate 12 vital months we could make these massive and speedy defence cuts. We cannot do it and we must face the immediate prospect before us.

The other alternative which my hon. Friends put forward is to sell some of our private portfolio investments. I have said before in an economic debate that this is not an answer to our problems. It is like a company in serious and fundamental difficulties bringing in an influx of new capital without dealing with the fundamental problem. The confidence factor in whether or not that company or, as in this case the country, intended to solve its fundamental problems would not be dealt with. That is the important point which is not considered—and there are many others. Dealing with the problem by selling off our private portfolio would not deal with the need to switch our resources from home consumption to exports. So it must be clear that we need some strengthening of our resources in addition to the 14.3 per cent. devaluation, and I do not feel that the suggestions of my hon. Friends are realistic alternatives to the proposal to take the standby loan.

Were there any alternatives to the strings and conditions? It is, incidentally, a quibble as to who attached the strings. Any responsible person borrowing money will attach his own strings—the string of wanting to be able to repay the loan. It is absurd to quibble or argue about who attached the strings or conditions. But the strings and conditions referred to in cols. 651–2 of HANSARD for 30th November will be needed in order to achieve the switch in resources which we need, and they would have been needed whether we signed the letter of intent or not. It is silly and irrelevant to argue whether it is "deflation".

Mr. Sidney Silverman (Nelson and Colne)

Is my hon. Friend aware that in last Monday's debate the President of the Board of Trade said very clearly that devaluation was not equivalent to deflation? Having persuaded me on that occasion, what does he expect me to do today?

Mr. Barnett

What my right hon. Friend said, rightly, was that there was no net deflation in this package, because while we must all hope that there will be a deflation in home consumption there will be an increase in export demand and there will thus be no net deflation. One can argue about whether it is or is not deflationary. I am not very concerned about that. This is a quibble about words. But I do not know any other methods than the ones suggested to switch from home consumption to achieve the level of exports which we need. If any hon. Member can show me another way, whether by selling portfolio investment or otherwise, whereby we can get this switch, I will be glad to listen to him, but I do not know that one exists.

By far the most serious point is that if we do not deal with the current financial and economic situation in this way we could be faced in a short time with a most serious situation, because there is already talk among irresponsible people about the situation in Britain. If irresponsible rumours of that sort arose again, there would be a disruption of the world monetary system which would be harmful not only to Britain, but to the trading position of the world.

If these measures are to be called deflation with strings and conditions—call them what one will—whether or not they were put in a Letter of Intent, they were necessary. So, because I believe that the package will give us the growth and full employment which we desperately need, I support this package and ask my hon. Friends to do the same.

4.28 p.m.

Mr. Richard Wainwright (Colne Valley)

It is the Liberal view that, so that the necessary devaluation might be carried out with a reasonable chance of success, the stand-by loan facilities were necessary, and that, to obtain those facilities, the Letter of Intent was also necessary and in no way surprising. We regard the surprise expressed in some quarters of the House as somewhat naïve. Where we part company with the Government is that the Letter of Intent to the International Monetary Fund has been used as the main statement of intent to this country. This, we think, is quite inadequate.

I confine myself to two aspects. The syrup applied to the European bankers is being used as a diet for the people of this country in respect of incomes policy. I draw attention to paragraph 12 of the Letter of Intent. The crucial question of how far wage increases for the low-paid are permissible in our present circumstances is dodged in the curious and, to me, almost meaningless sentence: There is no criterion for pay increases related to changes in the cost of living. I hope that those with the invidious job of dealing with requests for wage increases will hear from the Chancellor tonight what that sentence means. Does it mean that there can now be wage changes related to the cost of living, but that the Government are not laying down criteria by which to judge them, or is it intended to mean, what it does not say, that there are to be no changes of wage in respect of changes in the cost of living?

If that is so, we are back to the desperately weak contradiction which has undermined the whole Government incomes policy since July, 1966, namely, the total failure to define the low-paid. The Command Paper of 30th June, 1967, which is freely quoted, naturally, in the Letter of Intent, brings us back to an equally meaningless proviso. One of its four provisions for wage increases, which is now current Government gospel, was: … where there is general recognition that existing wage and salary levels are too low to maintain a reasonable standard of living. For 90 per cent. of our population there is "general recognition" that they do not have "a reasonable standard of living". Very few of us consider that we have, granted the opportunities and possibilities of the 1960s.

This also wholly dodged the admittedly awkward question of defining the low-paid who must have special consideration, even during a national emergency. I do not pretend that it is easy, but until the Government insist on a definition, even if a fairly harsh one, they will not get industry, by which I mean unions and employers, to "carry the can" for them by refusing wage increases. At the moment, those in industry who are being asked by the Government to refuse wage claims are being asked to "carry a can" full of acid and of holes.

I turn to the absence of any measures to counteract the enormous and, since 1949, unprecedented increase in protection of the home manufacturer which devaluation automatically gives. If someone is asked to bring himself to the peak of physical condition to run a marathon race, one does not give him a Christmas present of a feather pillow; yet this is exactly what devaluation inevitably brings, unless there are countervailing measures.

As my right hon. Friend the Member for Devon, North (Mr. Thorpe) said in the devaluation debate, we would like—we have said so since 1964—devaluation accompanied by large cuts in Customs tariffs. One obvious example is the British-made motor car. What will happen now? The steel from which it is made—many motor manufacturers have threatened British steel makers with the use of imported steel because of its alleged quality—the rubber tyres, even the sparking plugs, will all be protected from healthy foreign competition, let alone the assembled vehicle.

Neither Liberals nor anyone else want this country to engage in a sudden spree of buying foreign. What we want is the lazy, the inefficient and the lackadaisical home manufacturer to be subject to the deterrent of available foreign corn petition. That is just what devaluation removes unless we are to hear from the Government tonight of some measures to counteract the automatic effects of devaluation with a sharp decrease in certain strategic tariffs. Unless we can hear that the placebo which has, naturally, had to be given to foreign bankers will not be used also as the main diet for the British population, we shall feel bound to oppose the Government on this issue.

4.34 p.m.

Mr. Woodrow Wyatt (Bosworth)

There was one point in the speech of the hon. Member for Colne Valley (Mr. Richard Wainwright) with which I agree, and that is his reference to the naivety of some of my hon. Friends in supposing that one could obtain very large loans with no indication of how one proposed to repay them. A letter of intent in which one says how one proposes to repay is not the same as attaching conditions to the loans.

If my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot), for instance, asks his bank manager for a loan the latter may ask him how he intends to repay it. My hon. Friend may tell him of his very large earnings through writing for the Evening Standard and other journals. But the bank manager does not say, "Unless you do the following things, I shall not give you the loan." He would be well satisfied with my hon. Friend's good faith and intentions. That is the argument.

What distresses me about my hon. Friend is that he is so sincere and so anxious for the Labour Government to succeed. I know him well and love him dearly—

Hon. Members

Order.

Mr. Wyatt

Well, I do, and hon. Members opposite are not going to stop me.

By his Motion this afternoon, my hon. Friend is doing the one thing which he should know is fatal to the Labour cause. He is making the country feel that we are not fit to govern. It is he, above all, who is bringing up the ghost of 1931 and the bankers' ramp and all that kind of damned nonsense, making people feel that the Government have lost control of their own destiny when they have not.

If the Letter of Intent had not been written, it jolly well should have been, because one must tell anyone from whom one is borrowing money how one proposes to make the repayments. One cannot go on having loans without end as this country has been doing without that. My hon. Friend the Member for Ebbw Vale speaks of these foreign bankers as if they were some kind of criminal conspiracy—

Mr. Russell Kerr (Feltham)

That is right.

Mr. Wyatt

"That is right", says another hon. Gentleman down there. This is the International Monetary Fund, a world organisation, which is one of the few co-operative and constructive financial acts which have occurred since the Second World War. We are trying to get a co-operative approach among the nations towards helping each other out of their financial difficulties. This is not some kind of plot to bring down British Socialism. The Letter of Intent does not go half far enough if Britain is to restore confidence in her ability to maintain the £, even at the new level.

Everybody knows that in one way or another—I will detail some of them—we have been living above our income—

Mr. James Dickens (Lewisham, West)

Rubbish.

Mr. Wyatt

It cannot be rubbish, because—

Mr. Dickens

Is my hon. Friend aware that, during the three years 1964–66 inclusive, the total deficit on balance of payments was £1,293 million, that is, rather less than our total outgoings on the foreign exchange costs of overseas military spending, plus the net outflow of private capital to advanced industrial countries? How, then, are we living beyond our means?

Mr. Wyatt

I am very grateful to my hon. Friend. I was one of the first to point out this fact to him—

Mr. Dickens

Even for my hon. Friend, that is utterly ludicrous.

Mr. Wyatt

It was my right hon. Friend the Member for Woolwich, East (Mr. Mayhew) and myself and some others on the so-called Right wing of the Labour Party who converted the so-called Left wing of the party to the proposition that one of the fundamental difficulties in our balance of payments is that we spend far too much on overseas military expenditure. Of course, we all know that we are living above our means in many different ways. My hon. Friend referred to one of them.

The whole of this proposition is a matter of confidence. Whether we like it or not, 30 per cent. of the world does its trade in pounds and there are about £3,000 million worth of sterling balances deposited in this country. The owners of those deposits are entitled to draw them out at any moment and convert them into any foreign currency. So, we are in a fix, and if, at any moment, people abroad believe that we cannot sustain the value of the £ in its present position, obviously, they will make the best arrangement they can for themselves, their clients and their countries to protect themselves against such an eventuality.

The whole matter is one of confidence and sometimes on a very narrow margin. The Letter of Intent is designed to restore confidence among the International Monetary Fund and other bankers so that we do not have another run on the £—

Mr. Stanley Orme (Salford, West)

Will my hon. Friend give way?

Mr. Wyatt

I will not give way again. The last intervention which I allowed was not very fruitful, and only underlined the fact that my hon. Friend the Member for Lewisham, West (Mr. Dickens) had just come to a conclusion to which I came many years ago.

The reason that I say that the Letter of Intent does not go far enough is that everyone, whether in the City of London or in overseas capitals knows that the intention to spend £200 million a year less in Government expenditure is a very bad joke, because it is not a reduction in the amount which will be spent next year as against this year, but only a reduction in an intention to spend a great deal more next year than this. So there will be no reduction in Government spending next year at all, but a vast increase, quite apart from the Letter of Intent. My hon. Friends must face the fact that, until we start operating this country on sensible lines, people abroad will not have confidence in us.

The abolition of prescription charges was the most expensive memorial ever made to any one man. I refer to the late Aneurin Bevan. We all know that the reason we now spend as a Government £40 million a year on prescriptions which we were not spending before is because of the argument which Aneurin Bevan had in 1951 with Hugh Gaitskell about teeth and spectacles. This is no way in which to run a country. Everyone in the country knows that it was not unreasonable to ask people to pay 2s. for a prescription—

Mr. Orme

Who says so?

Mr. Wyatt

Well, everybody with any sense knows—[Interruption.] I have talked to many workers about it. My hon. Friend does not have a prerogative in talking to workers. I even employ workers. What is more, we have to make a profit, which is more than my hon. Friend does. Everybody knows that the previous arrangement, by which those who needed it were able to get prescriptions free, worked perfectly adequately.

One such act by my right hon. Friend the Chancellor, the abolition of free prescriptions, would instantly restore confidence in the £—[HON. MEMBERS: "Nonsense."] Of course it would. I will take another instance. If my hon. Friend can contain himself for a moment, I will come to something which he will like much more. He cannot have only the sugar; I will give him the unpleasant things first and then I am sure that my hon. Friend will agree with me in a moment.

I turn now to family allowances. As from next April, we propose to add to that bill £124 million in a year. What on earth for? It will not to any great extent benefit the half or three-quarters of a million children who are really in need. If hon. Members want to know, I am to get an increase in family allowances and I damned well do not need it. This is utterly absurd, and the country knows it.

It would be simple for my right hon. Friend to devise a scheme by which the really needy got more than they will get, and thereby save about £80 million a year straight away. By these two means—by dealing with family allowances and prescription charges—we could net about £120 million a year more in savings, which would convince the world that the Labour Government in Britain were determined to do something to put our spending right.

In the Letter of Intent there should not merely be wishy-washy references to pious hopes about wages, but a clear intention to have legislation again to make certain that wages are not allowed to rise unless there is a corresponding and genuine increase in productivity.

Several Hon. Members

rose—

Mr. Wyatt

I assure my hon Friends that interruptions, entertaining though they may be, merely prolong my discourse.

Unless we see to it, not merely by pious hopes, but by real action, that wages do not rise while prices rise—and prices will rise far more than the Government have forecast—we will wipe out within a few months the whole advantage of devaluation and find ourselves back where we started. What frightens me about the Letter of Intent is that it contains no intention on the part of the Government to legislate to make sure of compulsory wage restraint.

It is absolutely useless to pretend that George Woodcock, amiable fellow though he is, will be able to dissuade unions from having vast wage increases; and the moment prices begin to rise, the pressure on the Government will be insupportable. They will have to give in unless they have legislation to prevent them from doing so.

At the same time, I agree that the prices side of the Prices and Incomes Board should be strengthened. It should be remembered, however, that it is far stronger on prices than it is on wages because price increases are genuinely held up for a longish period before they are agreed by the Board, whereas wage increases can be retrospective, so that there is no real effect on wage increases at all.

Mr. Orme

Terrible.

Mr. Wyatt

I am pleased that my hon. Friend considers that this is a terrible speech. It means that at last he is having some of the ghastly facts which face his country placed before him.

Unless the Labour Party—which my hon. Friends and I all love—is prepared to face up to the realities of the present situation, and realise that devaluation is not a pipe dream which will take us over the hump, we will be out of office for 30 years. The new Chancellor of the Exchequer is probably the last hope that the Labour Party has for a generation. To start his period of office off by bully-ragging him is the most extraordinary way of supporting the Labour Government—particularly when we are faced with such grave difficulties.

I turn to a topic of which some of my hon. Friends will approve. I simply cannot understand how it is that, three years after taking office, a Labour Government are still spending about £570 million a year, in devaluation prices, in Government expenditure overseas compared with a total expenditure by the Government overseas of £16 million in 1938. This is one of the most extraordinary failures to face up to the facts in the history of politics.

The Government have said that they propose to bring back our troops east of Suez in 1975 or thereabouts. Since they have made that announcement, the troops there are now serving no good purpose. Why not withdraw them now? What would be the difference over our long history between withdrawing them in 1975 or in 1970? The difference is that there would be an enormous increase in confidence in the £ throughout the world and an enormous increase in our belief that we intend to live within our means. We could easily withdraw our troops in two years' time. We disbanded the entire Indian Empire within six months. We could certainly do the same in Singapore, Malaysia, and so on. I would say the same for our troops outside Europe. What are we doing with troops in Libya, Cyprus and Bahrein? They do nothing but make a focus of discontent against us.

Exactly the same situation existed in Persia, where we tried, at the time of Abadan and Mossadeq, to achieve our aims by force. From having 100 per cent. of the oil concession we have only 25 per cent.—because our troops were there. There can be no economy unless there is common sense. We should take our troops out and draw back to something approaching the £16 million a year that we spent in 1938, at post-1967 devaluation prices.

We are spending in overseas aid—by way of gifts, grants and loans—£207 million a year, but we do not have the money. We are borrowing from the gentlemen in Zurich to dish out to other countries. We are also spending £90 million a year more than world market prices for our food to help the underdeveloped countries. This is crazy for a country which has no money to undertake these responsibilities. We have the instinctive gestures of the rich man and no money to support them.

The Letter of Intent does not go far enough. I congratulate the Government on having had the good sense to write it in the first place, but it is a pity that it has not gone further, because Great Britain must cut back or she will not survive.

One of the features of post-war politics has been that every time the country has been asked to accept temporary inconveniences to earn ourselves a stable future, it has revolted against it, encouraged by whoever happened to be in opposition at the time. Does the Leader of the Opposition ever say what he knows to be true; that only a compulsory wage freeze can possibly pull us through? He tells the electors, "Vote for us and you will have an easy ride". It is always the same.

Mr. Edward Heath (Bexley)

If the hon. Gentleman casts his mind back to the last General Election he will find that I told the electorate exactly the opposite. I said that a hard ride was the only way to bring us through. In any case, I did not not agree with the compulsory wages and incomes freeze.

Mr. Wyatt

Of course the right hon. Gentleman does not say so. That is because he does not think that his party would ever get elected if he said so.

The whole country is bedevilled by this business of pitting ourselves against each other, always pretending that we will provide a mysterious extra very high standard of living without working for it. We must cut back.

The new Chancellor of the Exchequer is our last chance; and this is not merely the last chance for the Labour Party—[Interruption.] I believe that to be true, because if he fails, and we have another devaluation, as many knowledgeable people think we shall have, within another 18 months—

Mr. Robert Maxwell (Buckingham)

Rubbish.

Mr. Wyatt

It is no good pretending that they do not believe this. They do not believe that the Government are tough enough to take the right measures. If the Chancellor of the Exchequer fails, I fear that the Labour Party will be out of office for 30 years.

On the other hand, if the Chancellor does the unpopular but right things, then we can win the next election—[HON. MEMBERS: "Oh."]—as well as saving Britain, which is even more important. I know that hon. Gentlemen opposite think that nothing is more important than winning an election. I believe that saving the country is far more important.

At present, the Chancellor is in a unique position. For a few months he can be as tough as he thinks is properly right and the Cabinet must bend to his will. The Cabinet could not possibly allow him to resign. The resignation of a new Chancellor within two or three months would be more than even my right hon. Friend the Prime Minister could stand.

Thus, the Chancellor finds himself in the extraordinary position of having almost absolute power. It is utterly wrong for my hon. Friend the Member for Ebbw Vale—and I still love him dearly—to discourage my right hon. Friend from doing the tough and right things. The Chancellor must not be given to feel that half the party is against him when the whole party must be behind him, because he will have some unpleasant things to do if we are to succeed. We must fortify him and say, "We do not care how unpopular are the things you do in the next year or so, because we appreciate that you must do them".

I urge my hon. Friends not to try to make my right hon. Friend water down the things that he must do to save the country. Give him a chance.

4.55 p.m.

Mr. John Smith (Cities of London and Westminster)

I thought that hon. Gentlemen below the Gangway opposite were mostly in favour of devaluation. They must recognise that devaluation could not have been successfully carried out without some such arrangement as the one we are discussing. I thought that the devaluers were having some sort of honeymoon with the Prime Minister; and whoever heard of a honeymoon without strings?

The party opposite has got us into real trouble; and then, miraculously, someone turns up who is willing to bail them out—and then hon. Gentlemen opposite are outraged at the thought of telling that someone what it is proposed to do with the money. It is usual, when asking a friend to guarantee one's over-draft, to give him some idea of why, and even some idea of how, one hopes finally to release him from the guarantee. Indeed, to do so is a help; setting things on paper clears the head.

The I.M.F. is a friend, not a malevolent power bent on enslaving us. Despite the pejorative talk of some hon. Members about foreign bankers, the concern of the I.M.F. is that the world shall prosper, and the world includes us, and our ability to pay for imports from the world.

How can we possibly recover the confidence, let alone the respect, of the world if we keep behaving as if this were fairyland, as if all gold were fairy gold to be had simply for the wishing; and indeed as if this country were a fairyland of the type in the Norse Sagas, bent on self-destruction, as we are—attacking each other at a moment like this, attacking the business community which alone can get us out of our troubles? All internal debate on these topics is damaging to us abroad—

Mr. Maxwell

rose—

Mr. Smith

No. The hon. Gentleman has only just come into the Chamber. In any case, this is a debate, not an interview.

Mr. Maxwell

rose—

Sir Cyril Osborne (Louth)

The hon. Member for Buckingham (Mr. Maxwell) should try to behave himself.

Mr. Smith

We need to show the utmost solidarity of purpose to the world if we are to get out of our difficulties. Therefore, although this is a Labour document, I say that the Letter of Intent is unexceptionable. It contains a little claptrap about internal Government borrowing, about the "sale of debt to the non-bank public", but there is not much harm in that. Apart from that, there are in it a few facts, some decisions, some hopes, and a ritual concession to the "Furies" in paragraph 3. There are only three references to consultation, two of which are really part of the same reference; and this consultation is of a sort which can be none other than of great help to us. I am sorry that the Government's policies obliged the former Chancellor to write this letter, but, reduced to it as he was, I congratulate him on its form and on its content.

4.59 p.m.

Mr. J. J. Mendelson (Penistone)

I shall take the liberty of ignoring the humorous contribution made by my hon. Friend the Member for Bosworth (Mr. Wyatt), because we have very little time and this is a serious debate. That being so, one must not speak for too long. My hon. Friend will be on record for what he said about prescription charges and other policies that no doubt will find wide support among his colleagues in the Labour movement in the House and outside it. I leave him to deal with members of the party when they discuss his remarks with him in the future. I am more concerned with the policies of the Government and of the Opposition, and I want, first, to turn to the purpose of the debate.

The decision that the House has taken, and the policies that are alluded to in the Letter of Intent, will predetermine a great deal of legislation that will be introduced to the House by the Government. It may also predetermine some of the legislation the Government had intended to bring to the House, but may now decide not to bring to the House. There will, therefore, be very important positive and negative legislative consequences flowing from the Letter of Intent, and we would be failing in our duty to the House if we did not, at the earliest opportunity, examine the position.

I always listen with respect to the hon. Member for the Cities of London and Westminster (Mr. John Smith), but I fail to understand him when he reproaches us for even discussing these matters. If the hon. Gentleman seeks to sustain the doctrine that any discussion of matters that will affect the future of every citizen of the United Kingdom is damaging and should not take place, I doubt whether he will take his right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) with him in that proposition. However, I leave him to argue it out with his hon. and right hon. Friends.

We have to consider the policy that will he pursued by the Government, and the influence that the discussions that have taken place in the last fortnight will have on that policy. Therefore, the first proposition I put to my right hon. Friend the Chancellor of the Exchequer is that he must give a careful first opinion to the House and to the country on what these undertakings mean and how they will influence his future policy.

That does not only involve, as has been said, a future social services budget and legislation for looking after those hardest hit by the increase in the cost of living consequential on devaluation: it involves the whole strategy of the Government's economic policy. One does not have to be so blind to the economic facts of life as has been suggested in some speeches about the release of economic resources in order to increase the export drive. We can agree that there must be a release somewhere—that can be appreciated, and is elementary economics—without necessarily supporting the policies to which the Government seem to have committed themselves in the Letter of Intent.

I am very sorry that my hon. Friend the Member for Heywood and Royton (Mr. Barnett) is not in the Chamber at the moment, because he spoke with such superiority, as though a new Keynes was addressing us on matters of economics. He was for a short time a student of mine at the College of the Rhine Army in days gone by, but I must say that I never taught him economics, only politics. He was speaking today on economics, so I do not accept any responsibility for what he said.

The importance of the point at issue is that if we have a position in which we wish to release resources from some sectors and make them available for the purpose of increasing the volume of our exports, we must decide where we shall start. Here, the policy of the Opposition comes very much into prominence. For some considerable time the Opposition have put forward a number of policies. They have urged the Government to cut public expenditure. This has nothing to do with the Letter of Intent. It would be wrong to say that the Leader of the Opposition and his right hon. Friends had to wait for what M. Pierre-Paul Schweitzer was saying in order to urge certain policies on the Government. They were urging conventional policies—Tory policies and the policies of the City of London—on the Government long before the negotiations started.

The Opposition demanded cuts in public expenditure, but it was difficult to discover from them where, in particular, the cuts ought to be. However, in other times they have said in rather more detail that we should cut the social services, and that we are spending too much on local authority house building. The Opposition have put forward a whole series of proposals, but those proposals have been rejected time and again, first by the electorate and then by the House. The Government have been sustained by large majorities in the rejection of those policies.

I want now to turn to what I, at any rate, consider to be the most important aspect of this debate. It is that some of those self-same policies are now reappearing in the suggestions and conditions laid down by the international banking fraternity, and are in process of being imposed on the Government. This means that we have reached a position in which it seems virtually impossible for a social democratic Government, elected by a large majority—and past experience has shown it to be the case in other European countries—to pursue their policies successfully.

This has nothing to do with plots. It is not a deliberate plot. I do not accuse any right hon. Gentlemen opposite of having engaged in plots—I make that clear. But the economic philosophy represented on the Conservative benches is the philosophy that dominates the opinions of those people with whom our Government have to negotiate when discussing a standby credit, or any other credit. It therefore means that policies thrown out by this House are reimposed on the electorate by outside bodies. This is one of the most serious constitutional aspects we have to face in this debate. The consequence is that, whatever the electorate may say, even if the party opposite is defeated it always governs. Its principles are imposed on the Government even when right hon. and hon. Gentlemen opposite are in a minority in this House.

Let us examine the general proposition against the background of some of the policies urged on us. We do not want to spend too much time on what are and what are not conditions. Let us take it as read that everyone knows that before a standby credit is agreed a mission arrives from the I.M.F. and negotiations take place between its representatives and those of the Government.

But let us also remember—and here, again, I take issue with the hon. Member for the Cities of London and Westmins- ter—that a large part of the money to he filtered into the funds of the I.M.F. has to be guaranteed by a number of very powerful central bankers—as the hon. Gentleman well knows. I do not seek to teach him elementary economics, but that fact was absent from his speech. When the decision was being taken in these committee meetings that the money should be supplied to the I.M.F. by these banks, British internal economic policy was discussed in minute detail. I have not time in this debate to give a full briefing on those discussions, but I am glad to see that I carry with me the hon. Member for Louth (Sir C. Osborne).

Let us now examine some of the points that were then discussed. One of the most important statements made by the Prime Minister and my right hon. Friend who has just resigned office as Chancellor of the Exchequer in the last fortnight was the hope—and to some it sounded more like an assurance than a hope—that we shall now be moving forward to an annual growth rate of 5½ to 6½ per cent. This is of decisive importance to the future of the country.

That proposition was bitterly attacked in one of these committee meetings. It was said: "This is illusory. It would be wrong if you could achieve it. You should not attempt to achieve it. There ought not to be an increase of 5½ per cent. or 6½ per cent." If that policy is now accepted we shall find ourselves in a position in which, for reasons that are not lodged in the judgment of our own Government but for reasons having to do with policies urged on us by bodies outside, we shall not go all out to achieve the increase in economic growth that the Prime Minister himself accepted in the House and the country. This has nothing to do with being able to fulfil what we say, or with being particularly inclined to be optimistic in our forecasts.

I wish that hon. and right hon. Members opposite would get away from their obsession about the Prime Minister as a personality for this three hours of debate. This is something which any Prime Minister and any Government might have to face, and it is well-known by right hon. Members on the Front Bench opposite. If we accept the framework of allowing conditions to be imposed because we want a standby credit, it may be that we shall be put into such a tight position that our general expectations are called into question. I fear that the Government find themselves in that position at present.

I move on to another item which was discussed. There was a bitter attack on the Government's housing programme. The Financial Times this morning said that here are the places where cuts can take place and that as long as the Government do not decide on a very large cut in housing programme they do not propose to use the opportunities of devaluation at once. Once we have decided to release capital resources for export purposes we have to make that choice. Here we go to something on which the Opposition are always silent—our large defence budget and spending, not only overseas but at home. I am told that 800 British firms are engaged upon the production of Polaris.

If the problem is a technical one of releasing resources from one type of production in order to have more resources for export production, this is a case in point. Are we to say that this is the sacred cow of defence expenditure and, apart from the minor paring down which the Government have allowed, defence must never be touched, that we must depress our policy of economic growth and accept a large cut in the standard of living of working people but we must not touch nuclear weapons in order to relieve resources?

I speak not as a pacifist. It is well known that I have friends who are pacifists. I respect their position although I am not one, but if it is a question of having to make decisions, the Government have no right to say that we cannot look at the nuclear programme again, that it must go forward and employ the resources it is employing at present no matter what we have to do about increasing exports.

Sir Stephen McAdden (Southend, East)

Will the hon. Member—

Mr. Mendelson

I do not think that it would be fair for me to give way, as other h Dn. Members want to take part in the debate.

The Letter of Intent gives very considerabi e power to the Managing Director of the International Fund. I welcomed the decision to announce the contents of the letter and to publish it. I also welcomed the decision of the Government at this early opportunity to see to it that we at any rate retain the best possible position for devaluation. The judgment of the Government in these matters has the support of the House. What I do not accept is the provision in paragraph 16 of the Letter of Intent which said: If, however, present policies should turn out to be inadequate, the Government is firmly determined to take such further measures as may be necessary to achieve these goals. If, in the opinion of the Government of the United Kingdom or the Managing Director of the Fund, the policies are not producing the desired improvement … This gives equal status to the managing director of the Fund with the views of Her Majesty's Government. It is no good quibbling about what happens in these negotiations. I heard it said when I raised this point with a member of the Government, "Yes, we shall reserve our position to make our decision at the time". That is the kind of objection made about trade unions, that they consult and then take their own decision. This, surely, is not in the mind of Her Majesty's Government. It means that the managing director is given equal status in making decisions on Government policy with the Government themselves. This is an intolerable position. Many of us must take the earliest opportunity of showing the country that we do not accept it. There is no escape from that.

I move to what I think might be an alternative policy. We have been charged by hon. Members on this side of the House and hon. Members opposite with putting forward this critique of Government policy and of commitments entered into without suggesting alternatives. It is, therefore, my bounden duty, as the second speaker for this proposition, to point out the alternatives. There are very serious and very important alternatives. It would have been quite possible in this situation for the Government to say, "No, we do not accept some of these conditions because we do not agree with them". It must be remembered that in the situation in which negotiations take place people are always so eager to describe the weaknesses of the Government. They seemed to go out of their way to point out the weaknesses in which we found ourselves, but let it be remembered that in that fortnight there was a great deal of heart-searching going on in Washington.

We were in a fairly strong position and the Treasury in Washington was most anxious that an agreement should be come to with the British Government because the position of the dollar was directly involved. We should have pursued that position. There would not have been a breakdown of the negotiations. The Fund had much interest in seeing and America was pressing it to see that agreement with the British Government was achieved. We ought to have mobilised in that situation, and we ought to mobilise now, a very large part of the dollar portfolio. This has nothing to do with confiscation. It is quite possible to mobilise it as a help to our reserves.

Many people are coming to this view in many different quarters. I shall quote a couple of sentences from a pamphlet published by Michael Shanks, who used to be one of the most prominent journalists on the Sunday Times, an organ not associated with my views. He said: The dollar portfolio consists of private British holdings of dollar securities and assets worth about 3¼ billion more than our official reserves. If these were incorporated in the official dollar reserves our financial position would not only look a great deal better, but we would have more reserves available to meet sudden runs on the bank as it were Our credibility as a world banker would look much better. Whether we accept the argument or not, this is a dismissal of the suggestion hitherto made. That has gone out by the window and now many experts are seriously considering this possibility. We should decide here and now on very large cuts in military expenditure overseas and at home. If the Government are not earnest in this, they have no right to ask us to support the legislation which will flow from the commitments they have entered into.

If it is to be argued that no serious cuts in defence expenditure are possible, they have no right to say, "We cannot do as much as we wanted to in the social services and in helping those who have been hard hit by the corresponding increased cost of devaluation". They have no right to say, "You must accept hard times, but we cannot seriously cut our defence expenditure".

This is at stake in this debate. As I have already said, constitutionally this is the most important subject we could discuss. When the legislation which will flow from these commitments comes before the House, and when the denials of things the Government wanted to do are debated in the House, we would have no right to say to the Government then, "You ought not to do it and we do not wish to support it", if we had remained silent today and had not taken this early opportunity to make clear our point of view on the disastrous consequences of some of the policies involved in our commitments in the Letter of Intent.

5.20 p.m.

Sir Cyril Osborne (Louth)

I have promised to speak for only five minutes, not for 20 minutes, as the hon. Member for Penistone (Mr. Mendelson) did.

I want to make only a few brief points. First, I believe that the Government stand condemned in the country for trying to deceive the nation with half-truths. Secondly, the Prime Minister spoke only a half-truth when he said: it was the international monetary community itself which came forward with facilities"— of loan, whereas the Letter of Intent says this: The Government therefore requests a standby of 1.4 billion dollars". Thirdly, the Prime Minister said only half the truth when he said: The loans from the central banks have no strings".—[OFFICIAL REPORT, 22nd November, 1967; Vol. 754, c. 1335.] whereas the Letter of Intent promises a review in February, July and November and says: If, in the opinion of the … Managing Director of the Fund, the policies are not producing the desired improvements in the balance of payments, the Government … will consult with the Fund". This means that the international bankers, through the Managing Director of the Fund, will decide our economic destiny.

Fourthly, the new Chancellor of the Exchequer—I am glad that he is here, so that I can say this to him, I hope not unfairly—spoke only half the truth when he said this: the Fund has not attached conditions to this credit. The Letter of Intent is one mass of conditions. For example paragraph 7 promises a reduction of home demand by about £750 million to £800 million below what would otherwise have been the case. Surely that cut of £700 million to £800 million a year in home consumption is a savage enough condition.

Fifthly, if this £800 million a year is to be transferred from home consumption to exports, and if there is no real increase in national productivity, it is inescapable that our standard of living will have to be reduced by that £800 million a year.

Sixthly, even if this £800 million a year of resources are transferred from the home market to exports, the Government ca mot guarantee that they will be sold at a profit. To give them away in foreign markets below cost would impoverish the nation still further.

Seventhly, the new Chancellor of the Exchequer also said this: this standby credit should in no way be a subsidy to our standard of living in this country, either now or in the future."—[OFFICIAL REPORT. 30th November, 1967; Vol. 755, cc. 743–47.] I deeply regret that the new Chancellor has failed to make his supporters inside and outside the House, especially those below the Gangway, believe this horrid truth.

Lastly, I believe that the Prime Minister is guilty of trying to deceive the nation by keeping silent on the most important issue. Paragraph 12 of the Letter of Intent says this: There is no criterion for pay increases related to changes in the cost of living. In simple language, that means that there must be a long and savage wage freeze, despite a sharp rise in the cost of living. This is what the Government have accepted. The Prime Minister has funked telling the nation quite clearly that this is the price that this loan will impose upon the nation. Not one person in 10 million outside the House realises it and not more than one in 100 below the Gangway will accept it.

5.25 p.m.

Mr. R. B. Cant (Stoke-on-Trent, Central)

We have had a great deal of eloquence this afternoon. Much of it has had considerable constitutional and moral overtones. I want to address my- self to the very narrow thesis whether or not the Letter of Intent, to use the words of my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot), imposes intolerable shackles on the British economy.

I do not want to deal, first, as I might have done, with the question whether we needed a standby credit. My hon. Friend gave us an excellent exposition of why this is necessary to back up devaluation. I do not want to go into the past and explain that I have never been one who has been enthusiastic about devaluation, because I think that its repercussions are far more complex than is appreciated by most hon. Members.

What surprises me is the political immaturity which allows not only hon. Members opposite, but also quite a number of my hon. Friends, to believe that there could be a standby loan of this magnitude without conditions. This is a perfectly normal rule-book procedure to anybody who knows the constitution of the International Monetary Fund. Why it should take people unawares surprises me. It so happens that, because there was the calculated leak by the French, the Letter of Intent has had to be published. What surprises me is why some of my hon. Friends did not dig out the previous Letters of Intent and expose them to hon. Members opposite and give vent to their wrath on them.

I do not know why my hon. Friends always regard their wrath as being something which is particularly suitable to be given vent to on members of the Government. I can only draw the conclusion, having listened to my hon. Friend the Member for Ebbw Vale, that the present Labour Government—I expect applause from hon. Members opposite—are about the worst Government that this country has ever had. My hon. Friend had not a good word to say for them.

Political immaturity is demonstrated in another and more subtle way, in a failure to read between the lines, to accept that this is what we would expect it to be—a political document as well as an economic one. For example, its reference to "the growth of money supply" is quite intriguing, because I should imagine that this is the sort of thing that any 0 level student of economics might tear apart with the greatest of ease. To talk about the supply of money as a constant is to accept the implication that in some way in 1967 the quantity theory of money in its crudest form is more relevant than it was 100 years ago. Perhaps this was written by M. Rueff himself. I am only surprised that my right hon. Friend the Chancellor was not required to say that the level of money supply in this country should be determined in accordance with the sacred principles of the gold standard and be determined, in effect, by our holding of our stock of gold. Surely my hon. Friends can accept that this was said by the Chancellor with his tongue in his cheek.

I should apply the same yardstick to this mystical £1,000 million—I see we have the American interpretation of billion now—net borrowing requirement. All right. We can interpret this in the most gruesome way. My hon. Friend the Member for Ebbw Vale quoted Mr. Paul Bareau. The Financial Times said that the cut to £1,000 million was "almost an irrelevance". I accept that. We have had so many lectures by economists in the House since 1964 that we all know that, if we want to decide whether an increase in the net borrowing requirement is inflationary, we have to take a whole lot of other factors in the national accounting framework into the calculation. Anyone knows that sort of argument.

Anyone will accept, also, that the £1,400 million could become £1,000 million as a consequence of the gentle processes of reflation itself. If, as we expect, there is growth next year, this growth will yield revenues which will cut the net borrowing requirement of the Government.

We now have a National Loans Fund Bill. A cynical publication like the Economist suggests that the advantage of that Bill will be that the meaningless figure which used to be called the British Treasury's overall borrowing requirement will henceforth not be called anything at all so that the size of it will not scare foreigners out of their wits. If those are its purposes, we need not bother with it.

I turn now to what might be regarded not as something one can read between the lines, but as more substantial objects of criticism in the Letter of Intent. The Chancellor may have to face some cuts in Government expenditure. I hope that he will bear in mind the words of my hon. Friend the Member for Bosworth (Mr. Wyatt). He will never have more power at his elbow than he has in the period between now and the Budget. Certain things may have to be sacrificed. Perhaps the Financial Times is wrong in saying that the Industrial Expansion Bill is to be laid on one side, but, if certain things have to be sacrificed, then, to make possible this shift of resources, the Chancellor should do it.

I do not know whether it is acceptable or not, but I put this suggestion to him. Rather than put forward the bogus National Loans Fund Bill, let him realise that a step he could take would be to take some of the nationalised industry borrowing out of the Budget altogether, by throwing at least gas and electricity borrowing on to the market. I know that this would have certain repercussions. Because it would mean a higher rate of interest, it might force up certain prices. But let us never forget that this may be the direction in which the country has to go if its real cuts fall not on investment or on public expenditure but on consumption.

I know that my next suggestion is, perhaps, totally unacceptable to some of my hon. Friends, but I ask the Chancellor to consider seriously whether this is the moment to move from increasing the burden of taxation on individuals and companies and to move it to the poor old consumer. [HON. MEMBERS: "Hear, hear."] Not too much of that! I say that partly because I am a dedicated Common Marketeer. I believe that we must accept that, sooner or later, we shall have to move to a tax on added value.

The importance of this is simple. A great deal of our devaluation advantage will be eroded anyway as a result of various factors which have already been mentioned, but the fact that the Common Market countries are moving towards this form of tax on added value will devalue their prices against us. The Americans have already calculated that, by the beginning of next year, the Germans, through this shift, will have an added advantage of 2 or 3 per cent. on their prices.

Some of our cost advantage at the moment also derives from the system whereunder our social security contributions, falling directly on costs, are very much lower than they are in Western Europe. As these increase, another factor in raising our costs, we shall again be in a difficult situation. I doubt that the Chancellor will think seriously about that.

We should accept that the condition under paragraph 11 of the Letter of Intent relating to saving, and so on, is something to be welcomed. If, because he feels forced to do it or because he does It voluntarily out of his own inclination, the Chancellor introduces something like an indexed bond, something for the average saver, not the wealthy savers who have the chance to invest in equities, and so forth—if he can create something which will offer a hedge against inflation and perhaps, some participation in growth, that will be something from which we shall gain.

Now, the conditions regarding exchange control. I am a bit concerned about this. As distinct from many of my hon. Friends, I should welcome more overseas capital investment because I believe that this is the only way for us to get to international company status. Unless we get to international company status, we shall have problems ahead. But what concerns me more is this. Because we are a reserve currency country, a trading currency country, a depository of hot money and the rest, it may be necessary for us to take certain steps, which the previous Chancellor would not take, to exercise some control in this field.

Few people know much about it. All sorts of suggestions are put forward, referring to 28-day rules such as the Swiss have, for instance. In fact, the Swiss do not have a 28-day rule. On the Continent, as we know from the O.E.C.D. Capital Markets Study, there are all sorts of interest arrangements, and these the Chancellor should study. It is one of the ironies of history that, under a Labour Government, the British economy has become more sensitive to the movement of volatile hot money as a result of the creation of the Eurocurrency market, which itself arises because of the American banking Regulation Q which refuses the payment of high interest on short-term money. This has laid us wide open. We hear a lot about sterling liabilities, but our non-sterling liabilities are now £3,500 million. I hope that the Chancellor will look at that problem.

Our balance of payments has deteriorated in a secular sense. There is no doubt that that can be associated with the enormous growth of our overseas expenditure. But what overseas expenditure cannot explain is the fact that every time we have rapid growth we have a short-term deterioration within 12 months entirely due to the rapid growth of imports. I differ from my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). I think that within the Letter of Intent we could exercise control over this Achilles heel in the balance of payments by advance deposits for imports, by a simple extension of monetary policy which is not a contravention of exchange control. I hope that the Chancellor will look at that suggestion.

I am sorry that the debate has taken the turn that it has in some ways. But I hope that something fruitful will come of it.

5.42 p.m.

Mr. David Howell (Guildford)

It would be churlish of me, speaking from the back benches below the Gangway, not to begin by congratulating the hon. Member for Ebbw Vale (Mr. Michael Foot) for the part he has played with others in giving us the opportunity to have this debate, to hear the various diverting speeches, including the profound and utterly sensible speech of the hon. Member for Stoke-on-Trent, Central (Mr. Cant), and also to allow humble back benchers to look at some of the issues which too often in the past have been decided behind closed doors and by closed minds.

The remarkable thing about the debate on the Letter of Intent is the contrast between it and the heady, gay atmosphere in which the devaluation debate was conducted a fortnight ago. At that time, we heard from the benches opposite that there had been a wonderful technical adjustment, a financial change which had miraculously produced the easy solution. I think that one hon. Member opposite said that it had brought him out of agony and was of profound ideological importance for him and the Labour Party. Devaluation a simple adjustment of the exchange rate, had done all those things. It was no surprise, therefore, when we heard from the benches opposite the sound or rejoicing and clinking glasses about the quick solution which would do it all.

The importance of the publication of the Letter of Intent and the opportunity to debate it is above all that it brings home to all those who thought that there was a quick and easy way that there is not. It brings home to them that far from devaluation being a technical gimmick which will cut the corners, unite the Labour Party ideologically, allow a 4 per cent. growth rate and so on, there are still severe and difficult problems ahead, that there is no instant solution and that no amount of cheering will bring one about.

That is a vitally important contribution for the debate to make, and it is ironic that the hon. Member for Ebbw Vale, who does not hold that view, should have promoted the debate. At the centre of the requirements in the Letter of Intent, requirements which all of us knew were necessary before devaluation, at the time and since, of the devaluation, is the question of Government spending. Several hon. Members have already spoken about that. I think that it was the hon. Member for Penistone (Mr. Mendelson) who said that there is an awful lot of loose talk on public spending, that it is too easy for international bankers and others to say, "Cut Government spending", and for politicians and hon. Members on both sides of the House to say that they will cut it, and delegate to other people how it can be done.

I agree that there is too much loose talk on public spending. I share the surprise of other hon. Members that the Letter of Intent for a standby credit of enormous proportions should talk of cutting Government spending in a relatively loose form. The former Chancellor of the Exchequer used to stand at the Dispatch Box in genial form and shake his head when there was talk of cutting Government spending. He said that it could not be done. So many programmes were fixed and decided far ahead—electricity, roads and other crucial investment programmes. "Is the hon. Member proposing that these be cut?" he used to ask. If we are to consider the implications in the Letter of Intent we must face up to cutting public spending, because unless we do so we shall not meet the requirements of the Letter or of intelligent economic management, regardless of loans. We shall not deal with the central issue of control of our economy and with the basic requirement for the expansionary policy for which the Chancellor must be the first to wish.

The Letter confronts us with three issues about public spending. First, if I thought that the cuts which are now hinted at and proposed by the Chancellor would be panic cuts in our investment in electricity generating equipment and telephone exchange equipment, and major cuts in road programmes, I should be very dismayed. What use is a half-built piece of equipment, a half-built refinery, a half-constructed road? [Interruption.] If the hon. Member for Orpington (Mr. Lubbock) will contain himself for two minutes I shall make specific suggestions. I do not want any help from hon. Members on the bench in front of me at the moment.

If there were panic cuts in the forms of investment I have mentioned, we should not be facing the problem in the right way. Those programmes must go on. They were arranged a long time ago and are important for the future efficiency of the country. To cut them would compound the difficulties and make it more certain in future that we were back where we were before, with higher costs, and a still weak economy.

What may be possible, as the hon. Member for Stoke-on-Trent, Central, interestingly suggested, and what we should be debating, is not that the programmes should be cut but that the system of financing them should be totally changed. The hon. Member suggested that gas and electricity borrowing might be done on the capital market. We could examine that suggestion further; road investment could also well come from private resources. The roads are essential, but they could be paid for in a different way. [Interruption.] My hon. Friend says, "By tolls". Exactly. A similar idea could be thought out for telephones. Under the new public corporation to replace the G.P.O. they could be returned in greater part to private enterprise. Those would be ways of preserving the programmes, but ensuring that Government spending was cut.

Secondly, unless we can cut current spending, as well as capital, and specify the cuts, we shall not meet the requirements of the Letter of Intent. Hon. Members on both sides of the House have rightly painted to the need for far greater and wider use of charges. It must be right to reintroduce them for prescriptions. As the Plowden Report rightly said, there should be charges for nursery education. Without them, the result is that there is no nursery education.

The hon. Member for Penistone raised the controversial question of housing. Our attitude would be different if we thought that the millions of £s of housing subsidies really were eliminating homelessness and providing housing for those who need it. But many hon. Members know the difficult situation of being approached by young people with a couple of children who are unable to find a council house. I would perhaps agree that we should not touch the housing program me itself, but there is no doubt that the money given in housing subsidies is being spent in ways which do not achieve the result we want. That is why it is wasteful and there is room for improvement without disturbing the basic aims of the housing programme. The Letter of Intent does not specify what we intend to do but I hope that the Chancellor will he specific, because the sooner the Government are more specific the more possible it will be for us to contain the situation and improve it.

Then there is the question of those big cus in defence for which hon. Members opposite have called, and perhaps they are right. If the Government lead us to believe that there have been defence cuts, we must also be told what cuts there have been in commitments as well. It is impossible to imagine that the Government can maintain existing defence commitments, with troops scattered all over South-East Asia during the next decade, while still managing to cut defence expenditure. We need much more confirmation on this aspect.

But, of course, it is not merely a question of cutting programmes but of changing policies, carrying out the whole business of government very much more cheaply. There are a number of ways—and bankers, American, French or any other, or administrators of central Govern- ment are the first to point them out and use them—in which we could carry out existing policies much more economically. This would produce savings in itself.

It is not beyond the bounds of policy that we could aim for a 5 per cent. cut in every main civil programme by the use of proper cost reduction techniques and cost cutting in central Government. That would make substantial contributions to assisting us. If properly organised, formalised and announced in this House, it would make a contribution to increasing efficiency of government and dramatically raising its quality.

Our public spending is widely regarded inside and outside the country as out of control. We have an antique system of control over it. This House has little or no say in the control of long-term Government expenditure. If we had had sufficient control in the past, there would have been no letter of intent, no devaluation, no loan, and we would not have had this debate. The problem would have been solved by the sensible control of public spending.

5.52 p.m.

Mr. R. T. Paget (Northampton)

I cannot help expressing a little sympathy with my right hon. Friend the Chancellor of the exchequer in his friends. I felt his embarrassment at the tabloid, Cecil King nonsense we had from the benches behind him a little earlier. Indeed, I shared his embarrasment.

The speech of my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) was really based on two illusions. The first was that we are discussing a loan. We are not. We are discussing a stand-by credit to operate as a deterrent against speculators. This is not money we are going to use.

Secondly, it is an illusion to say that this is an agreement. It is nothing of the sort. It is an expression of intention. These were the intentions of my right hon. Friend the new Home Secretary. I happen to think that they are not very good intentions, for reasons I shall come to, but they are not conditions, and I think my right hon. Friend the Chancellor is quite right.

If my right hon. Friend wishes to change policy—and in certain particulars I hope he will—it will be for him to go to Mr. Schweitzer and say, "I think another policy is desirable and it is now up to you to say whether you wish to keep this guarantee on in view of those policy changes which I propose to make." Again, for reasons I shall go into, I think it would be unlikely but not very disastrous if Mr. Schweitzer said "No."

I therefore do not feel any undue pessimism about the Letter of Intent. We have had three absolutely disastrous years which have been piled, with an added momentum, on disastrous years before them. All we have done in those three years is to prove yet further that Conservatism does not work, because it is Conservatism that we took over.

These years have been unhappy ones for me because I am not talking with hindsight. I saw this disaster as an inevitable consequence. I said so at the time and my words were of course, merely discounted as the disgruntled bleatings of a disappointed man. Still, I am in a position to say now that every warning I gave has been justified by events and therefore it may be worthwhile just to rehearse the basic things which made me think this way, so that, perhaps they may not be repeated.

First, I come from a banking family and to me the recipe for disaster has always been for a trader to act as banker for his customers. We have seen proof of that time and again. Swedish Match and Kruger were a spectacular example. In the nineteenth century it was different for us. We had unlimited resources but now we are an ordinary trader and to try to be banker as well inevitably invites disaster.

Secondly, I am a planner and the moment one binds oneself to a certain level as first priority, one is putting planning outside one's control because the basic planning decision is always the size of the product and if a business takes in a committee of creditors to decide the size of its product then that business cannot plan for itself.

Immediately the Government gave absolute priority to the exchange rate, the National Plan went out of the window. That seemed to me to be obvious. I want to quote some words used by my right hon. Friend the Prime Minister which seem to express this very well—and he was writing, incidentally, in Tribune. He said: For Toryism makes finance not the servant but the master of the industrial and trading community. Instead of using the selective powers of physical controls … the Tories attempt to solve economic problems by the crude instrument of finance which acts like a hydrostatic control, raising and lowering the volume of water in a tank. It is not selective … that is why too often the baby of full employment is thrown out with the bath water. That article was in Tribune on 11th November, 1953, and it would be hard to find a better description of what has happened in these years.

At last, it seems to me, we have freed ourselves from this disastrous situation. We have freed ourselves from being crucified on the figure of 2.80. I hope that the level of 2.40 is not to be another sacred number and another last ditch for us to die in.

I should like to have the £ floating, available to change at any time, but I shall not now go into that argument. If we are to avoid this disaster in future and profit as we should be able to profit from devaluation, we have to do certain things. Here I entirely agree that we have to live within our income. This means reducing expenditure, particularly in foreign currency and on things we cannot afford. One of those things I would put as paying danegeld to Aden in the hope that they will not do something which they may not do anyway but which they will do if they wish. The second thing we should not do is to spend millions in Bahrain in order to build up for another humiliation similar to that we have had in Aden. The third concerns our nuclear weapons. They are incredible to our enemies, embarrassing to our friends and impress no one but ourselves and they are very expensive.

Lastly—and this will not please some of my hon. Friends—there is the question of Rhodesia. Our objectives may be impeccable—I take leave to doubt it, but they may be—but they are beyond our means. Lord Salter in another place put the cost, taking into account the effect on copper prices and the damage to our South African trade, as nearer £200 million a year than £150 million. This is a heavy and costly burden on our balance of payments.

If we are to put up our exports by £500 million, which is what is aimed at, the market in which we have to get at least £200 million of that increase is South Africa. It is our second biggest market and by far our most expansive. We shall not get that increase by maintaining an interference which we cannot afford in business beyond the seas which is no longer ours anyway.

Another thing we have to do is increase exports and, as has been said, this will happen to a great degree following naturally upon devaluation. Devaluation will add to the profit margin of exports and if one increases the profit margin people go for exports. There has to be some restraint in order to ensure that there are available resources for this but when one talks about a £750 million to £800 million cut in home consumption I venture to say that that is masochistic nonsense.

That will not release resources. It will paralyse them. It is the kind of thing which will throw the country into strikes, go-slows, industrial conflict and restrictive practices. If we are to get increased resources for exports we have also to get increased enthusiasm and movement and we shall not get this by such economy.

Again, it is unrealistic to say that we must suddenly switch over our balance of payments to a £500 million surplus—which, after all, means a £500 million deficit for somebody else. I would rather see us balancing our income payments on a higher level. But if we are to do this, the other and most important thing is that we should protect ourselves from capital movements. That is the banking side of the business and such movements have proved disastrous again and again.

The reserve and trading currency use of our currency by others is the problem we have to deal with. That is what this credit is about. Such a situation means that our economic decisions have to be taken not according to our own requirements but according to the nerves or even the spite of other nations. To put ourselves in a situation in which our workers can be thrown into unemployment because Kuwait has a row with Israel and decides to withdraw its reserves from London is an absurdity that we should not tolerate.

No one else has these currency crises because no one else—except America, which has adequate backing—allows their currency to be used for this purpose. Certainly the cost of money to finance this banking is more than the profits, even for America which succeeds in getting the money which it requires at an average of 1½ per cent., or 2 per cent. cheaper than we do and even the Americans, according to a Harvard investigation, find they lose money on the reserve rôle of the dollar.

What are the solutions? The ideal is an international currency to whom this would be transferred—good luck if we get it. The second is a complete and unconditional guarantee of sterling. That would have exactly the same effect as adopting an international currency. The sterling value would cease to be affected by our internal policies and we should use it as a trading currency, as everybody else who uses our currency, but that is too difficult an argument to go into now. An alternative to that would be simply a dollar guarantee which would make the £ the little brother of the dollar and an international currency for that purpose.

The third and most important solution of all is that, as on three previous occasions we should stop sterling being a reserve currency. We did that in 1914, in 1931 and in 1939. This has all been worked out and we worked it out in detail during the war. It means that sterling balances are usable only by consent of the Bank of England for ordinary trading purposes. I will not go into detail, but this is something which can be done and as an alternative to accepting a loan on unacceptable conditions it is something which we should do. We do not have this money for our own use. It is not financing anything, but is there solely to provide an assurance to other people who are using our currency for their purposes and that means that if the conditions are unsuitable to us, we ought not to have it.

I turn to the Letter of Intent. I said that it was not a condition. It is an expression of intention, I believe a disastrous intention. It expresses an intention to continue the same sort of disastrous policy which under two parties has brought us where we are. I cannot expect a declaration from a Chancellor of the Exchequer who has been in office a week—it is not fair—but let him at least say that he is free to change, that he was right when he said that it was not a condition and that he is free to re-think policies and to give us the hope of a new road which may divert us from our assignation with disaster. Let him remember that this money is not being lent to us. It is being lent to the world to guarantee the use of our sterling not for our purposes, but for the purposes of others. We ought to give the Chancellor a chance to reconsider the new policies. This letter, for which I could not conceivably vote, is not his letter and he has the opportunity to set us on a new road.

6.8 p.m.

Mr. Iain Macleod (Enfield, West)

This is something of a House of Commons occasion, as it is the first time that the new Standing Order No. 9 has been put into operation. I think that the House and those who have listened to the debate will agree that we have spent a very worthwhile three hours.

This is not the occasion—and I intend to be very brief—for thunderous speeches from the Dispatch Box. The charge against the Chancellor of the Exchequer is that at his first appearance at the Dispatch Box in his new rôle last Thursday he was less than candid with the House. We shall listen with some interest in a few minutes to what he has to say, but I am bound to say that on the evidence produced so far I would find him guilty of that charge.

The charge was mounted from the right hon. Gentleman's own side of the House by the hon. Member for Ebbw Vale (Mr. Michael Foot), one of the most brilliant, if not the most brilliant, speakers in the House of Commons, and a man with an almost infinite capacity for self-delusion. This is the same man who made that excellent and passionate speech in favour of the Government in the devaluation debate immediately following my speech. I warned him and his hon. Friends more than once in the summer that they were being conned by the Government and by the Chancellor of the Exchequer of the day. The truth is that the former Chancellor, the present Home Secretary, was right in what he told the House on 24th July: we now have debt; we have deflation and we have devaluation. The lowering of the standards of the people of this country, of which the present Home Secretary then spoke, is both the consequence and now the policy of the present Government.

I come straight to the issue of the publishing of the Letter of Intent. I do not mind whether the Chancellor deals with this or not. It is a pity to make confidential and even secret communications public. I would dearly like to see the communications written in July, 1966, and I dare say that hon. Members opposite would like to see any other letters of intent which there may have been, but let us be quite clear why the present Chancellor decided to publish this Letter of Intent. It was not because he wanted to. It was because everything, or almost everything, had already appeared in the newspapers.

I have a cutting from the international edition of the New York Times of Thursday, 30th November, of an article by Mr. Clyde Farnsworth, and it is quite clear that if he had not seen the declaration of intent, at least he had a very detailed knowledge of what was in it. It includes this sentence: Not since France needed international help in 1957 has a major industrial country been forced to give up so much sovereignty in economic affairs. I do not know whether that is right, but it is the judgment of somebody who was clearly in Paris last week and very close to these events.

These terms have been described by the hon. Member for Ebbw Vale as intolerable shackles. Let me turn to whether the Chancellor was as candid as he should have been. He referred to only one paragraph in the Letter of Intent, paragraph 3: The Government's main objectives of policy remain the achievement and maintenance of a strong balance of payments, together with a high rate of economic growth which will make for full employment. It was the only paragraph from the whole of that paper which he could have read which would have attracted not only no comment, but general cheers from both sides of the House. He referred to it twice. Looking back, he must regret that he did not give any indication at all of the terms, of the four-monthly reviews and the other matters which were being asked of us.

On another and more detailed occasion—and I should like to debate this with him—he said: … this does not involve any net deflationary policy"— Later he said: It does not in any way restrict my freedom of manoeuvre in arriving at the Budget next spring."—[OFFICIAL REPORT, 30th November, 1967; Vol. 755, c. 645–6.] I simply do not see how the Chancellor can reconcile that with what he knew was in the Letter of Intent which he was to make public within a few moments, because paragraph 16 of the Declaration of Intent, the last paragraph, includes the most important, although the shortest, word in the letter. It says: If, in the opinion of the Government of the United Kingdom or the Managing Director of the Fund"— not "and", but "or"—then various consequences follow. I simply do not understand how the Chancellor can argue that there are no conditions; of course there are. There are conditions and there are understandings and the parties to it drafted [his Letter of Intent together. My right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) has detected that the paragraph about the money supply was drafted in France. I have seen two comments suggesting that in fact it was drafted by the Chicago school of economists, and the hon. Member for Ebbw Vale said that it was international bankers' Esperanto.

But the salient fact of the charge, if it be a charge, remains: this is not a free will offering by ourselves. This is banker and client, perfectly properly—I am making no complaint about that—joining together to decide what the proper rôle of the client is to be in future. There are very few of us in the House who in one capacity or another have not had experience of that, and I have had experience from both sides.

Last Thursday I quoted an article by Mr. William Davis in The Guardian of last November when he quoted Pierre-Paul Schweitzer saying: When we put all this money at your disposal, we just agreed with your Government on what was our common view of desirable policies in the United Kingdom. There is no doubt that that is the position.

I see no reason why we should be naїve about it. Hon. Members from both sides of the House have said, and I agree, that we know that every banker, domestic, foreign, or international, discusses with his client what the client is to do with the money, and whether they are conditions, or strings, or intolerable shackles, or whatever they are, they are there, and it is absurdly naïve of the hon. Member for Ebbw Vale and his hon. Friends to suggest that money is obtainable on any other terms.

At this point I want to quote what the Prime Minister said on 3rd October, 1964, just before the election, a quotation well known to the House. He said: You cannot go, cap in hand, to the central bankers of Europe … and maintain your freedom of action, whether on policies, maintaining full employment here in Britain or even on social policies. The central bankers will, before long, be demanding that Britain puts her house in order. Those are not my words, but the words of the Prime Minister before the election, and they are an accurate description of our present situation.

Part of the trouble—and the hon. Member for Ebbw Vale made this quite clear—was that hon. Members opposite believed the Prime Minister. I said that I would not make a tempestuous speech. I simply say quietly from this side of the House that we do not think that that is a particularly good reason. In the Ministerial broadcast these were the sorts of sentences which brought the hon. Member and his hon. Friends into the Lobby: Last weekend the Government decided that we were not prepared to accept any solution which placed rigid limitation on the ability of our people and Government to solve our problems by our own exertions. I suppose that the small print word there is "rigid". He went on: And that is why the international monetary community have rallied round with a display of formidable strength to back the operation. This backing is of course to deter the speculators, not for us to live on. And that's why it doesn't involve unacceptable conditions. The small print word there, of course, is "unacceptable".

The Chancellor speaks last in this debate, as he usually does in debates when he can. It is a pity that in this as in some other debates he did not speak in the beginning and allow us to question him in the ordinary way. We have become used to it by now. It is always somebody else's fault; never his own—[Interruption.]

At the end of this debate the hon. Member for Ebbw Vale can, if he wishes, force a Division or, if the House allows him, he can withdraw his Motion. One of the difficulties—and the House as a whole appreciates this—is that when a Motion is for the Adjournment that particular Motion can and often does, and has done in the past, mean very different things to different people often on the same side of the House. It is one of the procedural difficulties with which we are all familiar.

It has been said—and I have quoted evidence for it—that these conditions and strings are more detailed and more severe than any that have been imposed upon us before. That is probably so, but I would have little confidence in the I.M.F. or, indeed, in any other bank which did not have a most careful investigation and did not have whatever arrangements and understandings it thought were appropriate at the time.

This is the position as I see it. It is for the hon. Member for Ebbw Vale to decide what he wishes to do. He and his hon. Friends have voted against devaluation and they have voted for devaluation; they have voted against strings and tonight it may be that they will vote for strings. The question surely is whether it is right for the International Monetary Fund to impose conditions on a standby loan of such a vast size. If I were asked that question and tried to answer it, the only possible answer I could give would be: yes, of course it is. We are not arguing on the details; we are arguing whether it is right and appropriate that that should be done.

The hon. Member for Ebbw Vale asked on a number of occasions why the earlier speeches had been made in the devaluation debate. For a very simple reason—to get him and his hon. Friends into the same Lobby as the Government. That was the position then. But now we are considering the question whether, with this vast stand-by loan, there should be conditions. I think that there should, and I echo very much the words of my right hon. Friend the Member for Flint, West (Mr. Birch). I have been afraid, as I said in the devaluation debate, of what I have called the irresolution of the Prime Minister. I believe that the Chancellor of the Exchequer has a chance, with firmness, in the months ahead, at least, to go a long way to repair some of the damage that has been done. If he will show that firmness, whether he likes it or not, he will get support from this side of the House. Although we genuinely think that he was lacking in candour last Thursday—and on reflection he must come to that same conclusion—because of the attitude I have expressed in relation to the International Monetary Fund, I would not think it right to oppose this Motion.

6.24 p.m.

The Chancellor of the Exchequer (Mr. Roy Jenkins)

The right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod) has delivered a brief but not altogether untypical speech. The British economy in the past two and a half weeks has been passing through one of its most critical and decisive periods for a number of years past. In my view, it has been an even more critical and decisive, but by no means necessarily depressing, period from the point of view of the future.

What has the right hon. Member for Enfield, West contributed? On the first Monday he confined himself to asking my predecessor to resign; on the Tuesday he launched a bitter personal attack upon the Prime Minister; and today he has been almost exclusively concerned with trying to show that I, answering his Parliamentary Question within three hours of entering my new office, tried to mislead the House.

I make only two brief comments on that, for I have no desire to devote my first speech as Chancellor to a semantic argument with the right hon. Gentleman. First, I have heard of Ministers trying to suppress the truth by suppressing vital documents, but I have never heard of one seeking deception and, at the same time, making sure that the House and the country were immediately put in full possession of a document of a type which had never previously been published. To do that really would imply not cunning, but imbecility, and I hope that the right hon. Gentleman, for our first few encounters, will at least acquit me of that.

Secondly, I note the strictly personal nature of each of his three contributions to the debate on these great issues. Not a word of constructive suggestion, not a single shaft of light on to the future. Therefore, if I may, I will turn from his speech, because I want to try and deal briefly with some of the wider issues.

My right hon. Friend the Member for Ebbw Vale (Mr. Michael Foot)—[Interruption.] My hon. Friend knows that I would not attempt flattery with him. My hon. Friend the Member for Ebbw Vale, and various other hon. Members who have spoken on this side, are worried lest the I.M.F. standby credit means that, by devaluation, we have merely escaped from one straitjacket into another. I understand their concern, even though I do not share it. We have lived too long, under successive Governments, within an economic straitjacket. But they are wrong in seeing the essence of that straitjacket as being the decision to take a standby credit or the terms of the Letter of Intent. The straitjacket arises not out of that, but out of the facts that we have been spending abroad more than we have been earning, that 1967 will be our fifth successive year with a balance of payments deficit, that as a result we are heavily in debt, and that, again, under successive Governments, we have suffered eight major balance of payments crises in the past 20 years.

Those are the stark facts of the situation. No one surely believed that devaluation in itself could sweep all that out of the way. Certainly, not my hon. Friend the Member for Ebbw Vale who, in his speech on 21st November, said: No one, so far as I know, has said that devaluation is a solution to all our problems. Nothing of the sort."—[OFFICIAL REPORT, 21st November, 1967; Vol. 754, c. 1164.] My hon. Friend was quite right. The act of devaluation could not in itself begin to abolish our debts—indeed, it makes them more expensive—or to puff away our trading deficit. That, too, is still there, and may even increase slightly in the next few months as the result of the terms of trade worsening against us. Devaluation improves the competitive edge of our exports and, as a result, offers us the opportunity of achieving the export-led expansion which has eluded us for so many years past.

But even that does not come automatically. It depends—and again I quote my hon. Friend's speech of 21st November—on how we exploit it over the next 12 months. And it is upon the result of that exploitation that we can hope to build a new-found solvency, combined with full employment, combined with a securely based expansion. When we have found it—but not a moment before—we shall begin to free ourselves from the constraints of the past. This is what I meant last week—I am sorry if I was not as clear as I should have been—by saying that the strings which counted came not from the I.M.F., but from the realities of the situation, and I am glad to have the opportunity of spelling this out in more detail today.

I turn now to slightly more detailed points. First, why do we need a standby credit? Certainly not to live on, to finance a continuing or even a growing deficit. This is the essential difference between this credit, which I hope we may never have to touch—I cannot be certain, otherwise we would not need it—and the sort of long-term loan, a subsidy to our standard of living, which we would have had to try to negotiate as an alternative to devaluation.

But we still need the standby. Devaluation is necessarily a hazardous process, involving a great upset to the world exchanges and considerable strain on the internal monetary system. And even with devaluation we are an island only in the most strictly geographical sense of that term. We are not an economic island. No great trading nation can be. We have the most vital interest in not upsetting world trade, and the methods by which it is financed. We have an even more vital interest in the stability of our currency at its new parity, and it would have been incredibly rash to have faced the immediate future without the confidence-giving backing of this standby.

What about the so-called "strings"? It is no doubt the case that we could not get the credit without a Letter of Inent such as my predecessor wrote on 23rd November. This is the practice in international finance, as the right hon. Member for Barnet (Mr. Maudling) and the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), who themselves wrote Letters of Intent, know very well. It is also the practice in arranging almost any form of financing. The lender wants to know the future intentions of the borrower for the management of his affairs. That is not unreasonable, and, indeed, it is in any event totally inevitable. But what is crucial is whether the borrower binds himself against his better judgment, and that my right hon. Friend the present Home Secretary did not do. He set out in the Letter of Intent a series of propositions which he believed to be necessary to enable us to exploit the possibilities of devaluation, and I, on the brief studies which I have so far been able to make, do not dissent from him.

What are the main points? First, we say that we are aiming at an improvement in the balance of payments of £500 million a year by 1969. This means a surplus in the second half of 1968 of £100 million, that is, at the rate of £200 million a year, with a further substantial improvement thereafter. Do any of my hon. Friends, or does any hon. Member, think that that is too rapid an improvement? If they do, it is an amazing proposition, for it means that they want to pay off the debt at a slower rate, and to remain longer in the straitjacket.

Then we discuss how this is to be achieved, and let no one believe that it will happen automatically. This means a transfer of resources of about £750 million to £800 million, £500 million to improve the balance of payments, and up to £300 million to compensate for the change in terms of trade. As the export demand builds up, we have to make room for it in the economy. Some room has been made already, but almost certainly not enough, and this is intentional. We do not want to dig a hole and leave it empty. We want it to be there only when the export demand is ready to fill it, and we think that the Budget is likely to be about the right time for this further excavation. This is why, on the present very provisional assumptions, we think that it will be reasonable to restrict the borrowing requirements of the central Government to £1,000 million, which, I may say, is a higher figure than in almost every year since the last for many years past.

If the assumptions change, if, for instance, the economy were to sag, we could and would look at the matter again, and, in any event, we have given no indication of how we propose to achieve the objective, whether by cuts in expenditure, or by increases in taxation, still less by what cuts or by what increases. But the objective of shifting resources is essential. Without it, there just would not be room, without grave overheating, for the exports to build up. We might produce a post-devaluation boom, but it would not be an export-led one, and thus, once again, we would be back with our old problems with the additional limitation that we had tried devaluation and failed to use it properly, and this we are determined to avoid.

Then we have the paragraph about prices and incomes. We say that we shall maintain the policy of the last White Paper, and we shall try to make its application still more effective so that increases in earnings shall not be greater than we can afford. Could we reasonably do less? I do not think so. Even if the I.M.F. had never been heard of, does anyone seriously contend that excessive wage and salary increases could not fritter away the competitive edge of devaluation over a year or so? And supposing we just sat back and allowed that to happen, what policy is it then proposed we should pursue at the end of the day? Severe restraint was highly necessary before devaluation. It is even more vital after it, and if only we can accept it in the short-term it will give us a richer reward than anything we have known in this economy for years past. It needs no I.M.F. to tell us these facts.

Then we have the proposal for three consultations with the I.M.F. during the coming year. There is nothing in itself derogatory about this. In some form consultation is a constant feature of international life these days. Last Thursday, while I was answering a Private Notice Question on the Letter of Intent, the United States economy was under scrutiny in the O.E.C.D. in Paris. Of course, if one is in debt the scrutiny is likely to be more frequent and more searching. This is a fact of life. The consultations which we have proposed are at perfectly reasonable times. In February, we shall be doing a post-devaluation review. In the summer we would, in any event, have been consulting the Fund under the normal Article 8 procedure which has long applied to all members of the Fund. In November, the credit will either be allowed to run out, or have to be renewed.

If any of my hon. Friends do not like these consultations, this, I suggest, is an added reason for their giving every support to the hard and unpopular measures which are necessary to make the fullest possible success of devaluation. Let them support us in getting the balance of payments right by a substantial margin, and securely right, at the earliest possible moment. For that is the way, and the only way, to avoid having people looking over our shoulders.

Mr. Iain Macleod

I am not quarrelling with the conditions, and I have not done so, but there is one point to which I drew attention, and on which I would be grateful for the right hon. Gentleman's comments. I am referring to paragraph 16. It is not a question of the Government. The word is "or", not "and". In other words, the initiative can also come from the Managing Director of the Fund. Is this so?

Mr. Jenkins

The paragraph, which I have not before me at the moment, means exactly what it says; but it is consultation and certainly not instruction.

These various points and the other lesser ones which have been mentioned in no way add up to making the post-devaluation prospect a depressing rather than a stimulating one. A hard prospect, yes, because it will involve some immediate check in the standard of living and much personal sacrifice. But not a depressing prospect, because it offers us the opportunity of solving our difficulties by effort and not by wasted resources.

The rate of growth for the coming 12 months Mould be quite a bit above the 3 per cent. originally postulated by my right hon. Friend. And it should be 12 months, after the initial difficulties, of rising employment. During the first year these processes should not be too fast, otherwise they will undermine their own future, but the changes will be firmly in the right direction.

What we must be primarily concerned about, however, is not 1968, but 1968 as a foundation for the future. We need a strategy to ensure that expansion, when

it comes, will be securely based—[Interruption.] No, not even the 1969 election. We want something a great deal more sound and long-lasting than a pre-election improvement. We need a strategy to ensure that expansion, when it comes, will be securely based—not just a brief interlude of spree, but the beginning of the end of our debt-ridden past. That is my objective and the objective of the Government.

The announcement of devaluation on 18th November was obviously the end of a chapter, the end of a three-year chapter, in which my right hon. Friend the present Home Secretary had fought with immense courage and determination to preserve the previous parity of the £. But it was more than that. It was also, in my view, the end of a volume in which way back, before the beginning of the three years, we had been trying to live above our means both at home and abroad. We had not done either for ignoble reasons.

Much of our world rôle has been carried out for unselfish purposes and it is certainly not discreditable to try to give people the highest possible standard of living. But both have to be paid for. In my view, two rules should take paramountcy. At home, we must take our bonuses after we have earned them and not before, and abroad we must recognise that the influence of Britain will depend more than anything else on the strength of our economy here at home. This is what we shall be judged by; I think that this is what we should be judged by. The immediate future is bound to be hard. But, in the longer term, if only we can accept that, our prosperity can be more abundant and more securely based than anything we have known in this country for decades past.

Question put, That this House do now adjourn:—

The House divided: Ayes 17, Noes 231.

Division No. 7.]	AYES	[6.45 p.m.
Allaun, Frank (Salford, E.)	Griffiths, Will (Exchange)	Park, Trevor
Atkinson, Norman (Tottenham)	Hughes, Emrys (Ayrshire, S.)	Ryan, John
Booth, Albert	Jackson, Peter M, (High Peak)	Silverman, Sydney (Nelson)
Dickens, James	Jenkins, Hugh (Putney)
Ewing, Mrs. Winifred	Lee, John (Reading)	TELLERS FOR THE AYES:
Fletcher, Ted (Darlington)	Mendelson, J. J.	Mr. Ian Mikardo and
Foot, Michael (Ebbw Vale)	Orme, Stanley	Mr. Russell Kerr.
NOES
Albu, Austen	Gordon Walker, Rt. Hn. P. C.	Morris, Charles R. (Openshaw)
Alldritt, Walter	Gourlay, Harry	Moyle, Roland
Anderson, Donald	Gray, Dr. Hugh (Yarmouth)	Mulley, Rt. Hn. Frederick
Archer, Peter	Greenwood, Rt. Hn. Anthony	Murray, Albert
Armstrong, Ernest	Grey, Charles (Durham)	Neal, Harold
Bacon, Rt. Hn. Alice	Griffiths, David (Rother Valley)	Noel-Baker, Francis (Swindon)
Bagier, Gordon A. T.	Griffiths, Rt. Hn. James (Llanelly)	Ogden, Eric
Barnes, Michael	Hamilton, James (Bothwell)	O'Malley, Brian
Barnett, Joel	Hamilton, William (Fife, W.)	Orbach, Maurice
Baxter, William	Hamling, William	Oswald, Thomas
Beaney, Alan	Hannan, William	Owen, Dr. David (Plymouth, S'tn)
Bellenger, Rt. Hn. F. J.	Harrison, Walter (Wakefield)	Owen, Will (Morpeth)
Bence, Cyril	Hart, Mrs. Judith	Padley, Walter
Benn, Rt. Hn. Anthony Wedgwood	Haseldine, Norman	Page, Derek (King's Lynn)
Bennett, James (G'gow, Bridgeton)	Hattersley, Roy	Palmer, Arthur
Binns, John	Hazell, Bert	Pannell, Rt. Hn. Charles
Bishop, E. S.	Healey, Rt. Hn. Denis	Parker, John (Dagenham)
Blackburn, F.	Henig, Stanley	Parkin, Ben (Paddington, N.)
Blenkinsop, Arthur	Hilton, W. S.	Pavitt, Laurence
Boston, Terence	Hirst, Geoffrey	Pearson, Arthur (Pontypridd)
Braddock, Mrs. E. M.	Hooley, Frank	Peart, Rt. Hn. Fred
Bradley, Tom	Horner, John	Pentland, Norman
Brooks, Edwin	Houghton, Rt. Hn. Douglas	Price, Christopher (Perry Barr)
Broughton, Dr. A. D. D.	Howarth, Harry (Wellingborough)	Price, Thomas (Westhoughton)
Brown, Rt. Hn. George (Belper)	Howarth, Robert (Bolton, E.)	Price, William (Rugby)
Brown, Hugh D. (G'gow, Provan)	Howell, Denis (Small Heath)	Probert, Arthur
Brown, Bob (N'c'tle-unon-Tyne, W.)	Howie, W.	Randall, Harry
Buchan, Norman	Hoy, James	Rees, Merlyn
Buchanan, Richard (G'gow, Sp'burn)	Huckfield, Leslie	Richard, Ivor
Butler, Herbert (Hackney, C.)	Hughes, Rt. Hn. Cledwyn (Anglesey)	Roberts, Albert (Normanton)
Butler, Mrs. Joyce (Wood Green)	Hughes, Roy (Newport)	Robinson, W. O. J. (Walth'stow, E.)
Cant, R. B.	Hunter, Adam	Rodgers, William (Stockton)
Carmichael, Neil	Jackson, Colin (B'h'se & Spenb'gh)	Rogers, George (Kensington, N.)
Carter-Jones, Lewis	Jay, Rt. Hn. Douglas	Ross, Rt. Hn. William
Coleman, Donald	Jenkins, Rt. Hn. Roy (Stechford)	Rowlands, E. (Cardiff, N.)
Concannon, J. D.	Johnson, Carol (Lewisham, S.)	Shaw, Arnold (Ilford, S.)
Conlan, Bernard	Jones, Dan (Burnley)	Sheldon, Robert
Corbert, Mrs. Freda	Jones, Rt.Hn.Sir Elwyn(W. Ham, S.)	Shinwell, Rt. Hn. E.
Craddock, George (Bradford, S.)	Jones, J. Idwal (Wrexham)	Shore, Peter (Stepney)
Crawshaw, Richard	Jones, T. Alec (Rhondda, West)	Short,Rt.Hn.Edward(N'c'tle-u-Tyne)
Cronin, John	Judd, Frank	Short, Mrs. Renée(W'hampton, N.E.)
Crossman, Rt. Hn. Richard	Kenyon, Clifford	Silkin, Rt. Hn. John (Deptford)
Cullen, Mrs. Alice	Kerr, Dr. David (W'worth, Central)	Skeffington, Arthur
Dalyell, Tam	Lawson, George	Slater, Joseph
Darling, Rt. Hn. George	Ledger, Ron	Snow, Julian
Davidson, Arthur (Accrington)	Lee, Rt. Hn. Frederick (Newton)	Spriggs, Leslie
Davies, Dr. Ernest (Stretford)	Lever, Harold (Cheetham)	Steele, Thomas (Dunbartonshire, W.)
Davies, G. Elfed (Rhondda, E.)	Lewis, Ron (Carlisle)	Stewart, Rt. Hn. Michael
Davies, Ednyfed Hudson (Conway)	Lomas, Kenneth	Stonehouse, John
Davies, Harold (Leek)	Loughlin, Charles	Strauss, Rt. Hn. G. R.
Davies, Ifor (Gower)	Lyon, Alexander W. (York)	Swingler, Stephen
Dell, Edmund	Lyons, Edward (Bradford, E.)	Taverne, Dick
Dempsey, James	Mabon, Dr. J. Dickson	Tinn, James
Dewar, Donald	McBride, Neil	Tuck, Raphael
Diamond, Rt. Hn. John	McCann, John	Urwin, T. W.
Dobson, Ray	MacDermot, Niall	Varley, Eric G.
Doig, Peter	McGuire, Michael	Wainwright, Edwin (Dearne Valley)
Dunnett, Jack	McKay, Mrs. Margaret	Walker, Harold (Doncaster)
Dunwoody, Mrs. Gwyneth (Exeter)	Mackenzie, Gregor (Rutherglen)	Wallace, George
Dunwoody, Dr. John (F'th & C'b'e)	Mackie, John	Watkins, David (Consett)
Eadie, Alex	Mackintosh, John P.	Watkins, Tudor (Brecon & Radnor)
Edwards, Rt. Hn. Ness (Caerphilly)	Maclennan, Robert	White, Mrs. Eirene
Edwards, William (Merioneth)	McMillan, Tom (Glasgow, C.)	Whitlock, William
Ellis, John	MacPherson, Malcolm	Wilkins, W. A.
Ennals, David	Mahon, Peter (Preston, S.)	Willey, Rt. Hn. Frederick
Ensor, David	Mallalieu, J.P.W.(Huddersfield,E.)	Williams, Alan (Swansea, W.)
Evans, Albert (Islington, S.W.)	Mapp, Charles	Williams, Alan Lee (Hornchurch)
Faulds, Andrew	Marks, Kenneth	Williams, Clifford (Abertillery)
Fernyhough, E.	Marquand, David	Williams, Mrs. Shirley (Hitchin)
Finch, Harold	Marsh, Rt. Hn. Richard	Williams, W. T. (Warrington)
Foley, Maurice	Mason, Roy	Willis, George (Edinburgh, E.)
Foot, Sir Dingle (Ipswich)	Mayhew, Christopher	Wilson, William (Coventry, S.)
Ford, Ben	Mellish, Robert	Woof, Robert
Forrester, John	Millan, Bruce	Wyatt, Woodrow
Fraser, John (Norwood)	Miller, Dr. M. S.	Yates, Victor
Freeson, Reginald	Milne, Edward (Blyth)
Gardner, Tony	Mitchell, R. C. (S'th'pton, Test)	TELLERS FOR THE NOES:
Ginsburg, David	Morgan, Elystan (Cardiganshire)	Mr. Ioan Evans and
		Mr. Joseph Harper.