HL Deb 17 September 1931 vol 82 cc64-93

LORD MELCHETT rose to move to resolve, That this House approves the action of the Government in setting up a Committee of the Cabinet to enquire into methods of balancing the trade exchange. The noble Lord said: My Lords, I have put down the Motion which stands on the Order Paper in my name to-day because I understand it is the earliest and possibly the only opportunity that, we may have of discussing this question. We have just heard from the noble Earl that after the proceedings to-day the House will be adjourned for a further week. Until I heard that statement I had only known that the probability was that we should adjourn until the 28th of this month. In the interval a great many things are occurring, and a very critical situation is developing in the country. I feel that there is a great deal that could be usefully said and discussed by your Lordships'. The country is waiting to hear the views of many members of this House who speak with authority upon topics which are agitating the country to-day. In the Lower Chamber there is very much doubt and difficulty, and the discussion of questions in this House might be of considerable interest and use to another place. For my part, in fact, I should like to see a series of logical and consequential Resolutions on the state of the nation tabled in this House, and discussed thoroughly and fully, so that we might have every opportunity of clarifying to the country the importance of the issues before us and allowing the country to understand them in the most complete and thorough form, and might understand one another before we have to deal with the Bills that will be sent to us from another place, when we shall have at once to engage in more practical issues.

The Prime Minister on Tuesday last set up a Committee to enquire into the question of restoring the balance of trade. I should like to ask the Government what this implies. Do the Government mean to stay on in office and to put the findings of this Committee into operation? Do they mean to try to restore the balance of trade itself? I should like noble Lords to realise that at the present moment we are buying every day about £2,000,000 worth of goods, and selling only £1,000,000 worth, and that the balance of trade is so much against us that no steps that can be taken by mere financial means will stabilise the position of this country for the time being. If the Government are not going to carry out the findings of their own Committee, or to attempt to carry them out, what will be the position in which we shall be placed? I think it would be a great mistake for us to be lulled into a false sense of security. An Election may have to take place in this country. I think we ought fully to realise that if an Election takes place at the present time, it will be utterly disastrous to this country and, very likely, to a large section of Europe. I believe that, when Parliament is dissolved, it will be impossible for any force to maintain the pound sterling at the present rate, and we shall be rapidly involved in a currency collapse.

After all, we have to look to the position of foreigners in this matter, and to what they will think and say. No one can guarantee that there will be any majority as the result of an Election in this country under our present electoral system. We may be faced with exactly the same situation as we are faced with to-day. Foreigners will sell British Government securities, and our currency will fall, on every bourse, on every exchange, on every pavement from Shanghai to Paris, right across the world, and nobody will be able to stem the great tide, if once any doubt comes into the minds of those abroad as to the security of this country. During the course of the Election, our exchanges will fluctuate according to the speeches of the Party Leaders. If a Leader of the Opposition makes a great hit the pound will go down, and when a Government Leader scores you will see a rise in sterling.

I do not believe that this is a situation upon which this country ought to embark without the most grave necessity and without being fully aware of what is likely to happen if we are driven to this course. This Government was formed, and took office, in order to avoid an Election and to escape those very disasters that I have just described. For myself, I fail to see how the position is now better than it was when this Government was formed. There are many disturbances, and a great-deal of trouble, evident now that were not apparent then. The nation is disturbed and divided. The Government have imposed, as they were bound to impose, crushing taxation. Unemployment has increased. It is true that they have balanced the Budget, but the Budget is balanced on paper only. All Budgets are balanced only on paper until the final accounts are drawn at the end of the year. You cannot with any certainty balance Budgets at the beginning of the year. The situation has only been improved on paper. In reality it has not improved.

There is, however, this advantage to the country in this difficult position: that we have a certain measure of national agreement to enable us to achieve some national unity. In the first place all Parties are agreed upon the essential importance of trying to balance the Budget on paper. The Leaders of all Parties have agreed to that course and there is a large amount of agreement upon another matter, the question of the institution of tariffs in order to redress the balance of trade. The Opposition have admitted that they preferred tariffs to cuts in certain of the services or the unemployment benefit or "dole." There were therefore three alternatives before us. Either cubs or tariffs or some other scheme hinted at vaguely but never presented in a practical or concrete form to the country. If they were prepared in certain conditions to accept tariffs they must have worked out in their own minds what they thought those tariffs were going to do. There are not many things which tariffs can do. It would have been very easy to set down very shortly the effect of the tariff which they were prepared to accept. First of all it would produce some revenue; secondly, it would effect some improvement in industry; and thirdly, some restriction in imports.

There is a fourth point, that it might in some cases raise prices, and it was upon this ground that the Opposition were opposed to the idea of tariffs. It is not necessary in all cases that tariffs should raise prices. There are some cases where they would result in a reduction; but the point that we can look to is, I think, this: If the only point between the Opposition and the Government is the £12,500,000 which we are going to take from the people on the "dole," is it worth while dividing the nation and running the risk of an Election? For my part, I would gladly see that £12,500,000 given up. £12,500,000 out of £170,000,000 is not so vital to the nation, and I only grieve very much that it ever came to be brought forward. I think it is a great mistake to rouse partisan feeling to such an extent upon a question which cannot be considered vital from a financial point of view for one moment, though on which there may be a great deal to be said from the point of view of justice. Other things have come down, and it may be said that this should come down too. All I can say is that a great deal of the feeling against the unemployed in this country is entirely unjustified. The unemployed are a very fine body of men; they are citizens who fought in the War and who, after a short time, have been without employment since. It is not a question of dealing with a few hundred thousand men who cannot and will not work. There are 3,000,000 of our people who are in this condition, and sympathy, not opprobrium, is their due. If this is all that stands between us and national unity, whatever the justice of the case may be I think it is a great mistake and a great lack of statesmanship to allow this £12,500,000 to stand between us and a united policy, which alone can save the country from disaster.

Then I make an appeal for the middle classes. They have been called upon to make an undue proportion of sacrifice. They have an essential standard of life to keep up and theirs is a perpetual struggle to save their children from being forced back into the labouring classes from which they have raised themselves. They have added burdens which make all the difference between being able to save themselves and being forced back into a condition of life for which they are entirely unsuited and quite untrained, and into a class which is already considerably overcrowded. They have no pensions and no "dole," and three quarters of their taxes are to be paid on January 1. They are the most loyal and long-suffering class in the nation. Thousands have been dismissed from their employment, and have no hope of re-engagement under present conditions. These are the people upon whom we rely. They were the heroes of Kitchener's Army, and are the keystone of the arch of national security.

This is the situation in which we are now placed. It is the Government's business to restore industry, to get factories restarted, and to get the men back into their jobs. People may think that the Government Committee which has just been set up is going to find some completely new and successful solution of this problem. Perhaps it will. For my part, knowing the Government and knowing the problem, I think that is highly improbable. There is only one solution and that is the tariff solution, however unpalatable to a great many people. I think we might regard for one moment the very large number of people, leaders in this country, who have completely changed their views on the subject in the last few years—people who speak with authority. In this House we have Lord Illingworth, Lord Inchcape and Lord Joicey, and in the other House Sir John Simon, Mr. Churchill, Mr. Runciman, Sir Robert Hutchison, Sir Murdoch Macdonald, Mr. E. D. Simon and Mr. George Lambert, and chambers of commerce throughout the country, including those of Manchester, Liverpool, Bradford, Leeds, Huddersfield, Wolverhampton, Sheffield, Leicester, Coventry, Derby, Dunfermline, Teeside, Halifax, Dewsbury and Exeter, have passed resolutions which in. fact proclaim that in their view tariffs are the only solution for the problems of this country.

There is one other remarkable conversion to which I would like to refer if your Lordships will grant me leave for one moment, and that is the conversion of my predecessor in this House who at one time was a very powerful Free Trader. In this time of national crisis I have felt that it was worth while looking up some of the things he said in order that they might be of some use to the people of this country in this hour of grave danger. I have taken two quotations which I think show sufficiently what I mean, and wish your Lordships' permission, I will read them to the House. The first is not a quotation from Lord Melchett but from Mr. Stanley Baldwin, who, in November, 1923, referred to my predecessor, then Sir Alfred Mond, as. "the ablest controversialist on the Free Trade side in England to-day." It certainly shows that he was one of the most prominent advocates of that system.

Curiously enough, my predecessor in this House, speaking in Manchester almost exactly five years later, December, 1928, said: I think it is perfectly futile to bandy words about an old and effete controversy. I think it is perfectly useless and a mere mockery to endeavour to deal with a situation of such seriousness by extracts from economists… Can you go on maintaining one part of an economic theory—a theory of free imports at all costs, regardless of its effect on British industry, regardless of unemployment, regardless of its effect on the standard of wages and living, when you have changed all the other factors that necessarily enter into costs of production? A change so violent in the point of view may seem hard to understand, but I saw that change take place, from the time when my predecessor left the Government in 1922 and, after a short period of politics in 1923, went back into industry and day by day found himself face to face with the problems which had to be faced. A complete change in his whole fiscal ideas came about from Free Trade to strong advocacy of Protection.

Nowhere is it more remarkably shown than in two further quotations. Speaking at Swansea in 1923 on the steel industry he said: It is a remarkable fact that our country has not been flooded with cheap goods. This country has been built up on a proved fiscal system. I see no reason—far from it—to depart from the policy which I have always advocated. In November, 1929, speaking in London, he said of the same industry, the steel industry: To-day you are paying £9,600,000 a year to 120,000 men to do nothing at all. By importing 3,000,000 tons of steel at £1 per ton less than the home produce you are saving £3,000,000. That is book-keeping which I do not understand. People do not realise these figures, and that is why they allow it to go on although, were those 3,000,000 tons produced in this country, it would employ 120,000 men. If there were no unemployed you might make some point about buying cheap steel. The industry needs safeguarding. I have been astonished to hear it has not been done. People are frightened at the repercussions it is to have on various industries. Let us try it and deal with them when they occur. They are sure to be of a different nature from what people imagine. They always are. I know one thing that would happen: your furnaces would go, your mines would go, your shipping would improve. All your industries would spring to life, and it is worth running some risks to achieve that. Dealing with the question of repercussions, one of the most usual arguments that are raised is that of the shipbuilding industry. Well, to-day, the shipbuilding industry is in a very depressed condition. It hardly seems worth while keeping a very large number of men out of employment who might otherwise be working in our steel industry for that reason alone. But in any case there is nothing new in this problem of the shipbuilding in- dustry with a tariff. The Germans had to face it. They faced it in a very simple, practical, and obvious way. They merely excluded steel for shipbuilding from the terms of the tariff, and had a rebate on steel for shipbuilding. There is nothing in the world to prevent us from doing exactly the same thing. The other day, in discussing this question with a man very well informed in the steel industry, he raised the point that the most profitable section of the steel industry to-day was the tube manufacturing industry, and that there was no adequate plant in this country to supply their raw material. Very well, to my mind that shows an excellent opportunity for us. We can give an exemption for the time being, we can bring in a tariff, slowly and by degrees giving the steel industry the opportunity to create this plant, to bring some new business to this country and to give further employment to people and additional profits to industry.

It is a great mistake to believe that the price level is the determining factor in this question. It is quite true that in some cases the imposition of a tariff will lead to a rise in prices, but it is not necessarily true. Is it always so desirable to have low prices? What is the use of low prices to a man who is on the "dole" and who cannot, of course, buy anything in any case? What is the use of telling a man, "This is the cheapest Christmas on record" if he has no money with which to buy? The real fact of the matter is that in a great many cases there is no necessity for any rise in the price level at all. In modern industry, with its marginal costs, the home producer will very often produce at a very much lower figure if he has a protected home market, and the price of the home consumer will not be increased if he is protected. There are a great many cases where that has taken place.

In mass production in modern industry, if you are producing at the rate of 85 per cent., instead of 55 per cent., the costs are enormously reduced. Many overheads are unavoidable. Your accountants, your salesmen, your technical officers, your technical controllers, your research staff—those you have to pay for in any case, however much business you are doing. Over and above the amount of business you can do under our present system any further business can be charged at merely the cost of conversion, and that will in many cases be 33 or 45 per cent. lower than the total cost that is charged to-day. That gives a great opportunity for expansion of business, and also for exportation. This country is being flooded with goods exported from other countries upon marginal costs. Manufacturers abroad are adding to their plants because a small addition will bring their total costs down and they can dump their goods in the free market that we are providing for them. Everybody who has a factory is tempted to increase it with that in view. After all, he says, there is always the English market in which he can dump and possibly got rid of a sufficient quantity of goods at a very low cost to enable him to carry his overhead charges in his domestic market. We can do exactly the same as he can.

I think that is the fallacy of the remarks made by Mr. Graham in another place, when he said: Side by side proposals were put up by the people who recommended the revenue tariff that it should be accompanied by a bounty on exports, because here they realised the idea would fail unless there were some method of supporting the export trades. But, of course, it will be plain to every hon. Member that no sooner do we apply this bounty to exports in this country than we bring into operation against our trade the anti-dumping legislation of other lands. Any export bounty of that kind is regarded as an artificial device, as a form of dumping which they consider they are entitled to treat under that legislation. On those grounds I would point out that this country is being continually flooded with dumped goods which are subsidised by Governments. They may not be direct subsidies, but they are subsidies on transport, subsidies on one charge or another. And we might as well be charged at this moment with subsidising industry by means of relief of rates. There are many ways of subsidising exports besides a direct subsidy. If we had a direct subsidy in a great many cases we should be doing neither more nor less than other countries are doing against us at the present moment, and the burden of which the British manufacturer has to bear in any case.

There is one thing which no one can calculate, and that is the ancillary prosperity which results from the starting of any factory, the putting into employment of any number of men as compared with keeping them on the "dole." They have their wages to spend. The company is spending money and making profits, they buy boots, they buy clothes, they buy furniture for their houses. It starts in a dozen different ways the multifarious currents of trade, which no one can define, and which no one can calculate. And, as a matter of fact, when you come down to the principal question, the processes of exchange are not so very difficult and complicated as people sometimes make out. All that we really do is to exchange food and raw materials for the manufactured products. And if your tariff includes, as it is bound to include, agriculture in this country you will exchange far more of your manufactured goods for the agricultural products of England. Your little towns throughout the land, to-day impoverished, just living upon a bare margin, will all have a wave of prosperity such as they have not seen for seventy or eighty years in this country, and no one can calculate what the effect of that will be. My own belief is that the effect would be dramatic so far as the industries of this country are concerned. Of course, that applies even more to the Empire, but there is no time this afternoon to go into that question.

I am not one of those who believe, that tariffs are the be-all and end-all of national and international organisation. I believe that a far more serious and more permanent reorganisation has got to be attempted than that. We have to reorganise the whole basis of our national and industrial life in order to meet the demands that science is making upon mankind to-day. The real trouble we are all confronted with is the failure of the philosophic sciences to keep pace with the natural sciences. That is our real problem, which it will take many, many years to solve. Probably my generation and the generation after me will not see its solution. We certainly cannot solve it here this afternoon. But we can solve one thing. We can press this Government not to run away from the task they have undertaken. We can press this Government to go for the only solution that can really restore the balance of trade in this country, and get these unfortunate men back to their work, and get some prosperity to our industry and to our agriculture. I would appeal to your Lordships, from no partisan point of view—there is no room at a moment of national crisis such as this for partisan interests—to approve of the Motion that I have put before you this afternoon in order to strengthen the hands of the Government, in order to give them an even greater sense of security in making plans for the future, in order to give confidence to the country and to the world at large that when it comes to the real problem England will face the world with a united front and deal with its difficulties successfully.

Moved to resolve, That this House approves the action of the Government in setting up a Committee of the Cabinet to enquire into methods of balancing the trade exchange.—(Lord Melchett.)

LORD GAINFORD

My Lords, first of all I would congratulate your Lordships' House on the presence of the noble Earl (Lord Peel) and the noble Marquess (Lord Crewe) whom we see sitting together on the Government Bench for the first time since the formation of the present Government. It is with great satisfaction that the House has realised that the principal Leaders of all Parties have come together, as they did after the episode of August 23, with a view to saving the pound from inflation and from the flight connected with it. I do not feel I can allude to the action of the late Government in any terms except those of great regret, with the exception of that of the three Leaders who have taken Office. I think it was a deplorable lack of political statesmanship, and I agree with the noble Lord who has just spoken that a question of £12,500,000 is not a sufficient justification for inducing a large section of the people of this country to abstain from supporting a Government in this time of difficulty. I know it is suggested by them that they are justified in their action in, as I would call it, running away from their responsibilities, because they were anxious to prevent the deprivation of a deserving set of men, the great number of the unemployed. After all, the cause of humanity is equally dear to us all and none of us is going to allow acute privation to exist among the unemployed or any other class of the community if it can possibly be avoided.

But the crisis which has been met is not the crisis upon which I desire to speak to-night. My subject is the objects which the Committee of the Cabinet will have to consider. What we require at the present moment is to find a method of reducing taxation. All taxation, even that which has been recently imposed or is about to be imposed upon us, is a burden upon the industries of this country, and we have to get rid of a great deal of that taxation in order to help our industries to become profitable, to enable us to meet the competition of other countries and to balance our Budget year by year. The taxation per head in this country is £15 14s., in France it is £10, in Germany it is £8, in the United States of America it is £6, and in Italy it is only £5. We are called upon to carry an unbearable burden of taxation which Government to try to diminish.

The unbalanced trade position owing to the fall in exports means that we are heading for national bankruptcy. In 1928 our exports amounted to £844,000,000; in 1930 they amounted to £657,000,000, a fall of £187,000,000. If you take the first eight months of this year, there has been a further terrific fall. Taking the eight months of the two preceding years and the eight months of this year, the fall has been from £488,000,000 to £398,000,000 last year and to £263,000,000 this year. The adverse balance to-day is worse than it has ever been in the history of our nation. We are living on borrowed money. Nothing could have illustrated that more than the necessity of the banks recently to take advantage of the generosity of France and the United States in issuing emergency credits to enable us to maintain the sovereign at its proper level. But economies are absolutely essential if we are to meet our obligations.

THE MARQUESS OF SALISBURY

Hear, hear.

LORD GAINFORD

And much more requires to be done than, I think, has hitherto been indicated. The causes of the present situation are generally admitted. There has been a series of extravagant proposals carried out not only by the last Government but by its predecessors in office. The social expenditure has been beyond what the nation could afford, although we are very reluctant to curb social expenditure. But it has run wild. There has been an increase in pensions of more than we can afford. There has been an increase in the contribution to the "dole" of more than we could afford. It is very difficult for those in another place to advocate openly the reduction of money spent either on social services or on "doles" when they are seeking the support at the next General Election of 28,000,000 voters. If the wealth which has been so largely exhausted in this country is to be restored it is high time for the Government to set themselves the task of investigation and inquiry into the remedies. The investigation which I want to see the Government enter into is not that which was dwelt upon by the previous speaker, but the undue interference with industry by the State. There has been a limitation it is the duty of any of hours by statutory enactment, also of wages. Every Department has powers which interfere with the direction and administration of labour, and officials, however worthy their motives may be, at least have not the business experience and training of those who carry on industries in difficult times.

Then I want them to enquire into the question of sheltered and unsheltered industries and their pay. Let me give your Lordships a simple illustration. The other day I met a workman whom I know close to any house. He was working alongside the road. He has not very hard work to perform. It is mainly cutting the grass on the edges of a tarmacadam road. He recently applied to the farmers in my district for an agricultural job. They did not think him worth it as he was not skilled enough. The wages that skilled agriculturists in my district are paid are only 30s. a week, but this man has got a job on the roads and is being paid 54s. a week. That is the sort of system which exists in this country between sheltered and unsheltered industries, and it seems to me to be grossly unfair. I want an inquiry into that matter, so that remedies can be found and proper economies effected in public administration.

There is another direction in which I think an inquiry ought to be entered into by the Government, and that is to consider what contributions should be paid by the State towards local taxation in the districts. I believe that the waste in local expenditure is very large, and is mainly due to large sums spent by the State in helping local authorities to carry on their work. It contributes to waste. I will give you another homely illustration. A bridge within a mile of my house was quite a good bridge, but narrow, and had a little elevation going up and a little gradient going down. It caused traffic along that road to steady from forty or fifty miles an hour to twenty-live while going over the hump. Alongside of it was a road which certainly 360 days in the year is quite possible for all traffic if the drivers like to go through a tiny rivulet only a few inches deep, which is very seldom in flood. It was not necessary to alter that, road. Within the last few months £3,000 has been spent in making an enormous wide bridge covering the passage over the water, and removing the old bridge which was quite adequate for all the traffic. That kind of expenditure by local authorities, while it does employ for the time being a, certain limited number of men, I believe to be a gross waste of public money, and ought not to be allowed to continue.

Again there is the Railway Commission. I am always sorry to allude to wages, but I believe that in these times we cannot afford to pay the wages which the average wage earner is securing upon our railways. In 1913–14, for which we call the average cost of living figure 100, the wages were £47,000,000 on the railways, and now, with the cost of living figure at 152, the wages being received by the railway men amount to £120,000,000 per year as against the £47,000,000. That is a prodigious increase in the pay of the railway men. The result is that traffic is leaving (ho railways, and—if I might put merely an assumption—20 per cent. should be taken off the railway men in the aggregate. That would mean £24,000,000 saved to encourage traffic on the railway system, and would enable dividends to be paid upon trustee and other savings which are invested in the railway companies. I want that kind of subject to be considered by the Cabinet to see whether savings cannot be effected in items of that kind.

I want next to deal for a moment with a subject upon which I have some little knowledge, and that is the subject of the coal trade. The export of coal is one of the most important items among the materials which we export in exchange for the necessary food and raw materials that are required in this country by our manufacturing industries. In 1923 we exported 78,000,000 tons of coal. At the rate which we have been exporting during the last eight months, if the same rate is continued for the twelve months, our export in 1931 of coal instead of being 78,000,000 tons will be 39,700,000 tons. It has diminished by half taking the period of eight months. That is an item which I think the country has to realize in order to see what can be done to recover our export markets in the world. It is known that our cost of producing coal in this country is much greater than in other countries—not the cost of the general items in production but the cost in wages.

The average wage which we pay in this country to our miners is 9s. 7¼d. per ton, or, if you like, exactly the same figure per shift. In Germany it is 6s. 5d. per ton and 8s. 6¾d. per shift. But in Polish Silesia, a country with which we are in competition to the greatest extent, the wages per ton are 3s. 10d., as against our 9s..7d., and their earnings are less than 5s., as against our 9s. 7d. per shift. That makes it very difficult for us to retain, our export trade in competition with them. When I tell you that the railway rates in this country, owing to the high costs of conducting our railways, force the railway companies to charge rates on seven miles between a colliery and its market the same as they are charging in Polish Silesia for 384 miles, you will realise how difficult it is for us to get even the coal to the sea in competition with the coal from other countries. That also is a subject which I should like to have investigated, to see what can be done not only by international agreement but in some other way calculated to meet that difficulty.

The noble Lord thinks that tariffs are going to settle all these difficulties, or settle them to a very large extent. I demur entirely, because I see that if a tariff is placed upon commodities which come to us from abroad, there is a great danger of a tariff being placed upon our coal going into countries abroad which at present are our best markets. Nothing could be more detrimental to one of our greatest industries than that other countries should place tariffs on the coal which we are so anxious to export. But I will deal with the fiscal question from another point of view in a moment. I cannot suggest what the findings of this Cabinet Committee may be, but I think that the facts are suggestive of what might be done to cure unemployment, bring about a trade balance, stop the drain of gold and do something more than merely meet temporary demands of the Exchequer. What we want is a proper distribution of the gold in the world. That is another subject which I think ought to be investigated by a Cabinet Committee. It is perhaps difficult to see what will be the inducement to either France or the United States to part with their gold reserves and spend their money in this country so that we should have a greater proportion of the gold, but the maldistribution of gold is to me one of the reasons for the extraordinary depression through which this and other countries are passing at the present time.

The real wages in Germany are 75 per cent. of our own, in France 55 per cent. and in Italy 45 per cent. That is a wage question which I think has to be considered in conjunction with all these other matters. We are faced with great competition, and we have to meet that competition. I believe that one of the ways of meeting it must be some sacrifice of wages as a temporary expedient in order to recover our position. The fallacy that high wages help production need not, I think, be dwelt upon much in the debate to-day. If 10s. has to be found to increase wages it has to come from some source or other, and the person who finds it is denuded of the 10s. as a rule. It perhaps increases consumption, but it does not necessarily increase the production of wealth. What we have to try to see is that wealth is produced and not merely consumed and wasted.

There is a great deal, I think, to be done to secure economy. One way in which economy can be fostered is by direct taxation imposed on every member of the community. When Sir Michael Hicks-Beach was Chancellor of the Exchequer in 1897 I made some observations on economy. I ventured to suggest to Sir Michael that it was the right course to tax every one in the community by means of direct taxation, so that everybody felt the taxation and did not merely pass it on to other people. I believe that principle is, sound, and I believe that if direct taxation could be imposed—in accordance, no doubt, with ability to pay—on everyone, on every wage-earner and on every rich man in the community, it would be a far better way than trying to raise money by indirect taxation, which often is not appreciated by those who have eventually to meet their obligations.

But what we have to avoid is that the pound sterling shall go down in value. Twenty shillings per week for an average working man is worth far more with the pound sterling where it is to-day than 50s. a week would be if the same collapse occurred here as occurred in France, so that instead of the franc standing at twenty-five to the pound it is now 124. If the ordinary householder pays 10s. for bread out of that 20s. he still has 10s. to spend on other things, but if when the collapse occurred he had 50s. he would have to spend the whole 50s. on bread and would have nothing left over for any other commodity. This sort of illustration, I think, is required in order that the public may realise the importance of maintaining the pound at its present level and not allowing it to collapse. The importance of maintaining it was very well illustrated by a speech delivered by Mr. Runciman in the House of Commons a few days ago, in which he pointed out that the savings of the working classes amounted to £2,470,000,000 in various securities. If all the middle classes and the poor who contribute to the Post Office Savings Bank, to the building societies, and to various other thrift institutions were to suffer the outlook would be more deplorable than any words of mine can picture.

It is unpleasant to have to face facts, it is unpleasant to propose a 10 per cent. reduction in wages, but it would produce a profit in nearly all our industries. If that profit was produced it would bring money into industry and in that way it would meet the problem of unemployment. Sir Josiah Stamp and Sir William Beveridge—both men who are not Party politicians but statisticians and men of great thought and reputation—have stated that the nation cannot continue to pay 50 per cent. more in wages than is paid by nations in competition with us unless our workpeople work 50 per cent. better than they are at present doing. Unfortunately, in certain industries, notably bricklaying and in other trades, workmen are not all doing their best. It is very hard to deal with questions which are going to hit the poor. It is very hard to do anything which will interfere with leisure, but, if we are to maintain prosperity and the leisure of the whole country and of the working classes in particular, then I believe it is in the direction of reducing costs of production that we must call upon the community to make a sacrifice in order to secure that end. The sacrifice need not be a very long one, but it must be for a time a considerable one. Diminishing the cost of production, I believe, in the long run will lead to the royal road to prosperity and to the position which we all desire to see our country once again become—namely, a prosperous country and leading the nations of the world.

LORD BARNBY

My Lords, the noble Lord who has just spoken emphasised the need for economy. That is the thought uppermost in the minds of your Lordships and throughout the country. It is for that reason that I listened with some alarm to the remarks of the noble Lord who preceded him, though in the main I am in entire agreement with the point he was trying to emphasise. The noble Lord who has just spoken concluded his remarks by saying we must, in order to maintain our trade balance, reduce our costs. I am sure your Lordships are agreed that it is hard to make that end tally with the philosophy that those who are at present being paid for doing nothing—it is no opprobrium to them, it is their misfortune—should be paid on a scale which requires no reduction in the standard of purchasing power. It is unpopular at the moment, but surely no Government has the right to shirk the unpopularity which the essential economics of the case require. That is fundamental, and I do not labour it.

The point I wish to make is that so far we have only attempted to balance the Budget. What is the good of that unless we are also going to adjust the trade balance? I doubt whether there are many in your Lordships' House who have been in more Continental countries than I have in the last few weeks for the purpose of business. It is not always comfortable, but it is at times necessary that the heads of large businesses in this country should travel as much as possible. When other countries in Europe find their currencies in jeopardy, and find from the intensity of the adversity which faces them that they must mobilise their resources and get cash for their merchandise, they look round to see where they can send it. Their position is no different from that of anyone else. They aim to direct it where they are likely to get paid for it. If anyone standing on the shores of the Black Sea or the Baltic looked for a target at which to level his goods he would remember that in these islands there are 45,000,000 of people capable of consumption on a scale surpassed nowhere else and—this is the point I wish to make—with a credit and a probity which give more probability of his being paid than in any other country in Europe. That is the point. We have adjusted, as I have said, our Budget; but what about our trade balance? We know that it is necessary to secure credits to maintain the stability of sterling, but are your Lordships satisfied?

In the political situation in which we find ourselves there are two leading questions: (1), Can we maintain the stability of the pound without limiting this avalanche of imports which in the immediate future is going to be directed to this country? (2), If political exigencies or the difficulties of the political position require an Election before action, can we rest assured that the pound sterling can maintain itself under the strain that will be imposed upon it? I venture to repeat that our manufacturers, as the noble Lord who spoke last has said, require cheaper costs of production. Such cheaper costs of production are going to permit us to sell abroad. But, there again, it is a question of credit, not only at home, but of every manufacturer in every country. For that reason, if we decided on a restriction of imports to protect the pound, there would be two results. First, we should emphasise to the world the weight that we can swing. The whole world will be impressed by what is in our power, and I venture to think that if, in those difficult weeks of July, the British Ambassador in Paris had been able to feel that he had either weapons in his hand or armour with which to defend this country, we should have had greater influence than, to judge from the French Press, we appear to be believed to have in France.

The second point which I wish to make concerns agriculture. Your Lordships are more familiar than any other section of the community with the difficulties of agriculture to-day. Agriculture must have some consideration, some measure of protection from this avalanche of primary products that is being mobilised throughout Europe and the world to pour into this country. As one who, like many in another place, consistently opposed such a simple measure as the Safeguarding Act, but who uses the retreat of your Lordships' House to make his first recantation of those principles, which are wrong under the changed condition, I feel that you must be impressed with the change of opinion that is taking place generally at the present moment. If it is a question of surrendering life-long principles in this necessity, the greater the honour to those who, recognising that the position is acute and as perilous to-day as it was in 1914, are prepared to sacrifice principles in the national interest. I hope that this readiness which we see in this direction, growing with a cumulative momentum, will permit some national agreement in this perilous situation and that, with the support of the whole nation, it will be possible to take some steps to protect our industry and our agriculture from the avalanche that threatens both, with all the subsidiary dangers. The result will give some hope to our manufacturers that they may be put in a position in which they can successfully compete. We have talked much about making economies, but to make economies we need a better hope for industry

VISCOUNT ELIBANK

My Lords, I think we all ought to be very grateful to the noble Lord, Lord Melchett, for raising this question to-day. I feel with him that this House ought to have been given greater opportunity of discussing these very serious matters, in this moment of grave crisis, and I am very glad to hear that this House is not going to be adjourned beyond next Thursday. No doubt during the coming week matters will move quickly, and there will be further questions with which this House ought to have an opportunity of dealing. Let me turn to the grave crisis with which we are confronted to-day. A Committee has been set up by His Majesty's Government with, in a sense, one of the most difficult tasks to perform that any committee has ever had placed before it. The Committee has been asked to investigate methods of restoring the trade balance of this country. We have heard to-night from various noble Lords an account of the position, but I should like to add to it by giving one or two more figures.

We have, at the present moment, a trade deficit of about £100,000,000. This is made up by importations of £1,000,000,000, from which we can deduct £600,000,000 of exports and £300,000,000, possibly, of invisible exports. Then, during the past few weeks, we have obtained, through short credits from America and France, the sum of £105,000,000. What have we got with which to face that deficit of £205,000,000? We have to-day—and I am not stating a fact that is not known to every banker and business man in the City—we have in the Bank of England 134,000,000 golden sovereigns with which to meet that deficit. That is the situation which this Cabinet Committee has to deal with, and on which it has to make recommendations. There is a gross deficit of £100,000,000. How are they going to find it? I agreed with the noble Lord, Lord Gainford, when he said that such matters as the maldistribution of gold ought to be investigated by this Committee. But how is it in their power to go into questions like the maldistribution of gold? Supposing they were to make recommendations in that regard, this Government is not a super-Government for the whole world. It cannot settle that question within the next few weeks, though it is a solution, or at any rate a partial solution, which would enable us at least to march again towards some stage of recovery. There is a question, no doubt, like the cancellation of Debts and Reparations, which would help enormously to settle the difficulties, but that again is not a matter with which the Cabinet Committee could deal.

There is, however, at least one remedy which is now accepted very largely in this country as a solution for our difficulties, and that is the solution of tariffs. Mr. Runciman, in another place, last week suggested that in order to repair this trade balance we ought to impose prohibition upon imports. I believe that when the Cabinet Committee investigates that solution they will find that it is not practicable—that, to-day, there are so many treaties in force with foreign countries which would have to be denounced and could not be denounced in sufficient time to enable us to deal with the solution with any degree of hope. More than that, I think the prohibition of imports would arouse an enormous amount of heart-burning on the part of those nations upon whom we impose it. I think that the only possible solution is the solution which has been suggested by my noble friends; Lord Melchett and Lord Barnby—namely, that of tariffs, because after all tariffs are a measure understood by all foreign countries, and have been used by them, for the best part of a century. While they will feel to some extent hurt that we, a nation which has employed the different system of Free Trade, or so called Free Trade, during the best part of a century, should suddenly revert to a system upon which I submit we originally built up our trade—although no doubt it will cause a good deal of feeling amongst them, at the same time there will be a feeling that we are doing to them exactly as they are doing to us.

There is a matter which is closely bound up with this question of tariffs, and that is that in the event of this Committee recommending tariffs as the immediate solution, the Government would then have to consider whether it was possible to induce the House of Commons to accept that solution. Like my noble friend Lord Melchett, I am entirely opposed to a General Election to-day if it is possible to avoid it. I think that the situation is so desperate that if it is possible by any means for this Government to take steps to deal with the situation then they ought to do so, but it may be that this House of Commons would not be prepared to accept the measures in the full sense that are necessary to remedy the situation to-day. A mere 10 per cent. revenue tariff is of no use whatsoever. What we require, to-day, is a measure of tariffs that will not only produce revenue for the country, but also protect our manufacturers and our agricultural industry from the blast of competition from abroad with which they are faced. Like my noble friend Lord Barnby, I believe that the very earliest measures have got to be taken to prevent this avalanche of imports which is likely to be hurled into this country within the next few weeks or months as a result of tariffs being proposed.

If it is not possible, what are we to do? I believe, that one of the reasons why foreign countries have had their confidence restored in Great Britain is largely the fact that a National Emergency Government has been established in this country. There are some people who say that this is not a National Government—that it is only a Coalition. I do not agree with them, because so long as you have a Government which includes the leading members of the three different Parties in the State then whatever may be said I think that at least it can be said that it is a National Government. If that is the case, it is most important that that National Government be. preserved in one form or another, and I, speaking as a Party man, and as one who has for long taken an active part in connection with the Conservative Party, and who has believed in Party, am prepared to sink my feelings in this national crisis and to support a National Government, and to support the Prime Minister of this Government if he were to go to the country on a national programme of economies and tariffs—indeed, to give him a free hand to impose any measures or do anything necessary to restore the country's credit and to extract it from the slough in which it is wallowing today. I believe that on those conditions, if foreign countries saw that we were going to have an Election upon that basis, they would do everything they could to keep the pound alive while that Election was going on. But it has got to be done at once. Whatever is done, whether the Government are going or are able to introduce these measures during the present Parliament, it must be done at once. They must find out at once whether they are able to do it, and if they are not able to do it then I regard it as their duty immediately to inform the country of that fact and to go to the country upon the basis I have just described.

There is just one other word. In all this I hope that we shall not forget that we have an Empire. I hope we shall not forget that there are Dominions overseas and Colonies overseas, all watching with the greatest anxiety and the greatest hope that we shall be able to emerge from these difficulties. It is because they are there that I think we still have a future. I do not believe that this country can by itself, without its Empire, without its Colonies and Dominions, extract itself from these difficulties. I believe that in any measures that may be taken, by tariffs or otherwise, we must always bear in mind that the Empire is there, and that if we have tariffs we must grant those Preferences to the Empire which they have granted to us in order that we may promote the consolidation of the Empire and continue as a first-rate Power.

EARL PEEL

My Lords, I do not think anyone who has listened to this debate can maintain that it has been unduly and narrowly restricted to the subject that was put down on the Paper. And, indeed, I regret that in the course of what must be a brief reply I cannot do justice to this vast range of subjects, partly because I have been very busy on other matters to-day, and partly because I could not in the space of any speech of reasonable length deal with all those matters over which the debate has ranged. For instance, there was a very interesting speech from the noble Lord, Lord Gainford. He raised four problems of transcendent importance and vast applicability. He dealt with the whole system of the control of industry by the State—a very large matter, on which I myself at the proper time could say a good deal. I could say a good deal also in regard to the complaints of manufacturers about the extent to which they have, in many ways I think unnecessarily, been hampered by State action. Then he raised also the whole question of the method by which savings could be effected, both in our public economy and in our municipal economy, and in other ways. That, again, is a very fruitful subject of discussion; particularly, I think, municipal economy, to which, per- haps, not sufficient attention has been paid in this general call for national economy. Then he ranged over the question of the more even and the better distribution of gold. On that, again, there is much to be said. Of course, that brings in the whole question of the tariff in the United States and the whole question of Reparations. Your Lordships will probably absolve me from dealing at any length with that subject. And, finally, there was the subject of direct taxation, which he opposed to the less marked activities of indirect taxation.

But, turning for a moment to the speech of my noble friend Lord Melchett, may I say that he made what I think all your Lordships will consider a very interesting speech in introducing this question. I listened to another of his speeches which he made last summer when we were discussing the question of tariffs, and I may say, if he will allow me—because he alluded to the subject—that I have listened to many very important and interesting speeches from his father in past years in the House on the same subject. May I, in order to relieve his mind from any anxiety under which he may be labouring, say that I desire to accept the Motion which he has moved? May I thank him for introducing that Resolution, and may I say that, having had substantial experience now of answering for different Governments in this House, I think it is the first time I have ever been fortunate enough to answer to a Resolution which supported the Government: Resolutions almost always have been critical. And therefore I am very much obliged for his support, and, indeed, that softens my heart, so that I will, if possible, try to answer the questions which he has put.

Those questions were searching, and, I think, very difficult to answer, because he said to me: "Is this Committee going to sit, and is it going to report, and will the Government remain in office until it has carried out the steps recommended by that Committee?" But the noble Lord also said that he thought that, in order to get the balance between the application of social and physical laws, it would require at least two generations. I think, therefore, he will see that it is difficult for me to give a very positive answer to his question, and as I cannot answer with great certainty perhaps he will permit me to be silent on the subject. Again, I am in the same difficulty about the question he asked about the General Election. I note all that he said about the dangers and difficulties of the pound sterling, and that speeches made on either side might, cause a rise or fall in its price, but at she same time he will be aware that those subjects, when the Election comes, will be very much to the fore, and that may perhaps acquit me of the necessity of answering on that point.

I should like to make one observation on a matter which he mentioned at the commencement of his speech. He was discussing the question of balancing the Budget, and he said that the Budget has been merely balanced on paper, but it has not been balanced in reality. He justly observed, I think, that you can never know when a Budget has been fully balanced until the accounts come at the end of the year. For a formal statement that was strictly accurate, but my noble friend did less than justice, I think, to the activities of the Government in introducing that Budget. That Budget, no doubt, does balance on paper, but the foreigner is not going to be impressed merely by that balance on paper. What I am sure has impressed foreign opinion is this, that so soon after it came in, the Government addressed itself and the nation vigorously to the task of balancing the Budget, and has been prepared to make great sacrifices, and all classes have been prepared to make great sacrifices, in order that the balance of that Budget might be attained. It is the spirit with which that Budget has been introduced and balanced, rather than the mere formal side of it which, as I think the noble Lord will agree with me, will make a great difference with foreign opinion.

The noble Lord further discussed at some length the question of tariffs, and he called our attention to the fact that so many notable persons who have for many years professed Free Trade opinions have been converted, and have altered their minds on the subject of Protection. I do not think he will ask me to express my opinion on that subject, because I have so often expressed it before. He knows very well what that opinion is; and, indeed, with my colleague, the noble Marquess, Lord Crewe, sitting beside me, I have a certain diffidence in expressing myself with that full vigour that might otherwise have been possible if I had been in a more unhampered condition. But I do think that the extent to which this move in favour of tariffs has gone is very remarkable. And it is remarkable also that in just the same way as when Free Trade was introduced in this country, it was more by the pressure of necessity than by theoretical arguments, that this change has come about. I have noticed that many of the eminent professors of Free Trade have become supporters of tariffs, without to my mind answering satisfactorily from a theoretical point of view the arguments that they so strongly professed when they were Free Traders.

The first step, as I have said, that the Government is taking, is, of course, to balance the Budget, and I quite agree with what noble Lords have said, that that really is only the first step, though a very necessary step in the whole process. There comes, of course, only second to it the great question, of economy in administration and expenditure about which the noble Lord, Lord Gainford, said so much this evening that is valuable. I only want to say one word upon the question of the trade balance with regard to which this Committee has just been set up. I may say that the Committee has not only been set up, but is working. It is sitting even this afternoon. Had it not been working I have no doubt the noble Marquess, Lord Beading, would have been here to reply upon this Motion. Let me examine for a moment the question of the trade balance. There are one or two figures I should like to give your Lordships on the subject. Taking first the year 1928, the excess of imports of merchandise and bullion over exports was £358,000,000. In that year the invisible exports, and I include among the invisible exports £15,000,000 estimated excess of Government, receipts from overseas, amounted to £495,000,000. There was thus an estimated total credit balance of £137,000,000 on the items named. I include in those items an estimated net income from overseas investments. In the year 1929 that excess of imports was £366,000,000 and the so-called invisible exports amounted to £504,000,000. In that year, therefore, the total estimated credit balance on those items was £138,000,000.

In 1930 the corresponding figure of excess of imports was £392,000,000, and the figure for invisible exports was £431,000,000, leaving, unfortunately, for that year a trade balance of only £39,000,000. Your Lordships will notice a declension in the year 1929–30, and I regret to say that in the present year the picture is a worse one. Not only will there be no credit balance of this kind but there will be, so I am informed, though I have not of course any actual figure to give your Lordships, a debit balance. It becomes clear, therefore, that not too soon has this Committee been set up in order to investigate this particular question. I note, too, that the adverse balance on visible items for the first eight months of the present year is £246,000,000, and that is very nearly the same figure as applies to the first eight months of the previous year. That, therefore, in itself would not necessarily give cause for any acute anxiety if the receipts and incomes from foreign investments and from shipping had remained constant. That, unfortunately, they have not done. It is because of those receipts that we have been able of recent years to secure the purchase of a large quantity of non-essential goods from abroad while still maintaining a sufficient margin to increase our foreign investments. Those receipts had fallen in 1930 by some £70,000,000 as compared with 1929 and very clearly will be largely reduced this year. It is hoped that that reduction will not be constant or continuous; but those are some of the facts upon which the necessity for examining into this matter became perfectly clear.

Noble Lords have discussed the various methods by which the balance of trade might be assisted by excluding imports. The noble Viscount was perfectly correct, no doubt, in what he said about prohibition; but prohibition is not a practical policy because of the various trade agreements by which we are bound to other countries; although I should say in passing that very high tariffs can be put on. I think you can put 100 per cent. on many of these goods without infringing the arrangement about prohibition.

VISCOUNT ELIBANK

Hear, hear—that is what I meant.

EARL PEEL

I am very glad that I accurately interpret the meaning of the noble Viscount, and we are on that point very much in agreement. As regards the reduction of imports, to some extent that may be brought about automatically by the fact that, unfortunately, people have so much less money to spend. But it is nevertheless the duty of every person to reduce to the lowest possible limit, perhaps to cut out altogether, any purchases of non-essential imported goods; I may say also going abroad and spending money there for purposes of pleasure. The point has already been taken in another place that those British citizens who are acquiring foreign currency or sending money abroad to purchase foreign securities are themselves putting a further strain upon the exchange. They should refrain from doing so; and they should refrain too from assisting anybody else to do the same.

There is little I think I can add at the moment without, as I said, going very deeply into questions I should not like to deal with without very full and careful consideration. I can only thank my noble friend for having introduced this matter to the House in a speech full of suggestions and ideas. I can assure all those noble Lords who have spoken that I shall place before the members of this particular Committee all the suggestions they have made, that their suggestions may not be lost. Lastly, may I say that the Government is fully aware that this tremendous crisis requires the help and assistance of every class and every Party in the whole community. May I add also, to calm the feelings of my noble friend, that in no circumstances will the Government run away from its responsibilities.

LORD MELCHETT

My Lords, I must thank the noble Earl for his reply and for accepting my Motion. I shall certainly not press him any further this afternoon to answer the questions which I put to him earlier on. He will have to answer them one day or other. For the rest, I think one thing has emerged from this debate particularly from the remarks of the noble Lord who followed me. That is that we are really very much "up against" the question of lower wages or tariffs. I put the question in that form in another place last year, and every time it comes up for discussion one finds exactly the same situation arising. Apart from that I would say only one thing more. My noble friend Lord Barnby said that the economic necessity was such that we must cut the "dole," that it was economic justice to reduce that payment with all other payments. It may be economic justice; but I have come to the conclusion that in this world there are times when you require psychologists more than economists, and when, in order to get a united nation, you make sacrifices on the question of pure economy, it is better for the country as a whole to be kind, perhaps, to the very poorest in order that we may all prosper.

On Question, Motion agreed to.