HL Deb 06 February 1946 vol 139 cc235-84

2.51 p.m.


had given Notice that he would call attention to the economic position of the country having regard to the proposed financial commitments outlined by His Majesty's Government and move for Papers. The noble Lord said: My Lords, I am aware, as we are all aware, of the very difficult situation in which the Government is placed at the present time. I have got to cover to a certain extent a good deal of rather controversial ground in dealing with the subject of my Motion. I have no doubt that I shall have to be critical of the Government's policy on certain subjects but I hope to make certain suggestions that perhaps—although I am not very optimistic of their adoption—may give food for thought in the difficult situation in which we are. It will be within the recollection of some of your Lordships that sixteen months ago, in October, 1944, I brought a very important matter before your Lordships' House. At that time, as a result of the debate, I was accused of being a most gloomy man. I think every member of your Lordships' House who referred to what I said, remarked how gloomy I was. I had not come into the House feeling particularly gloomy. Nobody disputed a single statement I made, and yet the result was that they thought it was very gloomy. I hope I shall get something a little more definite to-day. I am going to make one or two quite definite constructive proposals and I hope they will receive due consideration and not a mere comment that I am gloomy.

The question I raised at that time was the relation between the national income after the war and the public expenditure after the war. The national income, I would remind your Lordships, is the aggregate sum of all private incomes. The public expenditure is the expenditure of the Government. Sixteen months ago our concern was the relation between these two sums, for it was clear that the national income probably would not remain at the high figure of that time. The figure of the national income was then £8,334,000,000. As far as I can find out, there are no figures with regard to the subsequent national income since that date. What disturbed me at that time is disturbing me still more now, and that is that the proposed and contemplated additions to the post-war public expenditure are piling up to the extent of hundreds of millions. That is the worry that I think we are all bound to have if we look into the state of affairs to-day.

One of the reasons why I am raising this question now is that those of us who believed in the defeat of Germany and Japan were agreeably surprised at the termination of the war, which we did not anticipate would come so soon, when I last spoke to your Lordships on this subject. I feel that we must now take stock; it is very important for us to take stock of the position, and to measure our definite and unavoidable obligations against our definite and restricted resources. I would venture for a moment to repeat the key statistics, which I brought before your Lordships' notice in the speech to which I have referred. I estimated that for the first four or five years after the war the national income would probably average about £7,000,000,000. I would suggest that the people of this country, who are the earners and recipients of the national income, should be allowed to spend 75 per cent. of that income on the amenities, necessities and pleasures of life. I pointed out that before the war, in 1938, eighteen shillings in the pound was spent in that way, whereas in 1943 only twelve shillings in the pound was so spent. In other words, the prolonged and exhausting labours of war-time were accompanied with an immense reduction in the standard of life.

Our people are sensible and experienced people. They know quite well that what is not in the shops they cannot buy, even if their pockets are bulging with paper money. But here is what they do not think. They think this is a result—and very naturally so—of the war, but what they do not think, or believe, is that it is an unavoidable circumstance of peace. It is nine months since VE Day and it is six months since VJ Day. The present position is such that it looks as if we might be approaching the beginning of real peace. However, between VE Day and VJ Day a very important domestic event took place, a General Election, which replaced the Coalition Government by a Socialist Government, and Mr. Churchill as Prime Minister by Mr. Attlee. I make no complaint with regard to that. The judgment of the electors is final. The electors, together with many who are not electors, must accept the consequences which will issue from their decision.

I shall confine myself, I hope fairly and temperately, to helpful comment and necessary criticism of the legislative proposals and administrative measures which are the clear and obvious consequences of the choice of the electors. Whether or not any given consequence which comes before us depends on us for final acceptance, we naturally reserve the right of personal judgment. The Parliament Act of 1911 deprived your Lordships' House of a concurrent voice in all legislation, but if I may say so, it did not turn your Lordships' House into an assembly of tame cats allowed to mew but not to scratch. It will not suffice us to be told that a given measure was the subject of a pre-war pamphlet issued by the Socialist Party, adopted as such by the Socialist Party Conference, and stated to be part of a programme which would be initiated if they were successful at the polls. It reminds me of a very famous saying on this very point by the late Viscount Snowden. He writes thus in his autobiography There is all the difference in the world between the licence and irresponsibility of a conference and the position of a Government which has to face practical difficulties and knows that no Government can move far ahead of public opinion. Nobody knows that better than members of Labour Cabinets. This is a striking passage, and, in my opinion, a significant marginal annotation on Socialist programmes which are easy to make and sound so fine.

If, sixteen months ago, on the facts then known, there was good reason to consider, with minute care, the relation between the post-war national income and the post-war national expenditure, there has just occurred an event which makes it a matter of the utmost gravity to do so now. Your Lordships no doubt will anticipate that I refer to the new situation created by the American loan, by the conditions attached to our acceptance of that loan, and by our adhesion to the Bretton Woods Agreement. The first two, the loan and its strings, as the phrase goes, have profoundly shocked the people of the country. To put: it mildly, the ship of State is launched on an uncharted and stormy sea, with a new captain, many new officers and very many new seamen, all of them predetermined and pledged to steer straight for the Socialist port, whatever happens. All the major proposals of the Government's programme were there before September, 1939, many of them long before that. They are being carried out now, apparently without any consideration of the complete subversal of the conditions under which they were adopted, a policy which seems to me just sheer folly.

I would like to draw your Lordships' close attention to one of those subversive changes. It has long been the endeavour of the economists, well versed in statistics, to do for the country as a whole what business men are accustomed to do for a small business unit—namely, to find out what it is worth as a going concern: what it would be worth between a willing buyer and a willing seller. I understand that this sort of calculation goes back to a paper on political arithmetic which was read by Sir William Petty in 1674 to the Royal Society, which, as your Lordships are aware, was founded by Charles II. Much more important and quite near to us, is the calculation made by the late Lord Stamp. He put our national wealth in 1914 at £14,300,000,000. Allowing for losses in the war, for subsequent growth, and for the change in prices, Lord Keynes and the experts who accompanied him to Washington put the national wealth of this country in 1938 at £1,30,000,000,000. The object of our experts in placing this figure of £30,000,000,000 before the American experts was to point out that the war had blown one quarter of that out of existence.

They gave the following estimate of the items destroyed by enemy action. I will quote them: physical destruction on land, £1,500,000,000; physical destruction on sea, £700,000,000; internal disinvestment, £900,000,000; external disinvestment, £4,200,000,000. I may say, in passing, that I got all these figures from official sources, and I think that you will find that they are accurate. The first two items, physical destruction, are painfully self-evident—one particular bit of it is not very far from where we are to-day. Internal disinvestment means loss by wear and tear of existing physical assets. External disinvestment, which is the largest loss, consists of these items: sale of capital assets, £1,118,000,000; increase of external liabilities—which bluntly put, means goods bought on tick and used during the war—£2,879,000,000; unallotted items, £49,000,000; a total of over £4,000,000,000.

The loss of life and happiness due to the war is its most grievous burden. The uprooting of the long-term growth of civilization comes next in war's foul record, but by no means unimportant is the destruction of the accumulated wealth on the proceeds of which so much of our present physical well-being depends. No country, not even Great Britain, can suffer the loss of one quarter of its wealth without undergoing a measure of privation as the unavoidable result.

For my part, I am bound to say that when I look at the American loan in the light of the official figures I have just quoted, I am discouraged as to the possibilities of future co-operation between the nations of the earth—possibilities implicit in U.N.O. but awaiting realization in practice. When I reflect on the very different economic results which co-operation between Great Britain and the United States in their great crusade against the forces of evil brought to us and to them, on reflection, even bitter reflection, I am bound to say I do not see how we can do without the American loan, but I am also bound to say that it departs very far and very unfairly from the Churchill-Roosevelt idea of the equality of sacrifice. The Americans were great fighters and grand companions in arms during the war. They have, to say the least, not carried over into peace the ideals and enthusiasm that they developed during the war. I will have a little more to say about that later.

On our side, the compact is sealed, signed and delivered. That is not the case on the American side. There the final decision rests with Congress, and that decision will not, I understand, be given for four months at least, and it rather looks as if it may be longer than that. Moreover, there is no absolute certainty what the decision will be. They may alter the so-called string. What then? The build-up of the American political system looks, in theory, pretty well the same as ours, but is in fact completely different. Here the Government knows that what it proposes to do will be done, unless the other place compels it to resign; and the other place never does that in our day, because the Government has one more say in the matter. Instead of being booted out, it may boot out. That is a very salutary arrangement, which is unknown in America or in France.

Therefore there is an interval of some four months or more during which the American loan and the financial arrangement, which is part and parcel of it, is for us, though not a decision to go back on unilaterally, an arrangement of which the consequences and collaterals may be ventilated by discussion in high quarters. I consider that your Lordships' House is one of the quarters where it can profitably be discussed. The first of these collaterals is this. We are fully cognizant, not only of the obligations we have undertaken, but of the one absolute condition under which we can fulfil them. We can only pay our debt to America by exporting goods and services to America.

I believe the view is widely held in America that we did not pay up on the Baldwin debt agreement after the last war. We must do everything we can to see to it that the Americans know the exact truth about that matter. I propose to tell it here and now to your Lordships in very plain terms. We did not pay up, for the simple reason that the Americans would not let us pay up. The United States, as your Lordships are aware, was a highly protectionist country before 1914. The war was hardly over when congress began to add more bricks to a tariff wall which was already extravagantly high. There was first the Emergency Tariff of 1921, then came the Fordney-McCumber Tariff of 1921 and finally the Hawley-Smoot Tariff of 1930. There is this to be said for our excellent friends on the other side of the Atlantic, they love to do things on a colossal scale.

Their tariff wall from 1930 onwards was about as colossal a thing as anything they ever built and it put paid to the war debt owing by Britain to the United States. We must ask our American friends a very plain question, namely, "Are you going to do that again? Are you still extremely anxious to export goods to us and still extremely anxious that we shall not export goods to you?" This is a perfectly simple proposition, and I think it is one to which we should face up. I agree that American experts, President Truman and the members of his Cabinet—a word common in our system and theirs but meaning two different things—say as plainly as we do that the position is just as I have stated it. I am inclined to think that American businessmen see it the same way also, but—and here is the rub—Congress has to see it. On tariff matters, from Lincoln's day to Franklin Roosevelt, Congress has had only one thought—to keep out British goods. As your Lordships will readily see, the whole of that has got to alter if we are going to stand up to the situation into which we are putting ourselves with regard to this loan.

Even to-day President Truman has to recommend Congress to agree to the loan because its first purpose is specifically stated to be to enable the British to buy American goods. There is a famous public school song called "Forty years on". Our great grandchildren will be still paying America for the food we consume and the raw materials we use up. We are obliged by our present necessities to incur that hard and long-enduring obligation, and these present necessities are due to the greatest service one nation ever rendered to the other nations of the world. We started as a creditor nation and we ended up as a debtor nation. This seems to me to be quite wrong. It is a fact that in respect of the first world war, on balance the world outside this island still owes us £2,300,000,000. When you think of this little island and its small population, it is marvellous how we have stood up to all this.

If we had gone down after France fell, Europe would have gone down with us and the United States would probably now be fighting to save its skin. As an arrangement between friends who are trading side by side, this loan is a marvel of generosity: but as between a huge continent and a small island which have been fighting side by side until the existing national and financial resources of the small island have been exhausted, it has, in my eyes, a very different aspect, and I am in honour bound to say so. Look at what has happened quite lately. Sir Ben Smith, the new Minister of Food, has just come back from America. What has he got to tell us? We must not have dried eggs because there are not the dollars to pay for them. Supposing, when we were fighting the world's battles alone, we were short of shells and guns; would there have been any refusal then on account of no dollars? We are alone again now, but our struggle is to maintain the health of our people who have stood up to a terrific ordeal so gallantly.

Here are one or two questions on which I should like information. Is it the case with the American loan that a credit has been placed at our disposal so that if we order goods, say, from the Argentine, or from Australia, payment can be made by means of a draft which will be honoured by America? Or are there merely to be a series of bookkeeping transactions respecting American supplies delivered to this country as and when required? Is it not the fact that if the situation improves in this country, perhaps only a fraction of this credit may be taken out? Furthermore, is it not a fact that if Congress refuses to ratify the loan we are still tied to the Bretton Woods and ancillary agreements? If this happens, will it be possible for the Government to maintain that these various matters are all joined up together? Congress may turn the loan down. As this possibility must be under consideration by the Government, it would be helpful, I think, to have some indication of how they are preparing to cope with this added difficulty.

We cannot ask for details and it may even be indiscreet to ask for the guiding lines of their policy, except one such line which was excellently indicated by my noble friend Viscount Bennett when he speculated as to whether the family had been called into counsel. We have heard a lot about working parties in this country, and I am wondering whether at this stage it would not be a good thing for us to have, as soon as possible, a family party to go into all these questions and see what we can do together about our really rather tragic position. I feel that the magnificent way in which, for the second time in our generation, the Empire flocked in arms to the side of the Motherland, will ever remain the most striking tribute to the strength of the family bond. What they did for us in war, I am quite certain, they will do to the utmost of their capacity in peace.

Speaking generally, we may say that the economic resources of the Empire are sufficient, when fully exploited, to satisfy all the economic needs of the Empire. And that raises another interesting speculation. It may turn out, in time, that the loan, if agreed to by Congress, may be more than, in fact, we needed to ask for. If so, are we still to be bound in perpetuity by the conditions which we had to agree to when it was granted? Just as our people bent all their energies to win the war, and succeeded under wise and far-sighted leadership, I am quite confident that those same energies will win the peace under the same kind of efficient leadership. They are just as likely to succeed in the one as in the other. We all know, or, at least, we all ought to know, what the immediate problem is, for it has been stated plainly enough. We have to export 75 per cent. more goods in 1946 than we did in 1938. Call the volume in 1938 one hundred, then the volume for 1946 has got to be one hundred and seventy-five. But in 1944 the volume was only thirty-one, so that the volume for 1946 has got to be nearly six times the volume of 1944. I mention that to show your Lordships—what no doubt a great many of you are already aware of—the gravity of the situation and the difficulties we are up against.

But because we pay by our exports, and because we must have the imports in order to eat and work, the American loan is intended to assist us to get the imports we need this year, even though we cannot, this year, make enough exports to pay for them. And this state of things, do what we can, will last for a few years, and then gradually peter out, until the imports we need will be paid for by our exports. What are our prospects of doing this? Your Lordships will not need to be told that any answer to this question must be very speculative. What I shall endeavour to show is that if our speculations are based on recent experience they lose much of their speculativeness and become guides to conduct. Your Lordships will recall that the yearly payment of interest on the American loan is to be waived in any year in which it is established that our total exports are not able to pay for our total imports. Changes up and down in our exports are to be measured by the volume of exports and not their value in 1938. In short, changes in the purchasing power of the pound sterling are to be taken into account. I have taken the trouble to find out something that is really rather interesting, and I think helpful. I hope that you will consider the evidential value of the following index numbers.

If both British industrial production and British exports are taken as one hundred for 1934, we then have the following records of growth for the four years 1934 to 1937 inclusive. Production—100,107,117,126. Exportsl00,107½,110,120. Plainly these are most important results, and, if they can be repeated, most encouraging. The first of these results, the physical output of British industry has been made amazingly—amusingly, almost—out of date by our war effort. It was officially announced in the spring of 1945 that the physical volume of British industrial production had reached its record height. Therefore, the spring of 1945 showed us what British industries could do when tuned in to reach their highest note for the purpose of fighting. Is it too much to hope that they can do the same thing for the purposes of living in comfort and happiness. Production up one quarter in four years, exports up one fifth!

This is the historical object-lesson of the pre-war years, and we can if we will, and are allowed, repeat it in the postwar years. If we can get to the 1945 level of efficiency, as measured by output and quality, and if, after that level has been attained, we can improve upon it as we improved on the 1934 level in the four years that preceded the war, we shall see the light of day at the end of that long tunnel of endeavour by the end of the 1940's. Can we do this? We can only do it, in my view, if the Government will re-create the conditions of 1934 to 1937. Chief amongst these is confidence. That depends on two knowns and one unknown. The two knowns are British management and British labour, when they get down to it in dead earnest. It is, as regards our factories, true to say that strike ballots are no index of the general harmony. There are indifferent employers, there are indifferent workers, but the general picture is of them getting on nicely together, working and living with a common end in view—the success of the works. Because the balance sheet and the pay packet are most important things, which depend very largely upon one another, friction is bound to occur, but British industry has built up a system which cushions these shocks, and somehow or other we always find a way out. The unknown is the future of the present Government which is distinguished from all the preceding Governments in that it has both the will and the power to make vast changes of which no man, least of all the members of the Government, can see the end. In my speech sixteen months ago I spoke of the prevailing darkness; to-day I speak of the prevailing stagnation and frustration. I move about the country a great deal, and every day I hear that our industrialists, large, medium and small, are unable to move because they do not see the direction in which they can move so as to ensure success.

I fear that this stagnation and frustration must be regarded as the responsibility of this Government. Hitherto our industrialists have always known what the Government would not do, and have always been able to forecast, at least in general terms, the industrial results of what the Government would try to do. Now we have a Government who believe, or affect to believe, that our economic system is all wrong and is run on the wrong lines. The coal mines are to be nationalized; that is certain. What is also certain is that no man has any notion of what the coal situation will be like in a year's time. No man—not even Mr. Herbert Morrison, who has "passed the buck," as they say, to the management and miners—can say that. I should like to ask the Government this: are they confident that as a result of nationalization we are going to get more coal and cheaper coal?

I have drawn your Lordships' attention to the fact that a year ago the physical volume of the products of British industry was larger than it had ever been. Who gave the nation this record in our hour of need? There may be some dispute about what I am going to say, but I venture to say that the answer to this vital question is so simple that nobody seems to appreciate it or to know it. It was the management and the workers of each industrial unit who gave us the goods we needed; all that the Government did was precisely what all customers do—they drew up the specifications, placed the orders, and paid the bills; that and nothing else. The need for goods and services for waging war has diminished from a torrent to a trickle. It has been replaced by a need which is no less urgent, the need for a vast supply of the goods and services of daily life. This need, like the old one, can be satisfied only in the same way; and the sooner the Government take that way, or rather allow our managements and workers to take it, the sooner our needs will be satisfied.

The people demand goods, and they certainly have the money to pay for them. Bring supply and demand together and the thing will be done. The world demands goods. Admittedly there are difficulties, but I can see no reason why these difficulties should not be overcome. That can be done only by the men on the job; in my view it can be done only by the same managements and workers who gave us all we needed for fighting, and who must now give us all that we need for living. It is six months now since Japan crashed, and there is hardly a trickle back to the empty shops of the goods that our wives must buy for us if we are to have a semblance of the life which was led in this country before the war.

Ministers seem to be obsessed with the notion, derived from puffed-up Socialist doctrines, that everything depends on them. The actual fact is, of course, that in this business of making goods we need little or nothing from them. In the United States they are racing back to peace-time industry; here we are dawdling back. I want the noble Lord who is to reply to answer this question: what chance have we, as things are now, of competing with America in the markets of the world, where alone we can buy the goods we need and sell the goods with which to buy them? I invite a very definite answer on that point.

I shall conclude by saying this. For the figures which I gave in 1944 I was called gloomy; I was almost jeered at at times. The national debt at that time was £20,000,000,000. Our external liabilities were between £3,000,000,000 and £4,000,000,000. Lord Keynes gave that figure. To-day our national internal debt is over £30,000,000,000, as when I spoke before I anticipated it would be, and our external debt is over £4,000,000,000, making in all a debt of between £34,000,000,000 and £35,000,000,000. This is very serious, and I feel that I am not asking too much if I ask the Government—I do not expect an answer to-day—to set up a small but very competent Royal Commission to consider the whole question of the national debt, internal and external.

3.37 p.m.


, who had given Notice that he would call attention to the danger of runaway inflation, and move for Papers, said: My Lords. I understand that it will be for your Lordships' convenience that this Motion and that moved by my noble friend should be discussed together. In all the financial discussions in Parliament, nothing strikes me so forcibly as the neglect with which that fundamental matter of the preservation of the value of the currency is treated. Parliament constantly passes Bills which involve increased expenditure. Seldom do these Bills contain provisions for meeting this expenditure, which is a subject which appears to arouse no interest whatever in the breasts of the great organized political Parties; it is only isolated individual members who ever refer to it. There is, apparently, in high political circles no appreciation of the fact that prosperity is entirely dependent upon the volume of goods and services available and that money is nothing but a means of exchange.

I must begin with a few words about our present financial situation. One of the late Government's ideas for avoiding inflation was to prevent the cost of living rising, by means of subsidies. In this way it was hoped to avoid disturbance during the war while prices were rising, and it was hoped after the war gradually to discontinue subsidies as prices fell. The success of this plan depends on whether prices do fall after the war. Meanwhile, during the war, the Government made no serious effort, by means of a wages policy or otherwise, to prevent increases in wages far out-stripping the comparatively small increase that took place in the price of living. They allowed a game of "beggar my neighbour" to be put into operation by all the principal groups of organized labour, with large resultant increases in wages all round. They kept the price of living down by rationing and by controlling the price of necessities, but if anything they welcomed swollen wages, by far the larger part of which flowed into the Treasury in the form of enormous taxes on alcohol in all its forms, on tobacco, entertainments and so on, as well as by a considerable purchase tax.

In so far as the swollen wages did flow back to the Treasury—and no doubt to a very large extent they did—they liquidated themselves and left no permanent liability behind them; but it must not be forgotten that it was possible to collect all this money only by tolerating and even encouraging a large measure of inflation. Every increase in the costs of production without any corresponding increase in the volume of production automatically reduces the value of money, and with it the standard of living of everyone who depends upon a fixed income. We see one of the results of inflation in the unceasing demand of the working classes for wages equal, or more than equal, to those they received during the war and which were paid either out of borrowed money or from capital.

The money we borrowed has come largely from that part of the swollen wages of the working classes that was not spent in the way I have described. It was made practically impossible to invest savings in anything except Government loans, so the Government, having a monopoly of borrowing, were able to enforce the acceptance of very low rates of interest and so diminish the inflation which a higher rate would cause. That is, no doubt, perfectly right and proper and feasible at a time of extreme emergency, but it must be remembered that the loans made to the Government during the war were to all intents and purposes forced loans; all other investment was barred. When the late Chancellor of the Exchequer told us that he hoped these low rates of interest would continue after the war was over it looked terribly as if he supposed that official action could permanently override the natural law of supply and demand. I note that the present Chancellor has expressed much the same view, and at the same time has imitated his predecessor by his complete silence on any prospect of eventually balancing the Budget.

It is difficult to imagine, in view of the huge taxation on the bigger incomes that anyone except members of the working classes can be effecting any new savings, while most of the people with the higher incomes and bigger commitments are living on capital. In one way or another, a sum equal to the whole or more than the whole of the increase in wages which the working classes are receiving, is going back to the Treasury in taxation and any new savings are receiving an artificially low rate of interest. The financial situation, indeed, is as artificial as could be imagined. It depends upon enforced abstinence in some directions, the encouragement of inflated spending in others and the most rigid control of investment, while all the time our national assets are wasting away through neglected maintenance and there is piling up a huge mass of debt. If this debt continues to pile up and no adequate sinking fund can be established, the situation may become indistinguishable from repudiation.

If, on the other hand, purchasing power is released otherwise than very gradually it will clearly lead to runaway inflation when currency may lose its value altogether. I shudder to think of the condition of the working classes if this should occur. What would be their standard of living when, instead of the quick and easy way of settling transactions by means of currency, commerce could be carried on only by barter and taxes paid, if at all, in sacks of coal or chairs and tables? Something of this sort is what tens of thousands of British working people are at the present moment passionately demanding. We have reached the end of a long exhausting war during which the production of the necessities of life was drastically reduced and replaced by the production of war materials useful only for our protection, and adding little or nothing to our material wealth. We also had to sell out most of the reduced oversea investments which remained to us after the first world war and further to incur large new debts overseas. Interest on these latter debts and on Government loans due to our own people (after allowance has been made for taxes upon them) are a net addition to our pre-war expenditure. To continue to pay interest on them will strain us to the uttermost. There is no possibility of paying off any considerable part of them for many years to come. We find ourselves, indeed, with hardly any realizable securities and enormous liabilities.

Apart from borrowing, our one source of fresh capital will be our own surplus production. That is what remains unspent after we have kept ourselves alive and paid interest on our liabilities. It is of critical importance that this production should be as large as possible. If the capital for equipping the new factories and re-equipping the old is not forthcoming, it is hopeless to expect that large and rapid increase in the production of goods and services which alone can stave off inflation. To tide us over the period which must elapse before large production becomes possible, we are: asking for a loan of some £1,000,000,000 from the United States. To show that it is of the utmost importance 'that this loan, if granted, should be used exclusively for the purpose of increasing our productive powers, it is only necessary to point out that our shipping losses are officially estimated at £700,000,000 and our losses from bombing at £1,500,000,000. The loan does not cover half the losses from these two items alone.

All that the loan can do is to provide us with indispensable imports for a strictly limited period, but for anything beyond this it is hopeless to rely on loans from foreign countries. As I have just remarked, we have practically no realizable capital and the only source from which new capital can come is fresh savings. If we behave with ordinary prudence and make as productive as possible our supplies of fresh capital, which for many years must 'Fall far short of our full requirements, we may hope for a progressive increase in the supply of goods and services which will, in due course, restore prosperity and bring about a progressive increase in the average standard of living. But any diversion of our all-important savings to non-reproductive expenditure must automatically reduce the amount available for recovery and lengthen the period of our sufferings. It is exactly while our supplies of goods and services are short that the greatest danger of inflation arises.

The principal cause of inflation is unemployment, because it deprives us of the goods and services which the unemployed ought to, but do not, produce. As I have, on a previous occasion, ventured to point out, the fundamental cause of unemployment between the wars was that one of the legacies of the first world war was greatly increased wages unaccompanied by a parallel increase in the production of goods and services. Wages were inflated and then pegged at a level which gave a standard of living higher than the supply of goods and services made it possible for the whole country to enjoy. A large section of the workpeople could not be given those pegged wages, and so became unemployed. The production which they should have contributed ceased, while the money devoted to the doles which kept them alive was pure inflation, that is to say, money paid to recipients who were not required to produce anything in return.

To get production going after the war the first essential is the greatest possible supply of capital, so invested as to produce the greatest possible volume of goods and services. So great is this need that it may even be desirable to continue to prohibit any uneconomic use of fresh capital until the most pressing of our material wants are satisfied. There is a strong case for reasonable control of investment, but it will be greatly weakened if the Government do not set a good example by abstaining from using the taxes in unproductive ways. Not long ago I listened with interest and satisfaction to the statement made about inflation by the noble Lord, Lord Pakenham in his reply to a question on the subject of value payments by the noble Lord, Lord Wolverton. I agreed with every word, but was unable to reconcile what he said with the fantastic promises of enormous expenditure on new social services made to the voters by all political Parties at the last elec- tion. This promised expenditure is by its nature inflationary. Here again immense sums are to be distributed to people who are not to be required to produce anything in return.

Equally difficult did I find it to reconcile huge new expenditure on social services with the words of the Lord Chancellor, who I am sorry not to see in his place, during the debate on the American loan. Speaking of the necessity for imports he said: Failure to supply some of these commodities would have delayed the building programme.… But far more important than that would have been the necessity to concentrate on foodstuffs and to let go the equipment which alone is going to regenerate and revitalise our industries and get us started again. After many years have elapsed it is hoped that some of these new social services will pay for themselves by making production more efficient. It will certainly be a long time before this happens, and much of the promised expenditure cannot by any possibility ever pay for itself.

I hope in the course of this debate that the Government will give us an estimate of the increase in contemplated yearly expenditure due to the social services alone since the last year of peace between the wars. I have seen an unofficial but apparently reliable figure given of well over £600,000,000. Whatever the real figure is, it is certainly very large and is moreover bound to be exceeded as time goes on. Estimates are always exceeded and subsidies once granted gather volume. It is impossible that the Government can really suppose that some such huge sum can be added to our unproductive expenditure and thereby automatically withdrawn from productive investment without devastating effect upon our production of goods and services.

The impossibility of raising the required sums by any scheme of taxation approximating to that in operation before the last war must make it certain that any serious attempt to find the money will involve the imposition of direct taxes of considerable magnitude on wages. I do not myself believe that the money can be found at all, whatever steps are taken, but if an attempt is made to raise it in this way I anticipate an immense series of strikes for an increase in wages sufficient to offset the taxes, which, of course, simply means the vicious spiral. Everything seems to be ready for this now.

Remember once these social security measures are put into operation, they will be the law of the land. The Government will be legally bound to pay the stipulated sums. If the money is not forthcoming resort must be had to the printing press. The Government will be obliged by law to print off paper money so as to fill the gap. And this is not the only gap that will somehow or other have to be filled. It is hardly possible to open a newspaper without seeing that some new section of workpeople has been granted more wages, shorter hours, holidays with pay, and other expensive concessions. If these favours are not accompanied by enormously increased output, of which there is not at present the slightest sign, more and more unbacked paper money must be printed off, and the heavy inflation which already exists must proceed faster and faster. This is one of the penalties of chasing that Will o' the Wisp, security. The thing that the whole world wants, and always has wanted, is security, but the more elaborate and complete the regulations for ensuring it, the less likely is it to be found, and organized labour has been no more successful in the quest than other people have been. Their only idea is to go on demanding more and more wages in return for less and less work, and then they are surprised and injured when they find that their larger earnings buy less and less goods and services. Unquestionably, by means of organization, it is possible to force wages and subsidies up and up. Ever since 1910 it has been done, and see what has come of it.

Before the outbreak of the last war we had lost a large part of our foreign trade and foreign investments, we had been forced off the gold standard and we had suffered from heavy unemployment, and when the war came we had the narrowest escape from being made the slaves of a barbarian conqueror. The late Government had not the faintest idea of how the new social services were to be paid for, and their successors do not appear to be any clearer. Particulars have many times been asked for and no answer has been given more definite than that of the late Chancellor of the Exchequer who is reported to have said it was to be done by faith. Others take refuge in talking of an expansionist economy, but, beyond assuring us that this will produce good wages and conditions of service, they maintain a dead silence as to how it may be expected to achieve the desired results. From the South Sea Bubble to the Liberator Society, every shady company promoter has worked on these lines. Hardly a detail is wanting: complete absence of information; the call for faith; magniloquent polysyllables devoid of meaning, and promises of a golden future; and all of it leading to fraudulent bankruptcy.

3.59 p.m.


My Lords, I have listened with considerable interest to the two speeches with which your Lordships have been regaled, first of all from the noble Lord, Lord Teviot, and then from the noble Lord behind me, Lord Monkswell. I rather gather that both noble Lords hoped that I would reply in detail to the points that they put forward, but I think your Lordships will realize that they have given me a very large target if they expected that. I am afraid if I were to attempt to answer all the points which they have raised, I should keep your Lordships until a very late hour. With regard to the noble Lord, Lord Teviot, he was most anxious that I should not repeat on this occasion an accusation against him which I understand was made when he spoke before, when his speech was labelled "gloomy." I am not going to do that. I think the best thing I can say about his speech would be to choose the metaphor that he chose himself when he was describing the position of your Lordships' House, and I would say that he was willing to mew and unable to scratch. Personally, I am rather sorry, because if he had scratched, then I should have had the chance of scratching back, and I think I might have got a good deal of interest and perhaps amusement out of the attempt. But he covered so wide a field, as I have already said, that it is rather difficult to deal with it.

I certainly did not expect, when he rose, that nearly half his speech was to be devoted to the question of the American loan. I honestly thought that your Lordships' House had disposed of that matter in a very long and interesting debate that we had before Christmas, and, with great respect to the noble Lord, I certainly should be unwilling to re-open the matter again in a speech to-night, particularly as I am not at all clear from the noble Lord's speech whether he really wants the loan or whether he does not. He attacked the loan and what are called its "strings" in many ways, and yet I think he said it was necessary for us to have the loan and he was very—well, not gloomy but lugubrious about the time it was going to take before the Americans decided whether we were to have the loan or not.

I would like, however, in passing, to make one correction, at any rate, of a remark he made. He said that at the present time the national debt amounted to £30,000,000,000. I think he will find that the figure is incorrect, and that the amount is £24,000,000,000 and not £30,000,000,000 as he states. He then said that the only satisfactory thing after the war would be if three-quarters of the national income could go to private individuals to spend. It would be exceedingly nice if any such thing as that were possible. Of course, you cannot have a great war, incur vast debts, destroy vast masses of property and hope to go back to the situation as it was not only before the last war but before the previous war. You just cannot do these things. It is very unhappy that a war should have these consequences, but we did not want the war in this country. None of us would blame our own Party or even the Party of our opponents for this war; it was one of those terrible things with which this country was faced.

The point to which I would draw the attention of both the noble Lord, Lord Teviot, and the noble Lord, Lord Monks-well, is this: that the consequences of the war are not yet over—by that I mean the clearing up of the war. The day that the "shooting war," as the Americans say, ends, is not the day when suddenly peace returns; peace is a long process, and it is a very considerable time before it can be obtained. The noble Lord, Lord Teviot, also dealt with the coal situation. They had the Coal Bill in another place last week and debated it at great length. No doubt they will take it through its later stages and in due course we shall get that measure before your Lordships' House. I said I would not go back to the debate we had on the American loan before Christmas, nor am I going to anticipate the debate we shall have on the Coal Bill when it comes before your Lordships' House, and I think it would be quite unreasonable to expect me to do so.

The noble Lord said he would like us to return to the conditions that prevailed in this country before the war, and he specified the particular years 1934–1937, which he said were years marked by confidence. Well, the noble Lord's recollections are very different from mine. My impression is that the inter-war years were years in which there was very little confidence, either confidence at home in domestic matters or confidence with regard to foreign matters. My recollection is that they were years of growing disquiet and anxiety, both on the economic and on the military situation, and if confidence is to be created I do not think it will be done by the speech which the noble Lord himself delivered.

May I, before I leave Lord Teviot, say this. He wanted an answer to one thing in particular. He said he did not expect me to give an answer to-day but he hoped we would give one presently. I am going rather to surprise the noble Lord by giving him an answer to-day. He asked, would the Government set up a Royal Commission to go into the whole question of the debt and the expenditure of the country? I am prepared to give the answer straight away, and the answer is, No. We had the "Geddes axe" at the end of the last war, which caused endless mischief in this country, and the Government—I have not had the opportunity of consulting my colleagues but I feel sure that I am expressing their view—have no intention of setting up another "Geddes axe" to bring about the disastrous consequences that were brought about on that occasion.

Finally the noble Lord said what a pity it was that we are not like the United States; that they were racing back—I am not quite sure what they were racing back to, but I think the noble Lord intended to convey that it was prosperity. I have been reading accounts and hearing them on the B.B.C. recently of all the succession of unfortunate economic and industrial disasters that are over taking the United States at the present time, and if the noble Lord wants our industrial system to take its cue from the United States, where strikes involving millions of men are at present in progress with very little chance of bringing them to an end, I think his view with regard to copying the United States and the advantages it would bring to this country certainly needs bringing up to date.

Let me turn for a few moments to the noble Lord, Lord Monkswell. I am going to deal with the question of inflation shortly, and I will say this to him; that I have a very great deal of sympathy with the view that we should avoid inflation, because, as I shall show presently, I regard inflation as a very great evil. But I do not admit that there has been inflation in this country. There was vast inflation in the last war, but I think we have learnt a very considerable lesson from the financial wrongdoings of the last war—that: is, the war of 1914–18—and the finances of this war were conducted by all Parties in a manner which was a very great improvement and by which inflation, if it was not entirely avoided, was kept within very small limits indeed.

Whilst we are dealing with that, let us turn our minds to what happened after the 1914–18 war was finished and the shooting war had come to an end. There then was a scramble for goods which the Government of the day did not control, and as a result prices rocketed upwards. In the years which followed the conclusion of the shooting war in 1918 prices increased by an additional 100 per cent. over those which prevailed before the war. We have seen nothing of that at all at the present time. One of the noble Lords opposite sees fit to jeer at that remark, but it is a fact that we have not seen any increase in prices since the end of this last war, taking them as a whole.


Building costs.


I am talking of prices as a whole. You can, of course, single out certain costs which have gone up and certain costs which have gone down, but the level of wholesale prices at the present time is, broadly speaking, what it was at the end of the shooting war, and the cost of living is broadly at the same figure as it was at the end of the war. You may say that is due to various moneys being paid here and there, and that may be so. But that is not inflation; it is something quite different, because it has a completely different effect upon wages and other things.

A most unfair remark was made by the noble Lord, Lord Monkswell. I do not want to make a Party issue of his speech, but I do think it was very unfair of him to say that one of the great objects of the working classes, through their trade unions, was to get more and more wages for doing less and less work: I do not think that statement ought to be made. Your Lordships' House knows quite well the great work the trade unions did during the war and have done since. Although there have beer unofficial strikes, I think your Lordships will agree that the trade unions have set their faces against strikes and that there have been very few which have had trade union support. The trade unions are doing their best, under the very difficult circumstances with which we are all faced to-day, to pull the country together in a constructive way. I must resent such a remark as that which the noble Lord made.

Now I come to the substance of the question—inflation. As I said, I regard inflation as a very serious evil. Perhaps I may remind your Lordships of what happened on the Continent after the 1914–18 war—namely, that owing to enormous inflation the prices of articles bore no real relation to their prices before the war. As one simple illustration of that, a man who had a large farm and who had mortgaged it for a considerable amount before the war could have paid off the whole mortgage by the sale of a single egg. If your Lordships would like a more amusing example, I will tell you of two friends of mine who lived in central Europe and who were left a little legacy just about the end of the last war. They debated for some time whether they would put the money in the bank or whether they would spend it upon a little refreshment in the shape of a few dozen bottles of wine. They decided upon the latter course. As soon as they had drunk the wine they sold the bottles and the amount they realized for the bottles was larger than the whole legacy.

I do not know whether noble Lords will agree with me, but to my way of thinking there are two evils, rather like Scylla and Charybdis, which we have equally to avoid. There is the evil of inflation, which I agree is a very serious and grievous evil, but there is also the evil of deflation, which equally brings great havoc and ruin. I would compare those two evils to a burn and a frostbite. It is as great a mistake to imagine that deflation is a remedy for inflation as it is to imagine that you can cure a burn by subjecting the patient to severe frost, or that you can cure frostbite by subjecting the patient to fire and great heat. What we have to do in financial matters is to steer an even course so that the money value of articles, taken as a whole, remains broadly the same over very long periods of time. Unless that is so, all contracts into which the element of time enters are vitiated.

Let me give two simple examples. A man contracts to rent a house, it may be on a 99 years' lease. He agrees that he shall pay a sum in money every year, and both parties to the contract imagine that they know broadly the meaning of that sum. However, unless there is something like a steady purchasing power for that sum of money, the whole of the underlying assumption on which the two parties proceed is rendered of no value. Then take the case of the Civil Service. People enter the Civil Service at eighteen, or whatever the age may be, and they have a schedule of payments which goes on until they are entitled to a pension at the end of their service. They make that contract because they and the State, or the people responsible for the State, imagine that those sums of money are definable in terms of their practical purchasing power. If there is even a steady change—not the vast changes of inflation about which we have been thinking—that means that in thirty or forty years time the purchasing power of the money will be only a fraction of what it was before and the whole basis of that contract will be vitiated. Therefore, for my part, I need no reminder that both inflation and deflation are grave evils and that everything must be done to avert them.

What is the ultimate safeguard we have against inflation? This is perhaps a somewhat unexpected answer, but I should say it is the British character. Unless we had that character in the British people, no Government could permanently stamp out the dangers of inflation. You see that over the course of history. Not merely in the 1914–18 war, but in the years before that you find that whereas the pound sterling has kept something like a steady level of purchasing power, although not altogether steady, nearly all foreign currencies have fallen off down the years to a much greater extent. It is this cool-headedness of the British people and their fundamental understanding of financial problems which has enabled us to weather the storms of war and particularly to go through the last war with so little inflation as that which has actually taken place. It is because the British people have that unfailing sound sense that they insisted on a Government coming into power which was prepared to use its hand in controlling the economic situation instead of repeating the mistakes of the Government which came into power at the end of the 1914–18 war.

It is quite true of course that a great many people were disappointed that the expenditure of the State did not begin to fall immediately the shooting war ended and did not fall very rapidly at the end of a few months. But, in point of fact, that was a most uninstructed expectation. Those of us who were aware of the facts, even before the end of the 1914–1918 war knew that that hope could not be realized, and those who experienced the 1914–1918 war ought never to have expected it at the end of the last war. I do not know how far your Lordships have been following the figures as they appear in the weekly returns of income and expenditure. It is quite true that in the first few months after the end even of the Japanese war, there was very little falling off of expenditure. What were the reasons for that?

There were two or three very important reasons. One was that at the end of the shooting war there are large terminal charges that have to be met. First, there is the cost of demobilization and transport. There are the gratuities that have to be paid. There are the payments for the eight weeks' holiday period given to the soldiers. There are the charges for breaches of contract which have to be paid to contractors who are suddenly stopped in the output of munitions. To that was added, in this war, the cost of all the import of foods to which the great benefit of Lend-lease no longer applied, with the inevitable result—it would have been so whatever Government had been in office—that there could not be, for some months after the termination of the shooting war, any considerable—even if any—reduction at all of the weekly expenditure. But as time went on, as demobilization rose from ten thousand, twenty thousand, thirty thousand, a week to over one hundred thousand, as many of the terminal payments at the end of contracts were met, and as people returned to civil life the costs fell, and they have fallen very remarkably.

I would draw your Lordships' attention to some figures that only came out to-day with regard to the expenditure by the State. Up to December 31, 1945, there was only a difference of £310,000,000 between the expenditure of 1945 and the same period—the three-quarters of the year—in 1944. But the figures that came out to-day show that the total ordinary expenditure to date from the beginning of the financial year—the total ordinary expenditure up to date—is no less than £483,000,000 below what it was in the last year. That is to say, that in the few weeks that have elapsed since the end of the year we have secured a reduction of no less than £173,000,000 as against the corresponding period of last year. This means that the reductions now are beginning to get under way. There is every hope that that progress will be continued and, as a result, you are now, at last, beginning to see substantial falls in the expenditure of the country.

One noble Lord, I think it was Lord Monkswell, said that there were no signs either from the Chancellor of the Exchequer or from his predecessor, that distinguished financier Sir John Anderson, of what was going to happen with regard to the Budget in the immediate years ahead nor any sign of any prospect of balancing the Budget in the years to come. That is incorrect. We cannot foresee precisely what the gap will be in the year 1946–1947, and it is not for me, a couple of months before the Chancellor unfolds his Budget, to make any estimate, but, of course, the Chancellor of the Exchequer, at the present time, is considering very carefully what is the likely gap and is seeking every means of making it as small as possible. As to the future, neither the late Chancellor of the Exchequer nor the present Chancellor of the Exchequer said that he had no intention of balancing. Budgets in the future.

But it is not necessarily the right method to balance the Budget precisely in a single period of twelve months. It is necessary to take a rather longer period than a year, maybe three years or five years, and to aim at a broad balance over the period of years. That may be wise or it may be unwise. It is a matter to be debated in the other place, and, if your Lordships so desire, in this House at the proper time. But it is quite incorrect: to say that neither of those. Chancellors of the Exchequer has envisaged a balanced Budget in the future. I would remind your Lordships that the Chancellor of the Exchequer has promised that in the coming year there will be full estimates of the expenditure, so that an opportunity of seeing exactly what is happening will be possible for the first time since the war began. I have said, and it is true, that there will remain a gap. Certainly, there is a large gap in the current year, and it is not possible to hope that there will be no gap in the year 1946–1947. Moreover, I think that he would be an optimist who hoped that the Budget would be completely balanced in the year 1947–1948. But that gap, as was shown during the war, does not necessarily mean inflation. It would mean inflation if the people of this country were not alive to the fact, and, ignoring stimuli from the Government and the savings organizations, were not prepared to save money.

I do not know whether noble Lords have followed the figures relating to savings and the results of the great savings weeks which we have had in the current financial year. Figures are broadcast week by week. It must be realized that the people of this country are still alive to the need for saving, and I have every reason to hope that those savings will fill the gap and will provide sufficient to go a long way in order to provide the capital which is required for restoring the prosperity of the country.

There are a great many other points I should like to cover, but I want particularly to make a reference to what my noble friend Lord Monkswell said with regard to the social services. I am not quoting his exact words, but he said something of this kind, that where any money was paid by way of social service to a person who was not giving an equal return in work, that was in its essence inflation. I dispute teat entirely; that is entirely a false view. Just let us see what the social services involve. First of all there are the children. Does any member of this House, or any person who devotes serious attention to the affairs of the nation, really suggest that money spent on the upkeep and education of children is inflationary, either in the strict sense or in the wider sense as meaning something which is non-productive? I should have thought that every member of this House, and even the noble Lord himself, would have said that money spent on the education and upbringing of children gave a splendid return, in spite of the fact that we do not make the mistake of our forefathers by putting children of six years old up chimneys or down mines or to work in factories.

Then we come to the care of the sick. I should have thought that there was nothing of greater value than that. Of course, the money has to be well spent; it must not be thrown down the drain. I should have thought that money provided for that purpose was of the greatest value to the country. As to whether in the technical, financial sense it is inflation or not, that entirely depends how the money is raised. If you were to take the extraordinary course which the noble Lord suggested, of paying for these things by issuing additional paper notes, that might be inflationary; but no one suggests anything so foolish. What we suggest is that the money required shall be found by contributions by the people, and that what is not obtained in that way should be paid for out of taxation. That is not inflationary; it certainly is not more inflationary than building a battleship in the same way, or doing any of the other things which the State finds it necessary to do. Not only is it not inflationary but, in my opinion, it is in the direct interests of the people of the country.

Then take unemployment. The days were when it was said that a man was unemployed through his own fault, and that if he would not work he should be allowed to starve—he and his wife and his children. We recognize to-day that that is not only bad humanity but bad economic policy. To destroy a man's skill in that way is not only cruel but very unwise from a purely material point of view. This is not a Party question; it has been agreed broadly by the Coalition Government, which was composed of all Parties. I am not making a Party case.

The only instance where I can perhaps not plead material advantage is that of the care of the old. If the noble Lord chooses to say that so far as old people are concerned it might be more economic to let them starve or die, he may be right; but I venture to suggest that a country which takes cognizance of the fact that people who have rendered great services to the community in the past ought not to be allowed to live a life of penury and despair in their old age is taking the right view.

But, of course, all this has to be paid for. People say that the Labour Party said this and that—I think the noble Lord said that members of all Parties did so—but I have never disguised, when I was a member of the House of Commons, the true facts from my electorate, and it made no difference to the support which I had in my constituency. I told them perfectly frankly what I am going to say to your Lordships now. I said to them: "There may have been days when there was a great division of wealth in this country, and every man who wore a black coat and a white collar was called a rich man, and every man who wore different clothes and worked with his hands was called a poor man, and when the social services could be provided by squeezing the rich. Banish those ideas from your minds at the present time. The question is, what do you want to do? You are the people of this country"—I was talking mainly to men of the working class, though there were others—"what do you want to do? Do you want children to be underfed and under-educated? Do you want the sick to go uncared for?. Do you want the unemployed to be allowed to go down in health and vigour? Do you want the old to live lives of misery and destitution? Or are you prepared to put your hands in your pockets, while you are at work earning wages, in order to provide benefits that will prevent these things?"

That is the issue. I have never disguised it. It remains the issue to-day. I believe that these social services are absolutely necessary for the physical, economic, material prosperity of this country. I do not for one moment take the view that because these benefits are being paid to people who at the time are not at work, they are of an inflationary character. I therefore dissent entirely from the noble Lord. I take the view that in embarking upon this course we are setting a high note of civilization. I believe that the difficult course, the strenuous course, the course that involves, perhaps, abstinence and austerity, on which we are embarking to-day is a sign of the intelligence, the sobriety and the steadfastness of purpose of the people of this country. I repudiate as utterly unworthy the suggestion that the Government are trifling intellectually with our people. I believe that our people understand what they are asking the Government to do. If they do not, if there is anything which remains to be explained, it is open to the Opposition here and in another place to make it clear; but I think that the people do understand and that in taking they are not only saving themselves by their exertions but are saving the world by their example.

4.36 p.m.


My Lords, I am sure that your Lordships have listened with some reassurance to the last words which have fallen from the noble Lord, Lord Pethick-Lawrence. It is, of course, always unpopular to propose economies, but, now that the Election is over, I am glad to see that members of the Party opposite are, beginning to find their feet, and that they are contemplating explaining to the people of this country that you cannot get more out of a pint pot than a pint, or more from a wine-bottle than the wine it contains, even if you can sell the empty bottle for more than the full one cost originally.

I confess that I had the impression that the noble Lord was more afraid of the deflationary frost-bite than of the inflationary burn; well, of course, everyone has his opinion on these matters, and whether one is more afraid of being burnt or of being frost-bitten depends very much on one's anticipations of the future. I entirely agree that there is no necessary danger in an unbalanced Budget over a short period; as I have said before, there is no more reason to crucify mankind on the fifth of April than to crucify mankind on a cross of gold. But, as the noble Lord himself said, over a long period there must be a balance and we are all anxious to know how soon we may see the beginning.

Measures that were necessary in wartime cannot be carried on indefinitely and it is the rate of transition from war to peace that seems to many of us some what slow. After all, in war-time we had about fifty per cent. of the national effort devoted to making war and the people lived on about half of what they might have enjoyed in peace time. Nobody can say that to-day, six months after the war, we are anywhere near getting back that fifty per cent. I do not think anyone would claim that we have got more than ten or fifteen per cent. if that, and it seems that matters might be hastened. Some what if the Government we're a little less occupied in putting dogma into effect and a little bit more concerned with the realities and the difficulties the face us. After all, if we can get through five years of war and the "blitz" without ever going short of gas in London, it does seem a little scandalous that in the first cold winter after the war, when we are told that one-and-a-half million men have been demobilized, for the lack of a few men half London should have to go without gas and properly cooked food.

As to expenditure, I think we must divide that very definitely into two aspects, the external and the internal. The external expenditure is the one that hits us immediately if we are unable to meet our obligations. Here again it seems to me that the Government is a little bit ready with its generosity to other countries at the expense of the British taxpayer. Of course, a good case can always be made out for being generous. In 100 years of wealth this country has grown to adopt almost unconsciously the attitude of Lady Bountiful where foreign countries are concerned. I read the other day that a debt of over £50,000,000 has been forgiven to Poland, that £46,000,000 has been forgiven to Greece and that another £10,000,000 is to be loaned to Greece. I yield to no one in my admiration for the Greeks and the fight they put up against the Axis. But we put up a fight, too, and we are saddled with £4,000,000,000 worth of external debt. Is it not a bit premature to jump in and undertake to give up all the claims we have?

Again there is U. N. R. R. A. U.N.R.R.A. is undoubtedly doing magnificent work, but after all they have had a great deal of money to spend. The original contribution was £630,000,000, one and a half times the cost of our prewar food imports into this country. They have spent all that and they are asking for another £500,000,000. I do not think they got the whole £630,000,000 but they got something like £500,000,000 and now they are asking for us to give them a lot more. It may be a good thing, but I should like to see an itemised account of what happens to all this money. I have never seen anything published and I think the country is entitled to know what becomes of this money. Countries like France, the Netherlands, and Belgium which have gold and dollar balances pay for their imports, so that the whole of this money must be spent on other countries. No one could pretend that anything like these quantities could possibly be used for Greece or Yugoslavia in present conditions. I saw the other day that it was intended to divert the course of the Yellow River. That may be a very good thing to do but I do not think we in this country can give up a considerable amount of the national effort by contributing a large quantity toward projects of that nature.

Then comes the big, real, difficult question of exports. It has been said quite properly by everyone that unless we can balance our trade budget within the next few years, the standard of life in this country will diminish enormously beyond any idea that people have to-day. That is going to be extremely difficult, because America, in the course of one hundred years during which they were building up their capital goods and had to collect money from abroad, got imbued with the impression that any exports are good. In the course of the war the American output was put up by 60 per cent. It was one hundred and fifty billion dollars of output, whereas the highest pre-war figure had been ninety billion dollars. It is quite evident that even making allowance for people going out of productive work, there will still be a gap of about forty billion dollars to fill if America is to be saved from unemployment and unfortunately a lot of people in America take the line that this gap must be filled by exporting. Anyone who knows the figures knows how absurd that is. The total world figure for manufactured exports was only £10 billion, before the war and the idea of filling a forty billion gap by exports is therefore quite absurd. I am very much afraid that these facts have not been brought home to the American public and that export subsidies will be obtained from Congress to our detriment In any event the U.S.A. can of course never get paid except by imports.

These points, of course, make it all the more important that we should somehow try to work with the Americans and try to get some arrangement by which these troubles do not arise. I wonder whether the Government is really going the right way to work here? It is quite true that the President of the Board of Trade said the other day that people had got to work if they wanted to live. But what is the real procedure the Government are adopting, beyond the working parties we hear so much about and which may have a very good name? I have not been able to discover that they have done much beyond holding meetings which not all of them attend, but what are they doing to make sure that we obtain the goods needed for export? The great panacea is nationalization and it is quite all right to put your faith in nationalization. When I say faith, I am not saying that that means believing that which you know to be untrue, but nobody pretends—even the most ardent Socialist so far as I know—that nationalization is going to increase the amount of goods and the output per man hour to any notable extent in the next year or two.

There may be differences of opinion about it but no one can pretend that in the next year it is going to increase the quantity we turn out per man hour very appreciably. Yet all the measures the Government have proposed, at any rate those which are public property, are all devoted to these various forms of nationalization. Far from helping the manufacturers at the moment they are holding things back. It is surely a great waste of effort to spend all this time on these particular lines of action when we ought to be trying to do something more immediate to deliver the goods. It is as though someone were struggling in the sea and someone else came along and said, "It would be better to adopt a new stroke. I have been thinking things over, and if you were to move your legs out this way, or your arms that way, it would work much better." It might, but if the man had never swam that way it would not be a very good thing to teach him a new stroke instead of trying to enable him to get to the shore.

As to home affairs and internal expenditure, there again of course we are somewhat concerned about the position. Whether our debt be twenty-four thousand million pounds or somewhat higher if you take in local loans and so on, any of these figures is quite enough to make all of us anxious. After all, our total taxable income, as far as I know, has I think been put at about eight thousand million and of that more than half belongs to people with incomes of less than two hundred and fifty pounds and more than three quarters to people with incomes of something less than five hundred pounds a year, so that whatever extra expenditure there is, it has got to come out of the pockets of the poor people. I do not know whether this fact has really been made abundantly plain, that after all we are only concerned in what we produce in the long run. We may have a period such as in the war when people lend us money and we get stuff on lend-lease that enable us to live somewhat beyond our national means, but that cannot go on. The only thing that can be done by any Government is to encourage the maximum output and then to decide how they are going to distribute the income arising from it.

Well, of course, the noble Lord said the intention was to keep prices level, or reasonably level, not to have any considerable increase in prices. But after all what do the English people spend their money on? A great part of it is on housing. The noble Lord will say that the houses will be let at the same price as before, and that the Exchequer is going to pay the difference. Where does the money come from if the Exchequer is going to pay the difference? It comes out of the pockets of the poor man, because, if your total income is ) 8,000,000,000 and seventy-eight per cent. of the national income resides in incomes of less than £500 a year, new expenditure must come, in the main, from the pockets of the people with less than five hundred pounds a year. When they tell people that they are going to get their houses below the price it costs to build them, all it means is that they are going to take the money out of their pocket, in another form, but the people will have to pay. The same applies to coal. Coal is costing two or three times what it cost before the war. Is it going to be brought back to pre-war prices? If so, how? Again we may be told by Exchequer subsidy; or, perhaps, that: it will be by increased efficiency. We know it is pos- sible to increase efficiency and in the natural course efficiency does increase output roughly by one and a half per cent. a year, but you cannot increase efficiency two or three times in a few years; that would be absurd. It is impossible to have the coal prices reduced except by some method of taking the money out of the pockets of the people in the way of taxes and giving it back in the form of a subsidy.

I do not think anybody on this side of the House would claim that social services must necessarily mean inflation. If they are paid for by taxation or contributions of course they are merely a redistribution of the national income, and in effect all that the State is saying is, "We know better than you do how to spend your wages. We are going to take 25 per cent. of your wages away and give them back to you in another form." All of those things are of course perfectly legitimate. Whether the people realize it or would have voted the way they did if they had realized it is not for me to say, and whether they are good or bad I need not at the moment examine. However, as long as the Government really do stick to their intention of avoiding inflation and preventing a catastrophic increase in the price of goods, I do not think there will be much to complain of. But it is a very slippery slope on which to enter.

I must say I view with some apprehension the prospects before us. I hope the noble Lord will manage to fulfil his promise and avoid inflation. If he does not, and if money really becomes, as his right honourable friend once called it, a meaningless symbol, I think the British public will learn to curse the day on which they put the present Government in power.

4.47 p.m.


My Lords, I hope your Lordships will excuse a few unpremeditated remarks, which I am stung into making. May I begin by saying that it is surely a very good thing that we should have debates on this topic. No one really honestly can deny that inflation is a great danger to the policy of full employment. I think, however, that it is very important that in these discussions we should have certain common standards in order to talk about it. I am pained, for example, to find when the noble Lord, Lord Monkswell, talks about unemployment, he says that the loss of employment is the loss of the wages that people might have been making by their work. The loss of employment is infinitely worse than that. It is a capital loss. It is the loss of the skill and courage of the people that one employs. I wish noble Lords would read the report issued by the Carnegie Foundation in 1938 about the state of unemployed young men in South Wales, Liverpool and Glasgow that summer. There were about 50,000 young men- unemployed, and an analysis shows that the result of long unemployment made them hopeless, cynical, and unskilled. We were throwing away our capital. I confess I get alarmed when the noble Lord, Lord Monkswell, who should know so much about these things, misses that out.

Noble Lords must remember that in the years before the war, in those halcyon days when there was no prospect of a Labour Government, there were at one time unemployed in our industrial districts about 34 per cent. of the working population. We therefore had to do not only without their work, but to throw away that capital. If noble Lords had known the young men in the South Wales collieries, and seen them go to pieces, become cynical, disillusioned and hopeless, just in those very years of their lives when young men better off become excited and inspired, they would realize what we have been doing in the way of investing our capital. I implore noble Lords to agree that the real wealth of the country, and the capital wealth of the country, are not those things we call capital, but the courage and the skill, and, as I am sure the noble Lord who has just spoken will agree, the scientific knowledge of the workers of this country in the years before the war over 72 per cent. of the boys and girls left school when they were under fourteen or just about fourteen.

Of these unemployed people investigated by that Carnegie Foundation Report, only about 1½ per cent. had had any secondary education at all. Apprenticeship had largely disappeared, and we were then turning out about 72 per cent. of our young people unskilled. When we criticize social services, do let us ask, as seriously as we possibly can, are they social services which are making us more efficient? I have never known the noble Lord who spoke last to think that any money spent on scientific research was enough; he would always like to spend still more. That is an example. Of course it is too superior to be a social service, but the principle is sound. What is wrong with us at the present moment is that we are facing this competitive world and we are paying for the fact that we have half educated and left unskilled that very large proportion of our population. Unless we can get out of our heads the notion that social services are wasteful, we cannot have common ground for discussion. I hope that noble Lords will go on criticizing this Government and warning it about inflation, but I do pray them to do it in a more informed way, if I may say so.

5.2 p.m.


My Lords, I only intervene for five minutes to ask the noble Lord, Lord Pakenham, if, in his reply for the Government, he can give some information on one matter which is of considerable urgency in relation to the Motion of the noble Lord, Lord Teviot. Lord Teviot questioned our ability to pay for the commitments upon which this country is entering. My noble friend Lord Cherwell viewed with apprehension the future. Lord Pethick-Lawrence had not got those apprehensions. The answer as to whether we can meet those commitments in future must, in itself, lie in the days to come, but one thing is sure, as the noble Lord said: that we can only sustain our standard of life from the harvests of our wealth, and whether we have a Socialist, a Conservative, a Communist or a Liberal (if that were possible) Government, it is only from the proceeds of a healthy and prosperous industry, that we can continue our social services. To-day industry is depressed and worried. To-day every industrialist is feeling thwarted and desperate.


May I interrupt the noble Lord? Surely the noble Lord does not mean that literally? Surely it is an absurd statement to send out quite literally from this House?


Well, I will qualify it. Nearly every industrialist we meet to-day is feeling desperate and thwarted because of Government interference and the inability to get Government decisions in practice, particularly as regards the issue of raw materials. Perhaps the noble Lord from his seat of learning at Oxford does not go among the lower industrialists to the degree that I do. I can assure him that if he did he would find that nearly every trade to-day is feeling that Whitehall not only, as Lord Pethick-Lawrence said, has its hands controlling the economic situation, but is indeed throttling the economic situation. I am quite sure it is not the intention or the policy of the Government so to do, but the fact is that the machinery of government is to-day so clogged that people, with the best will in the world, cannot get decisions to enable them to fulfil the Government requirements of output for the export and home industry.

I will give two examples. A motor car manufacturing firm in Coventry has just produced a type of car called a utility car. Noble Lords will know what it is. The first batch of those cars was ready at Coventry for delivery. They could not be invoiced out because the Customs and Excise and, I presume, in the background, the Treasury, could not make up their minds whether they should be taxed as commercial or private vehicles, and on that hinged whether purchase tax should or should not be paid. That decision, so far as I know, has not yet been given. I give only that one example, but it could be duplicated. There is in one newspaper to-day an account of how a particular industry is unable to go forward because one Government Department says it has not got enough typists.


May I ask what paper that is in?


The Daily Express.


I guessed it was.


I am not attacking Government policy, and I would ask the noble Lord not to try to defend the clogging of industry, which every noble Lord on either side of the House knows is happening to-day. You have only to ask any industrialist. The President of the Board of Trade himself has said that the wheels of industry are not turning fast enough, and I would ask the Government whether they will not take the risks of decision for peace-time industry with the same boldness as the Government took the risks of action in war. It is far more blessed' in Whitehall to say "Nay," than "Yea," and until in Whitehall, junior officials, good, fine men, learn that the right thing to do is to say "Yes" unless there is a positive reason for saying "so," and that responsibility taken by them, even though they make mistakes, is welcomed by the Ministers, I do not think we shall get the wheels of industry turning.

The noble Lord who is going to reply should read the Economist—probably he does—and see an article which appeared last week which said that every industrialist who writes to a Government Department to-day does so in a spirit of defeatism, knowing he is going to commence a correspondence of three or four letters, probably with other departments, and in the end will probably get no decision for many months to come. If we are to go forward, whether under a Conservative, a Socialist, or any other form of Government, let us see that our decisions are swift and positive and not clogged through the machinery of government working too slowly.


May I, before the noble Lord concludes, ask him to state the specific question he said he was going to put to me? I took a careful note of his words.


My question is this: Will the Government take steps to see that the present stagnation of industry in many directions, through the inability to obtain Government decisions in one or more departments, will be dealt with swiftly by the Ministers responsible?

5.9 p.m.


My Lords, the noble Lord, Lord Teviot, I think said that it might be a good thing if occasionally in this Home we bad a little scratching. Being a Pacifist, I am always willing to scratch in a good cause, and I therefore mean to preface and end my contribution to this debate, which I will try and make a brief one, rather in the line of scratching. People who say, "I told you so," are never very popular, but I must say I am tempted at the present moment to point out that if the advice of a certain tiny minority in this House, not on the question of surrender, because they never advocated that, but on the question of a negotiated peace, had been taken, Europe to-day would not be in a state of economic chaos, the danger of inflation would be nothing like so great, and possibly Mr. Bevin would be having a less stormy passage in the Councils of U.N.O.

However, it is no use crying over spilt milk. We have these economic problems, of which inflation is one, and they have got to be faced. The very best way of mitigating the evil of inflation is by seeing that you have the maximum quantity of home-produced goods and imports on your home market to back and give value to your money, for remember that there is one thing, and one thing only, which constitutes inflation. Inflation has nothing whatever to do of necessity either with the way you spend your money or with the way you get it; it depends solely on whether there is behind your money, whether it be paper, coin or cheque, enough goods and services to give it value. Recently a weekly paper published a caricature of the Government's financial and economic policy. Like all caricatures it is in some ways unkind and unfair, but it does contain an element of truth, in my opinion—anyhow in the last sentence. It runs as follows: You take an industry, nationalize it, think of a number, double it, make that the basic wage, put in a working party to see that no one does any work, say that the industry is in need of reorganization, fill it with refugees from Hitler's tyranny and then announce that the Government's policy is austerity. If anyone does accidentally make something, our dear old friend the necessity for increased exports will enable you to keep the populace where it belongs until the outbreak of the next war. I must say that I have a certain amount of sympathy with the editor of that paper in what he says about "our dear old friend the necessity for increased exports." Before the war, I think I am right in saying, the export-import trade amounted to less than 20 per cent. of the country's whole business, but to hear some people talk and argue to-day you would think it amounted to something like 80 per cent. No reasonable person, of course, disputes the need for a certain amount of exports to obtain absolutely essential imports, but, as I think I pointed out in a former debate in this House, unless you are paying off debt—which in my opinion should usually not be incurred—it is vitally necessary to see that your exports without delay bring you back an equivalent value in imports of goods which are of even more value to the nation than the exports themselves.

For example, there is not much sense, when there is an acute shortage of woollen garments in this country, in exporting wool in order to obtain cotton if the national need for cotton is really not greater than the need for wool. Sometimes, too, we are told that we must make great sacrifices and build up an export market and that then perhaps in the rather dim and distant future we shall begin to receive imports. That again is a policy which, I think, requires rather critical scrutiny. In the past we have had far too much of this "jam to-morrow but never jam to-day" policy. Very often when the distant future date is at length reached we find that we have been chasing a rainbow's end and our attention is directed to some new foreign market that we have to make sacrifices to capture, and we may also find that some foreign country, perhaps with a new invention and discovery, has nipped in and captured the greater part of the market for the sake of which we made our initial sacrifice.

Then there is this question of world shortages, or alleged world shortages. No one doubts, of course, that there are terrible shortages in Europe, partly as the result of the war, and partly, I am afraid, as a result of the policy of certain of the United Nations after the war. I think, too, there is ample evidence that in some countries unaffected by the war there have been shortages due to abnormal weather conditions. But it is very important not to forget that certain big combines and also certain financial interests invent, exaggerate or even artificially manufacture, shortages, and in those cases, we should not swallow their propaganda too readily but should try and identify and denounce the culprits.

With regard to the Government's, in my opinion, rather exaggerated fear of imports, particularly imports which increase our dollar indebtedness, I read not long ago that the Government refused to allow the import of South African fruit but I have never read anywhere that it has refused to import South African gold. Useless gold instead of useful fruit is a typical economic arrangement under so-called sound finance. Then, as I also pointed out in the debate on the American loan, under the existing financial and economic system, not only America but many other countries are practically bound to make us very considerable presents of goods which on paper may seem to give us an adverse trade balance and increase our debt, but which need not alarm us unduly. The other day the American Admiral Standley, broadcasting in the U.S.A., said: It is advisable that we should supply Russia with as much as possible, even if we get neither goods nor money in return, as it will keep our factories and labour employed here. Of course, what is true of Russia is equally true of this country. I do not think that Admiral Standley is an economist, let alone a monetary reformer, but he saw certain obvious phenomena in the United States and he saw also the usual orthodox remedy. The cause of that shortage, as I have tried to point out on former occasions, is mainly the direct result of increasing mechanization and also investment.

I should like to say in conclusion, if I may begin to scratch a bit once more, that on nearly all the occasions when I introduce the subject of monetary reform or attempt to diagnose the cause of some of our economic ills, I am met with more or less contemptuous references to Social Credit, often made by those whose knowledge of finance is so limited that they cannot recognize Social Credit when they hear it or refrain from recognizing it when they do not. In order to clear the air a little, may I point out that there are two particular methods of creating and issuing money, known as the Just Price and the National Dividend, which alone characterise Social Credit. Good as I believe those methods to be, with or without certain modifications, I have not yet recommended them in this House; neither have I ever put forward the orthodox Social Credit diagnosis of the cause of money shortage in normal peace-time conditions. It is, briefly, that the only money distributed by industry in a form immediately available for buying consumable goods is wages, salaries, interest or profits, but the price of such goods must include many other items such as payments for raw materials, depreciation and so on.

The Social Credit expert argues that the smaller sum cannot buy the larger. Whether that diagnosis is correct is a highly technical question: involving such issues as the comparative rate of flow of purchasing power and prices. No Social Creditors have ever maintained that payments for raw materials do not eventually become consumer purchasing power, but they claim that during any given period they do not become consumer purchasing power fast enough to clear from the market all the goods that need to be sold during that period if a glut is to be avoided. Whether that diagnosis he true or not, one thing is certain, and that is in the normal peace-time working of the economic system of a country America there is a shortage due to investment and increasing mechanization. On that point I am prepared to meet anyone in fair argument either in this House or elsewhere.


May I interrupt the noble Duke? Would he hope to get along without investment?


Certainly should not hope to get on without investment. But if you invest and consequently increase the output of goods then you must increase the output of money in order that these good; may be bought. One last point. Sometimes I have been met by the suggestion that all my views on monetary reform are absolute bunkum because they are not approved of by the orthodox economists. May I suggest that there is a reason for that? Those who are interested in maintaining the present financial system by various indirect means are pretty successful in making sure that no one gets a post which will give him a national reputation as an economist unless he is in sympathy with the present system or unless from the Socialist angle he can be trusted to keep people barking up what is, I suggest, the wrong tree—private, ownership and production for profit.

Almost every economist has his own pet theory as to what is wrong with the existing system and his own remedy, and until he has seen that remedy tried without effect he will not look at: anyone else's, even if the latter be much more fundamental. For example, I think I am right in saying that Lord Keynes in cases where there are money shortages recom- mends more bank loans at a low rate of interest. Seeing that a bank loan is the creation of new money, it is a palliative, but it is not, in my opinion a proper and efficient remedy nor does it get rid of the problem of debt and the interest on debt.

Sir George Paish, to quote one other financier, attributes all our troubles to the wickedness of politicians in taking a dislike to the Governments of other countries and expressing that dislike by putting up barriers against their exports.

It is, again, perfectly true that if the economic position is bad, trade barriers will make it worse. It is not true however that perfect politicians who never do this are a substitute for the adjustment of the money supply to the goods output and the creation of money not in the form of debt.

5.24 p.m.


My Lords, I had not intended to reply. I was instructed to speak only if there were any points still to be cleared up. Perhaps you will allow me to speak for a few minutes as one specific point was put to me, and one general criticism was raised in the final speech. Coming to those matters at once, I might say that I was very much encouraged by the speech of my noble friend Lord Cherwell. He is a critic of unrivalled talent, and he, to-day, announced that he was fairly happy provided that the Government carried out its declared intentions. It is true that he also said that he was apprehensive concerning the future. For the noble Lord to express apprehension, I feel is a form of compliment. He occasionally uses rather stronger terms as I, who am a very old colleague and a very old friend of his, well know. I think that in this instance he was really paying us what was almost the most generous compliment in his power. I do not feel that we have any reason to regret his expression of apprehension.

Next I must reply to my noble friend Lord Balfour of Inchrye who threw out, in what seemed to me a rather unpremeditated moment, a rather wild statement about the industrialists of this country. He qualified it a little when I intervened, but generally speaking he gave a picture of the state of mind of industry 'which I did not expect from him. He implies that he is more closely in touch with industry than I. It may be so. I speak, as the noble Lord is aware, in this House, for the Board of Trade, and am therefore thrown fairly closely into touch with industry.


They are the villains of the piece.


I am afraid that I cannot accept that very cheap sneer. To say that the Board of Trade are the villains of the piece is quite unworthy of a noble Lord of the standing of Lord Balfour of Inchrye. It is a statement that is quite impossible to substantiate, and rather difficult to refute in a few sentences. However if the noble Lord presses his point I may tell him, though he may be aware of it, that Oxford is an industrial city and we have a rather large industrial population. Those who live there are in touch with one section of industry at any rate. The noble Lord has told us where he gets his information, and in view of his sources of information I am not surprised at the enlightenment with which he has sought to provide us. He reads the Daily Express. That is common enough. But what is more extraordinary is that he apparently believes every word that he finds in it.


What about sneers now?


The noble Lord says "what about sneers." Well, if that is a sneer then let it be so. But I am afraid I would rather sneer at the Daily Express than at the Board of Trade. Noble Lords must choose on that matter. If there are to be sneers let that be my deliberate choice. The noble Lord has cited one or two instances of stagnation in production, and has suggested that this stagnation is universal. He asks if we will take immediate steps to put it right. I do not admit that stagnation exists. If it did it would reflect very poorly on the patriotism of the people in industry.


The noble Lord is misrepresenting me. I said that industry quite apart from any question of political view or individual political outlook was wanting to do its best, but that owing to Government interference and lack of Government assistance and guidance, with the best will in the world industrialists could not get on with the job.


I am interested in the West of England cloth industry where complete stagnation is now taking place. Directors and everybody concerned in the industry have been begging the Board of Trade to give export licences for their cloth. They cannot get them. They are blocked in every direction.


The noble Lord, perhaps, has not heard that there is not an unlimited amount of shipping available.


I am speaking on behalf of the industry and stating what the position is.


I was pointing out to the noble Lord that it does not rest with the Board of Trade to say at any moment that there is an unlimited amount of shipping for the export of goods. There are many difficulties, and whatever the Government in power, whatever the character of the Civil Service—and I would take this opportunity of paying the highest tribute to that Service—whatever the mechanical arrangements in Whitehall, there would still remain immense difficulty owing to shortages of labour, shortages of raw material and so on. Therefore, to give a few examples of troubles which have occurred and to say that they are the result of Governmental bureaucracy throws very little light on the present position. On the other hand, I will assure the noble Lord that the Government are as anxious as he is—I venture to suggest even more anxious because they have the heavier responsibility—to remove any stagnation that exists, and I am quite sure that nothing that can be done to speed matters up will be left undone. I hope that the noble Lord will derive satisfaction from that.

The noble Duke gave us a lecture on economics which fifteen years ago might have been of considerable value to this House. I have not been in touch with him over that period. It may even be that he was a reformer in advance of his time. But may I tell him that there has been a great revolution in economic science in the last fifteen years. We do not regard his speech as necessarily that of a crank or as necessarily crazy. We simply call it old-fashioned. The noble Duke must realize that the world has moved on since 1931 and the Treasury economics of that time have advanced. All parties and nearly all sections of thought in the economic world now recognize, as many of us have done for years, that in order to get the maximum amount of production you have to make sure that the requisite amount of money is forthcoming. It is a very simple proposition. It was neglected for years owing to the teaching of orthodox economists, but now it is fully recognized, and if that is what the noble Lord is telling us we thank him for a statement of what to-day is obvious. We cannot regard it as calculated in any way to alter the present policy of the Government. I had not intended to intervene, but I was asked to say a few words, and I hope that what I have said is appropriate.

5.31 p.m.


My Lords, this is an instance of the unsatisfactory way in which our debates are inclined to develop now. The noble Lord, Lord Pethick-Lawrence, got up and answered me. Now he is not here. That is a little difficult for me. I did not like to interrupt him, I never like to do that, but if we could get back to what we used to have here, that the Minister answers the debate at the end of the debate, it would give the mover of the Motion a chance to deal with the subject in front of the person concerned.


May I interrupt to express the regrets of Lord PethickLawrence that he was called away? The noble Lord will appreciate that he was called away unexpectedly, and he asked me to take a careful note of anything which might arise.


There is one question on which Lord Pethick-Lawrence disagreed with me, and that is the question of what this country owed in the shape of a national debt. I have the official figures. He said I was wrong in describing it as £30,000,000,000, and that it was only £24,000,000,000. This is the way that the £30,000,000,000 is made up—national funded debt to date, £24,372,000,000, floating debt on December 29, 1945, £,294,000,000. I am informed that it is higher than that now. On the top of that we have the external debt of £4,200,000,000. In the debate I initiated in this House I added the external debt to the national debt, and I was taken to task for doing so. I was told that it was not the same thing, but I will put it to the noble Lord like this. If I owe him a five pound note and I owe a member in another place a five pound note, I certainly owe £10, and I do not see that there is any difference on this question of the debt. We do owe the money. That is one thing I should like to say, and I should have said it to Lord Pethick-Lawrence had he been here. He referred to the fact, in regard to some of the things I said, that the clearing up of the war was not yet over, and my answer to that is that we all realize that. We are not even "demobbed" yet.

Europe is in a state of chaos; things are not normal now, and what I am trying to do, without of course any success whatever, is to divert the Government from embarking on what some of their Ministers have described as this great experiment of nationalization, and its interference with the methods on which the whole business of the country has been carried on in the past. I assure the noble Lord without sneering in any way that I entirely agree with my noble friend Lord Balfour. There is a want of confidence, and I can tell him of a lot of people in industry who do not know which way to turn. We have rumours that the iron and steel industry is going to be nationalized, and that has a disturbing effect. I want the noble Lord to appreciate that there is a want of confidence and a feeling of frustration.

Everyone is keen to get on with the job, and I think the noble Lord will find that such men who are "demobbed" will want to get on with the job and I do not see that we shall be able to employ them in the present state of affairs. Lord Pethick-Lawrence also questioned my remark about the capabilities of the United States in production. He said they had had strikes and troubles. But no one would dispute, in view of our one hundred per cent. effort in the war, and theirs, probably, of sixty per cent., that they are in a position now to go into the world's markets and supply goods that in present circumstances we have no earthly chance of doing. I should like to make that point in reply to what the noble Lord has said. We have had a very interesting debate. I am most grateful for the way in which other mem- bers of your Lordships' House have taken part in the debate, and I have been very interested in what they have said. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.

5.36 p.m.


My Lords, I have one or two comments to make. Lord Lindsay seems to suppose that I do not regard the skill of the workman as capital. That is far from being my real sentiment. I think Lord Pethick-Lawrence went perilously close to making an election speech. I cannot imagine that a man who was Captain of the Oppidans at Eton cannot have seen a great many of the gaps he left in his argument. Money spent on charity cannot be used in production. He seems to have ignored that entirely, and bankruptcy will weigh more heavily on the working classes than on anyone else. I should like to finish with a quotation from Carlyle on the subject of bankruptcy: No falsehood, did it rise heavenwards and cover the world, but bankruptcy will one day sweep it down and make us free of it. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.