§ 2.46 p.m.
§ VISCOUNT SAMUEL rose to call attention to the economic situation, and to move for Papers. The noble Viscount said: My Lords, six months ago your Lordships' House discussed the economic situation. Since then some favourable factors have supervened. The physical restoration and replenishment of Europe and the world after the war has proceeded. The transport system has been improved; railways have been restored, and ports re-opened. Shipping has increased; fertilisers have been made available for the fields in various parts of the world; and the peasantries in the East and in all parts of the globe have returned to their labours. The harvest prospects for this year are distinctly better than last. In this country production has been increasing; and a great effort has been made in the coalfields with excellent, if still insufficient, results. Nevertheless, other things have occurred, and on balance the position is worse than it was when we last discussed it in your Lordships' House.
The most sensitive point, as we all know, is how this country can make payment for goods from abroad which are indispensable to our national economy. Grave speeches were made by many of your Lordships in the previous debate, and various suggestions were made. But earlier this month, in a speech by the
Chancellor of the Exchequer at Edinburgh, we heard this language:
The position, so far as our balance of trade is concerned, is definitely worse than it was six months ago.
And he went on to say:
We have exhausted our loans from abroad and we are rapidly exhausting our final gold resources. If we allow those to be completely exhausted we shall not be able to buy enough food to live on, or enough raw materials to keep our production going.
§ At the present rate of depletion these resources will be exhausted by next autumn. It is in the light of that statement by the responsible Minister speaking for the Government, the Chancellor of the Exchequer, that your Lordships meet to-day to consider the economic situation of the country.
Last August I had the privilege of opening what was then a two days' debate on the economic situation. I attempted then a general survey, but to-day I propose to concentrate on one point only—the question of prices, and especially of taxation in relation to the level of prices. If, in spite of the various favourable factors, the situation has worsened, I suggest to your Lordships that the essential cause is the failure to secure a general lowering of prices in this country and in the world. In an admirable speech in the other place on February 12 the Chancellor of the Exchequer touched upon one point and, it seemed to me, rather over-simplified it. He used these words:
If we are to achieve a balance of payments, we must gradually increase exports, and if we cannot increase them sufficiently we shall then be driven to reduce our imports still further.
That is usually accepted as a plain statement of obvious fact. But for the moment he left out, as most speakers on this subject are accustomed to leave out, one point—namely, the question of the range of prices. The prices of our imports have increased much more than of our exports. If each unit of imports were cheaper, we could buy a greater quantity of imports without increasing our exports.
§ It seems that the only way to increase the volume of imports is to increase exports. It is not so, however, because if imports all round were cheaper we could buy more for the same amount of exportation. Ultimately, therefore, the question comes back to prices. Here, the United States dominate the situation; and, by and 7 large, American prices determine the range of world prices. As we all know, during the last six months, and for rather longer, American prices for the main commodities have greatly risen. Whether this was due to the removal by Congress of controls some time ago is not for us to discuss. We have no title to intervene in any way in matters of American domestic politics. However, we are entitled to draw attention to the way in which this increase in American prices has affected us all in this country, in Europe and, indeed, throughout the world. The Marshall Plan is most generous and very welcome, but it can do little more than counter—even if it does succeed in countering—the injury that has been done to the economy of the world by the great rise in American prices. We have used up rapidly the whole of the American Loan, long before it was expected on either side that that would occur. The effect now is to reduce the volume of imports that we can buy from America with the same amount of exports. We in this country may sweat and toil, and we may forgo great numbers of the commodities that we need, only to find that a large part of the result goes down the drain owing to the great increase in the dollar prices of essential commodities.
§ Mr. Truman, President of the United States, has again and again drawn the attention of his nation to the effect of what he has called "this terrible rise in prices." The effect there has been to cause throughout the working classes in the United States a universal movement for higher wages. That movement has been successful and has inevitably caused a still further rise in prices, resulting in another round (as it is called) of wage increases, with similar results; and a third round is now pending. As the President reported to Congress a month ago, the upshot has been that the real wages in 1947 were not higher than, but were slightly below, the real wages in 1946. This continual increase in American prices, reflected in the charges for goods everywhere, is the worst thing that has happened in world economics in recent times. On the other hand, I submit that the best thing that has happened during the last few weeks has been some recession in those prices. If there were to be, as in 1929, a sudden deflation, a catastrophic fall resulting in bankruptcies, contraction 8 of industries and widespread unemployment, that equally would be a disaster. But a gradual and continuous decline could do nothing but good, both to the American people and to all the peoples of other countries. We know that this recent break in commodity prices has been considerable, but we learned from Washington a few days ago (February 18) that the fall so far has done no more than wipe out about 60 per cent. Of the increase in prices since November 1, 1947. It has not yet even eliminated, or nearly eliminated, the effect of those increases.
§ The price increase in the United States diminishes the quantity of the imports which we can afford to buy, and the price increase here in this country decreases the volume of the exports that we shall be able to sell. Sir Stafford Cripps and the recent Government Statement have made that abundantly clear; everyone understands that. Of course, we are all familiar with the vicious spiral. We know that rising prices due, in the first instance, to war destruction and shortage of production, cause increases in the cost of living. That brings about a natural and inevitable demand for higher wages. The cost of production is raised by a general increase in wages, and so prices are raised once more and our exports are handicapped by their greater cost. When this goes on continuously, time after time, ultimately in various countries there is for the people a lower standard of living. This, of course, is countered by an increase in the paper printing of currencies, which results in the collapse of the currencies; and economic chaos ensues. That is the vicious circle or spiral. If we wish to have a virtuous spiral, we must reverse the whole of that process. I am submitting to your Lordships now that we ought to concentrate our attention upon the reduction of prices. If prices are lessened, the cost of living is lessened. Then we have a lower cost of production without debasing the standard of living of the people. If we have lower prices, we have more consumption.
§ If that point is established, I come to my second and my only other point, to consider how far the policy of this country in the matter of taxation tends to keep prices down and how far it tends to raise them. The Budget is in sight, and this is a very topical inquiry. Our economists tell us that it is essential to have a high 9 level of taxation in order to mop up excessive purchasing power; that there is too much money chasing too few goods, and therefore that the best thing to do is to mop up that excess of money into the Treasury by taxation. That doctrine has been accepted by almost all our financial authorities. I hesitate to express an opinion on this matter, but I am one of the very few people who have in public expressed great scepticism as to the value of that doctrine. In the opinion of some of us it needs to be carefully used and closely restricted; and indeed not to be employed as a general specific for the cure of our ills. In my address to your Lordships in moving a similar Motion last August, I emphasised this point, that in this regard we ought to reconsider our fiscal policy. The shortage of materials and goods would lead to a rise in prices, but such a rise has to a great extent been met by the price control of necessaries, which has, on the whole, been successful; it has been able to hold prices in spite of the excess of demand over supply. With regard to luxuries, the prices have undoubtedly risen greatly and that, to some extent, diverts labour towards those trades instead of to the more necessary trades. The effect of that is small, taking into account the whole body of the nation and our industries in general. That matter, too, is largely governed by the control of materials, because with the hand which our Government now have on the allocation of materials to various industries they can prevent an undue flow into the non-essential trades. Those considerations therefore, as I suggest to your Lordships, are comparatively unimportant.
So far as the staple industries are concerned—the mines, the chief textile industries, agriculture, and the supply of capital goods—the diminution of purchasing power in the shops is not a consideration that matters, and the mopping-up theory has no or little validity. Furthermore I submit to your Lordships that this other point has to be taken into account: that if the working classes wish to buy things the imposition of taxation will not stop them. There are now enormous accumulated savings in the savings banks and similar institutions which are quite liquid. If a working man wants to buy furniture or a radio set, or whatever it may be, he can withdraw the necessary money from that which during the war
years he has accumulated in the savings bank or other institution, and this is now becoming recognised by the Treasury. As the Chancellor of the Exchequer said not long ago in his speech at Edinburgh:
This year there has been a great volume of withdrawals, which has made it impossible to reach the target of new savings that was set.
§ The figures that have been published show that in the ten months of the current financial year, net savings fell from £276,000,000 to £170,000,000, so that more than £100,000,000 has been withdrawn—if I may add a term to the economic jargon of the day, we may say that £100,000,000 has been "de-mopped." The well-to-do classes, it is well known, are not living only on their incomes—such as they are—after taxation. As all the world knows, there has been a great capital appreciation in recent years, partly due to the late Chancellor of the Exchequer's policy of cheap money, and those who have capital on hand in many cases, if they desire to indulge in expenditure in one direction or another, withdraw the value of some of the appreciation on their capital. Therefore, the deterrent effect or the mopping-up effect of taxation in lowering prices is indirect, uncertain and frequently ineffective.
On the other hand taxation undoubtedly has an effect in raising prices. It quickly comes to be regarded by the working classes, and indeed by others, as part of the rising cost of living. They are determined to maintain their standards of life, or even to improve upon them, and if part of their previous or their present income is removed by taxation, they seek to make it up as best they can. Again, to quote the speech of the Chancellor of the Exchequer in another place, it is clear that he realised this because he used this language, and I would ask the special attention of your Lordships to this point because it is vital:
These general taxes undoubtedly reduce the expendable portions of all personal income, but there is always a tendency for those incomes to rise wherever possible to counter the taxation effect.
That is really the secret of the whole matter. If you tax workers under P.A.Y.E. and take away perhaps 10 of their income in order to prevent them spending it, the next thing that happens is that, very naturally, the trade unions ask for a 10 per cent. increase in
wages, which, in present circumstances, it is impossible to resist, and thus the workers have as much money to spend as they had before. The only difference is that prices have risen all round, through the increased cost of production, both for those workers and for everyone else. So there again, by this policy of high taxation in order to mop up expendable income, the State is itself creating another vicious circle of its own.
§ If the effect of taxation is, as I say, to raise wages and to also give an incentive to an increase in profit in order to counter taxes, the rise in price that follows results in more cost to the State itself. Social services cost more; more money has to be found to grant the same real benefits; the Defence services, the Civil Service and Government supplies everywhere cost more, and the State has to make a larger expenditure in order to obtain the same results. Therefore, the conclusion is that if more taxation contributes to higher prices and higher prices contribute to more expenditure, the State will need to impose more taxation again in order to provide for its own services. All the time there is a continual pressure for better and more adequate social services, a pressure with which we must all sympathise; but there is always the danger that we shall adopt that glorious principle of public finance, so popular in every democracy: "More from the Government, and less from the taxpayer."
The Chancellor of the Exchequer and the Government have, therefore, made an appeal for a great effort to hold prices, to prevent them rising further and, if possible, to promote some reduction. The trade unions have agreed, in principle, but on the condition (which is surely a proper one) that the ruling shall apply also to profits and to salaries. Profits it is true are, by subsequent taxation and especially by Sur-tax, largely taken away from those who receive them. But all profits are by no means taken away, and there is always the financial inducement to raise profits even though a great part of the increase has to be surrendered to the Treasury. There is no doubt whatever but that in many industries, both in distribution and production, profits are now excessive, and extremely high dividends are being declared, far beyond the normal, in a large number of companies. This again is largely due to high prices.
Prices are so high that these companies have no means of disposing of their receipts except by a large distribution of profits. Here again I would quote Sir Stafford Cripps, whose recent speeches have been the compendium of wisdom. In the same speech in another place he said:
Price reductions will lead to reductions both in overall and in distributed profits, and a decrease in prices is far the most satisfactory way to get that reduction of profits.
So if he can bring about an all-round reduction in prices, it will, to a certain extent, meet the legitimate and proper demand of the trade unions for a decrease of profits if there is to be a standstill on wages.
§ I am sure your Lordships are well aware of it, but perhaps I may remind you of the present situation of national expenditure compared with that of pre-war days, for the present rate of taxation is not necessary in order to meet the needs of the Exchequer. The Digest of Statistics tells us that before the war, in 1938–39, the national expenditure was, in round figures, £1,000,000,000 (actually it was a little above that; it was £1,019,000,000). At the peak period of the war, in 1944–45, it had risen to £6,000,000, 000—that is, it had increased approximately sixfold. In the present financial year it has been budgeted for £3,000,000,000. I reiterate, before the war it was £1,000,000,000; at the peak period of the war, £6,000,000,000; and now £3,000,000, 000.
§ We must remember that half the cost of the war was met from taxation; the other half was borrowed. So soon as that expenditure diminished, by reason of the cessation of the war, our first duty was to stop borrowing; and in effect, of course, that has been done. But still there is a very large surplus. In his broadcast a few days ago Mr. Dalton told the country that in the present financial year there has already accrued a surplus of £750,000,000 over the Budget estimates. My plea to your Lordships is that we should press for a substantial reduction in taxation in the next Budget. I do not ask, or expect, any reply upon that from the spokesman for the Government today, and I should be loath to suggest any directions in which that relief of taxation should go; that would be a matter for separate discussion. But I am convinced 13 that the relief ought to be very large, and that it should increase year by year. I believe that that would result in a great increase in national productivity. Viewed as a whole, our economic situation is most paradoxical. The banks are full of deposits, the people have vast accumulations of savings, the Exchequer is overflowing with money; and yet we are hard put to it to know how to buy enough food to feed ourselves and sufficient materials to keep our industries going. Mr. Dalton told us that the Treasury Budget is over seven hundred millions to the good. The recent White Paper told us that the trade balance is nearly seven hundred millions to the bad. It is impossible to set one against the other because the first is pounds and the second is mainly dollars.
§ What then are the conclusions from this survey? I submit that they should be these. First, that it is essential to reduce the general level of prices. The right way to achieve that, taking a long view, is, of course, to increase supplies. That depends upon the numbers and skill and industry of our workers, upon the enterprise and efficiency of our managers, and upon the cleverness and success of our merchants, chief among whom to-day are the Government buying Departments. Whether their work is well done, indifferently done or badly done, the public cannot judge, except by results. I am not sure that those who are now in charge of food and supply and transport and shipping command the same degree of confidence as those who performed those functions under the Coalition Government during the war. If the Government buyers are unsuccessful in their purchases, we cannot tell how far that is unavoidable and how far it is due to lack of skill. Meanwhile, until long-term improvements in productivity can be brought about, in this and other countries, we must secure, by all the means we can, a standstill in prices. That demands a standstill in wages, profits and salaries. The Government have appealed to the nation with great courage and energy, and they have faced the unpopularity among their supporters that might ensue from an appeal for a standstill in wages. The Trades Union Congress, however, with a high sense of responsibility, have accepted this plea, and have undertaken to do their best to carry such a movement into effect. Their attitude throws into clear relief the 14 callous, mischief-making irresponsibility of the Communist Party—happily only a very small body in this country, amounting, I believe, to about one in a thousand of the population.
§ The Federation of British Industries to whom the appeal has also been made, have responded in a spirit of good will, and we all await with hopeful expectation the specific proposals which they may make. It is now for public opinion, and for this House as an exponent of public opinion, to express approval and support of this movement to try to hold prices as a key to the entire situation. My belief is that in this matter your Lordships should also call upon the Government to reconsider the policy—hitherto generally accepted by all Parties, and certainly by the bulk of professional economist opinion—that high taxation is a means of keeping down prices and a method of preventing inflation. I have submitted reasons for thinking that in the long run it may have the opposite effect. Our economists tell us that we ought to be ready to make any sacrifices in order to hold the economic position—and they are right. But they seem to me to be looking about to see what further sacrifices they can suggest, even if on balance they are not a help but a hindrance to the object which they have in view.
§ My belief is that we should not continue taxes which were accepted for war but which are not needed by the Exchequer for necessary expenditure in peace; I think that we should call upon the Government to exercise stricter control of expenditure in general. I notice that in the Departmental Estimates for the coming financial year, which were published a few days ago, the general figure represents a decrease on last year, on net balance, of only £250,000,000. That is an extremely small decrease when we take into account the figures which I have given and which I again reiterate—national expenditure before the war, £1,000,000,000, at the peak of the war £6,000,000,000 and to-day £3,000,000,000. I suggest that a reduction of £250,000,000 in Departmental Estimates for next year seems quire inadequate. The securing of lower prices through taxation is only a minor expedient. The major effect, in the long run is to raise prices. What we need, as I have said, is to reverse the trend hitherto, and by so doing to grant to the 15 nation what would be regarded as a great alleviation of its burden. Particularly would this plan be effective if it were accompanied by an active intensification of the Savings Campaign. Meanwhile, to hold the position temporarily, during the latter part of this year and in the immediate future, we shall have to look for provisional aid to the Marshall Plan, and possibly to the Dominions, if they would continue—as they have hitherto most generously done—to send us supplies on easy financial terms; but that last expedient cannot be more than provisional. After all, it is only the principle of Artemus Ward: "Let us all be happy and live within our means, even if we have to borrow the money to do it with." We have had a production campaign, especially successful in the coalfields, and a savings campaign. Both are still being waged. Now we are fighting what I may call the battle of the prices. The Government are calling upon the nation to mobilize for that. It is the task of the nation actively and quickly to respond. I beg to move for Papers.
§ 3.23 p.m.
§ VISCOUNT SIMON
My Lords, the noble Viscount who has raised this Motion has spent much of his time in a closely reasoned argument about the relation between high taxation and prices and in challenging the view that in some circumstances high taxation is the means of preventing inflation. He always speaks with such careful preparation, and draws on so large a fund of knowledge, that I feel sure everybody here will want to study what he has said. Certainly I shall want to read it over again before I feel confident that I followed his whole reasoning. But we shall have other economic debates. Indeed, I think that the date of this particular debate is rather unfortunately chosen. We are expecting shortly the Government's Economic Survey for 1948. What that will contain, of course, no one who is not in the secret knows; but I think I may say in advance that if it is of the importance of the similar document published for the previous year, those on this side will certainly desire an early discussion on the economic situation in the light of that White Paper. In the meantime, we are holding an interim discussion, in which I have no doubt it will be useful to consider what has 16 been said by my noble friend Viscount Samuel.
We had an earlier debate (not that to which the noble Viscount referred) on the Second Reading of the Finance (No. 2) Bill, on December 18, when a great deal of ground was covered and when the noble Lord, Lord Pakenham, was in considerable difficulty in replying. The hour was late; Christmas was very close; the noble Lord was at the time charged with immensely important affairs in Germany; he was called on to deal with a variety of matters, and he had already made several speeches that day. I can quite understand how it came about that his reply on that occasion did not cover the ground. All I would ask is that in the speech he is about to make he should deal with one or two of the matters which were raised and were not answered on that earlier occasion, so far as they are still relevant. It is of only secondary importance, of course, to go back over what has already happened. It is important mainly because it may guide us to form a wise conclusion about the present very anxious situation. I confess that I still feel, and I think a great many people still feel, the greatest doubt—and, if you like, confusion—as to what is the real explanation of the prodigious rate at which the American Loan ran off, as it did, in the second half of last year. I find it most difficult to believe that the explanation simply is, "Well, American prices rose to such an extent." I admit at once that that was a most important factor. But I have never seen any attempt to equate the one with the other.
When we bear in mind that in the last Economic Survey we were told that it was the intention of the Government to use at the rate of £30,000,000 a month the Loan which they had secured; that they calculated that they would have £600,000,000 left at the beginning of the year 1948, and that therefore they would still have a substantial sum to draw on, not only this year but next year as well, I feel that the matter does require some explanation. It was manifestly a mistake when the previous Chancellor of the Exchequer, Mr. Dalton, said that we could safely discount the new provision which came into force on July 15, by which we undertook to pay out in dollars in respect of current sterling liabilities. It was a mistake, because unquestionably that would lead to a tremendous, sudden drain at a most critical time. Without 17 wishing to prolong the debate on what may be called a historical point, I would say that it may be rather important to know a little about it. I would add the question: What is the amount of the American Loan which is still available? Or has it all been used up? I think it was said that £100,000,000 was left and was frozen after the severe drainage away of so large a part of the Loan. How does the matter stand now? Is there still a portion available, and if so, how much?
So far as the Minister can properly indicate—and I wish to be reasonable about it—how far do the Government anticipate any help from the Loan? How will matters stand when the Marshall Plan, which was rightly characterised by the noble and learned Viscount as most helpful and generous in intention, comes off? Much depends on when it comes off, at what figure it comes off and how we can carry on a very difficult situation until then. It depends on future happenings, and I do not expect any very clear statement about that. The point I want to make, particularly in the light of what has been said by the noble Viscount, Lord Samuel, is this. That we are in a grim situation, I suppose nobody denies; and every serious-minded person is exercising his brain as well as he can on this most difficult subject. It seems to me that we can deal with it only by the careful handling of matters which are within our control. The noble Viscount, Lord Samuel, said just now that there had been a most tremendous rise in American prices. So there has been; but we cannot control that. I venture to think that we should be exceedingly unwise if we preached to the Americans about it. The things we have to concentrate on, I should have thought, are the methods and management by which we may hope, within our own sphere, exercising our own powers, at any rate to mitigate the dangerous situation.
I have formed the conclusion, which I submit to your Lordships, that really we have suffered because there has been no very clear course steered as between action which has an inflationary tendency, and action which may be taken—and I think under the auspices of Sir Stafford Cripps is quietly and skilfully being taken—to correct that tendency. Nobody wants to criticise individuals as individuals, but it seems to me that the 18 action and conduct of the former Chancellor of the Exchequer at the Treasury had a distinctly inflationary trend. I cannot altogether forget the rash assurance which he offered some time before—I think it was to the Trades Union Congress—when he said that the fear of inflation was diminishing and had largely passed away. I think that was a very hopeful view, and what has happened since by no means confirms it. The importance of it is that in the early years of the life of this Government (in these matters, of course, the Chancellor of the Exchequer speaks with authority, though the whole Government share his responsibility) there was nothing like the dread of the consequences of inflation that there ought to have been. It was difficult. An appeal had been made at the General Election to the mass of our voters which, while it did include warnings that we were faced with difficult times, laid too much emphasis on the good time that might be coming if only the Socialists were returned to power. The practical judgment of the mass of the public did not have regard to the danger arising from an inflationary trend.
I would like to give three examples. Take, first, the effort made by Dr. Dalton to borrow at what must now be recognised at artificially cheap rates. It was a policy pursued at a great cost. The last of his issues, if I remember rightly (a 2½ per cent. issue), fell almost at once to 90 and stands to-day somewhere around the 80s, with consequent influences on all other Government stocks. At this very moment the investor in Consols will get a bigger rate of return than before Dr. Dalton started. I think when he started, the return, as figures were then, was something over 2½ per cent., and to-day it is over 3 per cent. And this was all done at the cost of a greatly increased creation of credit by the Bank—the creation of more money at the very time when, in Dr. Dalton's own words, the great difficulty was that there was too much money chasing too few goods. That is a policy which I believe the Government, in their wisdom, are now unwilling to pursue and are doing their best to correct. But it is an illustration of what was happening a little while ago.
Take food subsidies as a second example. There is, in fact, a great deal of misunderstanding as to the purpose for 19 which food subsidies were originally instituted. On this I may speak with a little knowledge, as I had something to do with it at the beginning. The original idea about food subsidies was this. We sought, by setting aside, say, £50,000,000 (as it was in the early stages of the war), to cancel out the immediate effect of the war on the prices of things brought from overseas. The moment a war breaks out it becomes more expensive to bring things across the oceans of the world to this country: ships may be submarined, the rates of insurance rise, and there is immediately an automatic increase in prices. At that time it was very desirable to cancel out that increase at once, if it could be done. That was the way in which food subsidies were regarded at first.
There was a second very important consideration, which was this: that if the prices to the consumer of prime articles of food could be prevented from rising, then in the pinch of the war some, at any rate, of the risk of there being demands for higher wages, possibly stoppages, disputes, arguments, and even strikes, was cancelled out. It was essential under war conditions that everything should be done to minimise that danger. In other words, it is not really the case that food subsidies were originally conceived as a social service. Indeed, it seems to me that as a social service they are extraordinarily clumsily constructed. A social service ought to bring the resources of the State to the help of those who need them most. That is the nature of social reform. But these food subsidies operate on the breakfast table and the dinner table of every one of your Lordships, whatever the income you possess, quite indiscriminately, and without the slightest regard to the fact that they have to be paid for out of the general taxes to which everybody contributes, and which to-day are, in fact, very largely a contribution from the poorer classes. I say, with respect, therefore, that it is a fallacy to suppose that food subsidies were originally of the character which they now assume.
I would ask the noble Lord if he would kindly tell us what is the present policy of the Government in regard to food prices. Are they fixing them at some figure, notwithstanding that the prices of food may rise? What is the view which they take of that problem, which is said now, I think, to involve 20 £392,000,000 a year, or thereabouts? And how is that question affected by the fact that the cost of imported food is rising so rapidly? I instance things like Canadian cheese or butter. If I understand correctly what I have read, the present Chancellor of the Exchequer is letting the price of, say, bacon rise. I am not saying that that is wrong, but it seems to me that it would be of assistance if we knew what was the present policy of the Government in regard to food prices.
In the meantime the most absurd things are being said in certain quarters. I do not know whether your Lordships have had your attention called to a pamphlet which was issued the other day from the Labour Party headquarters. I do not accuse the Government personally of drafting it; I only say that it was issued and is being circulated by Labour Party headquarters. It dwells on the increased prices of foodstuffs from America, and so on, and I would draw your Lordships' attention to this sentence which it addresses to the working man:But you don't have to pay them when you buy your food in the shops. Why? Because the British Government pays nearly £400 million a year towards the cost of your food, so that you don't have to pay inflated prices.One asks, in all humility: And where does the British Government get it from? It gets it by taxation which hits every sort of person, and indeed, if analysed, it hits heavily the very people who are themselves, at the same time, enjoying the benefits of the benevolence of the British Government in providing £400,000,000 a year.
I venture to think that that is a second example of a policy in which there has been an inflationary trend, although I fully recognize the grave difficulty which would face anybody now in dealing with the question of food subsidies. I take a third example, and I would like to ask a question as to the capital expenditure which has been authorised since this Government came into power. I believe that if you add the amounts together it is something in the neighbourhood of £1,000,000,000 in less than three years. Capital expenditure is not very difficult to justify if you take one item at a time. It is quite easy to do what indeed Dr. Dalton did in his broadcast last Saturday—to take certain expenditures and challenge his hearers as to whether that is not a good thing. I do not doubt at all 21 that if prudently administered there are all sorts of directions in which expenditure of a capital nature may appear to be an excellent thing provided that it is suited to the times in which we live.
But the question is not that. The question is to add up all of these capital expenditures, see what the total comes to and then ask yourselves: In the circumstances through which we are now struggling, can the spending in capital expenditure by Government authorities of so large a sum, collected in taxation by the Government, possibly be justified? What matters is the total. I certainly understand that the present Chancellor of the Exchequer—and indeed, the Government as a whole—has an eye on this problem, but the question I would like to ask is not whether they have made declarations that capital expenditure must be watched, but whether they are really engaged in reducing capital expenditure, so far as it is within their power, and, if so, what kind of amount is now being taken off. I feel that it will be found—at any rate, so far as my own inquiries and information go—that up to the present, although this danger (and it is again an inflationary danger) is admitted, none the less in point of fact the amount of the reduction in capital expenditure is very small indeed. Perhaps the noble Lord opposite, to whom I gave notice of one or two queries, may be able to tell us in his speech what is, in fact, the reduction that has been effected.
As I have said, I think in the policy that is now being pursued there is a mixture of two voices, and no steady steering along a defined course. To my mind, you can see that if you compare what was said by Dr. Dalton in his broadcast last Saturday with what has been said with great clearness and courage by Sir Stafford Cripps. I am not sure that I would have called the broadcast entirely a Party political broadcast. A good deal of it seemed to me to be rather in the nature of an attempted justification of the expenditure authorised during the time of office of the former Chancellor of the Exchequer. It is perhaps what might be called in this learned and classical assembly apologia pro largitione sua. The end of the broadcast contained a sentence to which I wish to draw attention before I sit down, because if this is the way in which the case has been put to the people 22 of this country, who want to do what is right and who look for guidance, who know this is a very difficult subject, and who are bound to depend very much upon what they are told by those they respect as leaders, I think it is a serious matter. I have here a note of the broadcast itself, and I find at the end of it a reference to the effect of stabilising prices which seems to me disturbing. What the speaker said was this:As prices are brought down, so will the value of money be raised. Wages and salaries will go further and buy more, and so will pensions and all other fixed money incomes.Now I quite understand the hope that if you proclaim a standstill, things will not change as they would if you did not secure a standstill. But really, at this time of day and in our present conditions, to say that the real income of the wage earner or the salary earner is going to be improved, seems to me a most unjustified and a most serious misstatement. The noble Viscount seems to disagree, but I think that is so. I do not wish to be unfair at all, and I think Dr. Dalton said this:Prices and profits must come down, not go up any more."—and then he refers to Sir Stafford Cripps in very proper terms. He continues:Prices are too high and this is raising the cost of living."—Then comes the passage I read:It is no use letting wages chase prices upwards. As prices are brought down so will the value of money be raised. Wages and salaries will go further and buy more and so will pensions and all other fixed money incomes.That is really a delusive hope at this moment. The very best you could hope to achieve, I think, would be a standstill. The Government know perfectly well that the best they can hope for is that the real incomes of the people can be stabilized. Even so, of course, the standstill may not be a very adequate cure if (as at least some people think), we are being swept nearer to the rapids. I respectfully submit—and I do it without being censorious—that it is playing on the superstition that there are vast sums of profits to be tapped in order to improve the wage earner's conditions. There are not. It is an untrue and therefore a very unhappy thing that that should be the idea created in the mind of the decent citizen of this country. I did not know it at the time but I saw 23 afterwards that in The Times leader today the same point is made. The first leader, it seems to me, is right when it insists that it would…create a completely false impression…to suggest that an improvement in real wages by reducing prices while wages are kept stable is even remotely possible at the present time…To advocate a raising of the standard of life now is to ask for the moon and encourage dangerous delusions.I should have thought that we would do well in difficult circumstances if indeed we could secure a standstill. But I would invite serious-minded men of all Parties to reject and to expose the fallacy—for it is a fallacy—that there is waiting to be drawn upon some great accumulation of wealth which can be used at this time, and in these difficulties, for the further improvement of real wages; it is not the fact at all. I cannot think it wise to speak as though the wage and salary earner will continue to have an increasingly better time. The fixation or the reduction of prices is to people who speak in this way a reason why real wages should rise. That is merely to announce cheerfully that we are "rounding Recovery Corner." The Lord President of the Council used that phrase some time ago, and I do not think that it is a fair expression of the extent of our anxieties at this moment.
Sir Stafford Cripps is not putting forward so encouraging a note. He is insisting that the position is not at present improving but that the position as regards our balance of payments for external trade is infinitely worse. There is an undeniable danger of a decrease in real incomes, and a testing time may be close which will call for sacrifices from everybody. I am the last person to adopt an alarmist tone; but, after all, is it not the fact that at present, in order to balance our external trade, we are drawing to the tune of something like £40,000,000 a month on our very reduced resources? Or is the figure more than that? Perhaps the noble Lord will be able to tell us what is the actual figure that we took from our reserves last month, and are taking at the present time, in order to maintain this precarious balance. Obviously, that is a very temporary expedient. And whilst I am not presuming to dogmatise on things so difficult as this—indeed, I sympathise with all my heart that these things should come upon any Government in this country—I 24 beg the noble Lord opposite to tell us, without using the language of alarm, whether we ought not to recognise that we are facing an iron time which may, unless we are wise, get worse. I hope he will discourage the idea that any section of the population, however deserving or hardworking, can in these circumstances look forward to anything except a full share in the burden which lies upon us all.
§ 3.55 p.m.
My Lords, I know that the whole House is grateful to the noble Viscount, Lord Samuel, not only for giving us the chance to discuss these grave matters at this particular moment but also, if I may say so, for the elevation, detachment and wisdom with which he has approached a dull subject. I cannot help mentioning that a few days ago a friend of mine who has never been to a debate in this House told me that he always read the debates, and that of all the speeches he preferred those of the noble Viscount, Lord Samuel. I do not know what his politics were, but I asked him whether it might not be a good idea to come and listen to the noble Viscount one afternoon; but he said No, he preferred to keep his illusions. I can only hope, though he has not asked me for a ticket this afternoon, that he has overcome his diffidence and has listened to the very fine speech that we have heard. The noble Viscount has given not only me but a much more important person than myself, the Chancellor of the Exchequer, a great deal to think over. I am sure that, with his experience, Lord Samuel will not expect me to provide an answer to this question of the relation of taxation to prices, because that matter brings us very near to the Budget.
The noble and learned Viscount, Lord Simon, was extremely charitable to me, in a most scintillating manner, and I take it as a kind of compliment to the present Government that he concentrated almost without exception on the alleged errors of a past member of the Government, and of an unspecified political scribe who writes what I believe is called political literature—though these writings do not always rise, in any Party, to that level. I have not had the pleasure of reading the pamphlet. I do not know the gentleman who wrote it, or the gentleman who wrote the Industrial Charter, or the gentleman who 25 concocted the words somewhere about the capital expenditure programme of the Government—words which, I believe, were endorsed last October at Brighton. The suggestion was that the capital programme was nothing like enough. I suggest that that gentleman, and the gentleman whom the noble Viscount has in mind, should fight it out and later report to your Lordships' House. I am bound to say that the noble Lord, Lord Woolton, who presided at the Brighton Conference, acclaimed this pamphlet, including the passage on capital expenditure to which I have referred. At any rate, on the subject of capital expenditure, since I was asked a direct question by the noble Viscount, I would remind him that the programme for the year 1948 is to bring about a cut of £180,000,000. It was not until the middle of December that we had an opportunity of discussing these things, and I am sure the noble Viscount would not seriously suggest that nothing is being done. There is a cut in the construction of factories: I know that on the best authority; and, generally, there will be this cut of £180,000,000. I hope the noble Viscount will take it that this cut will be made, although I cannot give him a figure of a cut between December and February—indeed, I should hardly have thought that in the case of capital expenditure one could expect a figure to emerge in so short a time.
May I take up one more of the noble Viscount's incidental points, before I turn to a general discussion of the situation and what occurred last year? I would remind the noble Viscount that the Government's attitude on food subsidies has been stated more than once. As to what the Budget will say on this question I am naturally as ignorant as the noble Viscount; and if I were to say anything it would be the sort of indiscretion which does not happen twice in a lifetime! Although my experience of politics has not been very long, it has been fairly chequered and I would say that I have never known a man who took so much interest in the young people of his own Party—and also of other Parties—as Dr. Dalton; and he took effective steps to lead them. While he is temporarily down, although he is a buoyant figure who will come up again, I feel it right to put that on record, along with the criticisms that have been made of him.
26 Whatever may be our disagreements this afternoon, I am glad to find that they appear to be less than on some previous occasions. It seems to me that five, things, at least, should go out as agreed conclusions from this debate. First of all, the country is in an exceedingly tight spot. Secondly, the people are making a mighty effort. They are living on smaller imports than they were before the war; they are exporting more, and producing more, than ever before in the history of this country, so far as one can calculate. Those things should certainly go on record. Thirdly, we must all do still more than we have been doing and—perhaps even more important—find out what is the most essential work that it lies in our power to perform. Fourthly, we must at all costs avoid inflation. Fifthly, our own recovery is inextricably bound up with the recovery of the Empire, and particularly of Western Europe—although I will not deal with that point this afternoon.
There has been little doubt in the country as to the tightness of the spot in which we find ourselves since the convertibility crisis broke upon us in August. The seriousness of the situation has, very properly, been underlined by both the eminent speakers who have preceded me to-day. During the year 1947, as the recent White Paper on the United Kingdom Balance of Payments (Cmd. 7324) informs us, there was a net drain on United Kingdom gold and dollar reserves of £1,023,000,000. Perhaps I should have mentioned this White Paper in advance to the noble Viscount, for I am not quite sure that he is fully seized of its contents. I hope that those members of your Lordships' House who pressed on previous occasions for a White Paper will find a satisfactory answer in the White Paper now before your Lordships. Therefore, unless the House press me very strongly, I will take leave not to go into great detail about the figures set out.
However, I would remind the House that the drain which reached its peak at £156,000,000 in the month of August had come down to £48,000,000 in the month of December, by which time, of course, it was still alarmingly high. In the month of January—I must report to the House what has not hitherto been published—the drain rose from £48,000,000 to £57,500,000. I hasten to say that this last figure is not quite as appalling as it 27 appears; indeed, it is not really a characteristic figure at all. Certain special factors have been at work raising it considerably and, if there are any doubts on this point, I am sure that the noble Viscount who is to wind up the debate later this afternoon will set out those special factors. But there is no reason to suppose that it is characteristic. We have no clue as to what the drain is likely to be in the immediate future, although it is not difficult to form a rough idea of how serious the position is. The noble and learned Viscount, Lord Simon, asked how much of the Loan was left. £75,000,000 of the American Loan was left at the beginning of the year—with your Lordships' permission I will take the figures as at the beginning of the year—and if we add to that other reserves, and count in the £80,000,000 which is coming to us from South Africa, we may say that our reserves for the whole sterling area at the beginning of the year were slightly under £700,000,000. That excludes the Canadian Credit, the details of which I will not go into this afternoon.
Yes, but it leaves out the Canadian Loan, which raises some rather doubtful points. The gold drain in December was £48,000,000, which has risen, in an uncharacteristic month, to £57,500,000. However, it is expected to be less than that in the time ahead.
The noble and learned Viscount, Lord Simon, is naturally, and at the same time courteously, anxious for a more precise view from the Government as to how long the drain is expected to continue at this kind of rate, and how long our reserves may be expected to last With the best will in the world, in the circumstances, I (or even the Chancellor of the Exchequer if he were standing here) could give only a speculative forecast. But even that privilege is denied me to-day, since the Economic Survey for 1948, containing estimates of this kind will not be published for about a fortnight. The noble Viscount asked me when it was likely to appear. The latest information is that it should be available to the public in just about two weeks. The noble Viscount also asked me, incidentally, whether it would contain any clear statement 28 of the Government's broad intentions regarding any credit we might receive from the United States. I think that on reflection he would hardly press that point. Indeed, he did not press it in his speech, because it will obviously be rather hard until we know for certain that we are to receive a given sum, and how much it will be, to say what we propose to do with it. That would appear rather an extravagant gesture on our part in the eyes of our generous American friends.
At any rate, that is as far as I can take this question of the drain from that angle this afternoon, in advance of the Economic Survey. I am the first to agree that we shall have to discuss all these matters at greater length when the Economic Survey is available.
§ VISCOUNT SIMON
May I inquire whether or not the Economic Survey will be published before Easter—because Easter is early this year?
Oh, yes. My information is that it should be published within a fortnight. I received that information from a gentleman who is closely concerned in its finishing touches. Unless some unforeseen obstacle occurs, we may take that as certain.
How is it that our country has found itself in this position? We have been over this ground so often in your Lordships' House in the past year that perhaps I may be allowed to sum up rather briefly this afternoon the story as I see it. Before the Second World War, we imported a higher proportion of our essential requirements than any other great country, and we paid for only about five-eighths of them by physical exports. That was a thoroughly artificial, precarious and unsound position, as we all know now so clearly—though it does not mean that it would not be agreeable to get back to that position. In the future, whatever temporary assistance we may be fortunate enough to receive, we shall have to pay for what we buy instead of paying for only rather more than half of it; and that is a totally different situation from the one which most of us have been brought up to regard as natural and fitting for Britain.
That is not the same, of course, as saying that in the post-war era the British people are faced with an inevitable and indefinite prospect of a lower standard of 29 life than before the war. We on these Benches believe, and I do not think the belief is confined to our Benches, that our pre-war resources could have been spent and allocated far more effectively than they were, that our man-power in particular could have been used much more fully, and that the product could have been distributed much more closely in accordance with the principles of social justice. I do not know that there is any great controversy about that at the moment, but, at any rate, that is the underlying doctrine behind the thought of the Government. During our term of office we have sought to honour that belief, and history will have to judge whether we have been successful or not in doing so. I am bound to say that the noble Viscount has frequently been very generous in calling attention to the fact that the public have shown a singular fidelity to the votes they cast at the Election, and it does appear that, with all our manifold imperfections, they believe we are attempting to pursue a worthwhile ideal.
When the noble Marquess, Lord Salisbury, the Leader of the Opposition, in a thoughtful speech last August, told the House that Britain had previously been a very rich country, and was now temporarily a very poor one, I think he put his finger on an important element of truth. But, as he would be the first to agree in regard to an isolated observation of that sort, it is not quite the whole truth. Even to-day, with all our privations, our standard of life is still much higher than that of most countries of the world.
§ THE MARQUESS OF SALISBURY
My point was that our standard of life is high, and we rejoice in it: but can we afford it?
Replying shortly, if I may, I should say that if we properly dispose of our affairs in the years ahead, we can certainly afford a standard of life much higher than that of most countries of the world; but I quite agree that we are to-day a country that is faced with great poverty unless certain fundamental adjustments in our whole national economy are made. That is where I do agree with the noble Marquess, and that is perhaps one of the main points, or indeed the main point, that he was making at that time. As a potentially rich country, but one that 30 trembles this year on the brink of extreme poverty, we are confronting a period of prolonged struggle to make both ends meet. In 1946 things, on the whole, went a good deal better than was expected; it seemed to everybody at the time that in fact our expectations of improvement were more than fulfilled.
In 1947 almost everything went much worse. The coal crisis in February meant that our export drive was certainly interrupted and by the end of the year reached only 120 per cent. of that of 1938 against the target of 140 per cent. The terms of trade that have been alluded to—that is, the price of our imports compared to that of our exports—were, owing to the world scarcity of primary products and also the general scramble for the exports of the Western Hemisphere, much more unfavourable than the Government, or indeed, I should think anybody had expected. Income from invisible items was negative as a result of the failure of countries like those in the Far East to recover.
What was the ultimate reason why convertibility could not be maintained? The noble Viscount has asked me to say very briefly, in a sentence or two as I think he would wish, how it was that the drain increased so rapidly in the middle of the year and how we were suddenly swept off this perch of convertibility. Looking back upon it, it is difficult to understand, though I do not know that most people forecast it at the time. I am not sure that the noble Lord, Lord Rennell, was not one of the most observant in this regard. But I think one would always expect that if our position were threatened there would be what, in old fashioned words, is called "a run on the pound," and that is exactly what occurred. In other words, foreigners saw that sterling was in danger and they took every possible step to move their funds from sterling into dollars Hence the sudden increase in the drain I do not think that is a process which is difficult to appreciate.
That was the situation when we discussed all these matters in the debate initiated last August by the noble Viscount, and certain steps were then outlined to the House and have since been carried out. First, there were the cuts in the import programme. They were not liked at the time by anybody, but they have been accepted and I do not think anybody has quarrelled with them. On 31 the side where Government and citizens come together, and where a certain amount of initiative has to be shown by the Government and a certain amount by the citizens, I would single out the various steps that have been made to negotiate trade agreements with various foreign countries. I would mention the payments and trade agreements that have been negotiated with the Argentine, Belgium, Italy, the Netherlands, Portugal, Sweden, Switzerland, U.S.S.R., Egypt, Canada, Poland, Finland and Brazil. In all these agreements three objectives have been followed: first, to secure our essential imports; secondly, to maximise trade between ourselves and the other country, and, thirdly, to avoid any payment on our part out of our gold or dollar reserves. There have been one or two difficulties, but by and large these objectives have been successfully achieved in the agreements which I have mentioned. Perhaps the House would care to pay a tribute to the brilliance and energy with which a great network of this kind has been rapidly improvised by the devoted band of officials organised for the purpose when plans based on the convertibility conception had to be rapidly recast.
At the same time the House may, or may not, be aware that important steps have been taken to prevent the sterling area, apart from the United Kingdom, producing such a drain on our reserves this year. Since last August special arrangements have been made with the sterling area. There was a conference in the autumn, and now continuous contact is maintained between the officials concerned in the other sterling countries and ourselves. I think it is fair briefly to say that in the year ahead of us, the year 1948, anything that is drained away by the sterling area—and after all these reserves belong to them as much as to us—will be much easier to forecast, and that the sums will in fact be much more economical. I am not going to say that there was gross extravagance—that would be most unfair, because some of these countries needed things—but certainly things have been tidied up and we know where we are in relation to the sterling area far better than we did last August.
That brings me to the export drive itself, which is the core of our national struggle at the moment. The House will 32 remember that new targets were set in September and that the programme of home investments has been cut in order to free resources for export. Discussions have taken place with industry about these new targets, and the response has been very satisfactory. Difficulties about some targets have arisen, owing to shortage of steel, and it is likely, therefore, that certain adjustments will have to be made. They will probably be explained in the Economic Survey when it is published. In January, 1947, exports were 112 per cent. compared with 1938. In August last the figure was 105 per cent.; in January this year 126 per cent. That is a marked advance and, undoubtedly, so far as it goes, taken globally, it is encouraging.
Yes, that is volume. I will not detain the House to consider the special difficulties created by the distribution of exports between different markets. I am sure that if noble Lords wish for detailed information, which I have brought with me in considerable quantity, they will let me know.
§ VISCOUNT SWINTON
Can the noble Lord give us in general terms what is the proportion to hard currency countries and what is the proportion to others?
When I give a figure I like to give the right one, and I will not give that offhand. I dare say that before I come to the end of my remarks I shall have that information available.
§ VISCOUNT SWINTON
The noble Lord offered to produce further information if we wished. Could he also convert the percentages given into requited and unrequited.
Speaking offhand, I would say that the proportion of our exports in 1946 to hard currency areas was 15.4 per cent. In 1947 I think it was 21.3 per cent. I may easily be wrong, of course. I have been given a figure of 15 per cent. for the Western Hemisphere, but I am going to be so bold as to question it. I am simply relying on my memory, and I am taking rather a bold step in questioning authorities who are so close at hand. My recollection is that 21.3 per cent. was the proportion 33 for 1947. I have equipped myself in some detail with an account of the various measures taken to try to impel our exports in the direction of hard currency countries. Putting it briefly, of course, we have done everything we can in the way of allocations to encourage manufacturers and exporters to sell their goods in those countries.
Now let us look behind this figure of 126 per cent. of the pre-war total. We are exporting in terms of volume 126 per cent. of our pre-war quantities. Let us see what that means in terms of human effort. I am very glad that no one in this debate has suggested that the British people are not working hard. In all the circumstances they are working very hard, although they are not all working at the right things. The country is producing distinctly more than before the war and, as I have already said, more than at any time in its history. I would like to give some figures to show the increase in production since the crisis of August.
§ LORD CHERWELL
If we really are producing considerably more and if we are exporting only 26 per cent. more than before the war, seeing that our exports before the war absorbed only about 12 per cent. of total production, will the noble Lord explain how it comes about that we are short of practically every sort of article in this country?
I think the shortage of those articles is greater in some quarters than in others. I would certainly say that the poorest section of the community are better off than before the war. I do not think that noble Lords on these Benches will doubt that. But there are grave shortages, particularly the shortage of food. In that case the shortage is very pronounced. However, I am afraid that the noble Lord who is himself a statistician must not resent the achievements which statements that I am about to place before him, will show. It is, I think, a pity that the noble Lord left the business. He was a leading governmental statistician, but he left that sphere for still higher flights of thought. If I may put it to him respectfully, he must not crab the work of his old colleagues. I will now give the noble Lord, who likes figures, some figures which will be readily intelligible to far less talented mathematicians than himself.
34 Output has risen sharply since August, but perhaps it is fairest to make a general comparison between 1946 and 1947. So far as we can tell, the London and Cambridge Bulletin seems likely to be confirmed here by the Government figures of production. The latest index shows that there was an increase of production between 1946 and 1947 of about 7 per cent. That is to say, the index suggests that there was an increase of 7 per cent. between the two years. But between the second half of 1947 and the second half of 1946—which is perhaps the best index, for we believe that this shows that people responded to the crisis—the increase would be a great deal more than 7 per cent., something of the order of 10 per cent. If we took the figure for November, 1947, which I think is the last available, we should find that it was something like 19 per cent. higher than for 1946. If the noble Lord will accept these figures, he will notice that they point to a sharp increase between 1946 and 1947. His only hope would be 10 argue that 1946 was a much worse year than pre-war years, that less was produced in 1946 than in 1938. The best information suggests that there was not much in it between 1938 and 1946. However that may be, 1947 was quite definitely a year when there was more production than in any pre-war year. That is the information of two independent bodies—one may almost say rival bodies—of statisticians.
§ LORD CHERWELL
Does the noble Lord include in his definition of what is produced the work performed by people employed by football pools? Does re also, for instance, reckon that if twice as many people are taken in a railway train as were taken in the earlier years, it means that the railwaymen have produced twice as much? If you do that sort of thing, of course, you can get very favourable results. But if you claim that the actual quantities of manufactured articles have materially increased it seems impossible to explain why we are so short of almost everything in the home marker, in view of the fact that we have exported such a small extra proportion of our manufactured goods, as he has told us.
I must ask the noble Viscount, when he replies, to explain in words which are quite simple, words of one syllable, the true nature of 35 the London and Cambridge Bulletin which has now been published and which is available to the whole country. The noble Lord, Lord Cherwell, will have either to reject out of hand or accept what I am saying as the substantial truth. The noble Lord may come forward and say it is all a question of football pools. It is not true, though he may believe it. I have not the complete index in front of me, but if I may, I will now refer to some of the key industries from which I think the noble Lord has been inclined to draw his own examples. Let us take two or three of what we may perhaps call the "bottleneck" industries. I have particularly in mind coal, steel and cotton spinning. The House knows of the noble way in which the miners responded during the latter part of last year. Weekly production this year is still below the levels of November and December, but it is recovering from the holiday trough and compares well with January of last year. For January, this year, the percentage was 11 per cent. higher than for January of last year. The production of steel in January this year was 17 per cent. higher than in January last year. Cotton spinning output was 18 per cent. higher in January of this year than in January of last year.
These are figures which I should have thought the House would be glad to accept. I should not have thought there would be any reluctance in any quarter to seize on these figures, because to me they represent a splendid achievement by the British people, frequently having to put up with most discouraging circumstances but fighting back and putting up, in many cases, new records. We must hope that those increases will continue. Coal docs not seem likely to be the most serious bottleneck this year. It looks as if steel will probably fill that rather doubtful place of honour—but that is not due to any weakness on the part of the workers; it is due to shortage of scrap. Coal and cotton still need increased labour, and I am sure the House will do everything in its power to influence recruits to enter into the coal mines and the cotton mills. I seriously suggest to the House that we would be losing sight of something rather splendid which has been happening in England in the past few months if we did not pay attention to these figures, or if we regarded them as simply the spare-time 36 occupation of statisticians. They represent a real effort, a real response to what was hoped for last October.
Yet the drain continues. The British people have been hit where they hardly expected it. Like a boxer, they are struggling back into the centre of the ring with a nasty cut over the eye, damaged in a way that may bring defeat to all their efforts unless these are unremittingly attended to. The leaks are being stopped. The luxuries are being cut out. Our noses are pressing themselves willingly to the grindstone. But still the drain of dollars goes on. That is the fact, and I am not trying to conceal it. I am simply trying to draw attention to the features, whether good or bad, in the national landscape. Clearly we should do something more and perhaps of a different kind. As Sir Stafford Cripps has said more than once, and as has been said by both speakers this afternoon, we should launch a head-on counter-attack on the pressure of inflation.
The whole House will have read the White Paper, Statement on Personal Incomes, Costs and Prices. You know its doctrine, which has already been approved and debated in another place. I think the House appreciates that doctrine, though not necessarily because it has been approved elsewhere. It says in effect that our costs must come down if we are to compete successfully in the export markets of the world. It says that the demand for goods on the home market must be diminished, if vital man-power is not to be sucked into producing for the home market when it ought to be producing for export. It says that if expenditure is to be kept down, incomes must be kept down. It says that as a general rule wages should stay where they are, and profits, if possible, should be reduced. It says that whereas the Government can take, and are taking, further measures to extend and tighten price control, the level of incomes in a democratic country cannot be fixed by the Government, but must depend on the traditional methods of free collective bargaining, though the White Paper does recognize that a heavy responsibility falls on the Government for indicating to the parties, in a time of grave emergency such as this, what kind of bargain is, or what kind of bargain is not, likely to benefit or damage the country. That responsibility it is discharging with all the vehemence at its command. My 37 right honourable friend, the Chancellor of the Exchequer (Sir Stafford Cripps), asked me this morning to pay special tribute when I spoke this afternoon to the way in which the Government's lead in this matter has been taken up by the T.U.C. and the F.B.I. That I gladly and wholeheartedly do, and in doing it I am hopeful that the whole House will wish to join me.
I am afraid that I have had a grim story to unfold to the House. It is no good pretending to the contrary. We are up against it, and the country should know the truth. The possibility of large-scale and much-needed assistance from the great and generous United States introduces a complication. On the one hand it would be folly to ignore the likelihood, as it now seems, of something very substantial being done for us by them this year. On the other hand, it is impossible to know how much or in what circumstances it will be forthcoming and quite wrong to count on anything as a certainty. In this situation we have done what noble Lords opposite, or indeed any sane man, would do in our place. We have declined to take extreme measures of austerity, which would damage our people and our power of recovery, so long as there is a reasonable prospect that they will be rendered unnecessary in the event. But we have made calculations regarding the steps that would have to be taken if the worst came to the worst, and we have built all our plans on the theory that if help does come from outside its whole object will be not to enable us to sink down on our backs, but to help us to get on our feet, and it is unlikely to be long continued unless we take full and vigorous advantage of the chance it offers us.
Noble Lords opposite sometimes assume that we on this side promised them the millennium if we were returned to power. In my experience, that has not been so. But I doubt if any noble Lord in any part of the House foresaw the whole combination of adverse elements that has descended on us from outside during the last year. All that, in any case, belongs to history. What the House wants to know now is where we stand. In the moral and psychological sense, we stand for a doctrine that is common to all of us—for the insistence that in this time of sustained national emergency there is a heavy presumption against anyone's right to increase his share of the national 38 dividend and in favour of everyone's duty to contribute more towards it, whether by increased effort or by effort in a more valuable direction.
In a physical sense, it might be possible, I suppose—and I do not know whether it would be with our people—to secure these results, this intensification, this re-adjustment of our whole national effort, by direction, by compulsion, by an iron discipline imposed from above alike on employers, trade unions and other citizens. That is not the way we have chosen, and it is not the way which would commend itself to the House. It is not the way that seems to us compatible with the values for which the war was fought and which we believe our nation, above all others, can exhibit most consistently to the world. Some measures of peremptory governmental interference it has been our duty to take. The cuts on imports, the higher taxation and the supplementary Budget, and the Control of Engagement Order, are examples of what I mean. After all, it has been mercifully unnecessary to use direction in the vast majority of cases. But we have never failed and I hope shall never fail to realise that the Government in Britain, as she is organised to-day, car at best provide a framework within which success is possible and likely.
There is, of course, an easier way than the one we have chosen of stabilizing wages and reducing profits and prices. It would consist of fixing all these things by Government decree. There is an easier way of producing a national effort. It would consist of ordering everybody to go about his business in a fashion that the Government thought right. There, again, we are convinced, and I feel sure the House will agree with us, that we would be throwing away our freedoms if we had to resort to these methods. I am sure we can come through our troubles, still sticking to democratic processes and beliefs, but only if we all work harder and at more unpalatable things, and abstain from certain forms of enjoyment which we have come to consider as our rightful share. One of the more unpalatable tasks that falls to all those who are better informed than their neighbours is to spread the facts, even when they appear harsh and painful. That is a task which none of your Lordships is likely to shirk, least of all when we remember the efforts that we are calling for from so 39 many millions of our fellow countrymen in humbler circumstances, and when we remember that a universal understanding of the national task is our only chance, but our sure chance, of standing up to our afflictions and once again coming through.
§ 4.40 p.m.
THE LORD ARCHBISHOP OF YORK
My Lords, I shall detain the House for only a few moments. I am not sure whether I ought to sympathise with the noble Lord, Lord Pakenham, on being called upon so frequently to speak on matters of major importance, or whether I ought to congratulate the Government on having a spokesman who is so acceptable to the whole House, and whose speeches are illuminated from time to time by flashes of unconventionality when, I suspect, he departs from his brief. I am not competent to enter into questions of higher finance. I am not a political economist—though we are all to-day domestic economists. I want to approach this matter from the standpoint of one who is always asking the question: How can this crisis, with all its gravity, be best brought home to the ordinary man? I want briefly to make four points.
My first point takes up the concluding remarks made by the noble Lord, Lord Pakenham. I am certain that there are still in the country a large number of people who do not yet understand the extreme gravity of the crisis. It is necessary for speeches such as that which has just been delivered, and such as have been delivered by the Chancellor of the Exchequer, to be repeated again and again, and to be repeated to the people, through the medium of the wireless and in other ways, in the simplest possible language, avoiding all technical terms, in the vulgar tongue, and in language which is relevant to the everyday work of our people. Let me take an example to explain what I mean. We all of us use that phrase, "lowering the standard of life," but I wonder what that means to a great number of people. I am convinced that it should be brought home to everybody exactly what is meant by "lowering the standard of life." To take another illustration; we all appeal to the people to do their utmost to help the nation at the present time, but I am frequently asked by people in humble walks of life: "Well, what am I to do?" There 40 are a large number of people who are anxious to do their utmost, but they do not know exactly what particular action they ought to take, or from what they ought to refrain. That is my first point—there should be a carefully thought out, systematic campaign of education.
My second point—and it is not new—is that, so far as possible, that campaign should be a united one. Whenever the nation has been in a time of crisis before it has faced it with unity. There is a great deal of unity to-day, and I should like to congratulate the Government and all concerned, on the way in which the trade unions and the employers have signified their determination to do their utmost to help the nation in this crisis. But surely there are large numbers of men of experience who do not belong to the present Government and whose advice might well be asked. So far as I know, no appeal has been made for co-operation from the Opposition; and among the Opposition there are many who have had great financial and administrative experience. Really, at a time like this it is necessary for anyone who has had experience to be prepared to pool it with that of others. In that way we are much more likely to reach wise solutions of these most difficult problems. Wisdom is not the monopoly of any Government, and the wisdom of a Government is not necessarily to be measured by the size of their majority. I am not for a moment urging that there should be a Coalition Government; I know that is completely out of the question at the present time. What I do urge once again—and what the noble Earl, Lord Halifax, urged in this House not so long ago—is that there should be something like a Council of State, in which members of all Parties, without in the least abandoning their Party allegiance, might be drawn into conference on this particular subject and make their own special contribution.
My third point is a point which was made by the noble Viscount who opened the debate—though he did not actually use the phrase—that there should be equality of sacrifice. I do not think we always realise how much members of the working class are being asked to surrender at this moment. For a long time they have been looking forward to their increases in wages. They have lately had every hope of obtaining their desires; for the first time in their long history they 41 have behind them the power of insisting on their demands. Just when, from their point of view, the outlook was most hopeful, they are told that, except in very rare instances, there can be no question of raising wages. That was a necessary decision. It is a decision forced upon them not by any Party but at this particular moment by the iron laws of economy. But it has meant a sacrifice to them, and that fact ought to be realised. When they say, as I hope they will all say: "For the sake of the nation we are prepared for a time to abandon all these claims," they will obviously expect equality of sacrifice in other directions. Already the importance of a stabilisation in profits and in prices has been stressed. Even if profits cannot be reduced, they can, at any rate to a large extent, be stabilised. Of one thing I am certain. If there should be a rise in prices, or even a suspicion of a rise in profits, we shall find at once a vigorous demand for a rise in wages. Equality of sacrifice is absolutely necessary if the nation is to act together in this crisis.
My fourth point is this. When the best possible schemes have been produced, when all plans as to what should be done to save the nation in this emergency have been made, they will not work unless there are a sufficient number of people who are prepared to show the moral virtues of honest and hard work, who are prepared to show restraint, refraining from making demands which otherwise they would have made, and who are prepared to make very real sacrifices for the sake of the whole community. I believe that the most valuable contribution which the Churches can make in this crisis is not by producing any economic schemes of their own—that might possibly be unwise—but for them to appeal to all classes of the community to exercise to the full those moral virtues without which we cannot overcome this crisis. I myself believe that the more our leaders and statesmen make an appeal to what is highest in man, the more likely they are to have a great response. Appeal, as I know we must, to self-interest, and also to the greatest happiness of the largest number; but those appeals, by themselves, will not be sufficient. There must also be a strong persistent appeal to what is highest in man—his unselfishness and sacrifice.
§ 4.50 p.m.
§ LORD PETHICK-LAWRENCE
My Lords, it is one of the pleasing characteristics of this House that we are not mainly engaged in what I think schoolboys would call "scoring points off one another." That, of course, does not rule out reasonable analysis and criticism of those who have been in power and authority on the one hand, and a proper defence of what has been done by those in authority by Government spokesmen of the day. I think it is in this atmosphere of calm consideration, trying to understand where we have gone wrong, trying to understand what are the means by which we can pull ourselves out, that we are most likely to reach a valuable conclusion to our debate.
A great deal has already been said of the causes of our present troubles, and in the course of discussion over the last year or two nearly every point of importance has been brought out. It would be idle and foolish for me to go over in detail all those matters which have brought us into the difficulties in which we are at the present time. But it does seem to me that there is one matter to which perhaps not quite sufficient attention has been drawn. The great strength of our position in this country in days gone by was that we were a great importer. We were by far the largest importer—at any rate proportionate to our population—of raw materials and foodstuffs. Our great strength in bargaining with other nations all over the world was that we came into the market with this enormous buying capacity, and were able to effect treaties and trade negotiations, either as individuals or as the State, just because we were a great and beneficent person—the customer. It remains true that since the war we are still a large customer for raw materials and food, but, instead of being the customer who is welcomed with open arms, we are the customer whom the tradesman is inclined to send away with a notice: "No goods for sale "—just as, not very long ago, when we used to go into a tobacconist and try to buy our favourite brand of tobacco, we found he had a printed notice on his counter bearing the words, "No cigarettes to-day."
I would remind your Lordships that the days before the war were days when food was actually being destroyed in some parts of the world. Coffee was being put into the sea or burnt; wheat was being destroyed and hogs were being slaughtered and not sold, for the simple reason that 43 there was too much. Therefore, when Great Britain came into the market and offered to buy immense quantities of those articles we were personæ gratæ. My experience when I was a member of the Government—and I am quite sure it remains so up to the present time—was that when a person who desired to purchase raw materials came into the market, all the rest of the nations of the world wanted to shoo him away and say: "You can do without the large quantities of stuff that you profess to require." Therefore, the strength of the position this country held before the war has turned into our very weakness.
I think that when people are naturally inclined to blame the Government for their inability to make valuable treaties in favour of this country, they neglect the fact that the great bargaining counter which we had before the war has been taken away from us and there has been substituted for it a disinclination to serve the customer at all. It reproduces precisely what we have in our retail shop in the small country village at the present time. It is said, for instance, that when we are making bargains with the various countries of the world we should have been able to do a better deal with regard to the question of sterling and dollars. Had we had the position we had before the war I have no doubt that when we were bargaining with Argentina, bargaining with the countries in the East, and even when we were bargaining with the United States, we should have been able to get a great deal of the transaction done in sterling and to secure the best terms possible for that very reason. But to-day our position is entirely different.
In that connection I should like to give a figure showing the increase in the prices of our imports during these years. For instance, the price of raw materials, which is one of the main things, has gone up from 100 in 1938—I am taking as a basis the figure of 100 as the price for 1938—to 224 in 1946 and to 270 in 1947. That, of course, is a very large absolute rise. But the point to which I wanted to draw your Lordships' attention—I am not putting it forward as anything new, but it is worth noting—is that it is not only a very large absolute rise, but it is a greater rise than we have secured for our own exports. Our own exports, taking 44 again the price of 100 as the figure for 1938, rose in 1946 to 198 and in 1947 to 227. Your Lordships will see that whereas the raw materials which we had to import rose in price between 1938 and 1946 by 124 per cent., the price of our exports in the same period rose by only 98 per cent. Even between 1946 and 1947, a single year, whereas the price of our raw materials rose by 20 per cent., that of our manufactures rose by only 14 per cent. I hope that illustrates in figures the point I have been trying to make—namely, that one of our difficulties (and perhaps one of our major difficulties) in making favourable financial and other terms, has been the fact that whereas before the war we were a welcome customer, to-day we are an unwelcome scrambler for goods that other nations particularly desire.
We have heard a great deal about the mistakes or the miscalculations that have been made in the course of the last few years by the present Government, and of the policies which have brought us into this trouble. I am not talking so much of what has been said in this House to-day; I am thinking of what I see in the Press, what is said in another place, the criticisms that are heard in the streets and on public transport. It seems to me that these criticisms are largely mutually destructive. Let me give your Lordships one or two illustrations. I remember that in the early days of the present Government we were told that the great mistake was that we were imposing too many controls, and that if only people were allowed to go their own way a little more they would be free to launch out, without being restricted by officialdom and bureaucracy. Even so recently as a few weeks ago the Leader of the Opposition in the other place and the Leader of the Conservative Party, made a great appeal which he summed up in the words, "Set the people free." But now I read criticisms of the policy of the Government, and of the Party to which I belong, in making a personal appeal, on the one side, to the wage-earner, the trade unions and the Trades Union Congress and, on the other, to the employers and the Federation of British Industries. People say, "What is the good of merely making an appeal? Why do the Government not do something about it?" It seems to me that the right method with the British people is to make an appeal. If it were found 45 that that appeal was entirely disregarded then it might be necessary, to take strong measures. In any case, this mutually destructive criticism seems to get us nowhere. What is required is a reasonable appeal, and then control, so far as ever control can go, to deal with those people who are not willing to come forward to meet the appeal.
Then take the question of taxation. I hear the Government attacked with two voices. One says that the real mistake is that taxation is too high and that it ought to go down; the other says, "You need a very large budgetary surplus in order to face up to the real situation and prevent inflation." These two criticisms, though they are not made by exactly the same people, are made by people belonging to the same school of thought, and they seem to me to be mutually destructive. The real need is to find a halfway line: not too high taxation and not too great remissions of taxation; and a budgetary surplus where that can be justified. It is not a question of accepting or rejecting a principle but of finding the proper application of it to the present circumstances.
While I am talking about taxation and Government expenditure, I should like to deal with one point that is sometimes incorrectly made. It is said that we do not want increased taxation but a reduction of Government expenditure; and the sphere that is chosen is the subsidies. These people say that if you reduce the subsidies you are not increasing taxation, but you are reducing Government expenditure. Is that really the case? The subsidy is negative taxation, and, therefore, if you reduce the subsidies you are in effect increasing taxation. Let me put it in another way. The net total of indirect taxation is the sum of the taxes that are applied indirectly, minus the subsidies; and if you reduce the subsidies, therefore, you are, in fact, increasing taxation: so that it is absurd to talk about reducing the subsidies as though that was not really a form of increasing taxation. There again I think those who talk about these things, talk with different voices and do not fully understand precisely what they mean.
I do not know whether a story that used to be told in my early days is familiar to your Lordships. It was a story of two men with a donkey. They 46 were amiable people, but they were constantly meeting travellers going in the reverse direction who criticised their behaviour towards one another and to the donkey. Each time they were advised, they changed what they were doing in accordance with the proposal last presented to them. They carried through every conceivable alternative method of dealing with the donkey, and in consequence they did not get very much further. In like manner, I think that if the Government had taken the advice of even some of the better-informed people they would have pursued a zig-zag course which would have landed this country in a far worse position than it is at the present time.
We have been told of the misfortunes which have befallen this country since the war—misfortunes which the people of this country did not expect. It would have been natural for them to be imputed to the Government, though as the noble Lord, Lord Pakenham, rightly said, in seems that the people have been pretty philosophical and have not blamed the Government unduly for the misfortunes which have come about. One of the greatest of these misfortunes, I think, is that when, with great difficulty, we negotiated the American Loan—doing so in spite of all its limitations and drawbacks, because it was absolutely essential for us to buy time—we did not, unfortunately, buy enough time; and we have not beer able to weather the storm. We were confronted with the complete upset of our whole manufacturing world during the war, and it has not been possible for us to recover fully since the end of the war. But in spite of these misfortunes and drawbacks, and of our liabilities, we have several things which are of tremendous value to this country. The first of these, as the most reverend Primate mentioned, is our national character. I confess that, though there: are features of the British character with which I am not in full sympathy, as a whole I have an immense admiration for the British character, and I should like to put this fact on record.
I sat through the whole of the war in the other place, and the first Chancellor of the Exchequer of that period was the noble and learned Viscount, Lord Simon. Later there were other Chancellors of the Exchequer. They rather diffidently proposed immense additions to our burden 47 of taxation. They were afraid, I think, each in turn, that they would be confronted by an angry House of Commons, representing a furious people objecting to these increases of taxation. Absolutely the reverse proved to be the case. Member after Member rose in his place and lambasted successive Chancellors of the Exchequer for not sufficiently increasing taxation. During the whole of that period I was Member for East Edinburgh. Never on a single occasion did any elector in my constituency ever say that the taxation in this country was too high and ought to be cut down, and that I ought to be getting up in my place to protest; rather was their attitude that I should be rebuking the Chancellor for his pusillanimity.
We take that as a matter of course in this country, but it is not so in the case of any other country in the world. In all other countries people have demanded and secured reductions of the burdens of taxation which the members of the administration have desired to impose upon them. Therefore, I do put forward this point of the character of the British people. We are all aware of that. When troubles came to us during the Second World War, especially at the time of Dunkirk, the people of this country, contrary to what the Germans thought we would do, never for a single moment postulated the ultimate defeat of our arms. That was due to the resilience of the people of this country and their determination to carry through under difficulties and bear their full share of those difficulties. That was a thing to be remembered, in spite of the horrors of war, in spite of the terrible feelings that we had that this was in some ways a break in civilisation that could never be repaired. The wonderful character of the British people is something worth remembering in the days to come. That is the thing and almost the sole thing which makes me absolutely certain that we shall see this present crisis through to the end and overcome it.
In the second place, we have something which we had not in fact before the war. We have now the complete unity of the people of this country. There is not the feeling to-day that there is one rule of life for the rich and one rule of life for the poor. To a large extent—I believe even to a greater extent than exists in Russia—we have become a society with 48 no class distinction. I do not say that there are not differences of wealth manifest in the ordinary walks of life, because there are. At the same time, the general tenor of life is very much the same in the case of people who are possessed of considerable capital wealth as it is in the case of some of the humbler members of the manual workers of this country. That is so to-day in a way that has never been before. Even the differences between the Parties to-day are not based either in the whole or even in the main, upon a feeling that there is a class distinction which has to be preserved or has to be fought against. Therefore, in the second place, I put forward the unity of the people of this country.
When the noble Lord who has just sat down was speaking on behalf of the Government, he said that the unity of the people of this country and the unity of Europe were being brought home to us. I am sure that the noble Lord would not disagree with me when I say that I wish he had gone one step further and said, as Wendell Willkie said, "one world," because it is not only the poverty and hunger of Europe that make our problem in this country a great one, but it is the poverty and hunger existing all over the world to-day that bring about that position.
When I sat in the Government as Secretary of State for India, my difficulties always were to reconcile my desire that India should not starve with the needs and the claims of the people of this country for food. It was largely because of the failure of the harvest in India—which, I believe, is still by no means over—that the shortage of grain for human consumption and of other articles of food raised the price of food and made food so difficult to obtain. If India, instead of being an immense importer of foodstuffs, as she is to-day, had been an exporter of foodstuffs, as she was in the years gone by, I do not think our problems would have been anything like so severe as has actually been the case.
There is another point about India and the East which has to be taken into consideration when one is thinking of these things. The uprising of the manual workers of the world, demanding a larger share in the good things and a better standard of life, has extended to the East, where, in days gone by, the man at the bottom of the scale had almost nothing to 49 eat—only barely enough food for his physical existence, to prevent him dying. To-day, in common with the workers in other parts of the world, he is demanding a fairer share. He has not yet got it, God knows, because the shortage of food is probably greater in India to-day than it has ever been in India's history. However, he is going to demand it, even when harvests are bad. I think we shall find that he will secure a larger measure of food and perhaps a larger share of the world's food supply than he has ever had before—and good luck to him. But, though it is good luck to him, I do not think we must shut our eyes to the fact that it is going to make the problem of getting food to this country greater than it has been in the past.
The unity prevailing in this country is not only between class and class; it is a unity between men and women in a way that has not been known before. This was particularly commented upon during the war by almost every visitor who came to this country, either publicly or privately. They marvelled at the work that the women of this country were able to turn out. They turned out work which was sometimes nearly as much as, sometimes as much as, and sometimes (marvellous as it may seem to many people) even more per head than the men were turning out. I know the difficulties of the Government in this matter. I know there is the difficulty of trying to avoid inflation. I believe that some statement is due to be made in another place; it may already have been made, but I have not heard it. I venture to suggest that the Government must, either now or at an early date, take some steps to meet the demand for equal pay for equal work. I believe that, splendid as is the devotion of women to the national cause, and loyal as they are, they will not submit indefinitely and permanently to the perfectly unjust position—a position which the Government know to be unjust—of a different wage being paid to two persons doing identical work under identical conditions, merely because one person is a woman and the other is a man. I suggest to my leaders in this House that they must take into account the fact that that injustice cannot be continued indefinitely. I say that in passing, because I am talking of the unity of the country. Unity cannot be maintained permanently on a basis of injustice.
50 I have nearly finished my remarks. In conclusion, I should remind your Lordships that we have had great difficulties to face. When I say "we," I am not speaking of my Party or of the Government, but of the nation. We have had many difficulties to face. While we admit mistakes, while we put out before ourselves the need for an improved attitude to many of these questions, let us not also forget the degree of success we have already attained. The noble Lord, Lord Pakenham, who spoke for the Government, has already pointed out how our productivity has increased and how, owing to the splendid efforts of those who have actually done the physical work and those who have assisted in the directing of them and had their interests at heart, the figures of production are steadily going up.
Let me take up one other point, that of inflation. A great deal has been said about how we have run into inflation in this country. I am not going to deny that there has been inflation, I am not going to deny that the dangers of potential inflation in the future have to be most carefully guarded against; but I would like to say this: that compared with other countries we have controlled inflation to a remarkable degree. France, our nearest neighbour, in some respects is in a similar position to ourselves. There have been many devaluations in France. I go back to the time when the franc was worth ten English pennies, and there were twenty-five francs to the pound, but the value went down in the First World War and it went down in the Second World War, and only a few weeks ago the French Government nearly halved its value again. Whereas any inflation we may have had means that we reckon the cost of articles on a price index at perhaps 200 per cent. as against what it was forty or fifty years ago, in France the cost is more like one hundred times what it was.
Take Russia, a country with an entirely different outlook on life. Russia has just devalued the rouble not 10 per cent. but tenfold. I do not know the figures in the United States. I am inclined to think that inflation in the United States is not just nearly as great as, but is greater than, it is in this country. I am speaking without the figures before me, but I shall be very surprised if I am far wrong in that estimate. Therefore I say 51 that we have a great deal to be thankful for and to be proud of in our history, and, with the national character and the new-found unity of the people of this country, I believe we can and will surmount the troubles that beset us. My Lords, I have occupied longer than I intended, but I have endeavoured to place before your Lordships my view of the present crisis and my hope and confidence that, in spite of all the dangers and difficulties that beset us, we have in front of us an era of more splendid hope and strength for our nation than we have had in days gone by.
§ 5.25 p.m.
My Lords, in addressing your Lordships' House for the first time, I ask for the usual courteous forbearance. We have listened to a number of able and penetrating speeches this afternoon, and it is sad to think that they will not be studied by anything like so large an audience as they deserve. Unfortunately, our national or more popular newspapers, with the meagre amount of space at their disposal, are not able to report debates at any length and it is doubtful whether any of the weighty words which have fallen from noble Lords who have spoken will be read by the millions in the Press. That emphasizes the point that I wanted to make, and which the most reverend Primate also made, that as yet the great mass of the electorate are not conscious of any crisis at all, or, at any rate, are not willing to shoulder the additional burdens which are necessary to avert it.
There are two other reasons for this. One, of course, is that the working man is fully employed at higher wages, and with shorter hours than he has ever known, and he is inclined to think that those who tell him there is a crisis are deceiving him; and he just does not believe them. A second reason is that he is bewildered by so many conflicting statements. Of course we are all, are we not, more or less wishful thinkers. We rather resent people who press unpleasant truths upon us, and that is the reason for those wishful-thinking speeches which tell us about rounding Recovery Corners, and winning through, and so on. But in addition to those speakers we have the conflicting speakers. For instance, one eminent bank chairman tells us that 1947 52 was a year of solid progress, but another eminent bank chairman tells us that considerable progress has been made in our descent towards earth. Those, however, are easily overshadowed by the late Chancellor of the Exchequer. On November 29 last he told an audience something to this effect: "I believe that we are standing on the watershed of the post-war world, and that we are going downhill, having climbed to the top of the ridge; and I believe that we shall find the downhill journey an easier trip to better conditions and easier times." Yet in last week's New Statesman he wrote that 1947 was a year of many setbacks. In view of those conflicting statements, how is any ordinary layman to be filled with a sense of crisis, and how is he to know what he should believe?
In the midst of this babel there is one gloomy consistent voice, which has been speaking not for the last two or three months only, but in the same tones ever since its owner addressed the Federation of British Industries some fifteen months ago. When one listens to that voice one is reminded rather of another Labour Chancellor of the Exchequer, a man of somewhat similar temperament, who in 1931 was forced by pressure of economic events to warn his countrymen of their peril. His policy of rescue may be summed up in eight words: "More work, less pay, from top to bottom." The result of that policy over the succeeding eight years was a slow and steady recovery, with unemployment dropping from 3,000,000 to 250,000, and trade and industry making good progress—a progress, of course, which was all halted by the war. But Sir Stafford Cripps is preaching the same doctrine to-day. At Edinburgh he said that the cost of our production is much too high, and the amount of our production is much too low—or words to that effect. What does that mean, except more work and less pay, in some form, for somebody? Last Thursday week I listened to every word of his speech in another place. I did so in glum silence, thereby keeping in tune with the serried ranks of his supporters behind him. The burden of his speech there was the same as at Edinburgh. He ended up with an appeal for the whole-hearted support of his Back Benchers, both in the House and throughout the country, in putting this unpleasant policy over in the constituencies.
53 The Chancellor of the Exchequer must have had high hopes of the opportunity which was afforded to Mr. Dalton in addressing, by means of the wireless, last Saturday night, an audience of two or three millions. Sir Stafford must have hoped, I imagine, that he would get a great deal of help from Mr. Dalton at the outset of this campaign. If that was so, I feel that he must have been disappointed, because the right honourable gentleman devoted three-quarters of his speech to telling us what an astonishingly fine Government the Labour Government are. That, of course, was quite appropriate in a. Party political broadcast. At the same time, by implication, Mr. Dalton told us what an extraordinarily fine fellow the ex-Chancellor of the Exchequer is. That, also, came quite naturally from my old schoolfellow. Only in the last four or five minutes of his broadcast did he deal at all with the economic situation, and then, as the noble and learned Viscount sitting below me has already said, he touched only for a minute or two on the question of prices and profits. He said that prices and profits are too high, that they must come down—and he left it at that. Not a word did he say about any necessity for increased exertion on anybody's part.
I submit that nobody listening to that broadcast would be seized with the idea of crisis, would feel that he was being addressed by a national figure who was telling him that the nation is at war, that the enemy is impending starvation, and that if we are to avert the fate that threatens us, everyone has got to join in helping to do so. That is why I want to emphasise the point, which has already been so much more ably put by the most reverend Primate. If we believe that what Sir Stafford Cripps says is true—and I certainly do—we should all (and, above all, the Government) combine to put this unpleasant truth over, we should plug it just as tunes from a musical play are plugged, until the public are thoroughly and absolutely seized of it.
My second point is rather similar. It is that, having decided on the remedies for these ills, however unpleasant those remedies may be, we should unhesitatingly apply them for all we are worth. Sir Stafford Cripps says that the remedy is more work, lower prices and lower profits. The noble Viscount who opened the discussion 54 dealt very fully with the question of prices, and I will not bore the House by underlining anything that he said. Little has been said on the subject of profits, however, and I think that they may be left with just a few words. It is as well to remember what large proportions of profits are already being taken. For example, out of 26s. 8d. available for distribution to the shareholder, 15s. 8d. is taken by the State. So, out of every 26s. 8d., the shareholder receives only 11s., and the other 15s. 8d. goes to the State. Another point in connection with profits is that the total amount of profits, divided on ordinary shares-quoted on the Stock Exchange for the year 1946, was £400,000,000 before taxation. Therefore, it is throwing dust in the eyes of the electorate to lead them to think that any further impost on profits will make any sensible contribution to bridging the gap.
Before I leave that subject of profits, may I make one remark which may not be strictly relevant to this discussion—that is, that the whole of the distributed-profits tax falls on the ordinary shareholder. I have never thought that to be quite fair, but if there is to be a ceiling for ordinary dividends it seems to me that it becomes manifestly unfair; that the ordinary shareholder will then become a fixed interest shareholder, with this difference between him and the preference shareholder, that the ordinary shareholder's dividends may go down, but if a ceiling is fixed they cannot go up. Therefore, it seems to me that as he takes the whole of the risk it is not fair that he should bear such a heavy tax as 25 per cent. of the distributed profits, particularly as it is not by any means inconceivable (seeing that it has been doubled in the course of a year) that the Chancellor of the Exchequer may see fit to add to it. I feel strongly that, in future, the preference shareholder, where he exists, should bear his due proportion of that distributed-profits tax.
May I now say something for a minute or two on the unpopular subject of more work? However much we may try to avoid the thought, I cannot help believing that in the end we shall be forced to do more work. Of course, none of us wants to do that, but I feel sure that that is what it will come to. If we are to get better work out of people, we must give them more incentive, or as much incentive as we can. It does not matter what industrialist you 55 speak to, he will tell you that one of the most unpopular taxes that has ever been put on in this country is P.A.Y.E. Every industrialist to whom I have spoken agrees with that, and maintains that the tax is a great hindrance to production. The noble Viscount, Lord Samuel, spoke about the need for decreased taxation, but, with all his great experience, he did not venture to, recommend in what direction reduction should be made. I rush in where angels fear to tread, and declare that if I were Chancellor of the Exchequer I would make a point of reducing, if not of abolishing, P.A.Y.E. on all incomes up to £400 a year.
The actual P.A.Y.E. Income Tax paid by a bachelor or a spinster earning £250 a year is £25. The acutal Income Tax paid by a married couple earning £500 a year, is £89. If all P.A.Y.E. were abolished up to an income for married couples of £400 a year it would cost about £300,000,000 in a full year. As the noble Viscount pointed out, there is a Budget surplus of £750,000,000 this year. We know that is not a true surplus. I believe the true surplus is more likely to be about £200,000,000. But whatever it is, if I were Chancellor of the Exchequer I would make the greatest possible effort to do away with this tax. But I would want something in exchange for it. I am all in favour of a five-day week. I introduced it into my own office twenty years ago, in face of the violent opposition of all the senior executives, but it has worked well ever since. But I am not in favour of a forty-hour week. I think that forty-two or forty-three hours is what is required. I do not care very much for Saturday morning work, because so much time is spent in going to work and coming back and in thinking about football in the afternoon, but I do think that some extra time should be put in, and can be put in, on the other five days.
I suggest that in return for the abolition of P.A.Y.E. the masses of the working-classes ought to be willing to give the extra 3½ hours' work a week which, according to the Economist, would amount to a total of no less than 1,000,000,000 hours a year. I suggest to your Lordships that we cannot afford at this time to reduce our production as we have done under this recent enactment by 1,000,000,000 working hours a year. Of course, that is rather different from 56 —in fact, it is the exact opposite of—the doctrine trade union leaders have been preaching ever since the inception of trade unions, which is the doctrine of less work and more pay. One sympathises with them in devoting their lives and the industrial policy of the trade unions to that doctrine, because when they started there was much too much work and much too little pay. But the wheel has come full circle and the opposite is now true, for the time being at any rate. It is of course difficult for trade union leaders to turn round and preach exactly the opposite doctrine, but I maintain that in the end they will have to do it.
It is perhaps that thought which led Sir Stafford Cripps to express a fear of totalitarianism. Perhaps he felt that the trade union leaders on whom the burden must fall would fail to convince their followers of any sense of crisis and would fail to combat the infiltration of Communism into their executive ranks, of which we all know. The result might be that an almighty crash would suddenly cause widespread unemployment and bankruptcy, and the working-class, confronted in that way with a catastrophe about which they had not been warned, would turn to the paid agitators of Moscow. But if all those who think as we do, who wish to back Sir Stafford Cripps in the policy which he tells us is necessary, make it our business to tell the working-class of this country the unvarnished truth, however unpleasant it may be, I have sufficient confidence in my fellow countrymen to feel sure that they will turn not to Communism but to common sense.
§ 5.44 p.m.
§ LORD LUCAS OF CHILWORTH
My Lords, it falls to my happy lot to congratulate the noble Lord, Lord Blackford, upon a very agreeable maiden speech. I think I may offer him congratulations on behalf of all sides of your Lordships' House. I am afraid that in expressing his point of view he disclosed that he had long left the apprentice stage. At one time during his speech I wondered whether, in his journey down the corridor from another place, he had failed to recognise that the air at this end is far clearer than the fog at the other. But I am sure that at the end the noble Lord said enough, in such a charming way, as to make us wish that we shall hear him on many occasions in the future. We 57 have heard this afternoon a great deal about too much money chasing too few goods, and about other theories. I do not intend to follow that line, because I confess that I have a sneaking regard for the truth of a Punch cartoon which I saw the other day, that perhaps the trouble was too many economists chasing too many theories.
I intend to approach our problem from the point of view of an industrialist. It is perhaps the one angle on which I possess some qualification to speak, and I cannot help thinking that that is the best angle from which to approach this problem, because we are an industrial nation. It is by industry that we are going to live or are going to sink. In my view, the focal point in our problem was made by the Chancellor of the Exchequer in another place, and by the noble Viscount, Lord Samuel, who opened this debate, when they said that what is required at rock bottom is more production at less cost. Since I had the honour to address your Lordships' House for the first time nearly two years ago, that has been the burden of every speech I have made. I remember having the temerity to tell your Lordships that the ultimate test of the industrial efficiency of this country would be cost and price. If the fact that we are to-day a high-cost producing nation is responsible for this gap in our balance of payments, it is not a new problem for this country. This gap appeared after the 1914–18 war and progressively grew against us through the inter-war years. It was camouflaged by the fact that the dividends from overseas investments kept up our standard of living, but it was primarily brought about by our neglect—I do not think it would be an exaggeration to say our criminal neglect—of the modernization of our industries and their re-equipment.
Through the war years, that equipment, which was out-moded and antiquated in 1938, had to stand an increased strain, and to-day we are trying to compete in a highly competitive world against nations far better equipped, through the fortunes of war, than ourselves. We are trying to compete with them with worn-out and antiquated tools. The position was graphically stated in another place by a contributor to a like debate when he said that in the cotton industry we are trying to produce cotton goods in seventy-year-old factories with seventy-year-old equipment 58 When the cry goes up, as it came from the noble Lord who has just spoken, that we have to work harder, what exactly is meant by that? If it means that we have to substitute mechanization and re-equipment by human sweat and elbow-grease, we shall get nowhere. If we are to attain a competitive position in the industrial race again, there is no alternative but to increase the horse-power at the hand of the worker. We cannot go on sweating and using elbow-grease with worn-out tools. So I would place the need for re-equipping industry as one of our greatest necessities. We may be able to obtain more aid from America—I do not know what we are going to do if we cannot—but unless we turn to putting our industries in a competitive position, when that further aid has gone the way the other Loan has gone we shall be in exactly the same position as we are to-day.
It might rightly be asked: How are we re-equipping our capital industries? By any calculation I can make, we are to-day re-equipping industry at only two-thirds of the rate we were doing it in 1938; and the 1938 rate was admittedly far too small. I suppose the question could be posed to me, and rightly posed: How are we to find the money to re-equip our industries and put them in that competitive position? Is it unnatural that I, as an industrialist, would do exactly the same in this problem as I would do in a problem in my own business, or in industry and commerce? I should look at the overhead side of my accounts. As the noble Viscount who opened the debate said, the first thing that: must strike us when we look at the national balance sheet is the fact that Government expenditure alone is close on £3,000,000,000 a year. The noble Viscount might have gone or and added, "approximating to one-third of the national income." That is a very serious state of affairs. How long car we go on like that?" Needs must when the devil drives"; and if we cannot fine sufficient economies in that account to re-equip our capital industries, then I can see no alternative but a lower standard of living for the people of this country. The sooner the people wake up to that fact, and the sooner they face up to it, the better it will be for us.
We have got to find the money for our industries; there is no alternative. At 59 the present time we are going from bad to worse. In some sections of the engineering industry, producers are having to bastardize their production because they are forced to improvise with their present equipment to meet the competition from abroad. Re-equipping our industries is the only way to get down high-cost production. If you think high costs in production can be reduced by more manual labour, you have never come up against a bigger fallacy in your lives, because the more manual labour you use for the operations the higher your cost. Mass production by machines is the only answer. I trust that His Majesty's Government, whatever they have said in the past, will reconsider this question of capital re-equipment in industry, because we can never survive without the tools. Perhaps I might use a variation of a hackneyed expression: If the Government will allow industry to provide itself with the tools, industry will do the job.
The noble Viscount, Lord Samuel, had something to say on the question of profits, which naturally arises on a study of the White Paper on incomes. There is a prima facie case for an increase in taxation upon distributed profits, although, in my view, there is no case at all for a tax on undistributed profits. The latter is a tax upon industrial thrift. If the argument is advanced that ploughing back profits into industry to-day is of no avail, because one cannot purchase the equipment, my reply is that the equipment should be available to purchase. But industry itself is largely to blame for the misunderstanding and misapprehension of the public regarding profits. While industrialists reproduce chairmen's speeches, while there are advertisements of company meetings in the Press—and they will use all the high-pressure salesmanship to gild the lily for the benefit of their shareholders and their prospective investors—they cannot hope not to create a wrong impression in the minds of the working men. May I respectfully submit that your Lordships' House is not unblameworthy in this direction? The noble Viscount, Lord Swinton, will recall vividly to mind the campaign which I tried to wage in your Lordships' House for a greater disclosure of company accounts during the course of the debates on the Companies Act.
§ LORD LUCAS OF CHILWORTH
I was just going to add that. The noble Viscount, if he will allow me to say so, led the Opposition through those tortuous clauses with great ability and great public spirit. When I pressed for the turnover to be disclosed in company accounts, I did not think the noble Viscount dissented in principle. I think he was rather apprehensive as to the ability of accountants to do it. Fortunately for me, and unfortunately for the financial advisers to the Government, many of the big companies have to-day found a way of doing it. Unilevers are perhaps the biggest example, and a number of our largest concerns have told the public quite frankly how their accounts are made up. The point was well illustrated by an incident in another place. When a Member was quoting the profits of a certain company the cry went up: "Well, what is the turnover?" and not one could answer the question. I hope it is not too late for the Board of Trade to alter that, as I am certain that until industry is prepared, or is forced, to disclose far more than it does, profits will always be suspect by the the wage-earner.
There is one other point with which I would like to deal, and that is a question also raised by the noble Viscount, Lord Samuel, in regard to prices. Commodity prices in this country have always been too high, and one of the major reasons has been the cost of distribution. Distributive margins have grown and grown and grown over the last twenty-five to thirty years. Again this is no new problem. The noble Marquess, Lord Linlithgow, presided over a Committee in 1922, and I would quote from that Committee's report:Distribution costs are a far heavier burden than society will permanently consent to bear.The Report went on to say that it should…be possible to concentrate in the hands of one intermediary the successive functions now performed by several.The noble Lord, Lord Woolton, when he held the responsible position of Minister of Food, said in your Lordships' House that in spite of almost unbridled competition the distributive trades were "one of the most expensive and 61 luxurious factors in our national life." But what was done? Nothing. Why have successive Governments—if I may use the term—dodged this great issue? Is it the political implications? Is it looking over their shoulders at votes? I would be the last one to make a charge of that description against the right honourable gentleman the Chancellor of the Exchequer, but in another place he used these words in dealing with this particular subject:Here again the margin necessary to enable the small shop to survive means often much greater profit for the larger shops, yet the bulk of the goods sold through the small shops is enormous. They are an essential part of the distributing system and so must be maintained in being.What are the facts? Immediately before the war there were in this country 750, 000 retail shops selling goods over the counter—I do not include in those figures the service trades—to something in the region of 11, 000, 000 families. The total turnover of those shops was approximately £2,600,000,000. Ten per cent. of those shops did 45 per cent. of the turnover. The average turnover of the whole lot was £3,000. If you take the turnover done by 90 per cent., it was under £2,000 per annum on average. It has been computed by experts that the lowest turnover upon which a food shop can be run efficiently with stock turn, and all the other technical details, is £4,000 per annum, and yet the average of the small shop was under £2,000. Distributive margins have been widened and widened and widened to take care of those falling turnovers. Adam Smith held the theory that if you put two shopkeepers into a street which only possessed one, the competition between the two would result in lower prices to the people who lived in that street. That, like all theories of classical economists, held good the day it was uttered and was out of date the day after.
I am sorry to interrupt the noble Lord, but as an old student of Adam Smith he will perhaps remember that he said that if two of them were unnecessary one of them went bankrupt, and so you finish with one.
§ LORD LUCAS OF CHILWORTH
What made nonsense of the Adam Smith theory was the advent of the branded article, because that was price-fixed and price-maintained. Both shopkeepers were, 62 therefore, forced to sell the same article at the same price, because they would not have had any goods at all from the manufacturer unless they had bound themselves to do that. So they simply halved the turnover and then went to the manufacturer or producer for a larger margin of profit to take care of the smaller turnover. That has multiplied itself throughout this country until the distributive and selling cost of nearly every article in commerce is about 50 per cent. of the price paid by the retail purchaser.
Now I quite agree that there is a great difficulty—which was recognised by the Chancellor of the Exchequer—in controlling this, but it will have to be controlled, and I support his method. I do hope sincerely, however, that he is also going to control the distributive margin, because all the price control that has taken place during the war and since the war has wrapped up that distributive margin in cotton wool, and has made even more money for the distributors than they made before the war. If that is not the answer and if lower costs cannot be Obtained—and I would not say a word to discourage the officials of the Board of Trade—I cannot see the National Chamber of Trade and the Distributive Associations of this country succumbing to what will be suicide for a number of their members, because there is no doubt that we could deal with all the goods for equitable distribution by considerably less distributive outlets. I have just finished—
§ LORD AMWELL
May I intervene for one moment, because I think it is rather an important point? When the noble Lord talks about distributive costs, is he aware of the fact that it is an axiom in advertising in this country that, taking all the distributive costs and not merely those of the retail seller, the staple article takes five times as much to sell as it does to produce?
§ LORD LUCAS OF CHILWORTH
I do not dispute the noble Lord's figures. Because it does cost five times as much to distribute as it does to produce is no argument why it should take five times as much. I was saying that I have just finished the task of presiding over a Committee which had some bearing on the cost of foodstuffs in this country. I could not help but be appalled as I listened to the chronicle of the journeyings in this country, from the farm to 63 the abattoir, and from the abattoir to the retail shop, of the beast which is sold as meat. It was a frightful story of cost, incompetence and waste.
So I wish the Chancellor of the Exchequer good fortune; but nothing of benefit will happen unless the differences between the cost of production and the price which the public pays are rigidly cut down. That is the only way. I speak from very considerable experience, and I would ruthlessly cut that margin. I would allow producers to add x per cent. to the cost of production; they could add as many intermediaries as they liked after that, but the people concerned would all have to be remunerated out of that margin. If that were done they would die out like flies. These people insert themselves and erect toll gates, and render services of no economic value whatsoever. If we could eliminate these costs, the cost of living could be appreciably reduced. I hope that His Majesty's Government will give attention to these two points, first, that the capital equipment of industry is absolutely vital to our survival, and also that there is need for a rigid cutting down of distributive costs of products for the home market.
§ 6.11 p.m.
My Lords, you may remember a short sentence in the Bible about some people of whom it said that they were eating and drinking and marrying and giving in marriage, and knew not until the flood came. I am not suggesting that we are so oblivious of the economic crisis that lies ahead of us as those people in the Bible were of the flood. So much has already been said in your Lordships' House, in another place, and throughout the country about the vital importance of production and so forth as to make it quite clear, I think, to the average man and woman that they have got to work hard during the coming years. But what I am rather more doubtful about is whether they realise that those "coming years" probably mean as far as one can see and probably as long as any of us here are going to live. I maintain that, to that extent, the country as a whole does not realise the full measure of our difficulties.
Too little, I feel, has been said by Government spokesmen and others as to what is going to happen and what further 64 plans His Majesty's Government have to try to bridge the gap in our export deficit if the production approach fails to complete the full cure. In that respect all we get from time to time are rather guarded statements that we hope we shall receive some Marshall aid. I hope, however, that if we receive such aid from our generous Allies we shall not merely use it to maintain the status quo, but that when it comes we shall have a plan acceptable to the country as a whole, so that we shall be able to get on to a permanently sound basis. That to my mind, is the only basis on which we should be willing to accept any further aid. I think none of your Lordships would disagree with me on that point.
I should like to ask the Government exactly what their plan is. Quite rightly, insistence has been put so far on production and increased exports. I maintain that very notable successes have been achieved already in that direction, thanks to the efforts of management and workers alike and despite the considerable difficulties that industry has been up against. These difficulties include shortages of raw materials and of components, and increased cost of raw materials and of all essential services. Many of these difficulties have been discussed in your Lordships' House, not only to-day but on previous occasions. Therefore, I think that insistence has rightly been put on production and on the ever-increasing necessity for curbing inflation, because any inflationary trend must have a very damaging effect on our export prices. But even if we view the result of these efforts in the most sanguine light, are we right in thinking that they are sufficient in themselves to bridge the gap of our deficit overseas?
It is not merely a question of comparing to-day's position with the position of, shall we say, ten years ago. We can look back twenty, thirty, or forty years and can see that even then we had a deficit on the balance between retained imports and exports. What are the arguments which can be adduced to-day to show why we can do better in 1948 than we did in, say, 1908? Admittedly, after the war there was a world shortage of goods. That shortage of course, still to some extent exists, although it is filling up all too rapidly. I think it was the noble Lord, Lord Pethick-Lawrence, who mentioned that there is a feeling throughout 65 the world that erstwhile backward countries should have a far higher standard of living, which if it could be achieved would open up considerably increased markets for our exports.
Those are factors which will act in our favour, but there are other factors which are not so encouraging. Look in the first place at the United States. She has doubled her industrial capacity during the war. Surely she must be able to find markets for her goods so that her people may remain in employment. Many countries, such as Italy, Holland, Czechoslovakia, and France, whose industries were knocked out or at any rate neutralised during the war, are now coming back into competition, and industrialists are finding very difficult price competition from these countries in the markets of the world. Manufacturers are all too often finding tariff barriers, and they see their established customers experiencing greater and greater difficulty in obtaining licences for imports into their countries.
Again, many countries who, before the war, were predominantly primary producers have, during the war, greatly enlarged their secondary industries. I quote one notable example, that of Australia. I was reading some figures recently in a trade journal, and it was there stated that the exports of manufactured goods from Australia had increased between 1938–39 and 1946–47 by something like three-and-a-half times in value. Even if we allow for the difference in money values, that is a notable increase. Of course, I, for one, do not in the least regret this trend in Australia. I think it is an absolutely right and logical sequence of events. But taking all these factors into account, and remembering the increased cost of transport, which is particularly adverse to those of us who have to import so many of our raw materials, are we right in thinking that, with this production and export programme, the country alone can safeguard itself and bring itself back on to an even keel? So far, nothing that has been said by any of the spokesmen on behalf of His Majesty's Government, either in this afternoon's debate or previously, has convinced me of that fact.
Surely, as in the case of any ordinary business firm, we have to take other steps. We have to consider what are our overheads. The noble Lord, Lord Lucas of Chilworth, made the same point. What 66 are our overheads? Obviously we cannot reduce our defences lower than a reasonable minimum. Not even in the direst straits would a firm stop paying the insurance premium on its fire policy. Certainly now is not the time to increase non-productive employees, whether employees of the Government of or private individuals, although I would suggest in that connection that I think His Majesty's Government have a great opportunity of taking a lead in reducing such non-productive employees. Now is the time to reduce non-productive capital expenditure. We have been told to-day that the reduction of £180,000,000 for the coming year is to be implemented. I think the question is whether that figure is large enough. There may be other such means of reducing what one may call the "overheads," but I do not want to deal with them. I want to look at the question from a much more long-distant point of view. Are we sure that we have not at home capital assets which ought to be overseas doing work for us?
I hope that I shall not be accused of straying from the field of economics, but the point I want to make now is one which, to my mind, is very pertinent to the economic welfare of this country. Would it not be right to consider the present population of something like 45,000,000 in this country as an asset which we cannot afford to keep here? Your Lordships will be well aware of the figures that I am now going to quote. Your Lordships will remember that, at the beginning of last century, the population of this country was about 16,000,000. At the end of last century it was something like 41,500,000. During those 100 years, that enormous expansion of population, occasioned by the tremendous increase of industrial capacity, was maintained. Not only was that increase in population maintained, but: it was maintained at a very definitely improving standard of living. The reason we were able to do that, surely, was that we had the world's markets to ourselves, and we had everything else in our favour. Therefore, we were at the same time able to build up considerable investments overseas. Coming to this century, it is certainly true that the population continued to increase, as also did our industrial capacity and our standard of living; but I maintain that those three factors did not increase in step with one another, and 67 it was more and more necessary to use up the investments that had been built up overseas in order to maintain the equilibrium. If, as I believe to be the case, that was true earlier in this century, when trade was far easier than it is now or is likely to be again, can we really think with conviction that now, without so many of these investments which we have lost during the war (as has been said over and over again) we shall be able to maintain a balance without a very considerable and unpleasant adjustment?
I believe that the noble Earl, Lord Gowrie, speaking last week during the Commonwealth debate, came close to a pertinent point in this connection. He said that what was wanted wasbetter distribution of the British race, without unduly denuding the Mother country.Obviously, this is not a policy which we in a democratic country can carry out to order. It has to be effected by the active desire of those men and women who want to move out of this country, and also by the spontaneous welcome of the countries to which they would like to go. If my information is correct, are there not a great many more men and women who would like to go overseas and find a new life elsewhere than have so far been able to go? May it not also be that there are a great many more in whom there is a latent desire to go? Is it not also true that within the Commonwealth and Empire there are countries which would do anything to get as many British men and women as they can possibly attract? Therefore, I would suggest this. Ought we not to consider that we should go out of our way to encourage and assist these people in every possible way, maybe using some of our rapidly dwindling sterling reserves for this purpose? Would not that be an investment which would, in the long run, pay more than handsome dividends?
In passing, I would suggest that perhaps, in some respects, the Overseas Resources Development Act and the British Nationality Bill may have made a slender beginning. However, I suggest that it is only a slender beginning, and it does no more really than scratch at the surface of the bigger and more fundamental problem. I know that it is often argued that a policy of that nature will tend to take the cream of the people from 68 this country. Indeed, only the other day I had a letter from a friend of mine in Tasmania making that point. It may also seem strange to put forward a policy of this nature when so many of our industries are manifestly under-manned. They may be under-manned for more reasons than one, but even if that is so, I would suggest that to pay too much attention to these points of view is to take far too narrow and shortsighted a view. Surely, in the long run, those two points may straighten themselves out; and by the further development of latent natural resources overseas, by building up further wealth in the sterling areas (not merely by primary production but also by secondary production), by the creation of new markets for the quality goods produced in the United Kingdom, we shall find that such a policy will prove to be a factor for strength rather than for weakness. It will be of strength not merely to the individuals who go out, not merely to the countries to which they might go, but also to this country, to the Commonwealth, to the Empire as a whole and, therefore, to the world at large.
On that basis, I would suggest that a policy of that nature is by no means a policy of despair, but is rather a policy of real enterprise. In concluding, I do not want anything that I have said on this longer-term matter to be taken as implying that I belittle in the slightest degree the vital importance of all possible immediate steps being taken for increased production and for the curbing of inflation. Both the immediate steps and the long-term steps are essential. The one will be of little avail without the other; we must have both. But I am concerned lest, in making a supreme effort now to tackle the problems that immediately beset us, we may not lay ourselves open to the accusation by posterity that we have overlooked many other long-distance or long-term points which, in the long run, may be equally as fundamental for our economic recovery as the immediate points.
§ 6.30 p.m.
§ LORD SHEPHERD
My Lords, I want to deal with three points. My first relates to the United States, because I think the trouble with which we are afflicted is rather more international than national; my second will have some reference to our balance of payments, and my third—and I shall speak 69 as a trade unionist of almost fifty years' standing—is in regard to wages and also subsidies. The noble Viscount who opened the debate made reference to the position in the United States, but I think what he had to say might perhaps have been a trifle more effective if he had quoted a few more figures for the record. If, without presumption, I may do so now, I shall be very glad to supply them. Production in the United States in 1940, just before they entered the war, was 100,000,000,000 dollars. By the year 1946 production had risen to 203,000,000,000 dollars, and in last year, 1947, it had further increased to 231,000,000,000 dollars. Those are important figures to have in mind when discussing the situation that now exists, not merely in Great Britain, not merely in the poverty stricken countries of Europe, but in the United States itself.
During the year just closed, according to the message of the President to Congress, there was expended in capital investment, 30,000,000,000 dollars. It is supposed that of that amount 13,000,000,000 dollars represents the reconditioning of industry, leaving 17,000,000,000 dollars for new productive effort; and, if one adds to that figure the surplus of American exports over imports of 8,000,000,000 dollars, one finds a new capital investment in that country amounting to 25,000,000,000 dollars. It is evident, therefore, that great as is the production of the United States at this moment, world-wide as her trading interests are just now, they are likely to be infinitely greater in the near future; and to consider the development or the redevelopment of this country without some reference to those figures does not seem to me to meet the case.
One would have supposed that with that great production of commodities there would be no such thing as inflation there. Certainly, if the whole of that production had to be consumed by people in the United States there would not only be no inflation, there would be a very large measure of unemployment. Great as the production is, however, it is not sufficient to meet the world demand, and it is the world demand that has changed the situation in the United States and caused inflation or a measure of inflation in that country. But the inflation that has taken place recently in the United 70 States is not due merely to the law of supply and demand. So long as that law does operate and trading is carried on normally we can expect that there will be gradual increases of price.
The increases of price in America have been of such a character, however, that we must suppose that there have been special agencies at work, and indeed we know from what has happened in the markets in Chicago and New York that speculation has been carried on to a very great extent. There have been boom prices for some months past, and a serious condition of affairs may arise in that country if it is allowed to continue. Let me give an illustration of that by quoting from a newspaper of a week or two ago. It is from the financial columns, and it has reference to the break in price in the wheat market:Wheat-Gambler E. T. Maynard had a hunch that grain prices were about to fall. He sold a million bushels he didn't have, while others were still buying—and made £100,000 profit in four days. This was one of the disclosures made to-day by United States Secretary of Agriculture Anderson. Mr. Maynard,"—the man in question—said to-night: ' I had no inside information. All you had to do was to read the newspapers. I don't know anything about farming or grains. The only time I see wheat is when I am motoring through the country '.The United States has been very much flattered by Opposition political Parties in this country for having got rid of controls and given a head to the commodity markets of that country. We have here an illustration of what can happen under the conditions that now exist. One man, without any knowledge of the commodity that he was selling, and, indeed, without having any of the commodity to sell at all, was able to make that profit, break the market and bring down the price of commodities at a terrific rate.
I have two other points about America. Despite its vast production and its great riches, and despite the great increase in the commodity income of every man, woman and child in that country, there was, in fact, a reduction in real income last year of no less than 8 per cent. That is due to inflation there. We are dependent very largely on America at this moment, as are the countries of Western Europe. If Congress continues to refuse to put into operation proposals which the President of that country has placed 71 before that body, we may find that we, who are in great difficulties here, are depending upon a broken reed.
I wish now to say a few words about this country and the balance of payments. I find that the provisional figure for imports for 1947 was £1,574,000,000. We now know that our exports fall short of that by no less than £675,000,000. Sir Stafford Cripps, the Chancellor of the Exchequer, and the Government, backed by the newspapers, are asking the people of the country to produce more in order to make up the difference between the two figures. If we could be quite sure that American prices, and prices elsewhere, would remain as they now are, then, given time, I think we might succeed in making up the difference. At any rate, I think we could make up the difference, provided that we could have some kind of help from the Marshall Plan temporarily. Sir Stafford Cripps, because he fears we may not be able to make up the difference in the time, has intimated to the public that it may be necessary to reduce imports in order to help to close the gap. For my part, I cannot see that a reduction of imports, with inflation spreading, is going to help us at all. If, for instance, we reduce imports this year by one-third, what guarantee have we that the remainder which we import will cost less than we paid last year? Is there any possibility at all, in view of this cancer which is spreading everywhere, that sacrifices on our part in that respect are going to help us to close the gap? I doubt very much whether it will be so. Therefore, I am wedded to the conclusion that everyone in our country, irrespective of Party, irrespective of political views, irrespective of class, must double his energies in order to produce the wealth that is required to pay our way.
There is another feature of this balance of payments that is worth some attention, because it is used in an easy kind of argument by a good number of people. The provisional figure for Government expenditure overseas for 1947 was £211,000,000. It is said that if the Government would cut that expenditure to £100,000,000 a year—or, better still, cut it to £50,000,000—part of our problem would be solved. I cannot put up with easy arguments of that kind. We 72 are not living in days of peace. We cannot make arrangements as if no enemies existed anywhere in the world. With the political situation, internationally, as it is, whilst we may change our mode of expenditure abroad, it seems to me idle to presume that the total expenditure abroad will be less than it is now. I am speaking somewhat as a pessimist, perhaps, and I know that not every member of my Party will agree with me on that. But so keenly do I feel the dangers of the present situation, so conscious am I of the fact that the Continent of Africa is going to be the future granary of the world—and therefore a place to be striven for by peoples in different parts of the globe—that I fear the worst, unless we look at all these matters broadly and not merely from the point of view of saving money.
Lastly, I wish to say a word or two, as I have often said before, with regard to the trade unions. Most of your Lordships will know me as a political organizer. I have a feeling, sometimes, that political organizers are not greatly esteemed by other people. Fortunately, I have, I will not say a double life but deep roots in the trade union organization with which I have been connected. And the fact that I drew a salary did not make any difference to my position therein. The fear expressed in many quarters that the wages paid to working people are too high, that they are a cause of inflation, and that the subsidies paid by the Government in respect of certain commodities are spoiling the independence of the working-classes of the country because those subsidies are no longer required is, in my view, wrong. I cannot see where the relative position of the working-classes has improved very much during the war years, and in the time that has passed since the fighting ceased.
I have not the latest figures, the figures for last year, but I am quoting from the Government publication which gives certain particulars about the way in which the national income is divided. It was estimated that in 1946 the national income was £9,181,000,000, and this was divided among three groups: first, those who received wages; secondly, those in receipt of salaries; and thirdly, those who drew interest, profits and rent. The figures given by the Government in their publication are interesting. In 1938, the year before the war, the percentage of the total of that year paid in wages was 73 37. The percentage paid in salaries was 23, and the percentage paid in interest, profits and rent, was 40. That was prior to Income Tax being deducted. In 1946, the figure with regard to wage earners was 38 per cent., as against 37 per cent. previously, so the relative position of the wage earner was up one per cent. The salaried worker received 21 per cent., and interest, profits and rent accounted for 41 per cent.
If your Lordships have regard to those figures, I think you will be satisfied in your minds that during a period of war and strife, when the trade unions had gathered to themselves greater power than they had ever possessed before, working people have not enriched themselves at the expense of other classes. The facts and figures are against that point of view. I have reached a conclusion, and I think the Treasury also hold this opinion, that the wages now paid to the working classes are not inflationary in character at all. As one who now has to live on quite a small pension, which provides him with a living not much above the standard of that of the normal workman, my own experience tells me that no workman with his present wage, under present conditions, can inflate prices at all.
Indeed, the commodities and materials which workmen buy are so controlled both as to price and quantity that it could not happen. If we assume that 1,000 represents the cost of living, we will find that 348 represents food, 88 rent and rates, 97 clothing, 65 fuel and light, 71 household durable goods, 35 miscellaneous goods, 79 services, and last but by no means least, 217 represents drink and tobacco. If there is one commodity among those I have mentioned of which the working-man could do with less, it is the last.
In spending his money on drink and tobacco, the workman is not necessarily inflating the prices of those commodities, because if the prices were raised and the profits increased, the tax collector sent by the Chancellor of the Exchequer would immediately be at the doors of the tobacco concerns. Those are the means by which any surplus value left in the pockets of the working-man is drained off, for the benefit of the Treasury. I, as a representative trade unionist, while prepared to agree to the control of wages and prices 74 in the interests of the country, cannot see any cure coming from a reduction in wages. I believe that any reduction of wages forced on the working-class, whether by the Government in agreement with the unions or not, would cause the working-man to lose interest in the struggle.
In conclusion, I shall quote from a letter to The Times by Sir George Schuster, because I think this letter contains what I have been trying to aim at in the latter part of my speech. Sir George says:For the majority of workers in British manufacturing industry, the amount of their weekly pay packet is already affected by production results—either according to some system of bonus (group or individual) or direct piece-work rates. In all these cases the amount of earnings depends on two factors: first, the degree of efficiency with which the work in a factory is organized…and, secondly, the degree of effort put into the job by the workers…It may be fruitless to dispute which of these two factors comes first.The letter continues:A leading ' big business ' British manufacturing concern has recently issued to all its constituent factories a brochure bearing on its cover the sentence ' Management is responsible for removing obstacles in the path of greater productivity '.Sir George goes on to say that in many companies recently because of re-organization production has increased tremendously. He says:I will quote one example…where, as a result of improving managerial technique, the following results were attained: increase in production, 50 per cent.; decrease in cost a unit, 28 per cent.; increase in average earnings of the workers, 28 per cent.I submit these particulars to your Lordships because I think they are of great importance at this moment in bringing about an increase of production. Unless we can encourage both workers and management to change the technique of management and to change the layout of the factories, we are unlikely to enrich this country as it must be enriched, so that it can take its proper place in the world as it used to do.
§ 6.56 p.m.
§ VISCOUNT SWINTON
My Lords, I think this debate has been worthy of the gravity of the subject. The object, I take it, if I may paraphrase what the Chancellor of the Duchy (Lord Pakenham) 75 said, was, first, to inform the country—and there I agree with the most reverend Primate, the Archbishop of York, that if we are to inform the country, we must talk in language which the country can understand; secondly, to offer a reasonable meed of criticism—and the noble Lord would not object if, in no Party spirit, there were a certain element of criticism of the action and inaction of the last two years; and thirdly, to enable those of us who axe rash enough to do so to offer some constructive suggestions. I propose to be rash enough to take the last mentioned course and to direct my observations to making one or two suggestions on two subjects: first, the stabilization of prices and I hope the possible reduction of prices, and the other, the source of supply of our food and raw materials.
The Government, as your Lordships are well aware, have invited industry to devise plans by which prices can be held or reduced and the cost of production reduced. The two really go together, because unless we can increase production and reduce the cost of production, there is no possibility of reducing prices, and possibly indeed little hope of holding them, certainly not if prices outside our control continue to rise against us. I believe that the approach which the Chancellor of the Exchequer has made is the right approach, and I am equally sure that the great majority in industry, whether direction, management or workers, will do their best to respond. But while commending the appeal, I feel bound to add that the Government have their own part to play. We have to try to get down costs in industry, but the Government must at the same time try to get down the costs of government.
We are all asked to save. That is right; but surely the greatest inducement the Government could give would be by setting an example and saving themselves. I honestly do not see any great signs of it in the Estimates that have been produced. I do not want to go into this matter to-night—there will be other occasions—but in order not to be merely negative, let me say this. It is not merely a question that there are too many clerks employed here or there. When we have to economise in business, we have to see what elements we can cut out for the time 76 being, and we must see we get value for our money. I am very much afraid that in the Defence Services, which we must have, we are not getting value for our money to-day.
Then there are the direct costs in industry for which the Government have now made themselves responsible. Everybody will agree that among the most important elements in cost in industry are coal, power and transport. These are outside the control of the industries which use them, and whose goods are transported. They are Government undertakings, and while the Government are perfectly right to make this urgent appeal to the parties in industry, here again they must set an example in the dealings within the industries which they themselves have taken over.
There is another factor that affects production costs—the complexity and delay in the operation of controls. I am not going to say for a moment that we can get rid of controls; of course we cannot. But the very scarcity which makes controls necessary, makes it all the more necessary that the operation of those controls should be as simple, as elastic and as rapid as possible. It is not merely the waste of man-power in devising, issuing and filling up innumerable and complicated forms, but also the difficulty of planning ahead in the absence of certainty, with the consequent feeling of frustration, which is very real. Then there is this factor—and in this connexion I think, perhaps, it is the most important factor. It is hard to reduce production costs if there are continued hold-ups in the delivery of materials, or in the issue of permits, which stop that quick run-through in the factory which, both physically and psychologically, is vital to secure the tempo of production and the actual production.
I am not going to be merely destructive. I hope that the Government will invite the partners in industry, management and workers, to simplify the system of controls (they know best how those controls can be operated; they know the difficulties they are up against) and will devolve on to industry itself as much as possible of the operation of the necessary controls, the Government discharging their proper function of giving the general directives. On the industrial side I would add one thing more. There is the question of incentive, because a negative policy by itself 77 will not get us through. I agree with much that has been said, and well said, about both wages and profits. But the obvious incentive—as it is, indeed, the surest cure for inflation—is that there should be more things to buy. I know all the difficulties about bridging the trade gap, but I believe it may well be that we shall get more for export through increased output and cheaper production if as that production materialises we give a little more to the home market. It is not a gamble; it is using business experience, and human experience, to take a chance, and to take the line which is likely to give the best results.
The wages policy, too, must have its positive side. A tremendously strong case is needed to-day to put up a basic rate of wages. But what really matters, is it not, is the production per man hour. Coming back to what I have preached for so long—indeed, to what I think is common ground to so many of us with practical experience—the chart at which we ought all to be looking together—management, workers and everybody—is the production per man-hour. And provided always that it is the result of greater and cheaper production, it is a right incentive that this should be reflected in increased earnings. This, too, has its bearing on profits, on which the noble Lord, Lord Blackford, touched in his interesting speech. He dealt with other matters, too, in a speech in which he showed that by coming to this House his hand has not lost its cunning, which was so well known to many in another place. The aim of every well-managed and successful business is not to secure a large profit on a small turnover, but to get a small profit on a large turnover; and you will succeed in business only if you succeed in doing that, apart from the most exceptional times. You may have a time of scarcity in which a badly run business profits for a while, but in the long run that must be the policy of business.
It is quite right that at this time there should generally be a standstill in dividends. I am sure, too, that the Government are wise to seek this by voluntary effort and co-operation, to which I believe they will have a wide response. But in any policy of limiting profits or dividends it is most important not to discourage the ploughing back into the business of a good proportion of those 78 profits. That is not a view held only on this side of the House; it was most clearly emphasised by the noble Lord, Lord Lucas of Chilworth, in the interesting speech which he delivered. (The noble Lord told me that he had to leave.) That is the only way to-day, because we are all so taxed. Twenty years ago, private individuals could save and speculate—that is to say, speculate in the right sense, of trying out this or that invention. To-day, when a rich man is taxed 18s. or 19s. in the pound, he has no money with which to do this. The only way to-day in which businesses are able to engage in research, in the development of new processes and new inventions, and in the installation of the most up-to-date plant, in order to attain the cheaper production, is by ploughing back their profits, or a large proportion of them, into the business. I hope that Sir Stafford Cripps, who has always taken an interest in the scientific side, will be more of a realist in the practical application of this than was his predecessor.
I now turn, briefly, to another aspect of policy, also on the positive side. I am not going to argue about what our standard of living is to-day. Let me accept for the purposes of this debate the statement of one noble Lord—though I am not sure that I agree with all of his premises—that our standard of living to-day is relatively high compared with that of a great many countries. Nevertheless, unless we can buy, and pay for, the food and raw materials we need, we cannot maintain that standard of living. Therefore, it seems to me that it is vitally important that we should consider the sources of supply of food and raw material in connection with our ability to pay for those imports, by exports or in sterling. It is perfectly clear that for a long time we shall not get enough dollars to fill the gap, whether the export to hard currency countries is the 20 per cent. which the Chancellor of the Duchy of Lancaster thought it was, or the 15 per cent. that the gentleman in the gallery told him it was—
§ VISCOUNT SWINTON
Let us give him his 21 per cent.; we give him his majority. Even if he has that we do not come anywhere near to filling the gap. The noble Lord, Lord Shepherd, gave interesting figures of the greatly increasing American production. The last thing I want to do is to lecture America on what she should do, but unless she learns the lesson of being a creditor nation—which I think we learnt as a matter of practice over a hundred years, and America is twenty times the creditor country that we were in our heyday—there is little prospects of our proceeding by way of direct export. It was hoped, rather theoretically, I think, that although we could not jump this gap directly, yet we could get round it by what is known as the process of multilateral trade—and I am all for multilateral trade. But really to suppose that by non-discriminatory multilateralism we are going to secure an equilibrium for this country to-day, or in any foreseeable period of time, is just midsummer madness.
When a multilateral agreement is achieved, the force of necessity often compels a country to abandon a policy to which it has adhered in perfectly good faith. France, by unilateral action, recently drove a coach and four through the whole multilateral financial arrangements. There was a great deal of criticism, and personally I do not think that what the French did—I say it with respect—was well designed to achieve the objects which they had in view. I do not think it was likely to bring back currency or gold from abroad, or even to extract the gold from wherever it may have been hidden in France. But that is a matter of personal opinion. It was very awkward and uncomfortable for us, and we may have our views as to whether or not it was a sound policy. I do not think we can be too critical of France for adopting that policy if they thought it was right. After all, we ourselves, by unilateral action, ran rather like scalded cats out of convertibility, to which the Chancellor had gaily introduced us a few weeks before.
§ VISCOUNT SWINTON
I know it was; I am perfectly aware of that. But the Leader of the House will not deny that if, as he ought to have known, it was 80 going to be quite impossible for this country, in circumstances well known to the Chancellor, to maintain that convertibility, then he should have said that to the Americans. I challenge the Leader of the House upon this. I am sure he knows that if any overture had come from this country suggesting that it would be difficult or impossible for us to maintain convertibility that would have been most readily and sympathetically received in the United States, because I know that the United States and every country in the world would much rather we had not gone into convertibility than that we should go into it and then have to scamper out of it after a few weeks, with all the consequent embarrassment. That is the only thing which can be polemic that I have said. If the Chancellor of the Duchy considers that any reflection upon the kindness of the buoyant—I would almost say inflated—former Chancellor towards the young, it is not intended to be that at all. I am sure he was always quite delightful towards the young. What we complain of is that he was the worst Chancellor in history. Multilateralism must be conditioned by what is practicable. The Government themselves are making a whole series of bilateral agreements, many of them more or less on a barter basis. The Agreement with the Argentine is the last. I do not know whether we shall ultimately see the conditions of the Argentine Agreement, but certainly they are very onerous. We have had to give an enormous price for linseed.
I was greatly interested by the story which the noble Lord, Lord Shepherd, told us about the gentleman who had a hunch about what the prices were going to be, and who was indelicate enough to speculate. Mr. Maynard speculated and made £100,000. Of course, it was wrong to make a profit but, incidentally, as the result of his speculation, he hastened the falling of these prices. I am not saying that he ought to have speculated as a bear and bought short, although it was greatly in the interests of this country, because we wanted the prices down; we wanted the market to become a bear market, and to be operated successfully as a bear market. What I think is an interesting reflection is this. Mr. Maynard had a hunch, and made £100,000 without any inside knowledge; yet the Government, with all the inside knowledge in the world, never seemed to have the right 81 hunch and lost hundreds of thousands—and indeed millions—of pounds. I am making a constructive suggestion when I say that I think it would be a good thing if the Minister of Food were to hire Mr. Maynard.
I would ask this question: Do the bulk-buying contracts allow us to take advantage of falls in world prices? What that leads me to is this. Surely all this shows the fact that we cannot bridge the gap, that multilateralism will not meet the bill. Surely all this shows the importance of Empire production and Empire trade. Indeed, the Government recognize this to-day by granting the importance of developing the potentialities of the Colonial Empire. We were discussing the ground-nuts plan only last week. That is all quite right, but surely it is even more important that we should use and develop the certainty—not the potentialities, but the certainty—of other Commonwealth countries, where production of foodstuffs which we need already exists and can be rapidly expanded. Nor, as I have frequently argued, does this Empire development—certainly in Australia, New Zealand, and Canada—limit or handicap world trade. It is, therefore, vital that we should enter into no commitments which preclude or fetter the fullest development of mutual trade within the Commonwealth and Empire.
The wording of Article 9 of the Loan Agreement is not very clear, and the terms of the Articles—particularly Article 30—of the draft Trade Charter, which is now under consideration at Havana, are much more obscure. Indeed, they are so obscure that on the last occasion on which this matter was raised, the noble Earl, Lord Listowel, the Minister in charge of these Colonial economic affairs—who has wisely gone on an Empire tour—was quite unable to give any explanation of it. Indeed, he professed himself to be wholly unfamiliar with it.Where ignorance is bliss…But I am sure that the Leader of the House—to whom I have ventured to give notice of this matter—will be more precisely informed and will accurately inform us. If Article 30 of this Charter is obscure, as I read them Article 16 and Article 17 are only too clear. Under Article 16 we should be forbidden, if we signed this, to grant or receive any new or increased preference anywhere in the 82 Empire at any time in the future. Under Article 17 we may be compelled to eliminate all the existing preferences that exist to-day. Therefore I put two specific questions to the Government. The first is this: Under our existing agreements, are we in any way precluded or restricted in developing our mutual trade with the Commonwealth and Empire—that is the Dominions and Colonies—either by direct purchase or by the extension of Imperia preferences? And as a corollary I ask this: Are the Colonies themselves equally free by purchase or preference to develop their mutual trade with the Dominions?
My second question is this: Will the Government give a clear and definite undertaking that they will enter into no agreement or commitment which will restrict the right of the United Kingdom to develop our mutual trade with the Dominions or Colonies, either by purchase or by preferences? And equally that they will enter into no commitments which limit the corresponding power of the Colonies to develop their trade with the Dominions? Under the Draft Charter, countries are permitted and indeed encouraged to enter into complete Customs Unions. I have always favoured Customs Unions. All my experience, whether at the Board of Trade or the Colonial Office, has convinced me that such Customs Unions not only benefit the countries within the Union by increasing their prosperity, but increase their ability to trade with the outside world.
Surely it would be unjust and fantastic if a world plan encouraged such comprehensive Customs Unions but discouraged or prohibited the application of the loose and more limited system of Imperial preference within the Commonwealth and Empire. That system is vital to the policy of developing Commonwealth trade and Empire resources, to which the Government, I am glad to see, are at long last converted; and it is just as valuable to the expansion of world trade as are the stricter all-embracing Customs Unions. It is important that we should have a perfectly clear and definite statement from the Government to-night as to what is their policy and what are their intentions.
§ 7.24 p.m.
My Lords, you will not wish to listen to another speech, and 83 I will only pick up one or two points because it seems to me an appropriate occasion, after a year during which economic debates have taken place in your Lordships' House, to see where we stand. It is just a year ago that a Resolution was moved from these Benches, which provided the ground for the first of a series of debates; and, looking back over the various discussions that have taken place both on the straight issue of the economic situation and of the Finance Bill, I find that there are two things that have struck me forcibly, and I think they will have struck other noble Lords. The first one is the studied moderation of the criticism which has been made during that year from all Benches on this side, in the hope of not embarrassing the Government in a situation which as long as a year ago was realized on this side of your Lordships' House to be virtually untenable. The awful truth of what that situation is has only now, at long last, been disclosed in its full blackness by the Command Paper to which the noble Lord, Lord Pakenham, referred. It is therefore no longer incumbent upon us to moderate our language and comments on the economic situation as we see it to-day, because the Government themselves have disclosed the figures in the Command Paper.
The second point which struck me forcibly is that warning after warning of the situation in which we find ourselves to-day has come from Benches on this side, and that those warnings have by and large been either disregarded, smoothed over on attenuated, not by noble Lords on the Benches opposite but by members of the Government in their speeches throughout the country, and by no one more notably than by Mr. Dalton. That the position in which we find ourselves to-day, the inflationary position in particular, is what it is, lies at his door; it is there that the major part of the blame must be laid. The noble Viscount, Lord Simon, in the course of his remarks referred to the policy adopted by the late Chancellor of the Exchequer in regard to the rate of borrowing. I regret that the noble Viscount was not a little more explicit in stating the cost to the country of that policy. What it has cost is visible to-day in the inflationary situation of the country; there is practically no other cause. I entirely agree with the noble Lord, Lord Shepherd, that it is not the wages that are paid to labour in this country 84 which are the main cause of inflation; it is not the profits, large or small. It is to the financial policy of the Government, as conducted for two years by the former Chancellor of the Exchequer, that we owe the present situation.
That leads me to the discussions which have been going on for some time, not only in your Lordships' House but elsewhere, on the policy that has been followed in regard to wages and profits. I agree, of course, that in our present situation an attempt should be made to keep the present level of wages and of profits, or a lower level of profits; but no attempt to do that will be of the slightest value, utility or effect unless the financial policy of the Government is consistent with that doctrine and policy. It is perfectly idle to expect the cost of materials and wages to remain constant if the Government continue to create money at the rate at which money was created throughout 1946 and 1947. And the measure of that inflation of credit and bank money is to be seen in the Statistical Digest month after month.
There is a slight sign now of some reduction in the volume of credit, no doubt as a result of the changed policy. The policy of the Treasury and of the Chancellor of the Exchequer has changed diametrically in the last few weeks, compared with the policy up to the end of 1947. There is some slight change in the figures. The leading figure is the aggregate of bank deposits. There is a slight tendency for them to fall. Up to the end of December there was no such sign. Unless we have a clear indication that the financial policy to be followed is to be consistent with the announced policy of freezing or stabilizing wages, prices and profits, that policy will be rendered completely futile. It is perfectly clear that that involves not what are euphemistically described as certain anti-inflation measures; it involves a reduction of the whole basis of credit in this country—in other words, deflation. It involves deflation in order to get prices down. It is not an anti-inflation policy which has been conducted in the last few weeks; it is quite the reverse.
The second Budget at the end of last year, for what it was worth, involved the creation of a larger Budget surplus. That 85 was a deflationary measure, and it is a deflationary policy which I have no doubt that the Government are intending to follow. However, I wish that they had said so, because it would have had a much more salutary effect on critics abroad of the financial situation of this country, to know that that was the policy which the Government were intending to follow. The present situation, including our balance of payments, to a large extent is affected by what others think of us. The sterling area is a workable proposition so long as the sterling area is large enough. If there are no other members of the sterling area except the United Kingdom, and all the currencies of the other units in the sterling area have become either hard currencies or currencies that it is difficult for us to come by, then we are in exactly the same position vis-à-vis those countries as we are vis-à-vis America to-day.
The incentive to other countries to remain within or to come within the sterling area, as I believe they would if the finances of this country were conducted as they should be, is their view of our economic stability. That will influence their decision whether or not to stay within the sterling area. Since these matters were discussed in your Lordships' House, the sterling area most regrettably has already contracted. It has contracted through the defection or, in certain cases, through the slithering-out of countries in one form or another. That is a source of definite weakness to us, and it is to stop that that I would urge, with all the conviction and power I have, that the announced financial policy of His Majesty's Government should be to in- crease the confidence of others in this country by saying what the position is (as they have done in the Command Paper) and by announcing that the policy of stabilizing wages, which has been sketched out, will be carried through by a deflationary financial policy of the Government themselves.
That brings me to the point which the noble Viscount, Lord Samuel, raised in the opening remarks of this afternoon's debate—the question of a reduction in taxation. I agree that a reduction in taxation would probably provide a considerable incentive. But a reduction in taxation, unless there is a restrictive financial policy of economy in the conduct of the Government of this country, would 86 be, as a matter of fact, probably a disastrous policy to pursue. To reduce taxation and have a spendthrift Government increasing expenditure would provide the worst of both possible worlds. However if the Government desire to follow a policy of rectitude in financial matters, and to go back to the old-fashioned idea that it is not right to spend more money than you earn, then a reduction in taxation with a smaller Budget surplus would provide a strong incentive to everyone in this country, and would have the effect which the noble Viscount, Lord Samuel, referred to, on demands for increasing wages.
Of course, that in turn affects the other point to which I want to refer—that of the stabilisation of wages and profits. Here, let us be clear what we all mean. I do not believe that the Government mean that in no circumstances shall either wages or profits be allowed to increase. To say that is not to stabilise something; it is to congeal everything. It freezes everything up. What we mean is that there shall be no increase in wages or profits without an increase in production. In other words, what we mean by limited profits is not really limited profits but maintaining the ratio of profits to turnover—maintaining the margin of profit. All these things work both ways, in wages as in profits. Let us take an example. If one accepts literally the doctrine that wages must never be increased from now on, it must also mean that a man on piecework must never be able to earn anything more by working harder than he is now. That, of course, is complete nonsense. It cannot be intended. Obviously, what we mean is that the cost of the output of that man shall not be increased by increasing wages.
The same thing applies to profits. I take it that what we mean by a limitation of profits is that the profit margin shall not be increased, but shall in some cases even be decreased. That is exactly the point to which the noble Viscount who has just sat down referred, when he spoke of the good manufacturer in an enterprising firm or company wishing to make a larger turnover and a smaller profit. That is to say, an increase in profit in money but a smaller ratio of profit. If that is what the Government mean, as I think, then I believe it would be a good thing if they were to say so, because the bare, crude doctrine that there is to be no increase 87 in wages or profits at all is, I repeat, the surest method of completely freezing everything up and producing the opposite effect to what we are all intending, which is to increase the volume of production.
The noble Lord, Lord Pakenham, was courteous enough to refer to some remarks which I made in the course of the debate in your Lordships' House in February last in connection with the question of convertibility. I did very much fear convertibility and, as some of your Lordships may remember, I referred to two critical dates which were then before us, but are now long since behind us. The first date was May I, which was the date of the reduction of working days and hours in the coal mines, a critical date in the production programme of this country. The second date was July 15, which was the day for the convertibility of sterling stipulated in the Loan Agreement. If the noble Viscount, Lord Addison, wishes me to say so, they were the two critical dates. In the light of after-events, they have proved to be the two critical dates of last year.
I myself believe that the events of July 15 were, as a matter of fact, avoidable. They would have been avoidable if we had gone to the United States and explained the situation in which we found ourselves. I was frightened of it then. I remain entirely unconvinced that we would not have been able to get out of that situation with honour and glory instead of getting out of it with ignominy, as we had to do last August. I believe that those two critical dates and the financial policy of the Government are responsible for the situation in which we find ourselves to-day. It is a situation which has affected your Lordships in a remarkable degree, as your Lordships have shown by expressing your feelings in this matter.
Looking back over the speeches that have been made this afternoon, I think it is undeniable that one extraordinary development has taken place. I have listened, I think, to all the speeches. In contrast with the debates which have taken place in the past year, there has been nothing in the way of criticism of the present policy of the Government. There have been many helpful suggestions; there has been a sense, possibly, of depression; but there has been a desire on the part 88 of everybody who has spoken to help, and to wish the Chancellor of the Exchequer, and the Government, well in every possible way and where possible to contribute the help of which any individual is capable. The speech made by the Archbishop is, perhaps, the clue to the policy which all of us should follow in present circumstances. It is true that we are in a virtually untenable position. It is true that there is no light before us at the moment to show us how we are to get out of this, except by the rather facile method of going to "uncle" and borrowing a bit more, which is obviously no solution for anybody's problem.
We have come to recognize what has been denied up to date, that apparently aid under the Marshall Plan is not a desirable but an essential factor in our situation to-day. It is not a question—and here I must differ with what the noble Lord, Lord Shepherd, said—of whether we ought to limit imports. It is not a question of whether we should, or should not, develop Colonial territories. Without that aid we are facing starvation. "Starvation" is a crude and horrible word to use. It is not a question of what imports we ought to deprive ourselves. It is a question of how we are to get any money to pay for any imports. That is the crude, black situation in which we find ourselves; it is one which can be cured not by polemics, not by attack or criticism, but only by offering individually whatever we have to offer to the Chancellor of the Exchequer in his present difficulties and to the Government in the conduct of the affairs of this country. If they will accept that help, which I am sure will be freely given and will heed the collective wisdom of all your Lordships in this House, and the collective wisdom of all those in the country who are able to contribute something, then perhaps we shall find a way which, at the present moment, appears to be obscured by an impenetrable black cloud.
§ 7.44 p.m.
§ VISCOUNT ADDISON
My Lords, it is a difficult matter at this time to summarise a debate such as we have had today. But, in the first instance, I should like to say how completely I agree with what the noble Lord, Lord Rennell, said just now, when he described the character of the debate. It is absolutely correct. We appreciate sincerely the character of 89 the debate, and thank noble Lords for it. I am quite sure that the Chancellor of the Exchequer, and the members of the Government, will bear in mind—and I am sure will profit by—the kindly suggestion made by Lord Rennell and the valuable and constructive suggestions which other speakers have made, notably the noble Viscount opposite, to whose speech I will refer in a moment. May I add that in the forthcoming Economic Survey the standard of frankness will be fully maintained, and we shall not attempt to hide or gloss over the difficulties which confront us? With regard to this statement on increases of profit and remuneration, to which the noble Lord, Lord Rennell referred, I can assure him, taking his words, that it was no "bare crude doctrine"; if was a general statement of policy and not, of course, open to the hard interpretation which he suggested some people might place upon it. We are sensible people; I hope that it will be regarded as a sensible statement, and that it will be so treated.
I will just summarise, in as few words as I can, some of the points which have been raised, and I should like to express sincere thanks to the noble Viscount who initiated the debate for concentrating our thoughts first and last throughout his speech on the subject of prices and their vital character. Of course, the task before us, as the noble Viscount, Lord Swinton, said, is how we are to be able to pay for what we need. That is what we have to face, and I am not going to gloss over it. With regard to the drain on sterling last year, to which some reference has been made, we are all, of course, quite familiar with the aspects of the high price. There were three ingredients, apart from our own necessities, which were added to what had been foreseen, and which I do not think it can be fairly claimed—I do not think even Lord Rennell would say this—were the fault of the Government. One was the increase in price of the things that we had to buy; the next was the very, heavy overseas expenditure caused by foreign complications of one kind and another, which we all hoped we should not have to incur; and then there were the demands of the rest of the sterling area. I noted what the noble Lord, Lord Rennell, said about that. The House made some inquiry as to the proportion of the drawings in that regard and I have a 90 little statement here which may be interesting.
During 1947 the expenditure on tie sterling area outside ourselves is estimated at 266 millions, and our own was 626 millions. Those were the proportions, and therefore your Lordships will see that the drafts on the fund from outside sources were very heavy indeed. There was that trying period of July 15, to which the noble Lord has referred so forcibly, but I am not going to enter into any controversy with him in regard to that. We had to get out of that dreadful situation. I would like to say this, however, that immediately that occurred, every one of the Dominion countries set about curtailing their demands for dollars. Of course in nearly every case there were large contracts, already placed, which had to be met, but I can say that agreements have now been arrived at throughout the whole of the Commonwealth, and with many other countries, which will safeguard the drawings upon the fund from now onwards. It has been steadied but, at the present time, it is not possible to say that there will not be a considerable monthly deficit.
That is where we are at the present moment. There are special reasons why the January drawings were a little heavy, compared with those for November, and perhaps I may mention them to your Lordships. There was a special drawing by India and Pakistan, which inflated the amounts exceptionally, but agreement has now been concluded with both of them to reduce the drain in future. Then there were special demands for certain materials, notably cotton, which were seasonal, and happened to fall in that month. These together, and a few others which were more or less accidental, coming in the month of January, increased the drafts above those of November by the figure which has been mentioned. I am assured that we need not anticipate their recurrence. Certainly, let us hope not.
Can the noble Viscount clarify one particular matter in that connection? The noble Lord, Lord Pakenham, referred to the reserve figure, excluding the undrawn part of the Canadian credit, in January as being a little under £700,000,000. Is that 91 £700,000,000 the figure for before or after the drawings of the £57,500,000 for January?
§ VISCOUNT ADDISON
Subject to complete confirmation I think it was the figure before the drawings. These were drawings during the month of January so, of course, that would be so. It is true that we must increase our production, and we must also increase the sources from which we derive our supplies, first, at home and, secondly from places where we can pay for them. May I just say a word about home supplies? It is not a matter which has been referred to in this debate, but it has been referred to many times before. I think it is right that we should pay a tribute to what is now being done. An effort is in progress, on what I believe to be an unprecedented scale, to produce more food in this country. That is a vital necessity. Your Lordships are aware of plans that are being made to increase the production of things that we need—particularly foods—in the Dominions and in the Colonial Empire. I will come shortly to the matter of discrimination which has been mentioned by the noble Lord. I must say, in this connection, that I think that all of us have to share blame for the state of affairs which has existed in the past. When one comes to review the possibilities it is astonishing how they have been neglected for so many years. Indeed, it is dreadful; but there it is, and the whole nation, I think, must share responsibility.
So far as our Dominions are concerned, I am happy to say that Australia, Canada and New Zealand are in a position to increase their production, at all events of certain foods, fairly quickly, and bold plans are now being considered in Australia and elsewhere. But I do not deceive myself about this, and I would not like to deceive your Lordships by suggesting that the increased food production in our Colonial territories, particularly in Africa, will be attained quickly. I think that we should only be deluding ourselves if we thought that. I was speaking the other day to one who has firsthand knowledge of what is now going on in Tanganyika. As he said, it is quite easy to destroy scrub, break down trees, clear ground and destroy the stuff on the top of it, but it is quite another matter 92 to turn up the soil which has in it tangled roots which have grown during past centuries, and to bring that soil into a cultivable condition. The enterprise that is now being embarked upon is a gigantic one. I only mention that to indicate that time is required. Amongst the things which we must have, time is a most important factor.
I entirely agree with what the noble Lord, Lord Rennell, has said as to the necessities with which we are confronted. It is a fact that if the Marshall Plan, in whatever form it finally takes, is not adopted, this country will be confronted with some of the dreadful necessities to which the noble Lord has referred. Our alternative sources of supply will not become available so rapidly as to obviate the need for such aid, and our increased production will not be sufficient to fill the gap. I think I may say a word of warning on that. If, as we all hope, some satisfactory arrangement is made for helping Europe to recover—ourselves included—it will not minimise by one iota the necessity of our being unceasingly active to see that we are self-supporting at the end of the time. I am quite sure that every noble Lord will agree with that. I am glad to say that it is expected that the exportable amount of coal this year will be a little more than was anticipated last year. Perhaps there will be an additional 3,000,000 tons over what was forecast. Steel production is going to be a record, but in this connexion we cannot hide from ourselves the fact that it is nothing like enough to meet all our requirements.
In one industry we have not yet achieved the condition which has been achieved in those two industries, although of course in those two there is still much more to be done. Quite frankly, I think we are bound to be a little disappointed with what has been accomplished by way of increasing the production of textiles. There is urgent need for much more labour in that industry. As yet, we are far from the production increase in textiles that we must have. This is a matter of particular importance, because textiles, above almost all of our other products, are very saleable in the Western Hemisphere. They bring in more dollars than almost any other particular type of production. So, increased production is an urgent necessity if we are to get the dollars which we need and must have. 93 I am told with regard to the production of electricity, that the demand of our industries for power and of householders generally for current, has risen at an astonishing rate, and that it will probably be two or three years before the new constructions which are now being undertaken will give us a supply which will be adequate to meet the greatly increased demands. There again this essential factor of time comes in. I do not propose to add anything to what the noble Viscount, Lord Samuel, has said with regard to prices. His speech, if I may say so, will be read by many others besides the gentlemen to whom my noble friend has referred—it will be taken as almost a text on the subject and by none more sincerely than by the members of the Government. We thank the noble Viscount for it.
I wish to say one thing with regard to the terms of the Trade Agreement, arising out of the questions put to me by the noble Viscount opposite. He made some useful constructive suggestions which I noted and which I will certainly pass on to the Chancellor of the Exchequer. All of them I thought were very practical and helpful suggestions. On his suggestion that, if we can, we should give a little more to the home market as production increases, I must say that the psychological effect of that action would be exceedingly valuable and the housewife would welcome it. It is particularly necessary that I should refer to what he said with regard to Article 9 of the Trade Agreement and what arises out of it. So far as present arrangements are concerned, the application of the discrimination Article is suspended until the end of 1949. By the very Agreement, the discrimination provision shall not apply until after January 1, 1949.
§ VISCOUNT ADDISON
That is right. I think the best example of how the Agreement is being frankly and sensibly interpreted is the character of the Agreements that are now being made with some of our Dominions, particularly Australia and New Zealand, for the purchase of the whole of their food exports. The noble Viscount knows me well enough to know that, so far as we are concerned, we shall not agree to anything which is going 94 to disturb the very basis of our Commonwealth trade. There are certain exceptions made with regard to the Agreement which have not yet been interpreted, bat it is agreed that none of the restrictions arising out of the discrimination should apply to the United Kingdom and the Colonies.
§ VISCOUNT ADDISON
It comes into the Havana interpretation. At the present time the Agreement, of which the noble Viscount quoted clauses, is being discussed and interpreted in the Draft Charter which is being dealt with at Havana.
§ VISCOUNT SWINTON
I asked two questions. First of all, what is our present position? Havana does not bind us?
§ VISCOUNT SWINTON
We are bound of course, by the Loan Agreement. Therefore I asked what our position was under Article 9. As regards Havana, I asked the noble Viscount specifically what Article 30 means, and whether he will give an absolute undertaking that the Government will not enter into any Agreement that will bind us in any way to restrict or reduce Imperial preferences.
§ VISCOUNT ADDISON
I was dealing first with Article 9. I shall come to the Havana Charter later. The interpretation which has been placed on Article 9, with complete good will by the United States as well as by ourselves, is reflected in the character of the Agreements we are making and have already made with the Dominions, and will not apply in any case to imports from the Colonies. With regard to the Draft Charter, I can tell the noble Viscount categorically that any fresh commitments which His Majesty's Government may incur will be only as part of a wider settlement which they consider to be to the advantage of this country, and in framing their conclusion they will be mindful of the vital importance to the United Kingdom of maintaining and strengthening the traditional ties of trade with the Commonwealth. That is quite a specific statement. It is also agreed that the conditions governing direct purchase should be those which would be in accordance with the commercial practice which would constitute 95 the policy of a private trader. That is to say, taking the South African citrus fruit industry—
§ VISCOUNT ADDISON
Not necessarily. The South African citrus fruit industry was developed for the supply of the British market, and it might be that in that case there would be no particular advantage. The fact that it had been created and commercially developed for the supply of the British market was accepted and, as the noble Viscount is aware, the whole production of that industry has been purchased by this country, and no exception is taken to it. He may be quite sure that we will conclude no Agreement at Havana which will jeopardise the development of our trade with the Commonwealth in the spirit in which both he and I understand it.
§ VISCOUNT SWINTON
The noble Viscount has been very kind in answering this question, but I am not sure I can quite accept that answer, because the Havana arrangement as it stands, as he will appreciate, does prevent any extension of preferences and does involve the knocking out of preferences, or the possibility that preferences will have to be knocked out, after 1952. I will not discuss whether the Agreement is right or wrong. Personally, I think it would be a terrible thing to do. What I ask is this: Will the Government give an undertaking that they will not enter into such a treaty—because the treaty-making power rests in the Crown and the Government—without bringing it first to Parliament to ask for the approval of Parliament?
§ VISCOUNT ADDISON
I am quite sure the noble Viscount may be confident that we shall not agree to anything at Havana—of course nothing has been agreed to—which will cripple us or handicap us in the future in our trade with the Dominions in accordance with what we have hitherto understood as pertaining to our obligations to the Dominions, and—I shall read particularly these words—that we shall not undertake any settlement which is not advantageous to this country. In deciding that, we shall be mindful of the vital importance to the United Kingdom of maintaining and strengthening the 96 ties—the traditional ties—of trade with the Commonwealth. I am sure the noble Viscount need not have any apprehension on the subject. With regard to bringing the treaty before Parliament, perhaps he would be kind enough to give notice of that question. I am not quite sure what the procedure is, but I personally think it is a right and proper thing to do, and so far as I know that would be the course which would be adopted.
§ VISCOUNT SWINTON
We shall not be raising this question in debate again for some time. I am very much obliged to the noble Viscount for his very kind offer to give an answer if I put a question on the Paper.
§ VISCOUNT ADDISON
I hope the noble Viscount will agree to do that. He cannot expect me to answer a question about future procedure without notice. I can assure him I am no less enthusiastic than he is in maintaining these vital connections with our Dominions. They are the best friends we have in the world. They are our best customers, and they supply us with things vital to our existence. I think those are good enough reasons.
There is one other thing which has not been mentioned, which is quite a small matter. I am sure noble Lords will agree with me that we must make every possible effort to continue to augment national savings. That is absolutely vital. I confess that I was not quite able to follow the argument of the noble Viscount, Lord Samuel, in what he said about taxation and prices. I will read it carefully, but I was not quite clear as to his argument; nor does it seem to me, from the comments which he made on it just now, that his colleague on the Bench beside him was altogether clear. However that may be, it is quite clear that the presence of surplus cash in people's pockets tempts them to buy things, and to pay higher prices than they would otherwise pay. I do not profess to be an economist, but that seems to be common sense. If people can be encouraged to put some of that money into Savings Certificates it will not be in their pockets and, therefore, they will not be under the same temptation to buy extravagantly. I am putting it exceedingly simply, not being an economist. It seems to me that there is an overwhelming and continued reason why we should do everything we can to develop 97 the savings movement. Noble Lords have not mentioned that, but it is, I may say, an essential part of our economic plan.
Finally, let me say this. Whether it is with the aid of the Marshall Plan, or otherwise—and I have given several illustrations of this in the course of my remarks—what this country needs to be able to buy is time. We must be able to buy a certain amount of time; and, given time, I myself have complete confidence that, with the character and grit of our people, we shall surmount our difficulties. That will be the importance of the Marshall Plan—to gain time. But during that time it will be necessary that we should put forth our utmost effort, so that at the end of that time we shall once more be on an entirely self-supporting basis.
§ 8.12 p.m.
§ VISCOUNT SAMUEL
My Lords, I think your Lordships will agree that we have had a useful debate, and I am glad to know that the noble Viscount the Leader of the House, from what he has said, also thinks that that is so. The debate was intended to be constructive, rather than critical, and I feel that it has served its purpose. This House has no financial powers, but all the same I believe that discussions such as we have had to-day may serve a wide public purpose. I trust that the Chancellor of the Exchequer, when he is excogitating his Budget, will cast his eye over the many useful suggestions that have been made in this House to-day. With regard to the last observation of the noble Viscount, Lord Addison, directed to my own speech and the question of the Savings Campaign, I intended to say, and I think I did say, that if there is to be any reduction of taxation, it ought to be accompanied by an intensification of the Savings Campaign. That is a necessary element in any economic policy. I trust that the Chancellor of the Exchequer will pay special attention to the singularly well-informed speech of my noble friend Lord Rennell, who has exceptional knowledge of these subjects, and who, I am glad to think, agreed with the point of view which I expressed on the subject of taxation. This is not an occasion when we could expect any new or momentous pronouncement from the Government. We are very grateful for the speeches that have been made, first by the Chancellor of the Duchy 98 of Lancaster and now by the Lord Privy Seal, and for their courteous answers to the number of questions put to them from all quarters of the House. I beg to ask your Lordships' leave to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn.