Lords Sitting of 22 February 1949

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers
  THE LORD BISHOP OF NEWCASTLE
  Noel Baring, Lord Bishop of Newcastle—Was (in the usual manner) introduced.

  HEALTH SERVICE BENEFITS FOR FOREIGNERS
  2.37 p.m.
  LORD BROUGHSHANE: My Lords, I beg to ask His Majesty's Government the Question which stands in my name on the Order Paper.
  [The Question was as follows:
  To ask His Majesty's Government in what circumstances free medical services and medical and dental appliances, such as dentures and spectacles, are supplied to foreigners visiting this country, who have paid no contributions to the British National Health Service; and what is the estimated cost of providing these special privileges for foreign nationals.]
  THE MINISTER OF STATE FOR COLONIAL AFFAIRS (THE EARL OF LISTOWEL): My Lords, the Act is so framed as to cover everyone in this country, including foreigners. While here they can, like anyone else, make use of all the facilities. There are, therefore, no special arrangements relating to foreigners, and no separate estimates of cost.
  LORD BROUGHSHANE: My Lords, is the noble Earl aware that a leaflet has recently been handed to all visitors arriving at British ports stating that the National Health Service will provide them, free of charge, with any medical, dental and nursing care during their sojourn in Britain? What is the explanation of emphasising this fact to all foreigners arriving at our shores, when they have not contributed in any way towards the expenses of providing these services and appliances?
  THE EARL OF LISTOWEL: My Lords, I am not aware of that leaflet but I will draw the attention of my right honourable friend to its existence. At the same time, perhaps the noble Lord will realise that, as on the average foreign visitors stay here only one month, it is not likely that the benefits they derive from the National Health Service are numerous.
  LORD BROUGHSHANE: Is it not possible to obtain a pair of spectacles or some dental appliance even within one month? Some of us have been obtaining these things in a less period of time than that.
  LORD HAWKE: Is the noble Earl aware of an allegation that Lascar crews are arriving in this country without teeth in their heads and are going back with "National" teeth and selling them in the bazaars at the other end?
  LORD SALTOUN: My Lords, if that is so, may I inquire how these people get their teeth and spectacles so much sooner than do people who belong to this country?

  NATIONAL INSURANCE (MARINERS) AMENDMENT REGULATIONS, 1949
  LORD CHORLEY: My Lords, I beg to move that the Special Order, as reported from the Special Orders Committee on Wednesday last, be approved.
  Moved, That the Special Order, as reported from the Special Orders Committee on Wednesday last, be approved.—(Lord Chorley.)
  On Question, Motion agreed to.

  AMERICAN AID AND EUROPEAN PAYMENTS (FINANCIAL PROVISIONS) BILL
  2.40 p.m.
  Order of the Day for the Second Reading read.
  THE MINISTER OF CIVIL AVIATION (LORD PAKENHAM): My Lords, I rise to move the Second Reading of the American Aid and European Payments (Financial Provisions) Bill, 1949. When this Bill was recently introduced in another place, the opportunity was taken for a general debate on the whole

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  economic progress of the nation, and indeed on most other economic and even non-economic matters—practically everything in heaven and earth. In view of the full and satisfactory information given by the three Ministers who took part in that debate, and in view also of the fact that it will not be long before the Economic Survey for the year is available, I have formed the impression that it is not the desire of your Lordships' House (although that desire may be altered at the last moment) to embark upon quite such a complete and omnibus inquisition as was held in another place. I am fortified in this view by what I read yesterday in The Times, which is invaluable on matters of fact—and even on matters of opinion it should always be reckoned with.
  Before coming more directly to the Bill, I would ask permission of the House to deal with some of the issues, although not at the same length as was adopted in another place. The Bill before us is concerned with machinery for handling the aid which the United States has so generously given us, and for passing on to other European countries a portion of that aid. It is a link, therefore, in the apparatus required for the most effective and beneficial distribution of this assistance. But I would emphasise that, besides this machinery, three vastly more important elements are required if the assistance and the recovery are to go forward until assistance is unnecessary and recovery is complete. First of all, there is the American generosity, which we cannot acknowledge too often, and which will always be alluded to in this House with great sincerity and feeling; secondly, there must be our own national exertions, by which we must struggle through our own national share of the common difficulties; and, thirdly, there must be our participation—and indeed our active participation—in the formation of a common European plan. It is therefore relevant to ask—and I will not answer the question at undue length—what we ourselves have achieved in the last year, because our own recovery helps the recovery of everyone else. After that I would ask leave to dwell for a moment on the common European problem, and on the lines upon which it is being tackled by the nineteen States, of whom we are one.
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  My Lords, what was the year 1948 in Britain? It was a year of good and solid progress—a year which, like 1940 in that respect, perhaps, did not seem very glamorous to everybody at the time. Yet, I venture to say that 1948 was a year whose facing up to realities and whose long steady effort entitles it to rank with any in the long and arduous history of Britain. The industrial population increased by only 2 per cent., compared with the previous year, 1947, but industrial production as a whole was 10 or 12 per cent. higher than in that year and about 21 per cent. higher than in 1946. While comparisons with pre-war years are conceded a lesser degree of statistical sanctity than those for the years from 1946 onwards (and least sanctity of all by the noble Lord, Lord Cherwell, who will no doubt divert the House as soon as I sit down)—although the pre-war comparisons are conceded a slightly lower degree of sanctity by all statisticians, including some who now work for the Government and who previously helped the noble Lord to play such a useful part in the war, it is generally accepted that as a country we are now producing about 25 per cent. more than in 1938. That, I say without apology, is a fine effort which reflects the greatest credit on workers and managements. It would, I venture to suggest, have been quite impossible if the national social and economic policy—I stress not only economic but social policy—had not been conceived on lines that were intrinsically sound and appealed to the people as a whole.
  When the crisis smote us in full blast in August, 1947, we argued in this House as to whether it could be more properly described as a production crisis or a balance of payments crisis; and we agreed that it was both, and must be tackled as both. Our response to the production aspect of the crisis I have just touched on. If we come to the balance of payments issue, the reduction in the overseas deficit due to increases in production has been perhaps even more remarkable. The rate of total deficit in the first six months of 1948 was only half that of 1947, and in the latter half of the year just concluded we may prove, as my right honourable friend the Chancellor of the Exchequer has recently said elsewhere, to be very near a general balance. I need not remind the House

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  that the progress of exports has been the vital factor in the recovery. From a rate 9 per cent. in volume above 1938, which was achieved during 1947 (that is, 109 per cent. of pre-war exports), they rose to 30 per cent. above the 1938 level in the first half of last year, and to 43 per cent. above it in the later six months. During January of this year, though the figure for a single month, taken in isolation, is admittedly liable to be misleading, the volume of exports is provisionally estimated at 62 per cent. above 1938. I believe the President of the Board of Trade said the other day that it was hoped we should reach a figure of 60 per cent. But there, as always, the Government understate their own virtues, and 62 per cent. is the latest estimate.
  My Lords, these are great achievements. Great credit is due to all in industry and commerce who have made them possible, but the Government are entitled to point out that they have been effected within a framework of conscious deliberate Government planning to which no previous part of our history provides a peace-time parallel. But I should be performing the greatest disservice this afternoon if any satisfaction that I appear to feel in relation to what has taken place during last year savoured in the slightest degree of complacency. The gravest of our particular problems is still before us—the problem of a dollar deficit. This will be hardest of all to solve, and above all the hardest to solve in time.
  The net gold and dollar deficit of this country and the rest of the sterling area taken together was over £1,000,000,000 in 1947. In the first half of 1948 its rate was halved. It fell again in the second half of the year to about one-third of the 1947 rate. But a rate even such as that—a rate of £330,000,000 a year—is far more than we can bear for more than a little while. For the present, with aid under E.R.P. and drawings on the Canadian Loan, we can meet our current needs, but neither of those sources can continue for very long. By 1952–53 we must be self-supporting. Nothing else is compatible with our self-respect and, indeed, with our national independence. On that goal, therefore—independence by 1952–53—our thoughts and plans and strivings are concentrated.
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  The policies required, which cannot be simple, either to formulate or to carry out, have been expounded in the long-term _programme which we submitted to O.E.E.C., and which we published before Christmas. I venture to suggest, with all deference, that there is no member of your Lordships' House who has not benefited, or who would not benefit, from reading with particular care at any rate the first fourteen pages of that document. Of course, the programme set out was never intended to be carried out in isolation. It requires to be reconciled with the eighteen long-term programmes submitted by the other countries, and before finally coming to the Bill, which the House will be relieved to hear is extremely short, I would like to offer a few observations on the subject of European co-operation, on the gravity of the problem and on the steps which are being taken to solve it. We in Britain, as I have suggested, have our production problem and our balance of payments problem—problems, of course, which are intrinsically linked. Europe has both these problems, and, additionally, her balance of payments problem splits itself into the problem of balancing payments with the outside world and the problem of maximising trade within Europe, intra-European trade.
  In speaking of Europe, I shall for the most part be referring to Western Europe—the countries associated with us in this great adventure which we are now discussing. But I must not pause to-day over the problem of European production. By the second quarter of 1948, the industrial production of the O.E.E.C. countries had recovered to the pre-war level, and, apart from Germany, it was 17 per cent. higher. This record, limited though it is for the purposes we have in mind, compares favourably with that after the First World War, in spite of much greater destruction. Moreover, since the middle of 1948, there has been further progress, and for the first time since the war, under the influence of currency reform and other measures, there has at last been substantial improvement in Germany.
  I ought to mention, however, that agricultural production, in spite of much better harvests in 1948, is still well below the pre-war level. Grain production is from 10 to 15 per cent. lower than in

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  the pre-war years, though the population is nearly one-tenth higher. These points and the urgent steps required to speed up the rate of recovery are well brought out in the Interim Report on the European Recovery Programme, published by O.E.E.C. at the end of last year, which many members of your Lordships' House will have studied.
  When, however, one talks about the extreme gravity of Europe's problem, one is thinking, as in the case of this country, of the balance of payments question. And here, once again, I must refer noble Lords to the admirable Interim Report, which, of course, is not the same document as our own programme: the Report is published by O.E.E.C. as a whole. Western Europe is a densely populated area, only half as large as the United States but with twice the population—a population built up over the last 150 years when Western Europe was the workshop of the world. At the end of the nineteenth century, Western Europe (with only one-tenth of the world's population) was supplying nearly nine-tenths of the world's exports of manufactures to countries that could not produce them for themselves, and with those exports was paying for imports of food and raw materials which Western Europe herself could not supply in adequate quantities. Even if there had been no World Wars, the march of events outside Europe was destroying Europe's predominance as a source of manufacturing supplies, and would undoubtedly have forced a change in Western Europe's economic structure—an adaptation in the nature of her exports, a specialisation of those products in which her competitive advantage was greatest and a reduction of her dependence on imports of primary products.
  By 1938—that, of course, was after one World War—the balance of Western Europe with the outside world, and in particular with North America, was highly precarious. Until 1913, Western Europe was a large exporter of capital; but by 1938 there was no net foreign investment at all on the part of Western Europe, and, if existing trends continued, Western Europe, quite apart from this last war, would soon have found herself living on capital. Western Europe, I would add, was becoming increasingly dependent upon invisible
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  earnings as compared with visible exports. In 1938, only 70 per cent. of Western Europe's imports from the outside world were financed by exports; about 20 per cent. were covered by investment income, and 10 per cent. by shipping, tourism and other invisible earnings. This balance—which as I say was precarious before the last war—was destroyed by the war. I need not allude to disruption which was caused; its various aspects are familiar to the House. Some of the factors are temporary; others are being tackled and, I hope, will be disposed of. But the loss of income from overseas investments, the Iron Curtain which was dropped by Russian policy across the middle of Europe and the flight of German refugees to escape the horrors of life in Eastern Europe behind the Iron Curtain represent far-reaching adverse developments which we must not expect to overcome in a day, or even a week, though I believe we are all at one in the conviction that, if we make a real success of Western Europe, the Iron Curtain will somehow or other get itself pulled down.
  Be that as it may, the countries of Western Europe in 1947 (this figure and the next two are vital figures), including the United Kingdom, were paying for only 40 per cent. of the imports they were receiving from the outside world. In the present year, the ratio is estimated at 50 per cent., and in the year 1949–50 at 60 per cent. By 1952–53, whether Western Europe likes it or not, she is confronted with the fact that she has got to pay for 100 per cent. of her imports. It was with this in mind that the nineteen plans were sent forward from the different countries and examined by a Committee representing the participants as a whole. It is with this in view that the Organisation for European Economic Co-operation—that is, O.E.E.C., as we know it—is dedicating its efforts and all its continuing endeavours.
  Your Lordships will, I hope, have approved the announcement after the Council Meeting in Paris on February 17, of the modification introduced into the structure of O.E.E.C. The change consists briefly in the giving of authority to the Chairman of the Council, M. Spaak, to associate with himself a group of Ministers from various countries in order to help him in the task of giving an impulse to the work of the organisation. This change has just taken place

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  and there has not yet been a full statement made in this country. M. Spaak held the first meeting of the Consultative Group last Friday and it was agreed to meet again early in March and subsequently at two monthly intervals. We regard this as a most important experiment. If it is to succeed, two conditions must be fulfilled: first, the Ministers forming the group must be of high standing in their own countries and one must look for understanding of the greatest possible degree; secondly, the discussions of the Group must not be carried out in public. I know that your Lordships will agree to that. These conditions have been agreed to by all concerned. I am sure that the work of the Group will ensure greater ministerial interest in the work of the European Recovery Programme, both in Paris and in the participating countries. My right honourable friend the Chancellor of the Exchequer will be the United Kingdom representative at the next meeting of this Consultative Group.
  To-day, in connection with the programme of European recovery, I would further stress two points which are both underlined in the Interim Report. The first is the virtual certainty that the individual programmes of imports will have to be adjusted downwards if viability is to be achieved by 1952–53. That does not mean, of course, that any participating country, our own, for example, would have to adjust its programme downwards, but that the total would clearly have to be adjusted if general viability was to be achieved. Policies a good deal tougher than those hitherto pursued by most of our Continental partners will have to be adopted if imports are not to fall something like 25 per cent. below the target, while at the best it is difficult to anticipate a more than 90 per cent. fulfilment of import targets. These blunt truths are being faced by the nineteen partners and the task of bringing the programme into harmony with the facts, and still more the policies into harmony with the programme—it is no good setting a target without accepting a programme—is one that lies before all the nineteen countries. This task lies before all of them, but it is one in respect of which we in this country appreciate our special responsibility and our special mission.
  There is not only the European problem of a balance between Western Europe
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  and the outside world, there is also the problem of intra-European trade, of trade within the Western European area. Before the war, about one half of the trade of the participating countries was with each other; but since the war, the total volume of intra-European trade has fallen sharply. As a result of the war, trade in 1947 between participating countries was less than two-thirds of the prewar level. As the Interim Report wisely points out, the serious difficulties that Europe will in any case have in paying for goods from outside Europe makes an expansion of intra-European trade all the more important. The full development of intra-European trade is obviously linked indissolubly with the general problem of recovery. Productive efficiency is involved. Specialisation on the right products is involved, and all that is meant by integration—a word which is beginning to be used as a substitute for thinking but which is still capable of employment as an aid to cerebration. Nothing has been and nothing will be more essential to the revival of intra-European trade than a workable machinery of intra-European payments.
  The ultimate object when it was started and to-day is the release of European trade from hampering restrictions and the restoration of the pre-war multilateral payment system. I an sure that every member of your Lordships' House is well versed in economics and does not want me to define "multilateralism," unless he has been away from the House for a long time and is a "backwoodsman" who is out of touch with the modern world. I understand by it a system under which a Frenchman who obtains our currency can use it to buy goods from any other country in the world. I hope that the noble Lord, Lord Rennell, will endorse that as a correct definition which would not be regarded as ridiculous in the City of London. The immediate and vital problem is to make European trade possible at all, and hence the Intra-European Payments Agreement, without which trade in Europe could not have continued even at the 1947 level. And so at last to the Bill.
  The Bill gives statutory authority for certain financial provisions of the Economic Co-operation Agreement of July 6, 1948—the Bilateral Agreement between His Majesty's Government and the Government of the United States—and for

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  the provisions required to carry out the Agreement for Intra-European Payments and Compensations signed at Paris on October 16, 1948. Put into plain language, the aid furnished by the United States to the United Kingdom is of three kinds—loan aid, grant aid and conditional aid. Loan aid is outside the scope of the Bill, which is concerned only with grant aid and conditional aid. The Bill is concerned in practice with the organisation of two accounts—the Special Account and the Intra-European Payments Account. Grant aid need not detain us long. Grant aid is received on condition that the sterling equivalent is paid into the Special Account of the Treasury at the Bank of England and disposed of in accordance with Article 4 of the Bi-lateral Agreement. The Bill makes no change in the accounting arrangements in force for dealing with grant aid. It merely gives statutory authority for the arrangements which have been established and provides for the Special Account to be audited.
  Conditional aid is the main subject of the Bill. It is that part of the aid furnished by the United States to the United Kingdom and to other O.E.E.C. countries which is conditional on their making available corresponding amounts as drawing rights in favour of other member countries under the Intra-European Payments Agreement. Let me make this more concrete. The gross sterling contribution of the United Kingdom under this scheme for the year ending June 30, 1949, is the equivalent of 312,000,000 dollars. On the other hand, the United Kingdom has drawing rights against Belgium to the equivalent of 30,000,000 dollars. In practice, this means that out of our total Marshall Aid, which is a much larger figure than 312,000,000 dollars—several times that amount—312,000,000 dollars are used to finance the export of goods for which we are not paid by the European recipients, while on the other hand, we get 30,000,000 dollars' worth of goods from Belgium for which we do not have to pay. The Bill provides for the sterling equivalent of the conditional aid received by the United Kingdom to be paid into a new account—namely, the Intra-European Payments Account. This account will be the source from which the United Kingdom satisfies the corre
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  sponding drawing rights exercised against it by other O.E.E.C. countries.
  In this way the Bill provides the domestic machinery by which we play our part in the Intra-European Payments Scheme—in what has been called the "little Marshall Plan." Since the provision of all these different currencies is, of course, complementary to the provision of dollars under E.R.P., it must be looked at the whole time in conjunction with the "big Marshall Plan." It was estimated in Paris last summer that if intra-European trade was to make the maximum contribution to recovery, something like 800,000,000 dollars' worth of goods would have to be exchanged in excess of what the recipient countries could pay for with their current earnings. The object of this Bill is to try and make possible that 800,000,000 dollars' worth of trade within Europe which otherwise would not take place. This shows the magnitude of the task that had to be faced and the importance of this scheme to Europe. Indeed, since the scheme includes the whole of the monetary areas associated with the European members, it covers a far greater area than Europe itself, and affects a very large part of world trade. In order to avoid any misunderstanding that may arise, perhaps I should say that we have kept in the closest touch with the Commonwealth throughout the whole business, as was only right and proper.
  The present scheme was hammered out after several months of discussion and negotiation with O.E.E.C. It was not the only way in which the problem might have been tackled; for example, a system of off-shore purchases might have been adopted, under which part of the E.R.P. dollars provided by the United States, instead of being allocated directly to meet expenditure in the dollar area, would have been made available to European countries to spend on purchases from one another. I am sure no one requires any explanation of these offshore purchases, but in order to make assurance doubly sure, perhaps I should say a word or two on the subject.
  Suppose that under the present plan (these are imaginary figures) Britain receives £100 worth of dollars from the United States and pays out £25 worth in sterling to Europe, then, under the offshore purchase system the Continent would have been given £25 worth of

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  dollars direct, which they would then have paid to us. That would have been the other way of doing it. In each case, Europe would have spent £25 in this country on our goods which they would not otherwise have been able to spend. But under the off-shore purchase system, the American authorities would have had to inspect the use that the European countries made of the dollars as between themselves. Mainly, I understand, in order to avoid that particular obligation on the Americans, it was decided that it would be better to discourage the use of dollars for financing intra-European trade and to have a system which depended on the provision by European creditor countries of the contributions required in their own national currencies. As the scheme has emerged, therefore, though it is linked to E.R.P. through the concept of "conditional aid," it is essentially a European scheme which operates under the supervision of O.E.E.C. and not directly under American supervision.
  The United Kingdom is the largest contributor, with a net contribution of 290,000,000 dollars, including the recent grant of 8,000,000 dollars drawing rights to Turkey. In addition, it was estimated that various European countries would need to draw on their sterling balances to the extent of 209,000,000 dollars. Our total contribution, therefore, in terms of unrequited exports, was estimated at approximately 500,000,000 dollars. This covers not only exports from the United Kingdom, but also—to the extent of about two-thirds—exports from the rest of the sterling area for which we assume the sterling liability. In this connection, we must recognise the very generous contribution of £8,000,000 which we have received from Australia.
  The scheme has been criticised on the grounds that it is not flexible enough and imposes a bilateral pattern on European trade and payments. As I have already said, we should all agree about the desirability of aiming at multilateral trade and convertible currencies in Europe, but no one seriously supposes that the necessary conditions for bringing into force a fully multilateral system exist at the present time. The fundamental disequilibria, the persistent deficits, must first be cleared away. That problem is not one that can be solved by any payment scheme, however ingenious, or by other improvements of
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  mechanism. Far reaching changes will have to be brought about in the pattern of existing European production and trade, and this is one of the main purposes of the long-term plans on which O.E.E.C. is now working.
  For our part, it is our intention to go as far as we can to allow the multilateral use of sterling, provided that we are not thereby involved in additional call on our gold and dollar reserves. Indeed, it is part of the Government's policy to encourage the international use of sterling, and a great deal of intra-European trade is already financed in sterling quite outside this payment scheme. Sterling trade between the countries outside the sterling area is very considerable, and is normally allowed at the present time, except in two situations—one where the sterling would be paid to a country which has already too much sterling and might draw gold from us; and the other where sterling would be paid by a country which has only just enough at the present time to meet its obligations to the sterling area. Except in those two cases, sterling trade between countries outside the sterling area is normally possible. So much for the multilateral point. As I say, we are really all at one in seeking the ultimate multilateral trade goal.
  Another criticism of the scheme is that it does not give the debtor countries sufficient real incentive to get out of debt and achieve equilibrium. No doubt this point—which I do not think can be dismissed in a cavalier fashion—will come under intensive review when the form of next year's scheme is considered. One should remember, of course, that the scheme itself is temporary, and each country knows that within a few years at most it has to make itself independent of outside assistance, whether that assistance comes from the United States or other European countries. In the meanwhile, I should just emphasise, what is I hope well understood, that it is not enough to possess a deficit in order to secure aid of a corresponding amount. One has to justify the deficit under international scrutiny, and to prove that the aid is really necessary to ensure recovery.
  In conclusion, I would say that the scheme is admittedly not perfect, and it is highly probable that there will be amendments and improvements to it in

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  the light of experience of its actual working. It goes without saying that any improvements suggested by noble Lords will be particularly acceptable, though I shall be agreeably surprised if they are forthcoming straight away; I feel that further reflection will probably be necessary before it is found possible to bring them forward. But, as I say, improvements and amendments will no doubt be made, and we shall be only too ready to consider what is put forward. This scheme, with all its possible imperfections, represents the first fruits of European co-operation, along with the division of Marshall Aid. The scheme has succeeded largely, though not completely, in eliminating the need for settlements between European countries in gold or dollars. It has kept trade going in Europe when trade was gravely threatened, and it has afforded a base from which the great and necessary increase can drive forward. It is part of something much bigger, of a Western European enterprise that we all hope and believe will not confine itself in the end to Western Europe geographically, nor express itself only in economic or material terms. With the good will of everyone in this country, and, I believe, of everyone in this House, we are engaged, with eighteen other nations, in making history. We are embarked upon a task which will require every atom of faith, vigilance and zeal that we possess; but at every stage we must be practical, realistic and effective. And it is with confidence that your Lordships will regard this measure as a useful and valuable step, that I submit it to the opinion of the House. I beg to move that this Bill be read a second time.
  Moved, That the Bill be now read 2a.—(Lord Pakenham.)
  3.22 p.m.
  LORD CHERWELL: My Lords, it is always a pleasure to play opposite—if that is the correct term—the noble Lord who has just sat down. When I see him sitting there, "buxom, blithe and debonair"—if I may quote John Milton—I know that we are in for an interesting, enlightening and enlivening speech. In this matter, as has often been said, we all row in the same boat; and if I venture to say that we do not all use the same sculls, it is merely in order to assert a difference, and not to boast an advan
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  tage. To begin with, I should like to join with the noble Lord in expressing our appreciation and our gratitude on this side of the House to the American Government and people for their most timely and, indeed, absolutely essential help. This should give Western Europe an opportunity to set its house in order and to get the wheels of trade and industry turning again, so that within a measurable period we may be able to stand once more upon our own feet. If I have had to say "Western Europe," and not Europe as a whole, this restriction is in no wise due to any failure on the part of the American Government or people, or on the part of that great soldier and statesman, of whom I shall always think as General Marshall, who gave the impulse to this scheme. I am sure that we all agree in regretting that his health has failed him, and in wishing him a speedy and complete recovery.
  If American aid had to be confined to Western Europe, it is entirely due to the insistent intervention of the Politburo—hag-ridden as usual by some insane suspicion—which has denied to the Eastern nations of this Continent a chance of participating in this munificent gift. It cannot in my view be emphasised too strongly that these American loans and gifts—because it is not altogether easy to distinguish between them—represent unrequited work and effort by the American people. When we remember how much we all desire to shorten our hours of work, it is no small thing to find the people of America are prepared to work one hour a week longer without reward—because that is what it comes to—merely to help their fellow men on this side of the Ocean.
  The main purpose of the Bill, if I followed the noble Lord correctly, is to authorise the Treasury to set up two accounts, the Special Account, into which unconditional grants and their proceeds flow, and the International European Payments Account, fed by American grants made to us on condition that we should allow equivalent drawings in sterling by any of the participating European nations. About the Special Account there is not a great deal to say. If I have understood the matter aright, it is fed in the main by sterling deposits corresponding in value to the goods and services bought with the dollars unconditionally granted to us by the United

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  States. Drawings can be made from this account only by agreement with the United States Government, as laid down in paragraph 4 (2) (b) and 4 (6)—and then only for purposes which are approved, broadly speaking, as tending to increase financial stability. As we are all in agreement with the United States in desiring to avoid inflation, I believe—no doubt the noble Lord will correct me if I am wrong—that most of the funds in the Special Account, so far at any rate, have been used simply to reduce the National Debt.
  There is only one point in this connection upon which I think we should welcome enlightenment, and upon which the noble Lord touched. And I think it is of great importance. Supposing, by some miracle, we succeeded next year, by the utmost austerity and self-denial and extremely hard work, in balancing our trade, should we cease to qualify for unconditional Marshall Aid, whereas other countries who had perhaps been less abstemious, less hard-working and had not balanced their trade continued to receive it? In other words, will there be any reward for virtue? If not, if virtue is to be its own (and, indeed, its only) reward, I am afraid some people—not, of course, noble Lords in this House—may cast envious eyes upon their neighbours enjoying "the roses and raptures of vice."
  The International European Payments Account gives rise to more interesting considerations. As I understand it, in some ways it constitutes a little Marshall Aid plan inside the main Marshall Aid plan, in which we stand to the other participating countries in somewhat the same relation that America stands to Western Europe as a whole. There is, of course, the important difference that whereas America has to sweat and toil to produce the goods which she sends to us, we receive as a free gift at any rate some of the dollars which we are to distribute under the scheme. Speaking in this House eighteen months ago, I advocated some arrangement by which any surplus we might have in our trade with other participating countries should be credited to us in dollars. To some extent this proposal is met by the plan contained in this Bill. The only danger I see—which the noble Lord himself mentioned—is that the other participating
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  countries, if they know that they can draw whatever they please from this account, so long as they do not exceed the total, do not seem to have any special incentive to balance their trade with us.
  The same, of course, might be said about our position vis-à-vis America under the Marshall plan. But the allocations under this plan are made year by year, and only after prolonged negotiations and examination in which, quite justifiably, the Americans have an opportunity to make sure that we are doing our best to reach equilibrium. I should be interested to learn whether anything corresponding to this exists in the relations between ourselves and the other participating countries. It might be rather invidious if Britain which, in effect, is merely distributing Amercan gifts, were expected to investigate the finances of other participating countries and to make sure that they were really making every effort to balance their trade with us. On the other hand it might be doubtful policy to give them complete carte blanche.
  There is another point of some interest, which the noble Lord only touched upon. It was stated by the Chancellor of the Exchequer that in addition to the 282,000,000 dollars net—that is to say 312,000,000 less 30,000,000—we have given other countries the right to draw from sterling balances an amount corresponding to 209,000,000 dollars. I should like more details as to which countries are to benefit in this way and how much each of them is to receive. As your Lord-ships may be aware, I feel strongly that many of these so-called sterling balances represent merely compensation demanded from us by a variety of countries for their sometimes rather meagre help in winning the war. I have always said that they should be set off, at any rate in part, against the amounts we spent in saving these countries from being subjugated. I gather that this 209,000,000 dollars which they are to be allowed to draw against sterling balances is not being made good to us by the United States; it represents simply unrequited experts which we have undertaken to deliver. That is a burden upon this country about which I think we should like to know more; we should like to know whether the acceptance of this burden was made a condition of our receiving Marshall aid and, if not, why we undertook it.

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  Another point of great interest arises in this connection. If a country with a negative balance wishes to rectify it, is this taken out of the 282,000,000 dollars of conditional aid, or from the 209,000,000 dollars by which we have agreed to allow sterling balances to be reduced? If reductions in the sterling balances were going to be made up to us in dollars in any event, this would not matter very much; but if we are not to be compensated it is of the utmost importance. If, unhappily we have to suffer the full impact of this drawing down of sterling balances, I hope it has been agreed that they will be touched only after conditional aid has been exhausted.
  There is another point which is not quite clear. If participating countries should not draw upon this conditional aid to the full amount and they have something left in the account at the end of the year, what becomes of it? Clause 4 of the Bill presents a possibility of transferring any surplus there may be from the International European Payments Account to the Special Account. Is this what is intended? I hope it may be. Broadly speaking—unless, of course, large sums should be transferred under this proviso—40 per cent. of the total Marshall Aid seems destined to flow through our hands to other participating countries—282,000,000 dollars plus 209,000,000 dollars. I think this is a very important point and one which is not fully realised. It ought to be emphasised when, as so often happens, the headlines suggest that this country is receiving under the Marshall Plan much more favourable treatment than other countries which are participating.
  I was much relieved to hear the noble Lord say that the Dominions and Colonies were being brought into these negotiations—
  LORD PAKENHAM: I did not, I think, use quite that expression. I said that we kept in the closest touch with them. One must not commit them to these various arrangements, but one must keep in the closest touch with them.
  LORD CHERWELL: I am not quite clear what is the definition of "keeping in the closest touch," but if it means the same thing as making an electrical contact, I shall be satisfied.
  LORD PAKENHAM: I should need that defined!
  LORD CHERWELL: After all, very large sums are being made available in this International European Payments Account for expenditure in the sterling area; and this fact may profoundly affect the economy of the various territories in which they are spent. I think it is in our own interests as well as in the interests of our sister nations in the Empire that these questions should be discussed and agreed with them in advance as far as possible; and I trust that being "kept in touch" means that they consider and agree to the proposals we make.
  Another matter which arises in this connection is that of helping European countries to balance their foreign trade. Whatever the exact conditions attaching to their drawings, I imagine that it is in everybody's interest to try to make sure that their trade balances as nearly as possible. If this is agreed, it is difficult to understand why we should seek to restrict the import of things from France, even if they be luxury imports, or to prevent people from travelling to France. These restrictions and regulations tend to increase France's difficulties in achieving equilibrium. The only reason for them, which may, of course, appeal to certain members of the Socialist Party, seems to be that they cannot bear to think of any individual enjoying travel or any luxury which cannot be enjoyed by everybody else. Some people can reconcile themselves to any deprivation—even to the rigours of the Socialist régime—provided they are sure everybody else is suffering just as much. But I am sure this un-Christian point of view would not commend itself to the noble Lord who moved the Second Reading of the Bill.
  I hope, therefore, that he will explain to the House why so many obstacles are placed in the way of travel to, say, France or Italy, which have considerable negative trade balances in the sterling area, and why it is that we can afford gifts and loans to these countries but cannot afford to import luxuries from them. Would the Chancellor prefer to have nothing in return for our goods rather than a few luxuries? Surely this is austerity run mad. I agree that it would be premature to-day to discuss at any length our general economic position. That, I trust, will be done when the new Economic

  1041
  Survey is in our hands. Unless facts and figures are available which the Government accept as accurate we should only be wasting our time in debating whether and to what extent matters are improving. I will, therefore, try to confine such observations as I have to make to the recovery plan which this Bill is to implement.
  The world is at present in the rather ridiculous position that everybody is trying to export to everybody else whilst nobody wants to take imports, save as gifts. This arises largely because all the quotas, controls, restrictions and duties are hampering multilateral trade by which so many marginal accounts were balanced in normal times. I was very grateful to the noble Lord for his definition of "multilateral" and even more grateful that the did not use the Chancellor's word "multilateralisation." I was afraid he would go a stage further and use the word "multilateralisationary." It is to our interest to encourage as far as possible the return to convertibility of currencies and the free flow of goods across national frontiers. This, I believe, is one of the main objectives of the European Aid Agreement, and it is, I am sure, very much to our interest that it should be achieved.
  If the aim of the Government is to make ourselves independent by 1952, there can be no two opinions; we all wish to do that. Whether the Government are setting about it in the best way it is harder to judge without full access to the facts and figures. Most difficult of all, of course, is to estimate whether they are likely to be successful. We all recognise the immense difficulty of working out a general plan for the economic rehabilitation of Western Europe. Even if we knew the best plan, there remains the formidable task of getting eighteen other nations, all jealous of their sovereignty, even the smallest of them, to accept the plan. We know from our own experience the resistances that arise at any hint that the pattern of our production and trade should be varied to conform to a general purpose or interest. But, if the nations of Europe are to work together, to use the noble Lord's phrase, to "integrate their economies" without risk of political friction—
  LORD PAKENHAM: I must disclaim the responsibility for having coined the phrase.
  LORD CHERWELL: I am glad to relieve the noble Lord of that serious responsibility. We use the word "integrate" in quite a different sense.
  LORD PAKENHAM: I thought that was for the psychologist!
  LORD CHERWELL: What I say is that if we are going to work together in this sense, there must be some semblance of a uniform approach to the problems and of equality of sacrifice. First and foremost, as I have often said, is the need to curb inflation, to ensure stable and trustworthy currencies. If the European farmer trusted his country's currency, most of the difficulties of feeding the towns would vanish. For this purpose, it is essential that their budgets should be balanced. But how many budgets are balanced, amongst the nineteen countries in question? Nobody can accuse our Chancellor of failure to comprehend this need. Some people even thought that he was in danger of overbalancing. But, no doubt he knew he could rely upon the Minister of Health and the Minister of Food to correct that tendency! Which other countries are following in his footsteps?
  It is very striking in this connection to compare the planned imports of this country in 1952 with the planned imports of other Western European countries. Whereas we expect to import in 1952–53 only 78 per cent. of our pre-war imports—and we rely upon imports more than most other countries—practically every other country is planning to import more than before the war. Benelux is to import 107 per cent., France 107 per cent., Italy 137 per cent., Western Germany 114 per cent. and the United Kingdom 78 per cent. If all goes well, we will just be able to maintain our present miserable rates of consumption, whilst other countries are planning to increase theirs above the pre-war level. When the noble Lord said he thought that the import programmes would have to be adjusted downwards, I trust he was not thinking in general percentages, because we at any rate are not planning to increase our imports above the pre-war level.
  LORD PAKENHAM: I think I implied as much in a passing observation.
  LORD CHERWELL: I regret that an implication of the noble Lord for once

  1043
  escaped me! I do not think it would be fair that this country, which made far and away the greatest contribution to victory of any country in Western Europe, should be condemned indefinitely to a lower standard, as compared with pre-war, than other Western European countries. It may be, of course, that the reason is that we alone are facing facts and that only our programme is genuinely aiming at equilibrium in 1952. This appears to be likely, since it seems that Western Europe as a whole is budgeting for a deficit of 750,000,000 dollars in that year. The council of the Organisation of European Economic Co-operation considers that this deficit is more likely to be £750,000,000. But, if this is so, it seems rather a reflection on the plan as a whole. It can scarcely be called a co-ordinated scheme if we are to continue our austere ways of life indefinitely, in order to achieve solvency, whilst our neighbours, who are supposed to be our partners, are improving their standards of consumption above pre-war level and are gaily piling up deficits.
  In this connection, I may perhaps say a word about agriculture. Every pound's worth of food we can produce in these Islands relieves us of the need of importing a pound's worth of food and therefore of sending abroad a pound's worth of exports. The growing of food at home, therefore, should have at least the same priority as producing for export. With this in mind, I was a little shocked to see that, whereas we intend to import after 1952 5 per cent. more of the raw materials of industry than before the war, we plan to import 25 per cent. less of the raw materials of agricultural meat production—namely, feeding stuffs. We expect to produce less meat than in 1938; but France plans to produce 26 per cent. more, and the average of all Western European countries is to be 6 per cent. more. It is true that there is some apparent slight financial saving possible by importing in certain circumstances meat instead of maize, but there are many other less obvious arguments on the other side. I hope, therefore, that this matter may be reconsidered. The question whether our aim to become independent by 1952 will be achieved depends upon a number of assumptions whose validity it is difficult to estimate. It is true that an illusion of accuracy
  1044
  is created by giving exact figures. But some of us who remember, say, the 1947 Economic Survey, have come to distrust such forecasts, especially when we see the immense miscalculations which recent Supplementary Estimates reveal. Some of the targets frankly seem to be very optimistic.
  Invisible exports, for instance, are reckoned to rise from 140,000,000 dollars last year to 1,050,000,000 dollars in 1953. As the invisibles include Government expenditure abroad, it may be that this portends an economy drive in foreign spending which we should all welcome. Anyhow, we can only hope, with varying degrees of confidence, according to whether our memory of past predictions is vivid or not, that these objectives may be attained. I will not follow the noble Lord in any detail into his figures about our production. I devoutly trust that he is right. If he is, however, some very curious consequences are implied. According to the Statistical Digest, we had throughout 1948 more than twice as many workers in the export trades as before the war. But our exports were up by less than 50 per cent. This implies that in these industries output per head is down to three-quarters of pre-war.
  LORD PAKENHAM: My Lords, rather than leave the noble Lord under a misapprehension, he should know that the basis of the figures has been changed. Therefore one cannot make a comparison on those lines. I thought I promised him the figures and said I would give him them after an earlier debate. If I have not done so, then I will write to him this time. But a comparison of this sort is not possible on the basis of the figures from the Digest.
  LORD CHERWELL: I do not remember getting any figures explaining this point, but I think in any case it should be made public, because it is quite clearly stated in the Statistical Digest that there are twice as many workers in the export trades as before the war, and it is clear that we only exported 50 per cent. more. On the other hand we had rather less workers producing for home consumption than before the war. Yet, according to the noble Lord's figures, production is up by more than a quarter. This implies that output per head is up by

  1045
  over a quarter in these industries. Thus, we have the extraordinary result, if the noble Lord's figures are right, that output per head seems to be up by a quarter in the home industries and down by a quarter in the export industries. "If you believe that"—if I may quote the Duke of Wellington, on a well-known occasion—"you can believe anything."
  LORD PAKENHAM: May I say that I should have thought the noble Lord might have modified the preconceived ideas with which he came down to the House in relation to what I have just told him, to the effect that one cannot use the figures of those employed in the export trade at the two dates for a comparison of that sort?
  LORD CHERWELL: If you change the basis of figures like that, you should explain how and to what extent it affects the result. Simple faith, we are told, is better than Norman blood. The noble Lord seems to enjoy both! All I wanted to say was that until these paradoxes have been explored and explained, it is hard to judge whether or not the Chancellor's assumption that productivity will increase by yet another 10 per cent. in the next three years is likely to be fulfilled. A very important item in balancing our foreign trade is bound to be the extent to which American capital is invested in the sterling area. For one hundred years or more, during which we had an export surplus, the financial equilibrium of many foreign countries, including the United States, was maintained by the influx of British capital. Many railways, gas works and industrial concerns all over the world originated in that way. Now that the United States has an export surplus, it is the turn of the sterling areas to accept United States capital investment. If this is agreed, every effort should be made to encourage it. Even at the risk of seeming controversial, I feel bound to say that potential investors cannot be blamed if they are deterred by the risk of seeing their concern nationalised, or of the imposition of a capital levy on top of the ferocious taxation from which we all suffer, and the inevitable difficulty of repatriating any profit they may make.
  Another very important assumption in Government forecasting concerns the terms of trade. All too often the Government treat these as a sort of act of God
  1046
  for which they have no responsibility. I have frequently complained that we are largely to blame because they have turned against us. After the war, we deliberately kept the prices of our exports down, out of some mistaken idea that this would bring us good will. By insisting on bulk purchase, on the other hand, we forced foreign countries into a system of bulk selling, with the result that we are now liable to be held to ransom by any country which can postpone its demands for our goods. The hungry man who wants a loaf of bread will always be at a disadvantage against the man who wants a new radio or television set. If we had a multitude of small traders dealing with each other, as they used to do, these forms of pressure would not operate.
  A particularly urgent question arising out of this state of affairs is whether we have taken sufficient care in making these bulk contracts and long-term arrangements to preserve the possibility of securing a proper advantage from any fall in world prices which may occur. It is more than likely, for instance, that there will be a world surplus of exportable wheat this year. I trust that the Minister of Food has not tied us up in some way so that we shall be unable to profit by this surplus. Countries like Canada, of course, which have in the past sold us wheat below world prices, deserve special consideration. It would be a scandal if countries which have exacted the last penny from us while there was a shortage should continue to enjoy high prices when there is a glut.
  Another point in the plan about which I am uneasy is the vast capital expenditure envisaged. The last time I mentioned this the Leader of the House took me to task because I said the Government planned to spend these enormous sums. He said that they were what the Government expected would be spent, not what they themselves planned to spend. That, of course, was merely one of these examples of adroit juggling with words to which we are accustomed and which, in a certain sense, we even admire.
  LORD PAKENHAM: May I ask in what sense the noble Lord admires "adroit juggling with words"? It is not a quality which on this side we admire, or which we like to hear attributed to the Leader of the House.
  LORD CHERWELL: Then the noble Lord does not like what he hears very often. I think all of us know what is meant by "adroit juggling of words"; we have all heard legal arguments of that sort, and many of us have paid large sums to have those arguments put forward. As I say, capital expenditure of this sort can be undertaken nowadays only with Government sanction. And if these amounts are to be spent, as the Government intend, the Government must take the responsibility for it, even if they do not actually place the orders. I wonder whether, in planning production, the Government have really taken full account of the abnormal times in which we are living, and of the fact that the pent-up demand of the war years is still unsatisfied. It is planned, we are told, to expand steel production from 15,000,000 tons to 17,500,000 tons a year. Shall we be able to sell all this or use it? Where are the 500,000 men to come from who are needed to expand these steel-using industries by one-sixth?
  I have asked again and again for some sort of steel budget showing where all our iron and steel goes. Without this it is difficult to say whether this planned expansion may not in the end lead to vast unemployment. I hope that the noble Lord will be able to promise this information, or at any rate will be able to explain why it cannot be given. A good case can always be made out for any item of expenditure. What does not seem to be realised is that there is not an unlimited fund on which to draw, but that one item of expenditure stands in the way of another. After all, there is no need to consider it in terms of money. We can regard all these things as being measured in man-hours of work. If there are a limited number of people prepared to work a limited number of hours per week, there is only a finite pool of effort on which to draw. If a given number of man-hours are devoted to improving roads, or building schools or satellite towns, or whatever it may be, there will be that number of man-hours less to make consumption goods or goods for export. One cannot have everything. If people prefer good roads, new schools and satellite towns to more food or more clothes, clearly they should have them. But they must realise that they cannot have both, unless they are prepared to work harder or for longer hours.
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  This simple fact was presumably at the back of the Prime Minister's mind when he said that we are trying to do too much. All our admirable social services represent so many man-hours of effort. If we want more medicine we shall have to do without something else. We cannot get it by "soaking" the rich. What they have left will not pay for a quarter of the Health Service. If we want to consume as much as before, and to have our medicine and false teeth and wigs, or whatever it may be, as well, we shall have to produce more. Unless we can do this, it means that one or the other will have to be cut.
  Since the war, these facts have been to some extent obscured by the generous gifts and loans we have received from the United States and the Dominions. Every family has been consuming every week, as a gift from overseas, between 10s. and £1 worth of food over and above what we could pay for. We cannot expect this to go on for ever. Nor for that matter can the rest of Europe, which is in the same case. Marshall Aid gives us an opportunity to set our house in order and to restore equilibrium between production and consumption. But it should be used as a stimulant and not as an anæsthetic. This I believe to be the honest desire of the present Chancellor, allergic though he is to the use of stimulants in private life. Having supported the acceptance of Marshall Aid, I naturally support this Bill which is, so far as I can see, merely part of the mechanism for giving effect to the general intentions of the American people.
  4.0 p.m.
  LORD RENNELL: My Lords, I, too, do not want to follow in this debate any of the roads which will lead to the economic analysis which we may expect to receive soon. There is only one general point that I wish to take up, which arises out of what both the noble Lord who moved the Second Reading of the Bill and the noble Lord who has just sat down have said. But before doing so, I would like to take this opportunity—because the introduction of this Bill which is to facilitate a piece of the mechanical administration of Marshall Aid seems to be an appropriate opportunity—to ask your Lordships and others to pause a moment and take thought what our position in this country would

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  have been to-day, in February 1949, if Marshall Aid had not come into effect. Those of us who calculated what our resources amounted to when the crisis of the summer of 1947 came upon us, reached, perhaps, a conclusion which I venture to put forward, because, though opinions may differ, I think it is a fair conclusion. Our conclusion was that we would have completely run out of all available gold and foreign exchange resources by the summer of last year—perhaps a little earlier, but certainly, I think, by about June. And I would like your Lordships to think—if not now, when you get home this evening—what would have happened to us after June, if the American people, in their wisdom, had not seen fit to support and follow up General Marshall's suggestions. We should now be in a position of such inconceivable difficulty, stringency and penury, that it almost sends cold shudders down one's back.
  This Bill, a very technical measure, is clearly not one which your Lordships will discuss in detail, but we are all grateful for the speech which Lord Pakenham has made in introducing it, because not only has he given us a great deal of material to consider to-morrow when we read the account of his statement in Hansard, but he has also raised what are, to my mind, one or two really important issues, which the noble Lord, Lord Cherwell, followed up. The real difficulty of our situation to-day, as I see it—I am not talking about the economic difficulty so much as the financial one—resides in our trying to pursue two rather incompatible policies at the same time. In 1947, we came to grief on account of our having brought into effect a scheme of multilateralism, designed, at the instance of our American friends, as part of the American loan condition, to pave the way for the convertibility of sterling and its restoration to its position as an international unit of currency, exchange and settlement.
  With the principle which underlay that, I do not think many people would find themselves in disagreement—certainly few in your Lordships' House would do so. Our quarrel at that time was on the ground that it was a scheme which was prematurely introduced. Many people in this country felt that it was premature, and some criticised our acceptance of that scheme without greater protest. We
  1050
  are now, under the administration to which the noble Lord referred and the machinery of which this Bill is a part, again committed to a series of steps designed to promote multilateral trade and multilateral exchanges. This scheme, I have no doubt, is a better conceived one, and it is hedged around with a number of safeguards which will not, I feel sure, create a situation similar to that of 1947. But I hasten to say that, so far as I am concerned, I believe that any perpetuation of purely bilateral trading must end up in complete stagnation, in the cessation in the long run of international trade. Even theoretically, bilateralism cannot Wark unless the exchanges are between two countries which are wholly and completely complementary to each other. The moment they are not complementary to each other, bilateralism must lead towards reduction of trade, which can only be rectified by the multilateralism to which the noble Lord referred.
  That is beyond argument, but it is, perhaps, necessary to study it, because from it flow a number of consequences. One of the essential elements of Marshall Aid is this element of multilateralism. I think, the intra-European payments to which the noble Lord referred are essentially a part, and a number of devices and machines have been set up to make this possible. In the long run that always means two things, both of which are really the same thing set out in different terms. That is to say, if we export goods to Ruritania on condition that Ruritania exports goods to Sylvania, and Sylvania will supply us with something we could not get from Ruritania, we have a complete circle, and the sterling involved in those transactions can be used as a means of settlement and can conserve its value. I have used a triangular example only, but clearly you can add as many sides or corners to the transaction as you like. The whole of that system depends, as indeed intra-European payments depend, on the multilateral aspect of Marshall Aid. It depends on each of the three (or whatever the number of different corners of the figure), all playing the game. If we make sterling available to country A to enable it to buy something with sterling from country B, so that country B will buy something from us which country A does not want, it involves in every case that country A and

  1051
  country B shall use sterling for the purpose specified and for no other purpose. In other words, sterling so used must be used for the proper purpose within the meaning understood in the international community in which we are trying to make this system work.
  A number of our trade agreements, to which the noble Lord, Lord Cherwell, has quite properly referred, also provide for this multilateralism. They all have implicitly, if not explicitly, an understanding that there will be not only that proper use of both the goods and the sterling, but also a proper control to ensure that no misuse is made of that sterling. We have in this country, for better or worse, an extremely elaborate system of financial and trade controls, which, however irksome and unpleasant it may be to people who have to operate under them, do in fact work. No doubt trade would work much better if we did not have them. Accepting for the moment that some such controls are necessary, we have a system which works and which, broadly speaking, we all of us respect, however much we may dislike it. The implication of many of these agreements is that other people possess the same sort of controls and work them with the same probity and honesty to which we in this country are accustomed.
  I am afraid that has not been the experience of many years past, for two main reasons, if I may generalise. The first is that other people have not the capacity to put into force the same controls as we have; the other is that many people have not the willingness to obey the controls when they enter into force. The effect of this has been that in many countries there has been a misuse of the facilities placed by us at their disposal, and I fear that future misuse of facilities offered might make this whole mechanism precarious. At the same time as these arrangements are being contemplated, we are being asked in our commercial negotiations with other countries to release to them sterling which they claim is owed to them in this country. Personally, I entirely agree with the noble Lord, Lord Cherwell, about unrequited exports and the making free to those countries on conditions which (to say the least) are open to criticism, of sterling accumulated here.
  1052
  I am all the more apprehensive about the release of these funds, because there are cases where, from one's own experience, one knows that whatever undertakings are given about the manner in which that sterling is to be used, in practice it is not so used; and it finds its way into a black market of one sort or another, financial or commercial. The effect of that is that, while we are trying to multilateralise trade—I trust the noble Lord will excuse this abominable word, but it has become current jargon—we are at the same time having to restrict the use made of sterling balances. In other words, we are having to work on a bilateral basis. So we have this conflict between controls, which by the nature of things tend to be bilateral, and agreements which we enter into to extend, widen and enlarge world trade and financial transactions. The reason we have to institute and keep these controls is not something entirely of our own making. We have tried to maintain the exchange value of sterling vis-à-vis the dollar, but in addition we are constantly urged by a large element in the United States of America, and notably in the International Bank and Fund organisations, to maintain the exchange value of sterling, and not to consider, for instance, its devaluation.
  I do not advocate that myself, for reasons which I shall come to in a minute, but in order to maintain the exchange value of sterling, these restrictions will and must remain necessary for a long time to come, however irksome they may be to us. I repeat, that controls and restrictions are bilateral in their nature and consequently are in contradiction to the attempts that are being made to enlarge and multilateralise trade. We are working in a paradoxical situation from which it is not too easy to see a way out. The noble Lord, Lord Pakenham, kept on looking at me during his speech. I do not know whether he thought I was to be an enfant terrible about something, or whether I would make an attack upon his views. I have no intention of doing anything of the sort, or of criticising at this stage the present system of controls, because I find—and here I may differ from noble Lords on the Benches to my left—that these controls and the financial policy pursued

  1053
  here for the last year or so are beginning to have an effect which may provide the only way out.
  I apologise to your Lordships if this is a difficult argument to follow; I am not sure whether I am making myself quite clear. When you try to maintain a rate of exchange and controls, and at the same time try and achieve a free market, you can in the long run achieve that only by having a currency which will stand on its own legs without a control. For two or three years after the war, the rate of exchange which governed sterling in the open market saw nothing but a decline—which may shock a great many of your Lordships not familiar with these matters. The decline reached a point at which sterling in certain markets was being quoted at so low a figure as 1.65 dollars to the pound, as against the official rate of 4 dollars. I am not saying that these quotations bear any relation to the real value of sterling, but in their movements they are an indication of what people feel and think. They are not a real indication, because the volume of transactions is obviously small; it is usually fraught with a great many difficulties, and since it often involves liability to some form of prosecution somewhere it is not entirely free and easy. But what is interesting and remarkable is that these different sterling quotations, in various sorts of markets, have in recent times undergone a very substantial improvement.
  Before I come to the reasons for that—reasons which I think will be obvious to many of your Lordships—I would say that I am pursuing this particular path because many of these transactions are in themselves the product and counterpart of those multilateral transactions which follow the freeing of sterling, for it is that sterling, which people have misused, which to a large extent finds its way into markets dealing in transactions of this sort. If we could always have been certain, and were now certain, that the freeing of sterling and trade would be only with people who would "play the game" on the other side, I would have much less apprehension about going down the path laid before us by the intra-European trade arrangements.
  Here it is appropriate to say that we are entitled to count on greater co-operation in many quarters abroad in trying to achieve our object. We are being
  1054
  exposed to a great deal of criticism in many countries by people whose object in seeing the restrictions broken down is to enable them to obtain a greater latitude to misuse the assets which they will thereby obtain. Here, I hope, my Americans friends will not consider it inappropriate or unkind, in view of the very great feelings I have for what they have done—as we all have—if I say that in many cases the American financial community themselves have not been very helpful in assisting us to maintain the value of our currency, by which many of them set so great a store. I hope that the realisation of what we are trying to do under these American aid agreements will find reciprocal assistance in the United States in enabling us to maintain our currency at the level at which they themselves want to see it maintained. The alternative—which is a possible alternative—is to cease to maintain our currency at that level. I can leave to your Lordships imagination the outcry that would come, not only from the United States but from many other parts of the world, if the devaluation of sterling were effected at a moment when, under the stimulus of Marshall Aid, the world is recovering.
  This recovery in sterling is extremely interesting. As I say, it is not a measure of its value because of the nature of the transaction; but the movement is undoubtedly a measure of people's confidence in what is taking place in this country. In spite of the many criticisms which noble Lords on my left and I myself have had to offer, and will continue to offer, about the policy of His Majesty's Government, I feel it is only fair for the people of this country to know that, throughout the open markets and throughout the world, so far as one can judge, confidence in sterling and in British Government finances and the financial situation has grown in the last six months in a very singular and remarkable way. That this is due to Marshall Aid, and to what we have been able to do under it, is undeniable; that it is due to the efforts which have been made in this country in production and in balancing our export trade is also undeniable.
  Fundamentally, however, the one element which I think has impressed people more than any other has been the cleaning-up of a Budget situation which

  1055
  in 1947 had impaired everybody's confidence in the Administration over here. That having been achieved, it makes one wonder whether, with another couple of years of admittedly ferocious taxation and drastic Budget economy at home, and with a continuation—perhaps with a slight relaxation—of restrictions both at home and in the export trade, sterling will not be in the position of having in open markets at least the value that it has on official markets, and, on account of people's shortages of sterling, may not even command a premium over the official rate. I do not say that that will happen (I am no more in a position to forecast what will happen than the noble Lord who moved the Second Reading of this Bill) but I do suggest that, for one reason or another, our international financial position has undergone a remarkable change for the better; and from a low point (if one may so term it) of black market values, with the dollar at 1.65 to the pound, sterling has at the present moment crept back to something of the order of 3.20 dollars, and in certain cases to 3.30 or 3.40 dollars, which is within jumping distance of the parity value.
  As I say, I believe this to be the outcome of a policy which has been pursued over the last twelve months. I regard that as only a beginning, however. It is inevitable that a policy of that sort, with at least as great economies as we have had in the last year, must be continued for another year or two, if only to see whether we can achieve the goal which I believe now to be in sight. Having achieved that goal, then we can undoubtedly afford a relaxation in controls and restrictions, especially in the export trade, which will eliminate the paradox to which I have referred—a movement towards multilateralism and yet, at the same time, the need to hold everything on a purely bilateral basis.
  4.26 p.m.
  LORD HAWKE: My Lords, I feel rather like the obliging person who was asked to make up a four and when he got to the first tee found that it was a foursome with three professionals. However, he did not return to the club-house. All the words spoken by the noble Lord, Lord Rennell, will be echoed in our
  1056
  hearts; in fact, his sermon on the improvement of confidence and the restoration of our currency was given by quite a few of your Lordships on the Second Reading of the Exchange (Control) Bill. We all of us wish God-speed to this great plan, conceived by the magnanimity of the American Government and paid for by the hard-working, long-suffering and over-burdened American taxpayer. I think we can greet it in those terms with the more justification in that this is one of the few plans I have seen whose authors readily acknowledge that "Man proposes, but God disposes." That is clear, both in one of the White Papers and in the speech of the Chancellor of the Exchequer in another place. We cannot attempt to criticise the detail of the plan; we can only hope that the more important things will be fulfilled, and that it will be the less important ones which will be unfulfilled. Nevertheless, it is the duty of Parliament to remind His Majesty's Government of any difficulties or dangers it may see ahead, and in doing so, even if ninety-nine out of one hundred have already been foreseen, Parliament will have done its duty.
  To turn to Europe for a moment, I am by no means certain that the Chancellor of the Exchequer is en rapport with the Latin countries; I do not know that he understands the Latin temperament. I fear he may be relying on them to burden their countries with an equivalent taxation to what we know in this country. Anybody who knows the Latin temperament in these matters knows that that portion of the plan will never be fulfilled. The Latin taxpayer is a sensible fellow; when his taxes are too high, he does not pay them. For years those peoples have had no trust in their Governments or their currencies, and I doubt whether even with this plan they will have any such trust in the future. New Constitutions or gold currencies seem possibly the only things that will ever restore their confidence. I hope, too, that the Chancellor of the Exchequer will beware of the temptation to try and export austerity to the Latins. They just will not accept it; they will laugh at him. If he exhorts them to turn their Chanel into locomotives, they will continue to send their Chanel to the vast areas of the world where perfume, perhaps for obvious reasons, has a high commercial value. At the same time they may turn

  1057
  to him and ask him how his particular plan to deal with the size of the Government service and the distribution trade is getting on, and how many of those persons have entered the cotton mills or the coal mines.
  So far as we are concerned, we have made a great improvement in our balance of trade, even though the deficit with the Western Hemisphere is still large. The plan is based on the existing terms of trade, and here I do not altogether agree with my noble friend Lord Cherwell, for I have lived in countries of basic production. I have found that it is only where commodity prices are high that the basic producers have money to spare to buy imported goods, and it is only under those conditions that Government revenues are buoyant and capital schemes indulged in. From 1875 to 1938, the terms of trade went steadily in our favour. The reaction now seems to me to be long overdue; and greater justice is needed to the primary producers. In the 'thirties, of course, the urban civilisation beat down the countryside to a most unwarrantable extent; and we had Hitler. It may seem to suit us to have cheap raw materials and cheap food, but we must remember that we are the head of an Empire of raw material producers, and we owe as great a responsibility to them as to ourselves.
  Now I turn to the Western Hemisphere. I fear that the plan may be too small. We are to make ourselves less dependent on the West, but will this plan ensure the continuance of full-scale manufacturing activity in the United States? Without that, I feel that commodity prices in the world will not stay at a level which makes prosperity for us. Think of the number of countries in the world whose economy is geared to that extra cup of coffee that the American drinks when he is flush of cash. If once we let the United States activities go down, I fear that we shall have the vicious circle—fewer imports from producing countries into the United States, and fewer exports from us to them.
  The noble Lord, Lord Rennell, mentioned the subject of the exchange rates. He is probably correct in saying that the pound and the dollar are not badly out of relation, but I am certain that the pound and many other currencies are hopelessly out of relation. The pound is
  1058
  valued far too low in terms of a great many currencies, particularly in South America. An adjustment in that value would have many of the effects of this plan. The noble Lord referred to the necessity for control of import licences. That vicious system of import licensing is the only thing which enables many of those countries to maintain their exchange rates at the present value. A tariff one can jump over; an import licence is an unscalable barrier, and behind these unscalable barriers the most devilish financial malpractices go on unchecked. The International Monetary Fund was intended to deal with these matters, but it seems to have had no effect whatsoever, and I rather wonder whether the time has not arrived to get rid of these expedients.
  What of the future? This plan is obviously not final. World prosperity depends on United States prosperity which, at the present moment, means a large export surplus; and so the old problem of the creditor nation arises. In the future there will have to be other "Marshall Plans" of sorts. They may take the form of investing in China, South America, India, the Empire or even in the backward South of the United States. But plans there must be, or there will be further great depressions. The only palliatives that we could suggest would be that the at present anomalous prices of rubber and gold—two of the largest imports of the United States—should be at higher figures.
  And now what about our future? We have this huge export trade. To keep it up I am convinced that we need to maintain, or see maintained, high commodity prices. That, of course, is good for our invisibles, our banking and so on. But if we have to do still more exporting I feel certain that we must have cheaper coal and cheaper houses in the strategic places, so that more people can get into the industries which can export. Those are the key to greater industrial activity here, and unless we get that we clearly are not yet out of the wood.
  4.37 p.m.
  VISCOUNT SWINTON: My Lords, I want to add only a few words in this debate, and they will be more of a general character than the more detailed observations which have been made to your Lordships in two very learned and interesting speeches—perhaps I should

  1059
  have said three speeches, because I certainly include the Minister, although for the moment I was speaking of his critical supporters. I sincerely hope that this controversy about production figures will be cleared up. Certainly I am unable to follow it. I followed the figures of my noble friend Lord Cherwell, and they appeared to be quite unanswerable.
  LORD PAKENHAM: Which figures?
  VISCOUNT SWINTON: The figures my noble friend quoted to-day. He took the figures of the number of people who the Government's own book of statistics stated were employed in export. He gave us the amount of the exports, and from the same source he gave us the comparative figures of people otherwise employed. The noble Lord, Lord Pakenham, apparently has another set of figures. He was good enough to say that he would write to the noble Lord to explain the discrepancy. I am not going to be unduly critical of the noble Lord—I will not say that he was "skating away" on the sort of phrase (it did not seem a very offensive phrase) which Lord Cherwell used about the Leader of the House—but his remarks appeared to me to savour a little of the maxim: "Never make a mistake in your logic; the facts remain at your disposal." Perhaps the noble Lord will be good enough to arrange through the usual channels for a question to be put down, so that we can all see in Hansard what is the present Government view, and the statistics upon which that view is based.
  LORD RENNELL: May I suggest that the figures are of such importance that they should be corrected in the Statistical Abstract? If the figures of people employed on domestic trade before the war are not comparable, it should be clearly stated that there is no comparison.
  LORD PAKENHAM: They are not comparable.
  LORD RENNELL: The reason why they are not comparable should also be stated in the Statistical Abstract.
  LORD PAKENHAM: This has often (I hope I am right in saying "often") been made abundantly clear. It was so on at least one public occasion. There is nothing novel in the announcement I
  1060
  have just made about the impossibility of any comparison between the two figures.
  VISCOUNT SWINTON: In Government publications the position ought to be plainly stated and rectified. Surely we can have the information. It is a matter of comparing present-day values with previous values; that has always been done. What we want are two figures which are strictly comparable. We ask that those figures and no others should be given to us.
  LORD CHERWELL: I should like to point out that apparently the Chancellor himself is under a misapprehension. On January 27, on this very topic, he said in another place that in 1938 we had only 14 per cent. of our manufacturing population working for export and that to-day we have 30 per cent. As we have a few per cent. more people in the manufacturing industries to-day than before the war, this means that more than twice as many people are working for export, about 2.2 times as many as compared with pre-war years. I suggest that the noble Lord brings this matter to the attention of the Chancellor of the Exchequer.
  VISCOUNT SWINTON: I hope these differences will be reconciled—I do not mean the internal differences in the Government; they cannot be reconciled—but figures which are published and on which we all work ought to be strictly comparable.
  In the clear and agreeable way in which he explained the Bill to the House, the noble Lord, Lord Pakenham, it seemed to me, took a rather excessive amount of credit for the Government in all this success. He was careful, of course, to speak of last year—even the noble Lord would not have taken much credit for the action of the Government in the unfortunate year of the coal crisis. But to what is this remarkable recovery due? I do not think it is greatly due to Government planning. It is due to two things: first, to the fact that we were able to use the remnants of the original American Loan, the bulk of which was so shamefully dissipated by the predecessor of the present Chancellor of the Exchequer; and secondly, to the further American Aid without which raw material could not be bought for industrial purposes.
  LORD PAKENHAM: I think the noble Viscount did not place his animadversions quite as he intended; it must have been a slip of the tongue. I think he was talking about the former Chancellor of the Exchequer in a very unfair way.
  VISCOUNT SWINTON: I said "the Chancellor of the Exchequer's predecessor." At any rate, everybody knows what Chancellor of the Exchequer dissipated the American Loan; there is no doubt about that. The recovery is due to the aid which has come to us from America and to the energy, initiative and capacity of all the partners engaged in industry. The noble Lord spoke not only of Government planning; he said that this recovery was due to the social policy of the Government. I take it that by "social policy" he means nationalisation, and I should like to know what proportion of this very remarkable increase in exports has been due to the nationalised industries.
  The noble Lord then went on to speak—quite rightly—of the importance of invisible exports. He was a little unfair to the part which those exports played before the war. Before the war they were not needed to anything like the same extent as they are needed to-day to pay for our visible imports. They were themselves created by investments of something like £200,000,000 per year, year after year; and it was that which gave us strength to get through two wars. These invisible exports—insurance, shipping, banking, merchanting, and brokerage—are likely to be even more important in the years to come, as the buyers' market becomes more intense and competition under the European plan itself becomes more intensified. I therefore sincerely hope that the social policy of the Government in the future will be designed to help the growth of these invisible exports, and that we shall have no repetition of such episodes as the casting away of the Liverpool Cotton Exchange—an act which the Government must profoundly regret to-day—and certainly that we shall have no foolish attempts (and, I hope, no foolish threats) of bringing within the scope of nationalisation those invaluable industries and businesses which alone can give us invisible exports. We shall need more and more every year.
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  This plan and this Bill deal with Europe, but I think it right to say—and we should put it on record—that our common agreement with the European plan cannot be carried out effectively by us except as a member of a great Commonwealth. I am glad that there is (as there must be) the closest consultation, not only because it is to our interest but because it is to the interest of the other countries which are so closely bound up with us. It is only as a Commonwealth that we can play our full part in European recovery. I would go further and say that though there is set out here our plan for the targets for Europe, those targets will not be realised without the most intensive and successful development by us and by other great Colonial Powers of the resources of our Colonies. That development calls for experience, talent and investment of capital; and these things can be secured only if the Government encourage the fullest partnership and the fullest co-operation of the great firms, whether they be in this country or in America, who have the knowledge and experience.
  I say that because, while I feel sure that the noble Lord himself would agree with that, when one has in this curious Government system under which we suffer to-day an extraordinary directive such as that issued on the Gold Coast (which we were discussing last week and which is a direct discouragement to this co-operation and this partnership) one becomes anxious as to the planning of the Government and the way they intend to carry out their plans. I am sure, too, that what is true of Colonial development is also true of all the development and all the enterprise which must take place if Marshall Aid is to be a success. Of course, there must be great planning by Governments; there must be a general direction by Governments. But who are to be the executants of this policy? The executants of this policy if it is to succeed, can to a large extent be only the preponderating partnerships of great firms and businesses, with their years and years of experience, "know-how" and ability.
  I would end on this note: that surely we can find other things to fight about in our Party politics. Every time a foolish speech is made here, the more important the speaker, or the more prominent the position of the man who makes the

  1063
  foolish speech—a speech, perhaps, which tries to divorce the common interest, to decry that essential partnership, a large part of which the great industries have to bear, and which contains foolish threats for the future—the more impossible it is to realise the difficult targets which this great Marshall Plan has set us.
  4.52 p.m.
  LORD PAKENHAM: My Lords, I am sure that everybody is delighted that the noble Viscount opposite, who deputises so effectively and forcibly for the noble Marquess, should have taken part in the debate. I remember years ago attending, though not in an active capacity, some hunter trials at which an exhibition of the "forward seat" was given. After this exhibition, which was given by a gentleman who had written a book on the subject, an Austrian Count who happened to be there, immaculate in monocle and lounge suit (which no Englishman could have equalled) and spats, said: "That is not what I call the forward seat.'" He insisted on mounting a horse and riding round the course with his head between the horse's ears. He outdid everyone in style and dash. To attempt to exclude the noble Viscount opposite from a debate of this type would be like trying to stop the Austrian Count from giving an exhibition of the "forward scat." Towards the end of my remarks, I will come to some of his more important observations, but with the constructive aspect of them, of course, we on this side are in entire agreement.
  May I say to the noble Lord, Lord Rennell, whose speech along with the other speeches to-day will be carefully studied—indeed, it requires a lot of thinking over—that I was not looking towards him with any kind of apprehensiveness while I was speaking? I was remembering a piece of advice given me years ago, which was that, if you can keep one man interested, there is no reason to suppose that you cannot keep the attention of all. I felt that the friendly and intellectual countenance of the noble Lord was the one place to which to try to direct my remarks in the struggle for attention on this occasion. It was in that mental atmosphere that my thoughts and hands and face occasionally strayed towards the noble Lord as I was speaking. Your Lordships will agree that Lord Rennell's
  1064
  speech was one that will be remembered for a long time by noble Lords, whatever their politics.
  May I take up one point that was put rather forcibly, and, I am bound to say, rather surprisingly, from the opposite Benches? It was implied by the noble Lord, Lord Cherwell, who has studied the Statistical Digest until I think he knows it by heart, even though he does not believe a word of it, that there was something deceptive about those export figures. I am bound to say that the noble Lord, Lord Cherwell, is either deliberately misleading the House—and that, of course, is quite out of the question; the thought of it would no more enter his mind that it would enter the mind of any of us—or he is handling these figures with an inattention to detail that I can only call a slovenly detachment from his usual academic capacity. That shocked me a good deal because, to take this crucial column of the man-power figures, in Table 5 of the Statistical Digest we find—at the top, it is true—that in June, 1939, there were only 930,000 people recorded as employed on export, and in November, 1948, the figure is just over 2,000,000; but if the noble Lord reads this Table with even moderate care, he will observe that in the footnotes we are specially warned that
  "Comparison of later figures with that for 1939 may be affected by…"
  various things there mentioned. So I hope that the noble Lord, who has raised this mare's nest in all good faith, will see fit to express regret now or on some later occasion.
  LORD CHERWELL: The noble Lord's speech might well be addressed to the Chancellor of the Exchequer. The footnote says that the basis of these figures has changed. It may have changed by 1 per cent. or 2 per cent. Surely he does not pretend that it has changed 50 per cent.
  LORD PAKENHAM: Would the noble Lord first of all read the footnote? I do not want to detain the House on this point unless I am pressed. The footnote reads as follows:
  "Comparison of later figures with that for 1939 may be affected by differences in the amount of work indirectly for export that is included, and the changes in the average labour

  1065
  content of exports due to changes in the relative amounts of different commodities exported."
  I feel that the least that the noble Lord could do when producing his singular argument was to read the footnote; he might have done something more.
  VISCOUNT SWINTON: My Lords, as one who is quite impartial in this debate—and I think that what I am going to say will show that to the House—I agree that this footnote warns us not to treat this as an exact comparison. But what do we gather from that? We gather that it might be slightly different. I will not now discuss these higher mathematical figures with the noble Lord, for one cannot obtain a perfect mathematical comparison, but surely nobody reading that footnote would imagine that the figures were vitiated to the tune of 25 per cent. or 50 per cent. If that is the suggestion as to the degree of vitiation there is, then those figures should not have been given as a standard of comparison at all. We should have had something quite different.
  LORD PAKENHAM: The noble Viscount in his speech has exhibited the impartiality we expect from the Leader of the Opposition. Let us leave it there. The next time I return to these figures, I hope he will begin by disputing the footnote.
  LORD CHERWELL: Will the noble Lord ask the Chancellor of the Exchequer to give us the right figures?
  LORD PAKENHAM: I will endeavour to satisfy the noble Lord, in my respect for whom I suppose I yield to no one. I am sorry to have been so acrimonious on this particular point, but it is not an issue from this side. In a cooler mood I turn to one or two of the points that were raised in the interesting contribution of the noble Lord, Lord Cherwell. He asked a number of very pertinent questions and I beg leave to reply to three of them. He asked about the scrutiny of these deficits—whether or not the scrutiny was an effective one. I would just tell him that the responsibility for this scrutiny is not that of the Americans but of O.E.E.C. Last summer the deficits were discussed and negotiated, so far as possible, on a bilateral basis, but a small body of experts was set up by O.E.E.C. to supervise the process and to settle disputes. The procedure for settling deficits and drawing
  1066
  rights next year will no doubt be carefully examined and, if necessary, improved. I think that carries the point some little way forward.
  Then the noble Lord asked another pertinent question about the unused drawing rights. No decision has yet been reached as to what should be done with these drawing rights supposing the full amount is not used. This will have to be considered by O.E.E.C. at the end of the year. We should expect (I say this with reservation) the conditional aid corresponding to the unused drawing rights to be adjusted, as the noble Lord himself suggested, into unconditional aid, so that the sterling will go into the Special Account. That is what one hopes would happen. But this raises the question of the sterling balances, and here I am glad to have the chance of making it plain that there is no close connection between the drawing of the sterling balances and E.R.P. There is certainly no condition in E.R.P that we should release so much of the sterling balances. It is a mistake to suppose that it is a question of our releasing all these balances. It is true that some had been blocked and are now released, but many of the balances were freely available for use by the countries concerned, whether we liked it or not. So that the 209,000,000 dollars is really an estimate of the extent to which the countries would need to use their holdings.
  LORD CHERWELL: Do these countries decide whether the grant should be from the sterling balances or from the conditional aid?
  LORD PAKENHAM: Does the noble Lord mean in the case where the balance is subject to agreement? Because some of the balances are unconditional. I do not off-hand possess completely full information on this point, but I can tell the noble Lord that the reduction of sterling balances is made up of the sterling balances to be used by Greece and Italy before they use their drawing rights and the sterling balances of other O.E.E.C. countries which are in deficit with the sterling area but can cover their deficit with their balances without needing any free gifts of drawing rights. There are a number of these sterling balances which are drawn on by the other countries without any grant from us coming under this arrangement—in other

  1067
  words, they are drawing on their balances, so I understand, in a number of cases where they are not receiving any of this conditional aid, and they draw unconditionally or under any existing arrangements.
  LORD RENNELL: That is the particular point I had in mind. It is not only the misuse of the balance made available under the agreement in regard to free balances that I regarded as a danger—and we know they are misused in a great many countries. The danger lies in the conflict between these multilateral agreements, where people are allowed to draw on the balances but are at the same time not restricted in their use. That is where I think we are entitled to demand that other people should exercise the same control as we do ourselves.
  LORD PAKENHAM: I do not pretend to possess complete and full information this afternoon about all these balances, but if any Question is put down I will do my best to answer it. I would like to make the broad point that we are not really linking up the drawing of the free balance with the drawing on E.R.P. That is a different matter. Noble Lords are fully free to comment on these balances—
  LORD RENNELL: They do inter-act.
  LORD PAKENHAM: All these economic matters inter-act, and these are no exception. I hope that one central point has been made in answer to the noble Lord, Lord Cherwell. He also put some searching questions about tourism in France. I know that in times past the noble Lord has been a most welcome visitor to France, and that he has contributed to the life and culture of that country. I think any steps which might be taken to deflect him from those paths are to be deprecated, although we cannot spare him for long from this House; and I would make it my personal task, if I had influence, to assist him. One day, perhaps, he may even invite me to accompany him! This debate may make it harder, but I hope not too hard. As regards tourism, that is under consideration and a decision has yet to be made. The French position is fully appreciated here, but there are difficulties about discrimination in favour of
  1068
  France as compared with other countries, and they have to be studied thoroughly. I hope that I have touched on some of the points raised by the noble Lord, but I will gladly resume discussion with him afterwards in greater detail, if necessary.
  I do not imagine that the House will wish to hear a further speech from me. I pause, in case I again misinterpret public feeling, but I do not imagine that another speech is called for. I would like to deal with one rather general observation that flowed in this direction from the noble Lord, Lord Cherwell, and was supported, I think, by the noble Viscount. I said (and on looking back I do not find anything to withdraw) that the productive effort of our country during the year 1948 was a fine effort which reflects the greatest credit on workers and management. I went on to say that it would have been quite impossible if the nation's social and economic policy had not been conceived on lines that were intrinsically sound and appealed to the people as a whole, whatever their Party predilections. The noble Viscount has "hotted up" the atmosphere a little, and in reply I will say only that we have in this country a definite plan. I am not clear from the noble Lord, Lord Cherwell, whether he would prefer the more happy-go-lucky methods of the Continent.
  The noble Lord, Lord Hawke, appeared to be praising the Latin temperament, and suggested that perhaps they understood better how to deal with their taxes. The noble Lord is a very serious man, but I think he was being humorous in that regard and I accept it as such. I gather from the noble Lord, Lord Cherwell, that on the whole he considers that things are being run here a good deal better than they are being, or are likely to be, run on the Continent. That may, or may not, appeal to everyone. But what is there in common between these various Continental countries? What is there in common between the systems under which they are living? Their Governments are more conservative and far less socialistic than the Government of this country. That is an outstanding fact about them. There are one or two Socialist Governments, but I suggest that if you consider the leading countries of the Continent you will not find any which have Governments which incline so far to the Left as the Government of this country.

  1069
  The noble Lord, Lord Cherwell, as I have said, took up a patriotic standpoint, and when he spoke of the methods of foreign Governments (Conservative though some of them may be) for purposes of comparison, he seemed to prefer the orderly methods, the planning and so forth, which we find in this country. There is an ideological point to which, perhaps, the noble Lord will return on a later occasion. But the noble Lord certainly made a forcible impression on my mind. I found myself very much in agreement—at that point—with what the noble Lord was saying.
  The noble Viscount, Lord Swinton, questioned whether I was right in saying that we owed something substantial to our social policy. He seemed at one stage to be concerned to criticise what we might call our planning—the general idea of economic planning embodied in our social policy. He asked whether I was referring to nationalisation. I do not think there is anyone who would deny that strides have been made in the coal industry since it was nationalised. No one, I think, will seriously suggest that that industry would have shown better results if it had not been nationalised. So, if the noble Viscount asks me to indicate a nationalised industry which has made progress, I point to the coal industry. I will not speak of the industry in respect of which I hold ministerial responsibility, except to say that with regard to that, as with regard to others, I have strong confidence in the efficacy of nationalisation. But, as the noble Viscount said, nationalisation covers only a small part of our industries, and what I was referring to was the social policy of this Government, which has provided a system of fair shares for all such as we have never before seen in this country. Some may like that policy and some may not, but I seriously suggest to noble Lords that the effort which we have obtained from our people in very difficult circumstances would never have been forthcoming if we had not taken the steps which we have taken to make sure that what little there was was shared equally all round—or far more equally than ever before.
  The noble Lord referred to the social services, and with regard to these I am bound to say that I am in a little difficulty because the noble Lord, Lord Woolton (we are all sorry that he is not
  1070
  in his place in the House to-day), has declared, I think, that anyone who says that the Conservative Party desire to cut down social services is a liar. Now the last thing I wish to do is to make any statement that would be regarded as a lie by the noble Lord, Lord Woolton. That is something which one certainly must not do. It is clear, therefore, that the Conservative Party would not cut down social services, and so I must assume that they support the very great enlargement of social services which has taken place under the present Government. If they do support this great extension of social services then they are at one with us, and they must accept my claim. I cannot pursue the matter further. I hope and believe that I am right in thinking that the noble Lord and his colleagues agree with us that the extension of social services—and particularly the health services—was long overdue. If I am right, we carry noble Lords with us in saying that this policy is an economically sound policy, and that it has contributed in a very large degree to what has been achieved by our people.
  But I must not continue in this vein. I must not put words into the mouths of other people, for we know where that sort of thing leads. Whether or not all noble Lords agree with me in everything I have just said, I know that we are all at one in feeling that through this American help we have been given a great chance, and that a special responsibility falls on us, not only to save ourselves but to give leadership in Europe. I am grateful to noble Lords who have taken part in this debate. What they have said is evidence that, whatever Party differences there may be between us, we are entirely at one with the whole country in desiring and determining that this great plan shall be brought to success.
  On Question, Bill read 2a, and committed to a Committee of the Whole House.

  CINEMATOGRAPH FILM PRODUCTION (SPECIAL LOANS) BILL
  5.15 p.m.
  Read 3a (according to Order), with the Amendment, and passed, and returned to the Commons.

  JURIES BILL
  Brought from the Commons; read 1a; and to be printed.
  CLYDEBANK BURGH ORDER CONFIRMATION BILL
  Brought from the Commons; read 1a; to be printed and (pursuant to the Private Legislation Procedure (Scotland) Act, 1936), deemed to have been read 2a and reported from the Committee.

  CERTIFICATES FROM EXAMINERS
  The LORD CHANCELLOR acquainted the House, That the Clerk of the Parliaments had laid upon the Table the Certificates from the Examiners that the Standing Orders have not been complied with in respect of Petitions for the following Bills:
  TWICKENHAM CORPORATION,
  SALFORD CORPORATION:
  The same were ordered to lie on the Table.

  GRIMSBY CORPORATION BILL [H.L.]
  Report from His Majesty's Attorney-General: Received and ordered to lie on the Table.
  REPRESENTATION OF THE PEOPLE (SCOTLAND) REGULATIONS, 1949
  Laid before the House (pursuant to Act) for affirmative Resolution and referred to the Special Orders Committee.