Lords Sitting of 27 September 1949

Preamble
The House met at half past two of the clock, having been called together by the Lord Chancellor in pursuance of the resolution of October 26 last: The LORD CHANCELLOR on the Woolsack.
Prayers

  RUSSIAN DEVELOPMENT OF THE ATOM BOMB
  2.36 p.m.
  VISCOUNT SWINTON: My Lords, I beg to ask His Majesty's Government the following Question, of which I have given private notice—namely, whether they have any statement to make on the development of the atom bomb by Russia.
  THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR FOREIGN AFFAIRS (LORD HENDERSON): My Lords, His Majesty's Government do not think it would be in the public interest to make any further statement at present beyond the announcement made on September 23.

EXCHANGE VALUE OF THE POUND
2.37 p.m.
THE LORD PRIVY SEAL (VISCOUNT ADDISON)THE LORD PRIVY SEAL (VISCOUNT ADDISON) rose to move to resolve, That this House approves the action taken by His Majesty's Government in relation to the exchange value of the pound sterling. supports the measures agreed upon at Washington by the Ministers of the United States, Canada and the United Kingdom which are designed to assist in restoring equilibrium in the sterling-dollar balance of trade for the purpose of enabling, the economy of the sterling area to maintain stability independent of external aid; and calls upon the people for their full co-operation with the Government in achieving this aim, whilst maintaining full employment and safeguarding the social services. The noble Viscount said: My Lords, I am conscious that I have a difficult task which—if I may make this personal observation at the start—may perhaps be made a little more difficult by reason of the fact that
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one of my colleagues upon whom I had relied to help me, the noble Lord, Lord Pakenham, is unfortunately, and to his own great regret, laid up and not able to take part in our discussion.
Your Lordships have had before you the Paper that was issued on the tripartite economic discussions at Washington. I shall make some reference to different parts of it in the course of my speech but, as your Lordships are aware, it has already been announced that, before the Chancellor of the Exchequer and the Foreign Secretary left for Washington, His Majesty's Government had decided upon a revaluation of the pound sterling. I am sure it is not necessary to say more than that a decision of that character and importance had been arrived at only after long and anxious consideration of the issues involved. It was clear, particularly in the second quarter of the year, that our sales in the dollar area were falling off, notwithstanding the great increase that had previously taken place. Moreover, of course, there was a corresponding fall in our reserves, because the commitments for purchases were still in existence. In addition to this, there was a widespread and considerable measure of uncertainty which was increasing, and not discouraged in some quarters, as to what would happen. This naturally had an inhibiting effect upon, business transactions. I will not enlarge upon it further.
It was manifestly vital that two things should be done. We must restore confidence in sterling and we must greatly increase our exports to dollar countries. A decision of that kind at that time necessarily involved a considerable amount of technical preparation and, from the character of it, there was obviously the greatest need for secrecy and, considering the time that elapsed and the fact that my colleagues told their colleagues the Ministers in Washington and in Canada, of our decision at the outset of their deliberations, I think we can congratulate ourselves that on the whole the secret was exceedingly well kept. While this decision undoubtedly brings a great and new opportunity for British traders to extend their sales in the dollar areas, and even to open up new avenues for sales, it brings with it, as we are all deeply conscious, some serious risks and some immediate disadvantages, and it calls for

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the recognition of certain governing necessities.
The first and obvious disadvantage of an action of this kind is that our imports from these areas cost more. That means that before we can realise by the activity of our industries the results of greater receipts from dollar areas there is an immediate effect upon the prices of imports. The outstanding import from those areas with which we are immediately concerned is wheat. It was on that account that we decided forthwith to make that necessity clearly obvious by at once increasing the price of the loaf. Happily, owing to the action taken by Canada, it was not necessary to go quite so far as was at first estimated, and the price of the loaf, as your Lordships know, was increased by one penny. That is a very considerable burden on those households in which young adolescents are particularly prominent, because they are the section of the community who eat the most bread.
There is, however, another very obvious necessity. If, owing to the revaluation of sterling in regard to the dollar, we are to increase sales in the dollar areas, clearly we must have access to the dollar markets. It is impossible to increase our sales in the dollar areas unless there are arrangements in regard to prices and other adjustments which make it possible to do so. I shall return to that in a minute or two in respect of the recent action of the President of the United States. Before I come to that, however, I would like to say a word about what is to me, speaking as an ordinary Englishman, the rather objectionable practice which sometimes we have noticed a good deal—namely, our habit of national disparagement. There are some people, and from time to time they find their place in the Press, who seem to take an unholy enjoyment in running themselves down—a practice which, without a doubt, has a decidedly adverse effect.
I was very interested the other day to see a table in the Economist, a paper which is by no means always friendly to His Majesty's Government, which dealt with this particular aspect of our activities. As we shall see in a minute, the disparity between the sterling and dollar
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areas is not a new fact at all. According to the table in the Economist of the 13th August, I see that before the war—that is to say, in 1938—we paid for only 27 per cent. of our imports from the dollar areas by our own exports to those areas. This table, which I hope some of your Lordships will take the opportunity of studying, reveals a very remarkable fact as affecting British production, which is so often disparaged. There is a list of the Marshall Aid countries and the table shows the proportion of their own imports from the dollar areas paid for by their exports to those areas before the war and during last year. In the case of France these figures are given: In 1938 she paid for 39 per cent. of her imports from those areas; last year she paid for only 14 per cent. Denmark formerly paid for 55 per cent. by her exports; last year she paid for only 39 per cent. And so I could go through the list of countries, though I will not burden your Lordships with it in detail. It is a remarkable fact, however, that whilst in 1938 Great Britain paid for only 27 per cent. of her own exports by imports she had from the dollar areas, last year she paid for 36 per cent. This is the only country in the Marshall Aid area which has increased the proportion of payment for purchases made by her own exports to that area. As the Economist rather appropriately says:
"There could hardly be a more triumphant statistical vindication of the commercial efforts that Britain has been making. So far from 'dragging its feet.' Britain is the only one of the Marshall countries that is earning a higher proportion of its dollar requirements than before the war."
I think that is something to be very proud of. Therefore do not let us take too much notice of these Jeremiahs who, as I say, seem to take an unholy joy in running down their own country. However, that does not affect the fact that it was only 36 per cent., that there is a very big gap, and that during the second quarter of this year that gap was increased.
It is not simply a question of costs, although that clearly is a most important item. Before I say anything on what happened at Washington, may I refer to a criticism about which I can well believe, having had the advantage of seeing the list of speakers, that I shall hear something to-day and to-morrow—namely, that

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part of high cost is caused by high Government expenditure? Nobody will seek to deny that high taxation and high charges necessarily have to be incorporated by manufacturers and industrialists generally in their costs. That is clear; and it is, and must be, an element to he reckoned with. So it behoves us to do what we can, within limits which I will mention in a minute or two, to reduce that share of the charge. Prodigious capital expenditure has been incurred by this country, during the last four years, quite properly, in view of the enormous amount of reconstruction which has taken place, and it may be that there will have to be some abatement of the pace. But we have to remember that the capital expenditure which has been incurred in the last four years has been a very important element in enabling us to export more than we have ever done before. Therefore do not let us lose sight of the fact that this expenditure on capital equipment, great and heavy a burden as it is, is an essential ingredient in our economy.
I will avoid introducing any more polemical a note than I can help, but when I hear critical statements about our high Government expenditure I often ask myself: what expenses would our critics reduce? I have had the advantage of studying the important brochure which has been issued in the name of the noble Lord opposite. I was very disappointed, and I make no secret about that. It did not give me the guidance for which I had hoped. Apparently there is no disposition to reduce expenditure on defence, which amounts to a prodigious figure, especially as we have had to increase the amount by more than £100,000,000 over what was anticipated. Would our critics reduce food subsidies? That, again, is a terrific burden. Those two items together amount, in the aggregate, to not far short of £1,200,000,000. Then there are pensions, health services, education and so forth. It is no use talking vaguely. If the Government are challenged to reduce their expenditure in order to enable industry to have lower costs, I think it is not unfair that we should invite suggestions from our critics as to what they would do without. So far singularly little has been heard from them except denunciation. That is all I say on that subject.
Let me now come to the Washington discussions. Whatever other differences
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there may be between us, I think we shall all agree that those discussions represent one of the most fruitful and friendly international conferences which have ever been held. The decisions arrived at will be of long effect. Some of the action which was taken there will, of course, give a substantial measure of temporary help, while some of it will be of a more permanent character. I would like to remind your Lordships of one or two items that are concerned, and in doing so I shall refer to certain paragraphs in the Joint Communiqué on the discussions. As I said a few minutes ago, it is hopeless to expect that we shall be able to sell more in that market unless it is made possible for us to do so, by tariff adjustment or otherwise. That is a matter which is referred to in both paragraph 6 and in paragraph 11 of the Paper. Yesterday the President of the United States gave practical effect to what is referred to in those paragraphs by signing the Reciprocal Trade Agreements Act, I am sure your Lordships will all have noticed with great relief that he said:
"We must reduce our own barriers wherever possible to permit our people freest access to foreign goods they may want to buy."
That is one of the fruits of the discussions at Washington, and I am sure that it is a matter of long-standing and great importance.
Another paragraph in the Paper which contains something that I think is also likely to be of long-standing importance is paragraph 12, which relates to what is called discrimination. As your Lordships are aware, Clause 9 of the Loan Agreement required that we should not discriminate in our purchases as between the United States and other sources of supply. But it depends what is meant by discrimination. If we have not the dollars to buy any particular class of goods in one place but have the sterling to enable us to buy goods of that class in another, clearly it is a recognition of necessity and not an act of discrimination to buy the goods where we are able to pay for them and refrain from buying them in a market in which we cannot pay for them. There is a very important sentence dealing with that, the effect of which, I am glad to say, is already beginning to be felt. In paragraph 12 we find this:
"It was the view of the United States and Canadian delegations that such liberalisation of United Kingdom import regulations should be

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considered since the United Kingdom shortage of dollars should not in itself force the United Kingdom to reduce its purchases from areas with which it does not have a shortage of means of payment."
That is a very important statement indeed. It means that we shall have a great deal more liberty in respect of purchases from some areas than we had before.
Another highly important result of this conference is referred to in paragraph 10. It had been arranged that Marshall Aid dollars were to be expended, within certain limits, on United States goods, although it was a fact that certain dollars were available in our economy which it would have been to our better interest to spend elsewhere. Paragraph 10, a very important paragraph, states that:
"It has been agreed that, in order to carry out the basic purposes of the Economic Cooperation Act, it will be necessary for the United Kingdom to finance with its share of E.C.A. funds a wider range of dollar expenditures than has hitherto been eligible, both within and outside of the United States."
What that means is that we are able to use Marshall Aid dollars to pay for a large quantity of Canadian wheat. That is an immense help.
Another important contribution to the alleviation of the present situation is the decision to increase United States purchases of certain commodities, which are referred to in paragraph 9. May I say a word about this matter? A part of the decline in our dollar receipts in the first and second quarters has been due to the diminution in the purchases of rubber, tin, wool and other primary materials usually supplied from their countries of origin on a basis for which dollars were paid. The temporary cessation of these purchases very much enlarges the gap, and steps are now in hand for their resumption.
May I now say a further word about some other difficulties that have often been discussed? I think we are all agreed that it is important in world recovery that there should be stability of prices for primary producers. That principle is embodied in the International Wheat Agreement, which puts a floor and a ceiling to wheat prices for the next four or five years. As one who has for a long time advocated stability of prices for primary producers, I regard this as a most
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beneficial arrangement—I am not criticising the particular figures; I am speaking of the principle. If that arrangement is desirable and right for primary producers of wheat, surely it is equally reasonable and right for primary producers of tin, rubber, wool and other commodities.
Another very important result of these discussions, which is referred to in paragraph 8, is the suggested increase in United States overseas investments. I will not quote the paragraph, but will merely refer your Lordships to it. We all know that in the last century, when this country was the greatest manufacturing country in the world, we did not always obtain a balance of international payments; indeed, we very seldom did, and the practice grew up of investing our excess abroad. For example, part of the excess was spent in building railways in South America. I do not know whether they have all turned out to be very remunerative so far as we, the investors, are concerned, but they were the means whereby current trade was kept going, and in this document that fact is recognised with regard to the immense surpluses held by the United States. That is a great comfort.
Some of the results of the Washington talks will, of course, be only of a temporary character; but others will be permanent and important. Notwithstanding all these adjustments, it remains a fact that the deficit between the dollar and sterling areas is of very long standing. There was a large deficit before the war. In fact, there has been a deficit since almost the end of the First World War, although it was to some extent made good by unseen receipts, such as shipping, investments and other services. These, of course, have gone. Speaking now entirely for myself, on the arithmetic put before me I have never been convinced that there is a near prospect of a balance between the sterling and dollar areas, if we all buy what we want. That is a very important qualification. We cannot accept, I think, that it should be past the wit of man to devise ways and means whereby there can be an exchange of goods and services wanted by both parties to the advantage of both parties, without that exchange being restricted by an artificial arrangement. Therefore, I regard paragraph 15 of this Paper as one of the most important of all, because it

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is there set out, I am glad to say, that there shall be between us a system of continuing consultation. A highly authoritative body has already been set up between ourselves, the United States and Canada to deal with the difficulties that arise out of this situation and to keep them continually under review. I hope and believe that before long that body will have made some workable suggestions for dealing with this deficit between the sterling and dollar areas. Do not regard this simply in terms of Great Britain. Of course, we are the banker for the whole of the sterling area, but it is impossible to exaggerate the promptitude and helpfulness with which the members of the Commonwealth have participated in this matter, as they will continue to do in all directions.
There is before us now. in this revaluation, a special effort to stimulate our exports to the dollar areas, but we shall not realise the benefits of this step unless exports to those areas can increase more than sufficiently to account for the fewer dollars we receive for the same number of goods. It calls for a prodigious effort. In view of the disabilities from which we have suffered during the last four years, when we had to begin from the immense destruction of the war, and in view of what we have accomplished, I am convinced that we can achieve this increase if we put our backs into it in our characteristic national way. But it means that there will have to be a combined effort and a determination not to increase wages, costs or profits so far as to inflate our prices in the overseas market. We shall also have to improve our selling methods.
Our major objective in this proposal is that matters shall be dealt with in such a way that we shall be able to maintain employment and the standard of living of the people. These are the governing objectives so far as we on this side of the House are concerned. I have painful and acute recollections of the crisis of 1931, in which I was concerned all through. I was one of the seven members of the Cabinet who dissented from the method which was then adopted. That was the opposite method to that adopted to-day. It was the method of, shall I say, forced deflation, where wages were forced down, with the idea, I suppose, that ultimately our prices would be so reduced
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that we could compete with anybody. We all remember the disastrous years of misery and unemployment that followed. I well remember that Mr. Snowden, who was then the Chancellor of the Exchequer, did his best to persuade some of us that we ought to go out and convince the unemployed that they would be helping the country by taking ninepence a week less. Their then receipts were 17s. 6d. a week. I was one of those who refused absolutely to have anything to do with that method.
The alternative, and the only alternative, is greater production, both from our land and our factories, at prices which will enable us to sell. As I said a few minutes ago, it is right that we should retrench as well as we can anything that adds to the costs; but it is vital, so far as it is possible, that there should be an obstinate refusal by both parties to increase wages costs and to increase profits, or to take advantage of the great manufacturing effort which will be called for by the demands of the dollar areas under this scheme. There is one exception with regard to wages: in view of the increased cost of living there may have to be special arrangements for the lowest paid class of workers. It is not to them that the appeal can mainly be made. Clearty there is an overwhelming necessity for everybody to refrain from increasing costs, as increased costs would defeat the whole purpose of the scheme.
There are other important steps which I think we must take. Our methods of sale are very good in some dollar areas, but they are not at all good in others. As we all know, there is room for great improvement in some directions. In some industries—and parts of the textile industry are involved—there is considerable room for improved management and for the economies that will flow from it. The increased production and sale of things that people want to buy is the only, way in which we shall be able to purchase the supplies necessary for our industries and to maintain employment. It is only thus, therefore, that we can secure continuity of employment and the ability to buy sufficient food to maintain the standard of life of the people. Finally, we are determined, with the co-operation of all the people, by this instrument to maintain those services for the children, the aged, the sick and the unfortunate for which

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this country is the pioneer amongst the nations. I beg to move.
Moved to resolve,
"That this House approves the action taken by His Majesty's Government in relation to the exchange value of the pound sterling, supports the measures agreed upon at Washington by the Ministers of the United States, Canada and the United Kingdom which are designed to assist in restoring equilibrium in the sterling-dollar balance of trade for the purpose of enabling the economy of the sterling area to maintain stability independent of external aid; and calls upon the people for their full co-operation with the Government in achieving this aim, whilst maintaining full employment and safeguarding the social services."—(Viscount Addison.)
3.14 p.m.
VISCOUNT SWINTON: My Lords, even if the noble Viscount the Leader of the House were not so personally popular with all of us as he is, I do not think there is anyone here to-day who would withhold from him the full measure of sympathy—for which, indeed, he asked—in the duty which he has been called upon to discharge. We regret the absence—I hope only for to-day—of the noble Lord, Lord Pakenham. We regret still more (it is not due to ill health) the absence of an even more distinguished member of the House—namely, our noble leader on this side. I think all your Lordships are aware that the noble Marquess, Lord Salisbury, is fulfilling a very longstanding engagement to lecture in Canada.
It was undoubtedly right to recall Parliament as soon as possible. We are faced with a situation of unprecedented gravity. One member of the Government, a junior Minister, has said that Britain is on the brink of a terrifying chasm. I do not think that is an overstatement. The situation was serious enough when we separated, and since then it has deteriorated further to such an extent that the Government have felt obliged to devalue, a step which the Chancellor of the Exchequer had repeatedly said they were determined not to take. I can well understand the point which has been made, that no Chancellor of the Exchequer can announce in advance that he is going to devalue. The noble Viscount the Leader of the House rather prided himself and preened the Government on the success with which the secret had been kept. But that really
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is not the point. The point is this. If I followed the noble Viscount's speech aright, he seemed to be representing to us that devaluation is, if not a triumph of policy, at least a very good thing. I must say that I was surprised to hear that. The Chancellor of the Exchequer and all his colleagues and supporters have vehemently opposed devaluation on its merits. No one has pointed out more cogently than the Chancellor of the Exchequer the dangers and the disadvantages of devaluation. Now that it has been done, and done more drastically than any advocate of devaluation had anticipated, Parliament and the country are entitled to the fullest information.
The noble Viscount who opened this debate has spoken—he devoted a large part of his speech to it—of the success of the Washington Conference. Let me say at once that I think our representatives there were met in the most friendly and helpful way by the representatives of the United States and Canada. Substantial concessions were made in the present arrangements which will be of considerable temporary benefit—namely, the right to use Marshall Aid dollars for Canadian wheat and the increased stock-piling. These concessions are certainly valuable. But I think most valuable of all, provided that we can create the conditions in which it will bear fruit, is the creditor nation attitude which the United States Government adopted throughout the discussions. Customs administration and high tariffs inconsistent with the position of a creditor country, are to be reviewed, and there is a readiness to encourage American investment in the United Kingdom and the Empire. The noble Viscount quoted President Truman's further words when he gave his assent to the continuation of the Reciprocal Trade Agreements Act. All that is of real advantage and a solid manifestation of good will. But, helpful as all this is, and much as we appreciate their co-operation, nothing that happened at Washington has really changed the stark facts of the situation. All depends on ourselves, and the time is short.
The Government have now tabled a long Resolution which has not been read to the House, although all your Lordships will have read it. Surely, what Parliament and the country need is a

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great deal more information than they have had, and I submit that we should have that information under three heads. First of all, the circumstances in which devaluation has taken place; secondly, the probable results of devaluation and, thirdly—and most important of all, and upon which the Leader of the House was conspicuously silent—what is to be the Government policy in the future. On all these we need much more information than was in the Chancellor's rather strange broadcast or, if I may respectfully say so, in the speech to-day of the noble Viscount the Leader of the House.
Let me take first the circumstances of devaluation. In effect, what the Government say is this: We thought devaluation most dangerous and to be avoided at all costs if possible. It was our policy to hold the pound. We found we could not do so; the gap was widening; the gold reserves were slipping nearer and nearer to exhaustion; we could not restore confidence, and so we had to devalue. But does not that show a terrible lack of foresight and judgment —a sort of Micawber-like attitude of hoping that something will turn up? I hesitate to revive old memories, but there is something unpleasantly reminiscent of Mr. Shinwell and the coal crisis. Everyone in the country, as Mr. Shinwell said, knew that there was going to be a coal crisis—everyone, that is, except the Minister—and the coal crisis came. I hardly like to complete the syllogism. Surely all the facts that made devaluation inevitable in the middle of September were apparent in July, and if we had to devalue, surely that should have been done in July, if not earlier, thereby saving another two months' drain on our gold reserves and dollars.
The Resolution before your Lordships is:
"That this House approves the action taken by His Majesty's Government in relation to the exchange value of the pound …"
I should have thought that even the Government themselves would have chosen the word "accept" rather than the word "approve." May I take a parallel, which I think the Leader of the House will appreciate? If a doctor, by faulty diagnosis and wrong treatment, reduces his patient to a state in which the latter has to undergo a serious operation to save
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his life, the patient accepts that as a painful necessity; but he can hardly be asked to approve. He usually changes his doctor—I am not referring to the noble Viscount in his professional capacity. I am sure that he never found himself in such a situation, except possibly as a beneficiary by an exchange of physicians. I do not think my analogy is at all far-drawn or inapt.
Now I come to the consequences of devaluation. Of course, it is an accomplished fact, and we must to the fullest extent possible avoid or minimise the disadvantages arising and must exploit to the, greatest possible extent any countervailing advantages. Wise policy, hard work and united effort can do this. Nothing else can. But surely it would be misleading not to face the facts and appraise the resulting situation frankly and fairly. A false optimism, underestimating the consequences, would be wrong and dangerous, and in his broadcast the Chancellor of the Exchequer did not err on the side of frankness. We all l now that one of the attributes of a skilful and successful advocate is the art which conceals art. Listening to the Chancellor of the Exchequer that Sunday night, and re-reading the speech afterwards, I was driven to the conclusion that there is another attribute of a skilful advocate; that is, the truth which conceals truth. After all, it was a most extraordinary speech for one who has repeatedly emphasised the disadvantages of devaluation and the higher prices that we should have to pay. The general impression created must have been that the only increase would be an increase in the price of bread.
I want to be perfectly fair, and I will read the Chancellor's words:
"Apart from this increase in the price of bread, there should not be any noticeable increase in other retail prices, at any rate for the time being. Over the next few months there may be some justifiable reason for an increase in the price of a few articles which are made mainly from imported dollar raw materials."
But if we look beyond retail sales from stocks, prices must depend upon the cost of production and the proportion and price of raw material in production costs. I am quite certain that it will be the aim of industry to keep production costs as low as possible, but raw material prices are outside the control of any manufacturer; and the raw materials affected

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enter not only into a few articles—they enter into a great many articles. The day after the Chancellor broadcast the Government raised the prices of nonferrous metals. Copper went up from £107 10s. to £140 a ton; lead from £87 5s. to £122; zinc from £63 10s. to £87 10s. and aluminium from £93 to £112. Those are raw materials which are used not in a few articles; but in a very great number. And in some cases their cost represents a material part of the cost of manufacture. They go not only into great engineering products, capital goods, but also into masses of consumer goods.
Then there are other materials which are paid for in dollars—for instance, cotton, which has already gone up in price (there was no mention of that) and timber. I do not know w hat the price of timber will be. And it does not rest there. I want to ask: What is the expectation or the intention with regard to other raw materials coming from sterling sources—for example, rubber, vegetable oils and oilseeds, cocoa, tin and wool? According to the Chancellor's broadcast, these ought not to be affected at all. But is that reasonable? It is so important that we must not gloze over these things. We all want to make the necessary efforts on this, but we shall make a much better effort if we base ourselves on reality and face facts.
Take tin. I understand that in the last day or two the Ministry of Supply have raised the price of tin (I am not saying that it was wrong to do so) from £569 to £739 per ton—that is to say, about two-thirds of the mathematical increase of the equivalent dollar price. But if the prices of these commodities are held at the old sterling level—and it does not look as if they will be—then so much less will be earned in dollars and the gap will widen further. On the other hand, if the price is raised in whole or in part to the present dollar equivalent, as has already been done by the Government in the case of tin, the sterling costs of these commodities to the using industries in the United Kingdom will increase accordingly. And, of course, it is not just a question of a few articles but of a great many articles which in a greater or less degree will be affected. Moreover, the effect would be felt not only in home sales but in export sales as well.
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In 1931 a good many of these prices did not rise, at any rate for some time; we were successful or fortunate, or both, in holding prices. But there was then a wholly different situation existing in the world. In the case of a great many raw materials there was a surplus, amounting in many cases to a great glut: it was so with sugar, tin, rubber, vegetable oil and oil seeds, and even tea. That is not the position to-day. Except in rubber, and possibly in tin, I doubt whether there can be any surplus. We have been told that we must develop other resources because the world is short of these things. So the position is quite different.
Then there is meat. Nothing has been said about meat. I want to know about it, and I want to ask a special question with regard to Argentine meat. What are the terms of the Government's contract for current supplies of Argentine meat and for the future? Similar questions arise as regards feeding stuffs, which should come from the Argentine and which are very important to our farmers. I read yesterday in The Times, as "from our Argentine Correspondent" that the Argentine Finance Minister had said that his Government had presented a Note claiming an increase in the price of meat and other commodities, the prices of which were fixed last June. I think we ought to have a statement from the Government as to what the position is.
It looks to me as if here once again we were up against the disadvantages of Government contracts and bulk purchases. We have repeatedly pointed out the disadvantages, and how in these transactions it always seems that, if the contract happens to run in our favour (and that does not often happen), we find ourselves faced with a claim to reopen the contract on political grounds. I hope that it will be part of new Government policy in the future to get back to the normal channels of trade. I am going to show how important that is, not only from the point of view of the cost of living but of increased business and of increased confidence in our currency. I am glad to see that the Metal Market is to be allowed to operate again in tin—but I hope that will not be all. Why not reopen the Liverpool Cotton Exchange? These markets know the business. They could not have existed unless they had in the past met business requirements; and they

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met the business requirements not only of this country but of all the world. They would meet the needs of our manufacturers and earn invisible exports; so their restoration would do a great deal to restore our trading position. Foreigners would do their business here and do it in sterling, and that would help to restore confidence in the pound I think we are entitled to a much fuller Government statement, and I hope that we shall have it to-day or to-morrow, on the probable effect of devaluation on commodity prices, dollar and non-dollar.
I come to the third aspect on which we are entitled to more information, and in our grave situation I think it is the most important. What is to be the policy of the Government? I listened with the keenest attention to the speech of the noble Viscount the Leader of the House and I could not find even an indication of what is going to be Government policy in the future. I listened with a desire to help and support if there was anything I could support, but there was nothing at all: there was only a void. There was no information—except about the fact of devaluation. But devaluation is not a policy, and the Government certainly have never pretended hitherto that it was. Devaluation by itself, and particularly in the circumstances in which it has been forced upon us, is not a policy; it is a confession of weakness and of failure. I observe that one member of the Government, Mr. Griffiths, the Minister of National Insurance, in seeking to commend or excuse the Government to the Socialist Young Guard in Butlin's Camp —who seem to have been austerely treated by British Railways—said:
"We devalued the pound rather than devalue men."
I do not know whether Mr. Griffiths attached any meaning to that rather odd pronouncement, which is presumably a variant of the curious and unfounded claim that the Government should have credit for full employment since the war.
Even the Chancellor of the Exchequer, who is much more cautious that some of his colleagues, in a rather tendentious passage in his broadcast, yielded to the same temptation. For greater accuracy I have procured a copy of his statement. He said:
"We"—
that is, the Government—
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"have so far since the end of the Second World War prevented the heavy unemployment that threw a deep shadow over so many of our homes in the years between the two wars. I wonder how many of you realise what a hard and difficult struggle it has been to maintain that full employment."
There was some echo of that same theme in the speech of the noble Viscount today. In Lord Balfour's words, that is "in no near relation to the truth."
Surely, full employment in the last four years has been due to two things: first a sellers' market in a world starved for seven years of everything in the nature of capital goods and consumer goods. The world was ready to buy anything there was for sale. That position is ending—if it has not already ended. Secondly, there was the generous aid from the United States and Canada, without which, as Ministers themselves have said, there would have been 1,500,000 unemployed to-day. I stress this matter because it is very important from every point of view that we should all appreciate what American aid has meant to us. Of course, we on all sides of the House realise it, but I doubt whether there is yet a nation-wide realisation of the great debt we owe to the United States and to Canada for their help. Economics is an abstruse subject and many have still not realised that. but for this help, freely voted by the American and Canadian peoples at their own expense, they would be out of work. In addition, there is a small but vocal minority who have not hesitated to charge the Americans with ulterior motives, not even giving them credit for enlightened self-interest, and to attribute to them misfortunes of our own creation. That is indeed biting the hand that feeds us. I am sorry to say that these people enjoy a publicity here and, unfortunately, in America too. out of all proportion to their influence. I hope that our American friends will appreciate how small and unrepresentative that minority is.
To appreciate what we owe to America and to Canada is essential to an understanding of our own position and the efforts that we must ourselves make. It is also important from the point of view of our selling campaign in those countries. Good will counts for a great deal in business, and we shall certainly be more successful in gaining customers

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if those customers know our gratitude as well as our need. Nor is it without its effect on the inflow of tourist traffic, the willingness of people to come here and the spirit in which they come and in which they leave. These things are really important. This is a very human world—at any rate, outside the Iron Curtain—and these human things count for a great deal in every walk of life.
I am quite sure that there is a great potential market in the United States but—and here for once I find myself in agreement with the Leader of the House—our goods will not sell themselves. Salesmanship in America is efficient and also expensive. Not only have we to understand the varied requirements of that market, but we must have sales organisations which in publicity and service will sell our goods. In this regard not only must industry combine in study and action, as I am sure it will—some good and increasingly good work is being done by the Dollar Board—but the Government should be ready to give a generous measure of initial help in these selling campaigns. That expenditure could be recovered out of subsequent sales, and I think it would be, because, after all, expanding our dollar sales is not a temporary expedient. It is necessary to do so as quickly as we can, but it is and always will be a long-term policy. So it is doubly important that the foundations should be well and truly laid.
I want to throw out one other suggestion. It is very important that stocks should be available whenever they are wanted in America. To carry stocks is expensive. During the war we in the U.K.C.C. devised a scheme for the Argentine which was complete. Sir Percy Lister was responsible for it. The effect was that warehouses were provided on special terms and stocks could be carried in bond until the mercantile houses wanted them, and the whole was carried on as an insurance policy by the Export Credits Department. It did not work for long because everything had to go into the war effort and there was little to export—everything had to be turned on to the making of munitions—but if the Government will look at it I think they will find it a very useful precedent. It was worked out in its entirety—not
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only in theory but also in practice. Something of the same kind might be useful in the dollar markets.
In view of what the Leader of the House said, I must say something else about the past, because he gave us an extraordinary account of what happened in 1931. There were a good many present who were in this business in 1931. To listen to the Leader of the House, one would suppose that under the Labour Government from 1929 to 1931 everybody was in full employment and that then there came a crash, a crisis, and the choice lay between continuing people in full employment or putting them all out of work. Really that again is "in no near relation to the truth." What happened was that from the moment the world slump started in 1929—it was unfortunate for the Labour Government that the world slump and their advent to power more or less coincided; I do not say that it was a case of cause and effect or even of contributory cause—they were completely impotent of any ideas of how to deal with the slump during the two years they were in office. Unemployment rose and rose, and it was because they would not face up to it that the Government split. Really the noble Viscount opposite must re-read his history and perhaps his diaries—for he has full access to the Cabinet papers. I beg him to go and consult the Cabinet records of the day. I should think he would find them interesting reading. If I also am allowed to see the records of the days before I became a Minister in that first National Government, I would like to read some of them, but perhaps I would not be allowed to see them!
But what was the real truth? Drastic steps were taken, not to put people out of work but to try to get people back into work. It is quite true that, after the National Government came in, employment rose a little in the few succeeding months. But to complete the story, as a result of the policy followed and the measures taken, 2,500,000 more people were in work in 1939 than when the Labour Government went out of office, confidence in the pound was completely restored and the pound could look any currency in the face. We had greatly increased our trade both within the Empire and with the outside world. I am not saying that we could not have done it

729
better, though I think we did it a great deal better than the Labour Government did. I thought it was common ground that we all had a great deal to learn. During the last war we, in the Coalition Government, did our best to learn those lessons and to apply them in the White Paper on Employment Policy which owed so much to my noble friend Lord Woolton, who did much to prepare it and to present it to his colleagues.
Then there is the false accusation that we have decried the British effort. I am not sure whether the noble Viscount opposite wanted to apply that to us here or to somebody else—
VISCOUNT ADDISON: I did not wish to apply it to you.
VISCOUNT SWINTON: I am obliged. We have never decried or depreciated, here or outside, the British effort. On the contrary, we have consistently praised it. It is and has been a great effort, but it has got to be greater. It has been a great effort. To whom is that honour due? It is not due to the Government. It is due to the direction, to the management and workers in the industries who have produced the output and increased the exports. Where great progress has been made, and where exports have gone up is not in the industries with which the Government have tampered or controlled, but the non-nationalised and relatively free industries, of which steel is an outstanding example. I freely admit that we have attacked the Government where we considered that their policy was harmful and hindering, and have made what I hope has not only been destructive but constructive criticism. Surely events have shown how right we have been. So let the Government draw some distinction between criticism of the Government and criticism of the nation, and between criticism of the Government effort and criticism of the national effort.
I would ask: Since when has it become an offence on this side of the Iron Curtain to criticise government? More and more this Government adopt the attitude that any criticism of them is a form of lèse-majesté. This attitude of L'état c'est moi is not wholly democratic. So far as the Government are concerned I think the Chancellor of the Exchequer was much nearer the truth when he said this—again I quote from his broadcast
730
"We have sought to counter difficulties by a series of temporary expedients, which have led to a series of crises."
The temporary expedients have failed. I ask the Government to-day, what is their permanent policy? We have been chided in the past for criticising extravagant Government expenditure and high taxation. But it is the Chancellor of the Exchequer himself who now says that Government expenditure must be reduced. In face of that it is idle now for the noble Viscount to get up and say" Where would you make a reduction?" We are not the Government. I hope we shall soon be, and then we shall have our answer. But I am asking the Government now: Where, and in what direction and to what amount, do you propose to carry out the policy which your own Chancellor of the Exchequer has said is necessary to-day?
Surely the overriding necessity is to restore confidence in the pound and to produce and export more. Economy and strict control of expenditure will do something. Dr. Dalton's squandering of the American Loan, his lavish expenditure, his reckless advance into convertibility and his even more precipitate retreat from it, undermined confidence in the pound and did damage from which we have never recovered. Indeed, while devaluing so drastically, the present Chancellor has not felt able to leave the pound free to find its own level. Surely that is proof that a changed policy is needed to restore confidence. Confidence can be rapidly restored and progressively maintained by sound policy and united effort. Our industry and trade are so varied that they need the skill and experience and the risk-taking initiative of everyone engaged in the complex network which links the purchase and supply of raw materials with every manufacturing process—the sale and distribution through the markets of the world, the merchanting, banking, broking, insurance and shipping. That combination made us the greatest exporters and the hub of the world's trade, and made the pound a universal currency. That combination can do it again.
We have workers whose skill and thoroughness are second to none; and we have unique experience. But there must be united effort and individual initiative. Both must be encouraged and given full

731
play, and the Government have the chief responsibility. The Government to-day can make or mar by what they do, and perhaps more by what they refrain from doing. The Government's Resolution calls for co-operation with the Government. But what is the policy we are asked to co-operate in? Are we asked to co-operate in the policy which, in the words of the Government's own Minister, has brought us to "the brink of the chasm"? Are we asked to support the nationalisation of our most efficient industries? All industry and commerce will welcome the chance to improve and increase production, and will be anxious to expand their dollar sales and to find new outlets. Only the knowledge and varied experience of industry and commerce can do that. Give them their chance. But the Government must give them security and encouragement. How can the Government expect industries to concentrate on this great task, to take great risks, if at any moment they may be stabbed in the back?
Then there is the question of foreign investment. The noble Viscount rightly commended to us the passage in the record of the Washington discussions—the encouragement of American investment here and in the Colonial Empire. But what chance is there if the policy is to be more and more nationalisation? It will not be easy for America to play the part of a creditor nation in this respect. But the will is there. Surely it is for us to create the conditions in which that will can become the deed. Those conditions are security, an adequate return, and incentives that make risks worth while. The threat of nationalisation kills all that. I have no doubt what our aims shall be—that there should be one value for the pound the world over; and that an appreciating value. That can be produced only by confidence, confidence in ourselves and confidence of the world in us. That confidence must be founded on wise policy and resolute action.
My Lords, surely to-day there can be only these tests, by which any policy should be tried. Will it make our industry more efficient? Will it encourage incentive and risk-taking in industry and commerce? Will it make us all concentrate harder on our jobs? Will it unite us in teamwork and individual effort? Will it inspire confidence in the world?
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To any measures which stand those tests we will give our full support. But a policy which will not answer those tests and runs counter to those principles we must resolutely oppose, for our whole future is at stake. We cannot support this Government Motion. We cannot approve their conduct of our affairs in the past. We cannot express our confidence in their future policy, which so far as it has been disclosed to us would defeat the very aim we should all have in view. Confidence in our country, yes. Wisely and courageously led on sound lines, we shall certainly win through. This Resolution, on anything that has been said to us, we cannot accept. We shall therefore table an Amendment on the lines I have indicated, which will make our position clear and which, I believe, will commend itself to the House.
3.58 p.m.
VISCOUNT SAMUEL: My Lords, I do not propose to trouble your Lordships with any of the technicalities of this question of devaluation or with any statistical examples. I have not the competence to do so and, besides, my noble friend Lord Rennell, who deals as part of his daily avocations with the actual working and mechanism of the pound and dollar exchange, will be able to address your Lordships from this Bench to-morrow. He much regrets that a public engagement prevents his being present here today. Indeed, those technicalities are so many, the factors are so complicated and the outcome so uncertain, that even the experts are sometimes chary of forming an opinion. I remember reading some time ago, when the cotton market was fluctuating and anxious, that a group of Lancashire cotton manufacturing firms sent one of their buyers as their representative to New York to study the market, and to send them a report. After a few days, so it is alleged, they received this cable:
"Some think that cotton will go down, and some think it will go up. I do too. Whatever you do it will be wrong. Act at once."
I fear that our best experts—at least I suspect that it is so—sometimes feel themselves to be somewhat in that position. For my own part, I propose to eschew any prophecies or appreciations and to deal only, in compact form, with the essential facts of the situation.

733
I think we must all agree that in the situation that had arisen devaluation of the pound was inevitable, and that the Government were right to take that step. At the same time, I for one regard that situation and that devaluation as a disaster, a disaster to the world at large and to this country in particular. I regard it as a disaster to the world at large because the stability of currencies, year after year, and, se far as possible, decade after decade, is a matter of very great importance to manufacturers and mechants. If they are constantly subjected to unforeseen and unforeseeable sudden changes in currencies, with the result that they may incur sudden losses, the risks of business, already great. are increased. That has to be insured against by higher profits and reserves; and that again is reflected in higher prices to the consumers everywhere.
To ensure the stability of currencies was the whole, or at least the main, object of the Bretton Woods Conference and of the establishment of the International Bank and Monetary Fund. Yet, so soon after their establishment, we see this sudden and drastic devaluation of one of the world's principal currencies. That is not only an evil to the world at large but also this country, for it must greatly shock confidence now and for the future in sterling. In our younger days we were all proud of the fact that London was the financial centre of the world. that the pound sterling was a standard medium of exchange and that it was so accepted universally. And this country gained immense economic and financial advantages, both direct and indirect, from that fact. Then came the first shock to the world, the shock which occurred in 1931, to which the noble Viscount the Leader of the House and the noble Viscount who has just spoken, have both referred. As it happens, by a coincidence, I am the third speaker and I was also somewhat in the centre of events at that time.
I was surprised to hear the noble Viscount the Leader of the House say in solemn tones to-day: "All your Lordships will have remembered the events of 1931 and the misery and unemployment that followed." The misery and unemployment that followed! What about the greater misery and greater unemployment that preceded that year? However that may be, the events of 1931 greatly added
734
to the deterioration in the international position of Great Britain. And now, in 1949, comes this second shock. It is, of course, the duty of all Parties and of all good citizens to make the best of the present situation as it is, and to do their utmost to support the Government of the day—because, whatever its political character, it represents the whole nation—in any measures that are useful and necessary, as numbers of these are, to gain the greatest advantage that can be gained from the relief which comes from devaluation and to lessen, so far as possible, the detriment which must also come from devaluation.
The Chancellor of the Exchequer, Sir Stafford Cripps, has said that this is a step that we cannot and shall not repeat. But while a Government may say that, and may intend and wish it, and may resolve that it shall be so, if the economic factors remain the same as they have been the consequences will be the same as they have been. We have seen the pound depreciate from five dollars, which was its value for decades and decades, with only trifling fluctuations, down to four dollars after the last war, and now to well below three dollars. We have seen what has happened in countries which are near neighbours of ours—of which Frame is an unhappy example. There, having been compelled once, twice and three times to devalue, and finding that there if no adequate confidence in the future or the franc, they have been obliged, whenever difficulties of a serious nature have arisen, to devalue again until, step by stet, the franc, which used to be worth 10½., as we all remember, has come down it it worth only ¼d. in even our own depreciated currency. I believe that one of the ways in which this House can best assist or try to assist the Government is not to gloss over the seriousness of the situation and to say: "Now we are out o the wood and this great country can be relied upon to do in the future as it has done in the past, et cetera, et cetera, et cerera.." The best course is for us to try to guide public opinion by bringing home to the nation the stark facts of the situation. So what I have to say to your Lordships will be neither optimistic nor pessimistic, but strictly factual.
Let me first, in briefest outline, remind your Lordships of the main facts. They are all familiar, but often something

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which is familiar is for that reason easily forgotten. We came out of the war triumphant militarily, but exhausted economically. Most of our foreign investments had been sold, and so they were no longer bringing us any income; we found ourselves with an immense National Debt which requires nearly £500,000,000 a year td pay the interest charges—£485,000.000 to be accurate. In industry, equipment had to a large extent run down and a considerable part of our buildings were destroyed, while new normal building was from six or eight years in arrears. And while at the end of the war we hoped that we should be free from the immense burden of armaments, that we should be able rapidly not only to demobilise our Forces but to reduce them to a low level, the German Army and Navy having been entirely destroyed, we find, on the contrary, that we have to maintain again enormous Armed Forces. Great economic loss and a great drain upon our man-power has been caused owing to the uncertain conditions created by the unco-operative attitude of Russia. The situation in the Far East, in the Middle East and in Europe, obliges us now to spend no less than £760,000,000 a year upon our armaments. Lastly, there has been an entirely new item in our national budget of expenditure—food subsidies amounting to £465,000,000 a year.
All these are burdens upon the people that have been consequent upon the war. In addition, we have had the rapid effort to develop the welfare State, the purpose of which we must all approve. Many of the measures which have been carried I, for one, have been advocating for years past, as have my friends in the Liberal Party, and we cannot, for a moment, object to them in principle. We had the Coalition Government bringing in family allowances, and the raising of the school-leaving age. The education budget is now £225,000,000. The new National Health Service is absolutely right in principle. the old inadequate Health Service was a disgrace to the country, and there was an insufficiency of hospital accommodation, maintained only by begging around for voluntary subscriptions. But the cost of the National Health Service has proved to be far greater than even its authors expected. and now involves a charge of £260,000,000. Housing, again, involves
736
an immense expenditure, largely owing to the extremely inadequate production of labour in the building trades and the excessive cost of the individual house. Housing costs £66,000,000. National insurance, national assistance and family allowances cost £380,000,000. Then there is the swollen cost of the administration of all these services. It is not only costly financially, but it is costly industrially, in that it withdraws from productive employments hundreds of thousands of persons.
There is no doubt that this Government, the first Labour Government with a majority—and with a large majority— keen, eager, inspired by a fine humanitarianism, were most anxious at once to carry out as many as possible of the objects for which they have been striving for years and of which they had been dreaming for years before that. Looking back, we can now see that that expenditure, in view of the economic circumstances of the time, was too lavish. It almost looks as if they felt they had money to burn. The enormous revenues piled up to pay for the German war remained on the credit side, and instead of reducing the immense burden of taxation by massive reductions, taxation has remained very much as it was, with the addition of levies of various kinds, like the capital levy of last year. All that might have been borne by the nation, were it not that at the same time the trade unions were active—naturally, perhaps, from their point of view—in improving the conditions of labour for their members. The coal miners established a five day week, and elsewhere that example has been followed. Shorter hours have been established in many industries, but that has not necessarily meant more rest and leisure for the workers and more vigour at their work, because it has frequently been followed by more overtime at higher rates of pay. which has increased the costs of production still further. Longer holidays with wages, have been established. All this has not been recompensed by any increase in the development of efficiency in industry and of output per worker such as has followed in America. The whole of this has been reflected in higher costs.
Higher costs seem to me to be the clue to the whole situation. If we fix our

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minds upon this question of costs, we shall be able to understand just what has been happening, is happening now and may continue to happen in the future. Last year, on February 24, I had the privilege of opening a debate in your Londships' House on the economic situation. I then addressed your Lordships almost solely on the question of high costs and on heavy taxation as a factor in keeping costs high. High costs for products raise the cost of living, increasing the economic costs of production and the prices of our exports, and that is the central factor in all our difficulties. The causes of these high costs are sometimes world prices, which cannot be laid to the blame of His Majesty's Government. Prices in America soared when the American Congress removed certain of the price controls, and the immense advantages which we have received from America in the form of the Loan and afterwards Marshall Aid have been in a considerable measure cancelled out by the rise in prices of American products for which we have had to pay.
Among the national causes there is, first and foremost, the immense burden of taxation—£3,000,000,000 a year. I think some of our economists are to blame for this. They have been advocating continually that taxes should be kept high, so that the people would have less money to spend and consequently inflation would be stopped; but I feel convinced, although it may be an impertinence for a layman to say so, that there is a considerable degree of fallacy in that. To keep the people poor is not the way to keep costs down, because, as a matter of fact, they have other resources. We may take away money in taxation, but people during the war years saved enormous sums. These savings are very liquid, and if the people want these commodities—wireless sets, or whatever it may be—they can withdraw their funds; and, as we see, there is a very large market in these commodities. We may take away a half of the income of the wealthier classes hut their capital has greatly appreciated. They do not of necessity alter their standard of living very much, but they draw upon some part of that capital appreciation. In various ways high taxation is not a successful means of preventing inflation. It
738
may apply in certain directions, but it cannot be fully effective. At the same time the direct effect of high taxes is to raise costs, because firms which are heavily taxed put up their prices as much as they can to recoup the higher costs. Everyone, employer and workman, tries to keep up the standard of living to which he has been accustomed throughout his life, by charging rr101e for his services or for the goods he sells, in order to recoup himself.
The Chancellor of the Exchequer has recognised that, and I quoted in the debate last year a statement which he made. The Chancellor of the Exchequer said:
"There is always a tendency for expendable incomes to rise whenever possible to counter the taxation effect."
There is no doubt that very high taxes have tended to keep up prices, and since that affects everybody in equal circumstances equally, competition does not come in; everybody joins in the rise of prices. It may be said, however, that most of it comes back to the Government. The immense taxation upon income means that often half of the individual merchant's or financier's income is taken away in taxes, and therefore it cannot make a great difference in the long run. But it does. Although half the income is taken away, the other half is not, and that income he receives and spends. All these are elements which, enter into the fixing of prices of goods in general. And so high taxes are reflected in high costs.
We are all actors and audience in a grim drama, and the villain of the piece in this economic drama is, to my mind, the high prices. If we learnt that the general prices of commodities at home and abroad were gradually falling and had fallen 10 per cent. within a year, it would be an immense relief to everyone: we could lower the food subsidies and the costs of production without debasing the standard of living of the workpeople. On the other hand, if prices were to rise 10 per cent. all round, it would be a colossal burden on the economy of lids country and of the whole world. I agree that devaluation at the moment is unavoidable, but I say it is a great disaster, because its effect must he in a great degree to raise prices still higher and to prevent their falling. The noble Viscount, Lord Swinton, who has just spoken and who speaks with the

739
knowledge and experience of one who was President of the Board of Trade for many years, has given a number of examples of the ways in which the devaluation of sterling must have a most detrimental effect. While the Government say: "We shall never cut the social services; those must be maintained at all costs," they may in effect do so if they raise prices. They may raise the price of grain and they may raise the price of meat, and the financial effect upon those who are beneficiaries from the social services will be precisely the same as if the services themselves were cut. If the price of bread, meat and other things goes up, the effect in a family with a number of children is the same as if the allowances themselves were cut, say, by one shilling a child, or whatever the figure may be.
Then we have the question of wage claims. When the cost of living goes up, what will be the consequence in the working community? There was an able article in the Economist on September 24 which gave examples of the number of wage claims of importance which were actually pending before devaluation. The Confederation of Shipbuilding and Engineering Unions were demanding an all round increase of £1 per week per man, the cost of which would amount in total to up to £130,000,000 per annum. That is for one industry alone. The railwaymen put forward a claim, which has been rejected by the Board of Conciliation, for a fiat increase of 10s. per week per man and time and a quarter for Saturday afternoons. The building trade operatives are also making a claim to meet the high cost of living. Then a number of industries—among them iron and steel, boot and shoe, hosiery and building—with 1,500,000 workers, have their wage scales tied to the cost of living index. The moment that goes up their wages go up proportionately. Similarly with regard to the miners, who are claiming a revision of their cost of living allowances. Moreover, the nationalised industries are pressing for pension schemes. The Government have in fact resisted this pressure, and in doing so I am sure they will have the support of public opinion at the present time. The Trades Union Congress have been adopting a responsible and statesmanlike position. They
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have been endeavouring to resist these claims, being fully aware of the gravity of the situation and the impossibility of maintaining such advantage as there is from devaluation if the immediate consequence is a corresponding rise in production costs.
That concludes my survey. The fact is that our ship is trying to carry too much cargo and spreading too much sail. We cannot do all these things at once: we cannot make good the arrears of national equipment caused by six years of war; forgo our income from foreign investments; pay interest on the National Debt amounting to £10 a year for every man, woman and child in the country; endure the heavy drain on man-power and the vast sums of money that we spend on armaments in order to maintain our military position; pay nearly £500,000,000 a ear to subsidise the food of the people; pay for a large and rapid development of health, education and other social services, and at the same time shorten the hours of labour and lengthen holidays and, I must add, immensely increase profits on commodities. Profits on commodities are much too high, and they are the consequence very largely of the trading rings or price-fixing associations, which fix prices to give a reasonable profit to the less efficient firms, with the result that the more efficient firms cannot help themselves and make enormous and excessive profits.
All this might possibly be borne if we had harder work throughout the nation. more production, better machinery and equipment and efficient salesmanship. If, at the same time, we could only get freer trade throughout the world, and commerce on a multilateral basis such as it used to be, then indeed we might look forward to an increase in the total of national wealth. And conceivably one might even carry all that cargo and all that spread of canvas if we were sailing in calm seas and sunny weather. But that is far from being the case: there are gusts and storms and lowering skies which may threaten worse. Therefore, unless our production is increased, and unless our prices and costs are lowered, then exactly the same causes which produced this crisis will certainly produce another.
I quoted from the Chancellor of the Exchequer, who said that the Government "cannot and shall not repeat" this

741
measure Of devaluation. But in July the Chancellor said that the Government had no intention of devaluing the pound. Yet now, in September, as Sir Stafford Cripps has said, they are taking
"a step which is contrary to what I stated on behalf of His Majesty's Government in July last."
The Motion which is before your Lordships' House calls upon us to approve the action of the Government in relation to devaluation. What is meant by the words "in relation to"? Do they include the gradual development of the past situation, out of which devaluation has followed? And do they include the measures necessary immediately and in the future to prevent a recurrence? I do not think this House is ready to approve the handling of the financial and economic affairs of the nation during the last four years, which has undoubtedly contributed to create the present situation. If we are asked to give our approval to that, we must say "No." Then, again, is this House prepared to approve the measures which this Government are about to take, or are willing to take to redeem this situation? I listened with close attention, as did all your Lordships, to the speech of the Leader of the House, expecting that programme to be detailed; but all he mentioned were already published alleviations which had been arranged at the Washington conference, which are of great value, and for which we are extremely grateful to the United States, as we are also to Canada for her co-operation. We hope they may improve the conditions of trade with the dollar areas. In addition to that the noble Viscount said that the Government might have to restrict capital expenditure, as I understood him, on industrial equipment.
VISCOUNT ADDISON: I did not say that.
VISCOUNT SAMUEL: What was it?
VISCOUNT ADDISON: Restrict capital expenditure. I did not say on what.
VISCOUNT SAMUEL: Is industrial equipment excluded or included?
VISCOUNT ADDISON: You must wait and see.
VISCOUNT SAMUEL: We must wait and see! That is hardly a satisfactory undertaking. If it includes industrial
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equipment, then it may do much more harm than good. But the noble Viscount indicated that the Government contemplated no specific economies in expenditure.
VISCOUNT ADDISON: No, I did not. I said that we must exercise all the retrenchments that are possible—or words to that effect. I certainly emphasised that more than once. I agree that I did invite suggestions as to which of the major items should be reduced and, having listened carefully to the noble Viscount, I have received no assistance from him.
VISCOUNT SAMUEL: That is what I was coming to, because the main burden of—I will not say the noble Viscount's song, but of his dirge, was to invite the Opposition Parties to say what they would do if they Were in the place of the Government. But that is not our business.
VISCOUNT ADDISON: I do not want to be drawn into a controversy with the noble Viscount. I am only saying that when complaints are made about our expenditure—the noble Viscount is complaining—we are entitled to be told what it is in particular of which he is complaining.
VISCOUNT SAMUEL: We on these Benches think that there ought to be a complete overhaul of all items of expenditure. We do not suggest a particular cut in that commodity or this commodity. That is not the business of the Opposition Party; that is the business of the Government of tie day. Theirs is the responsibility of making suggestions. It is they who produce the Budget. It is not the business of the. Opposition to say: "If we were producing the Budget then we should do so and so." Put us in a position to produce the Budget and it will be done. As it is, the Government cannot escape their own responsibilities. Since we are asked to approve the measures the Government are going to take, while they do not tell us what those measures are—they merely reply, "What would you do?"—we can only say, when we come to deal with the Resolution now before the House, that it invites the House to express an approval of the past and a confidence of the future which we do not feel, and that therefore we on these Benches cannot support the Resolution.
4.32 p.m.
LORD PETHICK-LAWRENCE: My Lords, we have listened to polemic speeches from the two noble Viscounts who sit on different Benches on the opposite side of the House. Before I sit down, I propose to say something on the polemic aspect of their speeches, but I want to begin with a few words with regard to this question of devaluation, separated from the polemics which they have introduced into it. The speeches which I have heard to-day in this House —with the exception of one or two words which fell from the noble Viscount who is seated on the Front Opposition Bench, and the various comments that have been made in the Press and elsewhere have assumed that there were only two alternatives before the Chancellor of the Exchequer with regard to this matter of devaluation. They were either to resist devaluation altogether, or to devalue to some new fixed parity between the dollar and the pound. As a matter of fact, that is far from the truth. There were at least four courses which were open to the Chancellor of the Exchequer, and the noble Viscount on the Conservative Benches vaguely hinted at one of them.
The first of the other two courses which might have been adopted was to slip off the gold value of the pound and to allow sterling to find its own level. That, I think, might be described as purchasing power parity. It is not an academic idea, because that was in fact the method adopted in 1931; and it is an entirely different method from that adopted by the present Chancellor of the Exchequer. It is rather remarkable that no one has noticed that fact. The other method which might have been adopted was, instead of relating the pound sterling to the dollar or gold, that it should be related to the general price of articles. That is sometimes called the price index parity. That appears to be a more academic idea, but I may remind your Lordships that it was sponsored by the British representative (who was then Sir L. Worthington Evans) at the Genoa Conference in the 'twenties, and that it was carried by that Conference, I believe unanimously. Before I sit down I will deal with those two matters, and explain why I do not think they are suitable for the present time and why I support the action which Sir Stafford Cripps took in place of them.
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I will now go into the first of the four courses which, as I have pointed out to your Lordships, were possible at the time —that is, the retention of the old exchange parity between the dollar and the pound. As I understand it, neither of the noble Lords who has spoken from the opposite side has really dissented from the decision to devalue the pound when the time came. What they said was that it became inevitable through the mistakes of the Labour Government, and I listened with great care to hear what those mistakes were. The noble Viscount on the Conservative Benches described them as faulty diagnosis and wrong remedy. But when I came to listen to what the faulty diagnosis was, and what was the wrong remedy which was adopted, I did not obtain such clear information as I had hoped. What I did get, after listening to the whole of his speech, was a tirade against the financial policy of Doctor Dalton. That was the only thing he said to justify his statement about faulty diagnosis and wrong remedy. It is a little late to go back to Doctor Dalton. He has been the target of the Opposition for a long time now. and I think we might let that subject drop.
VISCOUNT SWINTON: The evil which men do lives after them, alas!
LORD PETHICK-LAWRENCE: I still think it is a little late to raise that question, when we are discussing the causes which have led up to the present crisis. After all, two years have passed since that time, and for a year and a half of that period there seemed every prospect that we were getting even with the dollar-sterling, exchange. Up to the first quarter of 1949 the gap was being steadily reduced. It has been only in the last quarter that there was evidence that the gap was increasing. To allege that the whole of that was due to something which was done two years ago is distinctly farfetched and unrealistic.
The noble Viscount, Lord Samuel, took an entirely different view, and he went bald-headed for what the noble Viscount, Lord Swinton, rather skated over. He gave an account of all the expenses of the Labour Government, and though he told us that he was not going to specify any one item which ought to be reduced he thought there ought to be considerable reduction in the total. In

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saying this he seemed to me to be himself committing the precise ambiguity with which he twitted my noble friend the Leader of the House in the matter of a reduction in capital outlay. But though the noble Viscount was careful not to take and underline the precise items to be cut down, it was fairly clear from his speech upon what he thought we ought to spend less. He thought we ought to spend less on the social services; he thought we ought to spend less on the food subsidies, and he thought we ought to have resisted more strenuously, than has been done any suggestion of wage increases. I think it is perfectly clear from his speech that that was what he intended, though I entirely agree that he never specifically said so. We know, then, where the noble Viscount, Lord Samuel, stands, and we know broadly where the noble Viscount, Lord Swinton, stands, though he was a little more careful. He made some insinuations against my right honourable friend the Chancellor of the Exchequer, suggesting that he had economised a little with the truth, and perhaps made things too simple. I suggest that his speech was rather along those lines. So much for the attitude to this matter of these noble Lords. They attacked the Labour Government for the steps that led up to devaluation; they do not disagree with devaluation; and, as I understand it, they do not disagree with the amount of devaluation. Therefore, so far as the first few words of the Resolution are concerned, the noble Lords are, as I understand the matter, prepared to support it.
I said that I would say a word or two about other forms of devaluation which might have been adopted. I gathered that the noble Viscount above the gangway seemed to think that the method adopted in 1931 would have been better, but he suggested that the Chancellor of the Exchequer had not the courage to try that method. What was that method? It was, not to fix any value for the pound but to let it find its own level, its own purchasing power dictating its value—with the Treasury, perhaps as a rather careful nurse, pushing the perambulator from behind and preventing its going into the road. Now there are two things about that that need to be said. In 1931, sterling was the main currency, as
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opposed to the dollar; and when this method was adopted, practically the whole non-dollar world fell into line with sterling. The position to-day is different. All sorts of currencies are standing on their own feet. and it would have been too much of an act of faith to ask from all these other countries that they should accept the obiter dicta of the British Treasury and allow themselves to move with sterling with nothing more definite than the good intentions of the British Treasury. Therefore I do not think that the method adopted in 1931 would have been successful.
But there is another reason. It would have been too much to ask industry to have no definite ratio put before it from month to month. It is true that the single jolt that has been caused by devaluation is a very serious one, and presents some grave problems to industry. But it would have been much more serious if sterling had been left in the air and if the merchant never knew from day to day what would be the rate of sterling a month or two ahead. Therefore, I support quite definitely what the Chancellor of the Exchequer has done in this respect. It is interesting to notice that when we went off gold in 1931 I myself had been at the Treasury for a little while before, and my advisers told me in advance that if we went off gold in some such way as was actually done, they expected the pound to fall to 14s. in terms of its previous exchange parity with gold. In fact that was almost exactly what happened; the drop was almost exactly from 20s. to 14s.; and it is worth noticing that that is precisely the devaluation which the Chancellor of the Exchequer has chosen in the present instance.
The other scheme—that of the moving of the pound, not in terms of gold or of the dollar at all, hut in relation to an index of prices—a basketful of goods, as I once described it—is of a more academic character. It was, however, sponsored by a member of the British Government at the time and endorsed by the Genoa Conference. There are those in another place who take a strong view in favour of some such form of devaluation, but I do not think it could be carried through successfully. It depends upon a common agreement among the principal financial countries of the world; and that agreement is obviously lacking at present.

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Let me go back to the proposal which was carried through by the Chancellor of the Exchequer. The circumstances being what they were, he had no option but to take the course he did. Of course devaluation is an evil. Nobody denies that devaluation is in the nature of a breach of contract. That is why a Chancellor of the Exchequer has to resist devaluation and submit to it only when sterling is forced off its parity. If I were asked what produced this position I should say that it was largely due to the difficulty of getting goods into the United States. It was due also to the disparagement, not of the Government—this Government have never complained of disparagement of itself—but of the efforts of the British people. I am not charging the noble Viscount with that, but he will not deny that there has been great disparagement of the British people and of the pound. And it is that which in the end has brought the matter to this critical situation. The noble Viscount, Lord Swinton, must realise, if he has read in United States papers the quotations that have appeared from British papers, interviews that American correspondents have had in this country with people who are opposed to the Labour Government, and so forth, the immense and continued campaign of disparagement of the efforts of the people of this country which has appeared in the United States as a result of what has been said in this country. That, I think, was the final step which rendered devaluation essential.
The noble Viscount asked what is the policy of the Labour Government in addition to devaluation. I should have thought the answer was perfectly clear. If the noble Viscount who leads the House, and who opened this debate, did not refer to it to-day it was because it has been said over and over again. The policy of the Labour Government is twofold. First, it is to ask all sections of the community who by withholding their labour, or by the misuse of the monopoly power which they possess, can hold the community to ransom, to hold their hand and not to pursue their claims at present. It is not a question of one class or one section. Doctors, lawyers, and many others of the professional classes, in addition to the workers, have the power to hold the community to ransom in order
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to gain additional advantage for themselves. The first thing which the Labour Government are doing is to ask all these sections not to press their claims, in view of the present financial position.
The second part of the Government's policy is this. They are asking the nation to recognise that if devaluation is to be a success there must be a great increase of production. There will, we hope, be doors which will be more open to British merchandise in the United States, partly owing to the splendid response made by the American Administration and partly owing to the devaluation. It means that if we want to close the dollar gap we have to send into the United States and Canada a vastly increased quantity of goods. The effect of the devaluation by itself means that in order to obtain the same number of dollars we have considerably to increase our production and exports. If we are to get more dollars, we have to increase them to an enormous extent. Therefore it behoves all those who are engaged in industry, from the top to the bottom, to put their backs to the wheel and help to push the coach forward as it has never been pushed before.
What is the incentive to that?—this is where I want to challenge the noble Viscount, Lord Swinton. What is going to be the incentive? The noble Viscount must know that there is a whispering campaign among large sections of his own Party—I do not say necessarily in this House or in another place, but up and down the country—which comes out in large portions of the daily and weekly Press and says" In order to get the means to compel the worker to work harder, you want the whip of unemployment."
VISCOUNT SWINTON: Who has said that?
LORD PETHICK-LAWRENCE: I said it was a whispering campaign.
VISCOUNT SWINTON: My Lords, I challenge the noble Lord. He is now accusing my Party and I presume myself. We are being accused. The noble Lord tells us that there is a whispering campaign. Let us have some evidence of it. He is slandering the Party which I represent in this House.
LORD WOOLTON: My Lords, may I go even further? We have deliberately and definitely denied it. On Saturday I said that it was a dastardly lie.
LORD PETHICK-LAWRENCE: My Lords, noble Lords opposite can wax excited about it, but it remains true that there has been a whispering campaign.
VISCOUNT SWINTON: I have not heard of it.
LORD PETHICK-LAWRENCE: I read the evening newspapers—for instance, the Evening Standard, and I read that very important paper The Economist, and in those papers the words have definitely been used.
LORD HAWKE: My Lords, can the noble Lord confirm that?
LORD FETHICK-LAWRENCE: My Lords, I cannot, give way to everyone. The words have been used, and it is a well-known fact that there is a whispering campaign. I am not charging the members of the Front Opposition Bench; I would not dream of doing so; but there has been a whispering campaign going on. Everybody knows that it is so. It is pure childishness to deny that there has been that whispering campaign.
VISCOUNT SWINTON: No.
LORD PETHICK-LAWRENCE: The noble Viscount may say that. He is perfectly entitled to put himself into a white sheet and say: "I have never countenanced such a thing." To deny that there has been this whispering campaign is to ignore what everyone knows to be the fact. Unemployment is not a solution to this problem. The way to get better work out of the British people is not to put into the driver's hand the whip which was used against them in the days gone by. It is true—and to this extent I find myself in agreement with the noble Viscount below the gangway and, I should say, with the noble Viscount above the gangway—that we have got to appeal to the people of this country for an even greater effort than has been made before to give us the increased output which is needed to solve the economic problems of the country. I have a tremendous respect for the good sense, the good judgment, and the willingness to respond of the people of our country. During the war the leader of the Conservative Party put his appeal into words which remain historic. He called on the people of our land to stand shoulder to shoulder. He said at the time that he offered no
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rewards; he offered no incentives; he demanded nothing but "blood and sweat." And why? My Lords, the reason was to preserve the political liberties of this country and the method of life of the British people. For that men gave their labour; they gave up wealth; they gave up fame; they gave their lives. Those of us who have survived owe them a debt which we can never repay.
To-day we are in a position of equally critical significance. We have to defend not the political liberty but the economic liberty of this country. We have to defend not the method of life but the standard of life of our people. Our social services, this welfare State, our full employment, are part of the things that we have to defend; and if we put it to the people of our country—the great, splendid, noble people—that they can defend them, not by dying but only by living and working for their country, I believe we shall obtain a ready response. The noble Lords who sit opposite, both below and above the gangway, cannot have it both ways. They cannot in one breath repudiate opposition to the great ideals of the present Government—full employment, the welfare State, a good standard of life—saying: "We are not against any of these things. We never had those things in our minds when we wanted to reduce the expenditure of the country," and at the same time take exception to this Resolution.
The noble Viscount said that the Resolution had not been read out to-day. I thought that he could not have read it himself, because he talked about being asked to support the nationalisation of industry and all the wicked things which he regards the Labour programme to be. There is nothing in this Resolution about supporting the nationalisation of industry. There is nothing about supporting the full policy of the Government. Let me read the salient parts of this Resolution —I do not think I need read the whole of it, but I will if necessary. It says that this House:
"… supports the measures agreed upon at Washington by the Ministers of the United States, Canada and the United Kingdom which are designed to assist in restoring equilibrium in the sterling-dollar balance of trade for the purpose of enabling the economy of the sterling area to maintain stability independent of external aid;"—

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that is the purpose. Then it goes on:
"and calls upon the people for their full co-operation with the Government"—
in what? In nationalising industries? Nothing of the sort!
"in achieving this aim"—
that is, restoring equilibrium in the sterling-dollar balance of trade—
"whilst maintaining full employment and safeguarding the social services."
From what do the noble Lords dissent? They say emphatically, with their hands upon their hearts, that they do not dissent from maintaining full employment. They say that they do not believe in the social services exactly as they are to-day, but apparently they do believe —at least they say they believe, and I do not want to doubt their word—that they also would safeguard the social services. What is there to complain of in this Resolution? They are not asked to support the whole programme of the Labour Government. They are asked to unite in calling upon the people for their co-operation with the Government in achieving the aims that have been mentioned.
VISCOUNT SWINTON: My Lords, I will answer the noble Lord. I apologise to him, but I had to go out for a moment. How can we give support unless we know the policy? Of course nationalisation is relevant. The threats of nationalisation have done more to destroy incentive and to undermine confidence than anything else that has been done.
LORD PETHICK-LAWRENCE: There is nothing about that in the Resolution. The Resolution is, to support and assist in restoring the equilibrium of the sterling-dollar balance. However, the Opposition are going to have a vote to-morrow. They are perfectly entitled to take any action they like. But I point out that it would seem utterly illogical and inconsistent to say that they are not dissenting from a policy of full employment and from the social services, if they are not prepared to call upon the people to co-operate in working for the restoration of the trade equilibrium of this country while preserving those two things.
5.0 p.m.
LORD BALFOUR OF BURLEIGH: My Lords, I think it was a wise decision
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on the part of the Government to recall Parliament. It gives us an opportunity for a frank examination of what the noble Viscount, Lord Samuel, called the stark facts of the situation. I was glad to hear from my noble friend Lord Pethick-Lawrence that he agrees that the situation is critical. When I use the word "critical" I mean critical in the fullest sense. If ever we have a friend in hospital whose condition is said to be dangerous, we know that he is very ill; but when we are told that his condition is critical, anxiety mounts to an even higher pitch. That, my Lords, is the situation of our country to-day. It is the more dangerous and the more critical because it is so largely unrealised by the mass of the population.
In considering this critical situation, my mind goes back to June, 1940, when we had to face what was up to that date the most critical situation which had occurred in my lifetime. I suppose that in those circumstances we all had some sheet anchor to which we constantly referred to maintain our faith in ultimate victory. My own, and no doubt that of many others, was the confidence that if only we were given time we should build up so overwhelming a striking force of air power that that would bring us victory in spite of all other difficulties. What is our sheet anchor to-day? In this situation, which is just as critical, though of quite a different kind, and which offers other difficulties just as great, I can find only one. I think it is one which will be shared by every one of your Lordships—namely, that we have to rely, as always, upon the quality of the British people. But the quality of the British people cannot be brought into play unless you tell them the truth, unless you make them alive to the real facts of the situation.
As to the rate of 2.80 dollars, I confess that that came to me as a surprise and, I admit, something of a shock. But I feel that the Chancellor of the Exchequer is the only man who has all the facts, and consequently I, for one, am prepared to accept that decision and even to applaud it as a courageous one. Nevertheless, I cannot avoid a feeling of humiliation when I reflect on the glories of the past. I think we must be allowed to drop a tear for the strength and glory that was the pound sterling, now reduced to the status of a poor relation dependent upon friends for his financial support.

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Neither have I any criticism of the Chancellor's attitude of denial up to the last moment; I do not think he could do anything else. But what an unhappy fortnight that must have been for his colleagues who were "in the know"! The noble Viscount the Leader of the House said the secret had been well kept. My Lords, at what cost! I am sure the noble Viscount is a person to whom anything in the nature of a lie is grossly repugnant. But faced as he must have been during that fortnight with pertinacious and inquiring friends, he must, in order to accomplish this secrecy, have committed himself to some most frightful "whoppers." Indeed, in the interests of the country I think he must have committed himself, in the classic phrase, to a number of "frigid and calculated lies." We congratulate him on the opportunity once more to speak the truth, and we hope he will use it to the fullest possible extent. My Lords, if ignorance can save one from such a dilemma as that, indeed it is folly to be "in the know." The only other comment that I would make on the rate of 2.80 dollars is—and it has been referred to by my noble friend, Lord Pethick-Lawrence—the enormous increase which is involved in our exports to provide even the same number of dollars as before.
I shall have some criticism to make of the Chancellor's broadcast, but first I want to say a word about that much abused term "full employment." "Full employment" literally means a condition of affairs in which there are as many jobs as there are people available for them. But even under those conditions there is bound to be a certain amount of temporary transitional unemployment. People have to go from job to job. May it always be so that the people of this country are free to seek the jobs they want! There is always an ebb and flow between one industry and another. One industry contracts, another expands, and it is vital to the good health and flexibility of our industry that that should be so. I think I am right in saying that before the war no economist ever postulated a smaller proportion of temporary unemployment than 3 or 4 per cent. The noble Lord, Lord Beveridge, I believe, postulated 3 per cent. The present percentage is 1½, which means that there are only 250,000 people
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temporarily unemployed out of the working population of 20,000,000. That is not full employment; it is definitely over-full employment, and I shall have something to say to your Lordships about the consequences later on.
The next matter I want to talk about is another phrase that we hear—and I think it was used in the Chancellor's broadcast—namely, "maximum productivity." "Maximum productivity" ought to mean not maximum production in general, but maximum production of the right kind of goods and, in our situation, as everybody knows, goods mainly for export. The Government have told us that to achieve that maximum production we must have a certain redistribution of our labour forces. The Economic Survey for 1948 set a target of an increase of 195,000 for the three vital industries of coal, agriculture and textiles. The realised increase in 1948 was 82,000—less than half. The revised estimate for 1949 was an increase of 44,000. Of that, up to June 30 the increase has been only 18,000; and in the case of coal up to June 30 there has actually been a fall of 4,000.
On the other side of the picture—that which concerns the less essential industries—the 1948 Survey estimated for clothing, building, distribution, Government and local government services minus 249,000. In fact, during that year those four industries acquired 113,000 additional workers. In 1949, it was estimated that there would be no change in those industries. In fact, in the six months to June 30, there has been an increase of 58.000. My point in wearying your Lordships with these statistics is that the vital redistribution of our labour force is just not happening. I submit to your Lordships that that redistribution is being hindered by this condition of over-full employment.
My next point relates to inflation. The noble Viscount, Lord Samuel, said that he allotted the rôle of the villain of the piece to high prices; I would substitute inflation. We are all agreed about the dangers of inflation. The Prime Minister made a speech about it on Saturday. The 1948 Budget commanded general approval because it did set in motion a disinflationary process. The 1949 Budget was received with some doubts, and I think it is now clear that the 1949 Budget

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is failing to maintain that disinflationary process. I refer your Lordships who are interested to the London and Cambridge Economic Service Bulletin for May, 1949. In that publication, your Lordships will find an article by Messrs. Paish and Tress. That article contains large numbers of pluses and minuses, decimal points and tabulated statistics and many other things which only an economist could read with any pleasure, and I am not going to read it in its entirety to you. But there are two paragraphs which even I have been able to understand, and from these I propose to quote to your Lordships. It is stated that:
"The result of our re-examination of the official estimates for capital formation and business savings in 1949 brings us, therefore, to the conclusion that at present prices the prospective rate of total savings, public and private, in 1949 would seem to be at least £100,000,000 short of the rate of planned investment, and very possibly more."
A later paragraph reads:
"If, as is most probable, interest rates are not allowed to rise, the immediate effect of trying to carry out the full programme for fixed investment will almost certainly be to cause a renewal of credit expansion. This will tend to raise prices and check exports. Thus our main problems, both of balancing our overseas accounts and of maintaining internal stability, will be made more difficult."
I think there is no doubt whatever that Messrs. Paish and Tress were right. I think they have been proved correct by the fall in our resources which was a contributory factor to the fall in our gold and dollar reserves which has caused so much anxiety. But that, I think, has also been contributed to by our policy of over-full employment. The relationship between over-full employment and inflation is mutual—one contributes to the other. I say that the Government are conducting two contradictory policies when they say they are trying to get rid of inflation and at the same time are adhering to a policy of over-full employment. If anyone asks for proof of that, I offer him this very remarkable fact: that although there has been a quite noticeable diminution in our exports in recent months, that has been entirely unreflected in the unemployment statistics. Those exports which were not made must have involved the displacement of some labour, but whatever labour was displaced was immediately re-absorbed. This means—and this is the vital point—that resources which
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we so urgently need to pay our way abroad have been consumed at home. It is significant that the Economic Survey anticipated for 1949 an increase in the transitional unemployed of 2,000. In fact, in the first six months of the year there has been a decrease of 98,000.
I turn now to the Chancellor's broadcast. The major criticism which so many people have fastened on is, of course, that the probable rise in the cost of living has been greatly underestimated. The noble Viscount, Lord Swinton, and the noble Viscount, Lord Samuel, have both dealt with that, and I shall pass it by. I confine myself to dealing with the Chancellor of the Exchequer's remarks about employment. On that I have two criticisms. The first is that the inference of that broadcast—I am not going to read it; I am sure your Lordships are all very familiar with it—is that there is no possible middle course between over-full employment, which we are enjoying at the present time, and a policy of mass unemployment. That is a most dangerous suggestion to put into the heads of people. The second implication underlying that broadcast which I think is equally dangerous is that devaluation by itself will do the trick and will get us out of the mess we are in, without any increased effort on the part of our people. Nor is there any reference whatever in the broadcast to the redistribution of labour which is necessary if maximum production is to be attained.
There is another passage also bearing on unemployment to which I want to draw your Lordships' attention. Viscount Swinton has already referred to it. This passage seems to me rather puzzling. The Chancellor said:
"We have, so far, since the end of the Second World War prevented the heavy unemployment that threw a deep shadow over so many of our homes in the years between the two wars. I wonder how many of you realise what a hard and difficult struggle it has been to maintain that full employment."
That seems to me a very odd statement. I can make sense of it only by finding in it confirmation of my view of the Government's policy of over-full employment. I think it means that the Government are deliberately mopping up unemployment wherever it occurs. I feel that that is in disregard of the planned economy on which the Economic Survey was based. There is some evidence that what I say

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is true, and it would be not unnatural for the Government, with their horror of mass unemployment, to adopt such a policy. I am trying not to take a Party line. I believe there are cases where building licences have been given for quite important non-industrial buildings which Would not contribute to the export trade, which could have been delayed but the construction of which did have the effect of mopping up local unemployment in the building trade. I have my suspicions about unrequited exports resulting from the release of sterling balances. It would be only too easy to allow sterling balances to run down, even with all the difficulties involved, if that were going to prevent unemployment. If unemployment would have resulted, it was perhaps easier to allow the sterling balances to be run down, rather than go through the diflicult and unpleasant process of diverting that labour and those materials to other purposes.
I have a minor criticism, though I think it is an important one, which applies not only to the Chancellor of the Exchequer but to all members of the Government. They are much more prone to talk about "personal income" than about "wages". To the man in the workshop, "personal income" is what the boss gets; it is not what he gets in his wage packet. Another minor criticism is that hardly any Minister has had the frankness to talk about "devaluation." I was glad to hear the noble Lord, Lord Pethick-Lawrence use the word "devaluation," and not surprised. He is the first to-day; I do not think the noble Viscount the Leader of the House used it. It is always "a change in exchange" or "revaluation." I understand that during the critical fortnight the Treasury were reduced to issuing a circular which referred to "certain unmentionable circumstances."
The situation is grim, and the most dangerous thing is the delusion that devaluation alone will get us out of the mess.
LORD PETHICK-LAWRENCE: The Prime Minster made a speech the other day in which he said devaluation was not a magic wand.
LORD BALFOUR OF BURLEIGH: That is perfectly true. What have we to do in addition? I should like to make some suggestions which may result. I am
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afraid, in a good deal of misrepresentation. The Prime Minister said that devaluation was not a magic wand, but he did not say what I am going to say and what everybody knows in his heart to be true—namely, that in addition to devaluation we have to have retrenchment and reform. There is already an inflationary pressure in our economy and, as the Chancellor of the Exchequer pointed out in his broadcast, the dangers will be greatly increased in future if we succeed in getting the big export drive we need. As your Lordships know, when exports leave the country the purchasing power which has gone into wages and so on in creating them remains behind. I wish, indeed, that retrenchment and reform could have come first. Perhaps if they had, it would not have been necessary to devalue quite so far.
I am now going to tread on some very delicate ground and, in the hope of disarming misrepresentation, I am going to ask your Lordships' permission to be slightly egotistical. Twenty-five years ago I was on record in your Lordships' House in advocating, perhaps a little before it was commonly accepted policy, a decent home for every family at a rent it could afford. For me the driving force behind that advocacy was always the thought of what it meant to the children. I thought it was intolerable that children should be deprived of the advantages of a decent home just for lack of decent housing. My approach to unemployment is exactly the same. I think of it in terms of the young. I think of mass unemployment in terms of schoolboys leaving school, spending a few years in blind alley occupations, and then one, two, three, four or five years of unemployment at the most difficult stage of their lives, from 17 to 25 years of age, and finally perhaps being thrown on the scrap heap without the capacity to become useful citizens. Those of us who are parents can understand the anguish that that must have caused to parents who had to watch their children undergoing that terrible process. Many leaders of the Labour Party went through that. We know that the Prime Minister was working in the East End. Other Labour leaders probably suffered from it themselves. The noble Viscount, Lord Addison, spoke movingly of it to-day.

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I believe it is difficult for men, of whom it might be said that the iron has entered into their souls, to see clearly the danger inherent in this policy of over-full employment. It is that over-full employment produces a perpetual seller's market for labour. It means that wages can move only in one direction, and that is, upwards. If it is unwisely persisted in, it can have only one end—namely, a runaway inflation. That would involve an inability to buy in the markets of the world the food and raw materials necessary for the support of our population. I do not think it is realised by the advocates of over-full employment that it contains the dangers of a return by another route to the very condition of mass unemployment of which they so rightly have a horror. The logical result would be years of misery and starvation, compared to which the 'twenties were nothing, and the ultimate reduction of our population to the figure at which we could grow food for their support.
I hope I shall be acquitted of lack of sympathy either with social reform or with continuing employment. But we must have retrenchment and reform as well if we are to get out of our trouble. We must restore disinflation. I should have thought it was an occasion when an autumn Budget would have been appropriate, but I understand the difficulties involved, and so much can he done by administrative action that it may not be necessary. Retrenchment means cuts, and the noble Viscount, Lord Addison, asked those who advocated it what the cuts are to be. I thought the noble Viscount, Lord Samuel, replied quite correctly when he said that the responsibility is on the Government. They know the facts. If the Budget is inflationary, the facts must be faced. The truth is that the point has now been reached in which we cannot pay for all the desirable objectives we want. The choice has to be made between what is more essential and what is less essential. I do not think it is fair for the Government to expect to dodge that issue. They cannot dodge it by passing the buck to somebody else. They have the power and the responsibility.
Again I do not want to be partisan, but the noble Viscount was a little partisan about it. In my view, the situation is largely due to their own fault.
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Nevertheless, I am going to make a suggestion about the Health Service which I know will open me to misrepresentation. I think it is common ground that there is waste in the Health Service. We shall be all agreed that waste has to be eliminated. But I would go further than that. I do not believe people really appreciate a thing which they think somebody else is paying for. Consequently, I would advocate—and I defy any noble Lord to say that I am saying that social services ought to be cut down—the imposition of a charge, a token charge if you like, in respect of the services which individuals get under the great health scheme. I would have safeguards for the indigent—let me say that at once. If people could not pay, then they must be looked after.
Another suggestion of perhaps an equally dangerous character is this. I would ask the Government to modify the policy of over-full employment. I would ask them to allow temporary transitional unemployment to work towards the redistribution of labour which everybody knows is necessary to get full production. If anybody disputes the desirability of that, then I say he is enrolling himself as an advocate of administrative direction of labour. There is no other alternative. I am going to say something else which is so bold as to be foolhardy. I am going to ask the noble Lord, Lord Pethick-Lawrence, what he thinks of it. I would say that to diminish the condition of over-full employment would have a good effect in promoting industrial discipline. I believe that complete security is not helpful so far as the less energetic and less conscientious members of the community are concerned. I do not think the possibility of having to face a couple of weeks of transitional unemployment is going to do such people any harm, and I am quite sure it will he a stimulus to an increase in man-hour productivity. Let no one dare say that I am advocating the return of mass unemployment. I ask my noble friend if he will now accuse me, in what I have said, of demanding the whip of unemployment.
In addition to these things the Government must remember the disincentive of taxation. That is working up and down the whole scale of incomes. I dare say

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it is not possible in the present circumstances quickly to reduce taxation, but it must remain a prime objective. Greater incentives are needed not only for the employers but for the employed. I would like to echo what was said by the noble Viscount, Lord Samuel, about the need for lower costs. I wish to give your Lordships two examples of the need for reduction in British costs, the largest contribution to which I believe would come from an increased individual man-hour productivity. The first example is in the building trade, and my figures are taken from the First Report of the Committee of Inquiry into the cost of house building, appointed by the Minister of Health. Before the war it took 1,550 man-hours, the equivalent of one man working thirty hours a week for a year, to build a typical pre-war house of 800 square feet. To build the same house in 1947 would have taken 2,248 man-hours. This increase of 45 per cent. in man-hours required to carry out a given quantity of work represents a decline in productivity per man-hour of 31 per cent. I think it is significant, and it may be terribly significant, that that decline in productivity of 31 per cent. corresponds so closely to the actual devaluation which has been found necessary.
My other example of costs is connected with shipbuilding. Only a few days ago I heard of a case where tenders for construction of a cargo liner had been asked for within the last few months. A well known British shipbuilding firm quoted £52,000, a Swedish firm quoted £32,000 and a Danish firm £26,000. The same ship-owning firm which called for these tenders had a ship for repair. They asked for tender; in a British yard and were told they could not be given a precise figure, but the cost would be somewhere between £50,000 and £60,000. The ship was sent to Germany and the whole of the repairs were completed at a cost of under £20,000. Surely there is something pretty far wrong, which will not be corrected by a mere devaluation.
I have one final point. Grim as the situation is, I am far from saying that it is hopeless. I believe that with devaluation, plus retrenchment, plus reform, we can still pull through. But I want to suggest that perhaps there is something even more at stake than the immediate standard of living of the British people. I
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believe that what is at stake in this crisis is the whole future of our Parliamentary democracy. The people were strong enough to be told in 1940 of the dangers which then threatened them. Do the Government not think that they are strong enough to be told the real truth of the more insidious dangers which threaten them in 1949? It is up to the Government to tell the people the real truth. I beg the Government not to think that I am making a Party point. I say to the Opposition that it is their duty to tell the truth also and, above all, to be careful not to hold out hopes of increased benefits without corresponding sacrifices. But it is for the Government to set the example; they have the responsibility of power. It is a terrible responsibility, but it is also a great opportunity. I believe it is by the manner in which they face up to that responsibility and grasp that opportunity that they will be judged at the bar of history.
THE FIRST LORD OF THE ADMIRALTY (VISCOUNT HALL): My Lords, I would not like any misapprehension to exist. I did not want to interrupt the noble Lord in the course of his speech, but the impression which he leaves on my mind is clearly that his speech was definitely in favour of unemployment. It is true that he qualified what he said by saying that he did not agree with mass unemployment. Neither did he agree with full employment. But he did suggest that he thought there should be a middle course. It would be interesting if the noble Lord could give an idea as to what he would regard as a middle course between mass unemployment and full employment.
LORD BALFOUR OF BURLEIGH: I have great pleasure in answering that question. I regard the desideratum as full employment in the literal sense of the words. There must be a percentage of transitional unemployment, but it is not for me to say what it ought to be. In ordinary full employment there must be, as I explained in my speech, a percentage of transitional unemployment—not permanent, but transitional—as men move from one job to another in pursuit of the re-distribution of labour which the Government say is desirable.
LORD LUCAS OF CHILWORTH: For what reason?
LORD BALFOUR OF BURLEIGH: I do not think I am called upon to add anything further to what I have said. I spoke very carefully, and I maintain that if any attempt is made to make Party capital out of what I said it will be a deliberate misrepresentation.
VISCOUNT HALL: I want to assure the noble Lord that all I am asking for is an explanation, because he has put rather a unique proposal to your Lordships' House. There are numbers in transitional unemployment at the present time, but possibly not to the proportion he would like. However, he did refer to the fact that these persons could be used for the purpose of regulating a proper wage scale.
LORD BALFOUR OF BURLEIGH: I never said anything of the sort.
VISCOUNT HALL: Well, that was the inference I drew.
LORD BALFOUR OF BURLEIGH: Nothing of the sort.
VISCOUNT HALL: That is why I want the matter cleared up. I was under the impression that the noble Lord, in the course of his speech, said that it would assist on the productive side, and that it would enable some balance of wage scale to be fixed.
LORD BALFOUR OF BURLEIGH: Read my speech in Hansard to-morrow.
VISCOUNT HALL: I will certainly do that.
LORD BEVERIDGE: I think I know the answer, because I have heard what the noble Lord, Lord Balfour of Burleigh, said. What he said was that he wanted it not for the regulation of wages, but to regulate the direction of labour to get them into the right index. That was entirely different from what the noble Viscount has said.
VISCOUNT HALL: I will certainly read the noble Lord's speech to-morrow.
5.42 p.m.
VISCOUNT BRUCE OF MELBOURNE: My Lords, I do not propose to deal with the reasons which have led to the present situation in which it was necessary to devalue the pound sterling. With regard to that
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action, I am, in all the existing circumstances, completely in accord with it. The actual amount of the depreciation went further than the general anticipation, but with that also I am in accord. I am not, however, in the slightest degree with the Government in the manner in which they have handled this situation. It is obvious that we are up against the most serous crisis, as the necessity for a reduction in the value of the pound sterling connotes. In those circumstances, it seems to me that the Chancellor's statement should have been a most solemn warning to the people of this country that everything we have striven for years to achieve for the well-being of our people was endangered. It should have been a stirring appeal to the whole nation to combine and to help to avoid the terrible danger with which it is faced. It should have been made clear to all the people what was their task in helping to save a situation which is critical beyond almost anything we have ever encountered. But in every respect the Chancellor's statement fell tragically short. I have read and re-read the Chancellor's statement, and it seems to me that the only impression it could have made upon the mind of the ordinary citizen of this country is that we have done well over the last few years; that we were doing well until this troublesome question of the dollar-sterling relation arose; that that problem has been solved by devaluation, and that if the people will only go on behaving over the years ahead just as they have in the past, everything will be perfectly all right. I do not think that is an unfair summary of the impression which the Chancellor's statement must have conveyed.
We have also had the Chancellor and the Prime Minister himself pointing out with meticulous care that this was a free choice of the Government; that they have consulted with no Governments other than Dominion Governments about it, and that it was a free independent act. The brutal facts are that it was nothing of the sort: it was something which was absolutely forced upon us and could not possibly have been avoided. The statement went on to underline—as has already been mentioned—that this devaluation is the alternative to unemployment and cutting down the social

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services. It went on to state that the Government would be no party to solving our problems by that alternative method of unemployment and cutting down the social services. That must leave the impression upon the ordinary citizen's mind that, if the Labour Government is in power, those things can never happen. And yet the Chancellor knows better than any man that that is not the position. He should have told the people that devaluation was the only trump he had left in his hand, and if that fails to take the trick there is no alternative to unemployment, to a lowering of the standard of living and to a reduction of our social services. It is tragic that the Chancellor did not tell the people the story as it should have been told. The noble Lord, Lord Balfour of Burleigh, has stressed the necessity for telling the people, and I would reinforce everything he said to the utmost of my power.
Now think of the atmosphere which has been created by the Chancellor's somewhat complacent statement. I have indicated that two things are essential if devaluation is to succeed: first, we must prevent a rise of our internal prices, and, secondly, there must not be an increase in our costs for export production. He went on to indicate that the Government were determined that there should not be any increase in the internal prices, although he admitted that there would be some slight rise. Now I would ask noble Lords to consider the position, first, with regard to an increase in internal prices. The price of bread and flour has risen already. We have had various examples given to-day of other costs which must go up, and it is inevitable, whatever the Government do, that there must be some increase in internal costs. But I will give this point: that conceivably it may be possible that the increased costs will not have a very marked effect upon the index of prices in this country, and if, over the next few months, our balance of payments with the dollar area were to show a further depreciation I believe it might be possible for the trade union leaders to hold their followers and resist the claims for increased wages.
But try to visualise what the probable trend is going to be over the next few months. After all, we do get a momentary advantage from the devaluation and that ought to help us to export more. I
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will not go into the question of how much more we have to export to earn the same number of dollars as we have earned in the past. That has been very adequately dealt with both here and in the Press. The next point we have to remember is that the United States was party to this arrangement. The United States wants to see it work. The United States at the moment is in the mood that it would like to take more of o it goods, and we shall probably get a relaxation of customs regulations and procedure. I do not think that we shall get very much relaxation of tariffs. But with those two things combined, our balance of trade figures should show a great improvement. Can anybody suggest, that, in those circumstances and in the sort of atmosphere of optimism which would be created, it would be possible for the trade union leaders to resist claims for increased wages? And yet the moment any of those claims is accepted, it does something to reduce the value of the devaluation in our competitive position. Those effects will be cumulative, and there can be no end to our decline if we proceed in that atmosphere. Within a short period of months the whole of the advantages which devaluation was undertaken to achieve for us will disappear.
In those circumstances we have to consider what we can do. I agree with the noble Lord, Lord BL1four of Burleigh that we have to make the people understand the position and to put the facts to them. The necessity for them to understand is obvious when we look at the spectacle to-day, in what is probably the most critical position we have ever been in, of men talking about going slow, of unauthorised strikes, and so forth. These things can occur only because the people do not realise the dangers. Surely we can say, when we consider what our people did in the war days, that this sort of thing would not be going on if they had the faintest conception of where we stand. I believe that this debate, and the debate which is proceeding in another place, should go a long way to help to educate the people of this country, but I believe that every one of us has an obligation to make some contribution towards that education of the people; and it should be made in the simplest possible language.

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I propose to give one simple illustration. I am afraid it involves putting into Hansard a short table of figures and, having regard to a previous occasion, when I wanted to smuggle into Hansard some figures and was subjected to a mild reproof by the Leader of the House, I am afraid I must go through the painful process of reading the figures. They deal with the British balance of payments. They are as follows:

THE BRITISH OF PAYMENTS

(£ million)

Average 1907–1910–1913

1924–1928

1938

1946

1947

Excess of Imports

—153

—382

—302

—208

—441

Net Investment Income

186

244

175

73

47

Net Income from Services, etc.

124

204

57

—245

—236

Balance

157

66

—70

—380

—630

Perhaps I may ask that that table may go into Hansard just as it is here. As I have given the figures, it might presumably be put in as a table. The facts that the figures represent seem to me to be quite simple and capable of being put over to the public very easily. All that is necessary, to realise what the figures mean, is to imagine the millions cut off. For example, in the first period, a householder with his dependants finds he has spent £153 more than he has earned. Fortunately he has an income from some other source, which leaves him with a balance of £157. The next year he overspent to the tune of £382. But he has £448 coming in, so he finishes up with £66 in hand. In the next year, unfortunately he had not enough outside resources to cover him, and so was £70 to the bad. In the next period he is £380 to the bad, and in the last period £630 to the bad.
Now, does anybody suggest that any sane householder in this country, if he found himself in that sort of position, would not take a pull at himself and reduce expenditure? Would he not feel that the moment had come when some of the privileges of himself and his children had to be cut and that he would have to
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retrench? That is precisely the position in this country at the present moment, and the more illustrations of that sort are brought forward the better will the lesson be brought home to the people. It is absolutely vital to get the support of the people if we are to get out of this trouble. I am sure the whole atmosphere will change once the people really understand —and I do not believe they understand at present. But when they do understand the position they will be very emphatic in their demand to know what is to be done about the position.
I am going to venture upon a suggestion. I do not belong to any Party; I have no affiliations with anybody; and so I can make these suggestions from an independent point of view. I suggest that we should immediately frame an emergency two-years' programme and that that programme should be submitted for endorsement at a General Election at the earliest possible date, with an undertaking that at the expiration of the two years there will be another appeal to the country. That is the only possible solution which I can see. It is imperative, to my mind, to tide over the next two years. For my sins I am closely associated with the international economic side. The position there at the present moment is that there are greater hopes with regard to the solution of the long-term problem of the world than there have been at any time. Two and a half years ago a Commission reported that the only answer to both the short-term and the long-term problem was that we had to create more wealth in the world by developing the resources of the backward countries; and that that wealth could sustain an ever-increasing volume of international trade. Their Report also went so far as to say that unless we got on with the creation of that increase of wealth then unquestionably the nations were heading for a crisis infinitely worse than that of the years between 1929 and 1932.
I would remind Ministers that their own Government were parties to framing that Report, and they were present when seventeen nations endorsed it; yet practically nothing happened for two years. The Government seem to forget that last December the United Nations Assembly in Paris became very concerned about the situation. They passed a unanimous resolution referring the matter

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to their own Economic and Social Council and demanded that they should advise on the steps that could be taken to develop the latent resources of the backward areas. Within a month of that, President Truman, in his Inaugural Address, came out with his famous Fourth Point, advocating exactly the same thing. Since then there has been a real movement, and through the co-operation of the Economic and Social Council and of the specialist agencies the whole matter is in train now. If it goes as it looks like going, then the long-term problem will be solved.
But it will not be solved if, over the next two of three years, Britain, which is still a very great country, upon whom a great deal hangs, cannot solve her short-term problem. If we are going to have a programme and arguments of a political character it this country, if we cannot agree upon a policy that will cover the next two or three years, then we shall not only be destroying ourselves but we shall be wrecking the prospects of the world finding the solution of both the short and the long-term problem.
But if you say that there should be a two years' programme, what should be in the programme? Once more I have no responsibility, no affiliation, and I will tell you, in broad outline only, what I believe should be in the programme. I would put the following points:

(1) No increases in wages over the two years of the programme, save in proved cases of excessive hardship to lower paid workers or greater economic production justifying an increase.

(2) Re-examination of hours of work and alterations where it is established that greater economic output could be achieved without detriment to the individual.

(3) Prohibition by law of lockouts and strikes.

(4) Drastic action to restore discipline in the unions and control to their responsible leaders.

(5) Abandonment of all out-of-date restrictive practices.

(6) Reduction in expenditure on the social services.

(7) Taxation reductions to relieve the burden on industry, and to provide an incentive to the individual.

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(8) Abandonment of further nationalisation, including iron and steel.

(9) The reorganisation, re-equipment and modernisation of the industries already nationalised, particularly coal and transport, to be carried through on the basis of budgets balanced over a period of years and not annually.

(10) Maintenance of the present level of taxation, save the reductions under (7) designed to help the competitive power of industry or to provide a valuable incentive to individuals.

(11) Continuance of understanding for limitation of profit distributions.

(12) Drastic reduction of administrative expenditure, even where such reduction would mean abandonment of planning and non-vital controls.

On every one of those I could elaborate at considerable length, but as I have dealt with them all in previous public utterances I will not weary your Lordships by repeating what I have already said. Some of my proposals are a little drastic, and unquestionably they involve the abandonment for the time being of policies in which many men have a profound belief. To them I would say that I am not attacking any of these policies at the moment. I am not expressing any view, one way or the other, whether they are right or wrong. All I am saying is that out of bitter experience, I can tell them that in view of the circumstances that now face us they have got to call a halt. For the moment, those things have to be abandoned.
Many people feel that this is a unique situation. To me it is rather like going back over old ground. In 1929 I was Prime Minister of Australia when we were faced with the economic crisis. We had exactly the same arguments. The Government were attacked for not reducing expenditure. We were faced with the argument every time it could be put forward that we should reduce expenditure on defence. We were challenged: Would we reduce the social services? In the end it was obvious that we had to take the plunge. I was defeated in the House by one vote. I was defeated in an Election, but, within twelve months of the Labour Government's coming into power they had to reduce the social services—even old age pensions, soldiers' and invalid pensions. Everything had to be reduced. In that case, the Labour Government in

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Australia were just as firm adherents to the social services as are this Government. For after all, Australia was a pioneer among all Governments and was miles ahead of anything ever dreamed of in this country. We have been the breeding spot of these services. Yet those who believed devotedly in these schemes for the welfare of the nation had to take the plunge, and it was the Labour Government that reduced the services. What I am trying to stress is that, if history means anything, if parallel circumstances may be expected to lead to exactly the same result, there is no alternative for this country. It has either to grasp the nettle now or it will be forced to do very much more, in which event a much more bitter situation will arise.
I do not know whether any political Party would look at the suggestions that I have put forward. But one thing I do know; the people of this country have a deep-seated feeling of anxiety that all is not well, and leadership of an imaginative character which cut clean across all political divisions would, I believe, receive an overwhelming response from the people of this country.
6.8 p.m.
LORD LYLE OF WESTBOURNE: My Lords, when the Chancellor of the Exchequer made his momentous broadcast last week it was clear to most people that there was something which had been devalued even more than the pound sterling; and that was the reputation of the Government. A point I would like to make this afternoon is that the benefits, if any, of devaluation will melt away like driven snow and will be a mere palliative, like the previous American Loans, unless we fundamentally alter our political economy and our methods of life. In my view we find ourselves in our present position largely owing to the follies of our present rulers, and their policy of applying unpractical Socialist dogmas to the solution of practical problems. In a world of many uncertainties, one thing at least is certain: that our mighty planners have failed—and failed miserably and utterly. The arch-planner, the Chancellor of the Exchequer, like a cat with nine lives, has nine times made statements that the pound was not to be devalued. He said so in January,
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1948. He said so in March, May, June, October and twice in July, 1949; and, as late as September 6 he said that he would stick to his recent statement.
The Manchester Guardian, which I have been reading, believes that the Chancellor of the Exchequer's denials were necessary deceptions. It said that it was his duty to hoodwink the public, that he was in the position of a business man whose goods were about to be reduced in price and who would naturally not let his customers know in advance. The Daily Express, which is usually a forthright newspaper, agrees with the Manchester Guardian, but the Daily Mail, on the other hand, feels that these deceptions from a member of the Government are lacking in political morality. I cannot help feeling, as did the noble Lord, Lord Balfour of Burleigh, that what the country wants is the truth. Anyhow, the Chancellor of the Exchequer, having agreed in America to devaluation, comes back and tells the people, "It was a question of expediency" He admits that he acted from motives of expediency. Expediency and planning seem to make strange bed-fellows.
My Lords, one thing is certain, as I said before: the mighty Socialist plans for Britain's salvation have been blown sky-high. I have no personal feelings against the unhappy men who hatched the plans, but their efforts have been so disastrous to this country that I cannot help feeling that it would have been a good thing for Britain if they also had disappeared with their plans, for I believe their mentality is such that, learning nothing from what has happened in the past, they may proceed to hatch out other plans which may be equally disastrous to our country. The Socialists themselves seem to be in a great quandary. They see the absurdity of their position. They try to avoid the word "devaluation." In fact, I saw in The Times this morning that the Treasury had given instructions to that part of the Civil Service that they were not to use the word "devaluation"; they call it "revaluation." Whatever the Socialists may choose to say about it, in my opinion revaluation or devaluation represents a crushing defeat for the Government policy. They have tried to make a success of a managed currency, but after four years of trial it is plain that they are no better in managing currency than in managing anything else.

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I would like now to point out some of the reasons why, in my view, the Government have failed, and how they will continue to fail unless they adopt quite different motives and come down to solid facts. I cannot go into all the reasons for their failures, for that would necessitate your Lordships remaining in session for probably two or three more days at least. One can look only at one or two of the most glaring examples, and hope that as a result something may come of it. I would ask: Is it not a fact that British industrialists are being constantly reminded that they must produce more cheaply in order to compete in the export markets of the world? Is it not a fact that this decision to devalue the pound has been taken with precisely that object in mind? We must produce goods more cheaply. There is no divergence of opinion as to the desirability, nay the necessity, of that course. But how can this be accomplished when British industry is treated as it has been treated by the present Government? For instance, how can British businesses keep up to date? How can they renovate their plants? How can they instal the latest methods of production under the penal taxation which exists to-day? The Government take in taxes, apparently, about 40 per cent. of the whole national income. That is a burden that the economy, whether it is socialistic, capitalistic, or communistic, simply cannot stand for any length of time.
I have also heard some of the least informed and more ungenerous of the Socialists decry British industry. They say that it is effete, that it is out of date, and that the managements and directors are incompetent. I would ask those theorists whether they blame British industry for the state it found itself in when the war wits ended. Industrialists at that time had been driving their machinery to breaking strain. They were unable to secure renewals, and in most cases, having accomplished incredible feats in the service of their country, found that their plant was in a sad state. But how can Socialists blame them when after the war they could not obtain renewals, except after endless delays, and when by vicious taxation the money required for reconstructions and renovations was denied them? British industry, vis-à-vis the United States of America, was working under a terrific handicap after the war.
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It is hard to reconcile the allegation that British industrialists are so incompetent with the fact that under private enterprise we in this small island became the greatest trading nation on earth.
The second question I would like to ask is: How can British industry prosper when it is constantly being attacked by the Government? The Prime Minister and sometimes the Lord President of the Council, when he thinks it will pay, often adopt the policy of appealing to the industrialists. They say, in other words, "Come along, boys, let's get together. We are in a national crisis—a crisis similar to the war in its seriousness. Get to it. Stand shoulder to shoulder, as one in this great fight for British freedom, British trade and British prosperity." Those are excellent sentiments. Yet the next day we find, if not them at least some of their colleagues, telling the people that the capitalist system must be destroyed, that it is inefficient and that capitalists are guilty of almost every crime under the sun, both against the public and against their workpeople. My Lords, the country requires different leadership from that. One cannot help comparing it with the leadership during the war of that great man, Mr. Winston Churchill—the man who did so much with regard to the wining of the war, who succeeded in un tine not only the country but the Empire and the Allies. What a contrast to some of the misguided men who have at times attempted not only to stir up a class war but to divide the nation in its time of trial!
My third point is this: How can British industry prosper when it is nationalised? How can it prosper when it is threatened with nationalisation? Again I emphasise that the Government's design—and ours —is to produce goods as cheaply as possible. Will nationalisation make British goods cheaper? Has nationalisation made British goods cheaper in the experiments already undertaken? I am personally interested in nationalisation. When I was a Member of another place it was counted the right and proper course to declare openly when one had a personal interest, and I do so most frankly to your Lordships to-day. I have a personal interest in nationalisation. My company is in the new list for nationalisation, but I can truthfully tell your Lordships that, whether this Government or

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any other Government had been in power, or any other Party had produced a policy of nationalisation, I would have opposed it with all my strength.
Nationalisation has been a costly failure. It has increased the cost of production of all goods or services in the concerns already nationalised, and thereby it has increased the cost of all British goods, whether the concerns are nationalised or not. Since the Blackpool Conference I think it can fairly be said that any and every industry, even the most efficient, is potentially threatened with nationalisation. How is that going to make British goods cheaper and better? Is it going to help in the great drive in which the Prime Minister and the Lord President of the Council some time ago asked us all to join? I am sorry to have to mention my own company. I do so in illustration of what is happening. It is impossible to fathom the reasons for the Socialist decisions to nationalise certain industries. There is no valid reason, I maintain, for nationalising the sugar refining industry—even on the Socialists' own proclaimed formula. We are, admittedly, efficient; we are not subsidised; we are not a monopoly. The Secretary of the Labour Party made a most misleading statement only last week on this subject, in spite of the fact that, in reply to a Question asked in another place, the Parliamentary Secretary to the Ministry of Food, Doctor Edith Summer-skill, had specifically stated that the sugar refining industry is not subsidised, and that her answer is recorded in Hansard.
We can argue about politics, but for goodness sake let us get our facts right before we make up our minds on the subject. I pointed out in a speech the other day that, so far as the monopoly charge was concerned, there is no truth in the assertion; and I gave the figures. I stated that my company supplied 53 per cent. of the amount of sugar consumed, the second largest, the Sugar Beet Corporation, a Government controlled affair, supplied 23 per cent., and I pointed out that the remainder was accounted for by no fewer than five other companies. What I said did not seem to matter. The Secretary of the Labour Party came back to the charge and he made the same statements again. The point I am trying to
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make is this. In spite of the disastrous results of the present experiment in nationalisation, decisions to nationalise further efficient industries seem to be taken without any proper investigation, without any consultation with the parties affected and without ascertainment of the facts.
Again, speaking from experience, I can tell your Lordships that when my company first appeared in the list we had never been consulted at all. Even the veriest criminal generally has a chance to put up a case in his defence, but we have never been asked for any particulars or figures. So far as I know, no man in the sugar industry has ever been consulted. The little Hitlers, whoever they may be, had made their decisions. After Blackpool, we asked the Lord President of the Council, who happens to be the Chairman of the policy committee of the Party, to receive a deputation, in order that he might have the facts before him. Our request was refused. We were told that we were too late. The answer that came back from the theorists was in effect: "We intend to nationalise such-and-such an industry. No matter what the effect is on the workpeople, on the consumer or on the public, we intend to nationalise the industry."
I ask: How is that going to affect other industries? I keep to the subject of industries, because we are all agreed that, in relation to the devaluation of the pound, all depends on whether or not we succeed, whether or not British industry can prosper. I say that nationalisation is going to hit British industries and prevent them producing cheaply. I have mentioned one or two specific cases, including that of my own company. Now I am going to ask your Lordships to consider how other industries will be affected. So far, in the cases of a number of industries which have been nationalised, the services or products which they provide have increased in price. Other industries have had and will have to pay those increased prices and, of course, the cost of their own products must be affected. And what is going to be the effect on the mental and moral outlook of the people concerned? Is anyone going to feel safe from the clutching hand of the socialist bureaucrat? What a position for business men to work under! For industry it is the

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beginning of a situation similar to that which exits with regard to individuals in Russia to-day. People are constantly looking behind them while they are at work. The thought ever in their minds is, when will the tap on the shoulder come to tell them that they are wanted, that their industry is to be nationalised? When will more jobs have to be found for "the boys"? When will more efficient and paying businesses be required to mix with, and set off, the costly failures due to the meddling and muddling which has already taken place with regard to other industries?
According to the planners, some industries have sinned by making a good profit. When they begin to lose millions of the taxpayers' money, then, I suppose, the planners will be satisfied, and will look round for other victims. I think it was my leader, the noble Marquess, Lord Salisbury, who on one occasion aptly commented that:
"The best chance that an industry has of remaining in private hands is to be thoroughly unsuccessful and to declare every year a thumping loss."
No, my Lords, British business will not prosper under such conditions. There are, I know, some practical men within the Labour Party—for example, the union which represents our workpeople. I happen to know that they are prepared (to weigh the pros and cons of any nationalisation proposals for any particular industry. They are prepared to discuss the issues without political bias. But their voice is not heard. The men, I fear, who will be the ruin of this country are those who are steeped in Socialist dogma and prejudice, and who have no experience of industry at all—except what they have read in each other's books. Neither devaluation nor loans from our generous and capitalistic neighbour, the United States, can save us. We can be saved only, as has been said before, by our own hard work and by common sense. And the first thing common sense clearly tells us to do is at the earliest opportunity to get rid of this present Government who have so shamefully and so tragically mismanaged our affairs.
6.30 p.m.
LORD DARWEN: My Lords, I do not propose to follow the noble Lord who has just sat down. I do not feel that his speech was very relevant to the sub-
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ject under discussion, and it seems to me that his charge that socialisation has produced any part of this crisis was not proved. There are good economic authorities for saying that socialisation of industries in this country has not so far affected the cost of our manufactures. I myself fed strongly that we are in danger of exaggerating the crisis in which we find ourselves. I believe there are people in this country who take a certain amount of pleasure in exaggerating the crisis. My mind, like the minds of other noble Lords, has gone back to the crisis of 1931. In the last week or two I have met people who have been under the same tyranny of fear that many people were under in 1931, people who did not understand in the least what it was all about but who were yet oppressed with a great sense of terror and disaster. It always seemed to me, and I have never seen any reason for changing my mind, that the crisis of 1931 was very much increased by the propaganda and prophecies of disaster. I do not think there is any doubt that the crisis in which we are to-day can also be increased by too much exaggeration of the disasters which may flow from it.
There are great differences, as noble Lords have said, between the present situation and that of 1931. We were then buying our raw materials and foodstuffs at abnormally low prices. That gave us an immediate advantage, an advantage which the country has not experienced during this post-war period. But although it gave us an immediate advantage, buying at abnormally low prices was one of the principal causes of world unemployment. Agriculturists of the world, who compose about three quarters of the world's population, were so impoverished that it was impossible for them to buy the manufactures of the rest of the world, and that caused wide unemployment in the manufacturing areas, which were therefore unable to buy even the foodstuffs they needed, although they were at such low prices.
We are not in that position to-day. I think I am correct in saying that raw materials and foodstuffs have been at abnormally high prices in this post-war period. Now that position is changing and we are coming into a more normal period of the buyers' market. I believe that that is a tremendously important

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factor for this country to realise. We are coming into a buyers' market, and we are the greatest buyer in the world. It is essential that we should use our position as the greatest buyer in the world to see that our suppliers are prepared to take our goods in payment for their foodstuffs and raw materials on a fair basis of exchange. If our position is properly used, it should form a very considerable compensation for what we are losing by devaluation and should prevent any further inflation in this country.
Having said that, I want to add that I am profoundly in favour of multilateral trade. I believe that we ought to, and could, do a great deal to move towards multilateral trade while still retaining our position as the great buyer of the world. We need to develop a clearing-house system which will ensure that buyers can sell their products in order to be able to buy. I regard this devaluation—and I have no fear of the word "devaluation" —as a step towards this more multilateral trade, and I do not feel that there need be any very serious consequences from it. Whether there are or are not will depend entirely on whether the whole country realises that we have to face this situation, and that we have all to pull together in order that we may help the country out of its difficulties. It is exceedingly unfortunate that the devaluation has come on the eve of a General Election. I am not thinking about the vote. I am thinking of the temptation to the Opposition to exaggerate and misrepresent the position. I am sure they will not fall into that temptation in this House. But a tremendous temptation is there.
The value of currency depends to a large extent on confidence. Devaluation is necessarily a shock to confidence. Therefore we all have to do everything we can to restore confidence. That will involve sacrifices and increased work and effort on the part of the workers. Are we justified in hoping that the Opposition will also be prepared to make some sacrifice? It is unfortunate for them, but I believe it is true, that it is impossible to separate the credit of the country from the credit of the Government in this crisis. There I disagree with the noble Viscount, Lord Swinton. I believe that it is impossible to bring all sorts of wild charges
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against this Government without its affecting not merely the credit of the Government but the credit of the country. I believe that that fact must be faced. The credit of the country is essential to us all, and it ought to be the first consideration of every patriot.
It is important that we should try to make the people understand this crisis. It is not understood at the present time. It is important that they should understand that this devaluation is the recognition of an existing fact, the recognition of the inflation which has already taken place. Everybody, man or woman, knows that whatever he goes to buy he has to pay a great deal more for it than he paid before the war. That means that the pound has fallen, that there has been inflation. This devaluation, or revaluation, is only a recognition of this fact. The great danger is that there may be further inflation. It is in order to prevent that that it is so necessary to appeal to all the people of this country for sacrifice and for renewed efforts.
The Government have been charged with having made this devaluation too late. I disagree. I think the time has been well chosen, if one can say that it was chosen at all—shall I say that I think it has come at the right time? It has come at the beginning of the change from the sellers' market to the buyers' market. That is the important point. Our pound was over-valued. It meant that we were receiving more and paying less than we should have done if the pound had been brought down to its internal value in the country. But there was a tremendous world-wide pressure of demand for exports; price hardly counted at all. It would have been exceedingly foolish to devalue during that period, as we should have lost part of the advantage of that tremendous world-wide demand. It may be that we have been too much occupied with the demand from the soft currency countries. But, after all, their need of goods was far greater than that of the dollar area. Most of them had suffered with us during the war, and they were in real need of goods. I for one am glad that at any rate some of that need has been met.
It is only in the last six months that this change has begun to come, that the urgency of demand has slackened and the price factor has become important. That

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is one of the reasons for the decline in the sales to the dollar area, which has meant a re-widening of the dollar gap. Another reason for the re-widening of that dollar gap, as has already been mentioned to-day, was the whispering campaign in le United States and in this country. It was a most unpatriotic whispering campaign in this country, although there was some basis of fact underneath it. Now that it has succeeded, and devaluation has been effected, we all have to pull together to restore confidence and save the country. And I, for one, believe that this country is worth saving. We have built up here a really wonderful welfare State. I am not claiming for the Labour Party all the glory of having built up that welfare State. I am not assessing the credit to one Party or another. I understand that with a few slight modifications and, shall I say, minor exceptions, such as some of those of which we have heard to-day, all Parties, at any rate now, are wholehearted supporters of this welfare State.
If we look back to the opening of this century we can realise something of the wonderful progress that has been made in this country. It was only in 1903 that Sir Henry Campbell-Bannerman said:
"In this country we know that there is about 30 per cent. of our population underfed, on the verge of hunger."
That was the condition of the people of this country in 1903, and the result of having 30 per cent. of the population under-fed, on the verge of hunger, was shown in the medical examinations for the Force, in the years 1914 to 1918. One of the medical officers, sending in his report from a National Service medical board in those years, said:
"It is not good national hygienic economy to aim at immense commercial and industrial success if by so doing you produce a race of seniles at forty."
In spite of two world wars, we have wiped out that stain on this country. There is no longer any real hunger. Our people probably, and our children certainly, are much better than they have ever been before. Our social services, our health service, are the best in the world. Our policy of no unemployment has, almost accidentally shall I say, given a new status to the workman in the factory. The sanction of unemployment has gone from the hands of the employer. He
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has now become a leader instead of a taskmaster, and the workman has become a colleague instead of a servant. By the educational opportunities, by our rationing, by our taxation we have moved towards an equalitarian society; we have put the well-being of the people before economic success. Is there any noble Lord who will to-day say that that is a wrong priority? I believe that the existence of a healthy, well-educated people, free from the destructive effects of hunger and unemployment, and from a gnawing fear, is economically a sounder basis for our national life than under-fed, undeveloped people, hag-ridden by fear and insecurity. These are great achievements.
This is a new world, and the future of this new world is now at stake. I believe that if we can bring home to the people of this country the fact that this new world that has been built now depends upon them, and that if we are asking now for sacrifices they must be seen against the great advantages which have been won, we shall secure a tremendous response, and there need be no terrible consequences to this devaluation. Of itself devaluation will do nothing, as has been said; but it is the door to opportunity. Pay for what we need; pay for this new world. If we all pull together, I believe that this new world can be saved.
6.40 p.m.
LORD GIFFORD: My Lords, I am not going to join the last speaker in patting ourselves on our backs; I am going to do something quite different. I am going to look at ourselves for a moment as people outside this country see us. In company with the noble Viscount, Lord Samuel, f had a great and rather unique opportunity last week of seeing ourselves as others see us, because we stepped out of an aeroplane at Amsterdam Airport on that momentous morning of September 19, after the Chancellor had made his broadcast. I do not think our good friends in. Holland in any way criticised the fact that devaluation was necessary, but they were very critical of the way in which it was done. There was one remark in the Chancellor's speech to which they did take exception—namely, when he said:
"The matter is entirely our own concern. There is no question of consulting others, even our best friends."

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I feel that that was entirely incorrect, and in fact it is not borne out by the remarks this afternoon of the noble Viscount the Leader of the House, who said: "We do not think only in terms of Great Britain; we are the bankers of the whole sterling area." That is a view completely opposite to that which the Chancellor gave when making his speech.
The view taken by people we met last week was that an ideal opportunity of international co-operation had been missed. It was said to me that if we cannot get together on a straightforward financial issue like this, how can we do so with the more complicated matters with which countries in Western Europe are likely to be faced in the next few years? People there felt that the whole thing was undignified—each country not knowing quite what to do, and one following the other, instead of there being some joint announcement by the whole sterling area at once. It will be said that such a course of action would have been difficult because of the security aspect, but I feel that that difficulty could have been overcome. At this late hour of the evening I do not intend to keep your Lordships any longer, but I thought it only right to speak of the reactions which were put to me by a very prominent banker in the Netherlands.
6.44 p.m.
LORD HAWKE: My Lords, I much enjoyed the rhetoric of the noble Lord, Lord Darwen, but I felt it would have been more appropriate for a singularly persuasive bankrupt trying to melt the heart of the Official Receiver than for the sort of occasion on which we are gathered here. I would not have encroached on your Lordships' time were it not for the fact that the sterling area has hardly been mentioned this evening, and that Britain has definite duties outside this country. Let us consider how the world was grouped a month ago. There were the Iron Curtain countries, and then there was America, loosely coupled with Canada, where free enterprise was producing a tremendous range of goods and services. Then there was the rest of the world, some of the countries independent, some of them loosely linked with dollars and some banded into the sterling area. In a great many of those countries some form of Socialist government tended to prevail. The purchasing power, or rather
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the money incomes of the masses, had been raised and their working hours had been decreased. In fact consumption was greater than production. Those improvements had been financed by inflation, by drafts on reserves overseas, by despoiling the more saving members of the community and by loans and gifts from their more industrious neighbours. Currencies were maintained at an artificial high level by means of import licensing and exchange control. The sterling area was not backward in these perversions, and Britain was always in the van.
Now the essence of the existence of the sterling area is that countries who receive sterling from the very large amount of goods we buy in the world should he able to exchange that sterling for goods they want at prices not less favourable and deliveries not less quick than they can obtain elsewhere. So long as goods could be bought cheaper or quicker from Britain, the sterling area could be held together by bonds of self-interest as well as of sentiment. The change to a buyers' market in America has altered all that. The bonds of self-interest have weakened. While the bonds of sentiment may be enough for some of our friends—particularly those for whom our markets are vital—they are not enough for all. Britain has been forced to make all sorts of undesirable concessions in order to try and keep the sterling area together. There have been large releases of sterling balances, particularly to Eastern countries. These concessions have, to my mind, without any doubt at all, brought this day of devaluation nearer to us.
The position could, in theory, have been held by the exchange control, but, as was pointed out in your Lordships' House on the Second Reading of the notorious Exchange Control Bill, one cannot control exchange against the trend of exchange. If sterling will not buy what people want, or give them the security they want, they will find ways and means of obtaining it elsewhere. Once the leak starts, lack of confidence sets in, and exchange control is powerless against lack of confidence. Now faced with this situation, what did His Majesty's Government do? They sent this powerful delegation to the United States. I will not go through everything they brought back with them. I will merely say that, in my opinion, the only solid thing they brought back was a swingeing devaluation and with it a rise in

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the price of gold. The others I regard as palliatives, pious hopes or ephemeral advantages. The rise in gold and the change in the exchange rate are the only solid things.
What will be the effect of those on the balance of trade? It is absolutely impossible to predict the effect in the balance of payments at this moment, but we know the psychological effect of devaluation. Now the main purpose must be to lessen the attraction of the American shop window to the sterling area. Undoubtedly this will happen in the initial shock; but will the American prices decline still further? Will their deliveries get still better? In fact, will the thing last? Will people turn their eyes permanently away from the bright lights of New York to the rather drabber atmosphere of London? They may or they may not. Whether they do or do not will largely depend on the methods with which our internal affairs are managed in the future. If our prices are to rise to match the devaluation, if our deliveries are to get longer owing to the additional goods which we expect to ship to the dollar areas, then confidence in sterling will not return. But if there are outward and visible signs of a change of heart in His Majesty's Government it will return. If the electorate became seized of these matters and sent His Majesty's Government packing, then undoubtedly it would return. Otherwise devaluation may well be regarded merely as an inevitable and regular process in the development of Socialist Governments. After all, there have been Socialist Governments all over the world, and I know of none which have not had their regular financial crises, generally followed by their regular devaluations.
I personally wish that the devaluation had been in the form of setting the pound free, because I feel that His Majesty's Government would have issued a challenge. They would have said: "If you don't like our pound, sell it: there are people who think it good and they will come and buy it." I do not believe that even if it were practicable a Government tinged with the doctrines of His Majesty's Government could ever face the test of a free exchange. A free exchange is the only sanction that exists against financial misgovernment.
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We are not alone in this mess. We gave the lead, and so we bear the blame. But others have followed and have even exceeded us in follies. The noble Lord has just returned from a country that exceeded us in follies. I do not believe that Australia and New Zeeland are guiltless. If South American countries had not been too busy buying the votes of the urban masses to attend to their agriculture, if Indian economy had not been in such a fearful mess, the world would not have been so dependent on dollars, and we might have escaped devaluation. What we have to do now is to restore confidence. There are two aspects to this. First we have to deal with the production side—and His Majesty's Government have received good advice on what to do to increase our exports. But we have also to provide a field in which we can obtain more imports, because unless those countries which are willing to receive our goods overseas are prepared to exert themselves a little more to produce and export what we want, we shall have nowhere except the dollar area to turn to for our food and raw materials. And in my humble opinion that dollar area is not one where we can expect a very large permanent market for our manufactured goods.
So we are all in it—the whole sterling area and ourselves. If Australia and New Zealand could expand their agriculture as fast as they have expanded their industries, if India ceased to be a millstone, if the Argentine could get back to the area of tillage they had formerly, all these problems of where to look for our food would be much easier to solve, and it would remain for us merely to solve the problem of how to produce more goods in order to pay for those we receive. The crisis is a double one. It is one of underproduction and over-consumption throughout the whole of the welfare State world—which means practically the whole world except the United States and Canada. We gave the lead in prodigality and we have to give a lead in finding a way out of the mess in which we now are. We are, I repeat, all in it. I do not think that His Majesty's Government have the courage to reverse the policies which landed us where we are and which, having been copied in other lands, have redounded there to our downfall. It takes a great man, my Lords, to eat his words

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and to reverse his policies but, after all, the Minister of Health let the cat out of the bag the other day when he said that the members of the Government were "just ordinary chaps."
7.10 p.m.
THE LORD CHANCELLOR (VISCOUNT JOWITT): My Lords, I beg to move that the debate be now adjourned.
Moved, That the debate be now adjourned.—(The Lord Chancellor.)
On Question, Motion agreed to, and debate adjourned accordingly.