BALANCE OF PAYMENTS

HL Deb 03 July 1952 vol 177 cc677-723

2.48 p.m.

LORD PETHICK-LAWRENCE rose to call attention to the position of the balance of payments; and to move for Papers. The noble Lord said: My Lords. I think we are fortunate in that yesterday, only a day preceding this debate, we had an illuminating statement by the Chancellor of the Exchequer in another place relating to this particular subject. It was not only an illuminating disclosure but a very encouraging one, and I congratulate the noble Viscount who is to follow me in this debate on the fact that, in consequence of that statement, he will on this occasion bat on a favourable wicket. But it must not be assumed from that observation that I or my noble friends sitting on these Benches are in any way discouraged by this statement—quite the reverse. We may have our Party differences, which extend even into the financial field. But in the war in which we are now engaged (which, even if it does not call for blood, calls for the sweat of the people of this country in endeavouring to get our heads up from the troubles, financial and economic, which have beset us ever since the war ended), there are not two sides in this country; there is only one. Though we may differ about the means and methods, and though there may sometimes be criticisms about the devices adopted, we are at one in being heartened and encouraged by any news which goes to show that temporarily, or better still permanently, we are making progress in this desperate struggle.

The Chancellor of the Exchequer was very careful in two respects. In the first place, though he gave an encouraging account, he was most anxious and careful to explain that that did not mean that we could "let up" in any way in our efforts for recovery. Your Lordships will remember that no less a member of the Government than the Prime Minister himself stated—rather unfortunately I thought just before the Chancellor of the Exchequer's speech on June 12—that he was going to sound not merely an alert but an alarm, because of the difficulties that still confronted the people of this country.

Of course, your Lordships will realise that when any of us speaks, particularly in this House or in another place, on these important matters, he has two audiences outside the Chamber. The first, of course, is our own people in this country; and it would be very unfortunate if, when things looked a little brighter we gave the impression that all was therefore well, that nothing further need be done and that no further sacrifices were required. So we always have to temper our optimism with a great deal of caution and reserve. At the same time, we are addressing an international audience, and it is of the greatest importance that we should do nothing to minimise such recovery as we have already made. Nothing would be worse than that we should cry "Stinking fish" of our own country. Therefore, it is incumbent upon all of us who take part in these debates to bear these much larger audiences in mind. I am quite sure that the Chancellor of the Exchequer and the noble Viscount who will follow me and answer me in this debate will, equally with myself, keep those two audiences in their minds.

I should like to add this further remark. I always deprecate any undue stress being laid on something which happened yesterday or the day before, or in the last few weeks—or it may even be in the last quarter; because, particularly in regard to this question of dollars and our reserve of gold and dollars and other foreign currency, there are often temporary events which make a considerable mark on one particular period but which may be easily reversed after a short time. Therefore, I hold it to be most injudicious to place too great a stress upon anything which has taken place within a short period. I have spoken of that matter on one or two occasions before, and I will just make one reference to it again today. I pointed out, some little time back, that when the exchange moved considerably in our favour and I think reached nearly the highest point, 2 dollars 82 cents, that was temporary. It was good as far as it went, but I said that I did not attach any undue significance to it. Since that time, we have had a reverse process setting in; we have had the United States exchange with us falling against us and the low point being nearly reached. I think it was only about one-sixteenth away from 2 dollars 78 cents. Now it has gone up a little—to, I think, just over 2 dollars 78½ cents. I am anxious that no one should attach undue significance to that. It is good so far as it goes, but it would be a great mistake to make too much of it, because that sort of thing is often due to temporary causes which are not long enduring.

Further I would say this. There are, of course, two problems which are involved in the term "balance of payments," and though they are closely related they are by no means identical. There is the balance of payments with which the Chancellor of the Exchequer was particularly dealing in another place yesterday. This is the actual reserve of dollars and gold which we have in our Treasury, and the effect of the quarter's dealings with regard to that which is temporary and can be influenced—as I shall show presently—by isolated causes which may or may not be recurrent. There is also a balance of payments in the other sense, which is the United Kingdom's position with regard to its exports and imports, visible and invisible. This balance is bound up with the long-term situation and is, in the long run. far more important than those matters which affect merely the day-to-day situation. It was with regard to the first of these—the position of the sterling area and our relation to it as banker—that the Chancellor of the Exchequer was mainly talking yesterday. But it is to the position of the United Kingdom as a producer, exporter and importer, that I specially desire to devote my remarks to-day, because, as I have said, in the long run that is the more important consideration of the two.

Before I come to that, I would add one further note. The over-all picture that the Chancellor of the Exchequer drew was one of very great advance—practically the wiping out of the quarterly deficit of the balances in gold and dollars (and other foreign currency, if there is any) held in this country. And the Chancellor of the Exchequer was most careful to point out that there were several items of specially adventitious advantage accruing to us in the period. There was, for the first time in its new form, a special American contribution. There was. again almost for the first time, the effect of the import cuts, and there were a large number of other items which were by no means necessarily recurrent. The first question we have to ask is to what extent, from the United Kingdom point of view, these items are going to be part and parcel of the regular quarterly position in this country.

I should like first of all to come to the question of the United States. So far as the United States are concerned, President Truman asked for a contribution to European defence, of which the United Kingdom's share was expected to be 600,000,000 dollars. So far as I can make out, however. Congress has cut it down to about 400,000,000 dollars for the ensuing year—that is, roughly, £150,000,000. Further there is a proposal—it is hardly more than a suggestion—that the United States should buy aeroplanes from Europe, I think mainly from ourselves, which might run to as much as 700,000,000 dollars in the course of the first period. That would amount to £250,000,000 if these orders were fulfilled. Of course, those are large items. I do not know whether the noble Viscount has any information on that point, but if he has, the House would be interested to hear from him with regard to it.

Leaving these single items out of account, I come to what I might call the bread and butter question, the question of our visible imports and exports. So far as imports are concerned, we see to-day, and are likely to continue to see, the benefit of the cuts in imports made by the Chancellor of the Exchequer. May I say in passing that I am sure noble Lords on all sides will realise that whatever Party had been in office, whether the Chancellor of the Exchequer had been Mr. Gaitskell or Mr. Butler, something of the same sort would have been done, and, in a sense, this is not a Party question. We are now getting the benefit of these cuts on the right side of our balance sheet of income and expenditure. But we all know that this is not a permanent remedy, for several reasons. In the first place, cuts on imports are a game at which two sides can play. It is clear that if we cut off valuable imports from some other country, they will tend to cut valuable imports which they receive as part of our exports. Therefore, in the long run, we shall not get the same advantage from the cuts on imports as we receive when we first impose them. Our advantage tends to be neutralised by the action of the other country whom we are adversely affecting by cutting imports. We must be prepared, therefore, for some recession in the advantage which we get, on paper, from the cuts on imports.

Of course, we all know that that is taking place. It is taking place over Europe, and one of the serious factors we have to consider is our deficit with the European Payments Union, which has been running at something like £17,000,000 a month up to quite recently. The principal creditor is Belgium, and the Chancellor of the Exchequer reported yesterday, what was already well known in business circles, that an arrangement had been made by which part of that debt in future would be covered not in gold but by defence munitions, which would be supplied by this country and France. I think the total from the two countries is to be 50,000,000 dollars. The share of this country is in the neighbourhood of £8,000,000 to £9,000,000. But that is a single payment and, valuable as it is, it is not a large contribution towards a monthly deficit of £17,000,000. Any information that the noble Viscount has to give on that subject will be useful, but I shall be surprised if he has much to add to what the Chancellor of the Exchequer stated yesterday in another place. That is pretty well all I need to say on the question of imports.

The really vital and important matter is the question of exports, both visible and invisible. Exports have to cover a great number of things. In the first place, we have to find exports to make good the loss of exports to Commonwealth countries, which is very considerable, because when we make cuts in our imports, in order to save dollars, the other Commonwealth countries also made considerable cuts, including cuts in imports from the United Kingdom amounting to considerable sums. In order to get dollars, we have to make exports to the United States and Canada. In so far as there has been any fall in price, it has varied from article to article, particularly in some of the raw materials coming from our Colonies, and we have to increase our exports to the United States to cover losses we are subject to there. Therefore, it is important that we should have a substantial increase in exports of all kinds. That is much easier said than done; for three reasons. In the first place, we are being subject for the first time to a considerable amount of fresh competition, notably from Japan and Germany. We shall need all our wits and skill if we are to be able to hold our own in a world which is ceasing to be a sellers' market and becoming a buyers' market, in order not to be undercut by these new competitors as well as by older competitors who are in the field.

In the second place, so far as the United States are concerned, and possibly other countries as well, we are going to be confronted with fresh efforts to keep out our exports. Noble Lords will no doubt be aware of the efforts that are being made by manufacturers in the United States at the present time to obtain higher and higher tariffs, in order definitely to shut us out. That is being resisted by a certain section of thought in America, but it might be in part successful and that, in itself, would be a very important thing. Of course, the total imports into the United States from all countries of the world form a very small part of the expenditure of the people of the United States. I think it is somewhere about 3 per cent. of the national income. If only the Americans could be induced to increase that 3 per cent. to 4 per cent, it might make all the difference in enabling dollars no longer to be a scarce currency. However, that is for them and not for us. But this fresh attempt to keep out world imports and, in particular, those of the United Kingdom—I do not mean that they specialise against us, but we, amongst others, suffer—is a new obstacle to face.

Neither of these two obstacles is the main one. The main obstacle confronting us is to find the particular kind of exports which are going to be of saleable value in other parts of the world, and in the United States in particular. It is there that I believe we need to think very carefully. What sort of exports are we going to produce? It is easy to say that if we reduce purchasing power, or cut off by the process of making money dear, we reduce the amount of goods manufactured for home consumption and thereby provide material and labour to produce more exports. But that is only partially true. Unfortunately, there are only a few classes of goods which are widely marketable in the world at the present time. They nearly all boil down to something in the engineering line, such as motor car manufacture, prefabricated houses, to which a member of the Government recently called attention, and other similar things.

We have the difficult position at the present time that the engineering industry is being called upon for exertions for three main purposes: first of all, for rearmament; secondly, for building up the capital of this country; and thirdly, for export. The engineering industry has been working very well in recent years and doing yeoman service for the financial position of this country—I believe that last year its output exceeded that of the previous year by something of the order of 3½per cent. But what we must consider is whether they can be expected greatly to increase that progress. If you cut off raw materials for the textile industry; if you put the work girl in Lancashire out of work, or put her on short time, so that she does not go to the cotton mill, that does not necessarily mean an increase in the raw materials or human labour available for turning out motor cars or other engineering products. I see a great danger that we may at one and the same time have serious unemployment in certain industries in the country and yet not have the labour or materials available to produce the exports that are saleable in some part of the world. In other words, you cannot marry a recession in the textile industry with "overpress" in engineering. If the noble Viscount, Lord Swinton, who is to follow me, has any light to throw on that aspect of the matter, I am sure the House will be most interested to hear what he has to say.

I turn now from visible imports and exports to what are more or less invisible items. One of the great losses which we have suffered recently has been that of the Persian oil, which was a factor of considerable importance to us—I believe that would be called an invisible export. It rendered us great service. Whatever may be our views on whether, by different conduct, we could have retained that oil, the fact remains that we have lost it, and I feel it is unlikely that we shall get it back. In those circumstances, it is something which has already come about to our disadvantage, and I am afraid it is likely to remain so. Then there is the drain to E.P.U., the European Payments Union, of which I have already spoken: how far we shall have to pay out considerable sums of money in the course of next year, and further years ahead, to E.P.U., and in particular to Belgium, which must take either the form of gold or some world currency. There is another item, which I do not think will come into the picture in the immediate future but which looms ahead, and, in my view, ominously so—namely, the question of Germany. Hitherto, we have been getting an annual payment from Western Germany for Occupation costs. I understand that, under the new arrangement, that payment will cease, and in place of it a burden will be thrown upon us to help the Germans to rearm, which may begin in the year 1953. I gather that nothing definite has been fixed at present, but there is likely in the future to be a considerable item under that head. I feel that it would be optimistic to place that item below so large a figure as £100,000,000 a year. That may be too high an estimate—I shall be only too pleased to hear if it is so—but the information which reaches me leads me to think that it may be even more than £100,000,000. If that is so, it will be a serious figure on the wrong side of our account.

I have already mentioned the American invisibles, and I need not repeat what I said about those. But while I am looking a long distance ahead, I should like to make this general observation. When you are dealing with many countries, if you get an agreement with the Government, you feel reasonably sure that you will get your end of the bargain satisfied. With all respect to our valuable friends on the other side of the Atlantic, we can never be quite sure about that when it comes to dealing with the United States. Their Government come to an agreement, but they always have the reservation that it must pass through Congress. We have seen the President's proposal of 600,000,000 dollars for us this year being cut to about 400,000,000 dollars. We never quite know what the position will be with regard to the future. You cannot look a gift horse in the mouth: the generosity of the United States has been on a very fine scale, and we can only be grateful for what we have had. But there is this uncertainty which always affects anything which the United States do, in view of the different system of relationship between their Government and their Legislature from that which we have here; and until the thing is passed through all its stages one is never quite sure how one will stand in the future.

There is a further item, which I suppose is not strictly an invisible export, but something between the two—namely, the Colonial position. On paper, we have been doing reasonably well with regard to the support our Colonies have given us on the matter of their exports exceeding their imports. So far as 1951 was concerned, the Colonial surplus was something like 455,000,000 dollars, as against 410,000,000 dollars in 1950—quite a comfortable increase. But the fact is that most of that surplus, arid certainly all the increase, was produced in the first half of 1951; and if you take the second half of 1951, the position was not nearly so rosy. It may well be that, due to the fall in prices of many of the things which our Colonies have to sell, that figure has been considerably reduced to-day, and may be even further reduced in the months that lie ahead.

There is, among other factors, the recession in Hong Kong, which is quite important from our point of view, which seems quite irrevocable and which neither the present Government nor the last were able to prevent. Therefore, encouraging as was the statement which the Chancellor of the Exchequer made yesterday, so far as the last quarter and the actual dollar and gold reserves are concerned, I think the wider picture is full of great anxiety, and I do not think we can view the future with any complacency. There are some factors which are good and promising, but I am afraid that there are other factors which are not nearly so rosy and which, indeed, may be exceedingly dangerous. Lying behind it all there is this question of productivity in this country. Can we not only hold up our production at the high level which it has reached but increase it, or are we in danger of seeing something in the nature of a recession, possibly a slump, unemployment, and a reduction of total productivity?

It is a little difficult to get exact figures, because the actual war production of finished munitions is, I think, excluded from the figure of production. I may be wrong about that, but that is what I understand. I believe that: the latest figures show an actual reduction of something like 1½per cent. as compared with a year ago. That, I believe, is excluding war production. I should like to read a passage written by an expert on these matters, Mr. Oscar Hobson, who I think is an authority and a writer in the Sunday Times. He wrote in the Spectator of June 10 an article which was headed "Is it Slump?". He said: We are in a recession of trade. There cannot be any argument about that. What is really at issue is whether the recession is or will develop into a slump of the classical cyclical type, which will go on getting progressively worse for three or four years before the 'trough' is reached and a gradual recovery begins to develop. Well, While I agree that I did not expect a year ago that the commodity price fall would go quite as far as it has done, I still refuse to believe that what we are in for is a real cyclical depression of this kind. And the reason why I refuse to believe it is just—rearmament. I do not regard that as a particularly encouraging forecast. It may be—we all hope it will—that rearmament will slow down as the need for it ceases to exist. But if we are to pin our whole hopes on rearmament to prevent a slump, I cannot say that I feel very happy about the situation. I would add this further remark. We may not have a slump unless there is a slump in the United States of America. Whether there is rearmament or not, we also depend to some extent upon the good offices of our cousins across the seas in the United States.

I will close with a little story which I hope noble Lords will not consider irreverent, and I apply it to the United States. A little girl was offering up her petitions at the bedside, and she prayed first for dear papa and then for dear mama; for her little brother Jim, and for her baby sister, Mary. Then she said: "And pray God, do take care of yourself, for if you get ill we are all sunk." I beg to move for Papers.

3.26 p.m.

THE CHANCELLOR OF THE DUCHY OF LANCASTER (VISCOUNT SWINTON)

My Lords, I gather that it will be for the convenience of the House if I speak immediately and then, if necessary, with the leave of the House, I will add a word of two at the end. We are all grateful to the noble Lord for putting down this Motion. I do not know whether he has a prophetic vision as well as a prayerful attitude, but he certainly could not have fixed it for a more fortunate date. Perhaps he realised that the Chancellor of the Exchequer or I would be in a position by now to give the figures for the past quarter. Therefore, I agree with him that we could not be considering the matter at a more opportune time. Nor, if I may say so, could the subject have been introduced in a more thoughtful or responsible speech. If I may respectfully say so, I have for many years, in both Houses, listened to the noble Lord on these economic subjects. If I have not always agreed with him, I have certainly always learned something from him.

And, of course, the noble Lord is right. After all, the question of the balance of payments does transcend in importance all issues to-day, and will for years to come. It affects every element in our national life. Therefore, it is very important that we should try to see the picture as a whole, as, indeed, the noble Lord said, and in true perspective. Particularly is that so because, again as the noble Lord reminded us, what we say here is considered with care, not only by a wide public in this country but by a still wider public overseas, both on the Continent and across the Atlantic Ocean.

May I first, very briefly, put the position as it was last November? Then, so far as the United Kingdom was concerned, we were running into debt at the rate of over £800,000,000 a year. That meant that in that half-year our deficit was so large that it was about the equivalent of a quarter of our imports. You cannot get imports "on tick." The whole sterling area is dependent on the reserves. The noble Lord was right to stress the importance of E.P.U. It has great advantages, and I sincerely hope that it will be able to continue. But unless we can get into balance, E.P.U. has, of course, disadvantages for us as well. In October alone, we lost £89,000,000 to the European Payments Union. Taking the sterling area as a whole in the second half of 1951 the sterling area deficit with the rest of the world was in the region of £750,000,000. The consequence of that slide was that during that half year our reserves fell by £547,000,000 to £834,000,000—or, as we now quote them in dollars, to a figure of 2,335,000,000 dollars. At that rate, of course, the reserves would have been totally exhausted in nine or ten months. In fact, we should have been "over the precipice" very much sooner, unless we had taken effective action. All confidence would have gone, and there would have been a complete flight from the pound. And, of course, we should have been facing national bankruptcy in a very few months.

The immediate and urgent task was to retrieve that situation and I think the noble Lord. Lord Pethick-Lawrence. will agree, though he may criticise this or that detail, that nothing but a very comprehensive plan and a plan which involved both restriction and expansion—it is not easy to have both—was necessary. The way we tried to do it was by the import cuts which we introduced last November and again early this year; by economy in Government expenditure; by the provisions of the Budget; by the bank rate, and by restrictions of credit. I am not going to argue the matter—the noble Lord has spared me the necessity to do so, and we have often had these matters out and discussed the relative merits of cheap money and dear money—but he did issue a possible warning; and I should like, equally frankly, to say that so far as we can see there is no evidence and no sign today that dearer money is causing production to fall. That is the factual evidence for which I asked and which has been supplied to me. Finally, we have had to divert materials wherever we could to the most vital needs—and I put export first.

Now, my Lords, that was the position. Let me give you the results which have been achieved. Of course, these things do take time, and it takes a longer time, sometimes, than one expects. In the first quarter of this year the rate of loss of our gold and dollar reserves slowed down. We lost in all 635,000,000 dollars in that quarter; but in March our losses were reduced to 71,000,000 dollars. At the end of the first quarter, our reserves stood at 1,700,000,000 dollars. In the second quarter, the one just finished, the collective effect of these measures was much more evident and the position had greatly improved—and that in spite of the fact that we have had to pay E.P.U. over the last six months no less than £130,000,000 in gold.

The noble Lord asked me in that connection, whether I could say any more about Belgium. Well, as the noble Lord knows, there has been no direct loss of gold to Belgium. The money is put into the pool. We have been in continuous bilateral deficit with Belgium and Luxembourg; we have been on the wrong side over the whole of last year. I think it is a valuable transaction, valuable from the exchange and defence point of view. that we should have reached this arrangement with Belgium for what in the United States would be called "off-shore" purchases, by which we supply some of their defence requirements and that goes directly to reduce our debt which, on the present balance, would be payable in gold or dollars. I cannot really add to what the Chancellor of the Exchequer said yesterday except to say that I think there was a very genuine realisation the last time the Finance Ministers met a week or two ago in Paris of the the value of the European community and inter-trading. The countries in Europe should rely less on dollar exports bought by the gold which comes into E.P.U. and try to rely more and more upon each other. Now in spite of that drain in E.P.U., as the Chancellor of the Exchequer announced yesterday, during the second quarter we lost only 15,000,000 dollars, leaving the reserve at the end of the second quarter at 1,685,000,000 dollars. I am not going to overrate the improvement. It is fair to say that defence aid, which totalled some 202,000,000 dollars, came into that.

The noble Lord asked me about the future. I cannot tell him. I am not even sure yet exactly what is the form in which Congress has passed this Bill. It is quite certain that the, total amount which the President proposed to Congress has been cut, but, that from such information as I have now, I do not think that in making a global cut Congress recommended what specific cuts out of the global sum should go to any country. But some aid certainly will come our way, and, I hope, purchases of armaments also. I cannot give the exact figure (the noble Lord was being a little prophetic, for the figure he gave is not known even to me in the course of the rather intimate defence negotiations), but I certainly hope that it will be considerable.

But, making all allowances for that, I think it is a remarkable achievement that we should have, so to speak, broken level over the last quarter. And it is right that the world should know that we have done so. I think it gives us ground for sober confidence but no possible excuse for complacency. We have done no more than this: we have come back to the starting-point of a very long, uphill road. The reserves of the sterling area are dangerously low and it is not enough to keep them there; we must build up. Forecasts in these matters are difficult. We are dealing with the trade of the whole sterling area, which comes to about £10,000,000,000 overall in a year. One hesitates to make calculations, because an error of even 1 or 2 per cent. means £100,000,000 on either side. I do not pretend to be a mathematical planner, but whether you make a mathematical calculation or not makes little difference: if there is a good monsoon in India there is food; if there is not, then there is starvation for the million. The food has to come from dollar sources and to be paid for in dollars: then you get a wholly unexpected drain upon our reserves.

LORD PETHICK-LAWRENCE

You may get a monsoon in Chicago!

VISCOUNT SWINTON

You may get a monsoon in Chicago, it is perfectly true; but still, while we may speculate in private on what is likely to happen there, we must not anticipate in public. We shall all be agreed that our reserves are at a precariously low level, and that it is not enough to stand still. We have to build up these reserves. Another point is that we have not the old resources of credit to rely upon. Before the war we were a creditor nation, to the tune of something like £3,500,000,000. To-day, we are a debtor country to the tune of I suppose something like £2,500,000,000. To put it in another way, before the war, for every man, woman and child the world owed us £80 per head. To-day for every man, woman and child we owe £55 per head.

Our part in world security and the alliance of free nations involves heavy overseas expenditure, in addition to the rearmament programme at home. The noble Lord, Lord Pethick-Lawrence, asked me about the cost of our forces in Germany in 1953. In so far as the first half of 1953 is concerned, I am not very anxious. Until the European Defence Community Treaty and the Convention with Germany have been ratified, it is impossible to say whether any sterling charge in respect of such expenditure will arise before June 30 of next year, but I think it unlikely that we shall have to bear any of this cost in the first half of 1953. As regards the second half of 1953, the amount available from Germany for the support of the United Kingdom forces will depend upon negotiations which have yet to be undertaken, and therefore it is not possible to make any estimate of the charges which are likely to fall upon us. Another consideration—this is an obvious truism—is that we must export to pay for our food and raw material, and we face the keenest competition in a buyers' market. To-day, everything turns on price and delivery dates. It will be very easy to price ourselves out of the market. Do not let us forget that increased prices. increased charges, in the basic industries like coal, transport and power affect all other industries.

For example, the noble Lord spoke about engineering. We rely tremendously upon the export of capital goods for which there is still a large unsatisfied demand. But even here, in machinery and electrical goods, where exports each year from this country and other countries run into hundreds of millions of pounds, we are facing increasing competition, particularly from the United States and Germany. Japan is already beginning to move forward. Our industries did well last year. Our exports of machinery and electrical goods rose by 14 per cent.; the United States exports rose by 29 per cent., and German exports rose by 98 per cent. I am always a little suspicious of mere percentage figures: I remember the famous case of the anti-aircraft guns that increased by 100 per cent. because they had gone up from one to two. But that is not the case here, because German exports of machinery and electrical goods rose from £126,000,000 in 1950 to £249,000,000 in 1951. That is a pretty substantial increase. I will quote only one other set of figures. The noble Lord asked about our exports. I think the most important element is exports to the non-sterling area. There the situation is not too bad. For instance, in the third quarter of 1951 the monthly average was £114,000,000; in the fourth quarter, it was £111,000,000; and in the first quarter of 1952 it was £126,000,000, while in May—I do not give April which is a short month—the figure was £133,000,000. Those figures are of exports to non-sterling areas. If we can keep up that rate, that is fairly good.

I agree entirely with the noble Lord that the triple demand made by export, defence, and domestic requirements imposes a heavy strain upon the engineering industries. We have recognised that to the full. How are we to meet it? I would say that we can help to relieve that strain in three ways. First of all, we must obtain all the raw materials that our metallurgical and engineering industries need. Steel from the United States will, of course, be a tremendous help. Secondly, we must reduce the less essential home demands for supplies of durable consumer goods from the metal-using industries so that exports and defence can go ahead. Thirdly, we must reduce less essential home investment. But we have to be careful that we do not reduce this last too much—we have to try to restrain home investment; but there is a limit to which it is wise to go, if one takes the long view.

It is difficult when you have, as I have, the job of trying to apportion where it is most necessary something of which there is not enough to go round. It is very tempting to take the short view all the time. The short view is very important, but I wish people would not talk about "a crisis." This is not in the nature of a crisis. It is not like a fever where your temperature goes up and you either get the right prescription and take the right medicine or you do not, and then either you are cured or you die. It is not the least bit like that. This is a continuing struggle which will go on year after year. So "crisis" is the wrong word to use. Taking the longer view, it is extremely important that we should not prevent productive industry from getting those improvements in plant, new buildings and whatever is necessary to make it a really effective competitor. Therefore, I put very much as third the restraint on invest- ment, particularly investment in the manufacturing industries.

The noble Lord is a very attractive but a most difficult person to answer because he puts such penetrating questions. He asked also about the prospects of a recession or slump here or in the United States. It is not very easy to answer with certainty. While I agree that we must try to be as realistic as possible when we are looking at the future as well as at the present, I think the noble Lord will agree with me that unjustified fear or pessimism, if widespread, can help to create a slump. If anybody starts feeling his pulse, taking his temperature and wondering whether he is going to be rather worse to-morrow, then there is a great fear that he will be a little worse to-morrow. An old expression which I have heard used on both sides of the Atlantic is "talking yourself into a slump." It is no good being too much of a ruddy optimist—if I may put it that way. I hasten to add that I use the word in the sense of "rosy." I appear to have woken up the noble and learned Earl the Leader of the Opposition. "Rosy optimism" is what I mean. I do not think pessimism is justified.

There has, of course, been a recession, and there still is, in the textile industries. I think that accounts for the 1½ per cent. to which the noble Lord referred. There have been very steep falls in prices, and these have already led to renewed buying. On the whole, that position appears to be improving, though, if I may venture a personal opinion, I should say that I am doubtful whether Lancashire can ever look forward to employing all the people that the optimists have thought it could employ. I think Lancashire will get its biggest share in the export trade if the work is concentrated in the most efficient mills. We may have to bring in special orders and get sub-contracts into Lancashire, but I am sure that the secret of continued and permanent employment—security, if I may call it such—is getting a greater diversity of industry into that county. I am not just preaching something I myself have never tried to practise. In the years before the war, when I was responsible for starting them, I tried to get shadow factories into Lancashire, among other places. There was a large shadow factory at Speke and there were others at Oldham and Bolton. Those were admirable factories. Light industries, such as electronics and so on, will be the things of the future. Quite frankly, I should like to see Lancashire getting a fair share of those industries. But there must be a willingness all round. This is not just something the Government can do. It must be an outlook on the part of everybody. Between us, we all ought to try and get a greater diversity of industry there.

I am not unhappy about the general prospects in this country. Of course, it is true that even slight changes in activity in America can have a marked effect upon our balance of payments. That happened in 1949, and the result was quite out of proportion to the size of the temporary recession. But, from all the evidence I have, the large and increasing munitions programme in the United States, and also their very large domestic production, certainly does not lead me to suppose that at any time in the near future there is a risk of a large trade recession there.

My Lords, I apologise for going on for so long, but at this stage I want to give as complete and fair a picture as I can. As the noble Lord, Lord Pethick-Lawrence, said, there is another factor to be taken into consideration—namely, the trend of commodity prices. This is very important to the sterling area. Whilst it is very helpful to us in the United Kingdom as a manufacturing country, and, certainly to our people as consumers, that commodity prices should go down—and some of them have gone down a great deal—it is not favourable to the sterling area as a whole, since the sterling area is such a large producer and exporter of raw materials. Rubber is a very good example. From the sterling area point of view, a high or relatively high price for rubber—you do not want prices too high—is desirable. I am glad to say that there has been some improvement recently. That is the trend. World prices of food, as distinct from the materials we use in manufacturing, are high, and I do not see that there is any prospect in the immediate future, broad and large, of food prices coming down very much. I am sure that the whole era of cheap food is past. Today the food producers of the world are the people who, on the whole, have got a sellers' market.

Therefore, we have a very heavy task in front of us. This all shows that there is no discrepancy at all between the speeches made by the Prime Minister and those made by the Chancellor of the Exchequer. It is absolutely right and necessary that we should tell this country and the world what we have achieved. It is equally necessary to tell our people how grave the situation is, and that we have only just struggled back from the edge of disaster. We cannot afford to lose any of the ground we have regained; indeed, we must gain more ground. The position is precarious. The "trap-door" was, I think, not only a vivid phrase but an accurate one. It is very important that the reality of this position should be appreciated. It is difficult to bring it home to some people. If you have an engineering works or a shipyard, with orders on the books sufficient to provide work for two or three years, it looks as if everything is secure for an indefinite time ahead. But all that depends on our being able to get the raw materials. It is really like the position of a house which may be becoming undermined without anyone knowing about it.

Let me say this—I think it was Mr. Morrison who said it first, but others repeated it over and over again—that if it had not been for Marshall Aid we should have had about 1,500,000 or 1,250,000 more unemployed in this country. What those who said that meant was that if we had not been the recipient of those thousands of millions of dollars from America we should not have had the money to buy food and raw materials. We should have had to buy the food, but without that aid we could not have bought the raw materials which our factories needed. We should not have had the materials to keep 1,250,000 people in work. That is a perfectly fair statement. Bui of course we cannot rely, and we ought not to rely, on such aid to-day; we must stand on our own feet. But we must get that material.

The question was put to me, very fairly, what must we do to be saved and to be safe. I will try to put forward seven things which I think we must do—and by that I mean not only the Government but all of us. These may prove to be Seven Pillars of Wisdom. First, I would say that we must continue on the road we have followed, the policy which has saved us from disaster. Secondly, we may well have to tighen up still further on imports from the non-sterling area. In some things I think we shall certainly have to do so. But we must have the materials our industry needs for export and for defence, and we must concentrate on those. I would make it absolutely plain that where there are restrictions to-day, whether in timber, steel, copper, aluminium, or whatever it may be, on what our American friends call "end use," it is quite idle for people to think of more lush and easy times in which rare materials bought with our exports can be used for any purpose people may like. We should be fooling ourselves if we pretended that that was likely to happen. We shall have to maintain the restrictions on "end use."

Thirdly, we must grow all the food we can. The counterpart of guaranteed prices must be efficient farming. The county committees and the National Farmers' Union have promised their cooperation in this matter. There are some very good farmers, and there are some thoroughly bad ones. We cannot afford to tolerate bad farmers to-day, when there are all sorts of efficient young men who have been through our agricultural colleges and have got some capital behind them, but cannot get the farms. Sentiment must go by the board. But we have a number of people in the middle, who are pretty good farmers, who could get some more out of their land, maybe with more capital, but probably with more knowledge and with more use of the scientific services which are available for their assistance—for example, in regard to soil research, the kind of grass it is advisable to grow when re-seeding and so on.

I do not know whether I ought to trespass on the provinces of all my different colleagues, but I am pretty sure that a large and rapid increase in food production in this country will not be obtained by spending millions of pounds on ploughing up rather doubtful marginal land. I am not saying for a moment that we should not get what we can out of marginal land, but where we shall get more food, and get it rapidly, is from the land which is already pretty well farmed today. Therefore, my right honourable friend, the Minister of Agriculture, is absolutely right. I think, in giving instruc- tions to the Advisory Services—and very useful bodies those Scientific Agricultural Advisory Services are—to concentrate on what I may call the middle-class farmers, and to do what they can to help them to get the best out of their farms. I would add that a good landlord who plays his part in the maintenance and improvement of his farms ought not to be expected to tolerate a thoroughly bad farmer as a tenant.

Fourthly, I would say that we must develop Empire resources—Empire resources of raw materials and Empire resources of food. I know that this is perhaps a longer-term matter. I would instance the development of copper in Rhodesia. Then there is the Volta scheme for aluminium in the Gold Coast. And there are other projects which are being explored, as noble Lords who take an interest in these matters well know. These are longer-term enterprises. Do not let us regard any of these things as short-term propositions or as merely crisis measures. The long-term problems are going to be with us, and with whatever Government comes into office in the next five years, when we go out.

There is one matter to which I should like to refer, with which the name of my noble friend Lord Morrison (whom I am glad to see in his place) is closely connected. I know that he will support me when I say we must collect and use all the waste material we can use economically, wherever we can, in order to reinforce imports. That again is not a short-term business it is a long-term business. I should like to thank Lord Morrison for the job which he has been good enough to undertake. I knew that I could not have gone to anyone better, and the work which he and his panel have been doing ever since our debate some months ago in this House on salvaging has been admirable.

I take three examples—though its work is not limited to these. There is, first, paper. Last year, the board mills of this country used 1,000,000 tons of waste paper. I think they are now using practically all they can, and that about 95 per cent. of the material which they are using in their products to-day is this waste paper. But there came this recession in demand and the collections were still going on. The mills could not use all the paper that was coming in. Lord Morrisson then did a very practical thing—I am not sure that some of the local authorities would have taken it from anyone else. Some of them, who had been farseeing, had made contracts with the mills for as much as they could deliver. If those contracts had been fulfilled 100 per cent., nothing would have been taken from other people. Lord Morrison asked them all, whether they had contracts or not, to take an even cut. I understand from him that in practically every case they agreed to do so. The result is that this waste paper business has gone steadily on; and although it has had temporarily to be reduced it is ready to be reinforced whenever need arises. Then there is the collection of metal scrap, and particularly steel scrap. That is vital to-day. And this business, too, is being reinforced. Those responsible are collecting all they can. There again, local authorities and farmers' unions are all coming in in order to help in this matter.

But I come back to the question of food. There is another enormously important element in respect of which we can do much more than we are doing today. That is in the matter of food waste and the production of our "Tottenham pudding." Four hundred thousand tons of food waste was collected last year, and every bit of it was used to feed pigs and poultry. That was the equivalent of £3,500,000 worth of coarse grains which otherwise would have had to be imported. We know exactly how to make and use this product, and there will be a market for it so long as any of us is likely to keep pigs and poultry. Therefore, I make an appeal to the local authorities. Those who are engaged in this work just now I ask to intensify their efforts, and others I urge to take it up with all possible energy. I do not ask them to make a patriotic effort but to make what is a very good investment. I hope that they will respond enthusiastically.

My sixth point is that we must produce all the coal we can, and we must export all the coal that can be made available. For, quite literally, export coal to-day is gold. Above all, my seventh and final point, or Pillar of Wisdom, is this: that we must keep our costs and prices down. Our whole future turns on our ability to export. Wherever there is an opportunity to sell our goods we must exploit it to the full, particularly where we have a novelty or a clear lead. I cite one example in connection with which I think there is indeed a great opportunity—jet civil aircraft. In these aircraft we have a lead over the whole world. There are markets anxious to take these aircraft, and if we get into them now we shall probably keep them for a decade or, it may be, for a generation.

Broad and large, however, the sellers' market has gone for good. To-day the seller is courtier and the buyer is king—and there are a lot of courtiers at every court ! If we cannot export at competitive prices, we cannot export at all. We are all in this together. Nothing is more true than that we are all members one of another. All these industries react on each other. Take coal, for example. It enters into the cost of every article that is produced. And it enters into it not only once; it enters into it twice over. It enters into the cost of fuel or power which an industry uses, and it enters into the cost of transport of the raw materials or the finished article. The most dangerous thing we could do would be to price ourselves out of the competitive market. We should lose all the ground we have won—and we cannot lose it twice. A repetition of last year would be ruin.

In fairness I must add this. It could be said, and I think said fairly, that I should not be dealing with the case adequately unless I dealt with the cost of living. So I want for a moment, in conclusion, to deal with it. I am not content to say, though it is profoundly true, that if we were to price ourselves out of the export market that would strike a fatal blow, not only at the cost of living but at the employment and livelihood of millions. But it is said that by reducing food subsidies we ourselves have raised the cost of living. I think that is a very incomplete and one-sided statement. It has always been—and rightly—a cardinal article of faith with Chancellors of the Exchequer—with Socialist Chancellors as well as with the present one—that there must be a ceiling on food subsidies, and that quite irrespective of food prices. In 1949, though food prices had risen eight points in two years, Sir Stafford Cripps fixed the ceiling at £465,000,000. The following year food prices had risen fourteen points, but Sir Stafford Cripps reduced the ceiling to £410,000,000. The following year food prices had risen another nine points, but Mr. Gaitskell refused to raise the ceiling. I am not making a Party point out of this. It was absolutely right and necessary to do that. As Sir Stafford Cripps himself said (and I think I paraphrase accurately): if we do not do that—we shall have prices with no relation to reality.

Though I must admit that to-day I do not see a prospect of world prices of food coming down in the near future, the prices of many other articles are coming down, and coming down substantially. That is a new and welcome factor, and a very important one. In assessing the effect of the recent cut in food subsidies which the Chancellor made, we must in fairness take into account the countervailing benefits—the increase in family allowances, pensions and rates of benefit, and the reliefs in taxation. Sixteen million wage and salary earners benefit from these tax reductions. A broad statement of that kind is pretty general and it may be asked whether they benefit enough to make any difference. Let me take two or three examples from different industries which I think are representative. Take an engineer, a married man with no children, earning £10 a week: he is paying 12s. 9d. a week less in tax. A lorry driver, a single man earning £8 a week, is paying 4s. 5d. a week less in tax. A married miner with two children, as underground day-worker, getting £10 2s. 6d., pays 6s. 2d. a week less and a worker at the face, again a married man with two children, earning £14 15s. a week, pays 9s. 10d. a week less and, of course, these married men with children get the benefit of family allowance.

I have tried within reasonable compass, I hope at not too great length, to give a true picture of the situation as it was and as it is to-day, and of the task now confronting us. If it is a sombre picture—and it cannot be any other—I do not paint it in any mood of pessimism but rather in a spirit of realism and resolution. Surely those qualities of realism and resolution are among the strongest and most enduring characteristics of the British people, and they are the surest guarantee that we shall most certainly win through.

4.14 p.m.

LORD RENNELL

My Lords,. the noble Lord. Lord Pethick-Lawrence, who opened the debate, has said nearly all I should have liked to say. That will save myself and your Lordships a great deal of repetition. If I have anything to say, it is only as comment: upon one or two points made by the noble Lord. Before I deal with them, however, I should like to say how glad I am that the Motion was brought forward to-day and that the summer discussion in. your Lordships' House on the economic situation has been divided into two parts: first, the noble Lord's Motion on the balance of payments, and, secondly, the Second Reading of the Finance Bill which is to take place on Tuesday. I think this makes the debate much more manageable, and I, for one, welcome it.

The whole problem confronting us can be gauged only in terms of the effect that the various measures have, will have, or will not have, on the balance of payments. That is the one vital thing that matters in the world. Whether the impact of taxation is a matter of political opinion, whether a Budget measure is right or wrong according to people's opinion, whether the policy adopted by the Government on credit restrictions, about which the noble Lord and I have had many discussions in your Lordships' House, is right or wrong, the only thing out of all these that matters is the effect which they will have on our balance of payments. In the long run, it is by that that we shall survive. If the measures are inappropriate, we are heading for disaster, as the noble Viscount, Lord Swinton, has said.

The two previous speakers have reviewed the present situation, and the conclusion to which anybody who considers these matters must come is common ground to us all. Obviously, it is better to have lost only 15,000,000 dollars in a quarter than to have lost 500,000,000 dollars in a quarter. It does not matter very much whether something might have been done or not. What matters is whether we shall lose very much more of our reserves in the sterling area. So far, the figures that have been published are wholly satisfactory. What I think is important for us to analyse is whether this quasi-balance which we have achieved has been achieved as satisfactorily over the whole sterling area. That is a point on which I feel much more doubt than has appeared from the discussions up to date. We are the banker of the sterling area and we may be in balance with our current creditors' and debtors' account; but is the bank itself solvent on its incomings and outgoings? The difficulty of our own situation is that we are in a paradoxical position, a vicious circle. In order to export, we want to see prices reduced, to become more competitive. In the buyers' market we must be able to compete, especially with the new factors of Germany and Japan. Any reduction in the price of the raw materials we use in our manufactures, and in our own manufacturing costs, must be favourable to us. On the other hand, so far as the sterling area is concerned, as the noble Viscount has pointed out, a fall in the price of raw materials does not necessarily redound to the financial credit of the sterling area as a whole. It is in that paradoxical situation that I find the figures available disquieting for the future in this element of the sterling area.

I do not think that enough people are aware of the substantial fall which has taken place in raw materials in the last ten months. The Statistical Summary recently published shows, under the heading "Non-Food Materials Used in Manufacturing Industry"—which is pretty well everything except food—a fall in prices of raw materials from an index figure of 220 in March last year to 165, or, roughly, 25 per cent. The cost of living has not fallen and the cost of manufactured articles in this country has risen. In other words, so far as the export trade is concerned we are not getting the benefit of the lower prices of raw materials, but are suffering from the disadvantage that the sterling area has to sell those raw materials for a lesser price. In other words, what would be of benefit to this country is a disadvantage to the sterling area. That is a vicious circle in which I feel it is difficult for us to see what the immediate future will bring, except by one way to which I will come in a moment—namely, a general fall in manufacturing costs.

The same vicious circle applies to the measures which Her Majesty's Government have taken in the last six or nine months. The two main measures which they have taken have been, first, the restriction of imports and, second, the restriction of credit, by raising interest rates and various other methods. Those methods would, in my submission, have been much more effective, so far as we are concerned, if they had been taken earlier than they were. If they had been taken last year, or if, when they were taken by the present Government last autumn, they had been taken more drastically, in my view they would have avoided the rise in interest rates and the second cut on imports at the beginning of this year. That is not merely jobbing backwards and finding fault at what has been done. I have a particular reason for saying that.

The restriction of imports, or a rise in interest rates, in one country, will be effective for that country in comparison with what is done in other countries, provided that other countries do not do the same thing at the same time. If we had raised interest rates last year and had restricted imports before the general restriction of imports took place practically everywhere in the world, except in the United States, our measures would have been much more effective than they are today. The delay in doing that, and doing it in stages, as it has been done, led to our example being followed, perhaps inevitably, by most European countries, and by many other countries outside Europe as well. In other words, we there have the position illustrated in the old saying: "When father says 'Turn.' we all turn." If father had turned without everybody else turning he might have got a little rest in bed. As it is, as everybody else turned at the same time, he got just as many kicks as he did before he turned. We have now reached a position of competitive restriction, from which the world must extricate itself if development is to take place again. How do we get out of that without injuring the balance—the perhaps doubtful balance—into which we have succeeded in placing ourselves, as can be seen by the figures for the last quarter to which the noble Viscount, Lord Swinton, referred?

There is one point I should like to mention here which is perhaps a slightly delicate one. The object of restricting credit in this country was undoubtedly to produce a fall in prices, to produce economies. It is no doubt doing so, but probably at a very heavy price. I venture to doubt whether, in the first place, an aggravation of that policy would have any more effect than it has already had; and, in fact, I am inclined to think that an aggravation of that policy might produce unsatisfactory results. There comes a point when, if you restrict too much, you do not cause economies but cause bankruptcies. The current opinions which are expressed tending towards an aggravation of credit restriction here at this moment fill me with a good deal of apprehension lest productivity falls as a result of difficulties into which armament manufacturing concerns, and others not engaged in the armament industry—even those engaged in the export trade—might get.

There is some doubt as to how far we ought to go in this policy. The figures of production in this country are difficult to disentangle, for the reasons referred to by the noble Lord, Lord Pethick-Lawrence. The published figures of production—my noble friend the Deputy Leader of the House will correct me if I am wrong—are of ordinary production, and not armaments production.

VISCOUNT SWINTON

I think not. I will verify this for certain, but I believe the productivity figures are in respect of the whole of the production of industry, whether producing armaments or anything else.

LORD RENNELL

I am obliged to the noble Viscount. If that is the case, then the position is rather worse. Your Lordships will have seen the Central Bureau of Statistics' figures of productivity in The Times this morning. You have to take the months of March and April together, owing to the incidence of Easter last year and this year. If, as a rough average, you take March and April of last year and March and April this year together, there is a downward tendency in production manifest in each of the five groups to which these production figures refer, except in building. The noble Viscount, Lord Swinton, has been good enough to intimate that these figures include everything. Therefore, it means that, in spite of an increased production of armaments which has taken place in the last twelve months, there is a decrease in productivity overall. If, therefore, the armaments industry has increased its production, other manufacturers must have fallen more than the Index figures show. According to the Index, there is a reduction from March and April last year for all industry of 146 to 144; in mining from 122 to 120; and in manufacturing from 152 to 148. There is an increase in the building industry from 124 to 136, but a decrease again in gas and electricity. Is the policy of restriction which is being followed having the effect of reducing production? I ask that question because I believe that it needs consideration, although I do not expect that the noble Viscount will be able to answer it to-day. I am becoming doubtful, however, whether a policy of restriction, if continued, will produce more goods than it has done, and I fear that, if aggravated, it may send those production figures into a greater decline.

The other factor—to which reference has not been made this afternoon, although I believe it to be, paradoxical though it may seem, a favourable figure in our balance of payments—is that there seems to be little doubt, from such information as I have been able to glean, that after a brief initial period of confidence abroad in sterling and in the economic stability of this country, a deterioration has taken place in recent months. In spite of the controls and restrictions which are in force, the effect of that has been to create what may be called a short or "bear" position in sterling, not by people selling currency for future delivery but by foreign elements seeking to borrow, instead of to remit, and trying, by all those devices which still remain open, to take their balances away from this country. I believe that that position has built up again in the last few months. The effect of that position building up will, of course, have been towards a reduction in our reserves. Inasmuch as they have not been reduced in the last quarter by more than 15,000,000 dollars—to which the noble Viscount referred—we have been able to withstand that drain, and since that tendency never continues indefinitely, as experience has shown, there is a cushion or spring which will operate to our benefit in the quarters which are yet to come.

There is another element which I think has been equally neglected and which has some bearing on this point; that is, the accumulation of sterling balances in London. Here I want to refer to something which has not been mentioned this afternoon, but which I should like to elaborate a little. In the past it has been commonly said that we have been living on money borrowed from our Colonies and our Dominions, and inasmuch as they have built up sterling balances in this country which we owe to them, that, of course, is true. But, in point of fact, in the last few months the sterling balances of the major Dominions in this country have fallen astronomically. For instance, the published figures of Australian balances—and I am talking in terms of Australian pounds at this moment and not of London pounds—have fallen within the last twelve months from about £A800,000,000 to just over £A300,000,000. That was the last available figure on June 18. In other words, we have repaid to Australia money which she had lent us, and her balances here are now at a very low level. If they go much lower they will probably get to a level which is the minimum working balance—a point to which I will refer in a moment. The balances of all other major holders of sterling have also fallen steadily, and though they are still large as compared with before the war, that fall has improved our domestic position within the sterling area in the last twelve months by many hundreds of millions of pounds. That is a wholly favourable element in our United Kingdom position within the sterling area to which I think insufficient regard has been paid.

The size of these sterling balances which occupied your Lordships' attention in past years for many hours is, I believe, much less of a bugbear, if I may say so, than many of my noble friends on this side of the House have perhaps thought in the past. In the first place, the decline in the value of money everywhere in the world inevitably means that balances in the banking centre of the sterling area must be bigger than they would have been before the war, and bigger by a very considerable amount. In the second place, in a community which to-day is inevitably hedged round with restrictions and controls, a much larger balance has to be kept in any place or in any bank than would have been necessary in an entirely free economy, where either securities can be melted and turned into cash, or where anybody requiring sterling can sell currency and buy currency overnight, as they used to be able to do, in very large amounts. It follows that people trading with London, who normally might have been trading in any of the Continental currencies, and who require sterling, quite frequently have been required to keep sterling in amounts very much greater than if they could have gone into the market and bought sterling for this or for that. The process of controls has slowed up the banking turnover from the international point of view, from the point of view of the sterling area in London, and consequently has required the accumulation of a much larger liability of London towards the rest of the world than had been the case before. In so far as we have been able to diminish that liability by repaying to those to whom we owed sterling the amounts which we have repaid in the last year, our own domestic position has again been improved.

I believe that those are elements in the general picture of the balance of payments which require to be analysed in trying to assess how far our future position is likely to better or worse. The difficulties about commodity prices and costs of production in this country are well known and need no elaboration. Our only way out of that, as it seems to me, is one that has been mentioned so many times, almost ad nauseam, that I hesitate to say it again. But it is that we must have a greater productivity for a given standard of life. It is doubtful whether, at the present moment, the standard upon which we wish to live—our standard to-day—can be supported by the productivity of the country as a whole. That is the main element of doubt in our future balance of payments. The other element, or elements, are tied up with so many political difficulties which makes an economic assessment impossible that I can say no more than that we must be extremely grateful that in the last quarter the position has turned so much more in our favour as to make some light appear on the horizon.

4.37 p.m.

LORD HAWKE

My Lords, in this debate hardly a word has been uttered with which I would not agree. Undoubtedly our position is an extremely gloomy one at the moment, but I propose to start by referring to the brighter end of the picture. What is the situation in the world at large, with which we have to trade? The population of the world is going up at a regular and quite rapid rate; the machinery of the world is going up at perhaps an even faster rate, and the money supply of the world is going up at least as fast as that. The raw materials are increasing after a period of stagnation after the war. The world is still woefully short of many of the great British traditional exports; the world is grossly short of railway material; the world's passenger' planes are obsolescent; the road passenger industry in overseas countries is only awaiting better roads for it to become immensely more important. The other day the Minister of Works pointed out an entirely new industry—the export of prefabricated buildings, for which there is a considerable future. We are just breaking into the earth-moving business and into the business in large agricultural tractors, and the enormous world market for a really cheap small motor car has not yet been touched. Of course, every day our chemists are producing more and more wonderful things, mostly from our own very meagre raw materials.

In face of this comparatively bright situation, why is it that we seem unable to pay our way in the world? I can assure noble Lords opposite that in my analysis of this problem I am not trying to make Party points: I am trying to be entirely analytic and factual. The fact of the matter is that the whole position has been upset by the redistribution of income which was undertaken during their period of office. As Lord Keynes pointed out, the lower income group are the people who spend the largest proportion of their income on imported goods. Moreover, it is obvious and well known that the lower income group spend a lower proportion of their income on savings than do others. So money has been taken away from the people who spent less of it on imports and from people who saved more, and put into the hands of the people who do the reverse. Of course, that is a double factor. From the aspect of Christian ethics I am not arguing the matter; there is probably a very strong case for it. But I submit that nobody foresaw the end of the path on which the Party opposite entered at the time. At the same time the higher income groups had their purchasing power so reduced that many more took to disregarding income, living on accumulated capital, living on capital gains which were fed by the unrestricted credit, living on expenses allowances and tax losses, and all the thoroughly unethical things that result from too high taxation and inflation.

All those factors make for increased imports and decreased exports, and for a greater consumption of our own production in this country than would otherwise have taken place. That is most unfortunate. I do not believe noble Lords foresaw that this would happen. They certainly have not put into operation the particular antidotes that one might require to offset these factors—and it may be too late now. Her Majesty's Government, then, have been confronted with the double task, for the moment at all events, of reducing the percentage of our purchasing power which is spent on imports and, at the same time, increasing the proportion of our production which goes overseas. On the whole, I think they have made a most promising beginning. Restriction of credit was a key move in the whole situation—I mention restriction of credit, because the bank rate really follows. If credit is restricted and money finds its own price in the market, the interest rates must follow in due course—and of course the Budget was subsidiary to this. But undoubtedly these two measures have resulted in reduced consumption of goods; and that, working back all the way along the pipe-line, has very largely engendered these falls in raw material prices. While at the same time leaving prices at a very high and healthy level, the measures reduced them from the exorbitant level which they assumed as a result of the Korean boom.

There are still further measures which I think all people in this country would like to see Her Majesty's Government take. We are by no means convinced that economy in Government administration has yet reached 100 per cent. perfection—if, indeed, such a thing could ever happen. Nor am I sure that the example of economy there has penetrated yet into all branches of industry—because it is just as important that there should be economy with the shareholders' money as that there should be economy with the public purse. Indeed, to-day most of the shareholders' money is the public purse.

Their other task, the diversion, as apart from the restriction, is extraordinarily difficult, and one would like to know more about how it is happening. One is rather in the dark there. It is not difficult to achieve the diversion of raw materials by allocation to the people whom you want to have them; but when it comes to the human factor, to people, it is extraordinarily difficult to get people to change jobs. There is a lack of skilled men, and so on. Then, are the questions of transport to work being properly explored? If it is possible for businessmen to travel every day between Brighton and London it is perfectly possible for British Railways to provide express trains across country from Blackburn to some area where other work is available. Perhaps that has been done—I do not know. I know that in the heavy engineering trade it is only too often delivery and not price which is the thing that determines contracts. Nobody wants to place an order four years ahead. Very often people would be prepared to pay more money to be able to secure more speedy deliveries. What is the delivery period of British locomotives to-day? I am out of touch. Is it still four years? There is an immense demand in the world for our new airliners, the Comets. Is it true that India has rejected buying them because the delivery time is four years? I do not know. But these questions exemplify the difficulty of the diversion of resources—and it is diversion which is one of the hopes of the future.

That is for the present. I agree with my noble Leader when he says that this is a permanent state. But what of the future? We are receiving little guidance from leaders of the banking industry, or from statesmen, on what is the great plan for the many years ahead. We must all agree, of course, that the stability of the pound is largely a political question; but what is going to be the economic and strategic object? At international conferences we attend we all assume that the pre-war system was the normal one. But I submit that the pre-war system was already breaking down before the present difficulties began. Germany, one of the great manufacturing units, had completely broken away from the system, with its multilateral exchanges and so on. It was the same with South America; and we were none too happy.

The pre-war system I can define as trade only inhibited by tariffs—and comparatively low tariffs. I submit that that system has completely broken down and that it has been replaced by the war-time licensing system which, of course, is immensely attractive to industry, and that means labour in all countries of the world which have any industry. With more and more countries industrialising, there are more and more countries that have a strong political interest in retaining this new system of the regulation of trade by discriminatory licensing. We have exercised it since the war and it applies everywhere, except, I think, in the sterling area and now in the European Payments Union. It was not long before in the European Payments Union we ran into trouble. We promptly had to reimpose the licensing which we were supposed to eschew. No—I submit that the old pattern is what we might call a "Liberals' dream world" and the problem is: what is to replace it?

At the moment, we are travelling along the road of import licensing and that is, frankly, at times discriminatory. Whenever we are in financial difficulties (which is almost every day) our licensing system is discriminatory. Whether this is the best way of discriminating, I do not know. There are strong arguments for discriminatory tariffs instead, a high tariff system with a lower tier for one's friends and so on. But what I am convinced is that, in the modern world, where it is quite certain that large portions of our manufactures will be deliberately excluded if they are cheap—they are, in fact, excluded because they are cheap—we shall have to find methods, either of a drastic diversion of resources away from goods of that sort to others, or, by mutual bargaining, of finding people who will take the full range of all our exports. It looks uncommonly like Imperial Preference, but in any arrangements of this sort I should not exclude the inclusion of other people. The criterion should not be the sentiment of Empire. The criterion should be: "Are you or are you not prepared to exchange goods freely with Britain? "Of course, to adopt a tariff method is impossible now, because discrimination by tariffs is forbidden by G.A.T.T. and the most-favoured nation clause. Nevertheless, we are doing it by licensing, which we pretend is temporary but which I can see no hope of our ever abandoning; so perhaps we may achieve our aims in that way.

I should have thought it would be more straightforward and honest to try to achieve liberty to do it the honest way, by tariffs. Whether this age of restriction by licensing and so on will ever, in turn, give way once more to a freer trade outlook is problematical. It may well do so, I think, but whether it will be in my lifetime I do not know. Clearly, when we reach the stage of the United States population requiring a large unfavourable balance of trade, then will be the time when the world may possibly return once more to the freer trade ideas of fifty years ago. Meanwhile, to carry us over the next twenty-five years, we have to mobilise all the resources we can of common interest and sentiment; and we have to try to bind with it a trading system suitable for this second half of this century.

4.55 p.m.

LORD LUCAS OF CHILWORTH

My Lords, at the outset of the remarks which I shall venture to make to your Lordships, may I at once offer my sincere congratulations to the noble Lord who opened this debate, and also to the noble Viscount who spoke on behalf of Her Majesty's Government, for the simple manner in which they tried to state the present problem? I was rather surprised that there was not a large list of speakers to-day, and I could only surmise that the supposed complexities of this problem frightened many of your Lordships away, as they frighten to death the ordinary citizen. I am particularly grateful to the noble Viscount for reducing the problem to language which the common person can understand. That, in itself, is a public service. I was heartened to read in the leading article of The Times this morning something which I thought really reduced the whole of our problem to a few lines. It says: The task of securing external solvency can be expressed in simple terms. The nation must produce more at home and sell more abroad. If it does not or cannot do so, any expectations must he abandoned that its standard of life can be improved or even maintained. That is the crux of the whole matter. I think the noble Viscount, on behalf of Her Majesty's Government, if he will allow me respectfully to say so, made one of the best statements upon this problem I have heard emanating from the present Government.

I have only one quarrel with the noble Viscount and I may as well have that now, though I do not think it will turn out to be a quarrel, because I think he will agree with me as I agree with the noble Lord, Lord Rennell. We have either to export more or import less, but, always assuming—this is the assumption I make—that we have already eliminated unnecessary imports, I am very much against import restriction. It is a vicious policy. It sets up a vicious circle. Everyone else does the same. It encourages high-cost secondary industries to spring up. The next phase is tariffs—and where are we? We are in a whirl of restriction, with every country trying to impose more restriction than the other, and we are back in the state the world was in between the two wars. I would far sooner say that what we have to do is to increase our exports, and John Bull Limited has to make a profit. That is what it really boils down to. Call it a surplus, if you like, but we have got to sell more than we buy.

How can we do it? I agree wholeheartedly with the noble Viscount, Lord Swinton, that this is not a crisis. This is going to be our way of life in the future. We must have new thinking upon this problem. It is all very well to say, as I have heard it said by some of our greatest industrialists: "We can never go hack to the old ways of the past. We are living in a new life." People sit around in meetings and say that kind of thing, and then go back to their various parts of the country and lay their plans to make sure that no silly things like changes are going to happen in their lives. What we need, as the noble Viscount said, is a greater concentration upon those industries which can contribute most to our export market. In the second of his "Seven Pillars of Wisdom" the noble Viscount said, I think, that "sentiment must go by the board." That is true in this regard, and Her Majesty's Government must be proof against the industrial pressure groups that want to keep alive, or to be kept alive, by the allocation of materials that can ill be spared, just because those groups have been in existence for so many years in the past.

I agree with the noble Viscount about Lancashire. It is a hard thing to have to say, but it is true that the Lancashire textile industry will never play the part in this country's exports that it has done in the past. I do not know what the optimum figure will be; it may be 60 or 70 per cent. of past production. But again, as the noble Viscount quite rightly said, what we have to bring to Lancashire is diversity of industry and to do this we shall have to use the development area technique. We have to bring in industry. We must bring in and develop in Lancashire the engineering industries, because it is in those industries that I see hope for the future. It is significant that those industries have contributed 50 per cent. of our total exports since 1945. In 1938 the total exports of the engineering industries in this country were £100,000,000; to-day they are £1,000,000,000. That is the growth. We must see how far we can expand our engineering industries. That is the one great block of industries in which we can lead the word. How right the noble Viscount was about jet development! Here is something which can be exported. Look at the conversion value of a Comet airliner. That is one of the great factors we have to take into consideration in planning material allocation.

My Lords, I agree also that future markets are going to be held only by concentration on cost and price. I have no fear that we cannot battle with the buyers, on grounds of equality with our competitors. Cost and price are the things we have to watch. We must have delivery of our heavy engineering, and also quality in our exports. I am afraid that in an attempt to cheapen the price of their goods, some of our manufacturers have cheapened their quality. Apart from America, we have to look to Western Germany as perhaps our greatest competitor in the world of engineering. May I as an example take one industry that has contributed much to our exports, an industry with which I am not unacquainted—the motor industry? Its exports last year were £317,000,000–12½ per cent. of the nation's total exports. Our motor industry exported about 77 per cent. of its total production. I think we should pay tribute to one of the principal firms in this country, the Ford Motor Company, for making a very bold move and reducing its prices. That company has not waited to be driven into reducing its prices, and I think our congratulations are due to that far-sighted man, Sir Rowland Smith, and to his colleague, Sir Patrick Hennessy, for doing that. I hope that their lead will be followed by all the other manufacturers.

But now we come to a rather serious point. The motor industry is an example of the utilisation of capacity and of its effect upon cost. The motor industry in this country has a capacity of, approximately, 1,000,000 units a year. It is running to-day at only just a fraction over 60 per cent. of its capacity, and the reason is shortage of materials. I intend to come to that particular problem in a moment, but I want to put this to the noble Viscount, especially in his capacity as Minister responsible for materials: Are we not, in some cases, trying to spread our meagre amount of butter too thinly over too many slices of bread? That is one of the things of which I am afraid. I am afraid that we are so conservative that we want to retain for the sake of tradition industries which are using materials but which are going to play no part in the solution of the problem, or help us in the struggle we are having.

I am very glad the Government have taken in hand this matter of conversion value, because it is a great factor. I hope they will not be pushed around. I hope the noble Viscount will not be pushed around in his capacity as Minister of Materials, as I sometimes think the Chancellor of the Exchequer was pushed around in regard to his Budget. We must be very firm on this question of conversion value, because it is one of the matters we have to look to. Let me give another illustration of conversion, which the noble Viscount might like to think about. I understand that we have exported somewhere in the region of 230,000 to 250,000 tons of tinplate. Our food producers are screaming for containers. The conversion value, the total value of a tin of biscuits to the value of the amount of tinplate in that tin is twenty-one times. That is very high. Let me turn to ancillary uses. Every year for seven years after British motor vehicles have been exported, £30,000,000 or £40,000,000 worth of spare parts will need to be exported. My Lords, those are very valuable considerations.

When we talk with trust, confidence and hope about expansion in our engineering industries, then, of course, we look to steel. I am delighted with, and welcome, the plans of the steel industry to expand their output to 20,000,000 tons. I have never subscribed to the theory that we in this country might have a surplus of steel. On the day we have a surplus of steel in this country we shall be bankrupt. We must use our engineering industries to the greatest possible degree and therefore we must produce as much steel as we can. But, as I see it, the problem is, from where are we going to get the ore?

A little while ago, in the early months of this year, I took a holiday in Australia. During my journeys, when I was in South Australia, I went to the Iron Knob, that huge mountain of ore 1,014 feet high, comprising millions and millions of tons of ore having an iron content of about 65 per cent. The ores we in this country are using average in iron content only 40 per cent. I was taken right to the top of this 1,014-feet high knob, and from there I could see to the horizon thirty miles away. I saw nothing except scrub and two other iron knobs which had not been touched. There were millions of tons of iron ore in them. Throughout the time I was in Australia, whenever I met anyone in authority, politicians or industrialists, I said to them: "Here are we in Britain, trying to carry out an immense rearmament programme and at the same time to keep up our exports. We are scraping the barrels of Africa and Scandinavia for any ore that we can get. We are going to the extreme cost of obtaining the help of our American friends to divert shipping to bring ore from Africa to our country and return to America in ballast. Why cannot we have some of this ore which is here in Australia?" I was given many reasons, but not one which carried any conviction to my mind. I have an unhappy fear that a very large proportion of the Australian people are so obsessed with the idea of developing their secondary industries that they are losing sight of the fact that this ore would be a grand export and an immense help to this country. Perhaps, at some time or other, the noble Viscount will look into that point. If he does I am sure that your Lordships would very much like to know the results of his investigation.

Where are the markets? I must confess that I have never held a Very optimistic view of our successes in the dollar market. I think that in this connection we have to face some very hard facts. The Chancellor of the Exchequer said that the slogan of the future should be: "Trade as against aid." I would say that it has got to be "Trade or aid," because I have always been of the opinion that if America had taken a wider view of her responsibilities as the greatest creditor country in the world, and had lowered her tariff walls and her customs barriers to the imports of European and sterling area goods, we should never have required anything like the amount of Marshall Aid which we have had in the past. One does not have to tell this to the American Administration. President Truman has said this many times. It is Mr. Acheson's daily song. The Report of the Presidential Commission, published only the other day says some pertinent things, to the effect that this American economic isolationism has got to stop. Every informed member of the Administration says this. I am afraid that what we have to try to do by some method—I should not like to say how—is to convert Wall Street and American big business. Unless they do as the Presidential Commission's Report says, abandon their economic isolationism, accept imports on a much larger scale and work for a greater measure of economic cooperation, then Americans are going to sadly rue the day.

But where is the alternative?—and come now to the sterling Commonwealth. I am unhappy, very unhappy. I am unhappy because not long ago we had in this country a Sterling Commonwealth Finance Ministers' Conference, and immediately that was over—and we have had no official communiqué on the results of that Conference—we had these appalling cuts of United Kingdom imports into Australia. I know that perhaps I am now treading on somewhat dangerous ground, but I think these things have to be said, because restriction of imports is no good to Australia and it is no good to the sterling Commonwealth. The right answer is expansion of Australian exports. But when I was in Australia I was appalled to see the growth of high-cost secondary industries, with the high-cost selling that followed them. I was appalled to see the herding of the population. Over 60 per cent. of the population of Australia is herded in the big cities. Moreover, some of the costs of these secondary industries are equally appalling.

Let us be frank about this. I listened to every word spoken in public by the Australian Prime Minister when he was in this country, and he made some very fine speeches. But speeches are not deeds, and I am afraid that I can see every sign now that the result of the cuts in imports of British goods into Australia has been to give a fillip to these secondary industries. And what will happen next? They will want tariffs; and the whole vicious circle will start over again. Let us not blind ourselves to the fact that in the Australian Commonwealth Government there is a very strong protectionist group. What part can the Commonwealth countries play? In the course of a speech which he made at the Central Hall when he was in London Mr. Menzies asked, were we to set out on a lonely journey, or were we to try and travel together? He went on to say that the real question was how we reconciled our various individual ambitions and policies so that the strength of each contributed to the strength of all. The noble Lord, Lord Rennell, said that we are the bankers of the sterling area, and in the sterling area lies the largest trading community in the world, and in the Commonwealth sterling area lies the one hope of getting this world economic disequilibrium put right. Until we get the Commonwealth sterling area right, I do not think we shall make much imprint upon the American economy.

One other point, and this is my final one. Just take this matter into consideration. Before the war, Australia exported about 5,000,000 sheep and fat lambs a year, and about 1,000,000 quarters of beef. Last year, the export of sheep and fat lambs was reduced to under 1,000,000, and that of quarters of beef to under 300,000. And all the experts in Australia to whom I spoke told me that if this neglect of the primary industries of Australia went on; if the population continued to rise as it is rising to-day, at the rate of 3 per cent. per annum; and if they consumed as much meat per head as they are consuming there to-day, in six years' time Australia would be importing meat to feed her own people. Is that not a stark tragedy of the neglect of primary industries and of the insane goal of self-sufficiency which has taken hold of all these countries? They cannot be self-sufficient. Even America cannot be self-sufficient. I hope that as soon as they possibly can the Government will have a conference of Commonwealth Prime Ministers to tackle this problem. If the noble Viscount, Lord Swinton, has anything to do with this Conference, I hope he will talk to them as plainly and as bluntly as he has talked to us this afternoon.

5.21 p.m.

VISCOUNT SWINTON

My Lords, this debate has shown so much agreement that it is hardly necessary for me to speak, by leave of the House, for more than a moment in answer. Certainly it has been full of practical and constructive suggestions. All that my noble friend Lord Rennell has said on the financial side I shall certainly take to heart, because I agree with him that restrictive measures like raising the bank rate are always more effective if we take them first, and are the only people doing it. I am not being polemical when I say that I think it would have been better if we had taken that as one of the measures a good deal earlier than we did. I think that possibly we have come so near together that even my noble friend Lord Pethick-Lawrence, who introduced this Motion, may agree that it is sometimes necessary, if we are to restrict credit, to use the only machine by which credit can effectively be restricted, while at the same time I would agree with him, as my noble friend Lord Rennell has to-day, that we have to watch the restriction of credit to make sure that it does not obstruct productivity that we really need. That is the balance which we have always to try to preserve.

My noble friend Lord Hawke said that the diversion of credit was necessary and that the diversion of things and men was more difficult. I have always thought it possible for us to rely too much on purely mechanical planning about what we can do with manpower. After all, manpower is not machine power. We are dealing with the human element: people are attached to their homes and are not likely to move if there are not new houses into which to move. That is why housing is bound up with the production problem. It came as a revelation to me to learn from the Ministry of Labour that there has been a remarkable success in the new technique of operating the order under which all engagements have now to take place; that there has been a remarkable success in the upgrading of people and in persuading firms to make do with fewer skilled people than they think they need. We did it in the war and industry is learning to do it again.

It is often said that people can do only one job, but I think most people are like Cabinet Ministers: they can do quite a number of jobs. People said that it was no good taking industry into Lancashire because the Lancashire people would work only in cotton. But that was nonsense. I took industries into Lancashire before the war, and I remember that when there was a short boom in the cotton trade at the end of the war, and it was a question of turning out textile goods for the immediate stifled demand of the world, people were anxious about whether we should get girls who had gone off to munitions to come back to cotton. But they did. I believe that it is nonsense to think that girls as efficient as these Lancashire girls are could not equally turn to other industries, if there were the opportunity, and given a small highly skilled staff. The project of introducing light industries into Lancashire is in its early stages. Those of us who have been through these diversion problems in two wars know that in the highly technical industry of to-day, while a skilled man is worth his weight in gold, the number of highly skilled positions is much less than it used to be.

In the distribution of materials we are now learning a great deal more about which industries are the most deserving and most necessary. When we take the example of steel allocation, probably a great many mistakes were made at first in sub-allocation. No doubt I made mistakes in the broad allocation, and when it came down to making sub-allocations among 30,000 firms, inevitably mistakes were made, and there was not enough to go round. The whole object we have in mind is that materials shall go where the need is greatest; that is where they can fulfil the most useful purpose. We are learning a good deal about what individual firms are able to do in export.

One hopeless thing about controls is that they must be imposed on some basis, and there is always a tendency to fix controls on the basis of what an industry did in 1938. We might as well control on the basis of what they did in 1838 ! We are trying to get away from that as well as we can.

We are learning a good deal about conversion value. The noble Lord asked why we were giving so much tinplate as tinplate, because it has a low conversion value. I could not agree with him more. I suppose that I should not say this, but the noble Lord knows that I do most of these allocations. I started with a prejudice against the allocation of tinplate as tinplate, but I soon discovered that we do not live in a nice world, where everything is free and goes through the ordinary process of trade. I discovered that half the trade we do is on a barter basis, and I had to allocate tinplate because, as part of a bilateral agreement with some country, tinplate had to be sent so that we could get a commodity we needed. In some cases tinplate had to go to countries in order to pack the food which we were to receive under our contracts with those countries, in addition to getting the food at a particular price. I also discovered that there was this valuable dollar trade in food such as biscuits and confectionery. I can give the noble Lord an assurance, without revealing detailed allocations of tinplate, that I have given every ounce of tinplate that can be spared for the export trade.

With regard to iron ore in Australia, I think probably the answer is freight. I do not know how near the coast this iron ore is. In dealing with iron ore, freight is most important, and it is a long way to bring iron ore from Australia to this country if it can be got from Newfoundland and Sierra Leone; and I know, going a little further up from that special port, that there is a large new field of iron ore which can be developed. All these things are worth considering. It is common knowledge that we are all extremely anxious to have this wider economic and general Conference, and I sincerely hope that it will not be too long before it conies about. It is practical matters of this sort which must then be considered. Taking the fairly long view, with the currency problems that we are going to face, it may well be worth while developing something within the Empire, although, on a purely currency basis, if all currencies were equal, it would not be.

LORD LUCAS OF CHILWORTH

I do not want to detain the noble Viscount, but he will agree with me that we have had to do some rather uneconomic things, such as importing coal from America.

VISCOUNT SWINTON

I quite agree; and we do not want to have to do that again.

The noble Lord referred finally to a very wise Report made to the President of the United States, and said: "I think you have got to convert Wall Street." Wall Street might not be so hard to convert. I think the wise men who wrote that Report for the President must convert Main Street, rather than Wall Street. I am glad to say that most of them are not isolationists in foreign policy to-day, but it is natural, when it comes to domestic politics, that they are apt to be a little isolationist if their own industry is out for a moment.

There is no real, ultimate solution to this problem unless a creditor country becomes an importing country; and here is the only creditor country in the world, recognising it with extraordinary generosity in gifts and loans, and now in security aid. Yet the much more obvious way of doing it is by carrying out mutual trade. The closer we are together, the more we can talk in this friendly way. But it is much easier to grow up gradually as a creditor country over a hundred years, than suddenly to drop all your old habits and become a creditor country overnight. That is all I have to say, except this. I feel that this has been a remarkable debate. I do not remember a debate on this subject in which there was such unanimity and so many attempts at constructive suggestions. I certainly have learned much from the debate, and I think it has shown a unity of counsel and purpose which augurs well for us in these difficult times. I thank the noble Lord for having introduced the Motion.

5.37 p.m.

LORD PETHICK-LAWRENCE

My Lords, it only remains for me to say that, in my view, we have had a most enjoyable debate, and I hope that it may have fruitful and practical results. If the numbers taking part and listening to the speeches have been few, I am sure that they have made up by their quality for the lack of quantity. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.