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I agree with much that was said by the hon. Member for Smethwick (Mr. Gordon-Walker). I found his speech very interesting. I do not agree that the miscellaneous items which are going to provide the surplus this year take any money out of the people's pockets. These items are simply transfers of balances that are in other accounts coming back to consolidated fund. I was very glad to hear the hon. Member admit that there is an inflationary potential. I was sorry that the hon. Member for Chesterfield (Mr. Benson) denied it because, like all other hon. Members of this House, I have a great respect for the hon. Member's financial knowledge. I thought that he went a little wrong when he said that there was no inflation present today.
Several times yesterday the Chancellor of the Exchequer used the phrase, "I am going to speak frankly and conceal nothing from the Committee." I must admit that those words always put me on my guard. I was particularly unhappy when he began his passage about our overseas position with that opening gambit. He wanted us to believe that our finances can be divided into two separate realms. He seemed to say that at home we are in the money; he nearly had the courage to admit that abroad we are going bankrupt. This separation of our finances into two spheres does not correspond with reality. Great Britain is more dependent upon imports than any other country in the world. It can never be right to weaken the will to work of our own people by telling them that the position is satisfactory at home when, in fact, it is critical abroad.
The Chancellor did not tell us exactly when the American and Canadian loans will run out. The precise date is not important compared to the certainty that these credits will be exhausted long before our exports are large enough to secure a tolerable standard of life for the British people. We are not going to be able to pay for the imports necessary to keep body and soul together. The reasons are beginning to be well known outside this House. We have wasted 20 months on an unplanned Socialist honeymoon. Our exports had lost their buoyancy even before the fuel muddle robbed us of any chance of meeting the 1947 target. The prices of almost everything which we buy from abroad are steadily moving against us. The output of food from our own soil fell last year and must fall again this year. The gap that separates what we must import from what we can afford to import is now no longer being closed; in fact, it is getting wider.
I want to put the matter bluntly: When the dollar loans are exhausted, either we must again borrow heavily or we must go hungry and unemployed. That is the cloud on the horizon which will draw nearer every month, darkening party politics and threatening our very existence. I cannot believe that exaggerating the little that was achieved in 1946 is a good way to help this country to ride that storm. The Government's methods of flattering and buttering the public have the very opposite effect. The very reason why we now need a change of heart and a revolution in effort is because the last 20 months have achieved so little.
There were times yesterday when the Chancellor talked in that self-satisfied strain. He was far more self-satisfied on the wireless. The comment in my-household was; "If the Socialist Government have done as well as that, there is no need to ask us to work harder." That was actually the comment made to me at breakfast this morning. I will give one example of the Chancellor's attitude. He bragged about the 200,000 overtime babies. He did not mention that that is one of the few forms of production for which no licence or permit is required. That is a moral which should be drawn. He did not mention either that those children will have to be housed, fed, clothed and provided with imports by the working population for 16 years. We all rejoice that they have been born but the great questions remain, From where in 12 months' time, are they to get their food? Will there then be enough raw materials to keep their fathers and mothers fully employed? Those are the great anxieties which, as this summer wears on, will submerge all other problems. Shall we borrow again or shall we go hungry?
Before I come to the financial aspect of that critical dilemma I want to say one word about the size of the gap to be bridged. The Chancellor admitted that the estimate of our import requirements was badly wrong in the White Paper. It was very much too low even at the time that the White Paper was drafted, which was before the fuel crisis. The demand for imports is like the demand for electricity; it has been greatly stimulated by the redistribution of wealth, which is a good thing, and by the inflationary policy of the Chancellor, which is a bad thing. Wages are up 65 per cent. over prewar, old age pensions and social benefits show sharp increases, while the volume of savings in the hands of the public is much larger. All those increases in money incomes and in capital create expectations of a fuller life.
The Committee should not accept the Government's estimate for imports which, like their target for coal production, was pitched so low that it implied a swindle upon the general public. We ought not to hide from the people of this country what it means in imports if their hopes are to be fulfilled. Even assuming a much more vigorous policy for British agriculture than we have had up to now—and I have no faith in that assumption—I reckon that the import requirements of this country are at least £250 million more than the White Paper target.
When I look on the other side of the gap I cannot believe that we can attain the export target of £1,200 million this year; indeed unless something like 220 million tons of coal are raised in the next coal year, and unless the whole energy and temper of the country are roused, I see no reason to think that we shall do better in 1948. I estimate the export shortfall in 1947 at £150 million. The gap which should be the measure of our problem between exports and imports is therefore not the £350 million of the White Paper, but at least £750 million. I put it to the Committee as a serious estimate. I hope that the Minister who is to reply to the Debate will give reasons in detail if he disagrees. This gap is the key to our present difficulties.
What have the Government done to prepare for the coming foreign exchange crisis? They began well by borrowing 5,000 million dollars from the United States and Canada, without which our rations would have been cut to ribbons. They were only justified in paying the very heavy price for that breathing space if they had made it their first duty, the very centre and mark of their whole economic policy, to create conditions in which Great Britain could stand on her own legs when the loans were finished. For such a policy there were two great and obvious principles, to avoid inflation and to stimulate production. These should have been the twin principles of all the action of His Majesty's Government from the day they decided to borrow from America. The world can now see that they have not followed those principles.
I wish this evening to deal with one aspect of the failure of His Majesty's Government: the financial policy of the Chancellor of the Exchequer. The Chancellor of the Exchequer is the traditional guardian of British credit, but this particular Chancellor—I ask the Committee to note this point—takes a nineteenth century view of the definition of national credit. By what test should the credit of a nation be measured? By the rate of interest at which His Majesty's Government can borrow from themselves or from their servants, the banks? Or by the value of our money when it is offered at home and abroad in exchange for goods and services? The only genuine test is not the yield of Government securities but the purchasing power of the £. But we find that the Socialist Chancellor of the Exchequer has put a programme of crushing expenditure and his own personal ambition to lower the rate of interest in front of the value of the £ and in front of the credit-worthiness of Great Britain. He has been intellectually blind to what he has been doing. He is like an ostrich: he has stuck his head into his own paper money and seems not to believe that the rest of the world knows what he is about.
The Committee will have noted that the right hon. Gentleman was silent about the main facts of the monetary history of the past financial year: £800 million have been added to the deposits in the banks. £60 million have been added to the note circulation, and what is perhaps as important, there has been a sharp rise in the daily clearings of cheques between the banks. In other words, the Chancellor forced the public to hold a much larger stock of money, the public chose to turn over that stock more rapidly, and even before the fuel crisis there was no increase in the supply of goods to keep pace with the swelling volume of cash and credit.
I would remind the Committee that a large proportion of the goods which were sold to the public last year were obtained with borrowed money from America. The sale of those goods in our shops is an instrument of deflation, taking sterling out of circulation. The Committee may well ask themselves what will happen when this great safety-valve ceases to function. How, then, will the Chancellor finance his items under the line of capital expenditure when he is no longer receiving enormous sums in sterling from the public, against which he now pays out nothing? The only answer which the Chancellor can give to these charges of inflationary finance is that he relies upon controls and restrictions to conceal and to check the danger. We on this side would much rather that inflation was dealt with in this way than not dealt with at all. We would say of a man who has broken his leg that it is very much better to put the leg in splints than to do nothing about it, but it would be very much better still if the leg had never been broken, because once the man has met with the accident, there is no knowing whether he will ever again be able to walk with his accustomed vigour and freedom. We say of the Chancellor's financial policy that it is an unnecessary injury to our economy, and we cannot tell—no hon. Member can tell—whether British industry will ever again recover from the consequential treatment of controls and restrictions.
The Committee will look for causes for this increase in cash and credit since the war ended. I feel sure hon. Members will agree that the two most powerful have been the high level of expenditure and the cheap money policy. My right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) dealt faithfully with the high level of expenditure, and I want to add only a word or two about the cheap money policy. I understand the temptation to which the right hon. Gentleman the Chancellor has yielded. Here, for the first time in British history, is a Chancellor, owner and master of the Bank of England, inheritor of Lord Keynes' monetary discoveries, and able to practise the new technique behind the rampart of the most efficient exchange control in the world. No wonder this particular Chan- cellor fancied himself as the boss of a concentration camp of investors. How he must have chortled to think that these investors, unable to escape the cage of sterling, would have to- accept the domestic rate of interest he was pleased to offer. It all looked so easy and so enjoyable being cock of the gilt-edged market.
But the right hon. Gentleman forgot something. He forgot that a great many of these investors can still choose to hold cash rather than Government securities, and they can choose to invest the proceeds of Government securities which they no longer wish to hold in other securities and in other goods. That, in fact, is what has been happening. The more blatant pressure he had to use to lower the rate of interest, the more the preference for liquidity and for other forms of investments grew. The Committee will be aware that the methods employed to persuade holders of Government securities to accept lower yields have increasingly been the methods of the racecourse and the bucket shop. Long-term investors have been deliberately turned into short-term speculators. The Chancellor has been the chief tipster on the Stock Exchange He has incited Tom, Dick and Harry to join him on the merry-go-round of rising capital values. He has out-manoeuvred the widow and the trustee by subscribing to his own issues. We do not know what proportion of debt is now held by Government Departments.
To this stock jobbery the final result is not in doubt. The British investing public the most discriminating and experienced in the world, and when a Chancellor of the Exchequer broadcasts to all and sundry that gilt-edged securities are going to be as speculative as mining shares, the public is not slow to take the hint. They realise that a great game is on between themselves and the Treasury. But what the right hon. Gentleman has not realised is that in the end the public must win this game, for when they choose, they can stay out of the market, whereas all Chancellors are in it up to the neck now and forever. It is hard to measure or exaggerate the harm which has been done by the cheap money policy, coupled with high rates of taxation, to the good character of the investing public.
Hon. Members on this side of the Committee observe that the enormous powers of the Treasury have been used for the wrong purpose. These great new powers—and they are enormous since the discoveries in monetary technique—might have been used, and would have been taxed to the full, in keeping the value of the £ steady. That was the primary objective. Wise monetary action could have achieved this great advantage, and as a result the controls and restrictions could have been limited to genuine shortages of supplies. But what do we find? We find that the Socialist Chancellor has mobilised these great powers for the secondary objective of making scoops in the gilt-edged market, and the nation has had to pay a price not yet to be reckoned for his fun and games. Controls and restrictions have had to be multiplied and increased in severity, as every hon. Member knows, simply in order to keep inflation in check. Cheap money is a good thing, for the reasons which the right hon. Gentleman gave yesterday—all of us on this side of the Committee agree with that—but no political doctrine demanded that this policy should be pursued at so disastrous a rate and in so demoralising a way. The harm can never be undone, but even at this late hour we ought to have a firm assurance that no more new money will be created to enable the Chancellor of the Exchequer to play another round in the gilt-edged game. If we do not get that assurance, it will not be possible for the Government to persuade industry that the controls and restrictions which now hamper recovery can ever be removed.
I said in the House some weeks ago that planning for increased production is not possible against a background of inflation. I know I am right. No Government of whatever party could organise the scarce resources of a country with a view to abundance if all the time they were under the threat that unless everything is tightly controlled, the level of wages and prices will get out of hand. It follows that we shall not be able to prepare for the day when the loans run out unless the extravagance and caprice of this Chancellor are replaced by some more prudent, sensible finance, designed not to cause a great deflation in prices—I agree entirely with what my right hon. Friend the Member for the Scottish Universities said on that matter—but designed to bring stability into our monetary affairs. That is a prerequisite of recovery.
I can now return to the main question of what will happen when the loans run out. When there are no dollars except those which we can earn with our own exports, who will then take sterling and add it to his balance in London? On this point I wish to put an important question to the Government. In the period immediately following the exhaustion of the American loan, is there any prospect whatever that we can secure a volume of imports from soft currency sources which will enable us to maintain anything like our present rations, or anything like our present level of employment? Is it a fact that His Majesty's Government have already considered this matter and, rather than face the crushing cut in food and raw materials which they see coming, are going to ask America for further assistance? I press that point. Have the Government made up their minds about the import breakdown in a couple of years' time, and have they not also made up their minds to ask America for another loan?
We must have an answer on this point, because no Government have the right to keep the people in the dark about such momentous issues. Let them consider the time-table. The sands are running out. Even if they have the courage to tell us the whole truth now, how few months remain before we must either accept another American loan—whatever the terms may be—or find ourselves, without any adequate preparation, forced to endure the rigours of a siege economy. If Ministers remain silent—and I say this in all seriousness—they will be denying the British people the time and the opportunity to save themselves, and for that they will never be forgiven.
In conclusion, everyone of us has a duty to do all that he can to put our industry and finances on a sound basis before it is too late. Even if our eyes were opened and our hearts were stirred now, in April, 1947, we have scarcely time left to prepare for this, the greatest crisis in our economic history. I think the Committee know quite well what are the prerequisites of recovery: stable costs and prices, maximum supplies and wise use of scarce materials, efficient administration of Government and a general willingness to work hard. All these things are lacking today. Every single one of those four requisites is lacking today, and I would add that something more is required than economic and financial remedies for recovery. We have to find a political and moral basis upon which the great majority of the people of this country can come together and work out their own and their country's salvation. The Government make no attempt to find such a basis. They act as if they wanted the country to remain divided. One moment they threaten, and the next they flatter.
Free and intelligent men and women will not work hard for unconvincing flatterers, inefficient administrators and vindictive politicians. In all walks of life those men and women who are capable of leading our recovery are those who respect the truth and who respond when their own best efforts are not affronted and wasted by unnecessary controls and sectional party politics. I do not care who they are, labourers, foremen, managers, farmers or professional men and women, they all now want two things: they want an overall plan which measures up to our problem, and they want elbow room to do their individual best to carry out that plan. They see that the present Government, so long as they a-e tied to these narrow Socialist doctrines, cannot give the national lead for which they are looking. The sands are running out, and grave events will soon dictate enormous changes.