So are we. The Conservative Party did not claim that a great output of permanent houses could be achieved in the first two years, but we said that we would undertake to build 220,000 permanent houses in the first two years after the end of the German war. Of course, that was laughed out of court as hopelessly inadequate, and even the right hon. Gentleman the Member for Wakefield (Mr. Arthur Greenwood) called it chicken feed. Now, with great pride, the Leader of the House tells us that his Government have built 226,000 houses in the same two years, but he did not tell us—he carefully refrained from telling us—that nearly half that number—103,000 out of 226,000–were the "paper" to which he has just referred—prefabs. It is true that, in the two years from the end of the last war, housing was not conspicuously well handled. Indeed, it could not have been; it was handled by Dr. Addison. After two years had been wasted, he was summarily dismissed by Mr. Lloyd George for being incompetent. What did he do then? He did what all incompetent Liberals always do: he became a Socialist.
In his valedictory letter to one of his old retiring colleagues, the Prime Minister used the words that "age must give way to youth." Age, in the form of the right hon. Member for Wakefield, goes out, and youth, in the form of Lord Addison, comes in. The truth is that if the second world war had not come about, the immense strides to settle the housing problem would have led to a rapid solution. Let us give honour where it was due; it was due, above all, to the efforts and tireless labours of two men, Mr. Neville Chamberlain and Sir Kingsley Wood.
Then came the financial crisis. I hesitate to tread upon the ground of finance where even an Agag might prove too clumsy. I fear I am not competent to join issue with an expert knowledge in the more intricate parts of the Chancellor of the Exchequer's apologia. Since he made his speech last Friday, I have read it several times over carefully, slowly, and aloud to myself. But I am still—and that is the experience of other hon. Members on all sides of the House—somewhat befogged and confused. Perhaps I was meant to be. The Chancellor would have made a perfect conjuror. He has all the patter, all the quickness, and the rather dramatic personality that is required. But, all the same, dazed as one is by the flood of talk, and mesmerised by the rapidity of the sleight of hand, one yet has an uneasy feeling all the time that one's gold watch could not really have been turned first into a rabbit, and then into a glass of water. And one's dismay is all the greater when one gets to one's seat and finds that the conjuror has kept your watch.
Nor do I wish to enter into the battle of the economists. I thought, considering his doctorship, that the Chancellor was a little hard on the professors. Of course, Professor Robbins and Mr. Harrod are not so well informed as the Chancellor. They have only the sources of information which the Government choose to reveal. But I think "old wives' tales" was a trifle severe. Perhaps, I might put it this way. The Chancellor is better informed, but the professors are more objective. The Chancellor is counsel for the defence and the professors are expert witnesses, to be duly browbeaten, of course, by counsel. But, nevertheless, expert and impartial witnesses.
The truth is that the Chancellor, so it seemed to me, proved too much in his speech. First, like the magistrate in "Albert and the Lion' he gave the opinion that" no one was really to blame." He said that he had always been against convertibility, which he accepted" with very great reluctance." Then, on 8th July, he clearly thought
that he had made arrangements to avoid any substantial dangers which convertibility might hold for us, because he told my right hon. Friend the Member for Warwick and Leamington (Mr. Eden):
In a large measure, 15th July has already been discounted, and the additional burden of assuming these new obligations … will be noticeably less than many people may suppose."—[OFFICIAL REPORT, 8th July, 1947; Vol. 439, c. 2150.]
Than who supposed? The Chancellor? The professors? The Opposition? The facts prove that the critics were right, and that the Chancellor was wrong, for the rate of drawings, which were running at 75 million dollars a week in June, rose to 115 million dollars a week in July, and 150 million dollars a week in August—twice the rate. By mid-August the game Was up. Surely, a rise of from 75 million dollars a week to 150 million dollars a week was a noticeable effect. It was a devastating effect. It has involved the blocking of the last 400 million dollars of the loan, and, which is not at all a pleasant thing even under duress, it has involved the breach of a solemn treaty obligation by His Majesty's Government.
Nevertheless, the Chancellor tells us that there has been no leakage, voluntary or involuntary. I observe, as Professor Robbins points out very accurately, that some £230 million of the dollar credit was, in effect, used for the repayment of capital or of block sterling, not upon current account at all. This was a voluntary leakage, but was it wise, or was it well timed? Why at this particular moment was it necessary to make these payments to India and elsewhere? If there was no other leakage, and everything else happened according to the plan, why did the drawings double? It was not because the planned expenditure of the Loan, about which I will have a word to say later, had arranged for twice the amount to be spent on dollar purchases during those particular weeks. Perhaps the answer is to be found in the Prime Minister's statement in the Debate on the first day of this Session. He said:
The problem was very fully discussed … before we parted for the summer Adjournment. Since that Debate the world situation has deteriorated. Our own position has necessarily got worse with it. Indeed, the immediate effect of that Debate was to accentuate the dollar drain,"—[OFFICIAL REPORT, 21st October, 1947; Vol.443, c. 39.]
I am not surprised. I remember the speeches that were made in that Debate by the Government side and I remember the Prime Minister's own speech. It seems that, by the Prime Minister's own admission, his observations caused an immediate flight from sterling.
There used to be a Defence Regulation against the spreading of alarm and despondency. I do not know whether it still stands, but the Prime Minister's speech calls it a dollar drain. Once we had a Prime Minister with whose every speech the prestige and glory of Britain rose like a star. But, however low the Government have brought the national prestige, this leakage ought not to have been possible. Convertibility was not supposed to apply except to current transactions. The rate of legitimate current transactions ought not to have been very different after 15th July–15th August from what it was immediately before or after. Why, then, did the rate of loss double within a month?' Clearly, the Chancellor did not expect that it would, hence his reply. He would not have given an untruthful reply, and on 8th July he clearly believed that watertight arrangements had been made by the nationalised Bank of England. By the way, there will be no bankers ramp for Ministers to climb out on this time.
I repeat, why did the rate rise from 75 million dollars to 150 million dollars? Either there was a fatal flaw in the so-called "gentlemen's agreements," or they were broken. Perhaps it was that foreigners were allowed to convert gross sterling earnings, instead of net sterling earnings, which was obviously intended. Was it, perhaps, because of that, or was it that they were allowed artificially to increase their sales and to decrease their purchases so that they were able to take advantage of the golden opportunity of getting out of sterling into dollars? In any case, the very words "dollar drain," which the Prime Minister used, and which Mr. Snyder, the Secretary of the United States Treasury, also used, assumes a free movement of funds such as used to exist in the old days. I repeat that in theory there can be no drain on capital account. There can only be a transfer of legitimate current earnings.
Therefore, I think the House and the nation are entitled to a clear and simple explanation. The facts are admitted. There is no doubt at all about the character of the transaction, and I say that we are entitled to a clear and simple balance sheet which would give us the answer in an understandable form. No one can say that such a balance sheet was presented in such a form in the Chancellor's speech last Friday. Apart from the issue as to how much of the dollar loan has been allowed to disappear without direct benefit to ourselves, the Chancellor defended at considerable length the use of the loan. He denied indignantly the statement that the loan had been squandered, and he tried to prove this by explaining the percentages of the different commodities that we had bought such as food, machinery, raw materials, tobacco, films and all the rest of it.
Of course, the dollars were not squandered in the sense that nothing was obtained for them. Nobody ever suggested that. They were used to purchase commodities, as the right hon. Gentleman described them. Nevertheless, they were not spent according to any proper plan. If a man with a certain income purchases to a far greater extent than his income a large number of things which are desirable in themselves, such as motor cars, books, pictures and so on, the mere fact that those things have a value does not acquit him of the charge of having misused and, in this sense, squandered his resources. He, as an individual, has committed the mistake which we, as a nation, have committed, of living beyond his means.
None of the agility of the Chancellor can explain two simple facts; first, why the loan, which was confidently expected to last five years, has run out in little more than one year; and, secondly, why at the end of the Chancellor's second year of administration of our finances, our position is so infinitely worse than it was at the end of the first year. There is another vital point, for these are very serious issues. Apart from dollar shortages and our unfavourable position in terms of cash transactions, what about stocks? What is our inventory position? Is there more or less in the industrial pipeline? To what extent have we been de-stocking? Moreover, what is the new position to be? Even now that we have got rid of convertibility, or it no longer runs, it appears that the adverse balance still runs at a devastating rate. It is apparently the policy of the Government to budget
for a position in 14 months' time, when the total reserves of the whole sterling area will be reduced to £270 million. As "The Times" rightly observed:
Such a figure might be contemplated as the outcome of an unforeseen emergency; as the calculated aim of a fourteen months' policy, it leaves no margin for miscalculations.
We have had some experience of miscalculations. The truth is that the Chancellor's policy has been wrong throughout. His internal inflation and his unbalanced Budget have produced an unjustifiable complacency and a false sense of prosperity at home. The first stages of inflation are always more agreeable, like the first stage of any rake's progress. Experts disagree as to what should be the precise figure of capital investment. The Government have now decided to reduce the amount by £200 million per annum. But the totality of the amount directed to capital investment is not the only test. The chief test is its effectiveness, its qualitative value. It is selection, priority, allocation and a central plan which are required. In spite of all the talk about planning, there has been no central strategic plan at the centre. There has been continual tactical interference at the circumference with the whole of industry and commerce. The Government have spent two years at the wrong job. They have neglected their own job in order to interfere with everybody else's.
Before I leave the Chancellor's speech, I must make one observation about his attack upon Lord Woolton. With great and sensational emotion, the right hon. Gentleman brought all his heavy guns to bear upon the statement which Lord Woolton made at Stoke-on-Trent, in which he used the words, "days of over-full employment." This was answered in Monday's "Times" with his usual skill by my hon. and learned Friend the Member for the Combined English Universities (Mr. H. Strauss) who pointed out that the true and only begetter of these words was the Leader of the House of Commons, who used them at his Press conference on 20th August. If the Chancellor of the Exchequer had not been so anxious to convict my noble Friend, he would have been a little more cautious about his attack.
Of course, what both Lord Woolton and the right hon. Gentleman meant was this: While we all want to see a job for every man, We do not want to see such an inflationary state of affairs that there are three jobs waiting for every man. Indeed, the Government's own policy is to create artificial unemployment by withholding raw materials from certain non-vital industries. In that way, by the deliberate creation of unemployment, by making a pool of temporarily unemployed persons, it is hoped to man the more vital industries. Indeed, the old pressure of unemployment is going to be used to secure re-employment and re-deployment of the manpower and womanpower of the country.
In all these spheres of administration—and in these times administration is vastly more important than legislation—Ministers have failed, first as regards food, then fuel, then finance, and then the almost cynical mishandling of our Defence Services, on this side of the House we have always had an affection for the bluff and genial Minister of Defence, which has not been wholly dissipated even by the "piffle and poppycock" speech. Up to that day, or at any rate up to a certain day last spring, our affection was combined with respect. But we have not forgotten how the Socialist back-benchers called his bluff. He struck his flag within a few hours, in a most unsailorlike manner. As my right hon. Friend the Member for Woodford has just observed to me, he is more "Co-operative" than sailorlike.