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Orders of the Day — Budget Proposals and Economic Survey

Part of the debate – in the House of Commons at 12:00 am on 12th April 1948.

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Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk 12:00 am, 12th April 1948

The hon. Gentleman knows perfectly well what I said in the House last time I made an announcement. At the present time, with his knowledge of the clothing and textile industry, he will realise why it is not possible to add anything further to that statement just now.

I would like to deal particularly with the position of exports, because top priority has to be given to the job of safeguarding our foreign exchange reserves, which means that top priority has to be given to exports and to those import-saving industries, including agriculture, which reduce our dependence on imports. From the moment the war ended, but more particularly in the last few months, the Government and industry have gone full out for maximum exports. From the very low levels to which our export trade was pushed during the war as part of the inter-allied combined economic strategy, our export industries—which were short of manpower, short of materials, imperfectly converted from war to peace, and faced with the difficulty of finding new markets or recapturing old ones—had succeeded by mid-1947 in pushing the rate of our exports to a figure considerably above the pre-war volume. Last summer, with the increasingly serious position of our reserves, it became necessary to set our immediate export target at a still higher figure, and at a meeting which my right hon. and learned Friend addressed in the Central Hall last September, targets were set for every exporting industry showing the rates of export which they were called upon to achieve by mid-1948 and by the end of 1948.

I may tell the Committee today that industry, workers, managers, technicians and salesmen have responded magnificently to that call. Many of the targets are nearly reached; some of the targets have already been reached. A few, as our experience in the last few months has generally shown us, we cannot now hope to reach. My right hon. and learned Friend said last Tuesday that we have found it necessary to revise a number of the export targets in the light of changed conditions, in the light of the raw materials position, in the light of consultations with the industries concerned as to what they feel they can do, and in the light of our changed knowledge about the possibility of selling certain goods abroad.

In total, the targets now provide a rate of export, by the end of this year, of 50 per cent., by volume, more than in 1938. I have referred to the shortage of steel caused by the enormous requirements of the country which our existing steel capacity—even going full out and at a record level as it is—is simply inadequate to deal with. One of the things the right hon. Gentleman entirely failed to mention—entirely failed, it seems to appreciate—is the fact that our biggest shortage in 1948, greater even than our shortage of imported raw materials, will be the shortage of industrial capacity to produce the things we need most. Because of this shortage in steel, the export target figures for the engineering and other steel-using industries have had to be reduced by nearly 10 per cent. So have the figures in one or two other industries.

On the other hand, we have been seeing how far the export rate in other industries can be increased to make up this gap, not only to make up the deficiency caused by the steel shortage, but, especially, to provide additional exports in those industries whose products are finding a ready and, indeed, unfulfilled demand in dollar markets. The export targets are being increased for whisky, carpets, linoleum, scientific instruments, wires and cables, electric lighting apparatus, and machine tools.

The Committee, I know, are very well aware of the export effort we are asking from the textile industries. Cotton especially, but wool and rayon, too, have a special opportunity in dollar markets, especially Canada. The importance of our exports to Canada this year does not need emphasising. The cost of our food import programme from Canada this year is £100 million, and in addition to that, we depend on Canada for a very considerable proportion of our timber, non-ferrous metals, and so on. Our total exports to Canada last year were only £43 million, and it is absolutely vital to push up the rate of exports this year far above that figure. A special opportunity for exporting textile goods to Canada exists, partly at least, because of the difficult position in which Canada now finds herself in purchasing United States textiles at the rate she has been buying them in the past few years. We have an opportunity now of getting back the valuable pre-war Canadian market in cottons, which we gave up as part of the Allied economic plan in the war.

So we have called upon the cotton industry for a rate of exports of 100 million yards a year to Canada compared with 8 million yards last year. The rate at which we must be exporting piece goods to Canada at the end of this year is something like 15 times the rate Lancashire was achieving when the target was set by my right hon. and learned Friend in, the autumn. To make this possible we have had to increase the total cotton export target. As the Committee knows—and this is the answer to the hon. Member for Louth (Mr. Osborne)—unless we get a spectacular increase in cotton production this year, the diversion to dollar export markets from the home market may well mean not only failure to increase our clothing ration, but the grave necescity to reducing it.

The woollen industry, which has already made a big increase in production, is being asked to export 75 per cent. more woollen and worsted goods to Canada this year than last. The rayon industry, where production is far above any prewar record at the present time—the production of staple fibre is now 60 per cent. above what it was in the peak year of 1939—the rayon industry is also making an important contribution to dollar exports, and doing what a lot of other industries are doing as well—earning dollars in North America, and saving dollars by the no less important exports to Commonwealth countries that, but for getting supplies from us, would have to make further calls on the sterling area reserves to obtain what they need from hard currency areas.

One of the things on which we stand or fall as a nation this year is the success or failure of our drive for increased textile production and increased exports of textile goods. Textiles, for a century or more, represented a staple export of this country, and their inability to do more than they have been doing since the end of the war has been one of the main causes of our difficulties.

If that is true of textiles, it is equally true of coal. Our rising rate of coal exports, which my right hon. Friend the Minister of Fuel and Power will wish to discuss more fully tomorrow, is one of the most heartening things about our export position today and the increased production which lies behind it represents a triumph of industrial recovery to which the right hon. Gentleman did not make any reference at all, and an industrial recovery which could not have been achieved under any other method than that followed last year. That industrial recovery, perhaps, provides the chief contrast between the Economic Survey we are discussing today and the Economic Survey which the House of Commons debated a year ago. The right hon. Gentleman referred to steel. Does he think that steel production would have been what it Ills been this past year if the coal mines has been carried on as they were under the party opposite? The right hon. Gentleman knows perfectly well that coal was one of the biggest dangers to steel production a year ago. It does not need any words of mine to stress the importance of coal exports, not only for their value in terms of foreign exchange, not only for their value in terms of their bargaining power in trade negotiations, but also for the contribution they can make—and are making—to the economic recovery of Europe.

I hope tomorrow to publish details of the new export targets for other industries, and I do not intend to dwell further on them today. The combined target they represent, 150 per cent. of the 1938 volume by the end of this year, is not, as my right hon. and learned Friend said last week, to be regarded as an overoptimistic target. The Government are convinced that it can be achieved. But, equally, we are under no illusion about the size of the job it represents for British industry, not only in production but also in selling the goods when they are produced. In a few moments I shall come to the problems of industrial production for export and for the other necessary tasks set out in the Survey, but it would be highly unrealistic at this present time to talk about the export drive and export targets without dealing with the very great difficulty which many industries are having in selling their products abroad.

In some cases, these difficulties arise for normal commercial reasons—difficulties associated with price; in one or two cases, difficulties associated with quality; but, also, of course, from changes in fashion. My discussions with the woollen industry have convinced me that the biggest difficulty in achieving the target is the swing in world fashions right away from woollen cloths generally, and although there is a large unsatisfied demand for worsteds, the capacity of our industry on the worsted side is not big enough to fulfil all the export orders. I am not aware that any of the things the right hon. Gentleman proposed would rapidly do anything at all to increase the capacity of that industry, either. However, difficulties of a commercial character are only a small part of our exporting problems. With the exception of a very few markets, the main handicap over a wide field of our export drive today lies in the import restrictions imposed by Governments abroad—sweeping and crippling restrictions which, in the long-term plan, it is the aim of the International Trade Charter drawn up at Havana to remove.

Many of these restrictions arise, as do our own, from the serious foreign exchange situation, and for this reason it is, with the greatest difficulty that we can secure any relaxation of them. But their effects on British exports are probably, I think, more serious than on those of any other exporting country, because a highly industrialised exporting nation such as ours of Great Britain inevitably includes among its wide range of export goods many consumer goods—clothing, textiles, pottery, household supplies, and so on—which countries faced with severe exchange problems cannot easily be persuaded to regard as essential. Such goods must necessarily loom large in our export trade. Our industrial capacity is laid out on the basis of supplying just those types of goods, and we cannot easily—in many cases, we cannot at all—switch that capacity over to producing goods which are more in accordance with what overseas countries are demanding in an age of world shortage and in an age of enforced world austerity.

We have, of course, made representations, wherever it was thought possible by such means, to persuade foreign Governments to remove or relax those import restrictions, but our main hope of securing any easement in 1948 has lain in the bilateral trade negotiations which have been undertaken in recent months, and which have led to trade and financial agreements with 32 individual countries, covering practically the whole of our trade outside the United States and Commonwealth countries. I have already told the Committee some of the difficulties which we necessarily meet in these negotiations, caused by the fact that our imports are wholly or mainly made up of foodstuffs and essential raw materials, and by the fact that our exports for paying for these goods are spread over a wide range of goods often regarded as non-essential. So, in these negotiations it is a cardinal point for us to get the maximum opening of these markets for British exports.

Though I cannot pretend that we have been as successful as we should like in this matter, we have achieved a fair success, and in the agreement with Sweden—a country which had imposed particularly rigorous import controls—we have secured a very considerable relaxation of the controls over a wide range of goods; indeed, we hope for a total export this year of £50 million compared with £30 million last year. We are having further discussions with the Swedish Government to see whether we can do more to increase the flow of trade between our two countries. Similarly, the Swiss, Italian, Portuguese, Belgian and Finnish agreements all provide for a considerable opening up of the markets of those countries once again to traditional British exports.

The £10 million worth of general imports secured under the Argentine Agreement is useful, though I will not pretend for a moment that we regard such a figure as satisfactory. We should prefer to be able to pay for a considerably larger proportion of our imports from that country by our exports this year, and we shall certainly need to do that next year. But I can sincerely inform the House that it was the best arrangement we could get—or, indeed, which any other Government could have got in the present circumstances. [Interruption.] I am prepared to discuss that with right hon. Gentlemen opposite any time they like.

In contemplating the problems and difficulties which our export drive is encountering, perhaps it is a little easy and tempting to under-rate what has actually been achieved. I have already told the House that our actual rate of export in 1947—in spite of the shortages of manpower and materials, and in spite of the fuel crisis—was at a rate which, had we been operating against a background of pre-war conditions pre-war investment income, shipping income, ratio between import and export prices and so on—would have produced a balance sheet over last year considerably better than was achieved in far easier circumstances in 1938. Our export figures are, in fact, going up month by month. At the present time we are just beginning to feel, in the increase of goods actually sent overseas, the results of the increased efforts of last autumn and winter.

In January and February we averaged £116 million a month, which is about 125 per cent. of the pre-war volume of exports. In March, in spite of the fact that we lost several working days during the Easter holidays, the provisional figures of exports were over £120 million, which is not only a new post-war record, but, with the exception of the single month of July, 1920, the highest value figure ever recorded in this country. In fact, had March been a full working month at the same daily rate, our exports would have been over £125 million, and, allowing for the price element, would have represented a physical volume not far short of 135 per cent. of the 1938 figures. But these March figures had their dark side, too. Imports at £178 million were the highest for several months; and that, too, with the exception of last July and January, 1920, represents the highest figure ever recorded in all our trading history. So, in spite of the growing volume of exports, the adverse balance—and the need to reduce this adverse balance is the central theme of the Survey—remains still the biggest problem ahead of us.

As it is with our total exports, so it is with our exports to dollar areas. In January and February our exports to the United States were running at the rate of £5·7 million a month, and to Canada at £5 million a month: together the two were not only more than £4 million a month above the same period for 1947, but were over £1½ million a month above the figure for the fourth quarter of 1947. As such a high proportion of the sterling area essential supplies has still to come from dollar areas, with the high prices of dollar supplies, with the loss of our dollar investment income and dollar shipping income, and much of our sterling area dollar income, our gold and dollar reserves for the first quarter of this year—in spite of our increased rate of exports—were still diminishing at the rate of £147 million over the quarter.

We are making a special effort to increase exports to the dollar countries. Every industry in which there is still an unfulfilled demand in the United States is being looked at to see what more can be diverted there, including—though the hon. and gallant Member for Holderness (Lieut-Commander Braithwaite) will not cheer this—whisky. Ninety per cent. of our linen goods are exported, and all the orders from the United States are being fulfilled. The cotton industry, in addition to being asked to increase exports to Canada, has been asked also to boost exports to the United States. There we are aiming for exports at the rate of 30 million yards a year—four times the figure for last year; wool, five times the figure for last year, and four times the prewar figure; and lace, silk, rayon, clothing, hosiery, footwear, bicycles, and motor cycles are now making very considerable inroads in the United States. We all recognise the difficulties of selling private cars in that country, particularly having regard to price difficulties, but there have been striking advances in that field as well. In 1938 we exported to the United States 45 cars in the whole year; in 1946 and 1947, about 1,100 cars in each year; in January, 1948, over 1,300 cars in that one month—representing an annual rate of nearly 16,000. Machinery of various kinds, metal windows, sanitary earthenware, pottery, leather, wallpaper, china clay, books and works of art are making quite considerable additions to our dollar income at the present time.

I have dealt at considerable length with the problems of increasing exports, because that is our biggest job at the present time. But it is only one of the many programmes competing for our all too scarce national resources. To increase and maintain our exports we need to have a proper and full base of industrial production. We need especially to build up our import saving industries. In fact, we need a great production effort, going far beyond the export industries. It is indeed true that 10 per cent. more throughout industry will make the difference between success and failure in achieving the objects set out in the Survey. The Government and, of course, the Committee realise the difficulties, and indeed the frustrations, which beset so many of our workers and managements who are anxious to get the 10 per cent. more—and far higher figures—but who, for reasons entirely beyond their control, and the control of the Government, cannot do so.

Many of our industries are held back at the present time by shortages of materials. As the Survey points out, throughout 1948 we shall be short of many raw materials—of which, indeed, the whole world is short. [HON. MEMBERS: "No."] For instance, a world shortage of felled timber cannot but be felt by a country such as Great Britain, which today accounts, as it did before the war, for over half the world shipments of timber. Wood pulp, newsprint, paper, hides and leather are in short supply on a world scale. World production of many of these things is not up to prewar levels, and world demand is, in many cases, on a record scale. For one thing, there is the competitive consuming power of the United States operating at a peak level; also, there are nations in the Far East where tastes and the standard of living have developed, and rightly developed, which are now coming on to the world market for raw materials already in short supply.

It is not a question merely of imported raw materials. The Survey and the Debates so far have stressed the shortage of steel. The Survey stresses, too, the shortage of basic chemicals, yet those chemicals which are responsible at the present time for the worst shortages in industrial production—soda ash, caustic soda, and sulphuric acid, on which so many Questions have been put down—are being produced today at a record rate. Here again the problem is that before the war those industries were never laid out to meet the needs of a Britain working under conditions of full employment; and those industries which did foresee the growing demand could not proceed with their plans for development and expansion because of the war. To build up that capacity—basic chemicals capacity, as well as steel and electrical generating capacity—takes up a very large part of our industrial investment programme.

That takes not only materials and manpower, but, above all, time. That is why, if we are to achieve our national objectives, we have to plan and control the allocation of these essential materials on a basis of first things first. That is why we have to put on the many and detailed controls, to which the right hon. Member referred, most of which arise only out of shortage and the need to use our national resources on priority national needs. I want to assure the right hon. Gentleman about this right away, that some of these controls, but only a proportion of them, may well be required permanently as a means, in different conditions, of maintaining full employment and improving our social standards, but a very large proportion of them, whose effects and, indeed, vexations are often quite wrongly quoted as arguments against Socialism as such, will last as long as the conditions of shortage which give rise to them last, and not a moment longer. As the Committee knows, my right hon. Friend the Minister of Supply and I have appointed examiners of controls to examine and streamline controls where-ever possible, and in consultation with the industries chiefly affected work out alternative forms of control, which will make it possible for national purposes to be fulfilled with perhaps less difficulty and frustration for individual managements and workers.

I am sure that the Committee will realise the problems with which we are faced in the rationing and allocation of industrial materials. To mention only one of them, it is a fact that the materials which are required for some particular industry or productive process are allocated among the firms concerned on the basis of some percentage of their use of this material in a base period, say, 1939, 1942 or 1947. I do not seek to defend this method of allocation; in fact, I hate it. It acts as a disincentive to enterprise and efficiency. It holds back the expanding firm, and it frequently makes no allowance for new entrants. Except where special and complicated refinements are added to the scheme, it might well fail to give the materials to those firms which are capable of the biggest contribution to exports. I should like, wherever possible, to change that system, and we are changing it in a number of industries. The fact that in very many cases trade associations are insistent on its retention, is very far from being a conclusive argument for keeping it. I am sure that hon. Members opposite will not dissent from that. But, in so many cases there is no alternative.

To remove the control would lead to an inflationary scramble for materials, which might completely defeat the needs of all national services, and might result in the wholesale closing down of firms who did not have a special "pull" with the materials suppliers. We cannot afford, either on a short-term or on a long-term basis, to see such wholesale closing, together with the loss of manpower from industries. If I were to allocate, as I should like to do, some of the scarce materials to new entrants, whether ex-Service men or not, it would mean in many cases that existing firms, perhaps firms with a world reputation for their products, already operating with high costs at a low proportion of their capacity, would be pushed to an even lower proportion and even higher costs.

The right hon. Gentleman referred to what he called the "statistical famine" caused in steel distribution by some industries overstating their needs, or in some cases putting their needs two or three years ahead, thereby getting more steel than they needed and hedging against speculation. Suppose that we were to remove controls. Does he not think that a degree of statistical inflation and speculative inflation by industrialists trying to make certain of getting their supplies years ahead would not be far greater than it is today? Does he not agree that if we were to take off these controls, the chances of getting steel into the development areas and into schemes for expanding textile machinery capacity, into shipbuilding and into the export drive, would be far less, and that it would, in fact, simply go to the—