—the right hon. Gentleman says 9s.; I am prepared to stop at 8s.—and, as I was saying, at this point in the trade cycle, April, 1949, producing a Budget that contains no incentives to personal saving or personal initiative and quite inadequate provision for investment in industrial equipment. For a few months more the revenue will be buoyant because it is to be collected upon the profits of last year. During 1948 world prices were rising, and so were British profits. But those responsible for a cross-section of British industry are already predicting—and I have some experience myself—that there will be large and widespread declines in profits in 1949.
This change in the business climate is only another aspect of the demand for tax remissions advocated by the soft Budget party. Certainly there is less money about and there is less trade. If we were a self-sufficient economy, ringed round with a fence, cut off from the rest of the world, perhaps it might be possible to adjust matters by pumping more money into circulation. To put more money into circulation here, however, if it is done out of step with the other industrial countries, so that our prices are kept steady while theirs are falling, would cripple the export trade.
I was not satisfied with the Chancellor's remarks about the probable course of world prices. He was playing the long-necked ostrich and was hiding from himself the downward movement which has begun and was to be expected after three years of boom. The remarkable thing is that it has not begun earlier. How are we in Britain to adjust out-economy to a change which we cannot control? Taking a look round the industrial countries whose manufactures compete with ours is there a single one of them to whom we could say "Our British costs are more flexible than yours"? What other country has riveted upon itself so high a level of Government expenditure and such a leaden burden of charges as we have? Whatever we may think about nationalisation as a political principle the practical results are to raise the costs of industry and lower the receipts of the Exchequer. Again, the insurance and the taxation payments borne by British industry are higher than those in any other country in the world with which we compete.
Let us try to put this to the test. Those hon. Members, and there are many, who are familiar with trade, know that if the Americans or any other of our competitors, be it the Germans, the Japanese or any of them, lower their export prices 20 per cent. or 15 per cent. or 10 pet cent. we cannot follow them down. The fact is that British costs are today debited with more items that can neither be reduced nor shifted than any other costs in the world. It may be objected that it here and there we are priced out of one of our export markets we shall be compensated by falls in the prices of our imports. That does seem to be the view of the Chancellor. It certainly is not mine.
He spoke yesterday, significantly I thought, of the loss of dollar earnings to the sterling area arising out of falls in the prices of primary products. I should like to know more about that. What difference do these falls, that have already occurred, make to the estimates of the balance of payments in the Economic Survey? It is almost certain that those estimates were made up before the end of the year, and the falls in these primary products have taken place since that survey went to print. I very much doubt whether the balance of payments figures in the Economic Survey are worth much now. I see that in paragraph 57 it says:
… competition in export markets is increasing and there is no sign of any lasting slackening of demand for the primary products we import.
It would appear that the authors of the survey meant that in terms of our manufactures the United Kingdom will have permanently to pay more for its food and raw materials. I should like to know if that is the view of the Government.
As I see it, the essence of the matter is that we have to import food and raw materials much more urgently than our customers have to take British manufactured goods. Furthermore, the United Kingdom, of all nations, is badly placed to take advantage of falls in the prices of primary products. What we must pay for many of our imports has been fixed for months ahead, it may be years, by the clumsy methods of State trading. At this moment in the trade cycle it is anybody's guess whether the minimum prices in the Wheat Agreement will turn out to our advantage or not.
As we enter a period of world deflation we shall find that State trading is not such an attractive proposition. It may well be that even professing Socialists, who wish to avoid being brought to book for making losses, will turn back to private channels of buying and selling. Recently—and this is a very good example of what will happen —we have seen American industry get an advantage of several weeks out of a fall in the price of lead. Our manufacturers of paint and batteries have been handicapped. They do not even yet seem to have got the full recession in price. When the downward momentum of world prices gathers force that example will be repeated hundreds of times and every time it will be a handicap to British industry.
How do this Government propose to meet this change in the business climate? The Survey talks a great deal about reducing costs and improving productivity, but in the very vaguest terms. As the hon. Member for Stoke (Mr. Ellis Smith) said, the Government have no practical plan which could show results within the short period which we have to get free of our economic dependence. It may be that Ministers are relying upon bilateral agreements to maintain the volume of our overseas trade. That probably is the answer which the President of the Board of Trade will give on Monday. It makes me shiver to imagine what that right hon. Gentleman will do when the blast of falling prices strikes his card-house of bilateral agreements.
The hon. Member for Central Southwark (Mr. Jenkins) took up my right hon. Friend the Member for Aldershot (Mr. Lyttelton) about what had been happening in Belgium. Perhaps I can add a few words about the present state of Belgian industry. The Belgians wrote into their trade agreements lists of goods sufficient to keep their export industries busy. That is just what we are doing. But what happened? Their prices went ahead of those of their rivals; their franc became a hard currency; those who had signed the agreements with them could not, or would not, take up the export quotas of Belgian goods, and they had heavy unemployment in Belgium. If the hon. and gallant Member for Central Hull were here, I would tell him that shortly we shall go through the same test on a much larger scale. The question is how are we to come out of that test.
I want to say something to the Committee which is hard. I hope that hon. Members will hear my arguments before they dismiss them. In my judgment, His Majesty's Government have already lost control over employment policy. One hon. Member to whom I gave warning that I intended to quote him, the hon. Member for Dagenham (Mr. Parker), sees the storm coming and he comforts his constituents with the promise that a Socialist Administration will know how to spend their way out of unemployment. We should pay attention to the hon. Member for Dagenham. He represents in my generation the fine flower of Fabian intellectuals. This is what he is reported in the "Stratford Express" as having said on 11th March:
Vast working schemes were being prepared by the Government to be put into operation if a slump came. There would be plenty of work improving the roads and railways during a depression, and part of the Budget surplus was being set aside to finance it.
Of course, the hon. Gentleman was quite wrong about the Budget surplus. Last year's has been used up, and next year
there is not to be one. But I let that pass. That is not the important point.
The interesting point is that the hon. Member relies on Lord Keynes' technique of spending ourselves out of unemployment should it come. That technique cannot be used today. The Labour Government have destroyed the assumption on which it was founded. If they try, as the hon. Member for Dagenham tell us they will, to spend their way out of unemployment, they will spend themselves straight into a foreign exchange crisis. Lord Keynes' doctrine rested on a proposition which does not now hold good. He assumed that none of his measures to combat unemployment would be frustrated by any lack of essential imports. The hon. Member for Dagenham has completely forgotten that when the demand for exports falls off it can only be replaced with a stimulated demand at home if the necessary flow of imports of food and raw materials can be counted on.
What is now the position? Marshall Aid is tapering off. The gold reserves are as low as the sterling area can afford. British costs are rigid. The bilateral agreements are only pieces of paper. Any attempt to spend our way out of unemployment will result at once in a payments crisis. I find it hard to understand why the Lord President chooses to wait until next year for an election. I suppose it is as it was in ancient times —that the Gods make blind those whom they wish to destroy.