Sterling Exchange Rate

– in the House of Commons at 12:00 am on 27th September 1949.

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2.47 p.m.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

I beg to move, That this House approves the action taken by His Majesty's Government in relation to the exchange value of the pound sterling, supports the measures agreed upon at Washington by the Ministers of the United States, Canada and the United Kingdom which are designed to assist in restoring equilibrium in the sterling-dollar balance of trade for the purpose of enabling the economy of the sterling area to maintain stability independent of external aid; and calls upon the people for their full co-operation with the Government in achieving this aim, whilst maintaining full employment and safeguarding the social services. I am very glad indeed to have this opportunity of addressing the House as I am most anxious that every Member of the House and of the public throughout the country should realise the seriousness of the recent action which has been taken by His Majesty's Government in lowering the exchange rate of the pound sterling, and the extreme importance of our taking full advantage of the more favourable environment that has thus been created for our efforts to earn the dollars which are vital to the maintenance of our standards of living.

Despite the excitement and dislocation that must always accompany any substantial readjustment of the exchange rate between two major currencies—the whole operation may seem so simple and painless that it fails to impress its gravity fully upon the people. We were in a very grave situation before 18th September and we are still in a very grave situation—the difference is that now, for a period of time, we have a better chance of emerging from our difficulties than we had before the alteration was made, but provided, and only provided, that we take The right action.

We must make it abundantly clear to our people that what we all do now is of supreme importance and will in fact determine whether this alteration of the exchange rate is a futile and dangerous gesture, or the hopeful beginning of a new era of stability for sterling, during which we can gradually reach an equilibrium in trade between the dollar and sterling areas. As the decision to alter the rate of exchange was in fact made before the Washington talks it would, I think, be logical for me to deal with that matter first.

I would, then, propose to make some observations to the House upon the decisions arrived at in our meetings at Washington, before passing to what I regard as the urgent necessities of our attempt, in co-operation with the United States and Canada, to diminish the disequilibrium in trade between the sterling and the dollar areas. Last July, after the publication of the dollar drain figures for the second quarter of the year, I used these words in quoting from the communiqué of the talks in London with Mr. Snyder and Mr. Abbott: 'In this connection no suggestion was made that sterling be devalued.' And I added: And that, Mr. Speaker, I hope, is that."—[OFFICIAL REPORT, 14th July, 1949; Vol. 467, c. 688.] The question had not, in fact, been discussed with our American or Canadian friends, nor indeed have I been prepared to discuss it at any time with anybody except with my advisers and my colleagues in the Government. A week earlier, on 6th July, in reply to a supplementary Question, I had said: His Majesty's Government have not the slightest intention of devaluing the pound."—[OFFICIAL REPORT, 6th July, 1949; Vol. 466, c. 2160.] That was a completely accurate and deliberate statement made after consultation with and in full agreement with my colleagues, and in that intention I think that I was supported from all sides of the House. I might perhaps add the rather obvious comment that even if we had then had some future intention of altering the rate of exchange, which in fact we had not, no responsible Minister could possibly have done otherwise than deny such intention. To admit it would have been to have invited the speculators and profiteers to destroy our reserves.

Shortly after that I left the country and I did not return to take any part in affairs until 19th August. As soon as I then arrived back I reviewed the situation with those of my colleagues who had been particularly concerned with those matters during my absence, and with my advisers. The adverse tendencies which had already been noticeable in July, and which we had hoped might be checked or indeed reversed, were in fact persisting and it was certain that the visit of the Foreign Secretary and myself to Washington shortly afterwards would arouse further publicity on the whole question of exchange rates, upon which discussion was continuing, particularly in the Western Hemisphere.

In these changed circumstances, to which I will refer in rather more detail in a moment, we changed our intentions, and decided that we must take action but that it would not be wise or practicable for us to act until after our visit to Washington. Having taken the decision we started upon the necessary preparations which, with a currency as widely used as sterling, are somewhat complex and I think it is a matter of congratulation to the staffs who handled the matter that at no time was there any leakage of information as to our intentions.

Immediately the Foreign Secretary and I arrived in Washington, we communicated the Government's intention to alter the sterling exchange rate, in confidence, to our United States and Canadian colleagues. It was only at the very end of our Washington conversations on the following Monday, 12th September, that we indicated to them the sort of degree of alteration we were contemplating and it was not until shortly before I left, on the Wednesday, that I communicated to them the actual figure we had in mind. That is the sequence of events in Washington. It will thus be seen by the House that when we came to write and agree our conclusions in the communiqué which was issued, the whole group of Ministers in Washington had this factor in view, and it was indeed an essential though unwritten part of our communiqué.

The Government are under no illusion whatever as to the gravity of the decision they have taken, nor do they underestimate the effect it will have upon the life and livelihood of the people at many points. We appreciated that it was bound to have an impact upon practically every other national economy throughout the world, and our anticipations as to the effect upon other currencies have in fact turned out to be very nearly accurate.

It was because of this inevitable effect upon other currencies that we gave prior notice on the Friday to all Commonwealth Governments, and I particularly arranged for M. Petsche, the French Finance Minister, to have the information in Washington on that day. The other members of O.E.E.C. and other Governments particularly concerned were notified on the Saturday. I had personally notified M. Gutt, the Managing Director of the International Monetary Fund, on the Thursday evening, and at my suggestion he called a special meeting of the Fund for Saturday afternoon at which approval was given to our own and other proposed changes in exchange rates. It is really remarkable that with all these widespread notifications there was not any leakage of this information, and I wish to express my gratitude to all those in other countries who were informed and who maintained confidence so well.

I must now go into a little more detail as to the reasons for what might appear to some people as a rapid and even unjustified change of policy on the part of the Government. I am sure that I need not again elaborate the facts that I placed before the House in July last as to the rapid diminution of our gold and dollar reserves. That drain has continued as I then foretold it would and at the beginning of next month we shall be publishing, as usual, the figures for the third quarter, which are unlikely to show any substantial change in trend. The last few days since the change in the exchange rate will, of course, hardly influence that whole quarter. Let me therefore just recapitulate the figures. First quarter of 1948, a gold and dollar deficit of £147 million; falling to £82 million in the first quarter of 1949. The figure for the second quarter of 1949 was, however, £157 million, rather higher than a year earlier—so all our progress already made towards bridging the gap had been wiped out. This was, as the House knows, in great part due to a reduction in the income of the whole sterling area from sales to North America.

American and Canadian prices, which had risen more rapidly than ours after the war, were then falling more rapidly than ours, and as a result the sterling area sales in those countries were falling off. At first we still hoped to reverse that tendency by a greater sales effort and a further increase in productivity and a reduction in costs. But the July results were disappointing and the evidence as to sales and forward orders at the end of August showed a continuing decline. The hopes of a revival of our export trade were not, therefore, being realised and in the meanwhile our reserves were being further dissipated.

There was another factor of great importance. In the spring of this year an attack had been launched upon the exchange rate of sterling and this attack had been developed through the summer. As a result people began to doubt the rate, to speculate as to the likelihood of its being changed, and as a result business of all kinds fell off. Buyers postponed ordering goods, and others where possible postponed making payments, in the hope of a more favourable rate of exchange. North American holders in fact transferred into dollars as much sterling as they could as quickly as they could. These were factors which led to the increased drain on our reserves in the second quarter of the year, and that increased drain itself of course accentuated the tendency to regard sterling as overvalued.

There was some improvement in the situation as a result of the London talks with Mr. Snyder and Mr. Abbott and the Commonwealth talks which followed, but it was not so marked as to deprive this element in the situation of its importance. It remained a dangerous factor of instability which at any moment might flare up and again become serious in its effect. Finally, there was a progressive increase in the volume of overseas transactions in "black market" or "cheap" sterling, transactions which had spasmodically and quite seriously interfered with our dollar earnings. These dealings had the common feature that some goods in demand in North America and originating in the sterling area were used as a means of converting sterling into dollars at a rate of exchange below—and in some cases very much below—the official rate. We had long been actively countering, and had done a good deal towards stopping, this kind of traffic, but lack of confidence in the sterling-dollar rate of exchange provided fresh encouragement to this most undesirable trade; and we had to take some further steps to stop it.

It was after reviewing all the circumstances, all these points, and, of course, many others, including the effect upon our own standards of living, that we came to the conclusion that the developing situation demanded a change of policy; and once we were convinced of the necessity we did not hesitate to change our policy and act in a sense directly contrary to that which we had announced in July. We had, of course, exhausted the immediate possibilities of cutting down our dollar imports. There was nothing further that we could do in that direction without breaking our contracts and creating grave unemployment.

We had to take some immediate step that would enable us, before our reserves ran out, to increase the total of our dollar earnings by recreating confidence in the sterling-dollar rate of exchange and by making it clear that there was no gain to be derived from waiting for it to fall. That could only be done by a reduction in the rate of exchange. We had, of course, also to decide what new rate we would fix, and I judge, from the comment both in this country and, indeed, all over the world, that the rate we fixed was lower than most people expected.

Our first consideration was whether to adopt a fixed or, as it is called, a floating rate—that is, a varying rate which would be allowed to find its own level. If by a "floating rate" its sponsors mean to imply that all our exchange and import controls should be taken off and the pound allowed to find its own level, we could not possibly think of such a course. It would have consequences for our whole economy and social structure which are quite impossible to contemplate.

The only question we considered was whether the pound should be left to find its own level within the limited range of transactions which are at present permitted over the exchanges. Even on this narrower basis we decided that a floating rate would be impracticable. The general argument in favour—as I understand it—is that such a rate of exchange can act as a sort of shock-absorber to protect the internal economy of the country from inconvenient adjustments resulting from strains and stresses in our overseas balance of payments. However much there may be in that reasoning—and I think it is greatly exaggerated—I am quite sure that the arguments against are conclusive.

There is a most pressing need today to encourage and expand world trade and for that purpose some degree of stability in exchange rates is essential. Owing to the pre-eminent position of the pound sterling as a carrier of trade amongst the non-dollar countries, it is necessary—especially after a very large change such as was made last week—that the pound should set an example of stability so as to provide a firm anchorage for a large number of non-dollar currencies. Even from the point of view of our own exporters uncertainties—not as to small margins, but of considerable dimensions—in relation to every other currency in the world would be most unsettling and would damage our drive for exports. It would be another complication tending to throw our goods on to the home market. Similarly the cost of our imports would be subject to speculative influences and hence our cost of living, and that would place us in a very difficult position as regards wage and price stability.

It would further be quite impracticable to leave the rate wholly free and to disinterest ourselves in its changes. Apart from relatively slow adjustments resulting from the basic strength or weakness of the position of sterling, the rate would be subject to fluctuation based on speculation and other temporary factors and we should be compelled to intervene to steady it. That might be all right and quite feasible in normal times with adequately large reserves, but with the present abnormal times, economically, in many parts of the world, and reserves which certainly cannot be described as large, we should be most foolish to attempt to undertake such operations. I hope, therefore, that, without further elaboration of the arguments, I have said enough to convince the House that a floating rate was not practicable in existing circumstances. We therefore decided to have a fixed rate.

There were clearly two limits to be observed in fixing such a rate. First, it must not be lower than was necessary to achieve our objectives, and second, it must be low enough to be capable of being held and to make it quite obvious to all the world that there would be no second alteration. In arriving at the figure we had to examine the competitive level of prices for our imports into the dollar countries and other countries where they competed with dollar goods; the rate at which "cheap" sterling was in fact being dealt in in various countries and markets; and the general expectation of the rate that was likely to be fixed if and when we made an alteration.

We came to the conclusion that if we were to provide the substantial and unmistakable new incentive for our exporters which would place them in a fairly competitive position in the North American markets, we must go at very least as low as three dollars to the pound sterling, and probably a bit lower. So far as cheap sterling transactions were concerned, there was already evidence of a number at below three dollars to the pound. It will not probably be possible entirely to eliminate such transactions as long as there is an acute dollar shortage in the world, but it was clear that if a substantial stop was to be put on this very damaging traffic it would be necessary to go well below the three dollar rate. Finally, it was necessary to make it absolutely plain that this was not a tentative first step but a final and completed operation. We had to convince the world and our own people that we had without doubt gone far enough. I think in that we have succeeded.

It was for all these reasons that I have given that we fixed the rate at 2.80 dollars to the pound, that is, a 30 per cent. reduction in value of the pound. The general adjustment of exchange rates that followed our own change is, as I have said, roughly in accordance with our expectations. We never had any intention of starting a general competitive lowering of exchange rates, and we therefore welcome the adjustments that have taken place as being a general contribution towards the attainment of equilibrium between North America and the rest of the world.

With that explanation of our reasons for the alteration in our policy, I turn to deal with the outcome of the Washington talks. We must judge the value of these decisions arrived at not only in the light of the general observations in the communiqué but also with the knowledge of the world-wide adjustment in exchange rates that has since taken place. There can be no doubt whatever that the talks were an unqualified success, thanks in no small part to the outstanding speech by President Truman at Philadelphia shortly before our arrival in the United States. In my view the greatest result of the discussions is not the actual steps that have been agreed upon—though those are important in themselves—but the spirit of co-operation which was made manifest throughout by our United States and Canadian colleagues.

There can be no further argument now as to the essential value of the sterling area as a great multilateral trading area, or as to the absolute necessity of maintaining the stability of sterling. Both those points are made abundantly clear in the communiqué. There is another matter which is also clarified and that is the urgent need for the creditor nations to make it possible for the debtor nations to substitute earnings by exports of goods and services for the gifts, loans and other temporary help that they have been receiving since the end of the war. To achieve a new equilibrium at a high level in the sterling-dollar trade all parties must contribute to create the conditions in which such a balance is possible.

Our foreign economic policy has been dominated—ever since we took office—by this continuing need to reach a stable balance of our overseas payments. Looking back over the last four years we can see what a heavy task it has been. We had to restore and expand our productive capacity, to build up our export trade, which had virtually disappeared, to a level far above pre-war and at the same time make good the physical damage of all sorts resulting from the war.

We certainly need not be ashamed by the way our people have tackled that difficulty. The rate of United Kingdom industrial production in the first half of this year was 30 per cent. above 1938 in volume; our total increase in volume of exports and the proportion of imports for which they paid were in advance of any other European country as was the proportion of our dollar imports paid for by dollar exports. Last year output per man hour in industrial production rose in this country by about 4 per cent.—a very high figure—and the Economic Commission for Europe suggest in their report of 7th September that the rise since before the war has been greater in the United Kingdom than in the United States of America.

By these efforts we had practically reached a stage of overall balance in our external trade by the beginning of this year, but there remained the stubborn difficulty of the dollar balance. This had been tackled successively by Lend Lease, the American and Canadian loans and the Marshall Plan. None had succeeded in righting the fundamental disequilibrium which persisted throughout them all. They were of the greatest help in that they cancelled out the evil consequences of that disequilibrium but the disequilibrium itself remained.

It was because this fundamental difficulty was shown up so starkly by the comparatively slight changes in the dollar-sterling trade that took place in the second quarter of this year that the meetings, to which I have already referred, were held in London in July last. The only positive outcome of those meetings was the cutting down of the dollar imports into the sterling area which we all agreed was necessary but which we regarded as nothing but an unhappy temporary expedient. That is pointed out in paragraph 4 of the Washington communiqué.

What was necessary was to tackle the difficulties that surrounded the increase of dollar earnings by the sterling area. We had a preliminary look at this at the meeting with Mr. Snyder and Mr. Abbott in London but recognised that we needed more time. So we adjourned the talks to Washington and preceded them by meetings of officials to prepare all the factual data necessary. That enabled us to get straight down to discussing the major problems directly our talks opened in Washington.

Paragraph 5 of the communiqué records that: A permanent solution of the problem would require that a more fundamental attempt would have to be made by all concerned to expand the dollar earnings of the sterling area and to increase the flow of investment from the North American continent to the rest of the world. I stated the other night in my broadcast that some people had underestimated the difficulties and the degree of change brought about by the war. That has been very apparent to me over the last two years especially in my dealings with this House. Both the Opposition—indeed particularly the Opposition—and some others have constantly urged the wholesale removal of restraints and controls, a step which would very quickly have brought disaster if we had given in to that pressure.

Fortunately, we have been able with the help of Government supporters in and outside the House to maintain full employment—[Laughter.] I can assure the House that workers in this country do not think it a joke as to whether full employment is maintained or not. We have been able to maintain full employment and at the same time to build up rapidly our export trade at a rate far quicker than hon. and right hon. Gentlemen opposite ever thought possible. I am sure this constant pressure to let the profit earner free to act in his own interest arose from a failure to appreciate the enormous economic changes wrought by the war and not from any attempt to destroy our economy and so our hopes of recovery.

I am not going through all those points which are dealt with in detail in the communiqué, but it will be seen that they all concentrate upon action necessary to permit a permanent and high level exchange of trade to take place between the sterling and the dollar areas. A halt has been called to the tendency of increasing separation in the economic sphere between the Western democracies, a tendency which was of course directly contrary to the closer and closer political and defence association which was developing so satisfactorily. Indeed, this latter association was in grave danger of being made ineffective unless we could bring the dollar and non-dollar economies into a more healthy relationship one to the other. This was essentially a longterm problem and the Foreign Secretary made it clear in his initial meeting with the American Press when we arrived in New York that we were not concerned with more loans or gifts but rather with creating the conditions in which by the ordinary channels of commerce we could attain a dollar-sterling balance.

Any question of direct aid must, of course, continue to be dealt with through the Marshall Plan and the O.E.E.C. machinery in Paris. We have always held, and still hold strongly, that it is most inadvisable for any European representatives to seek to go behind O.E.E.C. by going direct to Washington to deal with any such matters. We were not, of course, able to solve all the many problems in a four-day conference, but we arrived at a conclusion as to a number of them and those conclusions will contribute very materially to the easing of the present situation. We have made arrangements to continue the meetings of the group of Ministers and their alternates so that we can reach further stages in solving the problem and finish the consideration of some of those matters upon the discussion of which we started, but which we were unable to conclude in the time at our disposal. This continuing determination to co-operate in solving the dollar-sterling problem is of the greatest importance in our view.

The ordinary day-to-day work as between our Governments will not, of course, be affected. That will be carried on just as before by the various representatives in the different capitals. We intend, however, to add to the staff of our Ambassador in Washington a very senior official whose whole time will be occupied by the study of particular problems arising from the general principles agreed upon in our talks in Washington. Similar arrangements will, we understand, be made by the United States and Canadian Governments. Matters will thus be prepared for decisions at Ministerial level at meetings which can take place from time to time in Washington or in either of the other capitals. It is emphasised in paragraph 15 of the communiqué that these arrangements will not in any way encroach upon any of the existing organs of international economic co-operation, such for instance as the O.E.E.C., but will rather assist us to play our full part in solving the problems which come before those bodies. It is probably in paragraph 6 of the communiqué that the clearest recognition of the nature of the problem is to be found. It is there stated as a two-sided problem for creditor and debtor which imposes upon each certain general obligations. The 10 detailed matters that were considered are listed in paragraph 7 and in the following paragraphs the action as regards each one of them is dealt with. The only one about which I need say anything at this stage is, I think, that dealt with in paragraph 12 and referred to as the "Liberalisation of Trade."

This House will recollect that when my right hon. Friend the President of the Board of Trade made the announcement about our offer to O.E.E.C. in this matter of liberalisation, he pointed out that it raised certain questions in respect of our obligations to countries outside O.E.E.C. That referred, of course, to what is known as the non-discrimination obligation. We have recognised for some time that, in a world suffering from acute balance of payments difficulties, the strict application of non-discrimination is likely to lead to a diminution in the volume of trade. The Government, however, have been most anxious to make some real progress towards widening the area of competitive trade, where possible, although it is out of the question at present of course to extend such a freeing of trade to countries with really hard currencies. We hope, however, to reach an understanding in the very near future which will enable us to put into operation our constructive proposals made to O.E.E.C. for getting rid of the restrictive arrangements now hampering trade between currency areas which do not require settlement of balances in gold or dollars.

The Washington talks should, I think, give all of us very real encouragement. We did not seek to bring back a collection of expedients which could be added up to a solution of a temporary crisis. That was not our aim. What we tried to do, and what I firmly believe we have done, was to reaffirm the community of interests of creditor and debtor alike and in the full realisation of the gravity of the problem that we were facing, whose roots were deeper than were supposed, to agree to co-operate frankly and continuously in our attack upon the problem. For we know that if we recognise and are determined to solve our problem, its solution will certainly be possible.

I now turn to what is the most important part of what I have to put before the House and the country—that is the steps which we must now take to preserve the effectiveness of the change which we have made in the exchange rate, and to derive the full benefit from it. It is of the essence of the continuous effectiveness of this drastic action that we should not flinch from the necessary economic restraints which it imposes upon us. It would be only too easy for us, if we were to reject the necessary measures, to counter all the good effects of this alteration and to plunge ourselves into a worse condition than ever. This is not a step that can be repeated—we must make a success of it now, for failure would be disastrous and would land us in that very mass unemployment and low standards of living which we are determined to avoid if we can.

The House will remember that time after time we have warned that unless we could increase our productivity, maintain or improve our quality and design, and revolutionise our salesmanship, we should not be able to hold our position, let alone improve it, even with the help of Marshall Aid. That Aid comes to an end, at latest, in 1952, and there is very little time left. It is because world economic circumstances and our own efforts have not been such as to enable us to earn enough dollars that we have been compelled—most unwillingly compelled—to take this most drastic action. But the reduction of the exchange rate is no miracle-working device. Its efficacy to improve our position will depend upon how each one of us reacts to the new circumstances. The time within which we can make or break has definite limits; we must not only act thoroughly, but we must act quickly too.

Our first need is to improve our competitive position in the North American markets, and to introduce into those markets lines of goods which we have never sold there before. This is a task for our manufacturers and merchants. The change in the dollar value of sterling has suddenly opened up immense possibilities in the North American market to hundreds of manufacturers and merchants who have never sold there before, as well as, of course, to the established exporters in those markets. Everyone who can discover any way of selling more goods in the United States or Canada, or of entering those markets for the first time, has an urgent duty to take advantage of the opportunity now presented. That duty must, I am sure, be clear to everyone who has the interests of this country at heart and who wishes to see this country continue to play her full part in the leadership of a free and democratic world.

There is no good reason now for neglecting this task on the grounds that the margin of profit is too small or the risks are too great. For not only do the new exchange rates offer an immediate and attractive incentive for an all-out attack on the dollar markets, but the talks at Washington have also created a climate exceptionally favourable to such developments. It is fully recognised by both the United States and Canadian Governments, and is so stated in paragraph 6 of the communiqué, that sterling area exporters need an assurance that the minimum of difficulties will be put in their way in entering the North American market, and that they would not be deprived of the chance of remaining there once they had gained a footing. We must, therefore, put aside the old fears and doubts as to that market, which are a survival, of course, from the days of very high tariffs.

There is now absolutely no reason for assuming that opportunities in the North American markets are limited to the few traditional export lines which have hitherto provided the bulk of Britain's dollar earnings—things like whisky, high quality textiles, fine china and so forth. On the contrary, the buying habits of the American and Canadian public have undergone marked changes since before the war, and it may often be entirely new lines which offer the best prospects of expansion.

There has, for instance, been a great westward shift of population inside the United States and a large-scale movement from farm to city, both of which have involved a relocation of markets and an opening up of ports away from the great cities of the East coast on which we have hitherto tended to concentrate our efforts. The national income has been redistributed to the advantage of the wage-earners, who now enjoy nearly three-quarters of the total. New selling and advertising techniques have evolved in response to these developments. Mail order is now a vast national business, and the self-service shop, the so-called super market, is another evidence of new times and new ways and stresses the very great importance now of packaging.

Another significant change in the United States has been the rapid post-war increase in the birth rate so that over one-tenth of the total population now consists of children under the age of five—an immense market for the appropriate goods; and, I may add, an extremely valuable market, as parents are prepared generally to spend more on their children than on themselves. Canada, too, has experienced changes which have an equally important bearing on the sales possibilities for British goods. For instance, the opening up of the great natural resources of the Prairie Provinces provides a wonderful opportunity for British engineering firms.

We appeal, therefore, to every individual manufacturer and exporter in this country and to all development councils and trade associations, to set themselves to examine at once how they can help, directly or indirectly, in this vital national task of earning dollars. One of the things that has been most strongly brought home to me again on my recent visit, by many of my American and Canadian friends, is that our salesmanship in the dollar market is not aggressive enough to compete. Mr. Hoffman, when he was over here, was perfectly right when he said that the huge reservoir of American buying power was still almost untapped by sterling area and other non-dollar manufacturers. The sales of our goods in the United States in 1948 were only about one-tenth of one per cent. of the United States total national product.

But he is also right when he says—as he and others have with great emphasis often said to me—that that market cannot be tapped effectively unless our exporters continuously study it to find out its special needs, the designs it wants, the packaging that will attract its consumers, the best methods of advertising and so on, and then, when they have got the knowledge, adapt their goods to it and go out and sell them. Americans and Canadians do not buy goods; the goods have got to be sold to them against the very keenest selling competition in the home market.

My right hon. Friend the President of the Board of Trade will, if he catches your eye, Mr. Speaker, elaborate upon this side of the matter. But I want to impress upon our manufacturers and merchants that American businessmen are confident that we can sell much more in their markets if only we will go about it in the right way, and they are prepared to help us if we wish and to show us what they, from their experience, consider to be the right way.

If manufacturers are unfamiliar with the habits and customs of the dollar markets, as many of course are, they should at once contact their trade association or local chamber of commerce or ask for the assistance of the Board of Trade —[Laughted]—to whom the highest tributes have been paid by my American friends for the work they are doing. Perhaps it would be better to laugh after inspecting the work they are doing. If manufacturers can find no suitable British merchant to handle their goods they should organise with others some co-operative form of export effort.

It will be necessary, no doubt, to divert goods from other markets, home and export, in order to increase our sales in the dollar markets. There should be no hesitation in doing this. Dollar earning must have first call on our resources for the present, even if it means disappointing some of our older customers. There is an urgent need for quick action if we are to establish the new markets or expand the old ones while the going is at its best.

The primary objective of our policy is, of course, to earn the maximum number of dollars possible. We should, therefore, maintain the dollar prices of our goods wherever possible, though we must, of course, take account of our desire for friendly market relations and the value of a lasting goodwill. In some cases, where the volume of supplies is already the limiting factor, it may be possible to maintain the full dollar price; in others, a moderate lowering may give us the expansion of sales that we need; while in yet other cases the maximum reduction possible in price may be necessary.

It is, therefore, obviously impossible for any one to give any present estimate of the increased volume of goods we should have to sell in the dollar market to offset the fall in receipts due to the lower rate of exchange. I can only say that it should be less than the calculated maximum figure of 44 per cent. We certainly need place no limit upon the expansion of our exports to the dollar area. If ever we make dollars a soft currency it will be quite time enough then to consider altering our policy.

What I have said about United Kingdom exports applies, of course, with equal force to exports from other parts of the sterling area. These are equally vital to the future health and strength of the sterling area as a whole, and to each member of it. Dollar economy likewise is as essential as ever. We must all do our utmost to save the waste of, or to do without, raw materials that cost dollars. The rise in their cost should give a natural added emphasis to this need for economy.

I now come to the repercussions upon our internal economy of this change in the sterling-dollar exchange rate. The first and most obvious is the increase in price of those articles and commodities that are bought for dollars and imported into this country, or bought for currencies which remain wholly or partially linked to the dollar. The most important of these is wheat—and flour—because this constitutes the major part of our imports from Canada. The price of the loaf has gone up from 4½d. to 5½d. and flour has gone up ½d. a pound, despite the fact we are continuing food subsidies at the present maximum rates.

Apart from this, rises in the price of foodstuffs are not likely to come either in large measure or soon. The percentage of dollar cost in foodstuffs is small—about 12 per cent. now—owing to the success of our policy of switching back to other sources of supply over the last few years. As regards Argentine meat, we have never agreed that there should be any automatic or proportionate increase in the prices we pay in the event of an alteration in sterling exchange rates. In response to an Argentine request in the course of the last negotiations we indicated that we would discuss meat prices with them if the sterling-peso rate of exchange was varied as a result of action taken by us. As soon as we have reviewed the general situation we shall be ready to enter into such discussions.

It is not possible as yet to say what the general course of other non-dollar prices is likely to be, but we anticipate no general or early rise. So far as prices in the shops are concerned, there is no reason why goods in the shops or in process of manufacture should be increased in price if the materials they contain were in the producers' hands before 18th September.

There will undoubtedly, in the course of time, be some increase of prices, especially in articles made mainly of dollar raw materials; how much will depend upon the course of dollar prices. We must, therefore, expect, as I have already said, some gradual increases in prices over the next few months, which will be quite legitimate, but the Government will do their utmost to see that these are kept strictly to a minimum. Statutory price control will, of course, continue in force and will be rigorously administered on the lines I have just stated.

The immediate effect of the increase in the price of bread and flour will put up the cost of living index by just over half a point, and it may be that by the end of the year, if there are no marked counterbalancing decreases, the index will have gone up by a point or so. That is the sort of measure of the immediate justification for price increases.

Before coming to the next point, on personal incomes, I want to make it quite clear—because this is a most important matter—that the alteration of the exchange rate is part of a deliberate policy in substitution for the alternative policy of severe deflation. That policy was pursued at one time under the aegis of the right hon. Gentleman the Leader of the Opposition, and depended for its efficacy upon a massive extension of unemployment, with the accompanying lowering of wage rates and so the impoverishment of the employed and unemployed. It is to avoid a repetition of these tragic conditions that we have adopted the alternative policy.

But the present policy demands for its success a great measure of restraint in the matter of personal incomes. If it is not made to succeed then deflation will be added to it and we shall have failed to avert mass unemployment and poverty. It is, therefore, of critical importance that nothing—and I mean literally nothing—should be done to increase personal incomes arising out of profits, wages or salaries at least until we can see how far our policy has succeeded in bringing nearer a balance in our dollar-sterling trade.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

Unfortunately, in one way, though not in another, it is inevitable that the steps we have taken will lead to a very considerable increase in the sterling profits of a number of exporters who can maintain or only slightly decrease their dollar prices.

As I have said, we want these dollar prices maintained where possible, so we cannot complain if they yield high profits. The Exchequer will take care of 50 per cent. to 60 per cent. of these increased profits in one way or another, but there is no way I have been able to ascertain by which selectively we can catch the extra profits arising out of the alteration of the exchange value. This of course makes it more than ever important that any increased profits earned should not be distributed by way of dividend. Unfortunately, recently a few companies, but, I am glad to say, only a few, have deliberately broken away from the voluntary understanding as to the limitation of dividends, a limitation which has been observed by the great majority. But I should warn industry generally that if there is any further breaking away I shall consider myself at liberty to introduce legislation to restrict dividends in the next Finance Bill.

The White Paper policy, which has been a most material part of our disinflation drive over the last two years, must now be reinforced. If we were now to allow costs to rise as a result of higher wages and salaries, we should very rapidly deprive ourselves of all the advantages of our lowered exchange rate. The White Paper must, therefore, be observed strictly, and it is only in the exceptional and genuine cases where some wage survives which, together with all the subsidies and social services, is insufficient to provide a family with a minimum reasonable standard of living, that there can be any possible excuse for going forward with a claim for an increase.

But even if such an increase is given to those at the bottom, we cannot accept the maintenance of differentials or relativities as any argument for present increases to those who are receiving higher rates. Especially and specifically there can, in our view, be no justification for any section of workers trying to recoup themselves for any increase in the cost of living due to the altered exchange rate. That is a general burden spread over all, and must be accepted as a very real and essential contribution towards the avoidance of mass unemployment.

It is, however, undoubtedly true that the contribution made in this way by the lower-income groups will be larger proportionately than that of the average profit earner—who will tend on the whole to benefit by the change especially in the case of exporters. In these circumstances, I propose as a special measure to increase as from today, by legislation, the rate of the Profits Tax on distributed profits by one-fifth, that is, from 25 per cent. to 30 per cent. This is and can only be rough justice, but I believe it to be justice, and it will give some help in the matter with which I am now about to deal, inflation.

These matters that I have mentioned are, of course, aspects of the problem of inflationary pressure which is already with us and will be intensified by the lowering of the exchange rate if that produces the desired increase in exports. The first danger is the one against which we have been fighting for the last two years, that is, rising prices leading to a wage-price inflationary spiral. That can only be avoided if we keep down both prices and wages, and for that purpose we must continue the subsidies on food at their present level. It is also essential for the same reason to continue the other social services. We are not embarking upon a policy of severe deflation which would naturally be accompanied by cuts in the social services, as it was between the two wars. But that does not mean that we? can permit inflationary pressure to grow, or that we should arrest our policy of disinflation. Our aim is to maintain full employment while at the same time removing any excessive inflationary pressure.

The second danger of increasing inflationary pressure arises from the diminution of the volume of goods in the home market if we succeed in stepping up our exports. That means that we must do something to diminish the demand for goods in our home market. If there is too much spending power to match our town production of goods and the present level of imports, we shall drive up prices and so increase the inflationary pressure.

Up to date, prices overall have remained fairly stable since the changes which resulted from the last Budget, and the index of wage rates has risen only one point since the beginning of the financial year. There have, in fact, been a number of price reductions of individual consumer goods, and the general picture has been one of holding the line. There have, however, been disturbing features, such as the degree of disinvestment of savings and the fall in our exports from an average volume of 155 per cent. of 1938 in the first quarter of this year to about 146 per cent. in the second quarter, and 140 per cent. for July and August. This reduction in exports, at a time when production has still been increasing, should have produced a more noticeable easing in the position on the-home market than has actually occurred, and leads to the conclusion that there is a renewed tendency to build up an inflationary pressure. The results of the last Budget are—if anything—working out as less disinflationary than we intended.

We have done a great deal, as the House knows, partly through budgetary policy and partly through the White Paper to which I have referred, to hold back these internal inflationary tendencies. Their danger is obvious. If we consume too many of the goods which we produce ourselves, we cannot export them; and if, in the process, we force up our costs and so our prices, we shall lose our export markets, especially the most important of them in the hard currency countries.

We must therefore limit our internal expenditure. We must not allow our desire to have more than we can afford to endanger our present standards, as it will do unless we reduce the inflationary pressure which is again present in our economy, and which the new circumstances may intensify. Though this may sound a complicated matter, not easy to understand, it can be put quite simply. We cannot have more than we produce, and we are constantly being pressed to do that from all sides and in a number of different ways.

I have already spoken of the need to keep down prices and personal incomes; that is one side of the picture. The other is the volume of goods available to the domestic consumer. The two domestic uses of the goods and services we produce or import which compete with the consumer's market are capital investment and Government expenditure. We must therefore look to both of these to provide some easement of the inflationary pressure, and that is an essential, immediate and integral part of our policy of taking the fullest advantage of the new circumstances, while preserving full employment and protecting our social services.

It is therefore necessary to review the whole investment programme. That review is being carried out as rapidly as possible. It is clear that as a result of the alteration of the exchange rate there will be an increased demand from overseas countries for the products of our engineering industries. While it is essential that we should maintain a high level of investment in industry in order to meet the changing and growing needs of production, yet we must economise wherever we can so as to have the maximum amount of capital goods for export. In 1948 the country devoted to gross fixed investment at least £2,000 million worth of goods—a figure estimated to be about one-third as much again as the average of the immediate pre-war decade. We know from experience that any change in our investment plans can only act slowly and over a very considerable period of time. Without major dislocation and waste we cannot bring about any very quick change in the volume of capital investment, but this makes it all the more necessary to do what we can as soon as we can.

Then, as regards Government expenditure. Present commitments preclude any reduction in the general level of expenditure on the Defence Services, and we are not prepared to reduce the scope of the social services provided for the people. We must, of course, economise to the utmost and avoid all waste in these services just as in others. Because we need to continue them it does not mean that there are no economies that can be made.

In the other fields of Government expenditure, we are making a fresh investigation—as of course we do annually in connection with the Estimates—to see whether we can cut out, curtail or retard any services not essential to major Government policy, and also to cut out administrative waste wherever it is found. Under the stress of a more pressing necessity to contribute substantially to the success of the main economic policy of which I have just spoken, we must and shall be ready to prune off less necessary services which should result in a substantial—though not a spectacular—reduction in Government expenditure. These economies will be put into effect in the normal way as and when each is decided upon. All these matters will of course be brought together and can be considered when the time comes to review them at the end of the financial year.

Another vital element of internal policy is our industrial productivity. Indeed, all those policies that we have been pursuing over the last four years to increase production, productivity and exports, must be continued with the greatest vigour. We are not substituting any new policy for them, but rather we are adding a new element which can make them more effective. I do not propose to recapitulate all that has so often been said about the need for higher productivity, but I would stress that productivity or unemployment is a real choice today. Productivity or a lower standard of living is another way of stating the same thing. The hope of cancelling out the increase in the cost of living brought about by the alteration in the exchange rate lies in a greater productivity in our industries and services.

The opportunity for improving our industrial efficiency and so increasing the volume of our production while decreasing costs is unquestionably there. Every well-informed observer, whether from this country or abroad, has recognised it. This opportunity presents itself in a rather different form to each of the two partners in industry.

The quality of management is probably the most important single factor in determining the efficiency of our industries. Good and inspiring leadership will always gain a response—as, indeed, the figures which I quoted a little while ago, as to the extent of our industrial recovery, amply prove. Low efficiency in the factory can often be traced to faults of management, and I believe that we have a great deal to learn from the study of human relations in industry which has been carried so far in America. There can be little doubt that, in order to produce a good atmosphere in any productive unit, action of a positive character is required from above. Only where that atmosphere is favourable can there be an effective step up in production.

For the workers the opportunity is essentially the same, but it presents itself in a different form. It is understandable that in some industries, particularly those with a long history of unemployment in the past, the workers should hesitate to co-operate in raising productivity for fear of working themselves out of a job. Yet such a failure to co-operate is likely to bring about, in a worse form, the very evil which their anxiety prompts them to avoid. The real threat of widespread unemployment in Britain today arises out of a prospective shortage of dollars, without which we shall not be able to obtain the essential imports of raw materials for our industries. To earn the dollars we need we must raise our output per man and keep down our costs of production. Anyone, therefore, who resists the introduction of new and more efficient methods of production is helping to increase unemployment.

It is true that in one or two industries higher productivity will lead to redundancy, and some of the workers in those industries will have to find jobs elsewhere. But taken as a whole throughout industry, higher productivity is the only sure way to make certain that there will be no general shortage of jobs and that some alternative employment will be available for those who are displaced. The fact is that some temporary hardship for a comparatively small number of workers who have to change their jobs is inevitable if we are to preserve that industrial flexibility which, as a great exporting and importing nation, we must have. Otherwise, if we fail to be able to export enough to pay for our essential raw materials, the incomparably greater hardship of mass unemployment will be inflicted upon the whole nation.

I have spoken of the two sets of tasks before industry and the nation—increase of productivity and of dollar exports and restraint as to personal incomes, costs and prices. If we fail in either of these two essential objects we shall fail in both, for they are interdependent. And failure will bring about two results, which can also be expressed very simply: we shall all be poorer and many of us will be out of work. Any firm which could earn dollars and fails to do so, or any manufacturer or trader—whether he exports or not—who does not get his costs down to the lowest figure, is, in fact, helping to put up the cost of living for us all, and to put some of us on the dole. Any worker by hand or brain who goes slow, or is an absentee, or demands more money for no more output, is, in fact, doing his best to put up his own household bills and to put somebody—quite possibly himself—out of a job.

This, at least, must be clear. We shall not emerge successfully out of our present difficulties if each of us relies only upon the efforts of the other man. It is the sum of all our individual and personal contributions that can add up to a triumphant success. In this great joint endeavour by every citizen let us each concentrate on our own job, and do not let us worry unduly about the mote that is in our brother's eye.

It is not new and spectacular deeds of an unusual or unaccustomed kind that are necessary; it is something much more difficult than that. It is that we should live our faith and in our daily humdrum job show our wholehearted devotion to our people by the constancy and intensity of our effort. It is time for us finally to renounce and to denounce that easy-going get-rich-quick attitude to life that in all levels of society has found its post-war devotees and which prides itself on the smallness of its own effort and the largeness of its personal gain. We must not allow anyone to confuse the just and equitable doctrine of fair shares for all, to which we hold, with the disastrous attempt to get as much and give as little as possible.

I am still, Mr. Speaker, and shall remain, a persistent believer in the good of humanity, and all that happened during the war and has happened since has only proved once again that it is not bribery but affection—affection for the family and for our people—that constrains us to forgo our immediate personal interests for the greater good of the community. It is by that token and no other that we shall succeed in the present venture.

4.8 p.m.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

As this is the first occasion on which the House has seen the right hon. and learned Gentleman since he went abroad in July, I am sure I am voicing the hopes of Members on all sides that the cure which he then undertook has done him good and that he will not, in addition to the many other pressing pre-occupations which obviously, to an increasing extent, will crowd upon him, have also to reckon with the burden of ill-health. Certainly today, in a speech necessarily long, the right hon. and learned Gentleman displayed all his usual dialectical skill.

Before I turn to the more important part of the Debate, may I mention one subject which I do not think was referred to by the Chancellor, and that is the Motion which he moved, and which you, Mr. Speaker, have now read out to us. We were enlivened over the week-end by a speech from the Lord President of the Council. We all hope that his short holiday has done him good and we were all glad to know that his holiday was not embarrassed by any imprudent delay in exchanging his sterling. In the course of his speech the right hon. Gentleman, with his passion for offering unwanted advice, gave certain recommendations to the Opposition as to their conduct during this Debate. From what he then said, I judge that he desired the atmosphere of this Debate in this most critical time to be that of a Council of State. Of course, I was confirmed in that opinion when I saw that the Minister of Health had been invited to take part.

It would have been impossible for the Opposition to forgo their right to criticise the handling by the Government of this situation, or to forgo the even more important right of questioning them closely as to the steps they intend to take in the future but we did not intend to put down a Motion of our own. Had a noncommittal Motion been put down, as often is done in circumstances such as these, we should not have felt it necessary to move an Amendment to it. Of course, the Motion on the Paper creates a different situation. Much of it is impeccable in its language, and contains sentiments with which we should not disagree, but the general effect is, and is intended to be, that of a Motion of Confidence in the Government, confidence in what it has done in the past and in what it is going to do in the future. We have no confidence in the Government. For that reason it would be dishonest on our part to allow the Government to pass a resolution which could be so interpreted. We shall, therefore, at the appropriate moment, move a reasoned Amendment on which it will be possible to take a vote.

This is indeed a very grave situation which the country is facing. In order to realise exactly how grave it is, we must judge it by what was said before devaluation. I must apologise. I know that we are supposed to talk about revaluation, but up to 10 days ago all of us called it devaluation and I find it difficult to drop the phrase. [An HON. MEMBER: "We do not mind what you call it."] I am glad of that admission. I will continue in that case to call it what it is, and that is devaluation. We must judge the effects of devaluation by what was said about it before, and not by the gloss which in some quarters has been put upon it since it happened.

The right hon. and learned Gentleman has often had tributes paid to his sincerity. I know that he was sincere in the arguments which he himself used over the course of the last year or so in regard to devaluation. In the course of discussions of the Finance Bill of last year, he put very shortly and succinctly the real arguments against this course. He said that it would be seriously injurious to our imports because we should have to pay twice as much for them as we paid today. He said: That means to say that we should have to export much more and get very much less than we get today. To embark upon such a programme would be the extreme of folly. This Government certainly have no intention whatever of embarking upon such a programme."—[OFFICIAL REPORT, 6th May, 1948: Vol. 450, c. 1572.] That was his considered view as to effects that would follow deflation and it was because of them that upon subsequent occasions he reiterated his determination not to adopt this policy. Nor was the right hon. Gentleman expressing merely his own view, of course. It was the view which had been adopted by the party opposite as a whole and supported by them in their speeches. I have here an extract from the August publication of a pamphlet which must be more familiar to hon. Gentlemen opposite than it is to me. It is called "Fact." I understand that it is edited by the Labour Research Department. That department, as recently as this August, put forward their views upon deflation and I should like, in order to put this matter in its real proportion—that is to say, its old proportion—to quote from what they say. I do not think hon. Members will regard it as a biased statement. They say: If we give more without having produced more in exchange for the same amount of dollars, somebody somewhere must be paying the difference. That somebody is the British citizen, and as American food and raw materials constitute a larger proportion of the poor man's budget than of the rich man's, it is the poorer citizen in particular who is punished. Then it goes on: Devaluation is therefore an alternative to wage slashing as a device for cutting our prices at the expense of the mass of the people.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

It is apparently what leaders of the party opposite thought was correct last August. There is an even more and rather pathetic instance. The hon. Member for East Coventry (Mr. Crossman) is, I gather, a regular and not inappropriate contributor to one of our best known periodicals, the "Sunday Pictorial." He, writing on 18th September, only a few hours before the Chancellor made his broadcast, said this: Devaluation would increase the price we pay for our foodstuffs and raw materials from across the Atlantic and so create unemployment and force up the cost of living. So Sir Stafford Cripps said 'No.' The hon. Gentleman is very unfortunate. Here was one of the rare occasions when he was toeing the party line and then he found that the line had changed. I only hope that the abject apology which he made the next Sunday will acquit him of any intentional deviationism.

Those were the kinds of reason which were given why we must resist devaluation at all costs, and they were reasons with which we on this side agreed. We, too, were impressed by the grave disadvantages that would follow devaluation. My right hon. Friend the Member for Warwick and Leamington (Mr. Eden), in the Debate in July, expressed on behalf of the party our adherence to the policy of no devaluation, which was then being pressed. We cannot therefore agree with the view put forward now in some circles and inculcated by propaganda from the party opposite, that this new method of devaluation is, in fact, a courageous and constructive policy which has been thought out by the Government opposite and introduced because it is the best thing for the country. It is nothing of the kind. It is an expedient which has been forced upon an unwilling Chancellor, as he himself told us today, by events over which he has no control. It is just one more expedient to be added to those temporary expedients leading to a series of crises which he himself told us had distinguished the Government's handling of our economic affairs. It has certainly come as a surprise to many of us, who thought we were now living for the first time in an age of planning, to find, after all, we were merely in an era of expedients.

This has been a forced action on the part of the Government, and because it has been forced and because it was not planned ahead and provided for, it has, even in the machinery by which it has been brought about, led to certain unfortunate consequences. Therefore, before I come to the effect of the step that has been taken, there are certain questions I should like to put to whoever is to reply with regard to the method chosen for bringing about this change.

The first question most of us have in our minds, and the question which has not been answered by the right hon. and learned Gentleman's account of what led up to devaluation in September, is what was the real new unforeseen factor that occurred between July and the end of August which made him realise at the end of August that he could no longer hold a position that in July he was not only determined to hold but still thought he could hold? We have been told, of course, that there was a continuing drain during the intervening weeks, but the right hon. and learned Gentleman himself as he said today, told us when he spoke in July that he expected such a drain to continue. There was nothing at all that he did or said in July which he expected would lead to a diminution of that drain. The whole crisis was played down. There was no sense of urgency, and even the cuts in imports, which by themselves many thought would be inadequate, were postponed for some months. He could not, therefore, have thought that the drain was likely to relax during the intervening weeks.

There would, of course, have been one circumstance which would have justified it, and that is if, when he went to Washington, he intended to ask for and hoped to receive some new immediate help in the way of further loans or gifts, but as he has told us himself—and all of us on all sides of the House were glad to hear it—there was never any intention in his mind of asking for such new help, and I think we are all agreed that in that he was right.

But could he not really have foreseen already in July what did actually happen and what, therefore, two months ago forced this step upon him? If he had done it—and I believe he should have done it—we should certainly have saved something—we should have saved two months' further drain on our reserves. An earlier date, before the "black market" operations to which he has referred fully developed, might possibly have led to stabilising it at a higher rate than, in fact, he did. Therefore, we want to know what were the new factors which produced what to him, apparently, was an unexpected result.

The second point on which I should like some information is whether it would have been possible to have had some fuller international consultation and co-operation in the step that has been taken. I realise the difficulties, but I am sure that hon. Members on all sides of the House see the result. Undoubtedly our unilateral action, with in some cases no notice and in all cases the shortest possible notice, to those countries with whom we are supposed to act and with whom we must act in economic co-operation, has produced an unfortunate result. It has certainly led to a failure to adjust to the full their currencies to the new sterling rate. I should have hoped that the Chancellor, who on many occasions quite rightly told us of the absolute necessity of working in future in co-operation with the other O.E.E.C. countries, would have found it possible to have worked more fully with them upon this occasion.

The third question is with regard to the rate of exchange. The right hon. and learned Gentleman was quite right when he said that to most people, even those people who may have expected that at some time or another devaluation would have become necessary, the rate of the new exchange did come as a great shock. It was hoped and believed that the true value of sterling would be considerably over the $2.80 at which it has now been placed. All of us agree with the Chancellor of the Exchequer in one thing, that if the rate was to be fixed it must be fixed at a rate which would hold. Whatever views we may have upon the present devaluation, all of us are agreed that it is a thing which cannot and must not be repeated. It is dangerous enough and may be disastrous enough as it is now, but if this were to be followed at some interval by a further devaluation, then, indeed, there would be nothing for this country to look forward to.

To that extent we are agreed that when this devaluation was forced upon us the rate had to be low enough to hold, but the mere fact that in order to do that the right hon. and learned Gentleman has fixed the rate so low has led many people to question whether it would not have been possible to have adopted an alternative method. I would not myself put forward the method of the free exchange, solely for this reason that the Government, which has so lost confidence all over the world, obviously could not afford to free exchange; but I, in company with many others, wondered whether there was not a half-way house. The half-way house, which has been described by the right hon. and learned Gentleman, is a floating rate. The question is whether it would not have been possible to have combined some freedom in the actual rate with the maintenance of some part, at any rate, of exchange control—for instance, the control of movements of capital unconnected with the movements of goods or services.

I confess that I was not entirely satisfied with the right hon. and learned Gentleman's reply. He did not say, as I think he might have said, that that was mechanically impracticable. What he said was that a rate that might fluctuate would be damaging to our exporters and traders in this country, but surely to some extent fluctuations in the rate could be ironed out, as they were in the previous devaluation, by the use of the Exchange Equalisation Fund, and a slight variation in the rate of exchange would, I think, be much less unpalatable than complete stability at the very low rate which we have now selected.

Finally, I ask the right hon. and learned Gentleman whether it would not have been possible to avoid in some way or another, especially if an earlier decision had been taken, the interval which occurred between the decision to devalue and the announcement of devaluation. I agree that no Chancellor could possibly announce that he was going to devalue on a certain date some time in the future. To do so would be to court complete disaster. Therefore, in the circumstances in which the Chancellor found himself he had no alternative but to deceive everybody, and I must say that he did it brilliantly, but he cannot have liked doing it.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

Will the right hon. Gentleman say when I deceived anybody?

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

It is an old-fashioned point but I suppose that the right hon. and learned Gentleman assumes authority for the Treasury. When a rumour arose only two days before devaluation and the Treasury were asked about it by the Press, they said that there had been no change in the Chancellor's policy.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

I understand that the person who answered the question did not know that there had been.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

Then I withdraw any suggestion that the Chancellor himself deceived us brilliantly. All he did was to allow those over whom he has authority to go on deceiving us fully.

Photo of Mr Harold Davies Mr Harold Davies , Leek

Say something constructive. That is what we want.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

I have every intention of making my speech in my own way. I know perfectly well that hon. Gentlemen opposite do not want anything said about either what they have done or what they are going to do, but I have every intention of saying it.

As I said before, the situation which we now face is a new and very grave one. We object, not only because we think it is dishonest but because we think it is very dangerous from the point of view of popular opinion, to the attempt which is now being made to say that it is a choice between two policies, a policy, on the one hand, which would depend on mass unemployment and the lowering of the social services and a policy, on the other hand—the policy which the Government have adopted—which will safeguard both those things. That is absolutely begging the question. [HON. MEMBERS: "Why?"] Because no one for one moment would pretend that, not the policy, but the expedient to which the Government have been forced does anything by itself to safeguard either full employment or the social services. On the contrary, in some ways it increases the risk to both.

The right hon. and learned Gentleman is quite right—I hope this will appear in Labour Party propaganda—when he says that unless we now all do the right things, what has happened will be not the safeguarding of full employment and the social standards but a futile and dangerous gesture, and to suggest that this thing by itself has safeguarded what everybody wants to safeguard—[HON. MEMBERS: "That has never been suggested."] Hon. Members cannot have been reading their own papers or their own propaganda. In some ways, of course, the devaluation makes our task, as the right hon. and learned Gentleman would agree, very much bigger. On the other hand, I agree with him that, in some ways, if we are prepared to take it, it makes our task at the same time considerably easier.

In dealing with both the assets and the disadvantages of this new move, I want to consider first the assets. We agree that the new price structure gives to our manufacturers in this country an opportunity which they have never had before of getting new goods and old goods into the North American market. We believe that there have been a large range of goods which have hitherto been priced out of the American market. That is not what the President of the Board of Trade believes. If we were to believe the President of the Board of Trade, we should not have very much hope of anything coming from this new situation because he said at Annecy, on 18th April, 1949: The problem is much more one of selling than one of prices. We do not believe that that is true. We believe that it is much more one of prices than one of selling, but if the President of the Board of Trade was right it is clear that devaluation would be little, if any, help to us at all, because devaluation must have the result of putting up the cost of selling organisations and making it more difficult and not easier. However, we disregard, I think rightly, on this as on other occasions, the statements of the President of the Board of Trade, and we declare that we, too, believe that there is a great opportunity for the expansion of our exports in the dollar area.

In saying that that opportunity exists, let us at the same time be mindful of the difficulties. It does not mean that quite suddenly a new miraculous opportunity is offered to us which can be taken with no difficulty and no sacrifices. In the first place, we have immensely to increase the volume of our exports just to keep ourselves where we are. I agree that every effort will be made—every effort should be made—not to reduce dollar prices except when it is necessary. Undoubtedly there will be some classes of goods in which the reduction of dollar prices will be unnecessary and the whole of the benefit will be retained, but there will be many others, as we have seen already, where some reduction even for existing exports will be essential and they have already been announced, while for those goods which up to now have had no entry into that market at all probably the full measure of reduction will become necessary.

Therefore, while we could hope that the increase in volume will not be the full 44 per cent. which the devaluation itself would demand, I think we should be very wrong to think of it as something less than certainly between 20 and 30 per cent. of our present volume. That is just to keep the existing dollar receipts going. In addition to that, if this is really to succeed we have first to restore our reserves. From what the Chancellor has said, they have run down now to a level which is really dangerous and which could be upset by any minor fluctuation in demand or in price, and they must therefore call urgently for restoration. Thirdly—this is most important of all—even when we have done that, we have still to face the necessity of so increasing our exports that we can counterbalance the falling off in Marshall Aid which we are bound to expect.

I have seen it put by the "Manchester Guardian" that to fulfil all these three tasks—clearly we cannot hope to fulfil them all at once—will need something like an increase of £300 million a year in the volume of our exports to the dollar countries. However great the new advantages given to us, that is indeed a formidable task to face. Secondly, we have to realise that the opportunity given to us is an opportunity equally given to all our other competitors who have devalued in step with us, that they will enjoy just the same advantages as we shall and that we shall have to keep in a price relationship with them if we and not they are to reap the full benefit from this market.

Thirdly, of course, there is the inevitable increase in our costs of production. Already we have seen announcements of increases for raw materials, some of which were largely under our own control, which must lead inevitably to some increase in the costs of production. At the same time some of them, while increasing our own costs, give an actual advantage to our competitors elsewhere. A striking case is that of wool. Wool, it is true, being a sterling area product, will not cause an increase in our costs of output, but devaluation will give to the woollen manufacturer in the United States the full benefit of the 30 per cent. alteration and largely nullify, therefore, any advantage which we should get.

Lastly—and here is a question with which I hope some Member of the Government will deal, because it is one of tremendous importance—there will be many industries in which the limiting factor to export will not be price or selling organisation, but labour, and particularly skilled labour. We have already seen announcements from the pottery trade and from the boot and shoe industry that their great difficulty in joining in the campaign for higher exports will be the labour which they require. When the right hon. and learned Gentleman charges us with not having fully appreciated the change in our whole economic structure brought about by the war, has he yet shown any sign of fully appreciating the change in our whole pattern of trade which will be brought about by this devaluation and the consequent export drive to the dollar countries? This new pattern, if it is to succeed, seems to me to call inevitably for a large-scale re-deployment of labour; and for a considerable increase in those industries where export now becomes a possibility at the expense of those catering either for other countries or for our own home market. We should like to know whether the Government have any plan for bringing about this re-deployment and seeing that bottle-necks of labour are not one of the causes why the export drive does not succeed.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

What plan does the right hon. Gentleman propose?

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

It is for the Government to say. They have the problem, and the country is waiting to hear what they have to say.

All of us must agree that although an opportunity for us now exists, and will do so for some time, the margin will be very small and will disappear if there are any increases in the costs of production. We therefore second the appeal of the Chancellor of the Exchequer to all sides of industry to realise the essential importance of keeping costs down. In this export drive we have got to succeed. We dare not fail. If we did fail, the obvious consequences would be mass unemployment—whatever the Government's creed as to full employment might be—and a continuing fall in our standard of life. I hope, therefore, that all classes of the community, all sections and all interests, will respond to an appeal to do whatever they can to keep down costs.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

I turn now to some of the disadvantages: first, the question of the cost of living. Over this grave disadvantage it is right to be realistic. It is absolutely wrong to exaggerate. No one wants unnecessarily to increase anxiety, but it is equally dangerous to minimise and thereby create a wholly unjustified complacency. Up to now the Government in their pronouncements have been minimising the dangers—the certain dangers—of the rise in the cost of living which will take place. Even today the right hon. and learned Gentleman, in dealing with the future, was careful to stop short at the end of a period of two months and thereby leave many who did not follow his arguments very closely with the idea that a one-point rise in the cost of living is all that is to be expected. That, of course, is to give a wholly false impression. We quite agree that, so long as there are a lot of imported materials in the pipe-line, increases in cost need not be immediate. Therefore, to take only a period of two months is not to take the critical or vital period. Let us face the fact that over a period of some months a rise in the cost of living is inevitable and must be substantial.

There is not only the point, which is always stressed, of the increasing costs of our imports from America and, particularly, of articles in which, we are told, imported materials form the major part. The rise in cost will not be confined merely to that selected group. We cannot possibly have a 30 per cent. increase in the cost of a vast volume of essential imports without that being reflected sooner or later in the general level of our prices.

I should like to ask questions on two specific commodities. I understand from what the right hon. and learned Gentleman said about meat that we are under no commitments whatsoever—

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

—and that the matter is merely one for discussion. All we can hope, therefore, is that the discussions will be firm in character and successful in their outcome, because otherwise the immediate effect on the cost of living must be serious. The second particular commodity about which I want to ask is coarse grains. What is the likely position with regard to the price level of coarse grains which we have to import largely from countries which have not yet followed our devaluation? Some of these grains are imported from America, from the Argentine and from Russia. Perhaps the President of the Board of Trade could give us some assurance on this point.

I do not believe that we can possibly exclude the effect of rises in prices of goods imported not from dollar areas but from soft currency areas. It is very easy to say, "We can ignore them. There will be no change in price there because they have devalued equally with us." From the point of view merely of currency change that is true, but all those countries will be subjected to the same internal rise in costs of dollar materials as will face us here; and we must look, even from those sources, for some increase in import costs.

Finally, there is the rise in the prices of materials of which we ourselves produce either the whole or a great part. The Chancellor, in his broadcast on 18th September, asked everyone to refrain from price increases and promised stern measures against profiteering. The first profiteers, however, have been the Ministry of Supply. With many of the materials with which they deal—tin, for example—the cost of production or purchase price has not risen, yet—of course, at a large profit to themselves—they have faced our own manufacturers with a big rise in prices over a wide range of materials, including all the non-ferrous metals and rubber. How can those prices not enter into our own costs of production?

I shall not attempt to evaluate what the rise in the cost of living is likely to be. I have not myself got the necessary material for working it out, but I see that Mr. Hobson in the "News Chronicle" gives his estimate as somewhere in the neighbourhood of 5 per cent. Others have given it as more. But the Government themselves must have some idea. I agree that at this moment a completely accurate picture cannot be given. There are circumstances which may act in our favour, internal price levels in America, and circumstances which may act against us, but the Government must have a pretty good idea of what the general rise in the cost of living is likely to be over the next six or eight months. I think they ought to tell the country now what they think it will be. I am sure they would far sooner face the truth now, however unpleasant it may be, than go away at the moment with some feeling of complacency only to have the truth dribbled out of them later.

I wish to say a word about the other great drawback to this scheme which has been adopted. It is the increased danger of inflation. The Chancellor of the Exchequer in his speech called attention to that danger—a very real one—and gave some of the methods by which he hopes to meet it. I therefore need not elaborate the reasons why that danger of inflation is bound to be so greatly increased. I would, however, like to ask the Chancellor some questions about the steps to be taken to meet it. One part of the danger of inflation is caused by the withdrawal from the home market of goods destined for export to America. That withdrawal can be reduced. It becomes the greater, the greater the success of one of the new methods to diminish inflation to which the right hon. and learned Gentleman referred. That is, by transferring some of the exports from other countries rather than from goods sold in the home market.

But the right hon. and learned Gentleman was very vague as to whether there is in fact a plan for the exports which should be transferred from other countries to the American market. He gave the impression, I think a dangerous one, that whatever exports could be transferred from any country to the American market should now be transferred. Surely he cannot mean that. He prides himself on the success of building up alternative markets to the North American market in goods which we require but, surely, the maintenance of those alternative markets depends on the maintenance of a fair proportion of our exports going to them. I suggest that any uncontrolled switching over of goods to the American market might, for some temporary advantage, land us in grave long-term disadvantages.

There is one class of export to which that objection does not apply. That is the class, the large class, I am sorry to say the rapidly growing class, of what are called unrequited exports. It has been a feature of the last few months that every payments agreement made with our creditors has resulted in increases in the convertible sterling we make available to them. Undoubtedly there is now in our export figures a large element of exports for which we get nothing in return.

I see the difficulty; I see the political implications which had to be faced during these talks, but we have to ask ourselves, however difficult it is, whether we can really face a continuation of unrequited exports on this scale. I do not believe we can. As long as we could look forward, in the past, to large-scale unrequited imports, it was possible, but I think it is coming to an end. I would like to have from some spokesman of the Government some elaboration of the rather obscure passage in the Washington Agreement which deals with sterling balances. It is suggested there that some new machinery is to be set up to make it more easy for the Government to handle this problem. We would like to know in more detail exactly what the machinery is and how it is expected to operate to our advantage.

In dealing with the problem of inflation, the Chancellor of the Exchequer made two important statements. One was in regard to increased taxation and the other with regard to increased economy. In regard to increased taxation, we shall of course have a fuller opportunity of considering it, a full opportunity for discussion of legislation, but I would immediately point out two things. The Chancellor said that the increase in Profits Tax was rough justice; well, it is very rough, because it is not going to apply only to those companies which are able to make increased profits because of these export opportunities, but will apply to them all and to a vast quantity of shareholders who also will have to suffer any sacrifices which the increased cost of living is to put upon them. The second point is that there is always a danger that a tax of this kind is merely paid out of reserves which it is essential we should accumulate.

I now turn to what the Chancellor said about economy; first, the cutting of the capital investment programme and then economy in Government expenditure. In regard to the cutting of the capital investment programme, perhaps he gave me a wrong impression, but it sounded as if the whole cut was to fall on private industrial investment and that no appropriate part was to be taken by Government capital expenditure. That, of course, would be disastrous. The vast majority of the capital expenditure of industrial companies is not undertaken merely for the fun of spending money, but because it is the only way of maintaining or increasing the efficiency of our production. We have to face the fact that any large cut of industrial capital investment is, in the long run, going to be paid for in decreased industrial efficiency. With regard to the cut in Government expenditure, I think that we on this side of the House are entitled to welcome the right hon. and learned Gentleman as a convert.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

Today the Chancellor has said what has been said before from these Benches and always hotly denied. He has said that if you omitted defence expenditure and expenditure on the social services from Government expenditure, there was no room in what was left for worthwhile economy. That he has told us on many occasions, but apparently he now finds there is room for substantial economy, and we would like to know what he means by the word "substantial." It is a rather indefinite word, but the people who are looking for the steps to be taken to combat inflation are not going to be satisfied merely with indefinite terms of that kind.

Sooner or later we must know—the sooner the better—what in fact the right hon. and learned Gentleman contemplates; what he thinks now, which he told us before he did not think, can be done in the way of economy and, under the more pressing circumstances of today, what substantial economies should be made. All I can say is that if those substantial economies which he can make now had only been made in the past, the more pressing circumstances he now has to fear might never have arisen. Let there be no misapprehension. In the fight against inflation which is now going to take place, the kind of economy and the scope of the economy to be forced upon the Government will not be determined merely by their desire. If it was, of course, no one would economise. Everyone hates economising in his own life and no one particularly likes economising in Government expenditure. It will be determined by one thing and one thing only—the amount of economy which is absolutely essential to prevent this inflationary pressure from growing. Unless the "substantial" to which the Chancellor referred is what we on this side of the House would regard as substantial, I am afraid that the steps he takes will be quite ineffective to deal with the dangers which he foresees.

I would, in conclusion, say one word about the Washington agreement. Here, I am glad to say, we in the House can be in entire agreement. There is no difference of party here. With a few small exceptions, we welcome this agreement, and we are glad to see its result. Perhaps the most important thing, after all, is the mere fact that we should have agreed at all. That is more important than the details, because the atmosphere was being created by Left-wing publicists and Left-wing publications which might easily have led to strained relations with the United States. I am glad that that danger has been averted, and that we can look for co-operation, not only in economic affairs but in these wider aspects, of which we are so violently in need. Great credit is due to the American Government for the wisdom and statesmanship with which they have declared their intention to shoulder what may well be and what to us in the past were the heavy responsibilities of a creditor nation.

If that spirit pervades not only the talks in Washington, not only the rough headings of agreement now reached, but their detailed working out and the actual application, it means a brighter prospect for our export trade than ever before. But this is, of course, only the beginning. In itself it brings little immediate relief, and we must hope that future steps will be carried out in the same spirit and with the same success as this initial venture.

I can best conclude by a reference to a recent most attractive speech by the Minister of Health. Speaking in the country last week-end he—I am afraid that I cannot attempt to reproduce the eloquence with which he no doubt made it—appealed to his audience and through his audience to the country to trust the Government. He told his audience, and through them the country, that he could not tell them what the Government would do because they did not know—I am putting it roughly—

Photo of Mr Aneurin Bevan Mr Aneurin Bevan , Ebbw Vale

Rough, but not even justice.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

He could not tell them why the Government would do it because they did not know, but even so they were to trust the Government because they were ordinary chaps. I do not think he could have consulted the Foreign Secretary before he made that statement. But why should anyone trust the Government on their record in the past? Why should we trust a Government who are today announcing the surrender of a policy which for the last year we have been told was vital? How can we trust a Government a member of which only last spring told the world that we were no longer interested in recovery, while here we find ourselves in the autumn thinking only of survival? How can we trust a Government who now admit that their whole conduct of affairs over the last five months has been one temporary expedient after another, each leading to crisis, and that we are now passing to the last and most dangerous of all the expedients?

There is nothing in the past of the Government which calls for confidence. There is no sign being given today that they intend any action in the future which will merit it in any greater degree. In this Debate, therefore, we are not able to give to the Government a vote of confidence, and when the time comes—I hope it will be soon—the country will be unable to do so either.

5.5 p.m.

Photo of Sir Austen Albu Sir Austen Albu , Edmonton

Those of us who had hoped to hear in the right hon. Gentleman's speech something which would give us some indication of the nature of the Amendment which the Opposition would be likely to move to the Government's Motion are bitterly disappointed. Nothing in what the right hon. Gentleman has said has indicated in what way the Conservative Party intends to give the country an idea of its alternative policy. His speech, which, if I might say so, seemed to me to be much below the level of the those generally given in this House by the right hon. Gentleman since I have been here, seemed to indicate a degree of disunity and doubt on the Opposition benches which will, I as sure, find its reflection in the Amendment when we finally receive it.

The right hon. Gentleman finished his speech by inviting the House and the country to compare the record of the Government since it has been in office, presumably with the record of the Conservative Party when it was in office before the war. That suits us on these benches very well indeed. No alternative has been put forward or suggested by the right hon. Gentleman or by any of their speakers or writers in the Opposition Press to the policy of devaluation which the Chancellor and the Government have now agreed to put in operation. I cannot myself see the point of the attacks which were made by the right hon. Gentleman on the Chancellor for having at a suitable moment changed his mind. So far as I know there are no doctrines in this matter. Nor, so far as I know, is there some definite stage at which to the whole world a change in policy of this nature becomes clear. It is presumably on the advice of the Chancellor's officials and in accordance with a general consideration by the Government of the situation as it is gradually changing that such a decision has to be made.

The Opposition have certainly no right to criticise the Government on the score of their handling of foreign trade since they have been in office. Have the Opposition forgotten that this Government have reversed the trade trends of more than half a century, trends in regard to which nothing whatever was being done when the Conservatives were in office? The situation with which we are now faced—certainly rendered far worse by the war and by the sale of our foreign investments—is the culmination of economic developments in the world which have been going on for many years, and right hon. Gentlemen opposite are as aware of that as are we on this side of the House, but when they were in power, and when it was within their power to do something about it they did nothing whatever.

So today, so far as one can see, there is no alternative policy which they are prepared to put forward unless it be that generally put forward in this House by the hon. Member for Chippenham (Mr. Eccles), the hon. Member for Scarborough and Whitby (Mr. Spearman), with the support, I presume, of the hon. Member for Orpington (Sir W. Smithers). Certainly the cheers which greeted the only recommendations made by the right hon. Gentleman, namely, that there should be considerable cuts in Government expenditure, and therefore presumably in the social services, which would naturally lead to deflation and presumably unemployment, indicate that to be the policy which has the most support on the Opposition Benches. But the hon. Member for Chippenham and his friends seem to me to reflect in this country the glow from the last flare-up of economic Liberalism which is taking place in Europe at the present time. I hope that the Chancellor and the Government will not allow themselves and their policy of economic planning and necessary controls to be nibbled away in any way by the growth—as I think, the temporary growth—of this development on the Continent.

I believe that the Washington Conference and the agreement made there, raises a hope that these economic Liberals, these last believers in laissez faire capitalism in Europe, are very shortly going to find themselves out on a limb. The advance in American thinking on these matters in the last few months, especially as indicated in the report of the Washington Conference, has been astonishing. It is not only that there is now in the United States a strong trade union movement of perhaps 10 million members who are understanding what we are doing in this country, and who are playing an extremely important role in support of the American Administration; it is not only, as the Chancellor has pointed out, that at last they really understand the role and responsibilities of a creditor nation, but even the manufacturers themselves—who might normally be expected to be somewhat behind advanced opinion—are changing their attitude towards these problems to an extraordinary extent. So much so that one may hope that in the future there may be less of the lobbying for high tariffs in the face of increased competition from outside the United States of America than there has been in the past.

I would quote in illustration of that the foreword by the Chairman, Mr. Curtis E. Calder, to a very interesting report on "The Foreign Trade Gap" published by the National Association of Manufacturers of the United States. Mr. Calder said: The battle for the trade gap is essentially that of reconciling our urge to export our surpluses with a reluctance to accept imports in payment for them. He went on: It is not too early to direct official attention to a careful and detailed analysis of those areas in our country which can, with the greatest benefit to the American public as a whole, accept an increased volume of imports. It is because of statements such as these, as well as the Government statements issued from Washington, that I think we can have confidence that we shall see permanent benefits, not only from the temporary change which has come about from the change in the ratio of sterling to dollars, but from the efforts we are making to balance our dollar and sterling trade throughout the world as a whole.

I believe that in the not so far distant future we may see a great development in economic planning in the United States itself. I am not sure that there is not a great deal more economic planning going on there at the present time than is understood by most people in this country, or the rest of Europe. It is a fact that they have a great deal more economic information than there is in this country; and they may have a great deal more technique for planning than exists in this country or in Europe. It is not at all unlikely, I think, that we shall see the American Administration in the near future planning for full employment; planning, in fact, for what may well be nearly an inflationary situation in order to ensure that there is a market in the United States for the goods which must be exported from non-dollar countries if they are to receive the food and raw materials which they need from the dollar area. I believe that this is what really lies beneath the agreement which has been reached at Washington.

If that is the case then there is some real hope. I think there is some justification for believing that that sort of opinion is growing in America because the quotation which I read from the Chairman of the National Association of Manufacturers in the United States does call on the American Government to direct attention to those areas in their country where imports can best be utilised. I suggest, therefore, that it is likely that we shall see a great expansion of United States economic activity, leading to a great expansion of United States imports.

Photo of Mr Konni Zilliacus Mr Konni Zilliacus , Gateshead

Is my hon. Friend aware that Congress has blown to smithereens President Truman's programme? Is he aware that Departmental officials have said that they do not expect devaluation will make any difference to the volume of American imports?

Photo of Sir Austen Albu Sir Austen Albu , Edmonton

I am certain that it would be possible to quote a large number of people in the United States who do not agree with the opinions I am expressing. But, after all, elections in the United States take place every two years and the pressure of opinion there, in my opinion, is likely to cause a very considerable change. I also believe that President Truman's Administration itself is becoming more and more dependent on a policy similar to that which we have adopted in this country. Therefore, I am not particularly concerned with what individual American spokesmen may have said in the last few days.

I wish to refer for a moment to the undoubted effect on the internal cost of living in this country, and to the rise in the price of bread. In the past, bread has always had a special significance for working class families. Due to the rise in the standard of living in this country in the last few years the significance of bread in the working class standard of life is not as great as it was; it is very much less. But it still is an important factor in the case of a working class family with two or three children living on the lowest income scale. I would suggest to the Chancellor, and to the Government, that while we, in general, support the policy that food subsidies should not be raised—that there should not be a continuance of income redistribution by the method of food subsidies—bread might be considered as a special case. I would ask the Chancellor not to be doctrinaire on this question, and if it is the easiest and simplest way of maintaining the stabilisation of prices and wages which he wants, to be willing to give way on this particular issue.

Although I believe there are many of the lowest paid workers who are now very near the level at which it is difficult to maintain a family on a decent standard of life, there are great difficulties in allowing their wage rates to rise and not allowing the differentials to rise with them. In particular it is very difficult to ask the skilled engineer, for example, to allow his differential to be reduced while nothing is done about the differential between the skilled workers and the managerial and professional classes. It is difficult indeed to say that we must pay directors of industries, whether public or private, the rate for the job if we do not pay the rate to the skilled engineers and technicians. If we are really sincere in all parts of the House and country on this matter, I am not sure that the time has not come for some reduction in the higher salaries and incomes in this country.

I should like to see a lead taken by the Government and a movement for a reduction in the higher salaries and incomes to show that we really mean it when we say that it is not possible at the present time to maintain the differentials. If we do not, I do not think it will be possible for these demands to be restrained. These matters are not entirely matters of arithmetic and economics, but are considerably matters of psychology as well. If people are to believe what we say in these matters we must take action.

Returning to my fear that the glow of economic Liberalism in Europe might lead to some nibbling away of controls in this country, I would like particularly to urge the Government not to hesitate to increase controls which are necessary in order to see that goods are exported and not used in this country, or to direct production into those types of exports which are the most profitable. If it were necessary to do so, I hope that the Government would not hesitate to reimpose clothes rationing. I believe that rationing is a fairer method of dealing with this problem than an all-round reduction of incomes.

I am glad that the Chancellor said that for our increased exports to the United States we could, or should, no longer rely only on the export of what are generally called high quality goods, but that we should aim our exports at that vast number of high income wage-earners who form the mass market in the United States. I do not know how many of our manufacturers read the very interesting annual studies made for the Federal Reserve Bank of the demand for durable consumer goods in the United States. If they did, they would see that even in this field of specialised goods of a good design, we could perhaps get a substantial market and a substantial income.

I hope that we shall not hear any more of the suggestion that the advantages of devaluation have been wiped out by the increase of the cost of raw materials. An extremely dishonest statement was given to the Press by a rather misnamed trade association, the Engineering Industries Association, which stated that the whole of the advantages of devaluation had been wiped out by the increase in the price of raw materials. The Engineering Industries Association is not really concerned with engineering products but with a wide variety of products. Unless their products are merely pots and pans, and it may be electrical batteries, in which the conversion factor of the materials to the finished goods is very low indeed, of course, this is completely untrue.

In most products of this type the raw material content is about 30 per cent. of the finished cost and of that it is unlikely that more than one half would be imported raw material.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

It is not only a question of imported raw materials. Raw materials even from sterling sources have been raised in price.

Photo of Sir Austen Albu Sir Austen Albu , Edmonton

I am sorry. I will put it in another way. It is extremely unlikely that of that 30 per cent. raw material more than one half would be non-ferrous metals. Perhaps that is a fairer way of putting the matter. If that is the case, it is obvious that the increase in cost of these goods is nowhere near as great as the tremendous advantage they will get in price because of devaluation. The statement to which I referred was put out entirely for political reasons.

That is why we are justified in having some doubts as to the honesty of the Opposition and those who support them when they take no steps whatever to correct statements of this type. The fact is that our manufacturers of this type of goods—and it is this type of goods in which there is a high conversion factor which we most need to export—now have a great opportunity. I hope that the Government will not hesitate to direct materials and to direct the economy in such a way that in future our exports are more and more of this type of goods.

Before I conclude I should like to make what might be regarded as a criticism of the policy of the Government so far. Perhaps there has been a little too much emphasis on the need for competitive exports. There is a serious danger of a competitive scramble by European countries for dollars—that is to say for the food and raw materials which we all need for our existence. I am well aware that while the climate exists to which I referred at the beginning of my speech—the climate of economic Liberalism—it is not possible to make planning arrangements either for investments or for the use of dollars and so on. I hope that one of the Government spokesmen during this Debate will indicate how far we are trying to press the European nations to co-operate in this respect. We should take the lead in organising the European economy as it affects the use of dollars, production, markets and long-term investment.

The present Governments in Europe are not there for good. [HON. MEMBERS: "Hear, hear."] I was talking about the other side of the Channel. I have no doubt about what will happen on this side. If there is the development of American policy which I also indicated earlier in my speech, and which I think is quite likely, I consider that we shall find a very different attitude towards these problems in Europe in the future. I hope therefore that the Government will continue to try to get co-operation in the use of dollars, in the development of markets and particularly in investments, so that we can improve the division of labour within the European countries in the future. If that is done, and if the developments which I mentioned do take place in the United States, I have no doubt that we shall succeed. If we should fail, for reasons which I think will be largely beyond our control, it will be necessary to look again at our internal controls and our policy of fair shares, and if cuts are to come they must come fairly and equally all round.

5.26 p.m.

Photo of Major Henry Spence Major Henry Spence , Aberdeenshire and Kincardineshire Central

There is one aspect of devaluation of which no mention has been made so far in this Debate. When he was assessing the relative merits and demerits of the situation the Chancellor of the Exchequer referred to the advantages which particular sections of industry might get in the export field, and he mentioned a certain feeling that wage-earners in those industries might have. But there are other effects on industry which he did not mention. I refer to the background against which devaluation took place. In answer to a supplementary question which I put on 6th July, the Chancellor told the House that there would be no devaluation. That assurance was repeated in another place.

The reason why I put that question to the Chancellor was that as a business man I realised how vital it was that we should have an assurance about our exchange rates. As a result of the assurances then given industry went ahead with its longterm contracts and with various arrangements in hard currency markets. While there may be benefit in certain markets from devaluation, industry today finds itself in considerable difficulty over the con, tracts made on the assumption that no devaluation would take place. I hope that the Chancellor will bear that in mind when he makes his assessment of how the profits and losses will fall.

In his speech the Chancellor sought to create the impression that an attack had been made upon sterling. Those were his words. He said that an attack had been made upon sterling in the third quarter of 1949. I think that it is true to say that all currencies are always under attack. It is only when they are weak that they decline and cannot resist pressure. There was no organised attack from any particular quarter—at least, the right hon. and learned Gentleman gave no indication of that.

I suggest that the reason why devaluation was forced upon us at the time was the accumulated years of overspending of our resources until we had got our currency into such a state that no one was confident enough to hold it if they could avoid doing so. Frankly, I was disappointed in what the Chancellor said about his plans for increasing productivity. I recall making a speech some 18 months ago in this House on the question of redeployment of labour. I believe that in the skilled redeployment of our labour lies one of our best chances of getting our economy on to a better footing and justifying the fact of devaluation.

We have full employment, but what sort of employment are people engaged in? There are far too many who are not in productive industry. That is a state of affairs which has grown over the years, but it has never been checked. It is vital if we as a country are to remain great and put our exchange on a permanently stable basis, that we should first redeploy our labour and, secondly, give encouragement to recruit people to productive industry. Productive industry today is not taking its full share of the input of new blood, and I ask the Chancellor to look at that.

I am an exporter of goods to America, and I should like to know a little more about the discussions which took place in Washington over the question of tariffs. At the present time, tariffs are the biggest single hindrance to the importation of our goods into America. They are really our greatest difficulty, and they run very high. On some textiles, they are as high as 60 per cent., and on certain types of china even 100 per cent. Unless we are given an assurance that devaluation of the pound sterling will not be offset by an increase in tariffs in order to protect the American manufacturers, we may find that most of the advantages we seek to gain will be thrown away. I sincerely hope that we may receive an assurance on that point later in the Debate The Chancellor quoted from the Board of Trade circular which was sent out to all exporters in which reference is made to the necessity for "maximising"—to use a new phrase—dollar earnings. If goods are in short supply, then encouragement is given to the manufacturer to raise his price in terms of sterling so as to earn more dollars. As I have already told the House, I export goods myself. The goods I export are limited in production, and I thought it would be interesting to see whether a small rise in the price of those goods might possibly be favourably received in America. I can assure the Chancellor that the reaction of the American buyer to any increase in price in order to enable us to take advantage of devaluation is very bitter and very strong indeed. I have been called some extremely hard names, and I have had to withdraw from the position I took up. I mention that fact because in making our assessment of the future I do not think that we should flatter ourselves that we are going to derive any large increase in our dollar earnings by increasing the sterling price of our goods.

Photo of Mr Konni Zilliacus Mr Konni Zilliacus , Gateshead

As an exporter, does the hon. Gentleman confirm the belief of the hon. Member for Edmonton (Mr. Albu) that American manufacturers are showing more benevolence to competitive imports from other countries?

Photo of Major Henry Spence Major Henry Spence , Aberdeenshire and Kincardineshire Central

I am not sufficiently in touch with American manufacturers to answer that question, and I do not think it applies to what I have just said. I am merely saying that American buyers take strong objection to any increase in the price of the goods we export to them in order to enable us to take advantage of devaluation.

There is one other point on which I should like further information, and that is the Chancellor's statement on the question of the cost of living and the rise which we may see in our cost of living as the result of devaluation. In his broadcast speech just over a week ago, the probable rise mentioned by the right hon. and learned Gentleman was on the basis of one or two points. He rather confirmed that again this afternoon. I hope we shall have a statement on this matter because it is very important. Of the goods on which our cost-of-living index is based, about 15 per cent. come directly or indirectly from dollar sources. Therefore, a rise of 30 per cent. in the cost of those goods would mean a net increase of 5 per cent. in the cost-of-living index. If these figures are wrong, I hope I may be contradicted and that we shall be given the dollar content of our cost-of-living index.

Before concluding, I wish to ask one or two questions which I am sure the people of this country would like to have answered before this Debate ends. They are simple questions which concern nearly everybody. The first is, what effect will devaluation have on our petrol ration? That is a matter which is causing widespread speculation. My second question is what effect will devaluation have on the foreign tourist travel as far as the British people are concerned? As the Chancellor knows, many people, including Members of the Cabinet, have availed themselves of the foreign exchange allowance in order to go abroad this summer. Can we have an assurance that those allowances will be continued, and be told at what rates they will be renewed? Devaluation is a fact, whether we like it or not, and we should not try to make a virtue of a necessity. We realise the problem that it poses to the whole nation, but I believe that something more resolute than we have heard this afternoon is required if we are to succeed.

5.37 p.m.

Photo of Mr Denis Pritt Mr Denis Pritt , Hammersmith North

The group of which I am chairman and which has been formed, of course, like many valuable products, by a process of extrusion, has put down an Amendment, although I understand it will not be called. That being so, I propose to make a general speech in opposition to the Motion of the Government. I listened to the admirable Tory speech of the Chancellor of the Exchequer. The only way in which it differed from the speech which a Tory Chancellor would have made on the topic was that it was very well made. I have a good many objections to the Motion and to the policy. I suggest that the policy of devaluation and all the other things that go with it provide no remedy. There is no element in it of any Socialist attempt to remedy the situation. I maintain that in any event no capitalist proposal could provide a remedy, and that the attempt made—although it is bound to fail—is for a capitalist remedy. I suggest that the remedy proposed will produce at any rate some of the evils—particularly unemployment—which it is claimed it avoids. And, finally, there are perfectly good remedies which I hope to mention towards the end of my speech.

I need not say very much about the Tory speech that was made from the Tory benches. It was interesting, as the speeches of the right hon. Member for West Bristol (Mr. Stanley) always are, not because of its content, but because of its style. It demonstrated the fundamental agreement on political principles between the two parties which is always claimed, by the right wing at any rate, as an essential of the two-party system. I would prefer to express myself on it thus—that we on this side of the House have long predicted that capitalism would fail as a system.

The real issue which lies between us and the Government on this topic is the far-reaching issue of whether the country shall continue to be dominated by the capitalists of the world—our own or those of some other nation—or whether, as we believe, a complete change should be wrought in our system by bringing under the control of this House the forces of finance and industry which have so great a power over the lives of individuals in this country. If anybody thinks that is rather better English than I usually achieve, I would say at once that those words are quoted almost textually from a speech made 18 years ago on the National Economy Bill of the 1931 Tory Coalition Government, and that the words were used in a speech made by the right hon. and learned Gentleman the present Chancellor of the Exchequer. He was not then a right hon. Gentleman, but he was right and he was honourable. He was speaking in his Socialist era, which has passed.

The first thing which it is useful to consider is why is there a crisis, or, rather, why is there the particular dollar crisis, which has lead to this devaluation? The Chancellor appeared to treat it as an act of God. In his broadcast he talked about our dollar exports "starting to fall off," and he succeeded in getting through a long and lucid speech this afternoon without mentioning the American slump, either in its present form or in its future form. He did not, of course, notice— or at any rate he did not mention it, although he probably noticed a good many things—that the difficulties of Marshall Aid, which now is plainly failing to do any of the things for Europe and indeed for America that it is supposed to do, came at the same time as the fall in the dollar exports—that is to say, the fall in the willingness of the United States, for one reason or another, to accept imports from this country.

The Chancellor made no suggestion that we had fallen down on our job by raising our prices from what they were before, or by producing goods of worse quality, but he did suggest various remedies to which I shall turn later. This falling off, apparently, was something which happened, like Topsy, or a war, to those who do not understand the causes of war. The plain truth is that it is due to the American slump. If you work on a capitalist footing you know you will get a slump; the only question is, how quickly and how badly? This is not yet a very bad slump, but it is bad enough to produce this crisis.

Facing the difficulty of obtaining dollars, the right hon. and learned Gentleman decides to fight hard for dollars. He is obsessed by dollars, and behaves almost as if there were no other part of the world with which we could trade. So he proceeds to try to obtain more dollars by immediately forgoing 30 per cent. of any sum of dollars that we can, obtain. Of course, that is not a complete answer; it is not even as topsy-turvy as some capitalist problems where we seem to have to admit that the only way to get something is to take less of it. But, as a method of obtaining more dollars, immediately to forgo one-third of all we do get is a policy which at any rate calls for a little explanation. It means that if we are to get more dollars—not to close the dollar gap, for the Government do not suggest that they are going to do that—but to solve some of the dollar trouble, we have to multiply our exports by some factor. The Government do not suggest what it is. If we double our exports we get something like one and a half times the number of dollars we previously obtained, which will not be very much help. If we treble our exports we get twice as many dollars, which is not very much help.

One does not know what the Government are going to do. Certainly there are no positive assessments, although there is some advice to manufacturers, for a discovery has been made on behalf of the Government that there are a lot of babies in the United States—and I mean babies of a baby age—and that we could sell them some new lines. Fairy tales, I suppose, for instance—[An HON. MEMBER: "Grimm's Fairy Tales."]. It is suggested that it should be Grimm's Fairy Tales, but the Chancellor was so light-hearted today that I think it is more likely to be Hans Andersen's Fairy Tales.

We are to get more lines into the United States also, by spending more dollars at 2.80 dollars to the pound on publicity. All I can say is that if hon. Members read the American Press and see what American manufacturers are saying, they will realise that it does not look as if we shall earn more dollars that way. The American manufacturers and their Press are saying, "We are not afraid of the devaluation of the pound." Perhaps it is cynical to suggest that if they had not wanted the devaluation of the pound we should not have been allowed to devalue it. They are saying, "We can meet it"—and, indeed, they make many threats; they can meet it simply by slashing their prices until it is no longer possible for us to get into the market. Then, when we finally give it up as a bad job, they put the prices up again so that nobody even in America gets the advantage for very long.

There are a great many difficulties about the situation. One of them was mentioned by the hon. Member for Central Aberdeen (Mr. Spence). He mentioned tariffs, We have no promise that tariffs will be reduced—only that they will be considered—but we have some substantial assurances that the tariff lobbies will not allow them to be reduced. We shall shortly be accused by the Americans of dumping, as we have the impudence today to accuse the Czechs of dumping.

Another difficulty is, of course, that this juggling—it is only juggling to reduce rates like this, although I am not blaming conjurors in the least if they can get away with it—is a game which can be played by lots of other competitors. We have plenty of competitors in our efforts to get into the United States markets and they might also devalue so that, as far as fighting them is concerned, we shall be no better off, although we may be better off in dealing with the American manufacturers.

What of American manufactured goods? There is plenty of evidence that in the particular lines in which we have succeeded in the United States, on the merits of quality—the best type of textiles and the best type of china, for example—the American manufacturers are now succeeding in producing both textiles and china which are almost as good as those we export. And we have not only to deal with present competition; we have to deal with forward-coming competitors like Germany and Japan. I fancy that West Germany is already, in effect, pretty well devalued and is assisted by low-paid labour, but I think the farseeing authorities in Western Germany are now considering devaluing there.

The last difficulty which I shall mention is that which will arise with the development of the American slump. The slump caused the crisis, within limits. It prevented a great many Americans from buying high-priced dollar goods from us, for they could not even sell the low-priced dollar goods which they were producing. In due course this slump will proceed, and our prospects of getting goods into the United States—in actual volume, apart from the diminished dollar receipts—must be falling rather than rising. I should be very happy if any of the Ministers could tell us what increase of dollar revenue we expect. I doubt whether they have any solid basis or estimate. As far as we have gone, I suggest it is quite clear that this step is, at any rate, not very likely to produce substantially more dollars, whatever other disadvantages may follow, and on disadvantages I refer not so much to devaluation alone, but to the Government's other policies accompanying it.

The Government are adding to this policy of devaluation a certain number of other points, policies, and decisions which, they say, are absolutely essential. True, they often say a thing is essential and then do the opposite, but we cannot be sure about that. One of these things is that an absolute freezing of money wages and personal incomes is demanded. I hope it will apply to judges and higher civil servants an increase in whose payments was recently proposed. It is to be an absolute freezing, although it is true that it has been announced in an indirect fashion by the Chancellor today that it is not to apply, after all, to low-paid labour, which makes nonsense of the declaration in his broadcast that with any rise in personal incomes at all we should have widespread unemployment as a reward.

There is to be inevitably—not as a direct part of Government policy but as a recognised and accepted result of devaluation—a rise is the cost of living. The Government say it will be a point or so by the end of the year, whereas many estimates say it will be more like 7½ per cent. If what happened in 1931 is any guide, I should think the increase will be a good deal more. In their charity people have almost forgotten the observation in the Chancellor's broadcast that there will be "no noticeable increase" for the present in retail prices, other than that of bread. "Noticeable increase." Who notices an increase of 1½d. or 1d. in the price of a loaf? The answer is: the people whose standard of living is most important because it is the lowest.

Then, of course, the rise in the cost of living, plus an absolute freezing of wages—and the Chancellor is going to freeze them if the working class do not stop him—means a fall in real wages. It means a fall in the value of every fixed payment made in any sort or kind of income. It means a slashing of every social service that takes the form of payment. It, perhaps, justifies and explains an assertion of Mr. Finletter to the Senate that it is the policy of the British Government to cut the social services, and that they are carrying out that policy. The Chancellor cannot very well repudiate Mr. Finletter because only a month or two ago he explained that he was a charming man, and that the more one met him the more one wanted to give him. Mr. Finletter has gone back home, and one cannot give him anything more directly, but it makes one a little anxious.

In addition to that, one notices that the Chancellor tells the working class not to go slow, not to be absentees. He does not tell the people in Throgmorton Street, who, when the Stock Exchange closed, did business outside, to be absentees. He tells the working class not to be absen- tees Yet, it is the working class who have been continuously increasing productivity all the time. Now he tells them that that is not enough. He says, "Thank you very much, working class, but will you produce a little more? You will get less real wages for producing it. It is true it may result in a little redundancy, but you will have the great satisfaction of knowing that you are serving your country." That is a 100 per cent. Tory policy, and if the Tories had proposed it, and the Chancellor had been in Opposition, he would have slashed them till they shrank in their seats.

Another point which, I am sure, will affect hon. Members opposite—and I think it should affect the minds of all—is that part of the remedy is wholesale American investment in the British Colonies—which is just the taking over of the Empire. It is not pawning it, but selling it—or giving it away—I am not quite sure which it is. The classic remedy of capitalism in slump or decline is to invest its money in somebody else's hard work in another country. I do not of course approve of either the Americans or the British thus exploiting Colonies, but the facts should be noted.

I do not want to go into the next point in detail, but I want to mention that we are threatened by the bogy of mass unemployment. The classic way to make unemployment—one of the classic contradictions of capitalism—is the way of cutting the purchasing, power of the mass of the people. So, the Chancellor's proposal for getting rid of unemployment is the classic method of small and then gradually increasing cuts in purchasing power. Every economist must know, and every experience from 1931 subsequently shows us, that that policy is the way to create unemployment. The Chancellor and I sat across there from 1935 onwards when it started, and pointed out step by step the results, as they were shown, of the Tory policy of cutting down the people's purchasing power, which the Chancellor is following today, and which he excuses as absolutely necessary because he must have his dollars.

Particularly in his broadcast, and to some extent in his speech today, he sought to lay the whole burden that is the result of the crisis on the workers alone. It is perfectly true that he is now eating his words a little. I suppose he has got a better capacity for eating words than most of us, because his other diet is so modest. He is now laying the whole burden upon the working class, particularly the poorest members of the working class, but I think, perhaps, some slight working-class pressure must have got through the doors of the Treasury since his broadcast, because although hitherto he has merely asked manufacturers voluntarily, not to forgo all increased profits, but just not to distribute them, now today he is not merely asking them to forgo distribution of increased profits, but says he will tax them if they are distributed.

But apart from that, profits stand sacred in this 100 per cent. Tory policy. Heaven knows why the Tories are opposing it. Profits are no light part of the share of the proceeds of production in this country. I think private enterprise produces in this country a little over £7,000 million a year, and 40 per cent. of that goes to profit; and up to now the only line has been to ask the wolf of profit not to be too unkind to the lamb of production, and now the Government are only to go only a little bit farther than that. It appears as though nothing is to be done with those profiteers—in-deed, swindlers some of them seem to be—and that they are not to be put away under 18B—or perhaps, it ought to be 18D as this is a matter of finance—who, when the Stock Exchange was closed, went out into Throgmorton Street to do their business and, as it is called, "made" something like £140 million for themselves or their clients. Buses were diverted for them. If the Labour Party had held a protest meeting in Throgmorton Street they would have been moved on by the police, and, possibly, prosecuted for obstructing the police in the performance of their duty in getting the buses through.

The Chancellor talks about "sharing the burden alike." He could not have been thinking of the General Election of 1931, when there were innumerable copies of a cartoon by Frank Horrabin showing a ladder leading down to a dirty pool, and on the ladder people with different incomes; the poorest, one who had no work at all—we do better than that now about employment—the man without a job, was at the bottom with his chin just above the water. The next man, a poorly paid worker, was a bit higher up, and so on, up to the top; and the fellow at the top of the ladder, who was well away from the water, was shouting, "Share and share alike. That's fair. Let us each go down one rung."

That seems to me to be what the Government are seeking to do now, and yet this policy is not a permanent solution of our difficulties, and it is not even claimed for it that it will close the gap. I have known the right hon. and learned Gentleman for a good many years in both his professions, and when I heard him on Sunday week I felt I had never admired him as an advocate more or as a politician less. What makes it much worse is, that at a Press conference the following day he said that the Government had been trying to deal with its problems by a series of temporary expedients, which had led to a series of crises. I suppose the idea of supplying goods to the babies in America is one of the temporary expedients.

The tragedy is that this is all absolutely unnecessary. The Government are rather like a man who walks into a river; he is not very clear whether he can swim or where he should try to swim to; but he hopes he will not get wet. He behaves as if there were really nothing else for him to do but to go on. But anyone can tell him that the best thing is to turn round and walk back. There is nothing else for him to do but to turn round and look back.

Photo of Mr Richard Stokes Mr Richard Stokes , Ipswich

How can he turn round and look back?

Photo of Mr Denis Pritt Mr Denis Pritt , Hammersmith North

I should have said there is nothing for him to do but to turn round and look forward. The Government will not look to other countries, other trades and other currencies which conflict with their own ideologies. I suppose the Americans will not allow them to do so. They suffer from the illusion that the way to defeat Communism is not to trade with Communist countries. But Mr. Truman has explained, in one of his more lucid moments, that the only possible way to fight Communism is to show that you can produce a better standard of life than they can. One of the results of the present idiotic ideological economy is to divide Europe into two classes of countries, those with Marshall Aid and those that are getting better off every day. These are mutually exclusive classes. This country and America will not look to reasonable remedies if they conflict with their ideologies. "The Observer," which is not a Government paper but which, because the two parties have now come so close together, often gives good advice to the Government, recently showed how we could trade with Eastern Europe to our immense economic advantage, but pointed out that this would never do, because the political results would be serious.

I do not want to go into details, because I am hoping that some of my hon. Friends will have an opportunity later of catching Mr. Speaker's eye and dealing with them; but it is clear that we could trade with 200 million people in Russia who are producing an increasing number of products we urgently need, and are willing to buy things from us. We could also trade with China, but all we have done up to now is to make an agreement with the United States, or perhaps I should say we were told to make an agreement, not to deliver perfectly harmless goods to China, in case we made the Chinese better off and someone might think Chinese Communism was a good thing.

There is also the very substantial remedy of cutting our Defence expenditure, which is some £760 million a year or £2 million a day. It is perhaps not a fair analogy, but it is rather amusing that the father of the right hon. Member for Woodford (Mr. Churchill) resigned his office as Chancellor of the Exchequer rather than sanction an expenditure on the Army of £27 million a year. However, we are spending £760 million and the Chancellor dismisses it in one line. Then there is our military expenditure overseas. The Chancellor wants something to close the import-export gap as well as the dollar gap, but the military expenditure of this country overseas is almost equivalent to the dollar gap itself.

Then there are profits. They are now to be taxed a little more—after all, this is supposed to be a Socialist Government which the country sent here to follow a Socialist policy. Why did not the Government severely reduce or get rid of profits long ago instead of making these pathetic little appeals to distribute a little less? Then the Government could maintain the standards of living of the working classes. There is no reason not to do so. We were put here to do so. The standards are not as high as they should be. The profits are high, and enable us to do so. It is a Socialist policy; and it is the way to stop unemployment developing, as far as that can be done in a capitalist country. Even if they did that they would not be doing as well as countries in Eastern Europe, all of which are increasing their standards every day. I admit it is much easier for them to increase their standards because they were lower, but at least we should be able to maintain ours. I am afraid that I have kept Members a little long, but I have left a good deal by way of detail still unsaid.

I notice that in the Motion the Government call upon the people for their full co-operation with the Government in achieving the aim of maintaining stability, full employment and safeguarding the social services. I think it would be far better if it called upon the Government for the full implementation of their own Socialist professions, in co-operation with the people who elected them. If the Government did that we should have a very different policy, a very different future, and a very much better Government.

6.7 p.m.

Photo of Mr Ian Mikardo Mr Ian Mikardo , Reading

On a point of Order. May I ask, with the greatest respect, not in any way wishing to criticise the Chair, but merely for my own information and that of the House, whether we are to assume now that the hon. Member for Louth (Mr. Osborne) has been called that you, Mr. Bowles, look upon the speech of the hon. and learned Member for North Hammersmith (Mr. Pritt) as having been in support of the Government?

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

That is not a point of Order. The hon. Member for Reading may be disappointed that he has not been called, but that is a matter within the discretion of the Chair.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

It is not often I have to confess myself in agreement with the hon. and learned Member for North Hammersmith (Mr. Pritt), who is now leaving the Chamber. That is typical of the totalitarian attitude of the people he represents—they just cannot take it. There are two things he said with which I agree. The first was that devaluation provided no remedy, and the second was with regard to the Chancellor's broadcast that he had never admired him more as an advocate or admired him less as a politician. I think that most people feel that the Chancellor of the Exchequer in his broadcast was not up to the high standard we expect from him.

The other thing I would like to say in regard to the speech of the hon. and learned Member who has just run away,—which is typical of his type who run away and let others do the fighting—is this. He said that Europe was divided into two sections—the Marshall Aid countries and those who are getting better every day. I wanted to ask the hon. and learned Member, before he so cowardly ran away, where Yugoslavia stood. I think that is as much comment as his speech is worth.

I wish to make three practical points, and I am especially glad to see the President of the Board of Trade in his place today. First, I believe that the Government have not made clear enough to the nation how difficult it will be to increase our exports to America. If the House will forgive me I would like to quote my own experience of trying to sell textiles in America only nine months ago. I carried around with me a bag of good, Leicester-made, textiles, and I called on the great mail order houses, the buying syndicates and famous stores. I found it very difficult to get orders, although the directors and those in charge were very polite and courteous to me. Because it was perhaps unusual for a British Member of Parliament carrying his own samples to call on them, they saw me before my proper turn in the queue.

Why did I find it difficult to get orders? Because we have to face a 40 per cent. tariff, and there is no indication in America that that figure will be reduced against our textiles. Buyers said everywhere that they were used to buying from their own mills and would find it much more difficult to buy from mills 3,000 miles away. It was difficult to get them to believe that we could give as good service as their own mills. I also saw trade union leaders as well as manufacturers' associations, and they all assured me—and let there be no mistake about it—that if there are big imports from Europe which cause any substantial degree of unemployment they would at once demand that the tariff rate should be increased. As I went around the textile mills of North Philadelphia I found that some were working short time—and, remember, this was nine months ago.

I received a letter this morning from the President of the National Association of Hosiery Manufacturers in America, who is a good friend of this country and a great admirer of our institutions. He says: If any American tariffs are lowered to the point where there results serious unemployment therefrom it is bound to be true that such industry would raise the issue and seek support to restore a higher tariff. This is not theory we are talking about; it is what will happen. He goes on: Among the industries which are most active against lowered tariffs are woollen manufacturers, glass and china. The writer has also sent me a cutting from the "New York Times" of last Thursday, which says: Tariffs may be the principal issue of the 1952 election in America. Cheap imports are being felt; labour is expected to demand greater protection. Many complaints pour in. With half a dozen important American industries already suffering from the cheap imports of competitive products there is a distinct prospect that organised labour itself"— not capital— may step into the picture with a demand for higher levels on imports. Workers in the glass and pottery factories in Indiana have already started flooding their Senators with complaints concerning distressed conditions in those industries, while workers in other industries, such as watches, furs, ball bearings, etc., are beginning to feel the pinch as hours of work are reduced and 'lay offs' occur. We have to face that, and I want Members opposite to realise that Senators and Congressmen in America are just as sensitive to the threat of unemployment as Members on either side of this House.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

The hon. Member has talked enough nonsense already.

If there is any real fear of unemployment in America tariffs will rise. Despite what Mr. Paul Hoffman said to this country, I believe that it will be very difficult indeed, materially to increase our exports to America. We are not the only people who are trying to export: we shall have to face competition from Belgium, France, Italy and Germany and, very soon, from Japan, and their prices will make ours look silly. In face of that I say, again, that the Chancellor was below himself when he broadcast to the nation. As one who has been accused in my own party of being rather a Crippsian "fan" I say that he failed in not making clear to our people the difficulties we shall have to face in increasing our exports to America.

Photo of Mr John Platts-Mills Mr John Platts-Mills , Finsbury

Will the hon. Gentleman—

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

No. Perhaps I may be allowed to continue with my speech. After all, I have not spoken here since last February.

My second point is that I believe that devaluation will not help us at all but will, in the long run, make our task more difficult. May I give another example, again from my own trade? Already, cotton has gone up by about 6d. per lb. The American cotton we buy will have to go up by 30 per cent.—the difference between the previous sterling price and the devalued price. Americans, with whom we have to compete, will still be able to buy at the old price. Wool has already gone up by about 6d. or 7d. per lb., but the Americans are buying all the wool they require in Australia—a sterling area—at 30 per cent. below. We have to jump a tariff wall of 40 per cent. while they are buying 30 per cent. cheaper. The Chancellor has not made it clear that we shall not easily compete with them in their own market.

May I give another example? The women of this country are keenly interested in nylon stockings. We have been making a lot, but most of them have been exported as the President of the Board of Trade well knows. The best machines for making them come from Reading, in Pennsylvania. They have been costing about £7,000 each. Now they will cost over £10,000. The workers who are on these machines must produce three pairs of stockings for every two they used to produce so that we can buy the same amount of machinery, or American tobacco or American foodstuffs. Ultimately, the same will apply to the Coventry car workers, the Lancashire cotton workers and the Yorkshire wool workers. To bring in the same number of dollars they will have to produce 50 per cent. more than they produced before—something which the Chancellor failed to tell them in his broadcast. I think the country expected something better of the Chancellor. It may be that these severe disparities will be held off until after the General Election, but I would remind the House that politics will not save the nation. It is economics which will save us. The Chancellor, probably for the first time in his life, was deliberately dishonest with the nation. He hid the facts, and I hate to say so.

My third point is probably the most important of the lot. The workers of this country have not the faintest idea what devaluation means or what it involves. It is no good the Chancellor shaking his head. I should like him to come into my factory and test it on the people at the benches. There are too many theorists running this country, and I am convinced that the average working man does not know and, in many cases unhappily does not care what devaluation means to him. I do not blame him entirely, because a year ago I asked the Lord President of the Council what the Government proposed to do in view of the desperate economic situation of the nation, and he denied there was a crisis. He called me a defeatist. Can we blame the working man? I do not. I blame the Socialists who "sold him down the river."

I should like to remind the Prime Minister of the appeal he made two years ago. He issued a letter to industry asking for 10 per cent. extra production, which he told us would put us right. It has not put us right. The answer to his appeal was a flop. Later on the Lord President of the Council issued some first-class posters telling the workers of the country, "You must equate your wages to the quality, price and quantity of the work you produce." What has been the result? It has been another flop. The Chancellor himself a year ago went down to the T.U.C. Conference at Margate and told the leaders of the working class movement that if they took 25 per cent. of the total profits from industry it would make—I think he said—only fourpence in the pound difference in their wages. He added that there could not be any higher standard of life by a redistribution of wealth, but only by producing more wealth. What effect has that appeal had? Ever since that time we have had a series of demands for shorter hours and bigger wages.

We are facing today the evil effect of 40 years of the preaching of Socialist false doctrine. They have told the workers, "Put us into power and you will have a better time." I have stood in a working class district in the market place as the son of a working man and listened to speeches such as that 40 years ago. To the average working man "a better time" means only one thing—shorter hours and more pay. Now the Chancellor comes along and says, "You cannot have more pay and you have got to work longer hours." Many working men today feel they are being defrauded, and I recall the words used in this Chamber in 1945 by Jimmy Maxton, who warned the Government that the working men would turn from them to the party which the hon. Gentleman the Member for Gateshead (Mr. Zilliacus) is trying to follow.

The doctrine that the Labour Party preached for so many years was, "Don't work harder, because the harder you work the more you put into the pockets of the boss." To tell the workers, "Don't work harder because that puts a pal out of a job" does not help our position today. Another piece of advice was, "Don't work too hard and make a job for your pal." That is what the workers have been fed on, and can we wonder that they will not turn round and do extra work now. Of course, they will not, and I do not blame them.

I should like in conclusion to put two questions to the President of the Board of Trade. The first is this—and this is what the Chancellor should have made clear to the nation—if the Americans had not given us permission to use Marshall Aid dollars for the purchase of Canadian corn, which was the one thing he brought back from Washington that was worth while, was there the danger of bread rationing being re-introduced? It should be made very clear whether the Government contemplated it. I should like to know, because the Canadians were not prepared to sell their corn to us for our false pounds, and they would not take exports from us because they wanted them from America. Was it contemplated that there would be bread rationing here if America had not once more come to our rescue? That is the sort of statement which would make the working classes realise the seriousness of our situation.

My second question is also addressed to the President of the Board of Trade. If we are going to get 20 per cent., 25 per cent., or 30 per cent. less in the dollar markets for our textiles, we have to send more to get the same amount of dollars. If we wish to close the dollar gap and earn more dollars we have to produce probably 100 per cent. more textiles than previously, and sell them to America. If those additional textiles are not produced in the next six months does the Government contemplate the reimposition of clothes rationing? As far as one can see it is inevitable. It is no good the Chancellor puckering his brow. It is a tragedy that the Chancellor did not seize the golden opportunity on Sunday night, and tell the nation the facts.

Photo of Mr Humphrey Attewell Mr Humphrey Attewell , Harborough

The hon. Member should tell us what he told the Americans.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

The real answer to this problem is the answer given by the hon. Member for Bosworth (Mr. A. Allen), who is an organiser for the boot and shoe industry. About two months ago he called for the boot and shoe industry to return to a five and a half day week in order to increase production and help solve the nation's economic problems. He said, "I speak as a trade unionist. I have pleaded before, and I do so now, for a five and a half day week in industry." I do not believe there is another way out of this and I think—I admit there will be as much opposition to the five and a half day week from some of the employers as from the workers—that we have to get back to it if ever we are going to give our people what hon. Members opposite have promised them.

My final word is this. The Government made this confession in Command Paper 7572, The difficulties of the present economic position do not present themselves in an obvious form to the British public … A real and grave crisis in economic affairs seems remote and unreal. That was at the beginning of this year when the Government were asking America for 940 million dollars. Today this Government of "planners" wants over 1,500 million dollars. What a tragedy it is, and whose fault is it? It is that of hon. Members opposite and of the Government, and the sooner we are rid of them the better it will be for the whole nation.

6.28 p.m.

Photo of Mr Ian Mikardo Mr Ian Mikardo , Reading

I agree with the hon. Member for Louth (Mr. Osborne) that it is very difficult to rid the minds of working men of the fear that increased productivity may lead to unemployment, and that the harder they work the more profits they create for the boss and nothing for the country. Where he is wrong is in ascribing this fear in the minds of working people to 40 years of Socialist doctrine. It is due to 200 years of capitalist exploitation. One of the difficulties which we have to face—and I am not merely making a party point—[Interruption.] I know that the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) does not appreciate that some one on this side of the House might be objective, but I do a great deal of work in a humble way in the field of industrial relations, and I know how difficult it is to get over this inhibition in the minds of working men that if they work harder they may be defeating national and their own objectives.

What makes it so difficult is that this is not altogether a rational affair. It is not based entirely on their own experience but on a sort of inherited class memory from their fathers, their grandfathers, and their great grandfathers, all of whom knew that if they did work harder they would be worse off, and if they did work harder they would be more likely to be without work later on. I believe that the hon. Member for Louth will agree that their grandfathers and great grandfathers passed down this fear to their children and grandchildren long before the days when he, as a boy, stood at the soap box, which fact shows that we are dealing with something much more than inculcated propaganda.

I remember—I had not intended to deal with this point but I am grateful to the hon. Member for Louth for leading me to it, because it is fundamental—that a year or two ago I went to Lancashire to help to organise a productivity campaign in one of their towns. In order to get the feel of the place I spent a few days talking to people such as manufacturers, weavers, overlookers, cloth-lookers, the town clerk, members of the town council, doctors, butchers, bakers and so on. One soon got used to a situation in which, no matter to whomsoever one talked about increasing productivity, one got the answer after a few minutes: "It's all very well to talk about increasing productivity, but what happens if we get another 1922?"

At first I was not worried about it. I had accepted it as a natural reaction. The first one to say it to me was a grey-haired power-loom overlooker of about 55. He said it, and so I asked, "What happened to you in 1922?" He told me that he was thrown out of work for more than three years. He had two young children, and a third was born shortly after he was thrown out of work. He saw them all go very hungry for rather more than three years. One can quite understand how that experience must have seared itself into that man's mind and his not being willing to do anything which would cause a repetition of the experience. The next person was an apprentice weaver, a pretty fifteen-year-old girl, who had only been in the factory for a few days. I suppose she must have been fifteen to be at work at all, although she looked about ten, with her blue eyes and long golden plaits down her back. I talked to her and asked her what she was doing about productivity. She answered, "That is all very well, but what happens if we get another 1922?" That child was not born, anyhow, until 1933, but she still remembered what happened in 1922. Then it was that I began to be frightened of this thing, and to realise that we were dealing with something inherent in class memory.

I have a friend who runs a large and very efficient factory in the most enlightened way. He has done it for many years. He has the best system of industrial democracy in his factory that I know of. He is more generous towards his workers than any other manufacturer I have known. He treats his workers in the most open-handed way. More than once he has come to me, as he did quite recently, and complained of his disappointment. Perhaps he has gone to his workers with something which was intended to be for their good, only to find a first reaction of suspicion on their part. He has said to me, "I do not know what these workers of yours want." It is very strange that when they do something good they are his workers and that when they are naughty they are my workers. He complained, "I have been treating them in the best possible way all these years. Why is it that they do not trust me?" I replied to him in the same way that I have spoken to the hon. Member for Louth. I said, "Your workers trust you. They know you. You have won their confidence; but what you have not yet done is to overcome the inheritance they received from their fathers, grandfathers and great grandfathers." It is not only we who have to realise the importance of that fact but people such as the hon. Member for Louth, who now wants to interrupt me but who himself would not give way for one moment, and who discussed the problem in a rather superficial way.

It seems to me that out of this complex problem of devaluation—the Chancellor of the Exchequer indicated some of its complexities—three clear things emerge. The first is that if any criticism is to be flung about concerning what the Chancellor has done and is doing—and I think there is room for some criticism—the last people from whom that criticism should come are on the benches opposite. Nobody has done so much to intensify the nation's dollar difficulties in the last few months as some of the occupants of those benches and some of their friends in the country. The hon. Member for Central Aberdeen (Mr. Spence) said that all currencies were attacked at some time or another, and I suppose that is true. What does not often happen is that the currencies are attacked by the nationals of their own countries. That is the special thing which has been happening about sterling.

There is the hon. Member for Louth himself, who comes here and talks qua ex-working man, qua non-party working man, qua the poor man who has been criticised in his party as being a "fan" of the Chancellor of the Exchequer, and who himself a few weeks ago invited America to interfere in the internal politics of this country. Hon. Members may remember Mr. Walter Higgs who sat on the benches of the party opposite until happily he was ejected from the House of Commons in 1945. He thinks it is his patriotic duty to go out to New Zealand and to cry "stinking fish" about his own people. He thinks it is right to say, "We need in this country 11 men queueing up for 10 jobs." It is a matter of simple arithmetic to show that that means that 22 million men are to queue up for 20 million jobs, and that there must be two million men out of work. That great Conservative said: We need 11 men queueing up for 10 jobs. Empty bellies are the only things that will make Britons work. That is the sort of talk that has been damaging British credit and British prestige all over the world during the last few months.

The right hon. Gentleman who spoke from the Conservative Front Bench today had much fun, as he always does, and he was good enough to let us share in it. He spent some part of his speech in telling us of things that had been said about devaluation before it took place. He was very kind in making no reference to his hon. Friends the Member for Chippenham (Mr. Eccles), and the Member for Scarborough and Whitby (Mr. Spearman), and to his right hon. Friend the Member for Bournemouth (Mr. Bracken), who also ran about making speeches on this subject for a very long time. I should think that in the latter days of the pressure on sterling nothing did so much to intensify that pressure as the active campaign against British exports to the United States that was carried on with his usual skill by the hon. Member for Chippenham.

Photo of Mr David Eccles Mr David Eccles , Chippenham

Would the hon. Member be good enough to say when I carried on a campaign against exports to the United States?

Photo of Mr Ian Mikardo Mr Ian Mikardo , Reading

Certainly. The hon. Gentleman has been writing not inconsiderably about things which have suggested to American importers that perhaps it would be a good idea to wait a little while before importing British goods, or at least before paying for them, because in the little while they might get them more cheaply. The effect of those writings in America has been very great indeed. If the hon. Member does not like what I say, I would beg him to read the leading article in today's "Daily Mail"—which does not support our party—which reproves what is called the "Keep daft group" in the Conservative Party who are carrying on this campaign of denigrating our credit overseas.

It would be very difficult for the Conservative Party to rebuke these black sheep who are in their midst because they would have to face the great problem of what to do with their own leader, who went to Wolverhampton and told the world that the British people were a bad risk because they consisted for the most part of work-shies and work-dodgers. It is not only speeches that count, but actions, such as the funk capital which has been running through the exchange control in these last few months by all sorts of devices and unorthodox means, and is euphemistically called weak sterling. I suspect that it is capital owned by people who do not vote for the Labour Party at election times. Thus the first thing which is clear is that from wherever criticism may come, it should not come from the Opposition.

The second thing which is clear—we all seem to be reasonably agreed on it—is that, whether it is true or not that one might have taken steps a few months ago to stave off devaluation—it is a question which is very difficult to decide now in retrospect—in September, 1949, anyhow, it was not possible so to stave it off. The third thing about which we all seem to be agreed is that devaluation is not by itself a complete and long-term solution of the problem and that, if this House lives up to its traditions, it will spend these three days discussing not devaluation but what we shall do now and what are the real measures which we should adopt to supplement the "shot-in-the-arm" effect of devaluation and to avoid a situation in which the dollar crisis becomes an annual event like the Boat Race, the Cup Final or Miss Shirley Temple's 21st birthday. That demands a good deal of serious consideration. One of the few remarks of my hon. and learned Friend the Member for North Hammersmith (Mr. Pritt) with which I agreed—there were very few indeed—was that—

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

My hon. Friend the Member for Reading has changed a lot. He used to agree with my hon. and learned Friend the Member for North Hammersmith.

Photo of Mr Ian Mikardo Mr Ian Mikardo , Reading

No, my hon. and learned Friend the Member for North Hammersmith used to agree with me. It is unrealistic to talk about bridging the gap by having British engineers opening up the Middle West of the United States, as though American engineers would sit down and watch us come in, or about developing large sales of napkins and talcum powder to American infants. That will not do the whole job; we need other measures. I put it to the House that we can get some indication of what they ought to be by an analysis of what have been the contributory causes of the present situation. Some of these causes have been totally outside the control of the Government, like this Tory-induced hold-up of American purchases and this funk capital about which I have been speaking, but other contributory causes stem from some of the Government's own policies and actions.

For example, there is the brake which we here have put on European economic co-operation and which, if not taken off quickly, will lead rapidly to that dollar competition between the countries of Europe which was referred to by my hon. Friend the Member for Edmonton (Mr. Albu) in which we, the French, the Italians and the Belgians will use this "shot-in-the-arm" only for the purpose of making our positions worse vis-à-vis the United States of America by cutting each other's throats in respect of both imports and exports. The Chancellor has said more than once, and of course it is true, that it is awfully difficult to get co-operation between countries whose political and economic systems are different and whose standards of living are at very different levels, and I do not say that one can by waving a magic wand set up a European economic authority; but what I say, and I say it with regret, is that from wherever the initiative in that direction has come in the past, it has never come from this country, and whenever that initiative has come, we have always applied a retarding force to it.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

I must ask my hon. Friend the Member for Reading (Mr. Mikardo) not to repeat these fallacies. The whole of the initiative as regards the liberalisation of trade in O.E.E.C. came exclusively from this country and we have pushed it ever since.

Photo of Mr Ian Mikardo Mr Ian Mikardo , Reading

I do not mind the Chancellor asking me not to do this, that or the other, but I have eyes to see and ears to hear, and I was at the T.U.C. at Southport, and my right hon. and learned Friend was not, when the Foreign Secretary came along and absolutely pooh-poohed any suggestion of any working together. It was just at the critical moment when Europe was ready for a lead in economic co-operation, and in his speech the Foreign Secretary revealed with absolute clarity that he did not know the difference between economic union and an economic closed shop. He poured the iciest of cold water on the whole concept of European economic co-operation, and set back by two years the opportunity of achieving that, and made the Chancellor's difficulties all the greater now that he is trying to do it through O.E.E.C.

The second example of the way in which Government policy, itself was a contributory cause has already been referred to. It is the lifting of controls and the spring-time optimism of the President of the Board of Trade which tried to induce us to believe that by letting people go where they wanted and make what they wanted, we could somehow harness the nation's industries to the national need.

The third way in which Government policies have contributed is that all the time we have been cutting this and cutting that and tightening the belt this notch and tightening the belt that notch, we have gone on and on increasing our military commitments and our military expenditure, just like people who do without their Sunday dinner or give up smoking cigarettes but nevertheless buy a new set of plush curtains for the front window in order to impress the neighbours. That is the way we have been behaving. We take on these commitments in order that the Foreign Secretary may make grandiloquent speeches and so that we can delude ourselves into thinking that we are still in our 19th century economic situation.

That increased military expenditure is terribly relevant to our present discussion in two different ways. Firstly, some external currency is involved. I believe that since the end of the war we have spent much more than £1,000 million of external currencies upon our military commitments. Secondly, the circumstance which the Chancellor himself poses more clearly than anyone else in the House could pose it, is that if we are to have more exports we can only do this by cutting social services, capital expenditure, home consumption or military expenditure. All men of goodwill will support him to the hilt when he said that we must not cut social services. I sincerely hope the Government will not be so crazy as to cut capital expenditure in a way which will weaken the improvement in the efficiency of British industry and make it still more difficult for us to compete with the Americans and the Germans.

I cannot see where capital expenditure is going to be cut if it is not cut out of social services like hospitals or schools or out of industrial re-equipment, and I believe that both of those would be equally wrong. "Home consumption," says the Chancellor, "let us tighten our belts a notch or two"; but one thing which is never called into question is the constantly increasing military expenditure. It is considered to be heresy and blasphemy even to begin to call into question whether the money devoted to that expenditure is used with the same efficiency and the same economy of manpower that we expect from the rest of the national economy.

The Chancellor goes to the microphone and says—how much we all agree with him—that nobody must jump the queue and that this devaluation will be no good if any section of the community seeks to escape bearing its fair share of the burden. Good enough. Now the people who live on wages will have to bear a share of the burden, so will the people who live on salaries, so will the people who live on profits, so will the civil servants in Government Departments and so will industry; so will everybody except the generals the admirals and the air marshals, who are not being asked to bear any share of the burden. I have no information at all but I have a horrible suspicion that they will come and ask us for some more money.

I am not an expert in military strategy and costs, but it seems to me, as the veriest and most simple layman, that we cannot have short-service men distributed in penny packets all over the world throughout the Foreign Secretary's commitments and cannot have, as we now have, more men being carted round in troopships than at any previous time in history except during war, without our military Estimates going up higher than the figures for which we have budgeted this year. I am greatly encouraged to see two hon. and gallant Gentlemen opposite, who must know much more about these things than I do, nodding their heads in agreement with me.

Photo of Mr Ian Mikardo Mr Ian Mikardo , Reading

I am sorry, I cannot give way. I just want to warn the Government, and I do so with the best wishes in the world and in all sincerity, that if they are contemplating any such thing as an actual increase in military expenditure, they ought not to put this additional strain upon the loyalty that the country is showing towards them. Although the nation will be willing to tighten its belt in order to solve our economic problems, I very much doubt whether the people will tighten their belts in order to maintain what many of them—laymen, like myself—vaguely suspect to be a not very efficient system and in order that we may pay four times as much per head to Brussels Pact defence costs as is paid head for head by the Belgians, whom the Leader of the Opposition is always holding up to us as an example and a model.

Let us bear in mind the difficult psychological atmosphere which has been created, and about which we have heard. I think the whole House will agree with the point which was made that nothing is more regressive than an increase in the price of bread. We shall put some of the people—low-paid workers with large families, the million people drawing National Assistance, which no one draws unless he is really up against it—we shall put all these people a bit more up against it, and they will see other people doing well out of all these difficulties.

I beg that in considering these things we shall not leave any part of our national expenditure sacrosanct. If we are to re-examine our capital investment programme, even to the tune of calling into question whether we should re-equip industries that desperately need re-equipment; if we are to re-examine home consumption even to the tune of putting an extra burden on people who already have not got enough, we should not leave as sacrosanct any part of our national expenditure, even if in the past there has been a tradition that defence goes unquestioned.

There are some Members of this House, including one who has already spoken, who shoot at defence expenditure for political motives. We may think what we like about that. I do not support that view. I voted, and said so at the time, against conscription and always did, not because I thought it was wrong, not because I wanted to weaken our strategic power, but because I thought it was inefficient; and I still believe, as a layman, that it is inefficient. I believe that we could find—I do not know the exact figure; I am rather guessing, but I think it is somewhere between £150 and £200 million a year—the money which would be required to offset for the poorest families this increase in living costs. I believe that we could find it out of military expenditure, not by weakening in any respect our military and strategic power, but by taking the inefficiencies, and especially the inefficiency of conscription, out of the present military set-up. I repeat, I beg that we shall not allow any sector of our public life to become complacent in this crisis and not allow any sector of public expenditure to go unquestioned and unchallenged.

6.54 p.m.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

The most significant feature of this Debate today has been the fact that all the back bench speeches opposite have been critical of the Government. Indeed, I wonder that the hon. Member for Reading (Mr. Mikardo) is still a member of the Socialist Party, since he criticises the Government for such gross mishandling of defence that they can be wasting 25 per cent. of their expenditure in that direction. The Chancellor of the Exchequer thought that the hon. Member had a rather vivid imagination, and he certainly must have if he really conceives that my hon. Friend the Member for Chippenham (Mr. Eccles) or myself ever, on any occasion, suggested that American importers should delay buying from this country. I am not quite so convinced, perhaps, as the hon. Member for Reading that American importers would have paid so very much attention to us even if we had said anything quite so stupid. What, speaking for myself, I did say was in a letter to "The Times," when I wrote that we should get on better at Washington if, before asking for further favours, we cleared up matters at home by getting rid of inflation created by the lavish expenditure of the Government.

I should like to refer to the speech of the hon. and learned Member for North Hammersmith (Mr. Pritt). The hon. and learned Gentleman is often inaccurate but he is generally ingenious in his defence of the Socialist system which is practised by the party of which he is not a member. It was a most staggering statement of his today when, in attributing to America the present state of affairs in this country, he blamed the country who for the last three years have presented us with an average of £500 million a year. Of course, there is no slump today in the United States of America. I am not a financial prophet—I have had to do with finance far too long to be so rash—therefore I am not saying what may happen in the future, but there is no slump in the United States today. In fact—

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

Let me finish this. In fact, the United States of America have just had the second best year in their history. Since before the war they have absorbed more than 10 million fresh workers and thereby raised the number in employment from 48 million to 58 million, a degree of progress which this country certainly has not achieved. Hon. Gentlemen opposite are very exacting. They blame the U.S.A. if prices rise and say that they interfere with our imports, and when prices fall they again blame the United States and say that they interfere with our exports.

Photo of Mr Konni Zilliacus Mr Konni Zilliacus , Gateshead

Is it not a fact that the dollar gap widened in the second quarter of this year because to a large extent the United States stopped buying raw materials from the sterling area—not in this country, but in the Empire; and is it not also a fact that the United States purchases were cut to that extent because of a large amount of unemployment? I believe that the official unemployment figure is at present about four million.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

The United States have managed to check their inflation and I wish we could have done the same. On this side of the House there are many of us who have a respect for the Chancellor of the Exchequer, and we are, of course, glad to see him back again, but I think that his speech today will cause profound disappointment throughout the country. He, clever advocate that he is, produced a wealth of statistics to show the wonderful achievements in the economic realm that have taken place under the Socialist Government. But I do not believe that that will cut much ice with the country today. People have a sort of feeling that statistics can be twisted and turned to show anything; they are beginning to realise the danger of a high level of unemployment and they fear for their food supplies. They had hoped that today the Chancellor would have told us what remedies were being taken to correct this state of affairs.

Under the circumstances, there are two obvious things which have to be done. One is the relatively easy step of revaluation. When I say "relatively easy" I am not, of course, underestimating the pain it must have caused to the Chancellor and his colleagues so completely to have to eat the words they had spoken in the past. The other, and far more difficult step, is to get rid of inflation in this country. The International Monetary Fund, in its last report, said this: Unless home demand is restrained the expansion of exports, which alone can justify an exchange adjustment, will not be achieved. … It must be accompanied by the appropriate fiscal and credit policies. We have not heard from the Chancellor what steps he is proposing to take to get rid of the inflation he admits exists and to cut our costs so that we can sell abroad. I agree that this Government met a very difficult situation when they came into office, but the fact of those difficulties does not seem a reason for immensely accentuating them by the lavish expenditure they incurred.

In this country we have to be tremendously efficient. I am not going to overstate the case and suggest that we are hopelessly inefficient. Of course we are not, but, being absolutely dependent upon getting food from abroad for one-half of our supplies and requiring a high standard of living in this country, we have got to be far more efficient than other countries, and it is in that that we have failed. We have been inefficient compared with what our needs are, remembering that we have to import and remembering that we require a high standard.

The country would have liked the Chancellor to have told us today what are the causes of that inefficiency. If the Government had freely admitted that they tried to do too much too quickly, I believe they would have had the sympathy of the country and a far better response than by this complacent attitude that everything possible has been done. I suggest that the prime reason for our relative inefficiency and for the fact that we are not able to make two ends meet in this country is the enormously heavy Government expenditure.

The United Nations report told us that the proportion of the national income spent by the Government and local government in this country has been increased over pre-war by 50 per cent., which is enormously more than has taken place in any other country in the world. I am excluding items which the Government cannot help, such as National Defence, pensions for ex-Service men, interest on the National Debt—all these things are unavoidable—but apart from this the Government have increased their expenditure by nearly four times. Their expenditure on social services has gone up from £326 million before the war to £1,165 million. Of course, I am not denying the desirability of that expenditure, but I am questioning its practicability at this time. I believe that that expenditure has had a devastating effect on the economy of the country. First, it has meant enormous taxation which is a great discouragement both to employers and to workers.

In my office in Scarborough the other day a bricklayer came in and said, "I am only working 32 hours a week and it is just not worth while to earn more while paying taxation at this rate." It is inevitable, if leisure is untaxed and the product of time spent at work is taxed, that there comes a point when people prefer untaxed leisure.

Photo of Mr Aneurin Bevan Mr Aneurin Bevan , Ebbw Vale

What did the hon. Member tell the bricklayer in reply?

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

That he would be earning the severe disapproval of the Minister of Health, but he seemed to be indifferent to that.

Photo of Mr Aneurin Bevan Mr Aneurin Bevan , Ebbw Vale

If the hon. Member had tried to educate him in facts instead of indulging in political propaganda, the man might have got more bricks laid.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

It is also clearly a direct discouragement to industrialists; if they launch on a new enterprise they must take risks, which may mean a loss. If that possible loss is not to be compensated by any real profit, clearly they are not going to strike out on fresh ventures which the country so urgently needs. The second result of this enormous expenditure is the fact that if the Government are taking 40 per cent. of the resources of the country, there is not enough left for ordinary consumer demand and the re-equipping of our factories on the scale that we have seen in America. Thirdly, it has entailed a series of controls and interference with industry which any industrialist, on whichever side of the House, must admit is paralysing industry. Fourthly, there is the inflationary position which is created. Owing to inflation industrialists are not spurred on to be enterprising and efficient and to cut profit margins because they can sell so easily. Indeed, they are not spurred on to export to dollar countries because they can sell at home so easily, and workers are not encouraged to go where they are most needed and to produce more because there are more jobs than there are men.

If we got back to free competition those employers who cut costs and make what is needed would succeed and those who failed would no longer find a demand and would have to go out of production. Workers who did necessary jobs would prosper and those who did unnecessary things, or necessary things badly, would no longer be required. Under that system we got a degree of efficiency which is not present today. The Chancellor of the Exchequer said in his speech that deflation depends for its efficacy on mass unemployment. I wrote it down rather quickly and I hope I got it correctly because I was astonished that the right hon. and learned Gentleman should say that. It seemed to be an electioneering stunt and was altogether beneath him. Surely he knows quite well that to get rid of inflation does not mean disinflation. To cure a man of high blood pressure does not mean that one is going to give him low blood pressure.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

If the hon. Member had listened to me, he would have known that that was just what I said. I distinguished between a deflationary period such as we had between the two wars and the disinflation we have carried out during the last two years.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

I do not think the Chancellor can claim that he has successfully followed a disinflationary policy during the last two years. He blamed the Opposition for the disinflationary policy necessarily causing mass unemployment. Before the war we had unemployment on a large scale, not only when we were the party in office, but also, of course, when the Socialist Party were in office. The reason was that neither we nor certainly they in 1931 realised what we now know. We did not then realise that the process of saving gets out of balance with that of investment and thereby too little purchasing power is generated and there is a glut of goods. Now we know how to deal with unemployment and there is no reason to suppose that we shall ever again have unemployment coming from that cause to any great extent.

But there is great fear of unemployment on a scale we have never known before, not through a glut of goods for which we now know how to make an effective demand, but through shortage of raw materials putting our men out of work. We have been suffering from an inflation which has been suppressed by controls, which is probably more dangerous than if it had not been suppressed, just as some illnesses which are suppressed have worse results than if they were not suppressed. It is rather like driving a car and keeping the accelerator at 60 miles per hour and checking the car by keeping on the brake. You go on for a time and then something crashes. So far what has crashed is the exchange rate. I suggest that we are approaching a very grave situation indeed.

The advantages of devaluation are only temporary unless accompanied by retrenchment at home. It should be remembered that many countries anticipated devaluation and therefore postponed their purchases and now we hope they will execute them, but, unless the right things are done, once more they will fear another devaluation. Therefore, it is imperative that the Government do those things that will get our economy right. Retrenchment such as I am asking for does not mean something quite terrific. It does not mean a complete reversal of every Socialist policy. Naturally, I am not in a position of having access to the figures available to right hon. Gentlemen opposite and I cannot make any guess with certainty of the degree of retrenchment required, but I suggest that something of the order of a cut of £250 million in Government expenditure and £250 million in those longterm investment projects which will not produce immediate results might be sufficient to get the economy of the country right and to get us into a situation in which men will work at the right job in the right place.

I think that hon. Gentlemen opposite, if they have followed my speeches in this House, will agree that I do not generally overstate my case. I therefore say, with a very real sense of gravity, that I believe that we are today facing two alternatives. One is a moderate retrenchment such as it will be perfectly possible for a Socialist Government to carry out without completely reversing their Socialist principles. We either face that policy of caution and of temporary retreat, if you like, or the alternative of drifting into a situation in which the most rigorous controls will be imperative. We are a patient and long-suffering race but beyond a point we will not voluntarily accept controls, and we shall find that such controls as I have envisaged would have to be enforced by the abominable methods of totalitarian Powers. I am quite convinced that whatever may happen in the next few months, unless the Government put our economy right within six months, we shall be faced by a drift to such disaster as this country has never conceived of before.

7.12 p.m.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent Stoke

During the past four years Labour's real policy has produced success or encouraging results wherever it has been applied. In economic affairs it has not been applied. We inherited a legacy from generations of exploitation of the people of this country, the subordination of everything to obtaining the maximum profit, two world wars and the early termination of Lend-Lease before the war was finished. In addition to that, everyone seems to have forgotten Command Paper 6707, which ought to have been broadcast by this Government on several occasions during the last 12 months.

While the Chancellor was speaking today he made me uneasy on three outstanding points in particular. First, the logic of his speech today means, in blunt language, a trade war. Secondly, there are to be no cuts in the Defence Services—cuts here, cuts there; maybe here, maybe there; but he said emphatically not in the Defence Services. Those of us who played our part in the two last wars are bound to feel uneasy about that. Then he said that the changes will lead to redundancy and the workers will have to look for other jobs. Nothing about any machinery as to how that is to be done. One could not but note the tone in which the Chancellor was speaking. Of course, it was only the workers who were being spoken about.

I wish, first, to state the situation in perspective as I see it. The last war was supposed to have been a world war; we were all expected to play our part. That meant that our resources ought to have been pooled. Most of the people of this country put their all into the war. Our use of dollars for the war started long before 1939, and the Americans should be reminded of that. So urgent were our war needs that before Lend-Lease was inaugurated capital investments had been made by this country in the U.S.A. to the extent of 200 million dollars. Mr. Stettinius himself placed this on record. Then came the catastrophic collapse of France, with its inevitable effect upon our securities throughout the world, and in America in particular.

The Germans had overrun the whole of Europe; the mightiest military machine which had been built up to that time was standing on the other side of the Channel. The result was that not only were we in this island straining ourselves but our securities slumped throughout the world. The Americans, in particular, thought we were finished, and our securities in America fell to zero. We went on working, we fought, we went short of food and our people stood the nightly air raids all alone for 12 months. Just as no individual can strain himself like that without prolonged after-effects, no nation can so strain itself without feeling the effects for generations afterwards. In addition to that, we put all our assets into dollars—10,000 million dollars for war purchases alone—while we stood alone. All our private holdings were sold, and superimposed upon that, the nation had to compensate companies such as Courtaulds and others for their holdings which had been disposed of in America.

I agree that the Americans ought to be reminded constantly of what President Roosevelt said and what President Truman has several times since reiterated, but which has not been put into practice. Speaking of equality of sacrifice President Roosevelt said—and this was emphasised by President Truman in 1945—that the fair thing would be for each country to devote the same fraction of its resources to the war so that in that way the financial burden of the war could be distributed equally among the United Nations according to their ability to pay. That leaves out of account the terrible strain upon the people of this country, and upon our productive capacity and our loss of life, but on the financial basis alone, if nations were facing their responsibilities for what arose out of the last war, the United Nations who were involved in that war would be in debt to this country to the extent of £5,800 million instead of Britain being in debt to them. We ought to have gone to the United Nations and placed the facts on record in order that the nations of the free world could face their responsibility.

The election of this Government did not change the economic laws, as so many thought it had done in the early days of this Parliament. The world war made a greater impact upon this country than most people realise, and at the same time it upset the relative equilibrium of world trade. Not since 1936 have the free forces of capitalism been allowed to operate in this country, and since 1945 there has been in economic affairs no Socialist direction or drive. Never in history has one Minister had so much power as the Chancellor of the Exchequer has had in this Government. He is a great lawyer—and so was the Minister for the Co-ordination of Defence.

The Financial Editor of the "Manchester Guardian" had an interview with Mr. Snyder and Mr. Hoffman in July this year. While the Chancellor was speaking I was thinking of the article based upon the report of the Financial Editor. Here are a few extracts from it, and in my view this is the key to the present situation: Mr. John Snyder, President Truman's Secretary to the Treasury, went to Europe yesterday determined to obtain a decision on sterling devaluation. His advisers believe with dogmatic fervour that an alignment of exchange rates would end the present division of the trading work into soft and hard currency areas.…Mr. Paul Hoffman, the Marshall Plan administrator, chose a more moderate note when he received me. He admitted that devaluation might be one possible part of a general plan to reduce European prices in terms of dollars, but made clear his view that the main problem was not curable by financial juggling. And the final quotation from Mr. Hoffman is: The question is how to force the British business men, sitting as they do behind the sterling shelter. He might have said at the same time how to deal with the British workers.

Since then, on 26th September, 1949, we had a further article from the financial editor who is at the present time in America and this is what he said: We know now that the communiqué issued at the end of the talks did not reveal all the facts. On the British side, devaluation of the pound, which had become almost the cardinal point of American foreign policy, has since occurred. Let everyone on this side of the House remember what I am about to quote: Perhaps the Americans were also told of some further British intentions. I would like to ask of whoever is to reply whether that is true, and if so, why we have not been told? World standards have greatly changed as has our relationship with the rest of the world. What has upset some people and stunned others have been the sayings and attitude of the Chancellor and his London School of Economics office boys.

Now we have devaluation and it is we—some of us can say "we"—who will feel the effects of it in the main. Now it is a fait accompli it is no use taking a negative attitude towards the problem. But I wish to reiterate that this country is in a terrible economic situation and the only way forward is by the application of a real Socialist policy with drive and energy. We urgently need a new economic policy and a planned financial policy. We are in a state of siege; the Chancellor made that clear this afternoon.

If that is done we shall have seen the last of the kind of Budget we had last time. No longer in this country can we afford to appeal to those engaged in industry while around them they can see the Dorchester-Savoy-Grosvenor type of life in the large cities and residential areas. We hear a great deal about restraint in wages but not a word about restraint in the luxury living which can be seen by anyone who visits the kind of areas I have mentioned. Bonus shares are announced in the columns of financial newspapers, large profits are being made and our lives are being gambled with in the gutter, as they were the other day. Well may the Prime Minister note at Llandudno the uneasiness which expressed itself when he touched upon that matter. The people of this country are entitled to ask that the next Budget should be a Budget based on radical principles and should contain proposals for a kind of capital levy.

We must have a national plan as soon as possible. Let me remind the Prime Minister that he has promised it on several occasions but we have not got it. There is no plan in engineering. In oil and coal there is no real plan. In pottery there are now great possibilities, especially after the speech to which we listened this afternoon, but in that regard little has been done about the manpower so urgently required. Decorators could run two shifts in this, one of the best dollar-earning industries in the country, yet for a long time they have been starved of manpower.

Let me draw the attention of the Minister of Health, in particular, to the china clay industry. Recently in Cornwall he created a great impression in regard to housing. His initiative might well have been imitated by other Ministers. I do not know whether he was aware of the position in the china clay industry, but if he was I would have hoped that something might have been done, though I know his responsibilities are great and I am not speaking critically. However, it is a scandalous situation, and someone ought to have dealt with it before now.

It is generally admitted that the china clay industry is a great dollar-producing industry, and the output could be increased enormously. Yet there are ships which are leaving Bristol and other ports practically empty. These ships could be carrying the china clay to America. Railway truckloads have been held up for months at different periods at the various ports. Ships have left the ports carrying ballast, and in some cases nothing at all. They could have been carrying china clay. We who have had so much to say about planning should deal with this industry which could be such a good economic proposition for our country. I am asking that early attention be given to the matter.

We cannot afford to take away our boys from industry as we are doing at the present time. It is true that some people's sons have never been taken away. An engineering apprentice would be giving far better service in the industry where he is so urgently required than in the Armed Forces. Young men and women engaged in the pottery industry would be assisting to achieve a greater output in that great dollar-producing industry. Men engaged in the cotton industry would be a far better proposition in this serious position than those same men taken away into the Armed Forces.

No criticism of our labour today is worth talking about. The facts are given by the Chancellor and from our own statistical department, in addition to the United Nations Economic Commission for Europe. No one can point a finger at the British workers for their contribution during the whole of the war and the efforts they have made towards our economic recovery. If there is any criticism it must be directed to other quarters. We can no longer afford the fixed abnormal prices which are greater in this country than in any other country in the world.

Before industry receives its raw material it is in a terrible position. People engaged in industry—management and workers—are going all out to give of their best, but before the raw material enters the factory they are already severely handicapped by the fixed abnormal prices of raw materials which are organised by the trade associations and the monopolies. I begged the Chancellor to take action upon this in the early days of this Parliament and from then until now nothing has been done worth talking about—

Photo of Mr George Drayson Mr George Drayson , Skipton

Is that why the hon. Member was sacked?

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent Stoke

We can no longer stand for the 2,000 trade associations which are superimposed upon industry. They fix prices which are acceptable to the least efficient. They are not like piecework prices which are fixed according to the best man or to the man of average ability. In this case they are fixed to suit the least efficient. They organise quotas to suit their members. The annual cost of the overhead charges for clerical and organising staff alone must be between £10 million and L15 million a year. In addition, manpower is engaged in these associations when it should be employed in productive industry.

The productive industries have now reached a stage when they are carrying a terrible burden. They must have reinforcements of manpower if they are to increase output to the extent which the nation's need demands. I predict that the prices of these goods will remain as they are and that we will not get into a competitive position. Unless these trade associations are dealt with we will never be able to increase our exports to the extent which is necessary. Therefore, the Government ought to give immediate attention to these matters while organising the plan for which I have asked.

We are terribly behind other countries in one or two respects. I could not understand why before the war we did not extract the by-products from coal and oil. If I remember rightly, my right hon. Friend the Patronage Secretary served upon a Committee and prepared a very fine document but no action has been taken upon it. As the result of the work of a number of public-spirited refugees from the Continent who have been engaged in the Manchester area and in other university centres, we are now emarking upon a quick procedure for extracting the maximum by-products from oil. This country will greatly benefit from a new oil refining industry which is now growing up very quickly. We have lost years of time, and now this industry will suffer from lack of capital equipment because of the limitation upon capital expenditure. In one White Paper it was suggested that capital expenditure should be restricted. When the attention of the Government was drawn to the effect that this would have upon new industries which would be to the good of the country, it is to their credit that a change was made and more expenditure was allowed.

We have now reached a stage when coal is our gold. It is treasure. It is too valuable to be burnt in its raw state. In war we apply modern science, but we have not done that in coal utilisation. This is one of our most urgent problems. The mining industry can make a great contribution to our economic recovery, but we need to bring it more and more up-to-date and to apply a policy of the scientific utilisation of coal in order to use it to the best advantage and to extract the maximum by-products from it.

I believe that the Government need to make a new approach to our internal problems. The same attitude needs to be adopted in respect of world trade. Here I am on good ground. I have here a document suggesting that a Socialist Government should adopt a constructive trade policy. If we had attempted to put into effect a constructive trade policy, provided that America was prepared to play the game with us—after we had reminded her of our great war effort—I believe that this situation might have been avoided; but it is no use saying too much about that now. The opportunity has gone. I hope that we shall make a constructive approach to our problems. We need to pool our experiences and to make constructive suggestions in order that this country can go as quickly as possible along the only road which is the hope of humanity—namely, the Socialist road.

7.37 p.m.

Photo of Mr David Gammans Mr David Gammans , Hornsey

I want to talk tonight for a very few minutes on rather a special angle of the Washington talks and devaluation, and I would remind the House that the Motion on the Order Paper deals with the Washington talks as well as devaluation in particular.

I must make three comments on the Chancellor's speech. It is only fair to tell the Chancellor—he does not seem to know it already—that he has done a very great harm not only to himself but also to the reputation of this country by the way in which devaluation was announced. I do not think that many people will accept the facile assumption which the Chancellor made this afternoon that a British Chancellor can, willingly or unwillingly, wittingly or unwittingly, deceive the British people and the world for a very long time and then just make no explanation or excuse.

I happened to be in Paris on the night when devaluation was announced. I was having dinner with a number of French politicians. Some of them rather cynically hooted with a certain amount of pleasure that, after all, there did not seem to be all that difference between British politicians and French politicians. They also remembered that the right hon. and learned Gentleman had gone to Paris not many months ago and lectured the French on political morality.

What ought the Chancellor of the Exchequer to have done if he could not have carried out the policy which he had announced? I suggest that what he ought to have done last Sunday week on the radio was to announce his resignation. It may be that the Prime Minister in the circumstances would not have accepted it. I rather believe that the House of Commons, whatever may be our political affiliations, would have supported the Prime Minister in not accepting it; but I wish he had done it, because, as it is, he has not only devalued the pound but I think he has devalued himself.

Photo of Mr David Gammans Mr David Gammans , Hornsey

I think that he has devalued the office which he holds and I think that he has devalued the hitherto unchallengeable reputation of a British Chancellor of the Exchequer. I think that he has also made an absolute mockery of European co-operation in the way in which he announced the decision. Countries with whom we are supposed to be associated, countries with whom we hoped to have even closer political and economic bonds in the future, were either not told at all or were told at the last moment. What has happened to the Socialist ideal about which we have heard so much of closer unity in Western Europe?

I should like to warn the House—and I am sure that any hon. Member who has been abroad in the last 10 days will support me—that the Chancellor has left a very bitter impression behind him not only of himself, for that does not so much matter, but of this country. If the time comes when we need the help of Continental countries in saving the pound, we may get the help of some of our friends on the Continent, but I do not think that we shall have earned it. Therefore, I deplore the way in which the right hon. and learned Gentleman made his announcement. He has done harm, and that harm may last for some considerable time.

My second comment is that I think it most dishonest of all of us to pretend that devaluation is only going to affect the price of bread. Surely, as my right hon. Friend the Member for West Bristol (Mr. Stanley) said this afternoon, the Chancellor ought not to have gone to the microphone and made that sort of suggestion. If hon. Members opposite are looking round for material for their speeches at the coming week-end—and some may find it difficult to find any—let them exhort their constitutents, if they have any money in their pockets, to buy things like sheets, blankets, pillow cases, boots and shoes before the prices go up, because they will go up. Hon. Members who give such advice may be doing a good turn for their constituents, and when the election comes their grateful constituents may do them a good turn. Let them tell their middle-class constituents who have been waiting three years for a car that they can double the number they first thought of if we are to accept the fact that because we hope to increase our exports to America we must, therefore, cut down the home market.

I agree with my hon. Friend the Member for Louth (Mr. Osborne) that there is a way out. It is to accept the fact—and this is not a class issue—that this country cannot get on its feet while we only work a five-day week. If we are prepared to increase our working hours, then we shall get that additional amount of production which will enable us to export more to America and other parts of the world and still have the same quantity, or even more, here at home. Are the Government prepared to say that, because I genuinely believe they ought to have the courage to say it?

My third comment on the Chancellor's speech—and again I would refer to what was said by my hon. Friend the Member for Louth—is that I hope the Government are not making their plans on the assumption that we are going to find it easy to increase our exports to America. I do not know whether, before he made his speech this afternoon and before he exhorted manufacturers to go into the American market, the Chancellor read what was said by Mr. Walter Phillips, Chairman of the American Chamber of Commerce in London, a few days ago. He made it perfectly clear how difficult it was going to be, and that in so far as this policy of increased exports to America succeeds the greater will be the pressure on Congress either to keep tariffs at their present levels or to raise them.

The American administration, and Mr. Hoffman in particular—I am sure in good faith—told us that we could increase our exports to America, but it is not Mr. Hoffman who will decide finally the level of American duties; it is Congress. I do not believe we are going to be able to get that increase in the volume of our exports to the United States upon which the whole of this policy which the Chancillor enunciated this afternoon is in fact based. I go further and say that I do not believe it is physically possible ever to close the dollar gap. I should like to have heard more about the long-term plans of the Government throughout the Empire and in the sterling area to increase the sources of supply of those raw materials which at present we get from the dollar area.

My three special points refer to the decisions reached at Washington or, rather, to the vague hints which have been dropped as the result of the Washington conversations. Was any firm agreement made with regard to the purchase by the United States of raw materials produced in the Colonial Empire? I am thinking at the moment of rubber. I do not think I need remind the House that last year the exports of Malayan tin and rubber earned us more American dollars than the total exports of the United Kingdom put together, and that 1d. a lb. rise in Malayan rubber brings us £4 million of dollar exchange at the old rate. We have heard rather vague statements to the effect that the Americans are prepared to abolish the regulations under which American tyre manufacturers must use a certain percentage of synthetic rubber.

Photo of Mr James Harrison Mr James Harrison , Nottingham East

There is nothing vague about that.

Photo of Mr David Gammans Mr David Gammans , Hornsey

I did not know that the hon. Member was a Member of the Cabinet; if he is, he had better sit on the Front Bench. I should like to know exactly what was put into writing, and I hope that the President of the Board of Trade when he replies will tell us what was decided upon.

I wish to warn the Government about stock piling. There is an idea that the Americans might help our Colonies, and the sterling area in the process, by stock piling. Stock piling is all very well, but one cannot keep on doing it. When one has stock piled one presents one's buyers with an enormous reservoir of raw material which they can throw into the market at any moment, and from then on it is they who decide the price.

The second thing about which I wish to ask is the vague suggestion—and I am sorry that the Chancellor said nothing about it—that the Americans are going to invest more capital in the Colonial Empire. It certainly looks as if someone must invest some money there, as obviously we have not the spare capital to do it. How far have we got with all this? Has it gone any further than the visit of a few American geologists to Central Africa? Is the sole tangible thing a scheme for fowls in Gambia where we have bought American eggs and American equipment? Is this a sort of "Operation Hen Coop" about which we have heard so much there? Has anything tangible been done beyond that? Let us be honest about this investment of American capital. I can see only two possibilities under which, in the long run, we shall get any American capital. The first is that the Americans can remit their profits in dollars, and, the second, that there is no vague fear or chance of nationalisation hanging over the project. Hon. Members opposite can either have American investment or nationalisation; they can take their choice, but they certainly cannot have both.

The last point I wish to make is a political one. I believe that while the Foreign Secretary was in Washington discussions proceeded on the general political situation in the Far East and the growth of Communism in China, and we were given to understand that a community of interests had been revealed. That is very good news; perhaps it is the best news to come out of Washington. If it is true, it is certainly better news than anything we have heard in this country. But what does it amount to? At the moment we alone—not even the Dominions are helping us—are holding the front against Communism in Asia. We have held it and are holding it now at great expense in Malaya. I am sure the Minister of Defence would agree that we are holding it now at great expense to ourselves in Hong Kong. Hong Kong, as well as being important in itself, is a symbol.

I regard Hong Kong for Asia as I regarded Berlin for Europe. If we lose Hong Kong, we not only lose a great trading port, but we shall never get anyone in the Far East to co-operate with us again. We are bearing that burden alone. Was that brought out at the Washington conversations? Did we get any sort of agreement out of the Americans that they were prepared to share that burden with us? So far as I can gather we did not ask them for troops; I suppose we do not need them at the moment. Are they prepared to help in any other way, and would they regard an attack on Hong Kong as an attack on the Western democratic way of life? That is important. These agreements on the Far East, agreements on colonial investment, agreements on colonial products generally, may turn out to be the most fruitful result of the visit by the two right hon. Gentlemen to Washington. I hope that some one, replying for the Government, will tell us a little more about them.

7.50 p.m.

Photo of Mrs Mabel Ridealgh Mrs Mabel Ridealgh , Ilford North

Listening to speeches from the other side of the House, I feel that there has been a refusal to acknowledge the drastic economic position which faced this country at the end of the war. As I listened to the hon. Member for Scarborough and Whitby (Mr. Spearman), criticising the hon. Member for Gateshead (Mr. Zilliacus), who suggested that America was causing our troubles here, there ran across my mind some of the statements which were made by Lord Woolton in another place in December, 1945, when the first American loan was being discussed. Lord Woolton then said that this country had been reduced to £3 million in gold and dollars and that, with the agreement of the United States, we gave up our export trade. It is that export trade on which we have had to rely to help us through these bad times, and speaker after speaker has pointed out that this country has made a very great effort in building up the export trade to a very much higher level than it reached in 1938.

I enter this Debate with some trepidation, in view of the number of technical experts on high finance who are taking part in it. I do not intend to deal with that side of the problem at all, because I feel there is a tendency to neglect the way in which the people of this country will be affected by devaluation. I believe that the very ordinary, every-day difficulties and problems which our people will have to face are extremely important and it is from that angle that I wish to speak. As far as the actual act of devaluation is concerned, I have little to say. It is an accomplished fact. I think we all agree that it is a necessary evil. It is something which no one, either on the other side of the House or on these benches, has wished to happen.

What I am concerned about is the effect this devaluation will have, what form it will take and where the effects will be felt. The drastic cut in our currency rate must mean that more money and more goods have to be found to pay the higher prices of the imports which we must have from the dollar area, which we are compelled to have if we are to maintain our standard of living. What I want to know is whether the plans which are being devised by the Government, because of this great and extra cost, mean that this sacrifice will be placed on a much more equitable basis than that which we have heard this afternoon. That is a point on which I am most uncertain.

We have to accept that devaluation is necessary to balance the nation's economy. If that is the case, it is a national responsibility, not an individual responsibility, and everyone should share that responsibility according to his ability. That is a very important thing. Already we have had an increase in the price of bread. We have had to pay that, and I am sure that no one on this side of the House believes it will end at a higher price for bread. Other things are bound to come along, as raw materials are brought into this country and goods are made. The prices are bound to go up, and though the Chancellor tells us that even when this has happened the cost-of-living index will go up by only one point, that one point means a very great deal to the low-income people, and especially the housewife, who is not having a very easy time today.

I am not for one minute suggesting that the people of this country are worse off today than they were before the war. In fact, they are decidedly better off than they were before the war. The Government's policy has assured that we have no poor people in this country as we knew them before the war. The people as a whole are better fed and there is very little malnutrition in the country. Everyone has money with which to buy essential food—perhaps just enough food, but still they have the money to buy that essential food. There is full employment among the workers. I do not think hon. Members opposite realise how extremely important is that fact to the workers. Hon. Members opposite have laughed at it.

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

Order. Is the hon. Member for Finsbury (Mr. Platts-Mills) reading a newspaper?

Photo of Mr John Platts-Mills Mr John Platts-Mills , Finsbury

Since you asked me, Sir, I must say that I was looking at some material in the hope that if I caught your eye I should have the material more ready. I will stop if you prefer that I should.

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

It is not in Order for an hon. Member to read a newspaper or a magazine unless he intends to quote from it later on. Perhaps the hon. Member had better desist now.

Photo of Mr John Platts-Mills Mr John Platts-Mills , Finsbury

That was the intention I tried to convey in the explanation I gave you, Sir.

Photo of Mrs Mabel Ridealgh Mrs Mabel Ridealgh , Ilford North

Higher wages have been introduced since the war, with shorter hours and better conditions, and added to that has been the wide and extended range of the social services. Not one of us, if we have a spark of decency in us, would want to go back to those days before the war when we had an average of nearly two million unemployed, when we had low wages and when one-third of our people were suffering from malnutrition. All of us should be extremely anxious that the gains we have made and the standard of living we have established for the lowest-income people should be held, and that those standards should not be lowered.

There is not equal sacrifice following devaluation. Perhaps I may quote an actual case, the case of a widow with five children from the age of two to a semi-invalid of nearly 17. Her family uses 30 loaves of bread a week and those 30 loaves a week mean 2s. 6d. extra out of her meagre allowance. When we compare that with another person who can go out for an evening's entertainment and, without the slightest hesitation, spend more than the whole of that family's income, then we appreciate that there is no equity in the sacrifice which is being made. I may be told that the individual who has the money to spend on the evening's entertainment is also paying a fair share because he has to pay his "whack" in the amount of bread he eats, but it would be small because such a person has a much wider choice of food and would buy very little bread. But does that individual pay his fair share? Is there not more to it than that? The fact that everyone is sharing the burden is keeping this person in his comfortable existence and making his life secure, and the increases which are, perhaps, still to be made will affect to a very, very small degree his standard of life.

Of course, the widow will carry a real burden. This widow's case is not an isolated type of case. There are all the pensioners who have to live on their pensions, and there are millions of people with small incomes to whom this increase in prices will mean a very definite lowering of their standards of life. I ask the Government whether that is what they are prepared to accept. Are they prepared to accept this lowering of the standards of those who are already low down in the scale? I wonder whether the Government are really aware that people who are finding it difficult to meet the increased prices, and who are living in overcrowded conditions, cannot even take council houses when they are offered them, or if they do accept them, they have to get out of them again shortly afterwards because they find that they cannot afford them.

The Government must see to it that life does not become harder for this section of the community. Personally, I should like to see a minimum wage for every adult worker, to give him a reasonable standard of life, a wage to which could be added special allowances for marriage and parenthood, and so on. Thus we should have a standard of life below which no person in the country could go. I appeal to the Government to find other ways than just this extra fifth on the Profits Tax to prevent an increase of prices.

I wish to suggest one or two sources where we might find some money. I am pleased that I happened to be in the Chamber when the hon. Member for Reading (Mr. Mikardo) spoke regarding the expenditure on military service, because I, too, do not agree with the Chancellor's statement that the present expenditure on the Forces cannot be reduced. I think there is quite a lot of room for a reduction of expenditure on the Forces. I realise that if we follow the policy of the right hon. Member for Woodford (Mr. Churchill) we may need that expenditure and even more, but I hope that that is not the policy we are following.

I wonder whether the Government have ever given thought to the idea of conscripting to the Territorial Army rather than to the standing Army. It would mean that only a month out of each year of the individual's working life would be taken away. It certainly would mean a considerable saving in pay. It would mean a considerable saving in accommodation, and so forth. All round, it would be much cheaper. Moreover, all those young people whom we need in industry to create the extra amount of goods for export would be there to carry on the job, and they would be able to make a real contribution in the effort to regain the economic stability that this country requires. There is not a single person in this House who has not praised the Territorial Army for the show it put up in both World War I and World War II. If necessary, it would do that again. So why keep so big a standing Army? I put that forward as one suggestion for saving a considerable amount of money.

But there is another source of economy in the Forces. It is to save a little by putting on the retirement list quite a lot of the higher grades of officers who are merely being carried in the Army to keep them in good jobs. At the present time there is a terrific amount of extravagant waste going on in the Forces. There are large houses which are used as palatial offices—houses that could be used at this time as flats for people living in overcrowded conditions. I am told by a person in the Forces who should know these things that there are places in camps and that there are huts that could be used as offices of this description. I think they might be used. I am also told that there are numbers of other grades of officers out of all proportion to the number of men that we have in the Forces. There are quite a number of ways in which we could be cutting expenditure.

I suggest to the Secretary of State for War that when he is visiting camps and depots he should go unannounced. There is far too much arranging of things to let him see what it is desired he should see, and to speak to those who are concerned only with keeping things as they are. I have especially in mind one of these depots. If the Secretary of State for War is interested I should like to offer him that information, and also the source from which it is derived. It will be very useful to the War Department. I have no reason to think that that is not happening in other parts of the country. Quite possibly it is.

My second suggestion, I am sure, will be received in no friendly way at all. What I should like to see, if there is no other way, is an increase, not a decrease, in the standard rate of Income Tax. Then those who can afford to meet these increased prices will be made to pay the increase. The proper people will be meeting the increased costs. Today a married man has to earn £10 a week before he starts paying the standard rate of tax. If he happens to have two children he receives about £13 per week before he pays that standard rate of tax. Today, that is not too bad. Of course, it may be abject poverty to Members on the other side of the House—£10 or £13 a week; but, at least, it allows for a standard of comfort, and it is a standard of comfort at which people could meet these increased costs, as compared with those who are much lower down the income scale and can ill afford these increases. I feel sure that those who are above that line would not want their comfort at the cost of the deprivation of those who are already low down in the scale. I ask the Government to reconsider their plans in relation to spreading the increases that have been suggested more equitably, so that those who have the ability to meet these increased costs do so.

8.10 p.m.

Photo of Mr Roland Jennings Mr Roland Jennings , Sheffield, Hallam

I wish to speak for a few minutes on this very important matter because I have grave anxiety as to the effect of devaluation on the masses of the people. In my opinion, during the last year or two there has been a great deal of political dishonesty shown by nearly every Member opposite. Without any doubt, it was evident in the speech from the Chancellor of the Exchequer when he went to the microphone the other night. He spoke to the masses of the people and told them that the effect of devaluation would be a penny increase in the price of a loaf of bread, when he must have known, if he knows his job at all, that devaluation will affect a thousand and one articles as far as the household is concerned. He should have said so openly and like a statesman. He has created a great deal of apprehension among the working people of this country. That is evident from his interview with the T.U.C., which was not such a smooth passage, and it will not be any smoother as time goes on. That, in my opinion, is the first evidence of political dishonesty.

The next is all this talk about personal incomes. Are the Government afraid to talk about wages today? Is there a suggestion that the people who are getting increases are the middle classes? Are the Government afraid to come out flatly and say they are going to freeze wages, instead of talking so much political dishonesty about personal incomes? A great deal is being said about the Socialist Government having found a cure for unemployment. [Laughter.] Members opposite may laugh, but as sure as they are laughing tonight, will mass unemployment come to this country if this Socialist Government continues in office.

The Government cannot even forget "full employment" in the Motion before us today. They speak of achieving the aim of maintaining full employment. Do they think that the masses of the people are fools and do not realise that if American help was not being given to this country we should have 1,750,000 on the dole today. Why do not the Government face up to it like statesmen? Ministers make a statement one day and if it is badly received and unpopular change their tone the next day and try to get over it for political purposes. No Government can guarantee full employment, whether it is a Conservative, Socialist or Liberal Government, because there are outside conditions which control the internal situation.

It is sheer humbug and nonsense to bluff the working people by saying you have a policy which will guarantee full employment. Ministers, if they are politically honest, will admit frankly that it is through the good graces of America that we can get our raw materials to keep our factories going and food to feed our people, whose standards of living would otherwise be very much less. These are facts which statesmen who have the economic interests of the nation at heart should face. The country wants uniting, and Ministers should not be making speeches purely with their eye on the next General Election.

What was the Chancellor's speech the other night but a vote-catching speech? It was a political speech that could have been made from any Socialist platform at the time of the last General Election. He omitted to tell the people exactly how hard they will be hit by devaluation. The policy of this Government has been carried out now for some years. Anyone knowing anything at all about trade and industry would have realised that the present situation and crisis would be the only result of carrying out that policy of aggravating industry. If Ministers did not understand that and did not know that, they are political fools, or if they did know that, they are political knaves for carrying out such a policy.

I do not think the present situation calls for party politics. [Laughter.] If Members laugh about the economic situation, all I can say is that in another month or two when they go into their constituencies the laugh will be on the other side of their faces. The people are not satisfied with what they have been told as to the effect of devaluation. I know that Members opposite will go into the Division Lobby on Thursday in favour of this Motion. There were a lot of Press reports that many Members opposite were going to oppose the Government and say how much they were against their action. The most honest speech I have heard today came from the hon. Member for Stoke (Mr. Ellis Smith), who spoke with courage and told the Government what he thought about them. I give him credit for standing by his guns. It is not the first speech of that character he has made, and I admire him for it.

The Government have aggravated and interfered with industry. They have nationalised coal and increased the price of coal to our industries. It is no use Ministers saying that industry should decrease the cost of their goods when they have added pounds to production costs by the increases in the price of coal. Then there is transport. The Government have put up the price of transport, and what a happy situation the railways are in. Perhaps those Members opposite who were attending a youth rally and were refused sandwiches and tea at Doncaster the other day, arriving at their destination two hours late, have had some of the benefits of the nationalisation of the railways brought home to them.

Members opposite must know that they cannot put up the prices of raw materials without increasing production costs. If they increase the costs of coal and transport, then up must go the price of the commodities produced by industry. It is no use Ministers going up and down the country telling industrialists to keep down their prices and get their goods on to the markets of the world, when their policy over the last few years has been to put burdens on industry and increase the costs of production. Today, householders and industrialists have had their annual budgets increased as a result of the policy of the Government. Before we departed for the Recess we spent a long time discussing the nationalisation of the iron and steel industry. [Laughter.] Members opposite may laugh, but I can assure them that many supporters of the nationalisation of this industry have changed their minds somewhat during the past year because they know that nationalisation will be an economic calamity.

The Chancellor's speech was an able speech, but it was simply a lawyer's speech. He asked industrialists to go into North American markets and see what could be done there. He said there had been an increase in the birth-rate there, and that they could possibly send goods to those markets for the benefit of newly born children. Does he want our manufacturers to send babies' napkins to North America? I could suggest some other things that might well be exported—the Government Front Bench, for instance. If we could export Members on the Treasury Bench to North America we would all be a good deal better off.

The hon. Member for Stoke paid the workers of this country a great compliment. If they are what the hon. Member says they are, why did the Chancellor plead with them to put more effort into their jobs? There is no Minister who dare face up to that situation and who will honestly say that we can reach our export target estimates on the present hours of work per week. The Government are guilty of political dishonesty in this matter. There is a good deal of apprehension among trade unionists that the Government will say, "The number of hours being worked per week is not enough; everyone must work an hour or two longer." To date, the Government have not faced up to this question. For years we have required brave and courageous leadership. The difficulties we are in today are similar to those we faced at the outbreak of war except, thank goodness, that there is no bloodshed. What must be done to get us out of our difficulties is to get rid of this Socialist Government and put a sane Government into office. The Socialist dream balloon has burst. You are hanging on and are hoping that when you go to the country—

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

It is very important that the hon. Member should realise the importance of addressing the Chair. If he did it would be a much better Debate.

Photo of Mr Roland Jennings Mr Roland Jennings , Sheffield, Hallam

I sincerely do, Mr. Deputy-Speaker, and I will not refer to you as being associated with what I have said.

The situation is far too grave for the Government to pursue their policy of political dishonesty any longer. They have made false promises to the country and are doing so today. We need proper leadership and we have not got it. The truth about the devaluation of the pound has been withheld from the people because it is possible that a General Election will take place within the next month or two, when the Government hope to go to the country and cadge votes before the full blast of devaluation hits the homes of this country.

8.25 p.m.

Photo of Wing Commander Edward Shackleton Wing Commander Edward Shackleton , Preston

I am sure the House is grateful to the hon. Member for Hallam (Mr. Jennings) for the life he has brought into this Debate, but I am equally sure that his speech was the sort of abuse which we are accustomed to hear from Tory platforms. It was sometimes addressed to Members on this side and sometimes to you personally, Mr. Deputy-Speaker. To attempt to answer the points made by the hon. Member about nationalisation and so on in a Debate which is mainly concerned with devaluation would be quite impossible in a short time, but there are two points which the hon. Member made to which I must refer.

First, there is the extraordinary blind spot in the minds of the Opposition on the subject of full employment. They seem unable to understand that we on this side of the House are proud of the fact that there is full employment, and regard it as a most notable achievement of this country. The hon. Member said this Government claimed the credit for the "cure for full employment." The Tories, of course, found, unfortunately, the "cure for full employment" years ago, but the actual achievement of full employment at this moment is very real and if Members would look at the unemployment figures in European countries and in other parts of the world they would realise just how great is that achievement.

The second point relates to the question of working harder. The hon. Member completely misrepresented the Chancellor and other Members of the Government on this subject. The particular point which is realised by the majority of people who study industrial conditions is that it is not merely a question of working harder but more intelligently—in other words, better management. I agree that there may be scope for increased output of energy but, mainly, where there is a slacking off it is a reflection on the management rather than workers. If we are to increase output it must come from a more intelligent use of labour, tools and capital equipment—

Photo of Mr Roland Jennings Mr Roland Jennings , Sheffield, Hallam

In the mines and on the railways.

Photo of Wing Commander Edward Shackleton Wing Commander Edward Shackleton , Preston

I believe it would be useless to go further into the hon. Member's points, except to accuse him of a serious piece of political dishonesty in that he belongs to the Conservative Party at all. He stated that it was impossible to achieve full employment, but surely he realises that his party stands committed to this policy and has been so committed since the days of the Coalition White Paper on the maintenance of full employment. The hon. Member should recognise that before he hurls around his charges of political dishonesty, unless he represents, as I suspect, the true voice of the Conservative Party.

Having said that, I should like to deal specifically with some of the references to devaluation which were made by earlier speakers. For the hon. Member for Louth (Mr. Osborne), for instance, it was a most painful occasion. As a self-confessed crypto-Crippsite he found himself in the position of having to attack his idol. He did so in a very uninformed way, and he made a number of assertions which must be answered. In particular, he referred to the effect of devaluation on the textile industry. He suggested that the price of cotton goods would go up by 50 per cent. He inferred that would come presumably from increased cost of raw materials and new machinery, which I wish to goodness was being in fact installed in Lancashire at a rate to produce some of that sort of increase in cost he fears, but it is not.

The real point is that the amount of cotton we obtain from America is only a proportion of our imports of cotton. A very high proportion comes from Egypt, Sudan and other countries, and, in any case, the price of the raw material is only part of the cost of the finished article. The conversion element is large in the cost of production, and the costs of distribution are very much higher, as anyone who has studied the Cotton Working Party Report would find out. It is quite wrong to suggest that as a result of devaluation, cotton goods are going to go up by an amount such as 30 or 50 per cent. It is wrong, inaccurate, and furthermore is calculated to cause an effect which it should be our aim to avoid—to cast alarm and anxiety amongst the workers, because they may have fears about the prospects of selling their goods both abroad and in this country. It is important to nail that lie. The hon. Member for Scarborough and Whitby (Mr. Spearman) also spoke—

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

Is it in Order for the hon. Member to refer to a statement as "a lie."

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

The hon. Member was not referring to it as a lie uttered by an hon. Member.

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

The hon. Member was specifically referring to a speech by my hon. Friend the Member for Louth (Mr. Osborne) and referred to my hon. Friend as telling a lie.

Photo of Wing Commander Edward Shackleton Wing Commander Edward Shackleton , Preston

If it would suit, I am perfectly prepared to say that the remarks he made were totally inaccurate, the effect of which is the same.

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

I have put a point of Order, Mr. Deputy-Speaker, and I wish you to give a Ruling to the House as to whether the hon. Member was in Order or out of Order.

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

If the hon. Member for Preston (Mr. Shackleton) accused the hon. Member for Louth (Mr. Osborne) of having uttered a lie, he is out of Order and must withdraw.

Photo of Mr John Platts-Mills Mr John Platts-Mills , Finsbury

Before my hon. Friend the Member for Preston (Mr. Shackleton) leaves the speech of the hon. Member for Louth (Mr. Osborne) would he address himself to the point where he suggested that the—

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

I have ordered the hon. Member for Preston to withdraw the remark which he made.

Photo of Wing Commander Edward Shackleton Wing Commander Edward Shackleton , Preston

I am not quite sure, Mr. Deputy-Speaker, what you are ordering me to withdraw. What I wish to make quite clear is that the hon. Member for Louth made a statement, maybe intentionally or unintentionally, probably unintentionally, which was wrong in fact. If "wrong in fact" is a more suitable expression I hope you will accept that in preference to the other remark which I made.

Hon. Members:

Withdraw.

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

Mr. Speaker laid it down before we adjourned for the Summer Recess that the word "lie" or "liar" is out of Order. The hon. Member used one of these, and I ask him to withdraw. He can substitute any expression which he considers covers the point.

Photo of Mr John Platts-Mills Mr John Platts-Mills , Finsbury

I am quite clear that my hon. Friend the Member for Preston (Mr. Shackleton) did withdraw, and substituted some words with a similar effect. I certainly heard him. He did it in response to your Ruling from the Chair.

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

It is a matter which can be cleared up quite quickly. Perhaps the hon. Gentleman will withdraw and go on with his speech.

Photo of Wing Commander Edward Shackleton Wing Commander Edward Shackleton , Preston

I wish to withdraw the word "lie" and substitute the phrase "A totally inaccurate statement which is highly misleading and pernicious in its effect."

Photo of Mr John Platts-Mills Mr John Platts-Mills , Finsbury

Before the hon. Member leaves the speech of the hon. Member for Louth, would he address himself to that part of the speech when the hon. Member spoke of the American market and the total impossibility of our selling more goods in that market? Would he tackle the issue that there are already five million unemployed in America and 11 million on part-time work?

Photo of Wing Commander Edward Shackleton Wing Commander Edward Shackleton , Preston

I hope the hon. Member—I do not know whether he is trying to be helpful—will allow me to make my own speech. I was about to come to the American market in view of the remarks of the hon. Member for Scarborough and Whitby, who accused people of ingratitude who attribute any portion of the present dollar crisis to the United States of America, and I feel that in doing so he is allowing emotion, no doubt due to his friendship with America—and I am not saying this in an offensive way—to interfere with a recognition of the true facts.

It is quite obvious in the present situation it is partly attributable to the recession, which I agree was desired by many people who studied the situation in order to lower prices, as the only way, in which a capitalist country can lower prices from the excessive level which they had reached, and this has had a serious effect on American buying. It is perfectly reasonable to expect that to be a factor in the situation. Indeed, the whole thing has been thrashed out in a lengthy correspondence in "The Times." I am sorry that the hon. Member for Scarborough and Whitley is not here, but the hon. Member for Chippenham (Mr. Eccles), who was taking part in the same correspondence, is here and those points were very fully covered. What was interesting to me in the speech of the hon. Member for Scarborough and Whitley was the very definite statement that we must accept a large cut in the social services. He actually named a figure of £200 million or £250 million. That is a frank and open statement.

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

My hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) made no such statement in the course of his speech.

Photo of Wing Commander Edward Shackleton Wing Commander Edward Shackleton , Preston

He actually mentioned a figure, and I am open to correction if I quoted it wrong, but I think he said that there must be a cut of £200 million in the social services and £250 million in capital expenditure. I think that figure was correct, but I am subject to correction. However, it was quite clear that he advocated a cut in the social services.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

My hon. Friend suggested that there should be a cut in Government expenditure, and he left it to the Chancellor to decide how that cut was to be brought about.

Photo of Wing Commander Edward Shackleton Wing Commander Edward Shackleton , Preston

It is very interesting to see the same part being played by the right hon. Member for West Bristol (Mr. Stanley) that was played by the hon. Member for Oxford (Mr. Hogg) in "The Times" correspondence. The hon. Member for Oxford dashed to the rescue of the Conservative Party, and just managed to place himself in front of the goal before the hon. Member for Chippenham and the hon. Member for Scarborough dribbled the ball through their own goal on this issue, and it is no good the Front Bench attempting to correct the indiscretions of their back benchers.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

The hon. Gentleman is misrepresenting what my hon. Friend said. He says he advocated a cut of £250 million in the social services. He did nothing of the kind. He advocated a cut in Government expenditure, and that, of course, covers the whole range.

Photo of Wing Commander Edward Shackleton Wing Commander Edward Shackleton , Preston

This will, of course, be settled by the OFFICIAL REPORT in the morning. He also mentioned a large cut in capital investment. I will pass from that point, but it will be within the recollection of the House that he did make some such remark.

I promised to cut this speech very short and it is longer than I had intended. Before I finish, however, I would like to make two small points, and the first is on the problem of getting into the American market. There has been a great deal of talk about the cost of production in this country being too high. It is extremely difficult to arrive at a proper quantitative and qualitative examination of those costs as applied to all the different commodities which might be exported to the American market. They may, in some cases, be too high, although they are competitive in the sense that in many cases they are comparable, and with the right sort of sales organisation they can be got into the American market. I realise there are great difficulties, expense and risk in such promotion. It is clear that devaluation does gives a tremendous opportunity, which is also psychological in its effect, upon the American market. One of the advantages is that it draws the attention of American wholesalers and retailers to the fact that British goods are now cheap and may be profitably promoted and sold in the American market.

There has been a great deal of talk on the subject of costs, and a great deal of misleading suggestions about Britain costing herself out of the world's markets. Much of that talk is untrue; nonetheless, this large cut has come about. In considering the effect of devaluation we should remember that it arises primarily in the United States and Canada areas. It may apply also in Argentina and in one or two European areas. The effect on the prices of our other imports will not be great, except in so far as costs gradually rise as the result of other devaluations. Even though I do not think that we should expect a large rise in the cost of living there will, as hon. Members have said, be some small rise.

The Chancellor of the Exchequer may think it is easy for us to stand up in this House and that we may be doing this just to curry favour with our constituents, but I suggest that he might consider, in consultation with the Minister for National Insurance, adjusting the scale rates in national assistance, particularly as they apply to old age pensioners. The amount of increase that each individual may get would be small. I have no idea what the global sum would be, but such a gesture might be made to match the one which my right hon. and learned Friend has already made, a very necessary step, in regard to Profits Tax. If he could adopt my suggestion it would be of great value to the morale of the nation, showing that the Government are anxious to maintain justice in carrying out their policy of devaluation.

8.43 p.m.

Photo of Sir James Henderson-Stewart Sir James Henderson-Stewart , Fife Eastern

The House has been recalled in order to hear a statement by the Government about the devaluation of the pound and about the consequential policy which the Government propose. The simple question that we have to debate, I fancy, in these three days is whether we think that that step and the consequential policy—the latter is to my mind the more important—are wise and sound, or whether we do not. The issue is vital, so vital that the Government have caused it to be a matter of a vote of confidence. On Thursday we shall have to declare by our votes whether we have confidence in the consequential policy or not. My position and that of most of my hon. Friends is that we have no confidence in that policy or in anything else coming from His Majesty's Government.

In the few moments which I have promised to occupy, I propose to deal only with two facts of this very wide question. The first is this: the immediate purpose of devaluation was to make it more possible for British goods to be sold in the United States and in Canada. I have recently returned from a trade mission to Canada. The President of the Board of Trade knows all about it. In the course of it I paid visits to parts of America as well. I must tell the House what I found. In the particular trade in which I am interested, agricultural machinery—this applies to other trades as well—I found a definite price disadvantage or differential against us. We found that we could not get into that market because of the high prices. I think that will be the report which the committee will present to the right hon. Gentleman the President of the Board of Trade in due course. Deflation has undoubtedly lowered and lessened that price differential. I therefore expect that a considerable number of speciality machines from this country can now be sold in Canada and the United States. I agree with the Chancellor of the Exchequer, because I saw it myself, that the Western States of America have great possibilities to British traders. Those possibilities existed before devaluation. Presumably they ought to exist still better now.

All that is true, For a short time I fancy we may see a spurt in some articles of British manufacture sold to America, but let the country be clear about the matter. It is probably that for a short time only will that spurt last. Secondly, let the country be clear that that is a risky market at its best, and not only because of the possibility of pressure groups and increased tariffs. I am not competent to speak upon this matter. But I did find that in Canada the greater part of the machinery of the industry with which I am concerned, engineering machinery, is made in America by relatively few very large firms. They are very powerful, and they are all able to make slashing cuts in their prices overnight. That, in my view, is the real danger. Therefore, it is a very risky market and it is not easy to persuade British manufacturers, with the best will in the world, to switch a large part of their production from already established markets to those very risky new markets. Therefore, I do not expect that a very great deal will come of it. Although for my part I shall do all I can, as I am sure my colleagues will, to get better sales, it would be a mistake to base too much upon it.

As I understand the position, the Government base almost everything upon increased dollar sales. But this move can be successful as a permanent measure only if another broad piece of policy marches alongside it. The Chancellor referred to this matter in the last part of his speech. I mean a policy designed to attack and to destroy the danger of inflation. I have heard from the Government back benches scarcely a word about inflation, yet, as the Chancellor said, that is the biggest menace in our country today. Undoubtedly, inflation was in the mind of Ministers in Washington when they reported as follows: This would require in the sterling area … proper incentives to exporters to dollar areas, and a vigorous attack upon costs of production. That means that the Chancellor himself knows that a vigorous attack upon the cost of production is absolutely vital if the spurt is to last any time; if, in fact, it is not all bluff that we are offering to the people now.

The biggest menace to costs of production in this country is the danger of inflation and the Chancellor told us today that the signs of a new inflationary movement are already present. What baffles and staggers me is that we got nothing concrete from the Chancellor today to indicate what practical steps the Government are taking to deal with inflation. Government economy is vital, but apparently there is to be no cut in the Defence services. Apparently, there is to be the least possible cut in the social services. [HON. MEMBERS: "None at all."] I do not think it is to be none at all, because the Chancellor of the Exchequer has talked about the social services having to be run economically. It may be that he has something up his sleeve that we do not know. That was my understanding, and I saw the Minister of Health nodding his head at that point. Indeed, the Chancellor of the Exchequer made the point clear before we rose for the Recess, when he said that there was a great deal of waste in the social services. He even issued a warning about it.

This is such an important matter for millions of working people that the Chancellor ought to tell us whether he has something up his sleeve. What does he mean by making the whole system more efficient and economical? What cut is he going to make? It is no use the Government blaming us for desiring things that we have no desire for. It is vital for us to know what the Government themselves are going to do to curb expenditure and inflation.

Then the Chancellor told us that one or two other services might be, as I thought he said, cut out altogether. I wished at the time that I had had wits enough to jump up and ask what those services were. These are vague statements on matters of the most immense importance to millions of our fellow citizens and it is not right, fair or just that they should pass without the clearest explanation from the Government.

It is because I am afraid that the Government have not got the courage to tell the country the truth or, first of all, to make up their minds about the truth in this matter and then tell it to the country, that I personally have no confidence in them. After all, the Chancellor has admitted—we have heard it many times today—that he has not had a policy for these last four years. It may be that he was criticising his predecessors or his colleagues, but he has said in the plainest language printed in the Press hand-out, a considered statement, that they had not a policy and that it was a case only of expedient followed by expedient, followed by crisis after crisis. That is what we have been saying all the time, but, if that is now admitted, what has been said today to give any of us or the nation confidence that it will not be just the same from now on? That is the issue. Confidence has been destroyed and cannot be restored. Therefore I shall certainly vote against the Motion.

8.52 p.m.

Photo of Mr David Eccles Mr David Eccles , Chippenham

We have had a very interesting Debate. On all sides of the House we are agreed about one thing. Whatever else can be said about devaluation, it is a tremendous gamble with the cost of living of the British people. Because it is a gamble it is not necessarily wrong. It depends when it is done and how it is done. During the early part of the summer, like other hon. Members, I was trying to make up my mind whether it would pay Britain to lower the value of the pound. So long as we were able to sell abroad all that we could produce and offer there did not seem to be a case for a change in the rate, but as the sellers' market began to fade and especially after listening to the complacent speeches of Ministers in our last economic Debate, I became convinced that British prices could never be made competitive again unless a whole series of drastic measures was adopted, among them concerted action to devalue the currencies of the Western world which were in substantial maladjustment with the dollar.

I took that line at Strasbourg, and it is interesting to notice that the chief opponent there of devaluation, not on the grounds of timing but as something bad in itself, was the spokesman of the British Labour Party. As late as 2nd September the hon. Member for West Coventry (Mr. Edelman), speaking clearly on behalf of his party, told the Consultative Assembly of Europe this about devaluation: Monetary manipulation leads to a brief export boom followed by rising costs of imports, rising costs of production, social agitation for higher wages, and strikes, and, finally, the black misery of unemployment. When the hon. Gentleman sat down he was loudly cheered by the Patronage Secretary who is issuing a three-line Whip for Thursday to get him into the Lobby to vote against the very thing which he was describing in that most serious language before the Assembly of Europe. And that after his Government had taken a decision to devalue.

Photo of Mr Frederick Lee Mr Frederick Lee , Manchester Hulme

Does not the hon. Gentleman agree that during the whole of the Debates of the Economic Committee at Strasbourg in which he advocated devaluation there and then and also asked the United States Government to do it for us, neither my hon. Friend the Member for West Coventry (Mr. Edelman) nor I ever tried to stop devaluation as being wrong in itself, but that the whole of our argument was that it was unfortunate to try to introduce anything in the report at that stage when the Chancellor of the Exchequer and the Foreign Secretary were on their way to Washington for the financial discussions?

Photo of Mr David Eccles Mr David Eccles , Chippenham

The hon. Gentleman is really being extremely naughty. He knows perfectly well what his colleague in the Committee argued. I can remember his words. I did not quote them because they are not published as the other words are, but he said that the Labour Government would never tolerate an instrument that hits the poorest people hardest. That is within the recollection of hon. Members who were there.

Those at Strasbourg who argued for devaluation made it very clear—this is on the record—that devaluation would have to form part of a comprehensive international plan to restore the solvency of the United Kingdom, the sterling area and the free nations of Europe. I was then, and I am now, against the kind of unilateral devaluation which the Government have flung in the face of the Western world just at the moment when the Western world was prepared to take a large step forward—a unique step forward—in economic co-operation. This is the most retrograde and uncivilised act that has been performed by a democracy since the end of the war. His Majesty's Government have turned up their Socialist noses at the wider approach. They consulted nobody about the rate. They preferred to challenge every non-dollar country to competition for survival.

Unilateral devaluation might have been done in a way which would have impressed the foreigner. Had it been performed in the grand traditional British manner, by fighting alone, back against the wall, it would have made a great impression; that is to say, had it been accompanied by internal measures of a sweeping character so well conceived and so comprehensive that no banker and no trader would have been able to come to any conclusion but that the new rate would be held and that if there ever were a change it would be a change upward, it would have gained unpopularity for His Majesty's Government temporarily but they would have won admiration. As it is, the only change in internal policy which the Government have adopted is to chop 30 per cent. off the value of our money. They have run away from the measures which would make devaluation respected.

Photo of Major Donald Bruce Major Donald Bruce , Portsmouth North

What would the hon. Member have done?

Photo of Mr David Eccles Mr David Eccles , Chippenham

In time the hon. and gallant Gentleman will hear. Let us make no mistake. It is this cowardly playing politics which forced the Government to pitch the rate too low to gain a little time—a few months may be or, for all I know, a few weeks until the General Election. They have had to undervalue the pound so that a short burst of orders in the export market will assure employment until the votes are cast. In doing that they have enormously and quite unnecessarily increased the risk of a rapid rise in the cost of living of the British people.

We are now committed to a hazardous gamble. Should it fail, and the degraded pound again be degraded, then gone is the last chance to restore London as a financial centre. The Socialists will then have reduced the status of sterling to that of one of the untrustworthy currencies of Europe or South America. The party opposite will be responsible for the culminating blow which must follow failure to defend the rate of 2 dollars 80 cents. That is to say, New York will then have to become the liquidator and manager of the sterling area. That is the issue before us. In these three days we are debating nothing less than the life and death of that great network of commercial and financial relations which our fathers established upon the basis of a sound currency, and it is on that world-wide system that the real wages of our people so largely depend.

We must take as our starting point the fact that sterling has been devalued by 30 per cent. The deed is done. The Government having accepted this disorderly defeat—because that is what unilateral devaluation is—it is our duty to ask ourselves how we can prevent that defeat from becoming a rout. The Chancellor in his speech told us that to fight our way back to safety we shall need the loyal support of all sections of the people—I am sure we all agree about that; but it ought to be equally obvious that that loyal support will be withheld unless the ordinary man and woman has understood what it will mean in their own lives if nothing more is done than to devalue.

As my hon. Friends the Members for Louth (Mr. Osborne) and Hallam (Mr. Jennings) remarked, the Government, as usual, have failed to explain the full seriousness of the position. I am not surprised at that. I was not in the least surprised at the tricky camouflage which was employed in the broadcasts of the right hon. and learned Gentleman and also of the Minister of Food. I asked the men who work for me in Wiltshire what was their impression of those broadcasts. They said that their impression regarding the cost of living was that only the price of bread would go up.

We expect that from this Government. Whenever they have anything unpleasant to announce, they always contrive to make it sound as though nobody will be hurt. They go further. They pretend that every stage on the road to bankruptcy is some kind of victory for Socialist planning and administration. No courtesan in history has ever robbed her infatuated lover with half the smiles and blandishments that Ministers have lavished on the British public whilst stripping them of their reserves and reputation.

We cannot yet tell what harm to the national character these repeated doses of deception have done, but we shall find out. We shall find out on the day of reckoning, and in the meantime we start upon the defence of the new rate of the pound heavily handicapped by the public misstatements of Ministers. In that respect this Debate is already doing good. It is demolishing the Chancellor's political optimism about the effects of devaluation on the cost of living.

It is downright dishonest to pretend that the only imports which will go up in price are those which we buy from the dollar area. We are already faced with substantial rises in the major raw materials that come from the sterling area itself, wool, rubber, leather, the base metals and, I suppose, oil will follow. When pre-devaluation stocks are worked off and when the contracts are renewed almost all the necessities of life are bound to rise, unless there is a big fall in American prices. None of us would want an American slump which would lead us into other difficulties, which I will not discuss tonight.

There is a novel feature about this devaluation which has never occurred before. It has faced His Majesty's Government with a quite unprecedented dilemma. They must want the sterling prices of raw materials to rise in order that the dollar earnings in the producing countries shall not fall off. On the other hand, by the extent which the sterling raw materials do rise in price it becomes more difficult to check the increase in the United Kingdom cost of living. There is a head-on conflict between the dollar earnings of the area as a whole and the price level in this country and, knowing that this clash must arise, the Government never ought to have devalued the pound until they had made the closest study with the Dominion and other interested Governments to find what rate would give the best prospects of earning the most dollars by the area as a whole, taking into consideration the particular problems of the United Kingdom cost of living.

In his speech today the Chancellor confirmed our understanding that the Government never made any such joint study either with the Dominions or with the European democracies. Instead, they plunged back into the economics of the jungle. They have reacted like a wounded savage, striking out blindly, without thought for friend or foe. Let us put this to the test. The Chancellor told us he only informed Mr. Chiffley of the change in the rate on Friday. That, of course, is not what Mr. Chiffley said. As reported in "The Times" last Thursday, he said it was Saturday in Australia before he got the news. Look at that. The Chancellor had told his American friends a week earlier but he waits until the day before the announcement in London to tell the Prime Minister of one of our closest friends in the Commonwealth and, of course, it rests upon the right hon. and learned Gentleman's head that Australia has had to take a snap decision which in practice is quite likely to prove against the interests of her people and of the sterling area as a whole.

How did unilateral devaluation impress our neighbours on the Continent, many of whom were still smarting from the prim lectures which the Chancellor had been accustomed to give them about their own finances? Let us take the French Minister of Finance. He described the rate of 2.80 dollars as a trade-war rate, and so it is. It is a one-sided declaration of economic war and my information from France is that it is as likely as not to bring the French Government down, so delicate is the relationship between their wages and prices. I recall a remark made by one of our Belgian colleagues at Strasbourg. He said, "Your British Socialists are not at all like ours. They are wholely and completely national Socialists." He might have excepted the hon. Member for North-West Hull (Mr. R. Mackay); otherwise that is the reputation earned by the Labour Party in Europe.

The Government having fixed a rate of 2.80 dollars, we are entitled to ask them how they intend to defend it. First of all, what sort of central banking arrangements have they made for the short run when of course our dollar earnings cannot expand? Our reserves are very low. Have they come to any arrangements about stabilisation credits? Are they or any member of the Commonwealth to get dollars from the International Monetary Fund? I ask these questions because every banker in the world is asking them and it is very stupid to leave them unanswered. This is not a case in which it is clever to be secretive. Confidence has been shaken and is not yet restored.

Then there is the Bank of England itself. The old function of the Bank was first and foremost to manage credit policy with its eye on the foreign exchange to see that the value of the pound did not depreciate. When it was nationalised that function was superseded and it was told to manage credit in accordance with the domestic policies of the Labour Party. Is it not time that in this emergency the Bank should be given instructions once again to look after, the external value of the pound first and foremost, at least until we are out of the wood? For all I know there is still too much money in this country today, and in spite of the fact that the rise in the prices of raw materials will call for more working capital, the Bank probably ought to be selling Government securities and contracting the credit base if we are to make the rate of 2.80 dollars really sound. We want to know something about these things.

I now return to the effect of devaluation on the cost of living. Two quite distinct forces have been set in motion which are now making a combined attack on British prices. It is hard to say which is the more dangerous, the increase in the cost of imports to which I have already referred or the most unusual fact that we have devalued at a time when there is full employment in this country, and when the risk of inflation is therefore altogether different to what it has ever been, to my knowledge, when any major country has devalued previously. There is no unemployment to speak of in the export industries today; there is a little short time here and there but there is no considerable slack to be taken up. Indeed some of those industries are still under-manned and they cannot therefore cope with increased orders without adding to the pressure on the labour market.

As my right hon. Friend the Member for West Bristol (Mr. Stanley) said, if we are successfully to defend the rate of 2.80 dollars a large number of persons must change their jobs. That being so, I wish to ask the Government two questions about this changeover in jobs. The first is whether it can be done without turning some present profits into losses and without some temporary unemployment. The Chancellor faced up to that and in guarded language he admitted that that was so as regards employment. But we heard the hon. Member for Reading (Mr. Mikardo) make, in part of his speech, some very true and just remarks about the extraordinary difficulty of getting out of the minds of our wage earners their fear of unemployment. This means a most delicate task in putting across to our workers that unless there is to be a considerable change in jobs now and quickly we have really no hope of defending this new rate.

I wish to ask the House a serious question on unemployment. Who really is the defender of employment in Britain? Is it the party opposite, who have decided to go on spending and whistling till there is nothing left and then in the great catastrophe millions are thrown out of work? Or is it those of us who are blunt enough to say that if the country does not make certain manageable reductions in expenditure and changes in production now the whole economy will come crashing down? I believe that any hon. Members opposite and on my side of the House who can for a moment put elections out of their minds would find it very difficult to answer that question in favour of the Socialist Front Bench.

My second question is this. Do they believe that this change round which is so necessary can be made while they insist on the policy of freezing all incomes? During the war we had experience of re-deployment of labour and capacity. The power of direction was then accepted; and yet it was seldom used with success unless it was buttressed by financial inducements. Those who went from cotton and other concentrated industries to aircraft manufacture had to have larger wages when they got there and we all understood why. What are the Government proposing to do about this type of re-deployment now?

They cannot use compulsion even if they wanted to, they have not the moral authority; and by their deliberate policy they have ruled out financial inducement. There is not going to be any re-deployment unless there is some change in Government policy. I think we would all agree that the most severe action is justified to hold down the total of incomes and profits. That can be done by a Budget balanced at a reasonable level and by a monetary policy including the judicious use of the interest rate. But inside this firmly held total of incomes and profits the Government ought to abandon their White Paper policy. If they do not do that; if, that is to say, they do not encourage some wages and profits to rise and some correspondingly to fall, the export industries cannot respond to the stimulus of the new rate. We shall lose our opportunity, the adverse balance will continue and we shall slither rapidly to an even worse depreciation of our money.

So I come to the measures necessary to limit the rise in the cost of living with which we are confronted. The Chancellor in his speech today showed us that he knew quite well what ought to be done. He also showed us that he and his friends are too frightened of their supporters to do it. If the export drive is to succeed, indeed, the more it succeeds, the more necessary it is to reduce internal demands upon our stocks and current output. What can be done? The Chancellor could further restrict personal expenditure by increasing the taxes. If he does that he will kill the will to produce at the present level of costs even what we are now producing. He will be faced with wage claims at one end of the scale and dissipation of capital at the other. Both would sabotage the defence of the pound.

He could cut Government spending; but he has said that nothing is to be touched except the expenses of administration of certain non-essential Government services. After a full year—and that is too late—those economies might yield, I think the figure of the hon. Member for Reading (Mr. Mikardo) was £100 million or £150 million. Even that is provided that we are not presented with any more Supplementary Estimates, and who thinks that we shall get off with no more of those Estimates over the rest of this year? This is chicken feed and will add up to very little.

There remains, of course, capital investment. The Chancellor said that he was reviewing next year's programme. Really, what possible saving within the next 12 months will he get out of reviewing next year's programme? What is he going to cut? The House ought to resist with the utmost firmness any suggestion of cutting investment in productive assets. Our whole future is bound up with expansion and modernisation. What is the Chancellor going to cut in the capital investment programme? I venture to guess—nothing that endangers 100 votes.

The conclusion stares us in the face that no adequate reduction in internal commitments will be made, so that we are in for an unpredictable rise in the cost of living. Whether that rise will get out of hand before or only after the General Election is obviously a question that deeply concerns right hon. Gentlemen on the Front Bench opposite, but it does not make one ha'porth of difference to the poor people who are going to suffer.

I have some suggestions about what we should do. I do not think that we should be depressed because our welfare-statesmen always fail in their appeals for more output to match the improved methods and machines. The possibility of a very sharp increase in output is still there. There is plenty of that kind of slack to take up, and we all know it. I was talking to some railwaymen last week-end and I said to them, "What will happen if you join the go-slow movement?" These men, with good English humour, replied, "If we went any slower we should stop altogether." They, like the bricklayer to whom my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) referred, seemed indifferent to the Government appeal.

We cannot expect a sharp increase of production under this Government. The fact is that by their sloppy mixture of flatteries and half truths they have forfeited the power even to make a cat cross the room to a saucer of milk. They themselves set the pace in extravagant spending. How can they hope to have any influence on anybody else? What influence would they expect the father of a family to have if every day he exhorted his children to produce more and to save more and then every night he jammed on his hat and went off to the local to spend their earnings? That is exactly what the Government are doing.

But another Government which had the courage to put its house in order might draw a very different response from the British people. The policy is the same today as it should have been when the gold reserves began to run out. First, work harder. That goes for all of us from the top to the bottom. It is the essential beginning. Secondly, reduce Government expenditure and taxation. Give back something to those who are worst hit. Also give encouragement to those who produce most. Thirdly, unfreeze the factors of production so that they can go where they are most needed. Fourthly, and this I am certain, had to be included, lower the value of the pound. The point about that sort of policy is that none of these things are any goods unless all of them are put into effect. It is absolutely essential to pursue both the stimulus of exchange depreciation and the discipline of reducing purchasing power at the same time.

Photo of Mr Thomas Scollan Mr Thomas Scollan , Renfrewshire Western

Tell that to your constituents.

Photo of Mr David Eccles Mr David Eccles , Chippenham

I do, and they vote for me. If all those four things were done we would underpin the revival of Britain, and we should make secure what we in all parts of the House want to make secure—the largest advance in the social services which it is within the capacity of the country to pay for. But, of course, for such a tremendous change in policy and direction we need leadership of a kind which we have not had since my right hon. Friend the Member for Woodford (Mr. Churchill) laid down his office.

I wish to make one further point. Apart from this salvage operation which will have to be performed, what longer term goal should be set before the people? Men will not work harder and spend less simply to improve the material conditions of other people whom they do not know. It is not enough to describe in economic terms what will happen if we do nothing more than devalue. The right hon. and learned Gentleman suggested that the additional stimulus should be the Christian virtues of love and of family life. With that we all agree, but, regrettably, that is not sufficient; politics too must be cast into an inspiring form. If the Government put their policy to the people only in economic terms, many will say, "Oh, it cannot happen to me; I am all right. They are only trying to scare us," and there will be no response. We shall only get that response if we unite for higher purposes.

There are three main roads along which we could go. We could look upon this fight to defend the new rate of the pound as a rearguard action to give—I was going to say to give the Foreign Secretary—time to settle the details of a sell-out to the dollar world. I do not think that policy would arouse much enthusiasm. We could tell ourselves that our aim is the complete independence of Britain and the Empire. That is an attractive vision. Independence always wakes an echo in a British heart, but is it a vision capable of fulfilment in a shrunken world where there may be atom bombs piling up on both sides of the Iron Curtain and where the future of Germany hangs in the balance? I think not. We have the immeasurable advantages of being the head of the Commonwealth and also of being America's most powerful ally.

Our real problem is how to turn that special position into a policy that will inspire our people in the second half of this century. I suggest that we should use all our experience, all our traditions of leadership, to draw our European neighbours into a closer union, first, with the sterling area, and, later, with the United States. That is a practical vision which corresponds to the size and danger of the world in which we live. There is real pride in it and something truly great. Our young people would respond. They would rise in their enthusiasm to recreate and enrich the peace of Europe and so of the whole world.

9.30 p.m.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

The hon. Member for Chippenham (Mr. Eccles), who made such an interesting speech, asked a number of questions which, no doubt, the Government will answer in the course of the ensuing Debate over the next two days. For my part, I should like to deal with some of his arguments from the point of view of a Labour back bencher. I hope he will not take it amiss if I begin by saying that the more one listens to the new race of economist-politicians, the more one is inclined to defend the race of lawyer-politicians to which my right hon. and learned Friend the Chancellor of the Exchequer is sometimes alleged to belong. It seems to me that nothing is more striking among the economist-politicians than the vehemence with which they disagree with one another, unless it is the rapidity with which they change their minds.

I should like to try to get one or two things cleared up. The first question which I should like answered by hon. Members opposite—and there are two more days of Debate in which it can be answered—is: Are they in favour of the devaluation of the pound or are they not? I do not mean, do they like it? Nobody likes it. What I mean is, do they agree or disagree that the Chancellor of the Exchequer, in the situation in which he found himself last week, had or had not to devalue? [An HON. MEMBER: "We should not have got there."] I know there are some criticisms about how we got there. I know there are criticisms about how we did it. I heard what the hon. Member for Chippenham had to say about consulting other countries and about the policies that ought to accompany devaluation. I shall have a word or two to say about all this in a moment or so, but I should like to have a clear answer from the Opposition as to whether, in the events which have happened, it was right or wrong to devalue the pound. There has been no answer to that.

The right hon. Member for West Bristol (Mr. Stanley), who opened the Debate, said that he accepted the pre- vious policy that it was not necessary to devalue, and that it was wrong to devalue. Was he speaking for his party, because if he was he ought really to have a word to say to the hon. Member for Chippenham who went to Strasbourg, and, at Strasbourg, assumed the exact opposite, Am I wrong in saying that the hon. Member, at Strasbourg, said that there was no way out except a devaluation not merely of the pound but of all European currencies, and did he not commit himself to that view long before the Government decided to devalue or revalue the pound?

Photo of Mr David Eccles Mr David Eccles , Chippenham

I am usually ahead of the Government, even if this time it was only by a week.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

The hon. Member was not merely ahead of the Government, not merely ahead of the facts, but ahead of his own leaders.

Photo of Major Donald Bruce Major Donald Bruce , Portsmouth North

His own leader was there.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

I do not know that that makes the hon. Member's position easier. Who was speaking for the party?

Photo of Mr Frederick Lee Mr Frederick Lee , Manchester Hulme

If my hon. Friend will permit me, perhaps I can answer that question. The hon. Member for Chippenham asked the Committee on Economic Questions to accept this: The Assembly asks the Committee of Ministers to invite the United States Government to send representatives to a monetary conference at which proposals shall be made to adjust the exchange rates of European currencies.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

And one takes it that by "adjust the exchange rates" nobody had any idea that they might be raised in relation to the dollar. So that I think we must assume, in spite of the right hon. Gentleman who opened the Debate today—

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

—for the Opposition—that, at any rate, it is in fact agreed that there is no Member of the House on either side who really believes that the Government had any option but to alter the value of the pound in relation to the value of the dollar in the circumstances which at that time existed. If that is agreed, then I hope there will be an end of the doubt, ambiguity, confusion, hesitation and reluctance and all the rest of it which has surrounded the matter, because what the House is really faced with, if it is agreed that the value of the pound in relation to the dollar had to be changed, is: What are the consequences and how are we to make the best of that situation?

I think there is another thing that is agreed, if we are to assume that it is agreed that the devaluation had to take place. The next thing that is agreed is that it is not a long-term policy and offers no permanent remedy for the instability of trade between the sterling and dollar areas. Listening to right hon. and hon. Gentlemen opposite, one would suppose that somebody on the Government side, some member of the Government, or the Government themselves had put forward devaluation as though it were the sovereign cure for all our economic ills. I have not heard a single word from the Government that supports any such view. Certainly, nothing in what the Chancellor of the Exchequer said went that way. Nor did the Prime Minister's speech at Llandudno the other day. Nor does anybody in his senses—and I assume that Members of the House of Commons retain their senses—assume that this is anything more than an attempt to adjust the immediate position, so that we may take advantage of the immediate situation in order to bridge the gap and prepare the way for more permament remedies.

If that is agreed, then I think there is another thing that is agreed, that if this method of stimulating American purchases of British goods is to succeed, it can succeed only if the British working class bears the burden and produces the goods; and the whole question is whether the Government or the Opposition can best command the confidence of those who produce the goods in order to meet that situation. Who has the moral authority? In order to examine that question, let us look at some of the remedies that are proposed. The hon. Member for Chippenham said, "Let us scrap the White Paper on wages and profits and personal incomes." Is that the policy of the party opposite?

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

I do not suppose he will. [Laughter.] The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) is vastly amused, but I am sure he will agree with me that it is really a fundamental question. In adjusting the economic machine to the new position it cannot be a matter of indifference, it cannot be a thing to be treated in a light-minded way, whether we are to go to the people and say, "Do not increase your personal incomes," or whether we are to go to the people and say, "It does not matter whether you increase your personal incomes or not." I do not think it is a frivolous or unfair or unreasonable question to ask the Opposition—whether they accept the view of the hon. Member for Chippenham that the policy of restraining increases of personal incomes on the basis of the White Paper ought to be maintained or ought to be scrapped.

Which is it? The country will want to know. The Government have taken a clear decision upon it. My right hon. and learned Friend was perfectly clear today. I quite recognise that nobody is infallible. He may have taken the wrong decision. It may be that the hon. Member for Chippenham is right. It may be that the country would rather agree with the hon. Member for Chippenham on this point than with my right hon. and learned Friend and the Government; but the country and the House are entitled to know on which side are the Opposition. [HON. MEMBERS: "Which side are you on?"] I am on the side of the Government. I recognise that the maintenance of that policy will require considerable discipline, considerable self-restraint and considerable suffering on the part of large numbers of the people. I recognise that one must be honest in saying that to the people to whom one turns for support, either politically and electorally, or in an economic crisis of this kind.

The Government have taken a decision quite clearly upon it. They published that White Paper long ago, and the Chancellor of the Exchequer says today that not merely does that policy stand, but the decision we have been compelled to take may involve very great restraint in order to maintain that policy. He says it is only in that way that we can prevent the devaluation of the pound from resulting in inflationary pressure which would defeat its purpose. If the Opposition think the Government are wrong about that, surely it is their plain duty to say so. If, on the other hand, they think the hon. Member for Chippenham is wrong, then it is their plain duty to disown him. They are not entitled to come and make contradictory speeches of this kind and leave the public in doubt and hesitation as to whether it is right or wrong.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

Does not the hon. Member realise that it is quite impossible to judge the wisdom of the Government's action until we know whether it is to be accompanied by that degree of retrenchment in getting rid of inflation at home which the International Monetary Fund has said is vital if revaluation is not to be wasted?

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

The hon. Member is a little embarrassed by not having heard the speech of his colleague. If it is true that the Opposition are not in a position to answer that question until they have information which has not yet been supplied, then the hon. Member for Chippenham ought not to have answered it. Please do not think I am criticising the hon. Member for Chippenham. If that is his opinion it was his duty to come and say so in the House, which he did.

My complaint is that the Opposition are still content to leave in doubt the fundamental question on which the success or failure of this experiment must depend. Everyone agrees that if devaluation of the pound is accompanied by inflation it will fail, and if it fails there is not much we can do to save ourselves from bankruptcy. If, then, the Government say that in order to prevent inflation it is necessary to maintain that White Paper, surely the Opposition have a clear duty to say in plain terms whether they agree with that or not, and until they do say whether they agree or not they really have no claim to be considered as honest or responsible politicians.

Let me ask the hon. Member for Chippenham, who has given a clear answer to the question, another question. He says he quite realises that if we were to increase the sum total of wages and salaries that would be inflation and it ought not to take place. He then says that nevertheless there ought to be increases in wages in order to attract labour from non-export industries to export industries. He says that we shall not attract new labour to the export industries from the non-export industries unless we induce that transfer of labour by offers of increased wages in the export industries. That is a plain statement. I would like to know whether the Opposition agrees with that, and if the hon. Member for Chippenham thinks we can maintain the cheapening of the price of our export products by increasing the wages paid to those who manufacture them?

I am no economist, and perhaps that explains my difficulty in understanding how that is to be brought about. Some day an economist will teach me how it is possible to increase wages in industry and still keep down the cost of the manufactured product. If we can once do that, there would be no reason why we should not increase everybody's wages tomorrow. If the hon. Member still thinks it can be done, he will agree that one does not have to be an economist to realise that if we can raise the wages of some workers without raising the total that we spend on wages we shall have to reduce the wages of some other workers. That is not economics; it is plain arithmetic.

I should like to know from the hon. Member whose wages he proposes to reduce? [An HON. MEMBER: "Yours."] I was talking about productive workers. I have never claimed that politicians entered into that category. Governments produce nothing; lawyers produce nothing; accountants and economists produce nothing, and politicians produce nothing. The most they can do is to get in the way or get obstacles out of the way. However, I understood that the hon. Gentleman was talking about the wages of workers engaged in productive industry. If we are not talking about that, then it is another matter. I still want to know from the hon. Member for Chippenham, who wants to increase the wages of workers in export industries without increasing the total wages spent, whose wages he proposes to reduce? It is an important matter.

Another point made by the hon. Member was that if the pound is devalued the cost of living must rise. That is true. There is a difference between the two sides as to how high it must rise, and there may be a difference between the two sides as to how high we want it to rise; but if it is admitted that the cost of living must rise, and that that rise will not ultimately be limited to the price of bread, the question of what happens to the lower-paid worker becomes important. If the hon. Gentleman has his way, and increases the wages of those in the export industries at the expense of other workers, how long does he think he could hold the wages front in this country?

I suspect that he does not want to hold it, and that the true answer was contained in another part of his speech when he said that devaluation was of no value unless it was accompanied at the same time by drastic alterations in our internal economic structure. He made it quite clear what these drastic alterations were. He said that we would have to reduce Government expenditure. He did not mean reduce it by a few millions, but in so large a measure that the reduction would enter into and be reflected in the ultimate cost of the goods to be produced and exported. As a Member who tries to be clear and honest with himself and the House, he has no right to stop there. He must tell us where these drastic economies are to be made.

Will he say quite clearly whether he wants a severe curtailment of the social services or not? I can quite understand the argument—I do not agree with it—of those who say that all these things—wages, the health services, food subsidies, family allowances, increased education payments, increased old age payments and an all-in comprehensive system of social security—may be very valuable and desirable things in themselves, but that we cannot afford them and, if we have them, that we cannot afford that they should enter into the cost of everything we produce, and in the end create the international situation in which we find ourselves today.

I do not accept that view myself, but I quite recognise that it is a tenable view. It really is not decent to hold that view and then conceal it from the country and pretend that one holds a different view. If one holds that view, one must go to the people of the country and say plainly, "Sorry; we believe in all those things and we would truly like to let you have them, but we cannot afford them." The right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) came very near to saying so, and, of course, that is true of the Conservative Party generally. I have never known them to come out and say, "We do not believe in social services." They have always said that they agree with social services but not now. There has always been some reason why we could not afford them and why we must wait until some other time.

I am not quite sure what their reasons were between 1918 and 1939, but what they are saying today is perfectly plain—"We cannot afford them now and, therefore, we must do without them, or without some of them." If they do believe that, will they please go out and tell the people so, and invite the people to support them on that basis? This is a democracy, and a democracy does not justify itself by wanting support and votes on policies that are not believed in. We on this side have been perfectly plain about it. The Government have said that there is nothing in this situation which may lead us to make any drastic cuts in the social services at all. They have said that obviously one does not want to spend money without result, and they will look very carefully to see whether administrative saving can be made. Everybody is in favour of that, but that is not what some Members of the Opposition are saying. They are saying something quite different from that. They are saying that, after making administrative saving, we would not have done enough, because we cannot afford all these social services and we must make drastic cuts in them.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

That is what I want to know. All that the Members of the Opposition have so far been saying is, "We must make these drastic cuts." It is quite obvious that there are only two places in which drastic cuts can be made—the Defence Services and the social services. For my part, I think the Defence Services are a little beyond our capacity to pay, and that we are bearing more than our fair share of the burden. I hope I am giving a plain and specific answer to that, but the Opposition do not believe that. They think that we ought to maintain that expenditure and it seems, therefore, demonstratively plain that what they mean when they urge a drastic cut in Government expenditure, is that the social services must be cut. If they do not mean that, they ought to stop asking for drastic cuts in Government expenditure. If they do mean that, they ought to come out plainly and say it.

The right hon. Gentleman who opened for the Opposition said that the Government were being dishonest about this matter. He said that the effect of devaluation was automatically to reduce the social services and automatically to make a cut in wages. The Government disagree with him about that. They say: "No such thing." If the right hon. Gentleman says that that is the inevitable result, I suppose that we are bound to infer that he thinks it is a result that ought to take place and that if it did not come automatically they, if they were the Government, would take measures to see that it did come. It does not seem to me—I may be quite wrong about this—that we shall get the best possible out of the workers of this country in this difficult situation by talking to them in ambiguous language of that kind, nor does it seem to me that we can get the best out of the people of this country by referring to them, as the Leader of the Opposition did only the other day, as work-shys and work dodgers.

Hon. Members opposite have had a good deal to say about confidence. They say they have no confidence in the Government. I would cease to have confidence in the Government at the precise point where they began to have it, so it does not surprise or distress me in the least to know that the Opposition have no confidence in the Government. It would distress me very considerably to find that the Government have lost the confidence of the workers and of the people of this country. So far, there is no sign of that. Nor is there any reason why that confidence should be lost. I know that the Government have made mistakes, and I think most hon. Members are aware that I have spoken when I disagreed with the things the Government have done. I say that in the past four years, in the circumstances which have prevailed, the Government have deserved very well of the people of this country.

I would like to say one final thing and this is in agreement with the hon. Gentleman who preceded me. I have said already that, as far as I know, no one believes that devaluation of the pound is a permanent solution of our difficulties. I agree with him that we have to look elsewhere for that solution and that possibly the most fruitful way of looking for it is in a united and integrated economic policy in Europe. The hon. Member had something to say about our failure to consult Europe in our devaluation. Europe did not consult us. He mentioned France, which in three and half years has devalued its franc from 484 to over 1,000, without any consultation at all. If we are to have a united and integrated economic policy for Europe it can only be by a controlled, regulated and directed economic plan. We cannot have a directed, controlled and managed plan with conscious and declared objectives unless we have a common currency in Europe. One cannot have a common currency for Europe unless it is a managed and controlled currency, because it is clear that—

It being Ten o'Clock, the Debate stood adjourned.

Debate to be resumed tomorrow.