Orders of the Day — Sterling Exchange Rate

– in the House of Commons at 12:00 am on 28th September 1949.

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Order read for resuming Adjourned Debate on Question [27th September. 1949]: 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."—[Sir S. Cripps.]

Question again proposed.

2.39 p.m.

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

I beg to move, in line 1, to leave out from "House," to the end of the Question, and to add welcomes the measures agreed upon in Washington but regrets that His Majesty's Government, as a result of four year's financial mismanagement, should now be brought to a drastic devaluation of the pound sterling, contrary to all the assurances given by the Chancellor of the Exchequer, and considers that a return to national prosperity, the maintenance of full employment and the safeguarding of the social services can never be assured under the present Administration, which, instead of proposing fundamental cures for our economic ills, resorts to one temporary expedient after another. We have reached a point in our postwar story and fortunes which is both serious and strange. We have before us this afternoon the financial measures which have to be taken as a result of four years government by the Socialist Party. It is our common interest and our first duty in the pass to which we have come, to decide what it is best to do and to help it to be done in the most effective manner.

There also lies before us a General Election, the date of which will be settled in accordance with what the party opposite consider to be in their tactical interest. All political thought and party machinery is affected by this. We are, I think, most of us agreed that it is high time for another Parliament and that all our difficulties will have a better chance of being solved in a new House of Commons. We are a Parliamentary democracy—[HON. MEMBERS: "Hear, hear."]—created before the Labour Party was born, or thought of. We are organised on a two-party basis—[An HON. MEMBER: "Two? "]—in the main, and an appeal to the nation is due and overdue. There can be no doubt that this Election overlays all our domestic affairs and also, I am sorry to say, it looks as if it will be fought out with more fundamental divergences at every grade and in every part of our society than have been known in our lifetime.

Finally, over all there looms and broods the atomic bomb which the Russian Soviet, for reasons not yet explained, have got before the British, though happily not before the Americans. If you take these three factors together, the financial crisis, the party conflict and the atom bomb, it will, I think, be generally agreed that the hour is grave.

The Socialist Government ask for a vote of confidence in their financial and economic policy during the last four years and in the measures they have adopted in the present crisis and they call upon the people for their full co-operation with the Government. This is a considerable demand, this vote of confidence, and it forces us to look back on the past conduct and record of the Socialist Party who, with almost absolute power, have ruled us during this difficult and harassing period. No one must under-rate the task which fell upon these Labour Ministers as the consequence of the Election of 1945. Britain and her Empire were in the war from the start and ran at full gallop, keeping nothing back, aiming only at victory till the finish. Britain had great claims on the respect of the world and on the good will of the United States. At the end there was an inevitable phase of national exhaustion, physical and psychical which required time to repair. There was also the tremendous transition from war to peace to be accomplished.

Under the unchallenged working of our Constitution a new Parliament was brought into being by the free choice of our people. Of course the circumstances were exceptional. There had not been a General Election for 10 years; three or four millions of our men were with our Armies abroad. The present Government were the result. They were the heirs not only of the problems of that grievous but triumphant hour, but also of all the slowly gathered treasures, customs, qualities and traditions of the ancient and famous British State.

How have they done? That is the question which by their Motion they ask us to consider this afternoon, and that is the question upon which the electors will have to pronounce at no distant date. I think it will be generally admitted that we are not in a very good position as a result of all we have done and put up with since the fighting stopped. In these last four lavish years the Socialist Government have exacted upwards of £16,000 million and spent them, over four times as much every year as was the cost of running the country in our richer days before the war. They have used up every national asset or reserve upon which they could lay their hands; they have taken 40 per cent. of the national income for the purposes of Governmental administration. Our taxation has been the highest in the world. It oppresses every effort and transaction of daily life.

Large incomes are virtually confiscated. The exertions and rewards of the most active class of wage-earners and craftsmen have been burdened in times of peace by the harsh direct taxation which in war, when we are fighting for life, may be a matter of pride to bear, but which in victory is at least a disappointment, and I believe has been a definite deterrent to production. Every capital reserve we had has been gobbled up. As has been well said, we ate the Argentine railways—£110 million—last year as a mere side dish. Our reserves of gold and hard currency which at the end of 1946 were £650 million have been draining away until we are brought together here and brought up against the fact that only £300 million at the old rate are left and that this would hardly last for a few months. It is because we are now brought to the verge of national and international bankruptcy after the dissipation of all this wealth that this emergency Session has been called.

Photo of Mr Percy Shurmer Mr Percy Shurmer , Birmingham Sparkbrook

Let the right hon. Gentleman sell his horse.

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

I could sell him fur a great deal more than I bought him for but I am trying to rise above the profit motive.

But let us see how great is the help we have received from the productive efforts and generosity of countries outside this small crowded island which has been led so far astray. We have been given or loaned—and have spent—about £1,750 million sterling by the United States. We have been helped to the extent of over £300 million by Canada, Australia and New Zealand. In addition, at the end of the war, Australia owed us £220 million and we now owe them £10 million, a turnover of about £230 million; and there are other very considerable items which could be mentioned.

In all history no community has ever been helped and kept by gratuitous overseas aid, that is to say, by the labour of other hard-working peoples, to anything approaching the degree which we have been under the present Socialist Government. And where are we at the end of it all? That is the emergency which we have been called together here to face.

After these preliminary observations I come to the actual Motion and Amendment which are before us, and the measure which has given rise to them, namely, the devaluation of the pound sterling from 4.03 down to 2.80 of the American dollar. The Government declare that this was all they could do in the extremity to which we have come or to which we have been brought by them. Nay more—they even try to represent it as a benefit and a fine shrewd stroke of timely policy. Here again in this matter I will venture to recur to first principles and seek for realities. One must be careful not to be baffled and bewildered by technical jargon. There is no sphere of human thought in which it is easier for a man to show superficial cleverness and the appearance of superior wisdom than in discussing questions of currency and exchange. I saw a very good cartoon in a newspaper the other day of a hospital ward filled with patients who had become demented through trying to explain the devaluation problem to their wives

But I will submit to the House some simple propositions which they may deem worthy of consideration and which are at any rate easy to understand. The reduction of the rate of dollar exchange from 4.03 to 2.80 means, subject to certain minor abatements, that we may have to pay up to nearly half as much again, some say 35 per cent., some 40 per cent., for what we buy—much of it necessaries without which we cannot live—from the dollar area. We may have to pay up to nearly half as much again over an area of almost one-fifth of our imports—actually 17 per cent.

That cannot be good for us. It can only mean that we are forced to give much more of our life energy, that is to say toil, sweat, physical fatigue, craftsmanship, ingenuity, enterprise and good management, to buy the same quantity of indispensable products outside this country as we had before. We have to do more work and draw more upon our spirits and our carcases to win back the same amount of food, raw materials and other goods without which we cannot carry on. That is bad for us; it is a new blow to our economic health and a new burden which we have to bear.

Now, the life thrust of the British nation, if not impeded, is magnificent, but we have been, as I said at the beginning, exhausted by our glorious efforts in the war. Great exertions are made by the people, but we can ill afford to make a new drain upon our latent strength and remaining motive power. We are not in a state of health to become a blood donor on a large scale at the present time. We are already a blood donor on a tremendous scale through our unrequited exports to India, Egypt and other countries to whom we became indebted for local supplies while we were defending them from being conquered by the Italians, the Germans or the Japanese. The "Manchester Guardian," perhaps at this moment a better guide on economics than on ethics, has estimated these unrequited exports at nearly one-fifth of our total exports. That is a lot.

Many hundreds of thousands of our skilled or semi-skilled wage earners are toiling today to make desirable things for those countries which are paid for simply by somebody scratching something off with his pen from what is described by the misleading term "sterling balances," which really means British debts. Nothing comes back in return to nourish the productive energies of the island. Trade is exchange, but here is neither trade nor exchange. An intense effort goes out and nothing comes back. I am not at this moment arguing the rights and wrongs, though I am quite willing to do so on a suitable occasion. I think that an amount for our expenses for the defence of those countries should have been set against the local supplies, but it would be a long argument and much could be said. I am not arguing it at the moment; I am only setting forth the brutal fact.

On the top of all this, the devaluation of the pound sterling draws a further draft in life blood and initial energy not only from the wage-earning masses but from all that constitutes the productive fertility of Britain. We are to give anything up to 45 per cent. more products of our own toil for the same amount of dollar imports. That cannot be a good thing, it cannot be something to rejoice about, it cannot be something to parade as a triumph or to boast over as some new benefit bestowed by the Socialist Government upon our struggling community. It is a hard and heavy blow. However necessary it may be at the point to which we have been led, even if it be the best step open to us to take in the plight into which we have fallen—and all that is arguable—the hard, blunt, simple conclusion remains; it cannot be a good thing. We have suffered a serious disaster. In all this my mind would have marched step by step with that of the Chancellor of the Exchequer until a fortnight ago. Now, he probably finds these notions revolting and reactionary. So much for the first of the realities of devaluation. I must not again make the joke about revaluation. The delicacy of the point will I am sure be fully respected.

Now I come to the second reality which is more complicated. Anybody can understand that it is not good for a man in a weak state of health with an overstrained vitality to be tapped month by month for his life blood for the good of others across the oceans, be they stronger or weaker, in order to win his daily bread and that of his wife and children. But this second point concerns the whole sterling area of which the British Empire and Commonwealth is the foundation; and also it concerns all the mighty regions of Europe outside the iron Curtain.

I see it said that the effect of our devaluation of the pound and its consequences on European and on sterling currencies is to erect something like a 40 per cent. tariff wall against the United States. I am myself a supporter of Imperial Preference, of European Unity and of the sterling area and I am glad to see all these vast regions and forces becoming conscious of a common identity. I cannot regret in itself the drawing of a girdle or zollverein around themselves. But here it is a question of degree. Up to a certain point it would be a help. It would help world recovery. But beyond that point it may well be a hindrance.

I think of course as a free trader. I may have adopted some variations and modifications, as we all have in the course of years, but still that is the basis on which my thought was formed many years ago. If we pierce down to the economic roots of world production and human material and creative power, the erection of a new barrier in addition to the political and economic barrier of the Iron Curtain in the modern world of today cannot be deemed a stimulus. Restriction is never a stimulus in itself. It may in a crisis make for order, but it is not a stimulus. It may on a longterm view promote a wider harmony and more equal bargaining power, but in so far as world trade is restricted this is a contrary force to the ideal of plenty. Abundance or plenty is the aim of mankind. Plenty is within its power. Plenty should be its inheritance. Plenty is hope for all. Restriction is inevitably the enemy of plenty.

It has been stated that the United States Government have pressed us to devaluate the pound. The Chancellor need not even shake his head. I was not going to omit the point. The Chancellor told us yesterday that he did it of his own free will when the time came. I do not suppose that the United States, this gigantic capitalist organisation, with its vast and super-abundant productive power—millions of people animated by the profit motive—I do not suppose that it will be seriously injured by a moderate wire fence being placed around the British Empire, the sterling area and United Europe. But I cannot believe that American manufacturers will see in such a development any immediate inducement to reduce their own highly protective tariff behind which they have built up their unrivalled economic power and which tariff is backed—as all tariffs are—by potent political interests.

I should be very glad to be contradicted by events. I have always hoped for a large reduction in American tariffs, but this is no time to nurse illusions or delusions. We must seek the truth even if we cannot give full effect to it at this particular moment, and we must face it when found however ugly it may be. I cannot feel that what has taken place—namely, the erection of a 40 per cent. tariff round the European area and the sterling area is likely to promote in itself the probability of an important United States change from her present protective policy. I hope, however, that they will rise above the considerations which obviously present themselves at this stage.

I come to my third point, my third reality, upon this issue of devaluation and it centres upon the word, "truth." Whatever the currency experts may say—and they say all sorts of things and with learned grimaces change their views very frequently—but whatever they may say, the true exchange value between pound and dollar, or between all other currencies and the dollar or the pound, the true one is the right one; and the one at which we ought to aim. In the present circumstances if the Chancellor of the Exchequer felt it necessary to devaluate the pound to a fixed figure, I think it was right to go the whole hog; and that it was better to cut down the rate of exchange to this level in the hopes of a later revival than to take half measures which would soon have been overtaken and overwhelmed by the true and real forces which are relentlessly at work.

Now the matter is done, and when we have had to give up our exchange position which we had maintained so long, I feel entitled to take a fresh view. I am all for a free market and a true market. As I told the House two or three years ago, it is only a false and untrue market officially supported that breeds a black market. A sham market can no more escape a black market than a man can escape from his own shadow. Therefore I should myself have been more inclined, had I been in any way responsible, to set the pound free under regular and necessary safeguards and control—[Laughter]—certainly, and accept the results, than to the present rigid method of pegging the exchange at the very lowest rate which anyone could possibly conceive.

The Chancellor of the Exchequer argued at some length against this yesterday, and it is obvious that anything that is free or largely unregulated is obnoxious to the Socialist mentality. But this was what we did in 1931—the last time we had to clear up the Socialist financial mess—[Interruption]—Oh, I remember it well. Quite soon we had a natural exchange rate of 3.30 which through the actions of both countries rested fairly stable until the war came. I do not think that the idea of the liberation of the pound should be ruled out by any Government which can command confidence abroad. That may be the decisive reason for the Chancellor of the Exchequer rejecting it at the present time.

I believe that great strength still resides in the sterling area of which Britain is the centre. That has to some extent been proved by the many countries which, roughly as they were used, and little though they were consulted, have had to conform to our action. I believe that this strength, working freely and backed by the intense productive effort of all the communities concerned, would in a short while achieve, a far better rate of exchange against the dollar than the present figure of 2.80 to which we have been condemned. I believe further that in its intrinsic strength under favourable circumstances a free pound might establish itself at a rate which, while far more beneficial for us than the present position, would nevertheless promote and express a natural but conscious affinity throughout the sterling and associated currencies of the world.

To sum up this part of my argument which I am submitting to the House, the devaluation of the pound sterling is a new and serious drain upon the life strength of Britain. We always supported, my right hon. Friend in particular, the Chancellor of the Exchequer in resisting it. It might have been better in my view, and may still be better when confidence is restored, to let the pound go free under proper safeguards—[HON. MEMBERS: "What are they?"]—control of the sending of large sums of money from this country—all this applied in 1931—[Laughter]—what are hon. Members laughing at? They had very little to laugh at in 1931. It might have been better, I say, and may well be better when confidence is restored to let the pound go free under proper safeguards and reach its natural level. A free pound would impose a less severe drain upon our conditions of life and labour, and nevertheless, in reaching its true level would afford a girdle to the European and sterling area which, without being unduly restrictive, would afford an effective means of economic as well as political association.

Now I turn from discussing the policy of devaluation to the timing of the act and the sequence of events in which it lies. Judged by the results, the management of our finances has been deplorable. If as a result of that mismanagement the devaluation or liberation of the pound sterling had become inevitable, ought it not to have been taken as part of a general policy of setting our finances in order? A reduction in expenditure—

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

—a substantial relief in taxation—[HON. MEMBERS: "On what?"]—The Chancellor of the Exchequer does not say there should never be any reduction in expenditure. Hon. Members should ask him on what. He has the power to answer the question, and the duty to answer the question—[An HON. MEMBER: "It is your duty too."]—I am as good a judge of my duty as the hon. Member is of his.

I say that a reduction in expenditure, a substantial relief in taxation applied to increase incentives to production and earnings, especially among the wage-earners liable to direct taxation, widespread relaxation of needless and vexatious controls and interferences with the flexibility of private enterprise, the definite lifting of the shadow of further nationalisation from our most active and prosperous industries and, above all, the return to power of a Government commanding national and international confidence—all these would have created and may still create conditions in which the liberation of the pound sterling would have a good chance of opening wide doors of prosperity into the future.

But by one means or another devaluation or liberation, if this step were inevitable, should have been taken as part of a general scheme of financial reform instead of being plunged into as an isolated act forced upon us at the last moment. Again and again the Chancellor was warned from this side of the House and by financial authorities outside that he was living in a fool's paradise. But all these warnings were in vain. I think he made some remark about "Dismal Desmonds." Was that his phrase or did one of his colleagues achieve this alliterative gem?

Therefore, whatever may be thought of the relative advantages or disadvantages of devaluing or liberating the pound sterling, the timing of the step was obviously wrong. A drastic alteration in the exchange rate, if proved necessary, should not have been left till the crisis broke upon us but should have been taken in anticipation of it. It is not easy to palliate the right hon. and learned Gentleman's blunder. We all know the abilities of the Chancellor of the Exchequer. In his position he had more and better information on the subject at his disposal than anyone else in the world. He ought, surely, to have exercised foresight and decision in good time before our remaining gold reserves had been drained away and he was forced higgledy-piggledy into action which we know he loathed, under the worst possible circumstances.

I am sorry not to see the Lord President of the Council in his place because I wish to quote with great approval some remarks which he has made on this subject: The real problem of statesmanship … said the Lord President of the Council in June, 1946— in the field of industry and economics is to see trouble coming and to prevent ourselves getting into the smash. We are determined that we are not going to be caught unawares by blind economic forces under this Administration. But that is exactly what has happened to his colleague the Chancellor of the Exchequer. He could not possibly have described it in more precise or harmonious language. In fact, it has almost a prophetic aspect about it.

I come to another point. The question is much discussed in the country of the Chancellor's political honesty. Ordinary people find it difficult to understand how a Minister, with all his knowledge and reputation for integrity, should have felt it right to turn completely round, like a squirrel in its cage, abandon his former convictions and do what he repeatedly said he would never do, and moreover, enforce upon his party and his most faithful followers the humiliating tergiversation which we have witnessed.

I am surprised, I must say, that the Chancellor's own self-respect did not make him feel that, however honest and necessary was his change of view, his was not the hand that should carry forward the opposite policy. Certainly he stands woefully weakened in reputation, first by his lack of foresight, and secondly, by having had completely to reverse the reasoned convictions with which he made us familiar. Of course, we know that changes in currency cannot be announced beforehand. The secret had to be kept. It was certainly very well kept, perhaps too well kept considering the position of some of our friendly countries like France. But we congratulate the Chancellor—and he will agree with this—and the Foreign Secretary on the high art which they displayed in the necessary process of deception. The histrionic quality of their performance was indeed remarkable.

But I am not speaking of the last month but of the position three and four months ago. I have been shown nine quotations from the Chancellor's speeches declaring himself the inveterate opponent of devaluation. It is very important that our Chancellor of the Exchequer should have foresight. It is also desirable that he should have consistency, as far as possible. It is important that Parliament and the country should believe that when he speaks at that Box opposite he means what he says. Otherwise, how can people attach the weight to his declarations and pledges without which a Chancellor of the Exchequer is grievously crippled? How he of all men could adopt the policy, "What I tell you nine times is untrue," is most astonishing.

Although his personal honour and private character are in no wise to be impugned, it will be impossible in the future for anyone to believe or accept with confidence any statements which he may make as Chancellor of the Exchequer from that Box. He stands convicted of lamentable lack of foresight. His usefulness, for all his abilities in the great office he holds, has been definitely impaired, and I find it most difficult to believe that he would have been content to stay in office if he had thought the ordeal was likely to be a long one.

It is odd that the Chancellor of the Exchequer in his present weak and vulnerable position should feel entitled to judge his predecessors with so much severity and to impute wrong and unworthy motives to them. The right hon. and learned Gentleman referred yesterday to my action in returning to the Gold Standard a quarter of a century ago. He said that his policy today was a substitution for the alternative policy of severe deflation. That policy"— I quote his words from HANSARD— 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."—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, c. 25.] There were loud cheers from hon. Gentlemen opposite.

This was a very aggressive and I may even say offensive reference to past history. To suggest that people would like to see other people unemployed is I think deserving—[Interruption.] I will pick my epithets with care, and I have a large collection of them—is I think deserving of the word "offensive." I think that the whole passage in which he referred to me is singularly out of keeping with the governess and sermon-like passages of some other parts of his discourse. I must say that I am obliged to him for making his accusations here, where they can be answered, instead of circulating them, as is no doubt being done far and wide at this present moment by his party propaganda machine.

The House must pardon me if I make a short digression—

Photo of Mr George Thomas Mr George Thomas , Cardiff Central

This whole speech has been a digression.

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

The hon. Gentleman is very talkative. One of the strongest claims that the party opposite have is that with their great majority they have never hampered free speech, however detrimental they might find it to themselves.

I will cite only one quotation in answer to the Chancellor. It is by Mr. Snowden, Chancellor of the Exchequer in the first Socialist Government of 1924, and Chancellor again in 1929. In the interval he led the Socialist Opposition in all financial matters. He was one of their most respected and influential founder members.

On the Second Reading of the Gold Standard Bill he said that while the Government had acted with undue precipitancy, he and his Socialist colleagues were in favour of a return to the Gold Standard at the earliest possible moment. The Socialist Opposition thereupon refrained from voting against what, in the right hon. and learned Gentleman's words of yesterday, was a policy which: … depended for its efficacy upon a massive extension of unemployment with the accompanying lowering of wage rates. Later on, in December of 1926, Mr. Snowden wrote an article in the "Financial Times" in which he said: All the facts do not support the impression that the return to gold has been detrimental to industry. The bank rate has not been raised; unemployment has not risen; real wages have not fallen; and the price level has been fairly well maintained. I am rather astonished that the right hon. and learned Gentleman, before he went out of his way to attack me about transactions long buried in the past, should not have acquainted himself with these declarations of Mr. Snowden's in the heyday of his power and influence with the Labour Party. I must also state, since the matter has been raised, that during my four and a half years' tenure of the Chancellorship, the cost of living declined by at least 18 points, while money wages remained stable. That certainly compares very favourably with what has occurred in the last four years, what is occurring now, and what is going to recur in a harder degree.

Secondly, I may remind the House when I am charged with seeking a massive extension of unemployment, that it was not until I left the Exchequer in 1929 that, under the Socialist administration, the rate of unemployment doubled and overtopped the two million figure. It really is remarkable that the accusation of being callous about unemployment or the welfare of the people should be launched against me, the author of the labour exchanges and of the first Unemployment Insurance Act, and, as Conservative Chancellor of the Exchequer, of the Old Age Pensions age being lowered from 70 to 65 and the institution of the Widows' and Orphans' Act.

When the right hon. and learned Gentleman or anybody on those benches can show services rendered to the working classes equal to those I have mentioned they will be more free to throw stones at others. All the benevolent and beneficial aspects of this Parliament—apart, that is to say, from sterile controversial party measures—were actually planned in great detail by the National Coalition Government. [Interruption.] The right hon. Gentleman the Minister of Health was not a member of that Government; he was otherwise occupied in those days. That legislation was actually planned by the National Coalition Government of which I was the head and which rested on an over-all Conservative majority in the House of Commons of 150.

I noticed by the way—the right hon. and learned Gentleman in his difficult position is showing himself not unruffled—that the Chancellor yesterday used a new term of prejudice and opprobrium. He spoke with disdain of doing anything which would start a period of freedom for the profit earners. What is this prejudice against profit earners? "Profiteer" is the word which all may abhor, but the stigma in that term is not "profit earner" but unfair exploitation. How can a country like this live without its profit earners? How could the Chancellor of the Exchequer collect his revenues without taking, as he admits, 50 or 60 per cent. of the profits that they earn? How can anything stand without the profit earners? How wrong it is for a statesman in his position to cast his censures upon them, and, presumably, reserve his tributes for the disinterested loss-makers who manage our nationalised industries?

In the closing sentence of our Amendment, which I am now moving, we have given prominence to the Chancellor of the Exchequer's own words. He has certainly been candid in his confession. He has admitted that the financial policy of the Government he is supposed to be defending has been the resort to one temporary expedient after another. That is certainly a frank confession, and it is, to a large extent, an explanation of our continued drift and slide down hill. I can only say confession is good for the soul, but after confession comes penance, not power.

His Majesty's Government in their Motion appeal for the co-operation of the whole people. It is certainly the duty of everyone to help in every way to increase our production and improve its efficiency. But surely it is not for the present Government to appeal to us on the grounds of national interest. Of our own accord, in spite of many provocations and insults, we have helped them throughout their long four years of power in all that we believed was necessary in the public interest.

First, there was the American Loan of £1,000 million. Not without some doubts and differences, and some criticism in our own party, I and my colleagues on this bench helped them all we could, both here and in the United States, to obtain the loan, little though we liked its terms. Secondly, the Marshall Aid Plan on which the Government are now living was stated by General Marshall to have arisen in his mind out of the movement for United Europe which he directly associated with my name. This, he said, had led him to what we all acclaim as his wise and generous policy without which, according to the Lord President of the Council at Manchester on 17th April, 1948, we should be facing cuts in rations and a million or two people on the dole. And the Minister of Health on 18th May, 1948, in a momentary lapse, which he has no doubt greatly regretted since, said: But for Marshall Aid, unemployment in this country would at once rise by 1,500,000. That the Socialist Government have been spared the distress, nay the agony, of an immense rise in unemployment which would have been fatal to them and for many years to their party, has been directly due, and provedly due, to the aid which the Conservative Opposition have given, irrespective of party interests.

I think that some acknowledgment of these facts by Ministers in this Debate would have been becoming. We cannot, of course, forgo our right or neglect our duty to criticise the maladministration of our affairs or fail to warn the people of what lies before them if they allow themselves again to be misled by promises and fallacies. At one moment we were told—it now appears, from the account given by the Chancellor of the Exchequer, none too accurately—that the mission which the Chancellor and the Foreign Secretary were carrying out in the United States was concerned with matters vital to our financial interests, and that it all hung in the balance. From that moment we used all our influence to silence all criticism, and we only resume it now that these matters have been settled and because a new policy has been declared.

At every moment throughout this Parliament we have urged all those with whom we have influence—probably the majority of the workers and producers of the nation, employers and employees alike—to do their utmost to stimulate production. We have supported, at the request of the Prime Minister, on the public platform the Savings campaign and the recruiting campaign, and we shall continue to do so. We have done this because though we are party men, we feel bound to put country before party.

But how does His Majesty's Government behave in this field? I will admit that they have done many unpopular things, some of which were in the public interest. But, on the whole, they have played the party game with national stakes in a manner which no other Government I can remember in my long life or read about in modern history have ever done. They perpetuated a mass of wartime controls to give them that power of interference in the daily life of the country which is a characteristic of Socialism. They reasserted by regulation the war-time control of the severest form of direction of labour. They have the power today to take anyone and send them anywhere they will. Though they took these powers, they have not dared to enforce them, but the insult to national and personal liberty remains unreduced. As a mere act of party spite the Chancellor of the Exchequer abolished, at substantial annual loss, the Liverpool Cotton Exchange. The Government thrust upon the nation struggling out of its war-time exhaustion the evils of nationalisation and their party doctrines.

It is some consolation, I must admit, that the miners and the railwaymen should have learned, and learned by practical experience, what the nationalisation of great industries means in practice to the workers in them and to the public at large. The whole policy of nationalisation is being proved every day more clearly to be a costly failure and a further drain upon our life blood. Now at this moment when we are brought to this melancholy pass, and now that we are in this position of grave difficulty, the Government still proclaim their intention to nationalise the steel industry, and, should they be returned to power, they proclaim their resolve to nationalise insurance, cement and sugar. Never have a Government or a party more completely divested themselves of the title deeds to speak in the name of the nation.

But all this ill-usage in no way relieves us of our duty to encourage everyone to do his or her utmost to improve the national effort in these days of crisis, and thus to preserve to the British nation the power to regain in the future the great position in the world which it has held in the past. Nor must we allow the insults which have been hurled at us to provoke us into similar taunts. [Laughter.] Hon. Members opposite laugh. Personally, I do not think that a large part of the British people are lower than vermin. I think that the British nation is good all through.

More than 40 years ago I sat myself in a Left-wing Government with a majority even greater than that of the present one, and I was one of their most prominent and controversial figures. The House returned in 1906 represented, in my view, more or less the same slice of the population, the people who elected it coming very largely from the same homes and from the same areas, as does this majority today. I found them very good people to work with, and I renewed this comradeship in the long and terrible years of the war. But there was a great difference between those days of 40 years ago and these in which we are now living. The Liberal Government of 1906 was built around and upon those great principles of Liberalism which have since passed into the possession of every party except the Communists, and are still spreading with irresistible appeal throughout the world. But now those who sit opposite to us are not ranged around the great truths of Liberalism they are ranged around the fallacy of Socialism, which is in principle contrary to human nature and which I believe can only be enforced upon nations in its entirety in the wholesale fashion of Communism.

At present only 20 per cent. of our industries are nationalised, and we have been living upon the other 80 per cent., which the Government eye with so much disfavour and malice. There is indeed a great gulf of thought and conviction between us. "All men are born equal," says the American Constitution. "They must be kept equal," say the British Socialist party. Here is the deadly stroke at the mainspring of life and progress. I grieve that in these perilous years we should be so harshly and needlessly divided. Only an appeal to the people and a new Parliament can relieve the increasing tension.

And let me say this. If at this moment the Government were to drop steel nationalisation and their other extreme plans, it would certainly enable the approaching General Election to be conducted in an atmosphere much less dangerous to the underlying national unities on which 50 million in this island depend for their survival. [Laughter.] The Chancellor of the Exchequer may lead the cackles opposite at those sentiments if he believes it worthy of his position and of the serious part he has played and is playing in our affairs. It is my duty and that of those whom I lead to warn the country in good time of its dangers. But I thank God that in my old age I preserve an invincible faith that we shall overcome them.

What has been the great characteristic of our age? As I have seen it during my lifetime, it has been the arrival at an ever more bountiful table of millions and tens of millions and scores of millions of people. There is no reason why this march should not continue. There is no reason why the struggle of the masses for a more spacious life, for shorter hours, for constantly improving conditions of labour, should not be crowned with increasing success. Otherwise, what would be the use of all the machinery and improved methods of modern times? There is no reason, I say, why the forward march should not continue, provided that mistaken guides do not enforce the rule that all must come to the table at once or none at all. That indeed would bar the door to that continuous progress and expansion which has been maintained even during the convulsions of our lifetime, and which it is ours to enjoy if we do not wantonly cast it away.

3.53 p.m.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

The right hon. Gentleman the Member for Woodford (Mr. Churchill) has chosen this moment of grave national crisis to make what was frankly an electioneering speech, a speech as irrelevant to the real issues with which the country is faced today as was his famous, and to us helpful, broadcast in 1945. There are very many things in which it would be tempting to follow him. Perhaps one or two of them will be taken up by some of my hon. Friends and even some of my right hon. Friends. But before I seek to bring the House back to a discussion of the fundamental overseas economic difficulties with which we are faced, and on which I heard not one word in the last 70 minutes, there are one or two things which have been raised in this Debate to which it is, perhaps, right that I should reply.

Perhaps I might begin with one or two points that were put by the right hon. Member for West Bristol (Mr. Stanley) yesterday. He had some more or less clean fun at the beginning of his speech and then went on to ask us whether we thought it was possible to get the increase in exports which was necessary out of our total national production. Obviously the answer is plain and obvious. Provided that our production continues to expand through increased productivity, the demands of the export market can be met without producing undue shortages at home.

But the right hon. Gentleman went further. He went on to express his doubts whether certain of our export industries could increase their output because of a shortage of skilled labour. He mentioned pottery, where there has been a shortage of decorating labour right through the last three or four years. He mentioned boots and shoes. He might well have mentioned cotton and wool. But he omitted to go on and remind the House, though my hon. Friend the Member for Reading (Mr. Mikardo) made good his omission, of the reasons for the shortage of skilled labour in these trades. Let him turn back, if he is interested in this subject, to the figures of wages and employment in those industries immediately before the war. I am not now talking of the great slump; I am talking of October, 1938—because there were no earlier figures which the Government dare publish of wages in these occupations. At that time the average adult male cotton worker was earning £2 10s. 10d. a week and many trained men as little as 25s. and 30s. a week. The average woman worker earned £1 11 s. 5d. In boots and shoes the average earnings were £3 4s. 7d. for men and 38s. for women; for pottery they were barely £3 and—

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

Would the right hon. Gentleman give us at the same time the figures in relation to the changed purchasing power of the pound?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

If the right hon. Gentleman is suggesting that the purchasing power of the cotton workers' wages was greater in those days than it is today, I would invite him to come to Lancashire and tell them so.

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

I knew Lancashire long before the right hon. Gentleman. I never suggested anything of the kind, but it is misleading to state the figures and to compare them without giving the changed purchasing power.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

But I am not comparing the figures with wages of today. I could do so; I could give figures which I think the right hon. Gentleman would not like. What I am saying is that in 1938—and the right hon. Gentleman has his own ideas of what the pound would buy then—these were the wages which were being paid in those industries which are short of labour today. The right hon. Member for West Bristol perhaps might have referred to the unemployment figures in those industries after seven years of so-called recovery. In pottery they were 17 per cent., in boots and shoes 11 per cent., in cotton spinning 22 per cent., in cotton weaving 27 per cent.—

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

Half what they were when hon. Members opposite were in power.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

And 12 per cent.—[Interruption]—I am sorry if the noble Lord does not want to go back—

Photo of Viscount  Turnour Viscount Turnour , Horsham

I was wondering what were the conditions in the time of Charles II.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

Unlike the noble Lord, we base our economics on the facts of the 20th century and not the facts of the 17th century. We did spend a good time this afternoon hearing about events of 1925 and 1926 and, indeed, 1906. Perhaps it might be profitable to return to them in a moment. But at that same time, 12 per cent.—[HON. MEMBERS: "Which time?"]—in 1938, of the cotton operatives were on short time and a lot of the others were working too few looms to get a decent wage—no wonder, with the exports of the cotton industry in that year down to the lowest figure since 1850. The right hon. Member for West Bristol did not mention these facts, which was perhaps wise, because he was President of the Board of Trade, at the time.

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

I thought the idea was that in this Debate we were going to ask what was now going to happen. I asked the right hon. Gentleman a question—a perfectly fair question—of what he meant to do in order to enable exports in these particular trades to increase. Perhaps he will now answer that question.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

The right hon. Gentleman is quite right. I had the same impression as to how this Debate was going to turn out until this afternoon.

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

Are we to understand, then, that the right hon. Gentleman has had those figures typed since my right hon. Friend sat down?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

No, I had them typed last night because they were relevant to answer the questions put by the right hon. Gentleman yesterday. I would just remind him that we heard nothing in those days, when those miserably inadequate wages were being paid—nothing from him—[HON. MEMBERS: "About what?"]—in those days which the right hon. Gentleman called "the richer days before the war," of the things we have been hearing about from the right hon. Gentleman today—"plenty the object of all mankind," or the "ever more bountiful table" to which our people are to come. It is certainly true, as he said, that they did not keep people equal then. [HON. MEMBERS: "Equal with what?"] The right hon. Gentleman seemed to think it was the wrong policy to keep people equal. Obviously, it was not followed before the war.

The right hon. Gentleman went on to express doubts as to whether it is possible to achieve the production required. I agree with the right hon. Gentleman about the need for increased production. Through the strikes and disputes which have been going on in the country we have lost since the end of the war 10 million man days. Every Member of the House will agree that that is exactly 10 million too many, and that we cannot afford a single one in the days that lie ahead of us. But hon. Gentlemen should remember that in a period immediately following a war—[HON. MEMBERS: "Ah."] We had a figure of 169 million in the 4½ years after the first war, and 174 million during the 4½ years when the right hon. Gentleman was Chancellor of the Exchequer.

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

The right hon. Gentleman is no doubt referring to the general strike, but I thought his party were rather ashamed of that.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

It is one thing that, I think, the House will agree, that the difficulties of those years were due to the financial policy pursued by the Government in the previous years. But then we heard last night from the hon. Member for Chippenham (Mr. Eccles), whose manoeuvres at Strasbourg to bring international pressure on this Government to devalue the pound seemed to have escaped the notice of the right hon. Gentleman the Member for West Bristol when he referred yesterday to his party's adherence to the policy of no devaluation. I do not suggest that the hon. Gentleman's manoeuvring had much effect, but coming on top of the insidious campaigns being waged against the pound in many places, there is no doubt that his manoeuvrings at Strasbourg did no more than help the speculators to profit further at the country's expense.

In his speech last night he contrived once again to combine his characteristic sneers at the social services and the welfare State with obedience to what are his party's clear instructions, that no one wants, this side of the Election, at least, to propose cuts in the social service expenditure. That is no more than what was said by the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) who said some time ago that we had gone too far with the social services, or what was said by the hon. Member for Scarborough and Whitby (Mr. Spearman), who questioned the practicability of our present social service expenditure which, he said—and I quote his words, Has had a devastating effect on the economy of the country."—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, c. 89.]

Photo of Hon. Lancelot Joynson-Hicks Hon. Lancelot Joynson-Hicks , Chichester

Does the right hon. Gentleman deny it?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

Is the hon. Member for Scarborough and Whitby speaking for his party? That is the thing we should like to know. We have had no lead from the Opposition Front Bench since the speech, a long time ago now, of the right hon. Member for the Scottish Universities.

However, the hon. Member for Chippenham held out high hopes to us in his speech that he was going to propose a policy, but it came to this simply, that, without specifying any items for the axe, we were to make slashing reductions in Government expenditure of unspecified extent but certainly on a very great scale, because he said the figure of £100 million to £150 million was chicken feed. He combined this with an attack on inflation which he thought could be best countered by the removal of restraints on personal incomes of all kinds, profits or wages or salaries, and "freeing the factors of production"—whatever that may mean. Presumably it means the removal of controls over scarce resources, which would fit into the promise of the right hon. Member for Woodford to "set the people free from Governmental control"—a phrase he used at Wolverhampton recently.

Yet the right hon. Member for West Bristol only yesterday seemed to want to impose controls such as we have never exercised in peace-time on our exports, because he said that … any uncontrolled switching over of goods to the American market might, for some temporary advantage"— I do not know what he meant by that— land us in grave long-term disadvantages."—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, c. 46.] However, I can assure him that, despite all the pressure, we have no intention of placing these controls on exports, such as he seemed to have in mind yesterday.

But, as my right hon. and learned Friend said yesterday, the Government—and I am sure that this is true of the Opposition—regard the danger of inflation as the gravest menace to our national recovery. My right hon. and learned Friend has called for restraint by all sections of the community. He has said on more than one occasion that we cannot allow the present situation to be exploited by profiteers who seek to lower the people's standard of living by unjustifiable increases in prices. To that end the Government will not hesitate to use to the full their powers of price control. Recently I removed from the area of price control a very considerable number of items where I was satisfied that there was no danger of any price increase as a result of decontrol while, at the same time, saying that if I was wrong and prices did increase I should immediately consider the re-imposition of control.

In the situation which has followed the alteration in the exchange rates we are carefully watching consumer prices. But the insistent demands of the Opposition for the removal of controls over our national resources perhaps makes it necessary for me to say a word on our policy of controls. What their policy on controls is, is very far from clear. In "The Right Road for Britain"—or whatever they call it—they say they will remove neither price controls nor rationing from any commodity unless there is enough of it. The right hon. Member for Woodford has changed his mind. He is a squirrel in the cage. This is a change compared with the whole policy we have had from the Opposition during the last four years, during which period they voted against bread rationing, and made party political capital out of both bread and potato rationing.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

And sweets rationing, too. But contrary to everything that is said in that policy document, the right hon. Gentleman in his speech at Wolverhampton, and in his speech today, seemed determined to have control stopped over every commodity, whether in large supply or not.

So lest there be any underlying doubt about our policy on controls let me lay it down. Certain basic controls essential to the maintenance of full employment, to the proper location of industry, to the maintenance of our economy on an even keel—those controls will remain a permanent instrument of our national policy. Controls necessary during periods of shortage to secure fair shares and a fair distribution of consumer goods so as to ensure that the factors of production are used for essential priority purposes, whether in home investment, in the social services, in exports, or Colonial development—these will be retained as long as there is any need for them.

What we want to get rid of as quickly as possible—and the right hon. Gentleman was wrong to saddle us with any desire to keep all these controls—are those controls which are a hang-over from the war-time administration, which restrict the handling or sale or manufacture of goods to specified firms engaged in their manufacture at some date in the past, 1939 or 1942, or some other year, limiting competition between those firms and preventing the entry of often enterprising, progressive, efficient firms from outside. Properly guided and aided, properly led and, in appropriate cases, properly controlled, I agree with the right hon. Gentleman that the native ingenuity, inventiveness and efficiency of our industries and crafts are capable of even greater achievements than those recorded in the last year—to which the right hon. Gentleman failed entirely to pay any tribute whatsoever.

What are we to say of those industries and trades screaming for decontrol and making great political demands for decontrol which, when we discussed decontrol with them, made it clear that their demand for decontrol was conditioned by insistence on either the permanent quota arrangements, protecting the inefficient and sluggish from the competition of the progressive and enterprising, or for a ring fence safeguarding to them, and to no new entrants whatsoever, the pickings of their trade? In that kind of thing lies the road not to free enterprise that we hear so much about from the party opposite and the Conservative Press, but the road to unenterprise, to industrial decay in which there would not be competition.

We have no room for controls operated by private industry and by trade associations, and we are still looking, after the speech of the right hon. Gentleman, after the speech of the hon. Member for Chippenham last night—perhaps we shall get it, and I rather hope we shall today, from either the right hon. Member for Aldershot (Mr. Lyttelton) or the right hon. Member for Warwick and Learning-ton (Mr. Eden)—for an indication of what their policy is in this situation. They have painted a picture of a people stifled with controls—but give no indication of what they would remove from control—and debauched by reckless Government expenditure—and have not said a word about a single item in which they would propose a cut. It is quite clear, I think, to anyone who looks at their past performance what their present policy would be. It is not to be found in the contradictory documents they put out in bright colours from time to time. It is perfectly clear it would be a policy of deflation.

The right hon. Gentleman with his quotation from the late Lord Snowden entirely failed to keep in mind the responsibility he must shoulder for the events of 1925 and 1926. There was unemployment and there was wage cutting at that time, and production was stagnating. Though unemployment was high, though the country was going through an orgy of wage cutting and increases of unemployment, he was not at that time attacking the Government or anyone else with those picturesque phrases of which we hear so many in his speeches. We know that what he was really thinking was of Prosperity, the errant daughter of our house, With hand at the knocker waiting to come in. Let us go to an impartial observer of the times, the late Lord Keynes, who was certainly no Socialist. What did he say? He said at that time—and the noble Lord would do well to remember this—

Photo of Viscount  Turnour Viscount Turnour , Horsham

I was saying—and I will say it to the right hon. Gentleman since he has referred to me—that I am waiting here at great inconvenience to myself to hear what the Government's policy is. What is the Government's policy?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

If the noble Lord can put up with inconvenience a little longer, I propose to spend quite a little time dealing with the Government's policy on what is the essential problem before us today—hardly mentioned by the right hon. Member for Woodford—the problem of increasing our exports to the dollar area. What we have to ask is this. What is the policy the Opposition are putting up?

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

Change sides and we will tell you.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

We cannot listen for 70 minutes to an election speech, without the shred of a policy in it, without asking a few questions. The right hon. Gentleman says that if we will change sides he will tell us the policy of the Opposition, but why do the Opposition not tell the country their policy now?

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

The right hon. Gentleman has forgotten that he and his right hon. Friends are the Government.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

The country is pretty clear what the policy of the Opposition is, and that is what the country is afraid of. They are pretty clear that they have got it right—if the Opposition ever get into office it will be the policy of deliberately intensifying unemployment. We have had that policy in the past, and we want some proof that we are not going to get it again. Lord Keynes said: We are depending for the reduction of wages on the pressure of unemployment and of strikes and lock-outs: and in order to make sure of this result, we are deliberately intensifying the unemployment.… I should pick out coal as being above all others a victim of our monetary policy.… Like other victims of economic transition in past times, the miners are to be offered the choice between starvation and submission, the fruits of their submission to accrue to the benefit of other classes. Is not that the Tory policy today? These words were written in 1926, on the eve of the greatest industrial disaster of our history, when a deflationary financial policy, such as the Tories are advocating today, brought this country nearer to economic ruin and provided the breeding ground for Communism, which it has taken nearly a quarter of a century to wipe out.

The history of the coal industry ever since 1926, even during the war and since, has borne witness of the disasters that policy brought upon us, and no bright Tory promises in attractive posters and pamphlets will quickly efface those memories. Even the beautiful picture of the Guildford by-pass is not going to wipe out the picture of the hunger marchers who tramped down the Tory Road for Britain. Although they have not yet gone so far as to say that they would slash the social services, the food subsidies or the Government's expenditure on their employment policy in the Development Areas, it is quite clear from their words and from the Tory Press that this is what they have in mind. The Conservatives will let the builders build you a workhouse now.

Let me now get back to the Debate we were having before the hon. Member for Chippenham rose to speak last night. Undoubtedly the fundamental problem with which we are faced in this Debate, against which this Motion has to be judged and in the alteration in the exchange rate and the results of the Washington discussions, is the gap in our payments with the dollar areas. My right hon. and learned Friend and other colleagues have on frequent occasions told the House the steps we consider to be necessary in order to bridge that gap in the dollar balance of payments which has resulted—about which we have heard very little—from the war and the aftermath of war.

Right hon. and hon. Members in all parts of the House who have addressed themselves to this problem during the Debate will agree that this is a problem we have to attack, which we have been attacking and have to go on attacking, on three fronts. First of all we have to reduce, by the development of alternative sources of supply, our abnormal dependence on dollar sources of supplies which resulted from the devastation of our normal supplying areas during the war and from the slow recovery after the war.

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

Would this be a convenient moment for the right hon. Gentleman to answer my question as to how we can combine the quite proper policy of developing these alternative sources of supply and at the same time switching all exports to the dollar areas?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

No one has ever talked of switching all exports to the dollar areas. It is quite clear, if we examine the figures, that we need only a marginal removal of a fraction of our present exports to the dollar areas. It is quite a small switch from the countries referred to by the right hon. Gentleman to the dollar areas. In no long period of time it would make this dollar gap a much more manageable one. But no one would suggest we should attempt to switch all our exports from the areas we are trying to develop as alternative sources of supply.

Secondly, we have to give the maximum help and encouragement that it is in our power to give to increase the dollar earnings of other sterling area countries, and wherever possible to help them to reduce their dollar expenditure. Thirdly, we have to achieve a speedy and permanent increase in the direct dollar earnings of this country through the export of both goods and services. I do not think that I need say much on the development of alternative sources of supply, whether in Eastern Europe or the Commonwealth. Since 1947, we have reduced the proportion of our foodstuffs coming from the dollar area from 39 per cent. to 19½ per cent. in the first half of this year, and of our raw materials from 22 per cent. in 1947 to 14½ per cent. this year.

We have developed our sources of supply of many raw materials to a tremendous extent in the course of the last two years. In the case of hardwood, for instance, we are now importing from sterling area Commonwealth countries over 11 million cubic feet, compared with only 5 million in 1938. From Africa alone we are importing 7½ million cubic feet, compared with 1.6 million in 1938. Our imports from the sterling areas of hardwood are 52.7 million cubic feet, compared with 16 million in 1938.

We have often been criticised for being backward in developing alternative sources of supply of tobacco. From Rhodesia we imported less than 19 million pounds weight in 1938, whereas in 1948 we imported 44 million pounds. Our plan provides for an increase going up to 60 million pounds in the very near future. I do not think that these questions of Colonial development are matters which should be discussed or argued on party lines. I would prefer to leave the judgment on this to what an impartial critic said some two or three weeks ago. During their years of office the Tories shamefully neglected our Empire resources. They left it to the Socialists, with the groundnuts plan and other schemes, to take a great step forward in developing the Colonial Empire. The Socialists deserve praise for that. Let us do what we can to give them a fair chance to develop their Empire projects. By their policy of neglect between the wars the Tories have laid themselves wide open to attack. I hope the Opposition will agree with that very fair and impartial criticism from the "Sunday Express" three weeks ago.

The House is well aware that the mere recovery or development of alternative sources of supply is not going to provide the answer quickly enough to our immediate difficulties. Our main problem in these years has been partly the decline in our own exports and our own earnings from exports. The main change in our dollar problems compared with pre-war days, apart from the loss of our dollar investments, has been the fact that the pre-war trade surplus of the rest of the sterling area, which paid for so much of our own trade deficit before the war, has been turned into a net liability with the dollar areas. It was to make possible an improvement in the sterling area dollar earnings that my right hon. and learned Friend concentrated in the Washington discussions so much on this problem. A number of paragraphs in the communiqué issued at the end of those talks, especially those relating to rubber and tin, to stock piling as well as more general subjects, will be of direct assistance to our sterling area dollar earnings.

Photo of Sir Walter Fletcher Sir Walter Fletcher , Bury

Can the right hon Gentleman say, on the present price structure, how rubber will be able to earn us a single dollar more? Can he say how this will be of advantage to us?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

In a free market—and the hon. Member knows what a free market is better than anyone else—it is going to depend on how much they buy. It is perfectly clear, however, that natural rubber has now an important competitive advantage compared with synthetic rubber as a result of the change in price, apart from the results which may come from the change in the synthetic rubber regulations.

I do not think anyone would be so optimistic as to think that the events of the past two or three weeks will be likely easily or quickly to enable the sterling area countries to play their prewar part in our dollar problem. If we are to be able to stand on our own feet and pay our way with the dollar areas, we shall need a very large increase in our exports to the dollar areas over and above that required to pay for our lost investments. So the emphasis Members have laid in this Debate on increasing the exports of United Kingdom manufactures is certainly not misplaced.

Some of the remarks which have been made in the past few weeks, especially in that crescendo of denigration which preceded the Washington discussions—I am thinking of a number of articles in certain sections of the Press, not to mention the speech of the right hon. Gentleman at Wolverhampton—have had a considerable propaganda success in suggesting to the world that our efforts have been puny and unsuccessful compared with those made by other countries. The right hon. Member for Woodford, for instance, said: Every one of the countries of Europe outside the Iron Curtain … had got its life going … better than we had done under a Socialist Government. That is a monstrous perversion of the facts. The plain fact is that this country alone in Western Europe has increased the proportion of dollar imports paid for by our own exports to the dollar areas.

In 1938 our own exports paid for only 27 per cent. of our total dollar imports. The rest was, as the House knows, paid for by investments, invisible earnings and by the dollar earnings of the rest of the sterling area. But in 1948 we had increased the proportion of our dollar imports paid for by our own dollar export by one-third—that is, from 27 per cent. to 36 per cent. Perhaps we might have had some little recognition of that during the attacks that have been made on our production and export efforts. No other country in Western Europe has shown any increase at all in proportion to its dollar expenditure, and a number of them have shown substantial decreases.

Photo of Mr George Drayson Mr George Drayson , Skipton

The Minister is dealing only with cold statistics. Does he agree that large numbers of people in other countries in Europe have more to eat and enjoy a freer life than the people of this country?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

I did not hear the last observation of the hon. Member, but I agree that in many countries the particular class in which he might be interested have more to eat than perhaps the people of this country. The average food consumption figures for this country, which were given by the Minister of Food the other day, show that the hon. Gentleman's interruption was completely beside the point and was not borne out even by cold statistics.

The tragedy of our situation is that in spite of our increased dollar exports we no longer have either investments or sterling area dollar earnings to bridge the gap. The reason for the deep concern felt in this country in the past two or three months has been the fact that our exports to the dollar areas, previously expanding, have taken a sharp turn downwards. Our total exports to the United States and Canada, which had increased from a monthly rate of £8.9 million in 1947 to £12 million in 1948 and £12½ million in the first quarter of this year, fell to an average of just over £10 million in the last five months. Further, while our exports to Canada have been fairly well maintained, our exports to the United States in the second quarter of this year were running at only three-fifths of the 1948 level. The fact that practically every other European exporting country has suffered a similar fall in its exports to the dollar areas is of no comfort or aid to us in balancing our dollar accounts.

We need a vast increase in our dollar exports if we are to achieve the stability and the independence of external aid which are referred to in the Motion before the House. In April, I told the House that we would set a target of £180 million for our exports to North America for 1950 compared with £138 million last year. Clearly, with the new rates of exchange this figure is no longer appropriate but no one in this House, I am certain, will feel that the dollar equivalent of that target—$720 million at the old rate of exchange, representing £250 million at the new rate of exchange—is too low a figure. In July, the right hon. Member for Aldershot in a Debate in the House, declared his view that even with a complete sweeping away of tariff barriers in the United States we could not increase our exports to that country by more than £40 to £50 million. I do not know if the recent change in the exchange rates has caused him to alter that view—perhaps we shall hear tomorrow—but anyone who holds that view, any party which holds that view, is denying that ability of this country to achieve independence of external aid in the next two or three years, and is certainly holding out to the country no prospects of any easement at all of our dollar imports or of those elements in the standard of living—including many items about which Members opposite have been vocal and which are dependent on dollar expenditure.

Mr. Hoffman, after his recent visit to this country, again pointed out that our total exports to the United States represented less than 1/10th of 1 per cent. of their national production, and that a trebling of that rate is well within the capacity both of British industry to export and of the American economy to absorb.

Photo of Mr Kenneth Lindsay Mr Kenneth Lindsay , Combined English Universities

Could the right hon. Gentleman give some grounds for hoping for a trebling or a quadrupling or-quintupling of our exports to America?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

Apart from the change in, the exchange rates, which will make our goods more competitive, and the enormous development programmes going on in Canada, I am certain that we can increase tenfold our engineering exports to that country.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

I will deal with that. The first thing, apart from the change in the exchange rates, is the improvements we are expecting in United States tariffs and Customs administration. Second, following the new exchange rates, if our manufacturers—and this is the view of many of our friends in America and the Dollar Exports Board—will go out and see what the market wants, especially in the West, if they will employ modern marketing research organisations and will set out to produce the things the American customer wants and will package and merchandise them in the way he wants, I am certain that in a short period we can treble the rate of exports of consumer goods to America and increase tenfold the rate of capital goods to Canada.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

Yesterday, I brought to the House evidence, which arrived only yesterday morning from America, showing that trade unionists as well as employers' associations would demand higher tariffs if our imports were increased. Will the right hon. Gentleman deal with that point?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

I could, but I will only say now what has already been published in the communiqué about the view of the United States Administration of the position of a creditor country in relation to the freedom of movement of trade. The hon. Gentleman's point may be a real one, but he must get the figures into the right perspective. At a time when our exports have reached less than one-thousandth of the national product of the United States I think a trebling of our exports to America should not have the effect which the hon. Member fears.

Yesterday my right hon. and learned Friend said a good deal about what needs to be done to increase our rate of exports to America, and I want to repeat what he said, particularly in relation to the small manufacturer who may now try to export—as I hope he will—to the dollar areas for the first time. If the small manufacturer, venturing out into uncharted fields, wants help and advice he can get it from many places—from trade organisations, the Dollar Exports Board, from consuls and trade commissioners in the U.S.A. and Canada, from the regional and central offices of the Board of Trade and other Departments and from the merchant community. I know the House will welcome the proposals that several of the smaller manufacturers should combine to run a joint selling organisation in North America.

I have told the House on a number of occasions that the Government stand foursquare behind the dollar exporter with all the help that can be given him with raw materials supplies and other facilities, and with the financial assistance available through the Exports Credits Guarantee Department. Already, the Exports Credits Guarantee Department have been deluged with all manner of proposals for special assistance, and I hope in the next few days to give full particulars of the ways in which export credits can help exporters and the ways in which this Department is already giving aid to exporters at present.

Photo of Sir Walter Fletcher Sir Walter Fletcher , Bury

The right hon. Gentleman has talked about the manufacturer selling his goods in America, but he has said no word about the merchant organisations which are the best means of bringing this about. If he suggests that instead of using the merchant houses there should be a combination of manufacturers asking for credits, I think he is following the wrong line.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

I referred only a moment or two ago to the services rendered by the merchant community and the advice they give to small manufacturers who go to them for help.

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

The right hon. Gentleman has said that Export Credits Guarantee Department is deluged with applications and is taking steps to give assistance. This is a matter of great importance. Will he tell us what the Department is doing.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

I certainly could, but I do not wish to weary the House now. I will, however, see that information is available to the House and the industrial and trading community during the next few days.

This Debate has thrown up the very serious problem of our exports to the dollar areas, and we have still heard no suggestion of any alternative policy for increasing those exports apart from statements about the difficulties, such as that made by the right hon Member for Aldershot in July about the impossibility of a big increase in our dollar exports. We have merely heard repeated many times the suggestion that we are in a mess because of excessive Government expenditure, yet we have heard no mention of the items of Government expenditure which are considered to be excessive. In some of the speeches we have heard, and in none more than that of the right hon. Member for Woodford, we have had a reflection of the political conflict which, before nine months are out, will be taking place in this country.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

The right hon. Gentleman said just now that I stated in July that an increase in our exports to America was impossible. I said that it was very unlikely to exceed £40 million.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

I quoted verbatim what the right hon. Gentleman said in July. I think he will find that what I said was in accordance with what he said in the July Debate.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

If the hon. and learned Gentleman is successful in catching your eye, Mr. Speaker, I hope he will put a lot of points, and give us what we still have not had—the policy of the Opposition which will get us out of our international economic difficulties.

To call for massive and sweeping reductions in Government expenditure, yet to scatter round freely the pork barrel promises of the Tory election literature, to stand as the champions of the social services, yet to press for reductions that are possible only by slashing cuts in the social services; to promise the abolition of controls, yet to promise the fulfilment of greater social priorities; to promise more houses, yet to give no indication where the timber would come from; to call for greater agricultural output and more feedingstuffs, yet to condemn the bilateral agreements which have brought them here; to press for more Empire development, yet to reject long-term contracts, 42 of which are, in foodstuffs alone, with Commonwealth countries; to press for yet closer economic co-operation with Europe, yet to condemn as without sense and without sanity the great and costly financial contributions we have made to the recovery of Europe—to do all this is evidence not of a Conservative plan or policy which provides any hope of bringing the country through the grave difficulties with which it is now faced, but of attempts to use any situation to exploit any grievances or shortage, and to make any promises which it is thought will appeal to the electorate.

But the Motion before the House, the speeches of my right hon. and learned Friend, and the reactions of our people in the form of record production and increases in exports and capital investment —these things are real. No one, after the Chancellor's speech, will be under any illusions about the size of the problem that lies ahead of us. Equally, I think, no one should be in any doubt that the policy he has outlined is the only one that can bring us through, that the events of the past few weeks have presented the community with an opportunity of new efforts and a sense of restraint which, if we grasp it, will bring us through to recovery and independence of external aid but which, if cast aside through apathy or thought of personal gain, will be lost, perhaps for ever.

4.45 p.m.

Photo of Mr Peter Bennett Mr Peter Bennett , Birmingham, Edgbaston

Today I am reminded of the time when I was a temporary civil servant and the files went round. There was a lot of stuff to read and it generally came back with the message, "Passed back to you for necessary action." I intend to say a few words this afternoon on the question of how we are to tackle this job now that we have devaluation with us, because it has been passed back to us, the workers of the country, to deal with.

The Chancellor of the Exchequer in his broadcast gave a rather favourable impression. No one would have thought that the position was really serious, and I question if more than a very few people realised what it meant in our national life. I have been listening for someone to explain some of the details which are involved in the change which has taken place, and which it is intended should take place as the result of devaluation. A good deal has been talked about selling more goods in the dollar markets. From personal experience I can say it is not a simple job. It is not a question of sending out catalogues now that prices are lower because of devaluation, and saying, "Please send us your orders."

I have been to the United States and Canada twice this year in furtherance of the effort made before devaluation so that the British motor industry could take full advantage of the opening which it was said was there. I can assure the House it is a most difficult job to arrange business for the motor industry or any of the engineering productions which are in general use. Arrangements have to be made for such things as the sale and distribution of spare parts. My own company has established branches in New York, Los Angeles, Montreal, Toronto and Vancouver, and arranged many agencies. It has meant a lot of money and a lot of effort.

When we come to the question of consumption of goods in the United States, we have to remember that they are large producers of very cheap goods. They specialise in certain directions, whereas we, by the very nature of our world trade, have to make different things to suit everybody in the world. We have not the great quantities. I mention that to show that it is not like falling off a log to do business in the United States. It is not going to be done easily; it requires a mighty effort. What has the effort been so far, and what is the effect since that Sunday evening when the Chancellor made his broadcast? I have been on this job in various ways. For instance, the motor industry has been talked of as one which has already done something in the United States and ought to do a great deal more. I have the figures and I know what the position is now that we have adopted a policy of devaluation and provided the opportunity for reducing prices over there.

We found it was fairly easy to sell cars while they were in short supply and people would pay fancy prices for anything sooner than walk. There was a somewhat similar position in this country, when people paid a great deal more for a second-hand car rather than wait for the lower-priced new car, because they wanted something immediately and did not desire to wait. In the United States the position altered when large quantities of American cars came off the Detroit assembly lines. People became "choosy," and did not want to pay so readily or so quickly the price for the small British car, which was only a little below the price of the large American one. We have had a very difficult job in America, though not so great in Canada, because prices there are not so low as in the States.

What has happened now is that the pound has been devalued, and people tell us, "You have a 30 per cent. advantage and that ought to help you." But it is not as easy as that. The price of the vehicle is the price charged in England with the freight paid in sterling and landed on the American continent, but from that very moment every charge is a dollar charge. The duty has to be paid in dollars, as have the customs dues, the port dues, the internal freights—and America is a big country in which to send anything about—the expenses of staff, advertising and the discount that has to be given to the dealers for selling the cars. From 35 to 40 per cent. of the sales price of the vehicle is in dollars, and that is not an advantage after devaluation. Therefore, the motor manufacturer who has gone out and tried without any help and without any incentive should not be asked to do the impossible.

Then again the manufacturer knows that the costs of production in this country are going up. There is no question about that, and I propose to give the figures in a moment to show why. They estimate that the vehicle will cost 10 to 15 per cent. more. This has to be added to the export charge and that has to be allowed for in making the reduction due to the dollar position. As a result one make of British car has dropped from $1,595 to $1,345, a drop of $250. That is a lot of money in America, and will make a great difference because before people would not buy a small car when for about $50 more they could purchase a large car. Another type of British car has dropped in price from $1,795 to $1,495, or by $300. The Americans are going to buy more cars through these reductions, because when previously Americans might have bought the small British car as a second car for their wives to go shopping with or for their boys they would not do so if by spending an extra $50 they could buy the larger car of American make. But it will mean that we shall get less dollars back, and, therefore, under devaluation we shall have to sell five cars for every four we sold before, which, in the state of the American market today, is not going to be easy.

Why are prices going up in this country? I took out my own figures. We estimated that "in due course" nonferrous metals would go up. We only made one mistake; it was not "in due course." My own companies in Birmingham have informed me that our purchases of non-ferrous metals during the next 12 months will go up by £780,000. When to that is added cotton, rubber, moulding powders and so on, the figure goes up to £1 million on an expenditure of £12 million, so that the increased cost of these materials goes up by from 10 to 12½ per cent.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

Would the hon. Gentleman tell us how prices for non-ferrous metals compare with what our American competitors are paying for such metals at the current rate of exchange?

Photo of Mr Peter Bennett Mr Peter Bennett , Birmingham, Edgbaston

We are paying £140 for copper; they are paying £107. Copper went up by 30 per cent., lead by 40 per cent. and zinc by 38 per cent. Since those increases nickel has gone up by 43 per cent. We in Birmingham use a lot of those metals. For instance, 80 per cent. of the battery in a motor car is lead, and when 80 per cent. of the raw material of any finished article increases it makes a difference to the cost of the finished article. The funny thing is that unfortunately since the Metal Exchange was taken from London it is hard to understand why we need put on these extra charges. It should be remembered that 75 per cent. of the lead comes from the sterling area, as does 60 per cent. of the copper and 50 per cent. of the zinc. We have to pay that extra, but the Americans are buying at the old dollar rate of exchange of 4.03 while we have to pay 2.80, which is a great handicap.

I am told that if the Metal Exchange were in existence this would not happen, but I do not know. I have never had anything to do with the buying of metals in a speculative manner. I cannot see why, if the metals are in the sterling area, we should have to pay these high prices, and perhaps speakers for the Government who follow will have it looked into so that we can have an explanation. I have been trying for a long time to find out. It may be it is somebody in the States or in Australia who is going to get the benefit, but unfortunately the Chancellor of the Exchequer is not going to catch them. We are the people who are going to pay. That is the story of what the motor industry is faced with today, what it hopes to be able to do and how it is going to be affected.

But there is another Birmingham industry about which I have been informed—the light alloy industry. The people in that industry have been working like blacks ever since the end of the war to popularise a lot of lines produced by that industry, which can be used for various purposes. Aluminium then went up by £19 or 20 per cent., and those in the industry say that much of their work was wasted as a result. The sale of household pots and pans is going to suffer also because the aluminium has gone up in price. Aluminium comes from British Guiana, is processed in Canada and then comes over to this country where it jumps up in price. Again I do not understand why, but it does.

I have given examples from my own organisation in the motor business to show that the purchases of all products in this country which depend upon dollar purchases or upon world prices, which are settled in New York, are going to go up and it means, therefore, that while admittedly we have got an advantage in the dollar area, we are going to be handicapped in the sterling area. We are going to have difficulty in this country. Motor cars are going to go up in price, and, in all conscience, they are high enough now. They are going to be harder to obtain, and delivery is bad enough now. Why should this be? It is because we have to send additional quantities to the dollar area. I agree that we have to do it unless we are prepared to starve. Who is going to suffer? It is the people at home.

Also, we do not want to lose our traditional markets. It has taken a great deal of work to build up those markets in the other areas of the world, such as the Dominions, and we do not want to lose them, because if we do someone else will step in, and it is not easy to give up an export market and then, as happened during the war, return when the war is over to get it back again. Generally, we find that someone else has come along and dug himself in, and it is very hard to get him out.

We shall lose our traditional markets and go short of a lot of things at home. We want more goods for export, but the price must not rise, because if our costs rise we shall begin to lose the benefit of devaluation in the markets of the world. If our prices rise and the goods are not produced at the right cost, we run the risk of inflation. How are we going to avoid it? We are always being told that we shall have to improve our efficiency. But some of us do not need to be told that. Our mothers told us that when we went to work in the first place. We have been doing it for years.

I have had some figures taken out and they show that since 1939 the technological advance in our factories can be measured as 150 compared with 100 in 1938–39. Other people are doing the same thing. We are not sleeping. We knew that it was a difficult job, but we have tried to keep abreast of modern developments. We have always had 10 or 20 people a year going to America to see the things that are being brought out in America, and these improvements are brought back so that we can Anglicise them and make them suit our own conditions. We have been following many of the devices which the Americans use, such as introducing new labour saving machinery, and we have got an advance of 150, technologically. Productivity has gone up only to 135. Where have we lost?

Photo of Mr Harold Davies Mr Harold Davies , Leek

This is not a party point. I think the hon. Member is presenting a most interesting argument and I hope that hon. Members opposite will listen to it. I would like to point out that the productivity of the British worker, with all the tools that the manufacturer has been able to put into his hands, is now in advance of that of any of the ex-belligerent countries.

Photo of Mr Peter Bennett Mr Peter Bennett , Birmingham, Edgbaston

I am telling the House the facts about an organisation that I know well. Those facts are available to anybody. If the hon. Gentleman wants to have them, I will introduce him to somebody who lives on them and can explain them to him. There is no mystery about them. The technological advance is 150 and the productivity advance is 135. The labour figure, as compared with that of pre-war days, is 90. That accounts for the difference of 15 per cent. If we could get exactly the same labour effort that we had in 1939, with the advance which has been made technologically, instead of getting a figure of 135 we should get a figure of 150, which is 15 per cent. more. Why is there this difference? To start with, as hon. Members know, hours were reduced by arrangement from 47 to 44. The agreement was arrived at in this way. The other side said to us: "We do not want to come in on Saturdays. It is a waste of time as well as a bother to you and to us. If we can arrange a working week of five days instead of five and a half, we can give you the same result in that period as you get now by our coming in on Saturday mornings, wasting time travelling and bothering everybody."

The fact of the matter is that we have never been able to get the same result in the five-day week, as we were promised. We are that much short. It accounts for half of what we are wanting. The other half comes from the fact that since the war there has been a steady ebb and flow of workers. I agree that a man likes to know that he can tell his foreman what he thinks of him, put on his coat and go down the street and get another job. Some of the girls are quite aware that they can leave the job, go somewhere else and make boxes, confident that when the winter comes we shall want them back. That process is very costly. It takes a lot of mopey to train people like winders. All the coming and going mean that we are not getting the work we were promised in the 44 hours. We ought not to have all this floating about because it means that we are not getting the full result of the technological advance.

I sometimes feel that if the employers' association had made a bargain and had not kept it they would soon have been asked: "Do you think it is quite cricket? You have not done your share to carry out the bargain." I am still waiting for somebody to come along from the workers' side and say: "We know that we have not given you in the 44 hours the same amount of output that you had in the 47 hours, and that we promised to give you. Now that the Chancellor has seen to it that you do not get anything out of it, we are willing to lend you a hand." I wonder. I do not know how a settlement of this point will be found. We can only do our share.

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

Would the hon. Member explain exactly what he means by a technological advance from 100 to 150? Is he talking in terms of horse-power per man, or in terms of the value of the capital equipment?

Photo of Mr Peter Bennett Mr Peter Bennett , Birmingham, Edgbaston

I am talking in terms of the facilities provided. I have already said that I will ask the men who look after this side of the business to explain it to any hon. Member who is interested in it. Hon. Members must not expect me to be able to give a complete explanation. I do not do all my own work. I come here, instead. There is no mystery. If the hon. Gentleman would like to know about production we shall be only too happy to show him all the charts and how they are worked out. If he can find any fault he is at liberty to do so, and the experts will tell me.

When we saw the Chancellor of the Exchequer and discussed this question he repeatedly asked us, the industrialists and the shopkeepers, to hold back for the present and not to take advantage of the rises in costs which they knew were coming. He asked us to use up our stocks. That was not quite fair. If we use up the stocks, we should apply the business principle of charging for them at the replacement value. If we do not do so, when we come to buy we have to pay 20 per cent. or 30 per cent. extra because of what we have already sold.

We are therefore eating into capital, Industry is running short of capital, for a number of reasons, and cannot afford to do so. The people who use lots of stuff cannot afford to go on using it up and not charging for it at replacement value. It is therefore unfair to ask it of them. I think it was doubly unfair when the Ministry of Supply took immediate advantage of the replacement value principle. I would remind them that the Chancellor of the Exchequer said that those who did any profiteering would find him coming down on them very hard. I wonder how hard the Chancellor has hit the Minister of Supply. [An HON. MEMBER: "He is not here today."] I told the Minister of Supply that I was going to "go for him" and I gave him an opportunity to be here. He said he would not be able to be present. The Ministry may be perfectly justified, but what is sauce for the goose is sauce for the gander. I do not see why business men who have to safeguard their capital should be at a disadvantage against the Ministry of Supply who are trying to make up losses which they have previously suffered.

Photo of Mr Herbert Hughes Mr Herbert Hughes , Wolverhampton West

The hon. Gentleman is making a very interesting speech. He has made a point that industry is running short of capital. If that is so, how is it that the Austin Motor Company announces, in "The Times" this morning, a 50 per cent. capital bonus? It states that £582,000 will be capitalised. According to "The Times" financial report the arrangement will still leave the company with adequate reserves.

Photo of Mr Peter Bennett Mr Peter Bennett , Birmingham, Edgbaston

They are not giving a money bonus. All they are saying is that instead of putting "reserves" against the figure on the balance sheet they will in future call it "capital." It is fixed capital instead of floating capital. The only point is that in future years it cannot be used for any other purpose. No money passes; it is purely a figure transaction and a statement on the balance sheet. There is no difference whatever. Nobody is getting any money, because the money has already been spent. Nothing else can be done with it. It has been spent on plant and machinery. They might as well call it "fixed capital" as call it "reserves," because it has become capital.

There is something else that "The Times" said this morning. In a leading article it referred to: the provocative and uncalled for increase of the Profits Tax on distributed profits … and the threat to restrain dividends by legislation. I thought that was very ungenerous of the Chancellor of the Exchequer. He spoke as though there were a lot of criminals about and he was going to get after them. He did not give the House any indication that the freezing of dividends to which he referred was a voluntary act. I am certain that nobody in the House knew that industry volunteered to do that in 1948. Hon. Members may think that industry did it after being told that they would be taken out and shot if they did not. What really happened was quite simple. I know what happened. I was one of those who received a letter from the Chancellor of the Exchequer in the spring of 1948 asking us, in view of the difficult situation that had to be met, to keep prices down so that we could hold them and peg the position. The three organisations—the F.B.I., the Association of Chambers of Commerce and the National Union of Manufacturers met together to discuss what should be done.

We decided that it was practically impossible to get wholesale reductions in prices. I had the idea that we might offer to peg dividends. In due course, as I made the suggestion, I was given the job of getting agreement. I got agreement from the various organisations and, as a result, more than 90 per cent. of the industries of the country agreed to freeze their dividends, and they did so. In 1949 the Chancellor said: "I want you to do the same again," but we could not get exactly the same agreement. Many of the organisations said that they were going to do it but they were not going to say so. Others said: "We are not going to agree a second year and then again a third year, and so on for keeps." We got an agreement that restraint should be exercised.

What is the result? The facts are given in the paper this morning. It is that 89 per cent. of the dividends declared are exactly the same as they were last year. The total amount distributed is exactly the same as last year. In those circumstances, why did the Chancellor think it necessary to threaten us? It was ungenerous of him. Then he came out with the increased tax on distributed profits from 25 to 30 per cent. because, he said, and I am quoting him, the average profit earner … will tend, on the whole, to benefit by the change, especially in the case of exporters."—[OFFICILAL REPORT. 27th September, 1949; Vol. 468, c. 26.] He said it was "rough justice." I deny that there is any justice in it at all. The President of the Board of Trade has just said that there is only a small quantity involved in the switch, about which he has been talking. The majority of people affected are going to find some difficulty. They cannot benefit from increased exports because there is only a small switch. They are people who are bound to suffer. Exporters are not finding overseas business cheap but very costly. Goods which have been sold in the dollar market have practically brought no profit, although they might have brought in dollars.

One of the earliest lessons which I learnt in business was that if one does an export trade it has to be done on a cheaper basis, and one has to make up the difference on the home market. I discussed this question with some of my friends last night. Some of them said they would be better pleased if the Chancellor only knew what a difficult job it was and would let them off the export market.

My organisation is chasing dollars wherever it can, but if the Chancellor said to us: "You have done your share, let somebody else now take your job over," we should be very glad. We are getting very little out of it, in spite of the terrific effort we are making, but it is part of the game, and as such we are glad to do it. Let it not be thought that the people who export are in clover. They are not; they are making up the difference out of the home market. The trouble is that if they are to keep on selling at cut prices in the overseas market they will not be able fully to recoup themselves at home. It is no good the Government saying: "We shall prevent you from selling anything at home in order to sell abroad." We cannot do it unless prices overseas go up.

I can assure the Chancellor that some of his friends—and his best friends—were very angry with him last night, and it was all we could do to prevent some of them who are serving on committees, from throwing in their hands. They said: "We have people going to Canada and America making arrangements, and now the Chancellor has done this." It is a case of "Incentives? Oh, no, you are not going to have any. We shall tax you in advance for fear that you make anything out of it." To ask a man to take off his coat and do something extra and then to slap him in the face and tell him that you have a horsewhip at home is not clever.

5.15 p.m.

Photo of Mr Hervey Rhodes Mr Hervey Rhodes , Ashton-under-Lyne

I preface the few remarks I have to make by saying that many of us, in various activities throughout our lives in and for this country, would shirk nothing, whatever it meant, to see this country through probably its biggest economic difficulty since it began to trade.

I agree with the hon. Member for Edgbaston (Sir P. Bennett) that the American market is an exceedingly difficult one, and the Canadian market is particularly so. It appears to me that we shall fail unless we take heed of the advice about manufacturers getting together. The sporadic efforts of small manufacturers going singly to America will not give us the trade we desire. The hon. Member for Edgbaston mentioned profits and spoke in a way indicative of quite a lot of the comments which have been made by chambers of commerce throughout the country and also throughout the Empire for many years past. There is very little difference in substance between what has been said before by other people and what he has just said. I have heard it throughout the Africas and also on the way to Japan, where I was two years ago. Such people are always talking about another tax on profits being iniquitous.

I am just as tired of hearing these moans about taxation from the other side as I sometimes am of the moans about profits from this side. The fact is that some profits have been immoral in this country during the last few years. I say that deliberately because anybody who has had any experience of certain industries and firms during the war has seen for himself what I mean. Because of the present rate of taxation, people have not been able to keep up apartments at the Grosvenor House and the Dorchester or to buy the biggest houses in certain districts and fill their garages with motor cars if the profits have not been immoral. Roughly speaking, this side of the House is supported by organised labour and the other side is supported by businessmen, shopkeepers, the senior middle class and the rest. I will tell the Opposition in a minute how they can win the General Election. I will give them a tip, but if they are prepared to adopt it I shall be very much surprised and so will the country. Since we came into power there has always been a restraint on the people who support us but, being free, the Opposition have been able to look after the interests of their supporters, and they have jolly well seen to it that they have done so.

Photo of Mr Hervey Rhodes Mr Hervey Rhodes , Ashton-under-Lyne

Quite right. I am not complaining at all. The Conservatives should influence their supporters, who are the manufacturers, the employers of labour and the users of capital, really to ration themselves in what they take out of the national income. They should copy the example of one of the greatest manufacturers of all times, Zeiss of Germany. Even when he became managing director of the vast concern which caused us so much trouble at the outbreak of the 1914–18 war when we had only one type of optical glass, all he took out of the business was six times the rate of his lowest paid worker. That was why for years and years Zeiss's impetus made itself felt throughout the length and breadth of the Continent.

What I am asking is that there should be a limitation in the drawings of people in charge of businesses, in senior salaried positions and in senior salaried positions in the Government. I am serious about this because I am doing it myself. I ration myself on the basis of my lowest paid worker, and I consider that I am entitled to say that if I am doing it. The confidence of the worker who knows that his executives and employers are on that basis is something worth having. Anybody who likes to see it can come round to my place and have a look. It is only a small factory, but I should welcome anyone.

Before the Recess we planned an extension. We did not take contractors' prices but decided to do it by direct labour. In our district we are proud of this accomplishment. We had to go down eight feet for the foundations. The men said, "All right, what do you want?" We said, "Brickwork complete by 14th July and the steelwork finished by the 21st." The men replied, "All right." On the night of the 13th July the red flag was flying from the peak of the brickwork, as a compliment to the party, I suppose. The fact that the men on the job knew where the bosses stood meant that the impetus we could create was two and three times what an ordinary builder would have been able to generate. Thirteen weeks after the job began the building was occupied. We must get on this basis before this country can come through its troubles.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

Perhaps the hon. Member would like to tell us who owns the works and how many shares he has in it.

Photo of Mr Hervey Rhodes Mr Hervey Rhodes , Ashton-under-Lyne

I own these works and I have not paid one penny dividend since I began. I am not boasting about it. I am very humble about it. I feel that the events of the world are far too serious for private or political prejudice of any sort. We shall have to come by either taxation or voluntary effort to a limitation of what we draw as salaried people, executives or owners of businesses or we shall never get the confidence of the workers. I am certain that that will have to come by bringing the workers into what has been secret before—how the profits are made and how they are allocated.

I now come to the question of machines. During the last few years we have been spending millions in hard currency in America, Switzerland and France on machines which, if we had set out our stall three or four years ago, we ought to have been manufacturing here today. Millions of pounds worth of machinery is on order in Switzerland and America which could have been made here if the tradition of the heritage and the ability of the people in the engineering industry, in design and in commerce had been utilised to its best effect. However, that was not done, and the result is that in two lines of machines in my own industry the Swiss, in particular, are a long way in front of us. The efforts we have made up to now to overtake them in those lines have been puny.

We have come to the stage when we shall definitely have to say how long we can allow machines to enter this country from hard currency areas. I ask the President of the Board of Trade and the Chancellor of the Exchequer to take stock of the orders we have now in America and Switzerland, give a reasonable time for those orders to be delivered, and then close the book. At the same time we must insist on the manufacturers of machines in this country being able to produce machines which are as good or better and in quick time.

The few remarks which I have made, especially with regard to profits and taxation, salaries, and drawings from businesses, have not been made in a small minded party political way. I wish the House to accept that from me, because I firmly believe that unless an effort of that description is made we shall fail entirely in that to which we have put our hand during the last fortnight.

5.30 p.m.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

It was right and proper, and indeed the duty, of the Chancellor of the Exchequer in his speech yesterday to call the attention of the House, and through the House the country, to the very serious economic position in which we find ourselves today. I only wish that in his recent Sunday-night broadcast he had used language equally serious in describing our present dangerous position. It is only right that speeches should be made in this House, for this is the forum of the nation. But I am not at all certain about that today. There are millions more people who listen to broadcasts and who are more affected by what they hear from that source than by what they read next morning in the newspapers.

It seemed to many who spoke to me that the terms in which the Chancellor explained what had happened were almost as if he were announcing a victory instead of having to admit one of the most serious trade and economic defeats that the country has ever known. In his speech yesterday, however, the Chancellor certainly corrected that impression. Very rightly, he said that the future will show whether this is a futile gesture leading to mass unemployment and a lowering of our standard of living or whether it is the opening of a new era.

I listened with very great care to what both the Chancellor and the President of the Board of Trade had to say about what steps are now to be taken in developing the road towards that new life, but as far as I could gather there was nothing said which was new since the Debate of last July. There was no new suggestion, no new policy and no new drive. I noticed also another aspect of the Chancellor's speech. In defending the change of attitude between his determination in July not to devalue the pound and his determination before he went to America to devalue it, there was a sort of underlying suggestion that there had been some great change which had brought about the necessity for his altered attitude. Really, can that be seriously argued? This is a problem which has been with us since even before the war—

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

—but which reached its serious dimensions in the last two or three years before the war.

Photo of Mr Richard Acland Mr Richard Acland , Gravesend

Yes, before the war.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

That is what I am saying. All that really happened in July, and between July and the change of mind which the Chancellor admitted, was a slight quickening of the pace.

What, then, is the position? The truth of the matter is that we had been, certainly in 1938, and for some years before then, importing and consuming more than we could pay for with our exports. Fortunately, however, until the war, investment interest coming in on the past efforts of our predecessors and services which we were rendering, were bringing in enough to enable us to pay our way. Then came the war, and we sold those investments. As I have said before in this House, we did more than any other country, as we did in the 1914–18 war, for the defence of liberty and democracy.

Not only did we sacrifice our young men and women but, as far as economics were concerned, we bled ourselves nearly white on behalf of the principles in which we believed. In fact, before President Roosevelt come forward with that tremendously generous aid of Lend-Lease, we had readily sold the bulk of our investments. We knew, therefore, that when the war was over we should be face to face with a difficulty which had increased since 1938. We knew also that when Lend-Lease came to an end the problem would come right up against us and we should have to devise some way of meeting that situation. Were we to go on importing, as before, more than we could pay for, or was there some way of increasing our exports so as to meet the increased demand for imports?

That problem was one with which many of us were concerned in the old House before the end of the war. We were continually asking the Coalition Government of the day what they proposed to do when we came face to face with this new position, with Lend-Lease ending, an increased population, a general desire for an improved standard of living, costs having gone up, the return from a war footing to a peacetime footing, and with the length of time which must elapse before all our young people would be back at work. What were the proposals? We had the White Paper of 1944, which set out a number of the problems but never put forward what were the concrete measures required to settle those problems.

Then the present Government came into power. I repeat again the attitude that we took at that time to the Government. On the occasion of our first meeting, I said that I wished His Majesty's Government well. That was because I wished them to tackle these problems with which the nation was confronted and, for the sake of the nation, I hoped that they would conquer them and that that task would be their main concern. Well, we have come through crisis after crisis. We had the crisis of 1946, when the Government issued their first White Paper. Let me again remind the House of what they then said. They said that all would be well, that we could pay our way and pay for the increased exports we would require on the then prices, if we could increase our exports in volume to 175 per cent. of the 1938 level. That White Paper is within the recollection of all of us. [Interruption.] Certainly it is. Does the hon. Member opposite doubt it? So often he doubts his own side.

That calculation was made by the experts advising the Government. Running through that White Paper was the obvious suggestion that that figure of exports would be reached within a reasonable time—certainly that it could be reached without our having to rely upon any outside help, which was not then forthcoming. That figure was not reached. Before the end of the year we were in tremendous difficulties. We went to America and got their first aid of £1,000 million and £250 million from Canada. Then, again, after a state of panic in the Government, there came a state of complacency, to which voice was given by the then Chancellor of the Exchequer, whose words I need not again quote. We were told that now the position was all right, that we would get through all our troubles and that by 1951 we should be paying our way and be in a position to repay the loan.

By July, 1947, the position had again changed and the Government came to the House to explain it. In that month the Prime Minister made a speech which was repeated almost word for word by the Chancellor of the Exchequer two years later in July, 1949. We were told that we were importing too much, that we could not pay for it all and that, therefore, there would have to be cuts, both immediate and deep; but it was admitted, of course, that a policy of restriction and cuts would in the long run only land us in greater difficulties. Restriction can never be of lasting assistance. It is only a temporary expedient in overcoming, perhaps, some main difficulty or another. It is exactly the same as if one has a broken leg and puts it for the time being in plaster. If the plaster is left on, the leg can never be used. What is wanted instead is a policy of expansion.

We then asked the Government what was their policy in addition to cutting imports, and when we told them that obviously they were spending too much, they admitted it. It was then said that serious cuts would be made in expenditure, especially capital expenditure. I frankly confess that I do not know the extent of those cuts, but whatever they were they were certainly not sufficiently serious to make any real change. Next, we carried on until Marshall Aid came to our assistance, when we were told: "This will certainly save us. We are all right now. We can go on trading and by 1952, when that aid will stop, we shall be perfectly all right." Before the first year of Marshall Aid was out, we were once again summoned to the House to hear a statement by the Chancellor of the Exchequer about the seriousness of the position.

Look at our position now. To do so, one has only to refer to the figures. As I have said, this position had started long before the war and since then has increased in difficulty. In 1938 the amount of deficit, even allowing for services rendered and what was received from investments, was £70 million. But by 1946 it had risen to £380 million. I well remember what the Chancellor had to say in 1947, when the deficit mounted to £630 million. There was a slight closing of the gap in 1948, but the latest figures, given by the Chancellor yesterday, referring to the second quarter of this year, show that once again we have fallen into the difficulties of 1947 and that the deficit is well over £600 million.

Now we are faced with a new position, and the pound has had to be devalued. I believe that in the circumstances now confronting us, the devaluation of the pound was inevitable; but I consider that steps ought to have been taken, and a better policy devised and followed from 1945 onwards, so that the pound might still be recognised as the medium of exchange throughout the world. I do not suppose anyone doubts that if that gap had not reached the extent which it has, the pound need not have been devalued to the humiliating position of $2.80. If it had to be devalued, it had to be devalued to a point where it was on a firm foundation, as near as human beings could calculate, and I do not quarrel with that figure. I was hoping it would be above that, but the Government have all the information at their disposal and it is right that they should put it at the figure where, as far as one can judge, there will be no drop, but rather—what we all hope for—that there will be a rallying to the pound and that it will gradually rise again. That is all I have to say with regard to the extent of the devaluation.

Let us consider our position. We are more vulnerable than any other country. Our very policy in the past has increased our vulnerability in modern times. [HON. MEMBERS: "Hear, hear."] I do not know whether that "hear, hear" was meant to be approval or disapproval; but no other country in the world has accomplished what we have been able to accomplish, with the exception, of course, of the new countries. Certainly we have over five times the amount of population; it has increased in 150 years from roughly 9 million to more than 50 million; we have a standard of living that, taken through and through, is better than any other and a welfare system and system of education which might well be envied and copied by other countries, with the possible exception of one or two countries which have learned from us, especially our daughter nations.

We should remember that in that time we have populated Australia, New Zealand, South Africa, Canada and in the main the United States of America—[An HON. MEMBER: "No."] Oh yes, the emigration from here during the 19th century was greater than that from almost any other country and it had a greater influence than that of any other nation on their affairs. They still speak the language which the hon. Member opposite and I speak. It is a great and honourable record. One wonders how it is that we have got that high record as compared with other countries who were just as well placed as we were. The answer was partly supplied by the right hon. Member for Woodford (Mr. Churchill) today. I was very glad indeed to witness his emotion and, listening to the moving language he used in paying his tribute to Liberalism once again—[An HON. MEMBER: "A young man."] He is still a young man in many respects and I still wonder why it was that, holding those views strongly and repeating today his faith in Free Trade, he chose this time to desert Liberalism and to go and lead its hereditary opponents, those who were its only opponents until the Socialist Party came and against whom we had to fight to get the very liberties we are now having to fight the other side in order to retain.

That record was built up by the fact that we were ready to trade with any country, buy from anybody and sell to anybody. So it was that sterling became the recognised medium of exchange for all the world and it was that medium of exchange which was understood in pretty nearly every charter company. No matter under what flag a ship was sailing, charter terms were always in sterling. What has been happening during these years is that, owing to our tremendous consumption over and above what we could pay for, we ourselves and other countries not within the dollar area formed one area, and the world has been divided into a dollar area and a non-dollar area. If we are ever again to build up the economic strength of this country and maintain and increase the benefits the people are rightly obtaining in regard to social betterment, and increase the standard of living, it can only be done by opening the channels of multilateral trade. That has been admitted time and again in recent speeches by both the Chancellor of the Exchequer and the President of the Board of Trade. But it would be impossible to work for multilateral trade throughout the world unless the pound were accepted in every country as a fair measure of exchange in which they could have confidence and had convertibility with their own currency.

In the circumstances that have come about, it was right, if we are to begin trading once again with all the world, that we should get the pound into a position where it would be accepted at that value without any question. So far, so good; but what are the disadvantages? One has to admit at once that it is never a good thing to depreciate one's own currency. It has always been a bad thing and it ought never to be resorted to until events have driven one, until one cannot do otherwise. The first thing that has happened is that real wages have been cut by one stroke of the pen. Not merely bread, but a great many other commodities are going to cost more. In spite of what was done during the war by the farming community, we are only now growing enough food for two out of every five and we still have to buy food for three out of every five. That is a high proportion, but there are a number of other matters.

Raw materials essential for our work and for employment are imported 100 per cent. It is true that we have coal, but we have no petrol worth talking of. Nearly all the metals like copper, lead and so on have to be imported. I was glad to hear the President of the Board of Trade say today that there had been a switch-over from the dollar countries to the sterling area in exports of timber, but nevertheless I take it that the figures of our imports of timber are somewhere about the same as they were before the war. I remember that in both soft and hard timber, over 90 per cent. had to be imported and all the pulp necessary for our paper industry was imported. Wherever that is coming from, prices will go up and, what is more, they will go up immediately, and should go up. The hon. Member for Edgbaston (Sir P. Bennett) was quite right in saying that if a man did not make provision for replacement he would very quickly find himself in the bankruptcy court and he has to put up his price to such an extent that he can be quite sure of having the wherewithal to purchase new raw materials at the now enhanced prices.

We must increase our exports. We have not yet reached 175 per cent., which was the volume figure for 1946. The most we have reached is 154 per cent. for one month. We still have that gap to close, but there is the extra gap now being created by the greater volume of goods which will now have to be sent to the dollar area to put us in the same position as we were in before devaluation. If that is to be done—I am still merely referring to the effect on the home position—there will be fewer goods at home. There will be inevitably demands for increased prices which it will be almost impossible to hold. If such demands are justified, they cannot be held. Legislation will not hold them in circumstances of that kind. One has to recognise that these are the immediate effects.

The effect abroad, in America, is twofold. We have now, so far as we and all others who have followed us are concerned, increased the value of the gold in Fort Knox by at least one-third. What is more, it will be more difficult for us to pay off the loans we have had from America when the time comes for us to repay them. That is the immediate position. That is the situation which now confronts us—which the Chancellor calls the beginning of the new era. Are we, as he has said, engaged on a futile gesture or are we now to face up to the warning which he very rightly gave us that if we fail now, the failure will be far more serious than if this devaluation had not occurred? If each one of us is to try selfishly to overcome the more difficult position in which we find ourselves by increasing our incomes, we shall not, as the Chancellor rightly warned us, be able to buy the raw materials and possibly part of the food which we have been getting. If we cannot buy the raw materials, it would at once lead to heavy unemployment. One section of unemployment creates another—it is like a snowball, it grows—and thereby we shall be face to face with disaster.

While on that aspect of the matter, I would say that in my view no reasonable-minded man would desire to see anybody out of work. I hope that that is the view of everybody in this House without exception. I only wish that on this great national occasion there had been less of the usual cut and thrust of politics across the Floor of the House. In the same way I am perfectly sure that no one desires in any way to cut down the social services. What we are all aiming at is to improve our standard of living and especially to help the weak wherever they may be, and especially all the lower income groups, to whatever class they belong.

That being the position, we are entitled to ask what the Government intend to do in order to face this new era. The only proposals which the Chancellor or the President of the Board of Trade put forward were those of buying less from the dollar countries and getting more from the sterling area. Why did that not occur to them long ago? They have been in office four years. This was the problem which was facing us throughout the war—what was to happen when the war was over. If the goods were available in those other areas, and no one has said they were not—[Interruption.] I apologise, if the Prime Minister says it has been said. I always accept what he says.

Photo of Mr Aneurin Bevan Mr Aneurin Bevan , Ebbw Vale

To take as an example timber for the building industry, we had to take soft wood from Canada and America for some time because the pre-war source of timber, which was the Soviet Union, was not available to us.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

I understood from what the President of the Board of Trade was saying that hard timber imports from Africa had now increased enormously.

Photo of Mr Aneurin Bevan Mr Aneurin Bevan , Ebbw Vale

I referred to soft timber.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

We used to get soft timber mainly from the Baltic, especially from Sweden. Norway was another source of supply.

We now have to increase the balance of our exports to the United States. Exhortations to that effect have been made time and time again. We have yet to learn what the effect of exhortations has been. If that is to be all, then I cannot see much happening in this great new era. I agree that the goods will now be far cheaper to the United States than before, but will that really lead to the opening of trade necessary to achieve this enormous expansion which is required to make good not only our present deficit, but that deficit plus the extra amount which we have to send there because of the devaluation of the pound?

Again, wherein will lie the encouragement and the incentives to those who send the goods? In July, I accused the Government of not giving those incentives through making their bilateral agreements with countries such as Czechoslovakia as a result of which our manufacturers can make easy money by turning out goods nothing like so good as they would have to send to America to face the competitive market there. In return we in this country have to pay a higher price to Czechoslovakia for the goods we get from there. That is encouraging goods into the sterling area. I want to know if there is now to be encouragement the other way to induce our people to increase their exports to America.

Even if that is done, it will not, so far as I can see, solve the whole of our problem. It is obvious from what the Chancellor of the Exchequer has said both on the present occasion and in 1947, and from what the Prime Minister said in July, 1947, that it will not solve the problem when we are faced by this enormous gap which is caused by the fact that we are consuming more than we can pay for. Therefore, something has to be cut. Whenever we mention that, right hon. and hon. Gentlemen opposite—the President of the Board of Trade did so this afternoon—throw out the challenge "What would you cut?" They are the Government. The most that we can do is to make suggestions. [HON. MEMBERS: "Make them."] Not since this Parliament opened have I seen hon. Members so sensitive as they are now. They are jumpy and cannot contain themselves. The most that one can do is, as I say, to make suggestions, because the Government have available not only amazingly able civil servants to help them with regard to their figures, but also the figures which are not available to us or are not available in the same way. To take as an example the Ministry of Health, we have not available the civil servants who are available to the Minister. We have to do the best we can, very often alone, without anyone to help us.

Photo of Mr Aneurin Bevan Mr Aneurin Bevan , Ebbw Vale

The right hon. and learned Gentleman has been in the House for a good many years, as I have. I do not believe that he can recollect any other Administration which issued the volume of statistical material which we put out month by month. In fact, I remember Ministers in the old days standing at this Box and being compelled to quote from newspapers because they themselves had not the figures.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

That is not the point, and the right hon. Gentleman knows it. Of course, what the right hon. Gentleman has said is true. He and I used to ask for that information, and I am glad that this Government is giving it; but even so, it is tiny and paltry compared with what is available to the Government, so we cannot enter into details.

That there must be a substantial cut I should have thought was quite obvious. That has been admitted by the Chancellor of the Exchequer. In his first Budget he set out to try to conquer inflation and to do so he was going to obtain a large surplus over and above his expenditure. His policy was quite right. He referred to it again in his speech yesterday. I only wish that the steps necessary to conquer the inflationary pressure had been taken before the pound was devalued. It will be much more difficult now. Whereas he had got the revenue for which he budgeted, what has really happened is that the surplus has gone, because he has not been strong enough to stand up against the spending Departments. The result is that now he has not that surplus which he wanted in order to conquer the inflationary pressure.

What does taxation amount to in this country? Between the Government and public authorities, £4,000 million—eight shillings in every pound that is earned in production is taken under the control of the Government or public authorities and spent under the control of the Government or public authorities. Put in another way, there is already 40 per cent. State control over all earnings. It is a higher rate of taxation than occurs in any other country in the world. I do not know what happens behind the Iron Curtain, but it is so heavy that now we have reached the point at which the law of diminishing returns operates. Any attempt to increase the ratio of taxes will result in less revenue coming in.

That being so, if already the Budget is unbalanced, if already expenditure is greater than income, there will have to be cuts in expenditure. The cuts must be such that the Budget will balance; that goes without saying. Secondly, according to the Chancellor, there must be a surplus in order to conquer in flationary pressure. That is his policy, and he is right. There must be a further cut to reduce taxation to give effect to that very initiative and enterprise to which Government spokesmen refer, and upon which the strength of this country was built up, and which enabled it to fight a 10-year world war. Those are the general principles.

Where are the cuts to be made? May I remind the Government of a promise made in July, 1947, of cuts in capital expenditure? Again, one can only lay down a sort of general guide. There ought to be cuts in the capital expenditure of the Government, public authorities and private persons. The guiding principle, I should have thought, would be that expenditure on capital matters will not be allowed unless it is absolutely and truly necessary. Will it produce goods within a measurable and reasonable time which will be available either for export or use within the country?

Those ought to be the guiding principles. I think they could be used, as they have been used in the past, with regard to the capital expenditure of the Government. But what obviously has happened is that they have been allowed to run riot. Nobody wants to cut down the welfare services, or National Insurance, or anything of that kind; but there is one form of expenditure which the Government themselves, as I understood the Chancellor to say yesterday, are not proposing to allow—whatever happens with regard to the cost of living—to exceed the £465 million which it has already reached; and that is the food subsidies.

There was a time when the Chancellor said that they would not be allowed to exceed £400 million, but they have now got to £465 million. Will not the Government realise that there we are subsidising incomes which do not require subsidising? There are hon. Members in this House who are getting the benefit of that and do not want it. It really is a form of subsidising incomes out of taxation. The smaller income groups will already be hit. Food will cost more—bread, for example, has gone up from 4½d. to 5½d. or 6d. What is to happen to old age pensioners and what will happen to families? I would prefer an increase in grants to the lower income groups. I would prefer an increase in the family allowances so that the families are provided for and that we should see whether we cannot cut down the food subsidies which are a sort of dole for every one of us, whether we want it or not. Those are matters about which the Government themselves can tell us what they are prepared to do.

What incentive is there for increased production? Will the Government encourage better terms, better money for more and better work? One does not want to stop anybody at this time producing as much as he possibly can. Therefore, I suggest that all restrictive practices—I heard the President of the Board of Trade referring to "rings"—ought to be stopped. I go further: bring in legislation and make all that kind of thing in this national crisis a criminal offence. I am sure that everyone in the House will agree with that. Stopping all restrictive practices would make the country realise that the more we produce, the sooner we shall get back to the position in which we all desire to be, of not one of us owing anything to any foreign country. I would also suggest that all quotas should be removed. It is very much better to let people compete for what they want, even if prices go up, rather than that they should hoard what quotas they have.

At the best, these can only be suggestions to the Government. The guidance must come from the Government and I have waited in vain for that guidance. We have had a patchwork policy from 1945 until now. Now we are told that here is the beginning of a new era which will put us once again on our feet; here is the beginning of a new era in which we shall have to fight hard in competition with others; an era which will restore our economic position and the strength of the pound. It is for the Government to tell us what is their policy which will help us and guide us. So far, not a word of help has come from them.

6.15 p.m.

Photo of Sir Arthur Irvine Sir Arthur Irvine , Liverpool Edge Hill

The Leader of the Liberal Party covered a great deal of ground in his speech. He mentioned that we on this side of the House were showing a certain sensitivity. Who would not be sensitive when confronted by political opponents who never offer a practical alternative policy? The right hon. and learned Gentleman had a long time in which he could have put forward a practical, constructive policy. I for one, and many others here, awaited it. But it did not come, although it is only fair to say that at the very end there began to be the suggestion of a constructive proposal.

The Leader of the Liberal Party resorted to what I should have thought was the untenable point that lack of information on that side of the House made it impossible to determine what cuts in national expenditure could be recommended. I should have thought that that was a point most difficult to defend. But at the end of his speech he made the comment that food subsidies were unselective and he stated, as is undoubtedly true, that many of us benefit from food subsidies who do not need to benefit. Surely, to follow up a comment of that kind, it is necessary to indicate what kind of selectivity could be introduced and to show how it can be decided who should receive the benefit of food subsidies and who should not.

Photo of Sir Arthur Irvine Sir Arthur Irvine , Liverpool Edge Hill

It was suggested that there might be an extension of family allowances but, of course, family allowances are just as non-discriminatory as food subsidies. It is unfortunately true that no effective measure can be suggested for avoiding the unnecessary waste, if hon. Members care to put it in that way, in people receiving the benefit of food subsidies who do not need them. No method can be devised to avoid that difficulty which does not involve a means test—an inquiry into the personal position of the recipients of those food subsidies.

I make that comment on what I must regard as the only constructive proposal which was put forward. I remember some time ago hearing a proposition made by the right hon. Gentleman the Member for Scottish Universities (Sir J. Anderson) which in my view was open to the same objection. He suggested that there would have to be some compensatory adjustments—that was his phrase—in the lower levels of income if food subsidies were reduced. But there was never any suggestion as to what those compensatory adjustments should be. There was no detailed proposal to follow the generalisation.

I am conscious of the fact that hon. Gentlemen opposite—members of both the Conservative and the Liberal Parties—become impatient with hon. Members on this side of the House when we complain that they do not make alternative constructive proposals. It is a complaint which we make constantly, and it arouses irritation but, believe me, it is a heartfelt complaint. As the General Election comes ever nearer, the more likely it is that it will be a contest between parties one of which has at least a series of concrete constructive proposals to make while the other has not sufficiently formulated its proposals.

The main criticism which the Leader of the Liberal Party made in the first part of his speech against my right hon. and learned Friend the Chancellor of the Exchequer and the Government generally was that at the moment of the announcement of devaluation, when the Chancellor broadcast, sufficient emphasis was not given to the gravity of the situation. The Leader of the Liberal Party seemed to agree that now, after the statement by the Chancellor yesterday, any error of that kind has been largely overcome. He only regretted that it was the less grave statement, so to speak, which may have received the wider audience.

Among the many claims that we make for this Government is one which we advance with all the force at our command; namely, that there never has been a Government which has been more successful in bringing home to the minds of ordinary people the true facts about our economic situation. There never has been a Government or a Chancellor of the Exchequer who has more repeatedly and constantly brought home to the mass of the people the necessity for manufacturing more, exporting more, and all the rest. Of course, they have succeeded in that, although it is a most complicated situation to get over to the people. The proof that they have succeeded is shown by the restraint of the trade union movement. That is the outstanding proof of the success of this Government in getting across to the people the true facts about our economic position. It is a success which we claim that no other Government could have had. Having explained the whole position to the mass of the people, we leave it to them to determine whether by their productive efforts and their restraint in making claims they will achieve a solution of the problem. We do not claim as a Government to have the cure-all of the situation. But we put the facts to the people. We say, "If you fail in the productive effort, then a very great crisis is upon us. The responsibility is yours."

Pausing there for a moment, I would point out that that is true democracy and it is the answer to any suggestion by our opponents that we are anti-democratic or authoritarian in our approach to this matter. What do we say to the workers? We say, "We do not offer to you as an incentive to greater production the spur of the fear of unemployment. We do not offer to you or to anyone as a spur to greater production the inequitable incentives of a less well controlled economy." The incentive which we offer—and we must make it clearer than ever from now on—is that we say, "If you do not make the productive effort which is necessary, if you do not seize upon the realities of the situation and produce what we need, then will follow, as sure as night follows day, mass unemployment, and your social services will be lost. It is up to you."

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

Might I ask one question? How does the hon. Gentleman distinguish between an incentive and a threat?

Photo of Sir Arthur Irvine Sir Arthur Irvine , Liverpool Edge Hill

I really see no point in that inquiry. As a matter of interpretation—I may be wrong—I conceive that a threat might be an incentive. But there is no threat here. The point is that to say that we have no incentive to offer is profoundly untrue. The incentive we offer is that if the working classes make the effort of production which is required and enable us to produce sufficiently to solve the dollar problem, then they will continue to have the advantage of full employment and to enjoy the present level of social services. That is a fair proposition. We are trusting democracy in this country to make the effort because we have told it what is involved. We go so far as to say that if democracy falls short of the necessary effort, then democracy itself may be endangered. Democracy, if it does not achieve the necessary productive effort, will be confronted by anti-social compulsions of one kind or another, so that its very existence may be threatened.

It is very significant that the hon. and learned Member for North Hammersmith (Mr. Pritt), like hon. Gentlemen opposite, distrusts the capacity of our democracy to understand the realities of the situation and to make the productive effort necessary to overcome it. Very significantly in his speech yesterday—one of those querulous, caustic point-by-point speeches which he likes to deliver—he indicated clearly that he thought we in the Labour Party were hopelessly wrong in our belief that we could persuade the working class of this country that their chance had come, by their own productive efforts, to make full employment a continuing feature of our economic life, and to enable our social services to continue at their present level, and later improve.

With the forbearance of the House, I wish to add one point to what I have said, and that is the necessity for achieving, as I think we can, equality of sacrifice and hardship in the undoubted difficulties which confront us. Hon. Members know that for several days past profits have been made by certain speculators and that exporters of goods to the dollar area who do not increase the volume of their exports and who do not lower their prices are going to receive a bonus. There will be no increase in the rate of tax on that bonus unless it is distributed. The exporters receive a bonus and they benefit from the whole transaction.

It must be appreciated how the lowest-paid grades among the workers feel about circumstances and developments of that kind. That is where our Labour Government is under a duty and an obligation to see that the closest attention is paid to the need, if possible, of improving the wages of the lowest-paid grades of workers. I understand that conversations are now going on between the Chancellor and others and the trade unions on this question of wages. It is, therefore, a particularly delicate question, but I think no harm can be done by my mentioning in this House one fact which is of great importance in considering this problem as a whole.

The fact that I choose to mention is that the recent report of the conciliation board in the dispute which has arisen regarding railwaymen's pay reveals that 55 per cent.—more than half—of the conciliation staff of the railways are in receipt of something less than £5 per week as a basic rate. The conciliation staff of the railways comprises all the staff now in the employ of the Railway Executive who are affected by the wages and terms of service agreements existing between the main line companies, before nationalisation, and the unions. It is a very startling and important fact that the rate of pay of over half the railwaymen in the country today is something less than £5 per week. It becomes more startling and more important at a time when, as I have indicated, small or large fortunes have been recently made and many exporters are receiving a bonus in one way or another owing to devaluation.

It is perfectly true that many among this 55 per cent. of the railwaymen are earning only a little less than £5 per week. It is also true, of course, that the average level of earnings of those 55 per cent. is well above £5, and that fact must be mentioned in order to get the picture clear. However, I am speaking of the basic rate, and it is that basic rate which is the matter of importance. We must not forget that the last general wage increase was in June, 1947, since when there has been an 11 points rise in the cost-of-living index. The latest adjustment between the differentials of the different grades below the minimum rate of 92s. 6d. was made in February, 1948, since when there has been an increase of six points in the cost-of-living index.

These are facts which, in my submission, a Labour Government cannot ignore. That grade of productive workers has a good claim for an increase, a claim which in the view of many of us here deserves attention and some concession. We are the first to recognise that in achieving such an increase—and we hope quite frankly it will be achieved—there ought to be, and, indeed, there must be a readiness among the higher-paid grades in the industries concerned to suffer a reduction—we hope a temporary reduction—in what are called the differentials and relativities. We claim that that necessity is much more likely to be understood and accepted by them from a Labour Government than from any other. On these grounds, and on many others which I could mention, I take the view that this Debate has certainly done nothing and revealed nothing which should shake one's confidence in His Majesty's Government.

6.31 p.m.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

The speech made by the Chancellor yesterday, several parts of which were cheered by Members of the Labour Party, was one of the most Tory speeches I have ever heard in this House. In no part of it was there any suggestion that the only solution for a crisis of capitalism was a Socialist policy leading to the elimination of capitalism and to the establishment of Socialism. In that speech and in his broadcast the right hon. and learned Gentleman tried to create the impression that only those goods bought in dollar countries would rise in price. That is not true; all prices will rise. The devaluation of the pound represents a cut in the standard of living of the people of this country just the same as if there were a general cut in wages.

We are told that devaluation in itself is not a solution. I should say not. The Chancellor said that if we all pull together and nobody takes advantage of his neighbour, everything will work out all right. We have heard that a few times before. On the morning after the Chancellor's broadcast speech we had what the Prime Minister in a model of understatement referred to as the "unpleasant scenes in Throgmorton Street." The street was blocked in a panic for profit. Had Throgmorton Street been filled by railwaymen in a demonstration for a living wage, an army of police would have been turned out against them. The sum of £150 million was made in one day, and then we are told that tin shares are up by 10s. Profits are higher at the present time than they have ever been, and, as a result of devaluation, they are now going to soar even higher. The workers of this country must now produce more and consume less in order to make greater profits not only for the British capitalists, but also for the American capitalists.

Can any Labour leader or trade union leader deny that allegation? We have to consider, in the light of that, the betrayal of the workers at Bridlington. The miners have demanded a new wages structure to uplift the whole conditions in the mining industry, yet the miners' delegation at Bridlington voted for keeping wages as they are. The railwaymen demand 10s. a week, the engineers demand £1 a week; but the delegates at Bridlington voted to keep wages as they are. We are opposed to the betrayal at Bridlington, and the Communist Party will support every demand by the workers to increase their wages and to place the burden of the crisis where it belongs.

It is interesting to compare the gentle tone of the Prime Minister in dealing with the gamblers at Throgmorton Street with the vicious hatred expressed towards the Communist Party and the workers. At the week-end he warned all and sundry that Communist mischief-makers would press for increases in wages. [HON. MEMBERS: "Hear, hear."] Someone says, "Hear, hear," but who are the first mischief-makers? They are the workers who demand increases in wages! The Communist Party can only participate in a demand for increases in wages if the workers first make the demand. If the workers do not make the demand, how can we support an increase in wages? When the attack is made on the Communists, it is an attack on the working class.

If representing the interests of the workers is mischief-making, then I plead guilty; I have been a mischief-maker for 45 years, and in the course of those 45 years I have had many associates, some of them now sitting in more or less comfort on the Government Front Bench. They have now become recognised by the "big shots" of America as useful cogs in the capitalist machine here in Western Europe. I can only say that their impudence in attacking the Communists for what they themselves claimed to believe is equalled only by the hypocrisy in their attitude towards the workers.

I am reminded of the fact that, at the weekend, the Minister of Health donned the mantle—a fairly ill-fitting mantle—of humility. When he donned the mantle of humility he said that he was unable to explain the difficulties; he said, "We are only ordinary working chaps beset by extraordinary difficulties." But I recall, from the other side of the House, that he told us of the advice Lloyd George gave him when he first came into the House, advice which he followed: "Always go for the big fellow, do not waste time on the little fellow," which meant the ordinary chap. The right hon. Gentleman's whole attitude when he was on the other side of the House bore out the fact that he had accepted that advice. Take the Foreign Secretary. I was in Leeds on Sunday night, and naturally there was recalled to my mind the conference in Leeds in 1917, in the middle of the war, for setting up workers' and soldiers' councils in Britain. The Foreign Secretary made the declaration, "I will gladly give my life for the revolution." I hope he tells that story to Vyshinsky.

Photo of Mr Aneurin Bevan Mr Aneurin Bevan , Ebbw Vale

I do not usually take umbrage at anything which the hon. Member says, but I would like him to give to the House the quotation from the speech in which I am alleged to have made the statement he has attributed to me.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

I should have to look it up. I never dreamed for a minute that the right hon. Gentleman would question it. I am certain that there are other Members in this House who were on that side of the House and who must recall him making that statement.

Photo of Mr Aneurin Bevan Mr Aneurin Bevan , Ebbw Vale

On a personal point. If I had sat silently here and allowed the statement to go unchallenged it would have been assumed that I made the statement. I think that is a most gauche thing to say. I never made that statement.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

I remember it as clearly as it is possible to remember anything. I remember him standing up there and making that statement. Notice was taken at the time that it was in keeping with the line he has followed—always going for the big chap, with no time for the little fellow, the ordinary chap. Somebody has just said that the Foreign Secretary did not make that statement. I was with the Foreign Secretary; I was sitting beside him and we were both of us on the Left-wing at that conference. I can remember a mass demonstration in Glasgow where the present Secretary of State for War, talking about the British imperialists, said "We will hit them so hard we will make their teeth rattle."

Where are now these mischief-makers? See where they have got themselves. When the Atlantic Pact was discussed the Leader of the Opposition could get up and say that the Atlantic Pact was the outcome of the policy he laid down at Fulton. Missouri. Was there any member of the Front Bench who could get up and challenge that? Was there anyone on the Front Bench who could question it? No; they all knew it was true, and everyone in this House knew it was true. At the time that speech was made at Fulton we said it was an offer to sell Britain and the British people to the American capitalist for war against Socialism in Europe, for the Leader of the Opposition has been notorious all his life as an enemy of Socialism.

Now the decision on devaluation bears out what we then said about the Fulton speech, and the Leader of the Opposition could quite well have got up today and said: "Devaluation is the logical outcome of what I said at Fulton, Missouri, in 1946." Attempts have been made to create the impression that this decision was taken by the Government of its own volition. Does anybody really believe that? Where did the demand for devaluation come from? From the Labour Party? From the Trades Union Congress? No; it came from America and was persisted in in America, and Mr. Snyder, a typical representative of big American capitalism, came over here to London and cracked the whip until the Cabinet yielded. That is true.

We are now being told that devaluation is an alternative to mass unemployment. That is a new discovery, because obviously, when the Chancellor spoke in this House in July and declared that this Government would not consider devaluation, he did not then know that devaluation was an alternative to mass unemployment. It could also be said, judging from the cheers which greeted him from the Labour Party Members when he made that statement, that not one of them understood that it was an alternative to mass unemployment. We are getting an amazing exhibition—front somersaults, back somersaults and double somersaults. We have a wonderful team of political acrobats. Outstanding amongst them is the hon. Member for East Coventry (Mr. Crossman)—behold the eighth wonder of the world, the caoutchouc man.

Every Socialist knows—or he did at one time—the cause of unemployment. It is caused by capitalist slumps. When there is a boom the capitalists go on producing and producing for profits, competing with one another, keeping down wages to cut prices in a market that is ever narrowing, until the period comes when the sellers' market changes into the buyers' market and the period of slump has arrived. A sellers' market is a market where demand is greater than the supply. A buyers' market is a market where the supply is greater than the demand. But what did the Chancellor tell us in July? That we were passing from a sellers' market to a buyers' market—to a market where the supply is greater than the demand. It is in such conditions that we are making all these propositions to increase our exports to America

There is nothing that we produce in this country that America does not already produce, and does not produce in such quantities that the American market cannot absorb. America is striving with greater intensity than even this country for exports. It is worth noting that in the second quarter of 1949 United States exports rose by £63 million above those in the first quarter, and the imports dropped by £42 million.

Photo of Mr Thomas Cook Mr Thomas Cook , Dundee

How much of that represents Marshall Aid?

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

We are concerned with the fact that America must have exports. Here is what the "Time" magazine said on 19th September: Almost every important commodity of our trade is produced better and cheaper in the United States than it is produced anywhere else. This means that if there were no tariffs American buyers would be unlikely to lock abroad for a large proportion of what they buy. It also means that there is keen demand abroad for better and cheaper United States goods. It should be abundantly clear from this that America is not going to provide a market for an unlimited supply of cheap British goods. True, a certain amount of cheap British goods will be taken, but the workers of this country will have to pay for them and they will have to bear the burden of sending those cheap goods to America.

Had there been a proposal for a straight cut of wages under a Tory Government in order to keep up the capitalists' profits and enable them to send cheap goods abroad, then there would not have been a Labour or trade union leader in this country who would not have protested to high heaven against it. This devaluation is the same operation only in an indirect form. It represents the same fallacy. It is the most farcical proposal it is possible to make. We are faced with a dollar deficit, a dollar gap, and the proposal we are now getting to close the gap is to pay more dollars for what we buy and get less dollars for what we sell. That is a typical absurdity arising out of the basic contradictions of capitalism.

The real reason for devaluation is not anything that has been served up here today. The real reason for devaluation—and it was discussed at Washington—is to provide American capitalists with the opportunity that was promised to them to buy up British assets and colonial assets at the cheapest possible rate. The Labour movement was brought in to end exploitation of the workers, but instead of ending exploitation it is increasing it. I challenge any Minister to deny that today the workers of this country are experiencing more intense exploitation than ever they have done. [HON. MEMBERS: "Nonsense."] Oh, yes. The Chancellor told us yesterday about the terrific output we were getting from the workers in comparison with what we got under a Tory Government.

Photo of Mr Thomas Cook Mr Thomas Cook , Dundee

The workers' conditions are better.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

There is the situation—that the Labour movement was supposed to end exploitation, but, instead of ending exploitation, is proposing to provide every opportunity for American capitalists to exploit British workers. And not only to exploit British workers, but, very much worse than that—and this is something all Labour Members ought to think about, with the knowledge they have of the brutal, inhuman treatment of the coloured people in America—it is going to provide opportunities for American capitalists to come in and exploit the coloured peoples of the Colonies. That was one of the conditions at Washington, and one of the gentlemen responsible for that nefarious decision continually claims to be a Christian. I should not like to be him when he stands before the judgment seat.

Now, I said on 15th September, 1948: I tell the Leader of the House and others that Britain can never get out of the crisis whilst she is dependent on America. I challenge any of them to show the people of this country how it will ever be possible to balance our trade and get out of the crisis while we are taking goods from America and America refuses to take goods from us. We should end the dependence on America …"—[OFFICIAL REPORT, 15th September, 1948; Vol. 456, c. 152.] This country will never be economically free and independent until we say to America, "We will trade with you and take your goods, but just to the extent that you take ours." We can only say that if we have an alternative source of supply, and the alternative source is at hand. We can get supplies without dollars from the Soviet Union, the countries of Eastern Europe and from liberated China, as well as from the Dominions. Friendship and trade with the Soviet Union and the other countries marching towards socialism is the way to our salvation.

Here I will deal with a reference made to the atom bomb by the Leader of the Opposition. There is talk of increasing our defence expenditure. That is madness. The only true defence against the atomic bomb is destruction of atomic weapons with international control.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

I notice that the Minister agrees with the proposition—destruction of atomic weapons with international control.

Photo of Mr John Lewis Mr John Lewis , Bolton

Does not the hon. Member mean "inspection"?

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

Yes. That is very important. I am going to send a cable to Lake Success tomorrow showing that the Government Front Bench supports the proposal of Mr. Vyshinsky for the destruction of atomic weapons with international control and inspection. [Interruption.] The Foreign Secretary is not supporting that. The hon. Lady the Member for Epping (Mrs. Manning), when the Prime Minister spoke yesterday about international control, asked whether that meant destruction of atomic weapons, but no answer was given. If we can get a decision on this and can get it carried out, the people throughout the world will give a heartfelt sigh of relief and we can then make a tremendous cut in our armament expenditure, which together with a very big cut in profits will mean we can increase wages, increase our housing programme, the building of schools and hospitals, and meet the demands of the old age pensioners. Is there any genuine Socialist who would object to that?

There was something even more important last week than the sensational disclosure of the atom bomb. It was the declaration of the Chinese Republic and the speech of the Communist leader, Mao Tse Tung—no more insults and a stern warning to the reactionaries of the West. The Chinese people, who have been liberated, are on the march and are holding high the blood-red banner of Socialism. The old evil world of capitalist exploitation is passing, however reluctantly, from the scene. The new world is emerging. The Labour Government, through subservience to America, seeks to tie the workers of this country to the old, to make them a part of the last desperate effort of the capitalists for survival. But in this they will fail. The long fighting traditions of the British working class will never permit them to be led along the road to ruin and disaster. Against the attempt to solve the capitalist crisis at their expense, against the attempt to make them part of the American war machine the British workers will fight, and in the forefront of the fight the Communist Party will take its place.

7.2 p.m.

Photo of Mr Kenneth Lindsay Mr Kenneth Lindsay , Combined English Universities

On a point of Order. It is probably known to you, Mr. Speaker, that there is a large number of Members who wish to speak in this Debate. The Lord President of the Council has asked that this Debate should be like a Council of State. I appreciate that there must be party speeches and even electioneering speeches, but may I ask the senior Cabinet Minister present, through you, Mr. Speaker, whether he will request the Lord President to provide one hour more for today's Debate, which is a serious Debate in which a large number of Members will otherwise not be called it means that speeches, which may be very excellent in themselves have been made which, in my hearing at any rate, have not got us anywhere near to the heart of this crisis? None of us knows whether we can export more to the United States, or whether we can make cuts of any importance in Government expenditure. We are almost in the same position as we were in yesterday, and therefore I ask the Home Secretary whether he will convey this request to the Lord President of the Council.

Photo of Mr Douglas Clifton Brown Mr Douglas Clifton Brown , Hexham

According to our rules, a Motion for the Suspension of the Rule has to be put down. Therefore, as far as today is concerned, the Sitting will have to cease at 10 o'clock. Nothing can prevent that.

7.3 p.m.

Photo of Mr Quintin Hogg Mr Quintin Hogg , Oxford

I have a good deal of sympathy with my hon. Friend the Member for the Combined English Universities (Mr. K. Lindsay). Each of us must clearly make his own synthesis between the exigencies of party controversy and the demands of national interest. But I thought it both naïve and perhaps a little disingenuous of the President of the Board of Trade to begin his speech today by complaining that the speech of the Leader of the Opposition was a controversial and electioneering speech. Of course, there is a sense in which the speech of my right hon. Friend was an electioneering speech, but so was the speech of the President of the Board of Trade, as one could see, prepared carefully overnight with typewritten notes, and meticulously lucubrated, although totally ineffective.

Both the speech of my right hon. Friend and the speech of the President of the Board of Trade were, in a sense, electioneering speeches, but there was this difference—the speech of my right hon. Friend was a very good electioneering speech and the speech of the President of the Board of Trade was a very bad electioneering speech. I shall be astonished if the Minister of Health, or perhaps he would prefer me to call him "the Right hon. Ordinary Chap" does not conclude this Debate by an electioneering speech—I shall be very disappointed if he does not do so. After all, what is Parliament for but the canalisation and focusing of controversy by means of the party system? On what has our reputation been based? Why is it that Parliament still focuses and attracts public interest in this country and throughout the world? Surely controversy through the party system is the best way of determining policy when honest men differ. If honest men differ at the present time on the causes of our plight and the means for emerging from it, why should not they say so in forthright controversy in this place? Will not that controversy be all the more lively and all the more effective if each one of us, when we speak, knows that, inevitably, we are speaking to a wider audience than this, to those who will ultimately determine the fate of this country and ourselves with more authority than any one of us can do?

There is only one condition about it all and that is that we should approach the solemn business of controversy with an absolutely honest mind, determined to express our true opinions and determined also—for it is no less important—not consciously, at least, to misrepresent the case from which we necessarily differ and which it is our duty to attack. In this connection I must say that the first thing I feel about the Motion and this Debate is the disingenuousness of the pretence which has been put forward in the two Government broadcasts, and in the Motion, that here we are discussing our approval or disapproval of a conscious and voluntary act or decision of a Government pursuing a definite and national line of a policy designed to prevent unemployment. There has been no decision, no voluntary act and no policy, unless the act of a coco-nut or a cock-shy in being dislodged from its pedestal can be described as a decision or policy.

The Chancellor has been knocked off his stand; he could not help it. We know he was sincere when he said that he had not the slightest intention of being moved from his pedestal, but we know that he was, in fact, knocked off. During the past week our country has been governed, and is being governed today, by events and not by the Labour Government, and it is this very fact which renders so meaningless and absurd the question which was presented to us by the hon. Member for Nelson and Colne (Mr. S. Silverman) yesterday when he asked if we approved or disapproved of the devaluation of the pound. One can only approve or withhold approval of acts which are voluntary. If a man jumps off a cliff and bounces on the way down it is not in the least sensible to ask whether we approve of the bounce or are prepared to offer an alternative policy to that which the man is pursuing. Perhaps it is a little discourteous, but it is inevitable, that his kindly critics, viewing him from above, should suggest that it would have been better is he had not jumped.

The second point which occurs to me about this Motion and the Chancellor's speech is the disingenuousness of pretending that only bread and a small number of other things will rise in price. I am sure that the right hon. and learned Gentleman deliberately tried to create that impression in the country by his broadcast, and I am perfectly sure that he had absolutely no basis in logic or fact for so doing. All raw materials will rise in price so far as one can see, whether they are produced in the hard currency areas or elsewhere, and this will inevitably have its reflection in retail prices, though to what extent we have not been told, at some not-distant date. It may make a lot of difference whether the Chancellor can hold prices to some extent until after the General Election, but it will make no difference whatever to our ultimate prosperity or to the extent to which we shall get out of our difficulties.

The other night a cartoonist of the "Evening Standard" presented a picture of the Chancellor in duplicate. There was a tall noble Chancellor at the Box and a small ignoble Chancellor crouching by his side, who, I am sorry to say, reminded me somewhat of my hon. Friend the Member for Orpington (Sir W. Smithers). One was good and the other evil—Jekyll and Hyde. It is true that there exist two Chancellors of the Exchequer. But one is not wholly good and the other is not wholly bad. They can best be described as the Fanatic and the Pharisee. The Fanatic is misguided and bigoted, it is true, but is patently sincere, and although almost always wrong he is nearly universally popular. The Pharisee is a very different character. He is the ingenious and less likeable person who applies all the arts of advocacy in order to try to get himself out of the the difficulties into which the folly of the Fanatic has landed him. It was the Pharisee we heard yesterday and on the wireless recently.

What requires to be said next is that the events of the past few weeks have made nonsense of everything that the Labour Party has put out in propaganda during the past four years. It has been suggested, in substance, that the wicked Tories wish to cut wages, reduce social services and land the country in mass unemployment. But what is the policy of the Government? What does devaluation of the pound mean? It means that every social service in this country has been cut. It is true that the ordinary recipient of a pension will still receive 26s. a week in terms of the revalued currency, but we do not know how much less that will buy; we know that the pension has been cut, but we do not know by how much. All we know is that the recipient, among the poorest of the community, will be hit hardest by the alteration. The same applies to every wage packet in the country, affecting most severely, as has been pointed out more than once, the lowest paid workers, many of whom are earning less than £5 a week.

I should like to know why it is that the party to which the Chancellor belongs, for four years has been accusing us of wanting to introduce the very policy which he himself has now sponsored? But in fact we have never suggested that we should introduce any such reductions. What we have always said is—and it has proved abundantly right—that if we continue to ignore economic facts, if we continue in the pursuance of an economic policy which is mistaken, we shall be driven, whether we will it or not, to make cuts in the social services and wage packets. That is precisely what has happened in the last few weeks. And what hypocrisy it is to talk about mass unemployment. The alternative to the devaluation of the pound was not mass unemployment, nor will devaluation alone prove to be a cure. The alternative was the complete disintegration of our national life such as no Government, of any complexion, could have faced.

Why does not the Chancellor say, in his broadcasts, what he knows perfectly well—namely, that the full employment which exists today is nothing but a lucky accident which has nothing whatever to do with Labour policy? Why does he tell us what I suggest he has the means of knowing is false, that we have kept full employment, as he said yesterday? He has already told the country that but for Marshall Aid there would be 1¼ million unemployed. What further difference would be made if the international situation was such that we did not have to have conscription? What difference has been made by the sellers' market? If it were not for Marshall Aid, the present level of our Defence Forces and the sellers' market there would be two million unemployed in the country today. Not one of these factors has anything to do with the voluntary action of this Labour Government. If it proves the falsity of every line of propaganda put out by Transport House during the last five years, I think it will have amply justified our criticism of the Government.

What has this criticism been? It has been that the Labour Party altogether misunderstood and under-estimated from 1945 onwards the nature and magnitude of the crisis which faces this country and its fundamental character. We have always asserted that the Labour Party pretended that by the imposition of innumerable controls and by the nationalisation of certain industries the peace could easily be won, when, as a matter of fact, it was always the case that the nub of the problem was the balance of payments as expressed in our export trade, which the right hon. Gentleman, who is to conclude this Debate tonight, once referred to as a twist of the Tory mind.

This being so I do not think it is illegitimate for hon. Members opposite to look so pathetically to us as they do for alternative policies. We will give them one. In the first place, we require a change of leadership. This country has suffered an unmitigated defeat in the economic sphere, a defeat equal to Munich in the days before the war and to Norway or Dunkirk in the early days of the war. It needs a new spirit comparable to that feeling of comradeship under which the nation surged forward after the defeats of 1940, but the condition of it is the same as the condition was then—that the old leadership held responsible for failure should be got rid of, and that new leadership—and I suggest the leadership under which we won the war—should be placed in its stead.

Secondly, we require national unity. It was for this reason that I intervened, as one hon. Member reminded us yesterday, in a correspondence in "The Times." It is of vital importance, at any rate in my judgment, that, although the social services have been cut as the result, for the second time in human lifetime, of Labour bungling of our economic affairs, the scope, the principle and the rates should remain unaffected, because I do not believe that the necessary spirit of unity can be obtained if an attack is made on the internal distribution of wealth in the country to the disadvantage of those who are least able to bear it. For that reason, I should uncompromisingly resist any attempt to cut away the social services.

At the same time, I was a little surprised to hear the hon. Member for Nelson and Colne (Mr. S. Silverman) last night try to baffle us with the question whether we were for or against the Government White Paper. I think it would be more profitable if he asked the question of his own friends. After all, it is the Government's White Paper, and they are supposed to be supporters of the Government. Yet the Chancellor of the Exchequer yesterday said of wages and also of rates of income: It is, therefore, of critical importance that nothing"— and he emphasised this by saying— —and I mean literally nothing—should be done to increase the 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."—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, c. 25.] In one speech from the back benches after another each Member has tried to avoid unpopularity in his constituency by saying: "If we must make some concession to what the Chancellor says, let us whittle away the rise in the price of bread by adding to the subsidy there. Let us see that the workers in my constituency get a little more." I should like to know whether this is in agreement with the Chancellor, and whether his words "literally nothing" are any more valuable than his declared intention never to devalue the pound. At all events, we are entitled to know where we stand with the party opposite on that point.

Thirdly, we must have a policy of concentration of effort. With the forbearance of the House I would like to explain what I mean by that. It is idle to pretend that there is any royal road out of this difficulty. We are faced with a fundamental disequilibrium in our economic life. The trouble has been brewing over a long time. It is not I think the fault of any party, even of the party opposite, that the conditions which required drastic action should have arisen. On the contrary, the difficulty has arisen because we have built up in this country by various substantial advantages a population of gigantic size, and now are faced with the problem of maintaining and improving its standard of living when we are permanently, so far as we can see, deprived of those very factors which enabled us to build it up.

Photo of Mr Quintin Hogg Mr Quintin Hogg , Oxford

This is not an opportune moment. I may give way in a moment. The fact of the matter as I see it is this—every single item of national and personal policy for years to come—and I mean many years—has to be weighed and examined in the light of this all important question—does what I propose to do myself or what the Government propose to do with public money or effort help to re-balance and re-equilibrate the economic life of the country or does it not? If that be the criterion—and I believe I have had some support in thinking it is—of British policy for many years to come, how does the Chancellor and the Government come out of the last two days Debate?

What was the point of the Profits Tax? Was it designed to effect any purpose which would increase our exports to the dollar areas or alter the fundamental disequilibrium in our balance of trade; or was it a sop to political sadism in which the right hon. and learned Gentleman did not believe, but which he had to give in order to continue to command the continued support of the least valuable of his supporters? So far as I am concerned, I have no inhibitions about taxation on profits, but I submit to the House this very simple proposition, that the only profits tax which is just—I am not talking about rough justice but any kind of justice—is the Income Tax and Surtax, because they are levelled on the individual income of the enjoyer.

Limited companies do not pay taxation. One may talk as if they did in Acts of Parliament, but it is only human beings who pay taxation. A profits tax on the profits of limited companies is selecting the individual incomes of a particular class without reason and without regard to the needs of the individual for a differential and discriminatory kind of taxation. I am perfectly sure that the Chancellor dislikes doing it as much as I dislike criticising him for having done it.

But what becomes of the rest of the Labour programme? We are now faced, if we believe their statement of policy, with a series of new acts of nationalisation. In what way is that going to fit into the criterion which I have proposed? In what way is the nationalisation of the butchers, the industrial assurance business or the cement trade going to alter the fundamental disequilibrium in the balance of payments? Can we afford to dissipate our effort, divide our people and waste our energies on great projects which have no relevance to the great issue of survival with which we are faced? We are asked, what is our policy. It is part of the answer at any rate to say that we will jettison all that, and concentrate on the real business of saving ourselves and our country for our children instead of indulging in matters of that kind.

I should have thought that hon. Members opposite could have very little complaint at this suggestion. They have already nationalised a number of basic industries. Why is it unjust or unreasonable on our part if we say to them: "You apparently, for reasons which are obscure to us, believe in the principle of nationalisation. You think it is a good thing. Well, you have got it in five or six crucial cases. Why cannot you make a success of one of them before you ask us to nationalise any more? If you are so confident that the principle is a good one, it only means pleasure deferred and you will have all the advantage when the time comes of saying, 'I told you so,' to the wicked and dispirited Tories." Why is it necessary to force through this irrelevant programme now except for the purpose of carrying on the kind of political warfare for which the right hon. Gentleman the Minister of Health has made himself famous? What is behind it?

I last say a word about the question of public expenditure. It now seems to be agreed—it was denied before—that what would have been regarded six months ago as drastic cuts are necessary, although there appears to be a division between the Chancellor of the Exchequer and some other hon. Members as to how much it will be. I suggest that if we apply the criterion which I have indicated, it must become apparent as a matter of mathematics that some cuts will have to be made. After all, if we are to switch great masses of goods into the dollar markets we cannot get it back all at once by increased production, and if we are not going to get it back by increased production at once or in the short run we shall have to get it back by decreased consumption in one form or another.

We know that the Chancellor of the Exchequer collects no less than 40 per cent. of the national income in taxation, and if there is therefore to be a widespread decrease of consumption in this country, as I believe is the inevitable outcome of the policy now announced, it follows that the Chancellor of the Exchequer must see to it that some part of the decrease in consumption is made by cuts in public expenditure. I have already indicated why I would not approve of an attack on the social services, but I must say something to the Minister of Health. He has had the privilege of inaugurating a National Health Service of the principle and general scope of which I have always been a supporter, but I believe that he is jeopardising the future of that service by riotous and extravagant administration. I believe that the administration of that service has pursued a corrupting and demoralising progress. I believe that there is no effective machinery at all whereby the public money and the public interest can be safeguarded. The patient can turn the hose of public money on to the doctor by putting his name on the doctor's panel and the doctor can turn the public money on to the patient by giving him expensive treatment, but at neither stage so far as I can see is there any effective principle in the scheme whereby there is anybody charged with the duty of seeing that the money is expended adequately in the interests of the public. It would not be surprising if the Chancellor, should he survive to another Budget, himself instituted some reforms in that service. I have ended, and I want to close on this note—

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

Before the hon. Gentleman turns to his final point, will he honour the House by taking us into his confidence as to what is the remedy he suggests for the fundamental disequilibrium to which he has pointed? So far the only remedy he suggests is a coalition.

Photo of Mr Quintin Hogg Mr Quintin Hogg , Oxford

I certainly do not approve of a coalition. I had thought that I was not particularly ingratiating myself with those who in a Coalition Government would inevitably be some of my future colleagues. I thought I had made it plain and that I had had a certain measure of agreement from some quarters opposite. I believe that there is no royal road in the sense that we cannot prescribe a patent medicine for the ill, but what there is is the necessity that every item of public conduct and every item of private conduct throughout a period of years should be separately examined in the light of that disequilibrium, and reshaped and remoulded—[HON. MEMBERS: "Controls."]—yes, self-control, too—in the light of that paramount necessity.

I turn now to my last point. It is vital that in our search and scramble for dollars we should not lose sight of our ultimate spiritual values and our ultimate social objectives. There are many on both sides of the political fence who will seek to make us do so. There are many on both sides of the political fence who will seek either to destroy the advantages gained over years of patient effort by many other than members of political parties, or else to use the economic crisis as a means of forcing a political or economic revolution. There are many who will try to utilise our dependence on the United States, which I suppose those on this side of the House hate as much as the enemies of the United States, as a means of poisoning our relations with that great country. There are many people who will use the difficulties as a means of upsetting our relations with Europe.

They must all be resisted. Dollars are not everything in this world. In the long run, by patient effort, we have built up a standard of life in this country which, saving the opinion of certain hon. Members opposite, has at all material times been better than any comparable country at that stage in the world. We are now faced with the maintenance of that standard of life without our traditional advantages, and it is our task to see that our posterity do not curse our name as that given who dissipated and lost their heritage. There is a song in a popular comedy written by the junior Burgess for Oxford University (Sir A. Herbert)—not very good poetry and not very good English—containing a phrase which caught my fancy. It ran something like this. [HON. MEMBERS: "Sing it."] No. My peroration is spoilt and the House must therefore be disappointed.

7.33 p.m.

Photo of Mr Frank Fairhurst Mr Frank Fairhurst , Oldham

I do not profess to be able to express myself in the eloquent language used by the hon. Member for Oxford (Mr. Hogg), but I claim to apply true sincerity and honesty in what I have to say. What I have to say may not be to the liking of all hon. Members, but I feel that I must say it because I believe it to be a contribution to the Debate.

Before coming to what I chiefly have to say, I would make a passing observation. The ordinary people today have social services which they never want to lose. It is true that they pay for them, but I believe that they appreciate them as bringing about better conditions and tending towards a higher standard of life in the future than they ever had before. That is an all-important fact. If I had to choose between a 5 per cent. increase in the weekly cost of living and loss of the social services, I should choose to retain the social services. I am not suggesting that that alternative will have to come before us.

Devaluation of the pound can only be a temporary expedient. The struggle between Shylock the dollar and the sterling golden calf has yet to be resolved. I am not optimistic about a solution being found without fundamental social changes in the United States and elsewhere. It has been patent to me for many years that the foundation of our social edifice built upon capitalist economy is unstable and cracking, and capitalist economy is completely breaking down. In July, the hon. Member for East Aberdeen (Mr. Boothby) said: No amount of cost-cutting and price-slashing will enable us to export manufactured goods in very large quantities to the United States ever again. I believe that he was right. He went on: We cannot have a so-called planned Socialist economy at home and international competitive anarchy abroad."—[OFFICIAL REPORT, 14th July, 1949; Vol. 467, c. 733 and 737.] Again I think he was right. He went on to explain that he was not against the welfare state in principle but only in favour of it when the time was oppor tune. The right hon. Member for Aldershot (Mr. Lyttelton), speaking in the same Debate, made reference to loss of confidence and declared that nationalisation and bilateral agreements were solely responsible for it. He said that we ought to try to increase our dollar exports. He made the striking suggestion that the United States were the home of manufactured goods. At the time I thought that was an illogical statement.

This is how the dollar crisis suggests itself to me. All soft currency areas are now involved in the crisis and repercussions are bound to involve the U.S.A. In 1948, we thought that we were beginning to come to grips with the problem and that there was a possibility of the gap between imports and exports being closed, but that hope proved to be unfounded. If our internal economy is dependent upon physical supplies from the United States and if the respective currencies are in conflict one with another because the standards of productivity vary, I cannot see how the difficulties can be avoided. In the past, the methods we have adopted to avoid them have manifested themselves in mass unemployment, reduced living conditions and economic misery. There is something fundamentally wrong with a social system in which people are unemployed by the million, other millions are suffering poverty, and overproduction brings silent industries and no work. Surely that is the economy of the madhouse.

During 40 years we have suffered two major wars, which have enabled Governments to stave off the crisis which we are now experiencing, but those wars made the world crisis more certain. The war of 1914–1918 gave us 10 million dead and 20 million wounded, a colossal burden of debt and a crisis which shook the world. The recent war saw each country busily engaged in smashing the economies of other countries, farm lands laid waste, industries, cities, towns and communications knocked to pieces, and victors and vanquished emerged from it almost bleeding to death. War, with all its brutality and misery, physical and spiritual, cannot be the forerunner of progress, but it is proving to be the red light against self-destruction. If the people of the world do not take heed now, what will happen may solve our problems in a way that no civilised person could wish. In a world where capitalist methods of production obtain, it would be suicidal on the part of His Majesty's Government to attempt to revert to the unbridled conditions of the past. If we can make arrangements and agreements with other countries, bilateral and multilateral agreements might bring a feeling of security. On the other hand, if the world is to continue to attempt to live by competitive struggle alone, it is doomed. World economy will continue to break down and economic wars must end in military struggle.

Is it not time that we realised that the world has grown out of the need for competition and that the conflict between competition and co-operation must soon resolve itself one way or the other? I say in all sincerity that as long as the profit motive prevails and is paramount, no nation can survive unless it is the most efficient, the least wasteful and the most highly mechanised, and its people the most industrious. That is not all. We might yet have the fantastic spectacle of people in all countries working for no wages and existing upon a starvation diet, in their efforts to beat each other in competition. Surely, again, that is economic madness.

It is remarkable that countries which were almost destroyed in the recent war are now beginning to rehabilitate themselves and American aid has been one of the means of doing this. Another £1,000 million has been granted. I venture the prophecy that in five years' time the general standard of living for millions of people will be much higher, provided that capitalism is halted, controlled or eliminated, or that the U.S.A. can continue to give away huge dollar aids, or to sell her surplus at extremely cut prices, or that she can build up to fantastic heights the social standards of her own people. If industrial countries are able to build up their capital resources one can visualise in the not distant future that the potential output of the world will be staggering. Yet we are faced with a great economic crisis because the sellers' market has now become a buyers' market. Does that mean that there is now a glut of commodities where once there was a scarcity? Has everybody, in all the countries concerned, all the food, clothes, houses, furniture and luxuries which they want and, because of this, are not now prepared to buy? The answer is, No; but we are told our prices are too high and are not competitive. Is not the acme of policy for all capitalist-controlled countries to sell their surplus and to buy nothing, especially countries which are practically self-contained, as is the United States of America?

On the other hand, I cannot see that if we cut our prices too hard or devalue our currency that will present a solution. If America wants none, or only very few, of the goods we produce, no good result is likely to be achieved by devaluation or the cutting down of our prices, or even by giving our exports away if America does not want them. All capitalist controlled countries want to sell the surplus which they produce.

I remember the time—I do not think I am wrong—when a certain well-informed person in the textile industry reminded the country of the days when goods were mass-produced by that industry. This country was the home of inventions which modernised the textile industry and enabled us to sell our goods in every corner of the world. India felt the full blast of that competition, because all her products had to be made on handlooms. In those days, the markets of the world were at our feet. We amassed huge fortunes. We were in the forefront of technical efficiency and had machines which no other country possessed.

The question which I am now about to ask applies not only to textiles, but to every other industry also. If we were in the forefront then, why are we not in the forefront today? Whose is the fault? It is not that of the workers, because, as is well known, in those days the cost of production in the direction of wages was almost infinitesimal. The answer is that the textile industry is today confronted with what has happened in America, and that in the past the owners and controllers of that industry cared not one jot about what was likely to happen in the future. They amassed huge profits but never sufficiently modernised their industry, yet our machine makers in nearby areas—I refer now to Lancashire—exported far better machines than were being used here. Those owners and controllers of the industry cannot evade the responsibility for the position which has arisen. Had their industry been modernised, as it ought to have been, we should now be exporting goods competitively to America and other places and thereby obtaining assistance which would be invaluable to us in our present situation.

It might be said that had we increased the price of gold by 50 per cent. from the rate of £8 15s. 3d., that might have helped to solve the problem, that it would have been a palliative or, perhaps, would have eased the situation. I do not know whether such a step would have had that result, for such a course has not been adopted, but I repeat that, sooner or later, America will discover that she cannot eat all the gold stored in her vaults. If we are faced with a difficult situation, it cannot end here. If America cannot sell her surplus cotton and other commodities which she has for disposal in Europe, the reaction is bound to resolve itself in unemployment. Even today, we are told, America has an unemployment problem. America is a highly mechanised country, capable of producing a far greater mass of commodities than her own people can consume. If she cannot dispose of her surplus, the problem which will be created in America will become acute and may well bring about repercussions which will be by no means happy and healthy for her economy.

My concluding words are these. I should not like to think that any possibility existed of this country or its people returning to what we have had to experience over the last 40 years. I am referring now to what was said by both the right hon. Gentleman the Member for Woodford (Mr. Churchill) and the right hon. and learned Member for Montgomery (Mr. C. Davies). Less than 40 years ago, the average life of people in this country was 40 years. Something, therefore, was radically wrong. It may be unpalatable to hon. Members opposite if I remind them of the days when queues began to form on a Monday morning.

In my childhood I have seen people slinking to the pawn shop on a Monday morning with bundles under their arms. They were taking their husbands' suits to pawn to enable them to exist for the rest of the week. Those same queues would return on a Friday to redeem their possessions. I have seen queues going to the market place on a Saturday night, scrapping for bones when the shops were fully stocked with meat. I shall never forget standing myself in a queue 100 yards long waiting to sign on because I could not get work. Nobody can accuse me of not wanting to do my job. I always wanted to render service, and always took pride in doing it to the best of my ability. We dare not, and cannot, go back to those shocking conditions. Whichever Government is in power has a responsibility to see that we make progress and do not go back.

The acid test of devaluation is whether it will help or will do otherwise, and whether it will play its part in maintaining full employment. Hon. Members opposite do not understand what the thought of possible unemployment tomorrow means to ordinary, decent, civilised men; neither do they understand the awful nightmare which it may be to that 95 per cent. of our people who want to work honestly and decently, nor the ravages which it can cause in the home. Whether we like it or not, we must take note of all these factors. We must plan our economy in such a way that progressively we develop a social life. We dare not lose the social services we now possess; the ordinary people will fight to the death to maintain them.

Let everybody, in every party, take note of these things. I say this with all sincerity, because I have a great pride in my country. There is no other country in the world like it. I do not even want to spend my holidays in other countries. There are so many places to be seen in this country and its people are such, that I have not the time to do otherwise than to get the benefits which this country can give me. I want to see the greatness of the past continued; I do not want to see a policy which would again create mass unemployment or bring about conditions such as I and countless others have suffered. There is no more degrading feeling for a man than to find himself slinking along and signing on for unemployment pay. If a man is doing a good job of work and is able to buy commodities and helping to build a planned social economy, it is far better than doing nothing at all.

The acid test of devaluation is whether it is going to build up the social life of the people. If I thought it would interfere with or reduce the social standing of our people in the long run, I would go into the Lobby and vote against this Motion. But I feel that on balance it is in our favour. The thing has been done and we have to make the best of it. As individuals we must try to make the best of the situation. This situation is not of our creating. There are thousands in the country, wealthy people, who do not care a jot how we go on and there are plenty of people who have sprung from the ranks from whom I come who are taking the same attitude. I would like to see this stopped, and I would not care what action the Government took if they could wipe these things out. We should tackle this matter and be frank. This problem is urgent and serious.

I say that the Government have tried to do a good job. They have had many difficulties, but they have given our people something they have never had before, social security. If they will plan the future in order to build that up, they will do something for which the workers will always hold them in respect.

7.59 p.m.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

The hon. Member for Oldham (Mr. Fairhurst) has made a speech of great sincerity which was appreciated on both sides of the House. What he said in the concluding passages necessitates my saying again—and I have no doubt it will have to be said again and again in the months ahead—that there is no one on this side of the House who desires to see either unemployment or any cuts in the social services, and there is no evidence whatever to that effect. I do not think that there is a single soul on our side of the House who would not do anything practically and physically possible to avoid a recurrence of unemployment. It is about time this was made very plain; and in future, if we are to be charged with seeking unemployment, as we are being increasingly charged, not in this House but at street corners up and down the country, some supporting evidence must be brought forward. I do not know anyone in my party who would not go to almost any lengths to prevent unemployment.

Photo of Mr Frank Fairhurst Mr Frank Fairhurst , Oldham

That is not the question. The question is whether the policy and principles of the party opposite would bring about unemployment or not.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

Some hon. Members opposite have insinuated that we think that the only way out for this country is to induce a certain amount of unemployment; and that, I submit, is untrue. There has also been a lot of talk in this Debate about the tremendous fortunes made in Throgmorton Street, which fascinated me. I looked at the price of a good many shares this morning, having heard so much about it; and I would direct the attention of hon. Members to the prices today, particularly of gold shares, and ask them to compare them with those before devaluation took place. They will find it rather difficult to see how or where these great fortunes have been made, except of course by the Government, because with their accurate knowledge of the situation, they were able to act really quickly. The tin people fairly jumped to it, and went right into the market. That was lucky for the Minstry of Supply. It was effective action, which went far to restore their financial position. I heard also that the Government were selling in Throgmorton Street. Perhaps the Secretary for Overseas Trade could make a few inquiries, and the Minister of Health could tell us the result tomorrow. I do not say it was actually gold shares; but I am told they sold something in Throgmorton Street at the very moment when the police were holding up the traffic for people to make these vast fortunes. That is the kind of story that is going round the country at present.

I do not think this is a very difficult problem which we are considering today, even for a simple chap like the Minister of Health, or for a cog in the capitalist machine, as the Minister of Food was earlier described. It is the old problem of what this community, created in the nineteenth century in circumstances and conditions which no longer exist, is to do about it now in the twentieth century. It is quite a rough problem; and I am certainly prepared to admit that it is not a problem created by the party opposite. I thought it significant that the leader of the Liberal Panty should have sighed once again for the nineteenth century. I always have the greatest sympathy for his sighs, for there are a lot of us who would not mind going back to the nineteenth century. Some would not like to, but some, especially the more comfortable Liberals, would not at all mind slipping back to the safe and cosy period of the formative stage of British capitalism when it was really surging forward. It was not cosy for everyone, but for a large section of the community life was very much securer and gayer and happier than it is today. But, whatever the leader of the Liberal Party says, we cannot go back—

Photo of Mr Richard Crossman Mr Richard Crossman , Coventry East

What about the hon. Member's leader in 1906?

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

I do not think he sighed for 1906; but he did compare the Government of 1906 with the present Government, and that was not very flattering to the Government of 1906.

What has happened? All that has happened is that about four weeks ago the Government had brought the country to a point where only two alternatives presented themselves, and one of them had to be taken very quickly. Those two alternatives were drastic cuts in Government expenditure, both on Defence and on social services; or, alternatively, a drastic cut in the external value of the pound. Those were the only alternatives which then presented themselves to the Government and they chose—and I cannot blame them for choosing, in fact I commend them at that juncture for choosing, although they should never have had to make such a choice at that late hour of the day—a cut in the external value of the pound. I say that those alternatives were presented because for four years we had not been earning our living and our reserves were almost exhausted—[HON. MEMBERS: "War."] I do not count war, because that is a different affair.

Let us now go back a little. It has never seemed to me that the Chancellor of the Exchequer has really comprehended the underlying realities of our economic position in the post-war era, nor has he evolved a constructive long-term policy to deal with the problem which now confronts us. On his own admission, and he cannot deny this, he has been reduced to one expedient after another, which have led him in turn from one crisis to another. He has lived from hand to mouth on dollars; and now the end of the dollars is in sight. It is indeed a depressing experience. For five years we have been gravely handicapped in this country by an overvalued pound. But what is it that has kept the pound sterling at the artificial rate of $4 throughout these years? It is the Bretton Woods Agreement. I would just mention, in passing, that we were not allowed by the present Government even to discuss the Bretton Woods Agreement when it was submitted to us for approval. I well remember that evening, and the protest that a few of us made; nevertheless, not one word of discussion was allowed by the Government to this House before we passed that Agreement, which has had such formidable repercussions on our economic and domestic life.

Then came the acceptance by the Government of free convertibility, under the terms of the Loan Agreement; and also of non-discrimination not only in that Agreement but again at Havana. At least I am on the record as having opposed them all. I submit that the Government should have gone to the Government of the United States at least three years ago and said: "Look here, a new situation is developing. We cannot go on with absolute non-discrimination in our present situation. We must build up a regional trading area more rapidly than we are doing; and we must have more flexible exchange rates than is possible under the Bretton Woods Agreement. You must see this; otherwise we have no right to go on taking your dollars." If strong representations had been made three years ago, we could, I believe, have got a substantial amount of concessions and readjustments from the Government of the United States. As it was we carried on all over the world with exchange rates arbitrarily fixed, in a world of utter chaos, without any knowledge of the governing factors; and which the people who fixed them could never have contemplated would last for over four years. Finally the price of gold, almost the sole remaining asset of the sterling area, was fixed at an artificially low price, which was surely crazy.

When convertibility came along this country financed the entire world dollar deficit for five shattering weeks. I vividly remember the evening when the regulations to establish free convertibility of sterling were brought before this House. The Chancellor of the Exchequer did not think it worth while to come down, it was so unimportant. He sent the Financial Secretary to the Treasury, who was absolutely charming, as he always is; but not entirely convincing. I said that I thought that the Chancellor would not be able to hold convertibility, and would have to abandon it. The Financial Secretary thought that my prediction was wrong, and that the Government's prediction was right. He received the support of the hon. Member for Chesterfield (Mr. Benson), who said that our doubts were the wildest exaggerations of the possibilities of the Agreement, and were purely partisan. Five weeks, and they were rough weeks, put an end to that.

Non-discrimination, which theoretically goes on at the present time, means that we have been unable to build up any kind of regional trading area, that international trade has been throttled down to the lowest common level, and that we have been driven into pure bilateralism by the relentless pressure of events. It was under these conditions that the Chancellor told us not long ago that his primary goal was the achievement by this country of complete national economic independence by 1952. He proceeded to impose an absolutely rigid economy on this country. Finally he said that never, no, never, would he devalue the pound. There was not the slightest intention of doing that. All this just does not add up, or make sense. The policy was almost entirely contradictory. At the very moment when flexibility was the first desideratum in our economy, wages, prices, interest rates and exchange rates were all frozen. We thus became enmeshed in artificial rigidities of our own deliberate creation. When pressure and tension began to grow, something had to break; and what broke was the pound. That is one of the penalties of a rigid national economy.

Let no one hail it as a triumph. It means an all-round reduction in the standard of living of this country, because it means an all-round reduction of real wages. We had better face up to that. It is no use "kidding" ourselves that it does not mean an all-round reduction in the standard of living; this is the really nasty thing about it, and we have to face up to it. If it does not mean that, then we shall be back precisely where we were, with this difference—that the higher price of commodities imported from overseas is bound to lead to large-scale unemployment in this country. If it does not mean a reduction in our standard of living, if wages and salaries catch up with prices in the next four or five months, we shall be worse off then before we embarked on the policy of devaluation. There is no escape from that. What rather shocked me about the Chancellor's wireless speech was that he seemed to regard the whole thing as something in the nature of a triumph. It was a major defeat for him, if for no one else.

I do not for a moment believe that the Chancellor's repeated assurances were a piece of deliberate deception on his part. On the contrary, I believe that right up to the moment he left for Switzerland the Chancellor thought that devaluation would not be necessary. I have in mind the assurance he gave at the end or middle of July to my hon. Friend the Member for Central Aberdeen (Mr. Spence), when he stood at that Box and thumped it, and said that there was not the slightest intention of devaluing the pound. I happened to be standing in the Chamber when he said it; and I will never believe that he deliberately made that statement believing it to be untrue. On the contrary, right up to that moment he thought that he could hold the pound. It casts a serious reflection not upon his integrity, but upon his judgment. That is his trouble.

It was his colleagues who, after he had gone to Switzerland, really began to get down to sizing up the situation, and who imposed devaluation upon him after he returned, under the pressure of events. I believe that to be the true story. That is why I found his almost ebullient optimism—it was not quite so strong in the speech he made in opening this Debate as it definitely was in his broadcast address—so extraordinary. Whether he is pleased or not, the last thing that should be done is to minimise to the British public the present danger of inflation, because the dangers are enormous, and no one yet knows how serious they really are. We cannot know for a few months. It is no use telling people, at this moment, that there is only to be a small rise in the price of bread, and nothing else. That is frightfully dangerous.

I have never for one moment believed that complete national economic sovereignty, free trade, free convertibility, and exchange rates fixed even provisionally between currencies of deviating internal purchasing power, could be made to mix. I have always believed that the structure created at Bretton Woods must crash, as crash it has. I therefore do not complain of devaluation as such. It was inevitable. What I do complain vehemently about is the method of devaluation. Like all precipitate and ill-considered action, it has caused the maximum dislocation and given the maximum offence everywhere. That is what I complain about. Also I think that, if timely action had been taken some months ago, the thing need not have been as drastic as it now is.

What have we got at the end of it? Another rigidity. We are now fixed at $2.80, and what is that? It is only another guess. Is there any particular reason to suppose that that guess is any better than the guess made at Bretton Woods? We do not know. We cannot know anything. The difficulty is that the two great precedents, the precedent of Poincaré in the 1920's, and of Neville Chamberlain in the 1930's, when we were driven off gold, cannot be applied at the present time, because there is no confidence in the present administration. That is what really makes the situation so difficult.

I do not like this fixed rate. I would have liked to hear a statement on the part of the Chancellor of the Exchequer that from time to time he would revise the rate up or down, in accordance with prevailing conditions. That is the least that I would liked to have heard. I would have really liked a re-establishment of the system which worked so successfully between 1934 and 1936, when we had an Exchange Equalisation Fund which really worked, and kept a comparatively stable exchange rate, because there was world economic confidence in the Government of that time.

Photo of Mr Stanley Evans Mr Stanley Evans , Wednesbury

How does the hon. Member reconcile this lack of confidence in the present administration with the prospect he now envisages of the pound appreciating in value?

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

Because I am quite sure that when we win the next Election it is going to appreciate in value. I have no doubt about that. If by any unfortunate chance the party of the hon. Member for Wednesbury (Mr. S. N. Evans) should win the next Election, I am equally sure that it would go down still further.

The worst feature of it all, however, is the failure on the part of the Government to make the slightest attempt at international economic co-operation of any kind with anybody. That I really do complain about bitterly. Some of us get pretty sick about the lip-service paid by the Chancellor of the Exchequer to multilateralism and free trade, accompanied by action in the precisely contrary sense of bilateral agreements and rigid national autarchy. Similarly with European economic co-operation. All the Labour boys at Strasbourg were talking gaily about international economic co-operation; whereas in fact the Chancellor was about to take action which amounted to the ruthless rejection of all economic co-operation with Europe at the present time, and, as far as I can see, in the future.

The President of the Board of Trade made a completely unjustifiable attack this afternoon on my hon. Friend the Member for Chippenham (Mr. Eccles) whom he accused several times of manoeuvring at Strasbourg in favour of devaluation, and deliberately undermining confidence in the pound sterling. I happened to be at Strasbourg, and I say there is not the slightest justification for that statement. My hon. Friend was rapporteur of the economic committee, and as such he did a fine job, which was commended by the entire Assembly, including the Labour delegates. They admitted that he did a fine job. In the Public Assembly I myself—and we may as well get this right because there are a lot of stories going round about the Tories undermining the pound at Strasbourg—I moved two Amendments. One was designed to achieve closer co-operation between central banks of issue for the co-ordination of credit policy, and that was accepted without a dissentient vote. The second one advocated a realignment of European currencies as the necessary preliminary to any approach to the United States or dollar area. In fact I have my own words quoted here. I said: It will be necessary to put our own house in order"— I was then referring to the European house— and to realign our own exchanges before we start tackling the dollar at all. How can we be accused, in these circumstances, of manoeuvres to undermine the value of the pound sterling as against the dollar?

On the contrary, the Chancellor of the Duchy of Lancaster got up in the Assembly and moved that the question of currency should not be discussed in the Assembly at all. The Chancellor of the Duchy of Lancaster—unless they now keep Cabinet secrets from him—must have had some inkling that there was to be a devaluation of the pound, but he did not let that one out at the Assembly in the slightest shape or form. He did not say: "We must not discuss this because we might want to devalue the pound." The impression he gave was that we must not talk about it was because it was unmentionable, and not to be contemplated. He was taking the Chancellor of the Exchequer's old line; and I say that that was creating a completely false impression.

What happened? Suddenly on a Saturday the French Government got word from the Treasury in this country of the full extent of the devaluation which was quite unexpected, and completely winded them. They were not told one word about it until the Saturday afternoon. I say that the countries on the continent of Europe think that this country has taken action which amounts to a declaration of an economic war upon them. If hon. Members do not believe that they should read the Continental Press. It is not reported in any part of the Press of this country; but let them read the Paris newspapers during the past week, and see what the French Press has been saying; and what all the French politicians from the right to the left have been saying about the action of this Government. They are saying: "Here you get the very people who two or three days ago at Strasbourg were jawing about international economic co-operation in Europe, and who are now driving a horse and cart through the whole thing. What chance is there of any effective economic collaboration with a Government of that kind?"

I really mind this, because I think it is very depressing for our future. The only hope for this country is to link our economy with that of Western Europe and the sterling area including the Commonwealth and Empire, and build up by close co-operation, especially in the monetary field, a trading area in which we can breathe and live. I have never believed that we can survive in isolation in the modern world. There are really only two alternatives which immediately confront us. One is to go right into the economy of the United States, and the other is to combine Western Europe with the sterling area and the Commonwealth and see what we can make of that, as a step towards ultimate agreement with the United States. But to sit still under planned National Socialism, which we are getting now, with a rigid economy and no effective international co-operation, and imagine we shall achieve complete national economic independence by 1952—which cannot be done anyway—seems to me to be absolutely suicidal.

The Labour Party used to talk quite a bit about international co-operation, but they have sabotaged it at every turn. There is no international co-operation on the part of this Government in the economic field anywhere. It is a policy which will lead us nowhere. If our economy was really flexible, if adequate incentives were given to production at every level, with an increase of capital investment in industry, I think we could increase our productivity; and that would help to counteract the very grave dangers confronting us at the moment.

With regard to the cherished belief of the Chancellor that we can quickly obtain a vast increase in our exports of manufactured goods to the dollar area, I remain frankly sceptical. I, like many hon. Members on both sides of the House, have visited the United States pretty frequently during recent years. Anybody who tells me that the way of salvation for this country, or indeed for Europe, lies in exporting manufactured goods in immense and increasing quantities to the greatest and most efficient producer of manufactured goods that the world has ever seen, somehow or other fails to convince me. The United States want a lot of things, but it has never struck me that, apart from whisky and tweeds—[An HON. MEMBER: "Herring."]—alas, not yet herring but I have hopes. It has never struck me that they were passionately anxious to obtain manufactured goods from anywhere else. Meanwhile, there is bound to be a fairly substantial rise in prices in this country. Let us face it. Do not let us deceive ourselves or deceive the electorate for electoral purposes, because I am sure that it will do damage.

In the end this remains fundamentally a crisis of confidence. That is why the pound has collapsed. Unless and until confidence in sterling is restored, we shall go on reeling from one economic disaster to another. There is really only one way to restore confidence in sterling and that is to consume less than we earn, and not more. It is just as simple as that. That means harder work and increased productivity; in other words, greater production for equal or less cost. I am sorry, but that is so. I do not see any other way round. Above all, it means greater production of coal, cereal crops and livestock.

It also means assured supplies and assured markets. Therefore, we must get ahead and rebuild and revive the sterling area by every possible means in our power. This involves at least the effective co-ordination of monetary policies, not the sabotage of monetary co-operation by unilateral action on the part of the British Government without even prior consultation with the Dominions, much less than any of the Governments of Europe. It involves also some planning and investment in the basic industries on an international scale; and it involves some extension of the preferential system.

That is what we did try to get at Strasbourg, and we 'thought we had succeeded. And that is what the Government have gone so far to sabotage, because nobody now believes in their desire for economic co-operation either in the Empire or on the Continent of Europe. Indeed, the Governments of the Continent of Europe are actually planning a conference, to be held apart from us, to decide what retaliatory action they can, and perhaps must, take against us on account of the extent of our devaluation.

The present Government does not seem to me to be the one to get us out of this mess. I say that with all the good will in the world. They are irretrievably committed to the sterile policy of nationalisation with which the Leader of the Opposition dealt so well today; to a rigid high cost economy when the supreme need is for flexibility; to a plethora of direct physical controls which are the most difficult and clumsy way of making economic readjustments; and to a level of public expenditure and taxation which deprives everyone of incentives to real hard work.

I am constantly asked by hon. Gentlemen opposite, and by other people, for a constructive policy. I always reply that it is not the business of an Opposition to produce a constructive policy. A lot of people also tell me that it is inadvisable for an Opposition to produce a constructive policy even if they could. [Interruption.] I must say that I have sat on the opposite side of the House quite often supporting a Government against the Labour Party when hon. Members opposite were the Opposition; and, far from having a constructive policy, in those days there was absolute bedlam on these benches. One could not make head or tail of anything they said. No two of them agreed about anything.

However, I have now achieved a constructive policy. It is a perfectly simple one, and may be expressed in one sentence. It is to defeat the present Government at the polls before they have completed the ruin of this country.

8.30 p.m.

Photo of Mr Richard Crossman Mr Richard Crossman , Coventry East

I have had the privilege of listening to two of the most entertaining speakers from the Opposition side—the hon. Member for Oxford (Mr. Hogg) and the hon. Member for East Aberdeen (Mr. Boothby). There is one difference between them. The hon. Member for East Aberdeen, like the hon. Member for East Coventry, is somewhat eccentric. I would say to him that he will stay a back bencher for a long time if he is so constructive in his policy. He upbraided the Chancellor for not taking his view on Bretton Woods, but there were one or two people on his side of the House who did not share his view. There has hardly been a single one of the issues on which the hon. Member has upbraided the Government, on which he has got his own party to take his view.

I believe in European union, as he does, on a definite planned basis. I watched at Strasbourg the fascinating spectacle of the orthodox Conservative economist voting down the hon. Member for East Aberdeen when he had brought forward suggestions which were a little too Left-wing in tendency. I suspect that if things really came to a head and something serious was done in Europe, the hon. Member for Chippenham (Mr. Eccles) would be the influential party there and the hon. Member for East Aberdeen would make the entertaining speeches.

Photo of Mr David Eccles Mr David Eccles , Chippenham

Perhaps the hon. Gentleman will remind the House that the one occasion on which I voted against the hon. Member for East Aberdeen was when I was against devaluation and he was for it.

Photo of Mr David Eccles Mr David Eccles , Chippenham

That is so. It is all on the record. As rapporteur of the Committee on Economic Questions, I should like this opportunity to say so. On the floor of the Assembly I had to take the side of the majority; that is to say, I was against devaluation. Some of the things which I understand were said by the President of the Board of Trade today when I was not here are so disgracefully wrong that I shall seek an appropriate opportunity to reply to them.

Photo of Mr Richard Crossman Mr Richard Crossman , Coventry East

I do not want to detain the House with a long controversy about Strasbourg, where I was not a member. If it is true that the hon. Member for Chippenham never voted or spoke against anything progressive proposed by the hon. Member for East Aberdeen, he is in grievous danger of coming to the position where he also will be regarded as a danger on the Tory benches.

I turn to the remarks made by the hon. Member for Oxford. He was most orthodox. He summed up the Tory policy as: jettison Socialism and trust our leader. On the other hand, he made one remark with which I agree profoundly. Indeed, it caused me to become the subject of the most witty remarks of the hon. Member for West Bristol (Mr. Stanley). He said that he thought that devaluation was a defeat. I held it on the day it occurred and I hold it today, to be a defeat. I appreciate that the Chancellor of the Exchequer cannot say that he was pushed off, but everybody else knows that he was.

But I say to hon. Gentlemen opposite that it is most peculiar for them and for the forces they represent to talk about being pushed off sterling and to be indignant about it, if we consider the rôle which they played in their political speeches during the summer. We heard magnificent language this afternoon from the right hon. Gentleman the Member for Woodford (Mr. Churchill), who said that he laid off his vicious attacks on the Government as soon as the Washington Conference had started. But the crucial period for confidence in the pound was in May, June and July—the period when the Tory campaign of vilification about weary Willies and about a bankrupt country was in full action.

I may say that the right hon. Gentleman the Member for Woodford knew exactly what he was doing when he went to Wolverhampton and stood at the rostrum and made a number of remarks which I appreciate are perfectly fair in party politics in normal times. [Interruption.] In the view of hon. Members opposite they may be true, but there are times when saying that what they think to be the truth is—[Interruption.]. All right. Let us be clear. Whether they thought it to be the truth or not, they realised at the time that by saying it in that form, they were destroying confidence in sterling.

It ill becomes them, therefore, to be indignant about our devaluing the pound when they played a subsidiary and dishonourable part in destroying world confidence in sterling. [Laughter.] Hon. Members opposite may laugh, but anyone who has studied the American Press in June and July will know that their speeches were reproduced in banner headlines all over America. For instance, the famous speech by the hon. Member for Chippenham in the Debate on the Budget in which he advised the Australians and New Zealanders that they would do well to make a separate arrangement with Washington because there was a Socialist Government in this country was given great prominence in America.

Photo of Mr David Eccles Mr David Eccles , Chippenham

I remember distinctly what I said. I said that if we went on allowing our reserves to get lower, and if the Government did not take steps to build up reserves in London, nothing could stop our Dominions, sooner or later, going separately to Washington. What was that but an appeal to the Government to do something to prevent the break-up of the sterling area? Every few months that break-up comes nearer as the result of their wretched policy.

Photo of Mr Richard Crossman Mr Richard Crossman , Coventry East

The hon. Member's so-called correction confirms my view. When a man of his position in the financial world speaks in that way, it is reprinted in America. Whatever he intends, it is taken in one sense alone.

Is it or is it not a fact that some hundreds of millions of pounds of funk money were moved out of this country during the summer? Is it not a fact that the people who had that money are the people who support hon. Members opposite and not us, and that they were encouraged by the tone of the speeches of hon. Members opposite to consider that in their own interest they would be well advised to get their capital out of the country. Did not that add to the lack of confidence in the pound? Then hon. Members opposite say they are indignant that the Government have been driven off the pound. That is not a very honourable thing for hon. Members to do. I agree, it is party politics, but if we are sitting as a Council of State we might have a look at the economic treason which has been committed, and we might as a House of Commons judge who are the people responsible. We heard from the hon. Member for Oxford the suggestion that this was a Dunkirk and that after a Dunkirk we wanted a change of Government, apparently a change to the people who were partially responsible for the defeat. That will not do. Maybe it was a Dunkirk, but after Dunkirk you do not select for power the people who were partially responsible.

Another point was made by the hon. Member for East Aberdeen, a point which caused some embarrassment in Aldershot. He said that there was an alternative to devaluation. How embarrassing that was! He said one could have retained the value of the pound by cutting off the head of the social services and offering it on a platter to Mr. Snyder. I put it in more vivid language than he did, but that is what it comes to. He said we could sacrifice the social services in favour of the pound or vice versa. I give him credit for integrity in admitting that that alternative was there.

I would also ask him whether he is quite sure that all the gentlemen in the party to which he still belongs, faced with that alternative, would have made the decision of the Chancellor of the Exchequer. Is he quite certain that the right hon. Member for Aldershot (Mr. Lyttelton), faced with that decision, would not have said, "I will make the big sacrifice. I hate doing it; it hurts me more than it hurts you, but when it comes to the point I must sacrifice the social services because I am looking after your interests in saving the pound." Are we quite certain that the right hon. Member for West Bristol would not have tailed along and said, "I do not actually agree, but we have to do it." Is he quite sure that, faced by the decision revealed by the hon. Member for East Aberdeen, right hon. Members on the Front Bench opposite would not have cut off the head of the social services and said to Mr. Snyder, "We have destroyed the welfare State. Please, let us have our pound."

The hon. Member for Chippenham said that if devaluation had 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,"—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, c. 1257.] that would have been all right. But what are the sweeping changes which would make every banker in the world believe that the new rate would be held? The hon. Member for East Aberdeen knows the answer, but he will not be able to give it in his election speeches. It is that there is only one thing which would make every banker in the world think that the rate of $4.03 to the pound was O.K., and that was the sacrifice of the welfare State of this country. [An HON- MEMBER: "And of nationalisation."] Yes, and nationalisation; and also full employment.

In these last two days I have heard a great deal from hon. Members opposite to the effect that it is all owing to Marshall Aid that we have full employment, but no one has pointed out that countries with an equal amount of Marshall Aid have a large amount of unemployment. Does the hon. Member for Chippenham propose to follow the policy of the Belgian Finance Minister which he found so compatible at Strasbourg? Belgium has achieved 16 per cent. unemployment and the biggest gold reserve in the world. In Western Germany also there are 1,300,000 unemployed. In Italy 2,500,000. The Opposition say that it is due to Marshall Aid that there is no unemployment in this country. No one on this side of the House will deny that without Marshall Aid we should have heavy unemployment, but what I am saying is that even with Marshall Aid most of the countries of Europe have heavy unemployment because they have free enterprise Governments.

Belgium, Western Germany and Italy have chronic unemployment and yet they are receiving large amounts of Marshall Aid. Marshall Aid is not a safeguard for a people against unemployment if they have free enterprise Governments on top of them. I am not pretending for a moment that hon. Members opposite desire unemployment. I do not think that anybody opposite desires a cut in the social services. They do not desire either of those things, but they do not believe it is possible to do without them. There is not the faith in anyone opposite that it is possible to work a full employment policy. That is why they are not Socialists. Man after man over there would like it, if it were possible but, they say, "Oh, my dear, it is not possible; we must face reality." We ought to get quite right what they really think. It is quite wrong to say they want full employment to fail. They would just allow unemployment to happen because they do not believe the alternative to it is anything but Socialism. That is their position. If they are not Socialists they cannot believe in full employment, they cannot believe it is possible. They have no faith. Look at them. Do they look as if they had any faith, as if they believed in a miracle?

I will be quite open; of course this may fail. Of course the job we are try ing to do, the achievement of a full employment policy, demands infinitely more responsibility from the working class, demands infinitely more managerial capacity from the managers, demands infinitely more self-restraint from us all. The policy may fail. The difference between us is that we believe it is going to succeed and they are so certain that it is going to fail that they want it to fail as soon as possible. But they lack the essential courage to go to the country and say, "It is lunacy; full employment is an impossibility."

Some people say that in a side-tone. I think it was the hon. Member for Edgbaston (Sir P. Bennett)—and he really knows for he is an employer—who stressed the cost of full employment and asked if one could afford to pay for it. He revealed his inhibitions about it. It is a perfectly sound point for a Conservative—[An HON. MEMBER: "When did he say that?"]—In the course of his speech this afternoon. Perhaps hon. Members were not listening. He mentioned the very heavy cost incurred by the lack of fear of unemployment, by the new atmosphere of workers who did not have the same doubts about their jobs and who, therefore, have to be given different incentives from those of the old days. Of course, there are a number of employers and a number of people outside who do not believe in the new incentives and are not prepared to make the experiment. All we say on this basic issue is that devaluation, in the wonderful words of the hon. Member for East Aberdeen—who has surely let the cat out of the bag—is an expedient to win time in which to set the house in order. That is all that it has done; it has given us time in order to do that.

Now I will come quite briefly to some concrete proposals for preserving full employment. How does one establish and make sure one can maintain full employment in this country? Let us turn to suggestions about exports to America: I do not agree with hon. Gentlemen opposite who say it is quite hopeless to try to export to America at all because Americans—[HON. MEMBERS: "Who said that."]. The hon. Member for Louth (Mr. Osborne) said it was practically impossible; perhaps his right hon. Friends do not listen to their back benchers, who give the impression that it is virtually impossible to break through the American tariff barrier. I believe that that view is a mistake, for two reasons. First, it is an over-estimate of our importance. The total percentage of the American national consumption we are likely to achieve is .02 instead of .01, and I do not believe that will produce a terrific reaction.

Take the industry in which I am interested. If we can sell 50,000 cars in America it will be an astonishing achievement, but last year the Americans sold five million on the home market. Until we send in enough of any one model that it would justify their setting up a production line, we shall be able to slip in underneath. I think therefore it is possible to be too dispirited about the possibilities of exports. On the other hand, this suggestion that we could and should seek to earn sufficient dollars to pay for all we are receiving in Marshall Aid and to bridge the gap seems to me an insanity and a danger—an insanity and a danger because it means that in the long run we become coolies, sweating our guts out to slip in underneath the higher American standard of living.

As a long-term policy I see that to be a grievous danger to the independence of this country and, I may say, to the future of the full employment policy, and I tell hon. Members on this side of the House at least, that our main aim now should be to use this time to cut imports of dollar raw materials and to switch to other areas as the Minister of Food has already done with food, reducing our imports from the dollar area from 37 per cent. to 12 per cent. No doubt that is far more difficult with raw materials. But I say we should be prepared to pay slightly higher prices outside the dollar world for our imports in order to get a sane economic unit in which we can live and work instead of becoming an appendage of the United States. If we want decent Anglo-American relations we should win a position of independence for ourselves and not tie ourselves to a form of peonage.

That is the first half of what I have to say about the dollar problem. The second half I would put this way. I, too, am alarmed that the Motion refers to the sterling area but does not refer to Europe. There is no reference of any sort to Europe, as though Europe did not exist. That is all very well, but they are also recipients of Marshall Aid. I do not think they were very flattered by the method that, no doubt, we had to use in announcing devaluation. I add this. The House may say that the French do not matter, or the Italians do not matter; but there is one European nation that is going to matter—the German.

Within five years, if we allow chaotic national competition for dollars to dominate the life of Europe, every type of British goods on the world market will be threatened by German competition—and a terrible German competition. I have seen something of the standard of living of Germany. The real wages are under half our own, and already the Germans are able to underbid us and cut us out, not because of the fault of the German workers, but because of the struggle for exports, and because those 65 million people have got to export or die, just as we have. If the two of us are to go in for a race for dollars, undercutting each other, slipping in under the Americans, that will not be sanity. I beg the Government to tackle the German problem before it becomes insoluble. The Germans do not want to starve themselves to beat us. They would prefer some rational planning with us of the export trade, so that we do not have cutthroat competition for the same market. We could have started by nationalising their industries, but that is a long story. Four years have passed, but there is still time to tackle the problem of German competition.

I beg the Government to give us a word about Europe, which has been so remarkably omitted from this Motion, because I believe that the stering area without Europe cannot exist, and that Europe without the sterling area cannot exist. We ought to recognise that in this Debate, because it is necessary that we as a House should repair some of the damage inevitably caused to European feeling by the methods of our devaluation announcement, although it was done in the interests of the sterling area and so of Europe. I speak to the other side of the House as well, because there are many on that side who share my view.

There is one remarkable aspect of this Debate, and that is, that we are all discussing not whether we should have retrenchment or no, but what retrenchment we should have. That is a striking fact, and that is a very serious question, and I want to put one or two short observations about it. There are four sorts of expenditure. There is personal consumption; capital investment; there are the social services; and there is defence. That is about how we can spend. Personal consumption is being cut by devaluation. We have also already limited food subsidies, and, therefore, a big slash has taken place already, and will continue to develop during the coming months, in the personal consumption of the British people. As the Chancellor made perfectly clear in his statement yesterday, the sacrifice is demanded of all alike. Personal consumption is giving its share, and I would say that capital investment will also be cut. We now learn that it is to be seriously reviewed, and some of it cut. About the social services, we also hear that the inessential services will be pruned. There is only one form of expenditure not to be looked at—

Photo of Mr Harold Davies Mr Harold Davies , Leek

Not a word about it.

Photo of Mr Richard Crossman Mr Richard Crossman , Coventry East

There is not a word about it from the Government or the Opposition. That is the £800 million for defence—because the figure will rise to that when the Supplementary Estimates are presented for Hong Kong. Moreover, when rearmament begins, the expenditure grows in the second and third year, rather than the first year, so the defence estimates must rise next year. I say with all seriousness to the Government that if there is to be equality of sacrifice it must be equality in all four sets of our expenditure. There must be the same ruthless analysis of our foreign commitments as there is of our home commitments. There is nothing sacred in them. The Government have a commitment to the pensioners, to the old people, and to the children, as well as foreign commitments to Hong Kong.

Before I decide on priorities I want to hear the case for each of these commitments which can be pruned. Which people can we afford to help? There might be a possibility, in the case of our military commitments, that we are assuming a burden too heavy for this country to bear. If the Government want to retain full employment, if they want to retain the structure of Socialism, they cannot possibly repeat what the Chancellor of the Exchequer said, that there can be no question of a defence cut. When retrenchment comes, it must fall on all—consumption, capital investments, social services and defence.

Photo of Mr David Renton Mr David Renton , Huntingdonshire

Does not the hon. Member agree that there is a further item on which savings could be made, namely, the cost of administering 20,000-odd controls?

Photo of Mr Richard Crossman Mr Richard Crossman , Coventry East

If the hon. Member means that £10 million could and should be saved, I agree, but we are dealing with big savings, savings from £80 million to £200 million, and when we get to these figures we have to deal with these four items. The House will have to make up its mind about the commitments the Government have taken up in regard to our own people, the poor, the children, as well as the people abroad.

If the Government do weigh all this up, I believe that they cannot possibly maintain this principle for a very simple reason, namely, that capital investment in the last resort is, even from a strictly military standpoint, the most important. It is ridiculous to increase armaments and cut capital investment. It is the economic strength of the country which gives us strength in war, and if we do not have a 30 per cent. margin in war we are finished, as we know from the French who took the wrong decision after the last war. I say, in terms of national security and in terms of social interest, that these commitments must be weighed objectively if we are to take advantage of devaluation and the time it has gained to make the building we have begun to construct during the last four years the beginning of a permanent democratic Socialist system.

8.57 p.m.

Photo of Sir Ian Fraser Sir Ian Fraser , Lonsdale

As I have promised to be very brief in view of Mr. Speaker's list, I must deny myself the pleasure of taking part in the extremely interesting debate which has gone on across the Floor of the House in the last hour or so. I will only observe on the general field that it seems to me the sooner a General Election takes place the better for the country, because it is clear that from now on misunderstandings are to be multiplied and divisions created, and that the sense of unity which can do so much to help us out of our difficulties is to be dissipated. Whatever happens in an Election—and obviously I hope my side will prevail and our view become the policy of Britain—it will be better than the period of arguments and controversies which must intervene. The sooner the issue is joined and settled the better for the country and the world.

My intention is to speak for some of our people in regard to whom I have not heard a word said in this Debate. They are the people who live on small fixed incomes, the people who are not manufacturers, managers, salary earners or wage earners. They are the retired people, the old people, widows and pensioners of all kinds, who are compelled to live on fixed incomes. All experience tells me that devaluation is indistinguishable from inflation, however it may be cloaked with words. It is indistinguishable. If we devalue our coins as inevitably as if we cut the edges off them we make them worthless and, consequently, all the things they buy become more costly. There will be, I foresee, inevitable adjustments, just as there have been all through history. Whether inflation is slow or fast, minimal or great, there comes, ultimately, an adjustment of prices to the new level. Before very long we shall find that the standard of living of our people has gone down. That is quite inevitable. I am not arguing that that could have been avoided, although I agree with those who have shown the ways in which it might have been foreseen. I merely say, for the purpose of my argument, that this adjustment will take place and that our standard of living, throughout every grade of society, will go down.

Those engaged in manufacturing, those who own equity shares, those who manage or earn salaries in business, and wage earners generally, will get their compensation and adjustment. In time the equity shares will begin to earn as before in the new currency. Managers and salary earners will get their salaries in the new currency, and so will the wage earners, but those who will get nothing will be those who retired on the old currency, who believed in it. We—and I say "we" because I am trying to get opinion to think about our difficulties; I am not trying to divide the House—will be told that we have let those people down. We shall be charged by them with having let them down. They have saved because we asked them to do so, and they will find that their money is different, that it will be worth less. If we have advocated national saving during the last five years, as I have, we shall appear to many to have let those people down.

Where the responsibility is greatest the people will have to judge. I do not propose to point a finger; I merely want to emphasise that every retired person, every pensioner, Civil Service, ex-Service or local authority, who has saved and bought a few preference shares, which are specially recommended for widows and orphans, everyone who has bought Government stock, not merely recommended for widows and orphans and little people, but positively enshrined and sanctified by special trustee legislation, will be much worse off. I believe they will be 20 to 30 per cent. worse off. The life which they had prepared for themselves, and to which they had looked forward, will be different and harder. I think the Government ought to tell us whether they are aware of this. I am sure the Chancellor is, but I doubt very much whether his followers are aware of the significance of it. They have believed 'the emphasis of the Chancellor's recent speeches rather than his clear and precise words, which could have been listened to or read. They have listened to the emphasis as the public have listened to the emphasis of his recent broadcast, and they have been misled. Let us be clear, however, that this will be what will happen.

We cannot plan for all these groups of the community, although the Government should have taken this into account. For the remaining few minutes of my speech I want to speak for one part of this group—the disabled ex-Service men. I am not going over it again nor am I going to repeat any of the arguments. I am only going to say that in the last year or two a case has been made out, which has convinced some of our people in this country that as increases have taken place in wages, salaries and remuneration generally, equal to something between 80 and 200 per cent. as compared with the days before the war, something should be done for the disabled ex-Service men. The rise in their compensation has been of a very much lower degree, and many people in this country, though not a majority yet in this House, are convinced that there is a case for looking into this question.

If that were so some few weeks ago there is more of a case now. That is the only point I want to make. The British Legion, which represents a considerable body of opinion, approached the Government 18 months ago and asked for an immediate rise in the basic rate of war pensions. We were refused. We realised the difficulties of the country, and we foresaw the events of this last week. We hoped that we might have got recognition of our claim before the rot which we forsaw set in. We, therefore, changed our appeal, and instead of asking the country to give us a rise, which we thought was overdue, asked for an inquiry outside of the Government Department to judge fairly between taxpayer and pensioner on the merits of the case. A considerable body of opinion supported us in that. I only say to those who supported us then, that if there was a case at that time there is a stronger one today, for inevitably in the next six months or year costs will rise. It is our duty to see if possible in advance what hardships there are and see what we can do to meet them.

A Select Committee has been talked of. For that I will substitute now a Departmental Committee. That, as the Minister may know but as some hon. Members may not know, does not mean a committee inside the Ministry such as the advisory committees which Ministers set up. It means an independent committee set up by a Minister, and I suggest that substitution because this House may not be long enough in existence for a Select Committee composed of its own members to complete its task. Therefore, we suggest some committee outside the Ministry but chosen by the Minister to go into this question and have the answer to it.

I make a last appeal. That is how to take this question of how Britain cares for her ex-Service men out of party politics and also how to make it sub judice, so that it does not become a matter for debate on the hustings in the next six months or so. It can be gone into carefully by those concerned in the quiet of the Committee Room, so that they might be ready to present their report and recommendations to the next Government. What I ask for is that serious consideration be given to the suggestion which I have made in my brief intervention in the Debate.

9.9 p.m.

Photo of Mrs Jean Mann Mrs Jean Mann , Coatbridge

I trust the hon. Member for Lonsdale (Sir I. Fraser) will forgive me if I do not continue his trend of argument in regard to the disabled ex-Service men. I have sat throughout this Debate yesterday and today wondering if anything would be evolved that would give a lead to the nation. I find there is nothing. One or two Members have amazed me by expressing themselves in terms suggesting that the Government are delighted at introducing devaluation of the pound. Some have implied that we are almost proud of it. I can assure hon. Members opposite that nothing is further from the facts than those statements. We view the matter with very great trepidation indeed. The reluctance of the Chancellor to introduce devaluation shows how far away he was from regarding it as a triumph. We have felt that it was a necessary step.

Some of us are wondering, party politics apart, if there was some other way out. We have therefore attended the Debate in good number. The benches have been filled almost all the time. We have listened to hon. Members opposite. They know there is a crisis, but if there is a danger to the country tonight, it is that of our people assuming that this crisis is some political quarrel, some eve-of-the-election disagreement. We shall err if we do not get home to our people the fact that the signal is at danger. I almost wish that there was no eve of the election and that hon. Members were free on both sides of the House to join in invoking the aid of the people in saving the country. I am sorry that I cannot agree with the hon. Member for Oxford (Mr. Hogg), who said that the political election speech was quite in order at this time. It really is not. It is up to us to try to evolve a solution.

Have hon. Members opposite a policy on this matter that they can pin to their masthead in the Election? Have they a solution? The right hon. Member for Woodford (Mr. Churchill), for whom many of us have a great regard, although he sits on the Opposition benches, has given us a solution. We might almost have guessed that it would be "set the pound free." It follows "Set the people free." We might also wish that the right hon. Gentleman was continuing as a great leader, free from the politics of the Conservative Party. He is not free, and when he makes pronouncements he makes them entirely from the party angle. He has made this pronouncement. He had expounded to him yesterday the dangers inherent in the policy of setting the pound free, but he was not statesmanlike enough to deal with them. Apparently, at the General Election, the people can get on board the "s.s. Churchill," destination unknown, charts and compasses not required. Just trust the right hon. Member for Woodford. Or they can go on the Stanley float. That is the other policy that emerges. It is not for a fixed devaluation at 2.80 but a floating value. That was the second brilliant suggestion from the Opposition benches.

Then there were the hon. Members for Chippenham (Mr. Eccles) and East Aberdeen (Mr. Boothby), both thoughtful men who very often deviate from the party line. The hon. Member for East Aberdeen told us how he deviated over Bretton Woods, convertibility and non-discrimination and went into the Lobby against the American Loan. I happened to be close on his heels that night in the same Lobby. I have rather a regard for his opinions and also those of the hon. Member for Chippenham. Those two, and only those two, followed the line taken by the Labour Chancellor of the Exchequer.

There was something else which the hon. Member for East Aberdeen repeated. It was his master's voice. He said that there is no confidence in the present Administration. [HON. MEMBERS: "Hear, hear."] Before hon. Members opposite applaud the statement of the hon. Member for East Aberdeen, will they tell us who has any confidence in them? What reason have they ever given any nation to have confidence in them? Why, the hon. Member for East Aberdeen told us that when he went into that Lobby he was deviating from his own party. Where were hon. Members opposite on the night of non-discrimination, convertibility and the refusal to allow discussion about Bretton Woods? What were the feelings of hon. Members opposite? The right hon. Member for Woodford led the party brilliantly in telling his hon. Friends to abstain. Who could have any confidence in that as a token of efficient administration?

The right hon. Member for Woodford says that we should judge by results and that our financial management has been deplorable. What was the financial management like between 1921 and 1938? Was there no American loan? No, but there was an American debt of £900 million, and at the end of about 20 years of so-called efficient administration there was still an American debt of £876 million. Our efficient administrators could only contribute a mere token payment. We came out of the First World War not with a devastated Germany, not with a Germany left with nothing at all and not with a policy of unconditional surrender, but with a Germany still pretty well on her feet and a Germany from whom reparations could be extracted. Contrast the position in which we find ourselves, with a Germany whom we have to feed from our own meagre rations.

Hon. Members opposite are never tired of telling us that there would be 1,500,000 unemployed if it had not been for the American Loan, but they know that there were three million unemployed before the war and they paid back only a small token of the American debt and were still in debt to America, so much so that the right hon. Member for Woodford, following Lend-Lease, described it as the most unsordid act in history. Probably it was, considering that the Americans had no reason whatever for any confidence in the Tory Administration.

Speeches have been made with a view to the General Election. Here is how the right hon. Member for Woodford perorated; he said that all should come and eat at the table, but not all at the same time. That shows that the Tory Party have never changed—all may come to the table, but all may not eat at the same time. Let me give a homely illustration how, as a mother, I used to set the table for tea. My family were sufficiently honest, I thought, to trust them to sit down and partake of the meal I had set. Very often when I came in at night after taking a propaganda meeting, the younger son would ask, "How much did you leave?" I said, "I left fair shares for all, something for every one of you"—usually fruit, one banana, one tomato, each. Then he would say, "Well, there was nothing when I got to the table." The right hon. Member for Woodford, when he said "not all at the same time," reminds me of the years when some were privileged.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

Does the hon. Lady think that if all the depositors in a bank were to ask for their deposits back on the same day, that would be a good thing?

Photo of Mrs Jean Mann Mrs Jean Mann , Coatbridge

I am talking of the national table and of the statement by the right hon. Member for Woodford that we have not all to eat at the same table at the same time. There was a time when I was a Parliamentary candidate for Dundee, and when the right hon. Member for Woodford was the Member for Dundee. It was during those years, when the finances of the country were so sound and so well run that we were bumping into the Geddes Axe and the sending of the pound across the Atlantic to look the dollar in the face—although that was promptly dropped when the 1931 Parliament was returned. I speak of 1922. There were some people who did not get to the table first; they were in the constituency of the right hon. Gentleman. The Geddes Axe was introduced. The unemployed man and wife, who were getting 26s. a week, were reduced to 23s. The children of the unemployed had to get one shilling instead of two shillings. The unemployed girls of the constituency of the right hon. Member—at that time Dundee—were to be reduced from 18s. to 15s. The people of Dundee sent a protest to their Members. They sent telegrams and asked for interviews. All were refused. Dundee would be much too poor to get any share out of that table.

I do not for a moment suggest that hon. Members opposite want unemployment, or that they want to see the standard of living reduced or want lower wages. I can remember the sound, which almost echoes in my ear because I heard it year in, year out—"We do not want to do this, but it is vital in the interests of the nation." That was what hon. Members opposite and their predecessors constantly told us about unemployment and wage reductions, "We do not want wage reductions, but look how India is producing cheaply and how this and that country is producing much more cheaply. We have to lower our standards to allow us to compete with lower standards abroad." They are forced by the policy that I think they would adopt of disregarding the export market and that in turn would cause unemployment in the home market. So this policy would willy-nilly drive us into unemployment and necessarily mean a reduction in the social services.

I am sorry that no one opposite has stated—beyond the ordinary reiteration we get in the Beaverbrook Press about the Civil Service, as if that would be any material contribution—any clear-cut lead as to where they would prune. I can remember reading books about the capital levy and I can remember Labour leaders stating very clearly in books at the time that this country could not support expanding social services if, at the same time, we had to prepare for war. In other words, we could not re-arm and support expanding social services at the same time. I cannot think that that is untrue tonight. I still fear that we cannot afford £800 million for arms and yet support the present social services. I think there will have to be a cut and if there is to be a cut, I disagree with hon. Members opposite, because I feel it will have to be in our preparations for war.

A word I wish to say now may appear insignificant. The Chancellor of the Exchequer, when he came to the microphone, I thought over-emphasised the 1d. extra on our bread. We have been suffering a bread increase month by month in the last six months and housewives have not intimated it, but I have been to many meetings in my constituency and found that the women were not concerned about that 1d. so much as they are concerned about the rapid deterioration in the keeping qualities of the loaf. We are having to pitch out too much bread—one-third of a loaf. Do not tell us that we are over-estimating. A mother with a family of boys and girls must necessarily over-estimate a little to allow for hungry children, and old age pensioners have to try to keep a loaf as long as possible. They pare it carefully and keep it and find the 1d. increase is nothing, but the 2½d. loss caused by throwing out is irritating everyone.

Although the Minister of Food is not present, I am glad that the very efficient Parliamentary Secretary is here. While the Ministry have given lots of hints on how to keep the bread sweet and clean, I say it is quite impossible and that this matter is getting far beyond a joke and that the deterioration has been getting very much worse lately. If the Minister of Food and the Chancellor got together and that deterioration were rectified, it would wipe out that 1d. increase. I hope that in further speeches we may get more of a lead to help the nation than I have been able to give or, I am sorry to say, than any Member opposite has given.

9.31 p.m.

Photo of Hon. John Maclay Hon. John Maclay , Montrose District of Burghs

If I may be permitted to follow the hon. Lady the Member for Coatbridge (Mrs. Mann) for a short time into her domestic arrangements, a privilege which I have never had in real fact, and to look at her table for one moment, I would say that she should think very carefully about the possibility that if everyone came to the table at the same time and the table was not quite big enough or strong enough the whole thing might collapse, with a complete crash, and bring the whole family down with it. That is the danger we have to think about. The hon. Lady knows that, because the gravity of this Debate arises from the acute danger our country is in at this moment.

Photo of Mr William Williams Mr William Williams , Heston and Isleworth

One sits at the table, not on it.

Photo of Hon. John Maclay Hon. John Maclay , Montrose District of Burghs

If the analogy were to be carried further, I should be in trouble about the time I was occupying, so I will resist that temptation.

Arising out of the hon. Lady's speech and some before it, I wish to touch briefly on the apparent belief that the economies to be made in the years to come or immediately, can only come from one or two sources—social services or defence. Is it not just possible that the real economy will ultimately come from freeing the country from the whole Socialist difficulties which have suppressed initiative and put obstacles in the way of industry, That has to be a horribly condensed statement, which sounds like a street-corner remark, but I have not time to expand it. There are other possibilities such as the nationalised industries. One could declaim upon that. There are sources of economy which could possibly do what is necessary without touching the social services or the Defence Services, but it will be an exceptionally difficult job. We have to face it, as the hon. Member for East Coventry (Mr. Crossman) was trying to do today.

It would have been very proper for us to have treated this Three-day Debate as a Council of State. That possibility disappeared with the terms of the Government Motion. Can the Government seriously ask this House as a whole to agree that all their policies which have led us to the present situation are correct? That is what their Motion means, and that is why it has been impossible for us to be a Council of State and why the Debate has been bound to fall into pretty violent party exchanges. I do not intend to indulge in these, as there are one or two immediate points which require examination in detail on a purely constructive basis.

The Chancellor, in his opening speech, gave us almost three columns of HANSARD on the art of salesmanship in North America. It was quite astonishing to me. I have listened to the speeches from the Government side of the House throughout the Debate and I have not yet heard one word from the Chancellor or anyone else on the question of delivery dates. The delivery dates of goods to the United States and Canada is an all-important element in salesmanship. Price, quality, packaging and advertising are extremely important, but I think that most of the industries involved have a pretty good knowledge of that side of salesmanship.

I have been over to the other side of the Atlantic recently. I found that in the case of many items, it was not any of these considerations which was the determining factor; it was that the receiving end could not depend on the arrival of goods when promised. What is still worse, a great many British industrialists and exporters do not dare to try to guarantee deliveries. It must be common knowledge that in a great many ranges of articles the American market is very highly geared. Fashions change very swiftly; there are seasonal markets. Their whole technique has been built up on planned sales campaigns through the year by American retail houses and mail order houses to meet the fashion changes. Unless we can guarantee delivery dates we shall not maintain the market, far less expand it. It is possible that the Chancellor did not make reference to that element because he may have realised that in the great majority of cases the ability to guarantee delivery dates does not rest with our manufacturers or exporting merchants; it rests with those responsible for procuring the raw materials and getting them to the manufacturing centres. In far too many cases today that responsibility is still in the hands of the Government, and not in the hands of the traders who could do the job.

I know there are difficulties in certain commodities, but I believe that the price mechanism working under the profit motive could give effective delivery dates. I accept the situation that in certain commodities there is still difficulty today and that there may have to be an element of allocation of short supplies; but I urge the Chancellor, who is asking great things from the exporters of this country, to see that his own Government and his Government Departments do not fall down on the one thing that can invalidate every other effort of the exporter, that is, interruption of the smooth flow of raw materials to the factories.

It would be wrong to shirk one other issue which has been touched upon very little in this Debate, and that is the question of working hours. I would take one simple illustration. Last week I had cause to go round a factory and I saw a battery of machines producing a type of bootlace which for some reason or other has an absolutely safe and assured market in the United States. Apparently that factory can sell all they can produce of that particular product and export across the Atlantic. Every one of those machines was working at maximum capacity. No amount of ingenuity on the part of the management or the workers, or anything else, could produce a single extra lace in the agreed permitted hours of work.

There is a moral in that. I know that in some industries there is the argument that a five-day week can be as productive as the five-and-a-half or six-day week. But there must be a great many other products which come into the same category as the bootlaces which I have mentioned, where the determining factor is the number of hours which the machine runs, because nothing can make them run faster. It boils down to the question of hours and we in this country have simply got to face that, or else the speeches and broadcasts of the Chancellor are just so much nonsense.

I would like also to deal with certain points in the Washington Agreement. All 10 of the points are obviously capable of very real advantage to this country. I hope some hon. Members opposite who have been making the most astonishing speeches in the country in recent months about our cousins—or whatever we like to call the citizens of the United States—will realise how much these 10 points mean as a contribution by the United States, and how they are trying to meet our problems and difficulties. There is a great deal in these 10 points which, if they are implemented, could carry us forward. They are almost entirely of advantage to us and not to the Americans, at any rate in the short term. The American administration have a difficult job selling some of these 10 points to their people. Do not let anyone abuse the United States when the administration and many others in America are taking the broadest possible view and struggling to convince their people to accept action which at least in the short term, may look extremely damaging to them.

I cannot resist mentioning, in passing, Point 1—overseas investments. I have had this out with the Chancellor before. Can our Government with their philosophies and theories really create the conditions which will make possible overseas investment on a large and expanding scale? I will leave that point at that, because we have had it out before in this House. I happen to doubt it. I hope that the Chancellor or some responsible Minister will explain to the House just how this Government with their particular theories can create the conditions in this country, or in any other country for which it is responsible, which will really make overseas investment possible. That question is most vital and we must know more about it. I hope that we shall know soon.

I take it, Mr. Speaker, that you hope that somebody else will speak before the House rises this evening. Therefore, I am keeping a rather anxious watch on you, but I simply must deal with the tenth point, which refers to provisions for continuing consultation. What I want to say cannot easily be compressed. When I first heard that one of the major results of the Washington Conference seemed to be agreement that there should be provision for continuing consultation, I was acutely interested and excited for the first time about that conference. Whatever the other points may mean in the long run, let us face the fact that practically all of them are agreements to discuss and not agreements to act. Some, I agree, are capable of quick implementation.

If there really had been an effective arrangement made for continuing economic consultation of a close and constant kind between the British Government and the United States, I would have congratulated the Chancellor of the Exchequer from the bottom of my heart. The Chancellor said yesterday: 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 … He said that the Americans would do likewise and send somebody over here.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

No, not send someone over here. These three people—the Canadian, American and the British—will share an office in Washington.

Photo of Hon. John Maclay Hon. John Maclay , Montrose District of Burghs

I am delighted to hear that. I am sorry that I misunderstood the Chancellor's remarks. The right hon. and learned Gentleman said: Similar arrangements will, I understand, be made by the United States and Canadian Governments."—[OFFICIAL REPORT. 27th September, 1949; Vol. 468, c. 18.]

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

Similar arrangements to have someone in Washington.

Photo of Hon. John Maclay Hon. John Maclay , Montrose District of Burghs

I am very glad that we have heard that, because I think that it is a great deal better than having crisscross expert advisers. I most sincerely hope that out of that small nucleus will grow a permanent body, to begin with confined to these three nations, which will be studying steadily and consistently not merely their own problems in relation to the problems of the others but the other nations' problems as well, so that in the development of their policy they will know precisely the effects of their actions on the economies of the other countries concerned.

We have the North Atlantic Treaty. We have recently had the detail of combined administration which is to be worked out day by day. A year or two ago such a state of affairs was absolutely unthinkable. It was unthinkable that we could have in peacetime such an effective getting together of the available forces and the working out of problems. If we can do that in defence matters we must do it in economics. The I.T.O.—the International Trade Organisation—and the Monetary Fund are not the bodies which can do the job which I suggest must be done. Nor can the O.E.E.C., which has been established for a special purpose: it may be a continuing one, I do not know.

We have had from the hon. Member for East Aberdeen (Mr. Boothby) the hon. Member for East Coventry (Mr. Crossman) and others a certain amount of discussion about the need for building up the sterling area, the British Commonwealth and Europe. They have all spoken as if this could be done independently of the United States. That seems to me to be the most consummate nonsense. I believe that Imperial Preference, preference areas generally and at some stages even bilateral treaties may be necessary. Imperial Preference has a most important part to play in the future. Nevertheless, the ultimate objective for this country and for the sterling area can only be some form of extended multilateralism. It is going to be extremely painful in existing world conditions to work through to that, but for the idea to get about that we are trying to build up areas that are in economic conflict with North America would be ridiculous and quite disastrous. We must have American capital investment if we are to achieve any useful objective, but we cannot expect it if conditions are such that America does not understand what we are trying to do.

I am not accusing the Chancellor at this moment of advocating the kind of self-contained units which I am describing. As the hon. Member for East Aberdeen said earlier today, he has paid at least lip-service to the whole concept of multilateralism, even if the policies of his Government appear to make such an objective impossible. No matter who is in power, we may have to go through a period of bilateral, certainly area, trading; possibly preferential trading and certainly Imperial preferential trading it we are going to build a sensible world again.

We must have America and Canada with us, and they must understand what we are doing at every stage. It is no use if, when three-quarters or nine-tenths of the way through the formation of policy, the British Government send a telegram to Washington for the Ambassador to pass on to the State Department. I have had experience at the receiving end of that sort of thing. When we were able to persuade London to give us the advance information so that we could keep our American colleagues advised, and when we got more and more of the key people into the discussions at the very beginning, then we got co-operation with the United States from the beginning to the end. There was no ill feeling and there was time after time agreement on the part of the Americans to take action which appeared in the short term to be damaging to their interests. We can get that agreement again.

I warn the Government and the House that if we try to work out our economic policy apparently in conflict with the United States without keeping them advised of the reasons for what we are doing, some of these things are going to be difficult for the Americans to swallow. We have got to build up a far better form of economic consultation than we have had in the past, and far better than that envisaged by the Chancellor's arrangements in Washington. I hope this Government will actively pursue that matter. I have asked the Government this evening to do certain things. They have a tremendous responsibility. They have asked for a vote of confidence. I do not believe that they are capable in practice or in theory of doing what must be done. Is there the slightest hope of the world having confidence in the British currency while the British Government remains in its present form? It is extremely difficult to believe that is so, and for that and for many other reasons my colleagues and I will have no possible hesitation in voting against the major Motion before us today.

9.48 p.m.

Photo of Mr Thomas Hubbard Mr Thomas Hubbard , Kirkcaldy District of Burghs

We are repidly drawing to the end of the second day's Debate on this economic crisis. We have heard many speeches from right hon. and hon. Members who claim to be experts on economic affairs. Many, indeed, have proved themselves to be very knowledgeable on these matters, but the speeches of some have convinced me that they are not nearly as knowledgeable as they think. I make no such claim; I am not an expert on economics at all. Perhaps my reason for intervening in this Debate is that I have been a victim of the economists in the past. Maybe that is as good a reason as any for intervening in this Debate. I say quite frankly that the problem now facing us is not one which can be solved by the economists; it can only be solved by the producers of this country.

One would almost be led to believe that this is the first time there has been such a crisis in this country, but other Governments have been confronted with the same crisis. It is true that there has been a difference. The crisis which stands out most in my mind is the economic crisis which arose not because of shortages but because of abundance. That was a time, indeed, when miners and others were induced to produce at a greater rate by the threat of unemployment and lowering of wages, knowing at the same time that the quicker they increased production the quicker they would be unemployed. As a man made mountains of coal round the pithead, the quicker he became unemployed. The quicker an engineer produced his motor car, the quicker he became unemployed. The same thing applied to the shipbuilders and, indeed, to engineers of all descriptions.

It is no use saying that they were dealt with kindly. Any miner will remember, as most people engaged in industry will remember, how the position was dealt with at that time. We remember the slash in wages of 1921 from 21s. 6d. a shift down to 12s. a shift. Keeping in mind the present criticisms of the railway services, and the suggestion that they are losing £5 million, it is extraordinary to remember that at the same time as the drastic slash in wages, a subsidy was paid to the then railway owners of round about £40 million, in 1919 to 1920 In 1920 to 1921 a further subsidy was paid, not of £5 million but of about £51 million. As far as the producers are concerned—the only people who can save our country today—there was a slash in wages in the mining industry from 21s. 6d. to 12s. a shift, with a further slash, in wages in the intervening years after 1926 of from 12s. to 8s.

Part of the trouble in the economy of this country has been that in this great industry—the only mineral we have in this country in any workable amount—men have been chased away from the pits through the line which has been followed by so-called economists. I always like to pay tribute to Adam Smith; my constituency always pays tribute to him and will always remember him, and we remember his words on the problem of productivity. At that time we thought he had solved it, but we found that increased productivity meant increased unemployment.

I want to suggest to my right hon. and learned Friend, as a very small but perhaps a very important contribution, that the one way we shall solve this problem is to get closer to the only people who will be able to help us. We shall, perhaps, have to get down to the method that was adopted during the war. The Chancellor has asked those engaged particularly in the exporting industries to accept responsibilities. He must also give them an opportunity of exercising those responsibilities, getting closer to them, finding in the industry itself where improvements in productivity can be made.

The miners of this country are doing a good job of work, but they are beginning to think that there are far too many clean faces at the pithead today. They want to know whether they are all necessary. If, indeed, there is redundancy, they want to know where it lies. These are the people who can give the best advice to the Chancellor of the Exchequer when he sets out to reorganise industry, as he must reorganise industry.

I feel very hard about the speeches we have heard today from the other side, complaining so bitterly about the increased Profits Tax, which my right hon. and learned Friend intimated to this House yesterday. Hon. Members opposite are very disappointed about it, but they are not so disappointed about the fact that still further restraint has been requested from these people whose increased productivity may solve our problems. There could be increases in wages so long as they are bound up with increased productivity, and at no time have I heard anyone say anything other than that increased productivity is the only way in which higher wages would be justified.

I indeed feel at the moment very disturbed about the people on the low, fixed incomes, particularly the old age pensioners. It is not enough to say to the old people that we cannot afford to give them anything extra. None of us in this country, even before the crisis descended upon us, could have lived on 26s. a week as a single person, and no man and his wife on 42s. The Government themselves have accepted that in the regulations for supplementary pensions. However, if the old age pensioners are to have any hope of an increase at all, it lies in an increased productivity in industry, and it is only the workers of this country who can make possible increases in the pension rates.

No matter how we approach this problem, we always come to the same point, that while we certainly need administrators in industry, and although experts in the economy of the country are necessary, ultimately we depend upon the workers who make the goods to be exported, and they are the people who, for far too long, have been too little consulted. I want to suggest very seriously to my right hon. and learned Friend that it is no good to approach problems in industry merely through consultations at the top. We have had increased production in the past, as I have said. On this occasion we have given the producers a guarantee that increased production will not cause them unemployment. At the same time we have to see to it that not only will an increase in production result in higher profits for those who run the industries but will also result in some reward for the workers.

Some good contributions have been made to the Debate, and more will be made tomorrow, but I hope that many of the statements that have been made on the other side of the House will not be taken too seriously, and, indeed, I hope that some on this side of the House will not be taken too seriously. I say that advisedly because today we have this difference, that the people of this country are asked to produce for their own good. We have to emphasise that. They are asked now to produce for their own good, not, as in the past, for the good of those whose only god was profit and whose only country was profit. We have to say to the people today, "You are not producing only for one group but for the good of the country." Let us remember this: we have bought time with devaluation; and if that fails, it will not be only the Government of this country that will fall, but this country that will fall, and all the people in it.

Debate adjourned.—[Mr. G. Wallace.]

Debate to be resumed Tomorrow.