Orders of the Day — Sterling Exchange Rate

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

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Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern 12:00 am, 28th September 1949

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.