Economic Situation (Government Proposals)

Part of the debate – in the House of Commons at 12:00 am on 26th October 1949.

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Photo of Mr Oliver Crosthwaite-Eyre Mr Oliver Crosthwaite-Eyre , New Forest and Christchurch 12:00 am, 26th October 1949

No, I must go on. Another point is the bilateral agreements. We have so hedged round our economy that it is hardly possible for sterling and the currency of any foreign country with whom we trade to be passed on for the use of a third country. Not only have we crippled sterling as an international currency because of the way in which we have used what is almost a barter system, but we have gone still further. When the Chancellor of the Exchequer said this afternoon that he wished to see a great increase of engineering products go to America, had he thought of what has been the effect of the Russian Trade Agreement and the Andes Pact, by which we have traded the very cream of our products probably for five years hence against the meat and coarse grain that we have already consumed?

I hope that the right hon. Gentleman will bear this in mind. I hope hon. Members opposite when they come to the House and when they make speeches in the country, and say it is easy to shift our exports, will remember that they have already traded the most readily transferable of the exports of this country for raw materials which we have already received and consumed. We have still to pay for them.

That is the sombre picture. It is not one that can be changed overnight. But the industries of this country have to bear the frightful burden of sending unrequited exports abroad against wartime sterling balances that in reality have never been earned by the countries concerned and, at the same time, the frightful burden of meeting the demands of other countries who have supplied us with meat or coarse grain and can now make demands upon our productivity. That is the picture we must face. Can it be any wonder that sterling is not an international currency as a result?

Perhaps the most illuminating point is that, as I understood it, the Government said that by devaluation to two dollars 80 cents a final step had been taken and no further devaluation was possible. In their statements in this House the Government said that they were satisfied that, if anything, they had over-devalued and that sterling would tend to rise. Yet, if one takes the dollar premium stocks in America, sterling is already again at a discount. I am very happy to tell the House that, whereas before the Prime Minister made his statement about cuts, sterling had fallen on these dollar stocks to two dollars 47 cents, since that statement it has risen to two dollars 65 cents. It has made up about one-half of what it had fallen below the official rate. But even if we can take some comfort from that, it is equally a measure of what the Americans think of the effectiveness of these cuts and the trust that they think can be put in sterling, that even after these few weeks sterling should be at a 5 per cent. discount over there already.

I should also like to draw the attention of the House to the value of the pound at home. We have heard a lot of arguments this afternoon about what is its real value, but in fact there is no value to the pound at home. There is hardly any single transaction in which anybody indulges from day to day in which subsidies, Purchase Tax, levies or some other consideration do not make the value of the pound in relation to that transaction completely spurious. I think that is shown very well by the present overall situation. Never have there been so many inflationary deposits in the banks. Never have Government securities fallen so far. Never has the Government rate of interest, set arbitrarily, differed so widely from the real rate as shown by market quotations. Wherever one looks, one can see that the pound, instead of being the proper and natural basis on which life can be led and transactions conducted, is now looked upon as a purely arbitrary symbol in the arbitrary hands of the Government.

Much has been said about food subsidies and incentives, but surely until the Government release the pound to the extent of doing away with what I call all these "phoney" concomitants of trying to erect a false economy, and until they bring back the pound to mean something in the hands of the wage earner and every other section of the community, we will never get any further in building up confidence and defeating inflation.

The Government have had four years in office. They were full partners during the war. They knew all the circumstances and all the difficulties. In 1945 there was no factor of the post-war difficulties in which they stood in any more ignorance than Members on this side of the House. They have produced one economic crisis after the other. They have tried to shift the blame recklessly according to whatever might be thought possible—that it was the hardest winter; that this was the longest time since the Chancellor of the Exchequer had had a crisis; that never had there been such a demand for dollars. All these factors were foreseen and should have been known by anyone.

A Government, if they are worthy, are masters of events which surround them. It is only when they come down constantly to the House of Commons and have to say that, far from being master, once again they wish to shelve their responsibilities, that they show their true futility. The Government in their wisdom have said that they will not test the opinion of the country. They may go on for a further eight months, but if in that time they do not strive to produce an answer that is worthy of the country, if they do not strive to see that at least those fundamentals of the making of the pound worth something abroad and at home are fulfilled, then they will stand condemned, if not now, then certainly in the verdict of time.