Orders of the Day — War Debts

Part of the debate – in the House of Commons at 12:00 am on 22nd November 1949.

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Photo of Mr Harold Davies Mr Harold Davies , Leek 12:00 am, 22nd November 1949

I qualified it; I said "If." Later on I will come a bit nearer the bone. There is something else we must realise about these unrequited exports. I have not the time to work out the involved economic analysis, but does not the issue of unrequited exports increase the inflationary tendency in the country? I think it does. We are continually sending them to discharge sterling war debts. "The Times" of 21st August, 1945, put the matter in a nutshell: The possible need for transitional financial assistance from the United States will arise in large measure from the arbitrary and accidental way in which the financial burdens of the common war effort came to be distributed and the case is strong for some readjustment recognising the principle of ' equality of sacrifice ' laid down by Mr. Roosevelt and permitting the change-over from war to peace to be accompanied with the fewest restrictive practices and the highest commercial freedom and productive efficiency. This naturally brings me to point 13 of the recent Washington communiqué dealing with sterling balances. The most encouraging passage in the entire communiqué was—or was it?—I put that qualification in, that the balances were frankly described as the result of payments made by Great Britain "in the common war effort." There is a frank and generous recognition of that on the part of the United States of America. Congressman Christian Herter came to Europe and made the famous Marshall Report, which he drew up after his Committee's tour of Europe, on 1st February, 1948. Congressman Herter's report confirmed this general thesis of mine. In his report dealing with England's trouble, Congressman Herter called for a war debt conference and paid a remarkable tribute to Britain, a much greater tribute than we have had paid by hon. Members opposite. Four brief passages of the Herter Committee's report are very relevant. The report says: For well over a century and until the recent war, the pound sterling was the monetary unit for carrying on a substantial part of the world's multilateral commerce. This activity has languished since the war because of the inconvertibility of the pound sterling and attempts to revive it by use of the dollar, however flattering, have been unsuccessful. The dollar can probably never take the place of the pound sterling in world trade because the United States may never be an importer to the same relative extent and on as world-wide a basis as the United Kingdom. He then pointed out that the sterling balances hung like a millstone round the neck of the British economy and he called right away for a distribution of the burden and suggested that the United States must assist in calling a conference and participating in the solution, perhaps by providing the means for converting some of the sterling balances into dollars as an inducement to Britain's creditors to make substantial reductions. Even the Herter Committee recognised that the dollar could never quite take the place of the £ sterling because of the unique position of the sterling area, and of Britain in particular, in world economy.

Have we used our bargaining power enough when discussing these sterling balances? The very fact that we import four-fifths of the world's butter, half the world's egg production, half the world's cheese and half the world's tea—I could give other examples—show that we are in a strong position. Have we used that position as a buyer in world affairs to force the world to face the public enterprise of the Second World War against Fascism and to try to get equalisation of the burden amongst the ex-belligerent countries of the world? I think not.

There may be some danger in Herter's suggestion about the dollar credits, because I believe that if we allowed our sterling balances to move over completely into the dollar area and be credited by dollars, there would be a demoralisation of the pound and we should also lose future markets. I do not think we should do that. I believe that another approach to this problem can be made, and I believe that our Government, whatever may be said elsewhere, have a strong bargaining power which they have not yet been prepared to use at the international conference tables of the world.

I have two other points to make and then I will leave the matter to other hon. Members to take up. Walter Lippman, in a famous article on "Liquidating the British Crisis," suggested that the United States should directly discharge these war debts to countries such as India. In my view a war debt settlement is needed between America, the Commonwealth and Britain to reach an agreement to enable sterling to be freely convertible for current transactions. There may be a danger in the Lippman suggestion. I ask the Economic Secretary whether he considers that this solution would be a selling out of the future of our heavy capital industries in those areas? Does he believe that if we did this it would mean that we should lose markets in areas which hitherto naturally linked up with the sterling area?

Finally, I believe that a co-ordination of economic policy within the Commonwealth is needed. On this issue of sterling balances, I do not think that up to now we have had that co-ordination. I wonder whether the Government and the country as a whole fully realise the absolute or paramount importance of this problem to the economy of Britain? I should therefore like the Economic Secretary to tell the House, if he can, in what kind of mood the Government hope to go into the Washington conference to discuss this problem of the sterling balances, and whether he realises that we have come to the end of continuous appeals to the mass of the people in Britain. We have been moving in a circle; we have been saying to the people of Britain of all classes, "Work harder, consume less, produce more, and we shall solve the problem." Then to our amazement we find that there are forces outside this House of Commons and outside this Government that cannot be controlled—I have given examples of some of them—and once again we are confronted with a crisis which is not really internal but external.

I believe that the great success which the Government have had has probably been due as much as anything to the profound common sense, innate stability and fundamental decency of the mass of British people, irrespective of creed or politics; but if the public are met all the time with some exterior crisis to which, no matter how hard they work or how little they consume there is no answer, I believe that we shall undermine the social welfare State which we have set up.

I regret to be forthright here, but I believe that in some cases there is an attempt in parts of the City—the hon. and gallant Member can challenge me on this matter if he wishes—to use this weapon of "hot" money, this weapon of cross-rates, this weapon of movements of goods, to undermine not so much the stability of the country but the stability of the Government, which have been in power for four years only and which in those four years have done more for the mass of the people than any other Government in history.