Debate on the Address

Part of Orders of the Day — King's Speech – in the House of Commons at 12:00 am on 8th November 1951.

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Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet 12:00 am, 8th November 1951

It is a great pleasure to have the opportunity of congratulating the hon. Member for Anglesey (Mr. C. Hughes) on his maiden speech. I think everyone will agree that he spoke with great clarity and with obvious sincerity on problems which are of immense importance and also on questions which particularly affect his own division. He is very fortunate to be able to represent in this House his native town. I am sure I speak on behalf of everyone in the House when I say that we look forward very much to hearing from him further contributions of such quality.

Today's debate has ranged over a number of subjects and brought in many new topics. I want to turn to the subject of the speech of the Chancellor of the Exchequer yesterday afternoon. I want to return to the question of Britain's economic position.

We are at the moment facing the third balance of payments crisis we have had to face in five years: 1947. 1949 and 1951 have provided us with a series of balance of payments crises, the third of which is in some ways the most serious, because it comes last. Devaluation, which was a remedy forced upon the Government in 1949, cannot be carried out again. That solution, that remedy or that palliative, has been used once. It cannot be used again. The third crisis is, by the very fact that it comes on top of two previous ones, bound to be more serious.

It is also more serious for this reason. Previous crises came at a time of instability in world trade and, particularly, instability in the American economy. It seemed that when the American price level was moving upwards, we had a cost of living crisis in this country. When it moved down, we had a balance of payments crisis. That is what happened in 1947 and 1949. Yet this crisis has arisen at a time when the American economy is relatively more stable. That is alarming. What is also alarming is that our problem is not solely a problem of balance between the sterling world and the dollar world, but the problem of the United Kingdom's trading relations and indebted. ness with the whole of the rest of the world.

For all these reasons, it must be recognised that the crisis we have to face now is in some ways the most serious. I must apologise to the hon. Member for Battersea, North (Mr. Jay), for using the word "crisis," but I think that it is the right one. It is true, as the hon. Member for Nelson and Colne (Mr. S. Silverman) said this afternoon, that the demands of rearmament superimposed upon an already heavily loaded economy have much to do with our present difficulties. But it seems clear to me that the taking of our part in the re-armament programme of the West is a solemn obligation from which we cannot depart. We must shape our economy to meet our obligations and not to meet our wishes alone.

The other feature of this crisis which is rather exceptional is the speed with which it has come upon us. The dramatic change in the balance of payments from a surplus of about £300 million to a deficit which is now at the rate of £700 million is really most extraordinary. I think that it is partly due to the fact that we are still living in a period of fixed exchange rates. Just as in the case of the nationalised cotton exchange we get wider fluctuations in prices than we did under the old system, so with fixed exchange rates there will be much more violent jerks and movements in international payments and settlements. But we have for some time to face the problems that are inherent in fixed rates of exchange.

One of the problems is that speculative positions against sterling are liable to be built up very quickly and very extensively. It is not a matter of a few wicked financiers in certain small centres of the world planning the sort of raids on sterling, or on other currencies, as were sometimes planned before the war. This is the activity of traders throughout the world who, suspicious of the future stability and strength of sterling, deliberately take a position against sterling by, for example, withholding payments in the hope of getting a better rate later on.

There are these temporary factors which mean, in the first place, that the swing against us can be particularly speedy but also that drastic action, really determined action, can produce surprisingly favourable results. It is clear that what is necessary at the moment is the strengthening of confidence in sterling throughout the trading world.

For my own part, 1 think that the measures proposed by the Chancellor are the best measures that could be proposed in present circumstances for dealing with this problem. It is obviously a matter for regret on both sides of the House that we should have to withdraw from some of the proposals for liberalising European trade which we hoped to see extended into greater freedom and greater trade between the nations, but it has to be done.

We have to look at the short-term problems. It is all very well to look at the long-term problems as hon. Members have been asking us to do, but in the long term, as 1 think Lord Keynes once said, we are all dead. The point is what is going to happen now. How are we in the next few weeks and months to cope with a very serious and really frightening balance of payments problem?

The first step is to reduce imports. As I understand it, the import cuts are very much on the lines of what would have been introduced by the late Government had they been returned to power at the General Election. But there are other measures that we must introduce. Our main problem, in order to increase confidence in sterling, is to grapple with the problem of inflation in this country. That is still our greatest problem.

There seems to me to be four main ways of doing it. We must produce more: we must save more; we must borrow less and we must spend less. I will take first the question of production. We cannot ever-emphasise or exaggerate the importance of increasing production as a means of combating inflation.