I trust that the House will show to me the usual kindness which is customarily offered to a Member making his maiden speech. I know that I am expected to be reasonably uncontroversial, but I should find that very difficult indeed. For example, after having listened to the Minister of Housing and Local Government this afternoon, it would be extremely difficult not to comment on the fact that the 300,000 houses, once an object to be achieved, then a target, has now become a "great hope," and only that.
In the major part of my speech I want to be as fairly "cross-bench" as I can. However, I support most warmly the Amendments moved by my right hon. Friend the Member for Lewisham, South (Mr. H. Morrison) regretting the absence of a well-thought-out and constructive policy in the Gracious Speech.
I want to deal mainly with the problem of the balance of payments, which was discussed last Wednesday. At that time the Chancellor of the Exchequer said that we were facing the problem of a sudden blizzard. A gap of something like £500 million to £600 million had emerged in our balance of payments. That was the kind of figure which we could expect in 1952. The solution which he advanced was one of cutting imports and, to a lesser extent, the expansion of exports. I believe this to be a totally inadequate approach to the problem. It conceals, or at least fails to examine, the fundamental world conditions which have caused this crisis and which, as far as I can see, will cause yet another economic blizzard another six months hence unless some very strong and firm decisions are taken by the Government.
Let me begin a more fundamental diagnosis of the problem which the Chancellor put to us on Wednesday. We are faced with a double crisis—the balance of payments of Great Britain has gone awry, and the balance of payments position of the whole of the rest of the sterling area has also got into difficulties.
In the case of Great Britain, the fact which seems to me to have been completely concealed, or had insufficient regard paid to it, is that the main cause of this position is that, in the first nine months of this year, our imports cost something like £2,900 million compared with £1,900 million in a similar period last year. That is a rise in the cost of imports of about £1,000 million, but a rise in terms of volume of only about 14 per cent. Therefore, in adjusting our economy to the movement in the rest of the world, we are faced with a sudden demand, a sudden bill, for another £1,000 million to be paid by this country—and for nothing much more in terms of volume. That is the position in Great Britain.
The position in the rest of the sterling area has hardly been discussed in this House, but, of course, we are in the position that the rest of the sterling area is also in debit balance with the dollar area. The effect of that is shown in the depletion of our gold reserves. Why is this happening in the rest of the sterling area as well as in Great Britain? We must remember, first, that about one-third of the income of the rest of the sterling area comes from four commodities—rubber, tin, jute and wool. It is in those commodities that there has been the greatest fall in world prices in the last few months; and it is those commodities particularly which have suffered from the ending of United States stockpiling.
When we add to that the effect of rearmament, we have the greatest part of the explanation of the debit balance of the rest of the sterling area, which has got into debit balance primarily because of changes in the prices of raw materials. The net result of all this, if we take the present financial crisis which is affecting this country and the sterling area, is that two-thirds of our adverse position today is due to this change in the terms of trade.
I should have thought that in these circumstances the speech of the Chancellor of the Exchequer would have dealt with the world position and its impact on this country. I was expecting—and I am sure many other hon. Members were also expecting—that we would have in this debate some indication of the discussions on materials and supplies which, for example, are now going on in N.A.T.O. I was expecting some words about the International Raw Materials Conference. I was expecting to hear what is happening about the Commodity Boards, and to hear something about what the Government have in mind in regard to the discussions with the Commonwealth Finance Ministers when they meet in London in January.
The fact is that Britain and the whole sterling area is in debit balance, not because of profligacy on the part of Great Britain, but because of the changes in world prices, capricious movements in world prices and stockpiling. Not one word about these matters was said by the Chancellor of the Exchequer. I suggest that the Government have come here quite unprepared and without any policy, because they have given no indication whatever of how they are going to deal with the need for international action in order to help to keep this country out of the "red." I believe that without this international action there will be another enormous crisis in the internal economy of this country.
I am a supporter of the late Government's target of £4,700 million to be spent on re-armament. I am not advancing my own ideas of measures to meet the world situation as a means also of cutting down our re-armament programme. I want measures so that we can re-arm up to that full limit.
Why is it that there is this enormous problem of the capricious movements in the terms of trade and raw materials prices? It is, in fact, more fundamental than that; it is the problem of the weight of the United States in the world economy. I suggest that the effect of this giant in the world economy on the smaller countries is now so enormous that the slightest capricious movement in the amount of trade between the United States and the rest of the world will continuously and repeatedly throw us into the "red" at an unexpected moment, unless something is done on an international scale to keep the flow of dollars to the rest of the world on a more even level.
What is the weight of the United States in the world economy? I think the figures are insufficiently realised. To some extent, we have been living in Cloud-Cuckoo-Land so far as this issue is concerned. The weight of the United States in the world economy is enormous. Even in 1929, when some of these international comparisons were made, it was true that the national income of the United States was as high as that of 23 other major countries of the world combined, and, of course, they included Great Britain, France, and even the Soviet Union. I repeat that already in 1929 it was as high as that of 23 other major foreign countries combined.
Indeed, the history of economic activity in the rest of the world between the wars can be traced quite simply as the ebb and flow of dollars outwards to the rest of the world in international payments in which the United States was concerned. If there was a certain withdrawal of dollars, there was unemployment in the rest of the world; with an even flow, there was the maintenance of a higher level of employment.
But now the situation is even more alarming. May I give some figures which have a bearing on our present position? The United States today is consuming over half the world supplies of copper, lead, zinc, tin, and aluminium, and its national income is going up at such an enormous rate that, instead of being half of the world economy, it is probably now somewhere between 50 and 75 per cent. of the whole world economy.
The result is that, if we have a slight proportionate change in the next 12 months in the flow of dollars outwards by international purchases in the dollar area, the whole sterling area, and Great Britain in particular, may face another economic blizzard which may amount almost to wrecking our economy. The position, therefore, is that the size of the gold reserves which would be needed to enable us to balance out over the year is so enormous that we cannot expect the British economy to be viable in the world in present circumstances so long as there is no even ebb and flow of dollars to the rest of the world.
When we add up finally not only the fact that the weight of the United States is so enormous in the world, but the further impact of our re-armament on the prices and supplies of raw materials, and particularly of non-ferrous metals, which are going to be very short indeed, we can see that in six months' time, if we have another movement or change in the flow of dollars, plus re-armament and world shortages, we shall be faced in this House with further demands from the Chancellor of the Exchequer for enormous cuts in our imports and the gravest danger to the whole of our economy.
The final point, before I come to my own solution of the position, is this. We are faced also with the problem that the whole sterling area is in danger of breaking up. It is already true that India, Pakistan and Ceylon are conducting the financing of a great amount—indeed, a growing amount—of their trade through direct relations with the dollar area instead of through London, because they do not rely on the sterling area building up sufficient dollars and gold to maintain economic stability in all emergencies. In the course of last week we have had some details of the Copland Plan which is now being discussed in Australia as a possible means of Australia contracting out of the sterling area and maintaining direct relations with the dollar area.
On all these counts, I believe that we are in a situation which is fraught with great danger for the whole of the sterling area. The danger lies in the slightest movements in world purchases by the dollar area, further movements of world raw materials prices under re-armament, and finally the prospect that the sterling area will rot from within because of these dangers, and a continuation of the trend which we now see in India, Pakistan and Ceylon in building up their own dollar reserves.
What is the solution for all this? I said earlier that I honestly expected the Chancellor of the Exchequer to come to this House with some details of what is going on in the International Raw Materials Conference and in N.A.T.O., and to tell us what, in fact, he is going to talk about in the meetings of the Commonwealth Finance Ministers, because the only possible solution, first of all, is to get world raw materials under control. That is the only possible thing to do; otherwise we shall be faced with these cuts in this country again within six months. The first solution must be to improve the stability of the prices of raw materials and to provide a flow of raw materials for the different re-arming countries of the world—but it must be a steady flow and at reasonable prices. Otherwise, we shall be in chaos.
There is a second solution which personally should like to offer in all humility. To have a buffer against any movements at all, we should need an enormous gold reserve in this country which we have not got. A slight proportionate movement in the dollar flow makes an enormous difference to the price or earnings of our sterling area imports and exports. I believe the second basic solution is an Atlantic payments union. I believe that in the coming years we can deal with international payments in the sterling area only if we advance to the United States the idea that we must in some way link the sterling and the dollar areas in some such Atlantic payments union which will give us a buffer, with a certain supply of dollars in addition to any gold reserves we have, and will enable us successfully to breast the waves of any crisis of the kind we have been facing repeatedly in this country over the last few years.
I support the Amendment moved by my right hon. Friend the Member for Lewisham, South, regretting that the Government have not given to the House any indication that this is a problem facing this country. In his speech on Wednesday last, the Chancellor of the Exchequer talked about these developments in world trade which cause crises in this country. He said:
For an exposed island living, as we do, upon imports, they are our normal pattern of life, like our weather, or like the seas which gird our shores, now rough now smooth.
And here is the significant sentence:
We must always be ready at very short notice to make the required changes in our economic rig."—[OFFICIAL REPORT, 7th November, 1951; Vol. 493, c. 195.]
With great respect, what humbug that is. In face of the economic blizzards which can hit this country owing to the weight of the United States in the world economy and to some capricious change in its economic activity, it is going to be
impossible, except at the sacrifice of the whole of our standard of living, to make what he calls
the required changes in our economic rig.
The Chancellor's speech, I believe, shows no understanding whatsoever of this fundamental problem which is facing Great Britain and the whole of the sterling area.
If I may have one more dig at the present Government, I would point out that the situation was more than bluntly revealed by the Foreign Secretary when he made his well-known faux pas on television over the famous Tory Party graph on the Cost of Living which was used during the General Election. Anyone who reads the "Economist" this week will see how that graph has been corrected by people who understand statistics. It shows, in fact, that prices of raw materials were levelling off before Korea and have since shot upwards owing to re-armament, whereas the Foreign Secretary was telling his television public, "You can see that the rates of increase in world prices have been exactly the same ever since 1945."
He did not understand; he did not know. He paid no regard to the fact that prices were levelling off very nicely before Korea and that re-armament has now pushed them up to a sudden increase in the gradient of the curve. Those are two pieces of evidence. I do not believe the Government understand fundamentally that this is the problem facing Great Britain—the enormous problem of increased world prices. They have certainly come to this House with no solution for it in the past few days.
I want to end on this note. In pleading for an Atlantic payments union and for drastic top-level international action on the question of raw materials, I am not disregarding the necessity for combating inflation in this country. That, of course, must go hand in hand with whatever other action is taken; but to combat inflated prices, the kind of cuts which the Chancellor has proposed in the House during the past week are no solution whatsoever unless something on the lines I have indicated regarding international action is pursued.
I am in abysmal ignorance of what are the Government's plans on this topic in the coming months. I believe it is monstrous that we are to be sent into Recess without knowing before we depart whether the Government have any plans for something which they must in any case tackle while we are away. I believe that this international action is something on which the whole prosperity of this country, indeed the survival of the British economy, depends in this new and economically hostile world. I have yet to be convinced that the Government know and realise the fundamental nature of this problem, or that they have any solutions for meeting it.