Financial and Economic Situation

– in the House of Commons at 12:00 am on 30th January 1952.

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4.26 p.m.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

I beg to move, That this House, recognising the peril to the security and economic stability of the country caused by the continuing fall in the central reserves of gold and dollars, which results from the adverse balance of payments, agrees that measures adequate to halt the downward trend and to rebuild those reserves must be urgently taken in all matters where action would benefit, directly or indirectly, our overseas balance and the strength of sterling. I move this Motion, which stands in the name of the Prime Minister, some of my right hon. Friends and myself, formally, as I made a very full statement yesterday and I do not suppose that the House will wish to hear me again.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

On a point of order. May I ask your guidance, Mr. Speaker? Towards the end of the statement which the Chancellor made yesterday, he referred to an Order which the Ministry of Labour were going to make. As that Order is not yet available in the Vote Office, may I have your guidance as to whether, in the course of this debate, we are to cover the whole range of manpower proposals, or whether there is to be further time for a debate on manpower issues?

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

It is difficult to give a Ruling in advance, but I should myself say that, if the hon. Member speaks of manpower in relation to the particular Motion which is before us, namely, the difficulties with sterling, such remarks on manpower would be in order.

4.28 p.m.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

As I listened to the Chancellor of the Exchequer making his statement yesterday—largely factual in character, perhaps a little flat in tone, restrained and sombre—I could not help once more contrasting it, as I did when the right hon. Gentleman spoke in November, with the speeches which we used to hear from the then Conservative Opposition before the last Election, with the speeches we heard during the General Election, and even with some of the post-Election speeches which his right hon. Friends have been making.

I should not be surprised if some of my hon. and right hon. Friends dip into the positive treasure house of quotations which exists, but I shall content myself with just a few gems. The right hon. Gentleman the Prime Minister, going back as far as the 1950 General Election, said: I am sorry indeed that Lord Woolton is not looking after our food, as he did in the war. We should have a better diet now if he were, and at about half the administrative costs, Cheap and abundant food is the foundation of our strength. It will be the foundation of our policy. … I am sure that the Socialist policy of equalising misery and organising scarcity has only to be prolonged to be fatal to our British island. It is one of our criticisms of the Chancellor's proposals that there is a substantial measure of inequality in the burdens which they impose; but I can compliment him unreservedly on the progress he is making towards organising scarcity.

At the same Election the "Daily Graphic" quoted Lord Woolton himself: Lord Woolton gave this pledge to the nation yesterday. 'When you return a Conservative Government, you can rely on it that the cost of your food will not go up. I promise you that you will have a greater choice, better variety but no higher prices.' Coupling that with what the noble Lord said at the recent General Election: We need a better diet and I believe that we can get it. I must say that I thought the Chancellor of the Exchequer was really a little unkind to use the very word "variety" when he was speaking of the effects of the imports cut.

I could not help wondering, when reading the report of the broadcast that the Chancellor made last night—I did not have an opportunity of listening to it—just what the effect would have been if he had spoken those words or made that broadcast at the time of the General Election, instead of Lord Woolton. I say with some confidence that the effect on the result of the Election would have been substantial.

So far as the utterances since the Election are concerned, there are these echoes of previous statements. The Leader of the House enjoyed himself early in January. He said: Let us together hack our way through the wood and the undergrowth which Socialist neglect has allowed to grow. We now know our difficulties, and knowledge is half the battle. I must say that the Chancellor generously admitted that nobody who listened to my Mansion House speech could have doubted that whatever Government were returned to power, an ugly situation would have been bequeathed to them. So far as Socialist neglect is concerned, we now have the new doctrine that the position has been getting worse for half a century.

I understand the Government do not very much like these gems being brought to light again, but I must tell them that there are millions of people in this country who feel very strongly that they have got themselves into power under false pretences. It is certainly not only our right but our duty as an Opposition to draw attention to this in every possible way; but we do not intend, now that we are in opposition, to follow the bad example which the Government set when they were sitting in opposition on these benches. We shall not, therefore, blame them for what is clearly due to world events. We shall not object to actions which we would ourselves have taken, nor shall we pretend, as they constantly did, that we can do something which we know all the time is not really possible.

We shall not spare our criticism, on the other hand, if we believe that the measures which the Government put forward are inadequate, inappropriate or unjust. It is in this light that we shall view and examine the proposals of the Chancellor of the Exchequer. Let me say at once that, having considered them and having come to the conclusion that the measures are in various respects inadequate, inappropriate and unjust, my right hon. Friend the Leader of the Opposition will tomorrow move an Amendment to the Government's Motion now on the Order Paper.

The Chancellor's statement yesterday was a long one, but he left out some extremely important questions. For example, he said nothing—or virtually nothing—on the vital question of production. He said nothing on what I would say is the equally important issue of wages, profits and dividends and the whole problem of restraining cost inflation. He said nothing, practically speaking, of the relationship of defence to the present situation—a question with which a lot of people are concerned. I hope that it will be possible for the President of the Board of Trade, who, I understand, is to follow me, to deal with these matters, because certainly one cannot get a fair picture of the present situation, or indeed pass adequate judgment on the Government's measures, unless these other subjects are also dealt with.

My main criticism of the Chancellor is not that he left out those three vital matters—because I know he was hard pressed for time—but that I do not feel he made any serious effort to match the extent of the remedies he was proposing to the needs of the situation. It is all very well to say that paying our way is a moral issue. In a sense, that is perfectly true; but it is also true that just how much has to be done does depend on statistics; it does depend on the facts of the situation, to which I do not feel he devoted any substantial time.

Furthermore, when one comes to study his statement, one finds also that he really said extremely little about the causes of the situation. I appreciate, again, that there is only a certain amount of time available, but people do want to know why we have a sterling-dollar crisis again, and I think it was a pity that the Chancellor was not able to throw a little more light on that.

I think it is a pity, too, for another reason. There are a number of commentators, speakers and writers who hold a very simple view of the whole situation, who go about saying that it is all due to the fact that we are living in a kind of "quagmire of inflation"—as I think a distinguished banker called it the other day. Let me say straight away that I do not accept that view myself. It is simply not true to say that here, in this country, we have been in a continuous inflation for the past six years.

I am bound to say that I think those who take this line are attempting to stampede us—and I mean "us," including the Government in particular—into adopting pre-war policies which we all want to avoid. They create for this purpose a kind of atmosphere of moral wickedness, sin and retribution and imply that we are where we are now because there is something wrong with our moral fibre. Even the Chancellor referred to this idea. I was not clear whether he took this view himself when he spoke of the United Kingdom being soft.

Might I pause just to deal with this point of view which I know hon. Members must have read in the Press and heard on the wireless from time to time? If one takes the view that a position of full employment is inflation, then certainly we have had inflation over the past six years. If the standard is that there is inflation whenever there is fewer than a million or half a million unemployed, then it follows that we have had inflation. We do not and will not accept that criterion.

But if, on the other hand, it is argued that the fact that prices have gone up since 1945 is evidence of inflation and the result of inflationary policies in the United Kingdom, then, obviously, that cannot be so because these price increases have occurred, as we all know perfectly well, throughout the whole world. In point of fact, the influence of the United Kingdom Government's policy on world prices is inevitably extremely limited.

The third possible definition is that we are in an inflation when we are not paying our way, when we have a balance of payments deficit. We have that at the moment, but I think we should remember that in 1948 and 1949 we were in balance—a very small deficit in 1948, a very small surplus in 1949 in overall balance—and that in 1950 we had a substantial surplus. It is, therefore, sheer nonsense to describe the whole of this post-war period as nothing but a continuous inflation, and I suggest to the House that we should dismiss these over-simplifications and look at the facts objectively. We should try to examine them to see what are the real causes. I do not think that until we have done this we can really pass judgment on the remedies.

The first point I want to make abundantly clear is this. There is not one, but two problems here. There is the problem of the sterling-dollar balance and the problem of the United Kingdom balance of payments. They are distinct. There is often an inclination to run them together. That is most dangerous, if only because it implies that the problem is automatically solved if the United Kingdom gets into balance. Nothing of the kind. We could very well have, as we had in 1948 and 1949, an overall balance on our own account, but, nevertheless, a very serious dollar deficit for the sterling area.

It is equally possible that one could have, as we had earlier this year, a deficit in the United Kingdom, but, nevertheless, a dollar surplus.

The problem with which we are immediately faced is, of course, the sterling area problem—the loss of gold. That is the immediate cause of the Chancellor's anxiety and of our anxiety, and I propose to say a few words about that first. The right hon. Gentleman practically left it out of his speech altogether. The President of the Board of Trade laughs, but it is, in fact, true. He made no references to the causes of the dollar situation; he merely said what the United Kingdom had to do as a result of the sterling area position. I want to try to fill in the gap.

As I have said, in 1948 and 1949 the United Kingdom was in balance while the sterling area as a whole was in deficit, and it is, I think, worth just pausing for one second to consider the reasons for that. I think there were three fundamental reasons and none of them had anything to do with the moral delinquency of the British people. The first is that whereas before the war the amount of gold produced by South Africa was able to purchase a very substantial proportion of dollar imports, the price of gold, in contrast with everything else, has not gone up since before the war, and therefore it now buys very much less. That has certainly been of fundamental importance in our post-war situation.

Photo of Sir Walter Fletcher Sir Walter Fletcher , Bury and Radcliffe

Is the right hon. Gentleman referring to the free market price for gold or to the fixed price?

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I am referring to the fixed market price. It is true that the free price is above it, but not much. The point is a clear one and of very fundamental importance.

Secondly, there has been a very large increase in the quantity of imports brought into the rest of the sterling area—not the United Kingdom—from dollar areas, and I think the main reason for this is something which is of profound importance to the whole world. It is the increase in population in India. We have to recognise that the main reason for the expansion in the quantity of dollar imports into India is foodstuffs for the people. The third reason is that, on the whole and quite apart from the gold situation, the prices of sterling area products have not risen as much as those of dollar area products.

In 1950 we had what can now be clearly seen as a temporary improvement. The prices of wool, tin and rubber—the three key materials of the sterling area—all reached fantastic heights between the middle of 1950 and the spring of 1951. At the same time, the volume of dollar imports was cut down, partly in consequence of the decisions of the 1949 sterling area conference. Thirdly, there was a very big inflow of capital into the sterling area. By "inflow of capital," I do not mean fixed investments; I mean an inflow of funds from other countries, including the dollar area.

What happened in 1951? I think all of us must have been impressed with the figures which the Chancellor gave us yesterday, and in particular with the incredible suddenness of the change. Here we have a position that whereas in the first part of the year the sterling area was in substantial surplus with the non-sterling world, by the end of the year it was in tremendous deficit.

What are the causes? I do not think they are much in dispute. There has been a collapse of prices for sterling area materials—the ones I mentioned just now—and there has been a substantial increase in purchases, partly our own purchases from the dollar area. But it is also, in part, the consequence of the higher prices which Australia and other members of the sterling area were receiving before for their products. In other words, having piled up the balances because of the high prices of wool at one period of time, they proceeded to run them rapidly down in a few months afterwards.

The third reason for it is, again, the reversal of the capital movement; and, lastly, but by no means least—this is a factor in the situation to which I have seen very little attention paid so far—there has been in these last months a substantial decline in United States imports. It is not so long ago when we were worrying about the enormous buying power of the United States. Some of my right hon. and hon. Friends were afraid that they were going to suck up all the materials in the world to themselves, and I would not deny that in respect of some materials scarcities, of course, exist.

But the plain fact is that in, I think, the period from February to September, 1951—the first six or seven months of this change in development—United States imports fell 15 per cent. in volume. That coincides, of course, with the period of considerable expansion in the United States economy, and it must, I think, give us all rather serious concern that at a time when the United States is in relatively a boom condition, this slight turndown in imports, which is of very little significance in the United States economy as a whole, should have had such serious consequences for the sterling area.

This, I think, is the background to the problem we have to face today, and in that light I think we have to ask whether the plan which has been put forward as a result of the sterling area conference is adequate to deal with the situation. I say "plan," but the Chancellor will probably agree that so far as the rest of the sterling area is concerned one can only describe it as an aim. We do not know how they are going to get on. We are merely told that they are to try to play their part as well.

That leaves me in some doubt as to whether, at any rate in the light of the information which has been given us, the action taken here is adequate and, in particular, whether it is immediate enough. I am not familiar with the gold movements since the end of the year, but it seems very likely that the momentum of the gold outflow may well have continued since 31st December, and I cannot help feeling that, in leaving the whole situation apparently fluid and not taking even more drastic action at the centre to restrict dollar expenditure, the Chancellor may have taken a very grave risk. In particular, I would ask him whether he is really satisfied that nothing more can be done to restrain these movements of funds.

It is quite obvious that they must be playing a fairly large part in the situation. I do not refer so much to the evasions of exchange control, though there are certain evasions which are not easy to track down. I am thinking of something simpler than that. It is the rule, as I said in November, that those who export from this country, and, I think, from the sterling area, have six months in which to pay in any dollar earnings they make. Is it wise to leave them that six months?

I venture to say this because I think I ought to say it, that when they think the£ is to be devalued again they are not going to pay their dollars in. Is it reasonable, when we have no gold reserves, that British citizens and British companies should hold on to dollars in the hope of a speculative rise? I suggest, as I said in November, that the Chancellor should now consider cutting down that six months' period to three months; that if he were to do that I believe he would get immediately a very rapid inflow of dollars.

The second criticism I have to make is this. The Chancellor said, I think, in his broadcast last night, that one of the causes of the trouble was that we had not prepared for it. I am bound to tell him that, in my view, so long as we have for the sterling area gold reserves as low as our present reserves and as low as they were at their peak in relation to their liabilities, we shall find it very difficult indeed to meet all the changes in the world situation which may come upon us. I suggest to him that what is needed in the sterling area is really a tighter, more continuous arrangement for consultation and taking decisions.

I can well imagine that hon. Members opposite may say, "Are you not really criticising yourself?" I accept that while we were in power maybe more should have been done. Of course, there is a good deal of continuous liaison. But, I think everybody agrees it would have been better if the Finance Ministers' conference could have been held some months earlier. In fact, when I was Chancellor I asked my colleagues to meet me in September. They were not able to do so, partly because Australia and New Zealand had their Budgets at that time. It may be that Ministers cannot meet more than once a year. But at least there should be a definite understanding that they should meet once a year; and it should be possible for officials to meet more or less continuously to discuss urgently any changes in the situation and recommend to their Governments any action that has to be taken.

A third suggestion or criticism I have to make about the sterling area is this. In the statement he issued the Chancellor spoke a good deal about convertibility. I must say that I thought he was a little rash in being so free on that subject. Can we really contemplate the free convertibility of sterling into dollars until, first, we have gold reserves which may be two or three times their present level and until, second, we can be sure—and this is extremely important—that the prospect of sterling-dollar trade is such that we can expect a balance at least, and a balance when we have no import restrictions?

Does anybody seriously believe that there is the remotest prospect of these conditions being fulfilled for many years to come? I hear some hon. Member saying, "Yes." If the Chancellor accepts my view that gold reserves have not only to be absolutely high but high in relation to liabilities it means, in fact, that the United Kingdom has to earn in surplus something like£1,000 million. Indeed, even that would not be enough because part of the surplus would be used to repay debt.

Can we contemplate the possibility of that in the near future? It might be said there is no harm in saying that this is the ultimate goal and that we are always thinking this. I understand that the Minister of State for Economic Affairs has a working party going into this. But there is danger, for this reason. First, it gives some people the impression that we are going to impose convertibility on ourselves when we are not ready for it. I hope very much that the President of the Board of Trade will be able to dispel that because again there are commentators, writers and other countries who would like us to do that. The logic of that argument is that we should impose severe deflation on ourselves and I say that is wrong.

Looking at the future—and there are some very worrying characteristics of which the future weakness of sterling area materials is one—I think we have to work for a greater degree of self-sufficiency in the sterling area. We shall not get that if all the time people think they are going to be exposed to dollar competition. Therefore, if we go on talking about convertibility as being just round the corner we shall not have the development which we all agree is desirable.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

All I did in my speech was to read the resolution of the Conference and this attitude to convertibility represents the view of Commonwealth Ministers as a whole. I did not go further. I said a party was examining it. I did not say convertibility was round the corner. I might add that I am deriving great benefit from the advice of the right hon. Gentleman on these very difficult matters.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I appreciate, of course, that the Chancellor is not speaking on his own on these occasions. Nevertheless, I feel that it would be helpful if any false impression created by this statement could be corrected in the course of the debate.

I turn to the United Kingdom position and the contribution we are to make. Once again the Chancellor has really given us no information about the causes of our own balance of payments position. I have already said that the general inflation argument seems to me really illusory.

I suggest that the reasons for the adverse balance we have this year and had last year are these. To the extent of£100 million it is due to stockpiling and was planned. To the extent of£100 million to£150 million it is due to an increase in the volume of imports into this country over and above what we planned. Part of that—I do not know how much, but perhaps the Government can tell us—must have gone into stock and must strengthen the country, but some of it is probably the result of the liberalisation of European trade and of a greater flow of imports from Europe. The third reason, to the extent of£150 million to£200 million, is that the terms of trade over the year as a whole were worse than we expected and to the extent of£100 million I would say it was due to decline in invisible exports, partly due to the loss of profits on the Persian market.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I think we can ignore that one. The hon. Gentleman is evidently quite unable to follow the argument and I really cannot delay to try to explain it again.

The Chancellor also gave us very little idea of what he thought the prospect was going to be for the United Kingdom and that makes it extremely difficult for the Opposition to judge just how adequate are the measures he proposes. Perhaps I might explain it in this way. Looking at the prospect for next year I see two fairly favourable facts, neither of which has been mentioned. In the first place, if, as the Chancellor himself assumes, the terms of trade remain as they are today as compared with the average of last year, we shall automatically secure the benefit of about£150 million more of exports.

The figures are these. On the average, in 1951 import prices rose by 34 per cent. against 1950 and export prices by 19 per cent. But in December, while the import figure was, as it happens, just about the same as the average for the year, export prices had risen to 27 per cent. above 1950. That means, looking at this year as a whole, instead of having to face as we did last year a burden of£300 million which became£500 million, if the Chancellor is right in his assumptions, we enjoy automatically a bonus, so to speak, of£150 million. I am a little surprised that we have had no indication of what the Chancellor's views are on this extremely important matter.

The second factor which, again, I would have thought was a relatively favourable one is this. Last year we had to incur very large additional expenditure on defence. It may not, as we have been told, all be spent this year, but the increase, including Civil Defence, was about£500 million in one year. Even if we had not had any slowing down in the process of expenditure, in 1952 the increased expenditure on defence would have been a great deal less than that. I do not know how much it is going to be because we have not had the Estimates, but my guess is that it will be much nearer half the increase we had last year. If that is the case, we face a rather easier situation here in the United Kingdom than appears at first sight.

While I am speaking on defence I should like to say this. We naturally welcome the£100 million which we are receiving, but I do hope that the Chancellor of the Exchequer, in the first place, will make it plain to our American friends that they have agreed with us, as they have, and should say so publicly, that this is not aid in the ordinary sense of the word, but is a genuine compensation for the remarkable effort we are making in comparison with other countries. I couple that with a request to him that the report of the Temporary Committee of N.A.T.O. should be published. There is no doubt that it will leak out. Indeed, a good deal has leaked out. Therefore, I hope he will press for its publication. We are really entitled to see exactly what this Committee—"The wise men committee" as it is called—did propose.

The third unknown factor in the situation is production. I do not propose myself to say a great deal about that. Obviously, there are difficulties in the matter. We know that the rate of production now—and this is really the most serious feature of the situation—is no higher than it was a year ago, after having been about 4 per cent. up to very recently. But until we know what the Government expect to do in the way of production and until we know what the Government expect in the way of exports, it is extremely hard for us to estimate whether the measures which the right hon. Gentleman proposed are of the right order.

I would, however, in all caution say this. In contrast with the sterling-dollar problem, which I believe, has not been tackled as quickly and energetically as it should have been, and which is the major cause of our present anxiety, I am inclined to the view that the total amount of savings for which the Chancellor has asked in the United Kingdom may be on the excessive side. I realise that it is very difficult to estimate in the absence of further information from the Government, but here is the position. We had a deficit last year of£450 million or£500 million on the balance of payments. The cuts in imports alone total£500 million. The cuts in investment are another£200 million, and the cuts in consumer goods are another£70 million.

We have, therefore, reached the order of£800 million. Is the Chancellor really aiming at a surplus of£300 million, or does he think the production position is so bad that we are actually going to fall well below last year's level and that we need all those cuts for that reason? I must repeat that we must be cautious on this, but unless there are very pessimistic assumptions about production I must say that I am not clear why we are going quite as far as this.

However, we in the Opposition recognise that some further measures are needed—as I said earlier we do not in- tend to follow the practice of the Conservative Party in opposition. We shall recognise that, but we shall make our criticisms in detail, and, in particular, we shall consider how far the measures proposed will produce their effects with least sacrifice by everybody and with due fairness to everybody.

Photo of Sir Arthur Salter Sir Arthur Salter , Ormskirk

Would not the right hon. Gentleman agree that for the purpose of the particular calculation that is now being made in relation to the balance of payments, it is not really right to add the import cuts to the economies in investment? They are related to different problems. We cannot relate them together.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I have already complained that we have only been given a quarter of the picture. That is part of the burden of my criticism. It is perfectly obvious—and I have no doubt that when the Economic Survey comes out it will bring these things together—that the investment cuts are designed to improve the balance of payments. The Chancellor said so. I agree that he has not brought in defence and we do not know what the extra burdens are. I have asked for further enlightenment and I have suggested tentatively that on the figures given it looks as though the Chancellor is slightly overdoing it.

I should like to say something about the methods which the Chancellor proposes. We have always recognised that in dealing with the balance of payments situation and in preventing inflation it was necessary to adopt both physical and monetary controls. I need not burden the House with this subject in detail, because I have said a good deal about it both at the time of the Budget and earlier. We particularly believe that monetary policy alone is not adequate to deal with the situation. We believe that it is on its own clumsy, unfair and not well calculated to achieve the precise result that we want, and that, above all, if we were to rely on that there might be a real danger of unemployment developing.

We believe that in the present circumstances there are specially strong reasons for dealing with this situation by physical controls, and I will develop those reasons. First of all, there are the import cuts. Again, we have very little information. We are told that coal is not to be imported. I thought the Chancellor might at least have stated that the reason for that was that the coal output has kept up extremely well.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

I went out of my way to pay a tribute to the productive work of the miners, and I did it on purpose.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

The right hon. Gentleman says that, but after all, what are the Government doing? They said earlier that there would be a terrible coal crisis and that they would have to import coal. Now they say, "We claim great credit for this. We are not going to import coal." I do not think very much of that argument.

If we examine the rest of the import cuts, the striking thing about them is that, as far as I can see, they are to be almost wholly at the expense of stocks. The tobacco cut, so-called, is not a cut at all in consumption. The newspaper headlines may have given that impression, but as I understand that is not the intention of the Government. They are proposing to take£22 million out of stock. They are going further than that. They are to raid the stockpile, which, I must say, is a very unwise policy.

I could quote the right hon. Gentleman and several other speakers on the opposite benches who were protesting all the time when we were in office that we were not doing enough. I am not going into that now—I will leave that to my hon. Friends—but I do say this: If the Government are seriously concerned about the international situation, if there are any risks at all, I should have thought that the one thing which we ought not to do was to run down these stocks, so painfully built up.

I do not want to score a party point here at all. I put it to the right hon. Gentleman quite seriously: is not this a matter of the utmost concern to the Atlantic alliance and is it not a little surprising that when the Prime Minister was in Washington he does not seem to have been able to raise this vital issue and to ask, for example, if it is a case of danger of war, whether the Americans would not be prepared themselves to hold stocks over here? We all know—and none better than the right hon. Gentleman the Minister of State for Economic Affairs—what very grave consequences may occur in the event of war because of the shipping situation.

The Chancellor may say we have to do this because we have to make the savings somewhere, and that brings me to my last point about imports. I think he was unwise to tie himself down to no further cuts in imports from Europe. After all, it is from Europe, I am afraid, that most of the luxury and semi-luxury imports come, if we rule out the sterling area. He may hope—but he cannot be sure—that we shall achieve a balance with Europe at the present level, but if we do not do so, I should have thought that we should have to go further in this respect that we have done. I should far prefer, and I think all of us would prefer, cutting out some further items of apparel and other semi-luxury imports, even semi-manufactured textiles, from other countries rather than run down vital stockpiles here.

I pass to the investment cuts, and I do not propose to delay on them for very long. In the main I think this is a right and appropriate policy in the present circumstances. I say that for this reason. We all know that it is on the engineering industry that the greatest burdens fall at the moment. We all know as the Chancellor said, that we can be sure of expanding our exports here. I do not think, unfortunate as this decision is, that for our part we should resist proposals designed to hold back investment at home for the time being.

I was glad indeed to see the Chancellor converted, as on other occasions and in other connections, to the policy of suspending initial allowances which he so bitterly criticised last April. There is, however, just this difficulty. If he is relying solely on monetary controls, I think it will be very difficult to protect essential home investment, and I hope he will be able to enlighten us a little more on how this is to be done. It is not so easy to do it through steel allocation as he seems to imply, if I may say so.

I pass to the cuts in consumption, and again I do not propose to delay very long on the physical cuts of metal consumer goods. We must admit that we foreshadowed that there would be scarcities of these articles. I recall having said, when the defence programme was adopted, that this was the kind of thing which would have to be cut out. Nevertheless, I hope the Chancellor will take especial care to ensure either that more of these articles are exported or, if not, that there is an easy transfer of labour into export trades or into defence, and I would particularly ask him to be very careful of applying these physical cuts to firms in development areas where there may not be opportunities of other employment.

Next, I turn to the most controversial part of the Chancellor's statement—the proposed cuts in the social services. On Government expenditure generally the Chancellor told us remarkably little. He said he was holding civil expenditure at its present level. I am bound to say that that is not such a tremendous achievement, in the light of the promises of the sweeping cuts which were going to be made. If we count in all the semi-military items, I think he will find that last year, in fact, we did very much the same thing when we were also faced with a rise in wages and prices and other costs.

What we do say, however, is this: we secured a net reduction in the civil expenditure apart from social services and we increased the social service expenditure. It seems to me that this time the Chancellor is making his cuts in the social service field. We have been told about only three cuts. We have been told about the Central Office of Information; we have been told about education; and we have been told about health.

The first question I want to put is this. Are we to understand that this is the limit of the cuts which are to be imposed of any important or substantial character? If I may, I will follow that with a more specific question. There is a great deal of comment in the Press today to the effect that this is all very well but, of course, it does not go nearly far enough and we must all wait for the budget. We know we have to wait for the Budget so far as taxation proposals are concerned, but are we to wait for the Budget for other announcements dealing with public expenditure and, in particular, do we take it from the fact that no mention was made yesterday that the Chancellor has no intention of cutting the food subsidies? I would remind the Chancellor, if I may, of some of the things which were said about that by himself earlier. In the Budget debate last year he said: …it is no part of our policy as long as we are facing, within the limitations imposed by this Budget, the rise in prices, that we can reduce these food subsidies in any easy way, because I am convinced that that would lead to a very serious rise in the ordinary cost of living of the taxpayer."—[OFFICIAL REPORT, 16th April, 1951; Vol. 486, c. 1579.] Then we have the friend and important colleague of the right hon. Gentleman, Lord Woolton, the Lord President of the Council, who said more recently, during the Election: It's all of a piece with the other rumours that are designed to frighten you. Rumours that the Tories will reduce old age pensions, that they will cut food subsidies, abolish rent control, put up the cost of living and that they will reduce family allowances. There is not a word of truth in any of these charges. We may leave out the ones where obviously he was not quite accurate, but let us press just this one: can we have an assurance—because the country is entitled to know this—that the food subsidies are to remain? I will gladly give way to the right hon. Gentleman if he would like to make a statement.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

The right hon. Gentleman has employed this menacing technique before. Neither by this method nor any other method will he or any other hon. Member extract from me what is to be in the Budget, because that would be quite out of order.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

Nobody is asking the right hon. Gentleman to give away his taxation proposals. Had he said to us, "Well, I am not dealing with the subject of Government expenditure today, because that is all part of the Budget," we should have understood it; but what he did was to pick out certain items of Government expenditure where there were to be cuts and to give the House the impression that there would be nothing else. [HON. MEMBERS: "No."] Yes; he said they were trying to keep expenditure at the present level and were going no further. I warn him that if, as in the case of the school-leaving age, we have this refusal to say what the Government are going to do when they could perfectly well tell us, we shall not be deceived into thinking that he will do nothing about it.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

Will the Chancellor agree, in view of the undertakings given in this House and to the trade union movement by every Chancellor since Sir Kingsley Wood, that those undertakings were that any cuts in the food subsidies would be looked upon by organised workers as a cut in wages?

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

For my part I fully agree that one of the crucial features in the whole situation is the effect which any cut in the food subsidies has on the cost of living and, therefore, on the whole of the wage rates.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

If he has an opportunity, perhaps my hon. Friend will be able to develop the point further.

I want to leave that and to turn to the general economic case for the cuts. The Chancellor put it this way. He said: It may be urged, and is urged by some economists of various schools, that there is little connection between Government expenditure…on social services and the balance of payments. This is a complete misunderstanding of the true position. Every pound spent by the Government means either a direct call on man-power and materials or a transfer of income to someone else, who is thus enabled to make such a direct call."—[OFFICIAL REPORT, 29th January, 1952; Vol. 495, c. 52.] I say that in that statement to us he was putting forward a half truth. It is, of course, true if we assume that nothing else can be done, if we also assume that the cuts in the social services are to be followed by an exactly corresponding reduction in demand, that there is to be no change in the stocks of consumer goods, that the workers are to be transferred immediately into the export trades, that there is this tenuous connection. But really, in present circumstances in particular, we cannot assume that any labour and resources displaced in this way are to be absorbed elsewhere, nor can we possibly accept that there are no other ways of reducing consumption.

Let me take the general question first. Are we in this country still consuming too much? It seems to be the right hon. Gentleman's view that we are; and, of course, all the inflationary school would say so. But let us look at the facts of the situation. I refer the right hon. Gentleman to his own document, the "Bulletin for Industry," for January, where we are told that consumption in the autumn fell to the extent of about 3 per cent. below the level at the same period of the previous year, and that for the year as a whole it had not been any higher than in 1950. Indeed, it is not necessary to refer to this document for that. There are plenty of hon. Members whose constituents are able to inform them of the state of under-employment and short-time in consumer goods industries, and the President of the Board of Trade I imagine, must be very concerned about this.

That being so one must ask oneself: Is it really desirable to contract this demand any further? If there were a tremendous inflationary boom going on in those trades and they were seen to be sucking back resources into the home market which ought to be for export it would be a different matter, but that is not happening now. If we talk of exports, what the Chancellor said was that in this field—precisely in this field of consumption goods—the prospects for higher exports were now very bad.

I regret it, and I admit at once that we hoped to expand exports here, but the situation has changed in the last nine months. No doubt that is partly associated with the curtailment of the United States demand. There is a real difficulty here, and I must say that I think that if the Chancellor presses on this consumption side, as he is continually urged to do, he will be in real danger of creating serious unemployment.

Let him not under-estimate the tragic consequences if that were to happen. The hon. Member for Bridlington (Mr. Wood), who was the first successful hon. Member in today's Ballot, said he intended to move a Resolution dealing with the desirability of keeping old people at work. What is the good of talking about that when they are being thrown out of work all the time? Indeed, the Civil Service cuts themselves, which the Chancellor is making, will, I am afraid, make it extremely hard to convince the Civil Service that they should have a later retiring age. We cannot ignore these consequences, and I beg him not to be misled by the deflationary school into thinking that all that is necessary is merely to cut consumption and that then we shall be all right.

I turn to some of the details themselves. In passing, let me say I regret the end of the Crown Film Unit. It had built up a very good reputation. It had played an important part in training technicians for the British film industry. It was a live organisation. It can never be re-created once we break it up altogether. The amount of the saving that is involved is really trifling. I hope that even at this late date the right hon. Gentleman may be persuaded to see if he cannot make cuts elsewhere, even in that department itself, and keep, at least, the framework of the Crown Film Unit going.

As to education, we are told that the school-leaving age is not to be cut, but I must tell the right hon. Gentleman, and the right hon. Lady the Minister of Education, that there is on these benches grave anxiety about the proposals which are now being put forward by the local education authorities. Indeed, there is some reason to believe that if the school building programme is cut back still further the right hon. Lady herself will find that she simply has not the accommodation to maintain the present school age. We really cannot accept that the scholarships which we expanded—we are proud we did—up to the universities should be cut down. I am told even that some authorities are proposing to find their economies by abolishing school dentistry. Well, I think that is a little difficult to reconcile with the Health Service, to which I now turn.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

Will the right hon. Gentleman be kind enough to inform the Government, particularly my right hon. Friend the Minister of Education, of any case of any local authority who are abolishing school dentists? We should like to look into it.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

Certainly. My hon. and right hon. Friends will be very glad to—

Photo of Mr Thomas Peart Mr Thomas Peart , Workington

Will my right hon. Friend allow me? There are four counties altogether—Buckingham, Cornwall, Northumberland and Somerset.

Hon. Members:

All Tory.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I come now to the proposal, appropriately enough, for cuts in the Health Service—the two proposals to impose charges for dental treatment— for ordinary dental treatment—and the 1s. prescriptions charge. As the House knows, last year we imposed part charges on dentures and spectacles. We did this because out of the total Budget we had to find more for pensions, and we put up the social services by£60 million, and we increased taxation by, I think,£170 million from the new taxes imposed, quite apart from the extra coming in from the old taxes, and because we felt we must hold the position.

We did not, therefore, in the circumstances feel able to go beyond a small increase for the Health Service of£7 million, which left it at the£400 million figure. I do not believe myself that that was unfair. I do not believe that the charges that we imposed—the part charges that we imposed—of course, I know some of my hon. and right hon. Friends do not agree with this—[HON. MEMBERS: "Hear, hear."] Yes, but I am entitled to express my views on this. I do not believe that hardship was caused. I do not believe that there has been any very serious reaction. [HON. MEMBERS: "Oh."] No. I do not believe so, and I do not believe so for this reason, that we were not attacking sick people: we were not attacking people who were ill in the ordinary sense of that word. As I say, we had—every Government have, of course—to make decisions between various possible alternative expenditures, bringing in the whole problem of taxation.

But what is the situation that the right hon. Gentleman is confronted with today? At that time, as I have been constantly reminded, consumption was rising fast. At that time we were facing, undoubtedly, a very heavy increase in defence expenditure. At that time we were imposing very heavy additional taxation. Now, what is the position today? Consumption is falling, not rising. There is no increase—indeed, there must be a reduction—in the total social services expenditure in the light of what the Chancellor has told us. As to taxation, all we have had from him is a hint that it is desirable that it should be reduced. Well, it may be desirable, but we have to balance these things, and we say unhesitatingly that we would not reduce taxation if that were simply to be the result of the imposing of these charges.

There are other special reasons why we object to them. Last year, one of the arguments which impressed us for imposing the part charge on dentures was, that it would leave the dentists more time for preservative work. That was a point of view strongly expressed by the British Dental Council. In point of fact the Chancellor is now simply killing that; he is discouraging people as much as he possibly can from going to the dentist to save their teeth. It is all very well for him to say that this will all be for the benefit of the children's teeth when his right hon. Friend has dealt with the local authorities who are misbehaving—which I hope she will do—but how, in that case, is it expected to get a net saving of£7½million? It is very difficult to explain, if the dentists are to do the same work on the children, why there should be any saving at all. Surely this is not the only way in which it can be done.

As to the 1s. prescription charge, it is quite true that we proposed it, but when the then Prime Minister announced it he made it plain that it would not apply to old-age pensioners. I can tell the House that the reason we dropped the charge was largely the administrative difficulty of applying this charge when old-age pensioners were exempted, and I have no doubt at all that that is the reason why this Government is not exempting old-age pensioners; they know that there would be great difficulty.

But, of course, it creates a wholly new situation. This charge is now being imposed on people who are sick, who may find themselves in a state of great hardship. I cannot see, unless old-age pensioners are exempt, that there is any chance of preventing that, and I draw particular attention to the unfair consequences which this proposal will have.

Turning again to a broader issue, our view is that if there are to be economies in consumption—and I have warned the House that I do not think the case for them is nearly as strong as it was in the light of the industrial situation—they should be imposed on those who can bear them best. What is to happen about taxation? It really will not do for the Chancellor to come here before we even know what the E.P.T. provisions are to be and to impose these cuts. If he is so concerned to reduce consumption, why does not he take a leaf out of my own book and impose dividend limitation? Nothing is being done about this; dividends are going on increasing; and it is far more important to stop expenditure of that kind than expenditure of the ordinary people.

We have no illusions about the gravity of the crisis affecting the sterling area. We recognise that the United Kingdom must play its full part in putting matters right. But we cannot overlook the fact that every time the Chancellor speaks, whether in dealing with causes or remedies, he himself exposes the utterly fraudulent nature of the pretext and policy on which his party were returned to office. As to the remedies he proposes, I am afraid that from what he said we can have little confidence that there has been an adequate grasping of the problem of the dollar balance, either in the short-run or in the long-run. As for the United Kingdom, the running down of stockpiles is unwise and may be dangerous.

Whilst we believe that it is justifiable to cut investment in plant for the time being, the proposed cuts in the social services, in our view, are unfair in their incidence, cannot but inflict grave hard-ship on some very poor people when they are sick, impose a sharp check on educational development, and yet, far from helping towards the solution of our balance of payments problem, may very well give rise to unnecessary and wasteful unemployment.

For all these reasons we shall fight these proposals, not because we are indifferent to the economic problems facing the country, but because we believe that these problems can be solved only when the people see that the measures adopted are both necessary and fair, and when they are led by a Government which, unlike the present one, has won its way to power by honesty of purpose—and there are millions and millions of people in the country who are beginning to see through the present Government—and a fundamental belief in the ideals of social justice.

5.35 p.m.

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

The right hon. Member for Leeds, South (Mr. Gaitskell) has had rather more time to consider the speech of my right hon. Friend the Chancellor than I have had to consider his, but I prefer to follow immediately upon his speech because I think it is time that the tempo of this discussion quickened a little, and that many hon. Members who are anxious to participate in the debate should have an opportunity of doing so. When the right hon. Gentleman opened his remarks I was afraid that his speech would fall a little below the very high standard we always expect from him, but as he proceeded I realised that he had emerged at any rate almost unscathed from what, if we believe even half that is said in the Press, must have been a very severe ordeal during the last 24 hours.

The right hon. Gentleman referred to the pledges that were made during the General Election. There are many hon. Members in all parts of the House who have had quite as long experience, and many of them much longer, in politics as I have, and if they will cast their minds back over the many elections they have fought, I dare say they will probably consider that, in general, politicians of all parties have some hopes which are not fulfilled. I remember very vividly pledges which I gave.

I remember particularly speaking on the eve of the poll in a marginal seat in the last General Election, and what I said was that all I pledged myself to was that they would have strength however hard we might have to struggle to achieve it and truth however bitter the truth might be to tell. I ask hon. Members opposite whether some of them did not pitch their pledges a little higher than that, if not in the last Election, then in 1945 before they faced the crisis which, according to the former Prime Minister, was every bit as bad as the crisis which we face today.

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

Or greater. The only other thing I would say about pledges is this. No party can fulfil its pledges in a few months of office. What we ask is to be judged after a long period of office, which we intend to hold.

After that part of the right hon. Gentleman's speech I thought, if I may say so with all respect, that much of what he said was both wise and helpful. He referred to the dangers of any precipitate move towards convertibility, and I thought I saw the right hon. Member for Bishop Auckland (Mr. Dalton) nodding his head at that stage in the proceedings. I can assure him that none of us, in any part of the House, is oblivious to the dangers of precipitate convertibility before the necessary stability, confidence and financial reserves have been built up.

The right hon. Gentleman then said he was anxious that I should spend some considerable part of my speech in dealing with certain problems, particularly production, and that I intend to do. He finished with some references to the social services, although at one stage I thought he was getting a little out of sympathy with some of his supporters. I intend to refer to that at a later stage in my speech, and to say why I think a particular limit has to be set to Government expenditure in that and other directions.

We shall be debating the speech of my right hon. Friend the Chancellor of the Exchequer over the next two days. Obviously many differing views will be put, and many of us will differ as to the emphasis we would place on particular parts of the problem and the solutions we would give to it. But in the last resort I think it is as well to remember that we are doing more than fight one another. We are fighting a very considerable catastrophe within our national affairs.

I believe that a prerequisite of any solution to this problem is that the British people themselves should realise the full gravity of the danger which confronts them. If they do recognise that gravity in time, then I am quite confident that we shall emerge from our present difficulties; but the worse service any of us could do at the present time would be to pretend that the crisis was not there or that, if it were, it was not really very bad, or to suggest that it is something which is being played up and painted up for political purposes.

It is not that kind of crisis. The right hon. Gentleman in his heart knows that it is not that kind of crisis. The trade union leaders and industry know it, and the world outside know it; everyone outside this country in particular is watching and waiting to see whether the action taken is, in the words of the right hon. Gentleman himself, adequate to the problem that confronts us. It is with that aspect of the matter that I want to deal.

The Leader of the Opposition did say, quite rightly, that he too had faced crises. He did face one in 1947 and another in 1949, and he said that there was a certain similarity between this crisis and the ones that he had to face. He said that some of them were worse. This is not a first cousin to his crisis; it is the same crisis. We have no wish to take credit for the crises of the right hon. Gentleman which have been almost continuous; and without arguing in theory the question of how much inflation there is in the country—of which the right hon. Gentleman is no doubt as good a judge as anyone else—the fact is that the sterling area as a whole and this country in particular has chronic difficulty in balancing its accounts with the rest of the world and making an attempt to live sufficiently within its means.

The truth is—and many hon. Members opposite have pointed it out—that this country has assumed commitments and responsibilities which strain its resources to the utmost limit, and any attempt to go on spending at the present pace—and by spending I mean not only in terms of money but in terms of steel, material, manpower and capacity—can only end in disaster. After all, no argument which the right hon. Gentleman addressed to the House can get away from the fact that in the last quarter of last year our reserves were running out at the rate of£333 million and only£834 million of these reserves are left. They would be exhausted if nothing were done and the drain continued at that rate by September, and a very serious and major crisis would have developed long before.

Let us be quite clear what we mean by "crisis." We do not mean just calling a conference or something of that kind. We mean a situation in which it would become difficult, if not impossible, to buy the necessary food the people eat in this country or the necessary materials to keep the factories going.

This phase of the crisis differs in certain respects from the previous ones to which the right hon. Gentleman the Leader of the Opposition referred. In particular, in this crisis, we have to climb out of it by our own efforts or not at all; nobody else is going to be able to help us. It is to be remembered that during the past six years the gap was closed by borrowing. I am not making any party point about that; I am dealing with this factually. It is true that during that period we got from Canada and America dollar loans of£1,227 million and another£796 million in loans and gifts from Marshall Aid. We are not now borrowing but repaying, and on the 31st December we did repay£63 million in respect of interest and so on.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I hope that the right hon. Gentleman will distinguish between the sterling area and the United Kingdom.

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

The point which I am making is that at the moment we have to get out of this ourselves; we cannot look to someone else to help us in this matter. It is much easier to live upon an overdraft than to live within one's own resources, but, in the long run, it is better to carry on as a nation by buying steel and paying for it, working with it and turning it into exports than by having to borrow gold.

I want to mention what I regard as one of the happiest features in this rather sombre scene. That is that we are not alone in this crisis. We have the British Commonwealth and Empire with us I was with my right hon. Friend the Chancellor of the Exchequer during the meetings of the Finance Ministers, and they faced very largely the same problems as we do. Their credit and their currency is at stake, as is ours. They have had to return to their countries to make the same kind of harsh and unpopular decisions as we in this country have to make.

I think that hon. Members on both sides of the House will agree with me that it is inspiring to see the efforts which are being made in the sterling Commonwealth. I saw in the papers the other day one incident which particularly interested me—the New Zealand dockers going out and working on their annual anniversary so as to shift meat to this country. That was a realisation that they have a great contribution to make. In this matter we are moving in close co-operation with the Commonwealth, and we shall continue to do so.

Photo of Mr Robert Mellish Mr Robert Mellish , Bermondsey

The right hon. Gentleman might say something in favour of the British dockers; they are working overtime as well.

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

I had no thought in my mind to the contrary, but I think it is right that at this moment we should pay a tribute of that kind.

The three aims which emerged from the meetings of the Finance Ministers' Conference were these: Firtly, that we should try to solve our short-term balance of payments problem by living within our means. Secondly, that we should develop the immense natural resources within the Commonwealth to the fullest extent; and thirdly that, on the basis of expanding trade, we should close that deficit and move towards the goal of convertibility.

This debate is necessarily in the main about the short-term issue, but I think that it is wrong to exclude altogether the long-term issue. In the long run, I do not believe that we shall be able to close this trading gap solely upon the basis of current account. I think that we shall require to redress the balance of capital and to create a situation in which the world as a whole and the dollar area in particular have the necessary faith and confidence in the sterling area; confidence to put their money there, a realisation of the resources which are to be developed and the knowledge that they can get profit from that area and that their interest and capital will be safe and will not be expropriated upon any political caprice.

Photo of Mr Arthur Woodburn Mr Arthur Woodburn , Clackmannan and East Stirlingshire

The right hon. Gentleman rightly said that we should like to solve the problem permanently. Can he explain how reducing our stocks in this country and increasing American stocks in the second six months of this year will make any contribution to what will happen after this year is finished?

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

That is hardly related to the point I was discussing, but I can tell the right hon. Gentleman that there are good precedents, if not respectable precedents, for drawing on stocks in this way. His own Government drew on stocks in its time. It is not a wholly indecent thing to do. That is what stocks are for in certain cases.

Turning to the question of remedies, I would first say to the right hon. Member for Leeds, South, in particular—indeed, I think he agrees with me—that there is no one sensational remedy which could be produced for a situation of that kind. There is no panacea. What is required is a combination of many measures, all of them moving in the same direction.

If I may venture one criticism of the outlook of many hon. Gentlemen opposite, it is that they attach rather too much importance to physical controls, which have an important role, without recognising that physical controls themselves are not enough and have to be accompanied by many other measures such as monetary or fiscal measures, measures of allocation and the rest, all designed to serve a common theme; and that common theme at the moment is to reduce our imports and to expand our exports in order to close the gap in the second half of 1952.

This policy has not yet been completely painted. I agree with the right hon. Gentleman that it is an incomplete picture. In November last, we had the preliminary sketch in which one saw the necessary short-term measures, like a cut in imports and the development of a monetary policy. That preliminary sketch has been expanded in the speech of my right hon. Friend the Chancellor of the Exchequer into something much wider. Exports are now brought much more into the foreground of the picture as a highlight. The whole sterling area is brought in in a way which was not possible before the meeting of the Finance Ministers.

But even now the picture is not complete, and the full panorama cannot be seen or judged until the third stage is completed, which will be when my right hon. Friend introduces his Budget early in March. However, I shall deal with the picture as it now is without casting my mind forward to that, which would be wrong.

I will first say something about imports. It would be wrong to under-estimate the extent or severity of the import cuts which were imposed in November last. After all, at that time foodstuffs worth£170 million were cut, mainly from Europe, and the full impact of that has not yet been felt by the British public because the pipe-line is not yet empty. Meanwhile, it was severe to us and it is also severe to the Continent of Europe.

The real difficulty about cutting imports—the right hon. Gentleman knows it as well as I do—is that it is very difficult now to find an import which it would be right to cut. The truth is that since before the war the population of the country has increased by 7 per cent., production has gone up by 40 to 50 per cent., exports have increased by two-thirds and imports have remained in volume roughly where they were. It is plain in those circumstances that when one starts to look for cuts one finds that one thing after another is really either an essential foodstuff or an essential raw material.

I and the Government were anxious, if it was in any way possible, not to make further cuts on the Continent of Europe. I appreciate the points which the right hon. Gentleman made, for they were perfectly fair and proper ones, but I should like to put the contrary case for a moment. It is of immense benefit to this country to have at least one area outside the sterling area where it is possible to buy and sell with reasonable freedom and without constantly being forced to the wretched method of bilateral bargaining.

I should be very loth to see something happen which would cut further into that principle. In the event, we were compelled to cut tourism to£25, which is a severe cut. All I would say about it—I say it to our friends in Europe—is that if debtors have obligations, creditors have obligations, too, and if they have at heart, as we have, a desire to keep trade flowing in the area, everything they can do either to abolish or to widen the quotas which at present restrict or curtail our trade in that area will help immeasurably. I hope they will bear these words well in mind.

I turn now from that rather narrow and restricted field of cutting imports to what is obviously the much more hopeful, progressive and expansionist side, that of trying to expand exports. It is obviously much better to sell more than to buy less, and that is what we want to do. It is upon the expanding of our exports that our future depends, and on the success of it hangs the success of our defence effort, our standard of living and our position in the world. Our prime object at the moment is to make more capacity and materials available for exports.

I will not launch upon the great field of coal, except just to say that I remember the late Mr. Ernest Bevin once saying, "Give me 10 million tons of coal and I will give you a foreign policy." The battle for the sterling area will in no small measure be fought out on the coal faces of this country. With coal, it is possible to buy and sell almost anything in the world.

The right hon. Gentleman referred to textiles and some of the unemployment that exists in part of the textile industry. I am well aware of some of the causes, like the slowing up of demand, not only in this country but in many other parts of the world as well. One thing which has a very great bearing on it is the manner in which the textile industry has been tied up in the complexities of Purchase Tax and utility control until it can hardly move one way or the other.

Hon. Members:

Oh.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

How can the right hon. Gentleman say such a thing when he knows quite well that short-time and unemployment have only developed in the last few weeks, whereas Purchase Tax and the utility scheme have been in being for six years?

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

The right hon. Gentleman knows that one can carry a great deal of marginal inefficiency in the circumstances of a sellers' market, but it is just at the time when one wants one's industry to be most effective that draw-backs of that kind become most marked and most difficult. I will not enlarge on that theme, but I would invite hon. and right hon. Gentlemen opposite to discuss that matter not only in the House of Commons but also in Lancashire and Yorkshire, and let them talk not only to the employers in those areas but to the textile unions too.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

I happen to represent, as I have done for some 16 years, a Lancashire constituency which lives almost entirely by textile production. If the right hon. Gentleman thinks that those in the industry would welcome an attempt to improve the conditions by interfering with controls and utility production, he had better go and ask them.

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

I think the hon. Gentleman had better ask them, because the position was that the Labour Government before they came to office had appointed a special committee to look into this particular problem. That committee has presented a Report which will be published on 23rd February. I mention this matter now because time will be taken to consider it. We will press on to a full discussion so that decisions can be taken upon that Report as soon as possible after it is published.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

I am sure the President of the Board of Trade would not want to mislead the House. He knows perfectly well that the Committee was appointed to deal with one specific problem—the problem of Purchase Tax in relation to our international obligations. He also knows that before that Committee was set up I appointed a committee to consider what changes were necessary to maintain the utility scheme on a permanent basis. Is he now going to use the international problem as an excuse for destroying the utility scheme?

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

The right hon. Gentleman had better await the publication of the Report. As I was saying, we shall press on and do what we regard as our duty when we have had an opportunity of considering and discussing the Report.

I turn from the textile industry to the engineering industry. The problem of the engineering industry is less difficulty in selling and more difficulty in getting hold of its raw material, which is steel. We believe that the measures which we propose here will give, as they intended to give, assistance to engineering exports. They will make available capacity, materials and manpower which were not previously available. But that capacity and those materials quite obviously can only be made available if sacrifices are made in some other fields.

Let me admit quite frankly that in a position of that kind we are compelled to some extent to sacrifice the future in order to safeguard the present. It is necessary in such circumstances as those in which we find ourselves at this moment that there should be some slowing up of home investment in order that exports of goods immediately saleable can proceed. We propose to achieve that by discussions with industry itself. My right hon. Friend the Minister of Supply has initiated those discussions already. He has already met and received great assistance from the Engineering Advisory Council, on which both sides in industry are represented, and we shall match our steel allocation and the action which is taken under the Control of Engagements Order to fit in with the agreements which we reach in regard to export and home supply quotas.

All concerned in the export industry should recognise that it is the firm intention of the Government to seek to make everything possible available to them and to make selling for exports a more attractive proposition than selling for the home market. I know that many of them are faced with very great difficulties at the moment. I know the steel situation which we took over. I am not making any point about it, but the right hon. Gentleman will agree with me that defence order and preferential treatment systems had, in fact, largely broken down.

Photo of Mr George Strauss Mr George Strauss , Lambeth Vauxhall

Mr. G. R. Strauss (Lambeth, Vauxhall) indicated dissent.

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

The right hon. Gentleman does not agree with me, but he would be in a minority vote amongst the industrialists concerned, who know that methods have been devised and new allocation schemes introduced. These will be put into effect at the earliest possible moment.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

The right hon. Gentleman mentioned the Control of Engagements Order in connection with the engineering industry. Could he explain that?

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

It was very fully described by my right hon. Friend the Chancellor of the Exchequer. It is a question of the notification of vacancies and not direction of labour.

Might I say one further word about exports generally? It is sometimes asked where the exports are to be sent to, and, in reply, I want to say this. I think it is wrong for a Government of any political pursuasion to seek from the centre to try to switch exports here and there about the world.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

On a point of order. When this debate began I asked whether we would be at liberty to discuss the manpower proposals, which were touched upon by the Chancellor of the Exchequer at the end of his statement yesterday. That Order by the Minister of Labour was not available in the Vote Office when this debate began. The right hon. Gentleman has widened the thing a little by describing this as the Control of Engagements Order. I put it to you, Mr. Deputy-Speaker, that if we are intelligently to discuss this issue of great importance and the man power proposals in connection with it we should have that Order available, otherwise we cannot decide whether this is a Control of Engagements Order or merely one under which the Minister of Labour will ask people to go into certain jobs.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

The right hon. Gentleman the President of the Board of Trade is perfectly in order in what he is saying. I do not issue any Control of Engagements Orders and I know nothing of that.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

Is it in order to refer to a document which was not available in the Vote Office today?

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I do not think he was referring to a document but to a scheme.

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth

To return to the question of the destination of these exports, from which I do not wish to be deflected, all I would say is that it is no part of the duties of the Government to direct exports into particular markets. Industry should be aware of the objects which we have in mind. The chief object is to close the gap between the sterling and the non-sterling world. I attended the Finance Ministers' Conference and, knowing the decisions that were taken, what I would say is this, that if I were a British industrialist at this moment I should be earnestly looking for markets outside the sterling area to take the surplus production, which we think these measures will be making available.

I do not want to keep the House too long, but I must touch on the question of the finances of the social services and Government expenditure, to which the right hon. Member for Leeds, South, devoted so much of his speech and which, I think, deserves some answer. It is really quite useless to preach the importance of exports unless one is prepared to take some steps at the same time to cut back home demand. It is also the same thing—and I hope I carry the right hon. Gentleman with me in this—to say that there could be no greater fallacy than to imagine that our internal finances and the level of our Government expenditure were not very closely related to our balance of payments position.

My right hon. Friend has, in fact, succeeded, despite rising wages and rising costs, in holding back that level of expenditure to the level of last year. I believe that the right hon. Gentleman would have attempted to do the same thing. I do not believe that he himself really thinks that it is possible in present circumstances for any Government to sit back and watch the sum total of expenditure rise month by month and year by year without making a determined effort to stop that rise and hold it at a particular level. The right hon. Gentleman and his predecessor have often said the same thing. It was they who, in fact, put a ceiling upon the Health Service. It was Sir Stafford Cripps who said that we cannot go on expanding one thing after another, that we must absorb it within itself. I believe that is the right and honourable approach to our finances.

To make matters plainer, the Opposition left behind them legislation, which, in fact, can be used for this particular purpose, and none of us need make any apology for using that legislation for the same ends. All I can say in conclusion about this is, that the perils which confront this country are very great, but obviously they are not insurmountable. We in the United Kingdom have got to give a lead. After all, it is part of the pride and part of the penalty of leadership in the sterling area that we should at least go as far and perhaps a little further than those we ask to go with us. We have every intention of setting an example and making our decisions, whether popular or unpopular, to secure that end.

I am not here to lecture on what everybody ought to do. The vast majority of the people in this country are beginning to recognise what it is which confronts us. If I were an industrialist at this moment I would ask myself whether there was not any means at all whereby I could expand exports a little and find a new market. All of us probably have to work a little harder and longer. [HON. MEMBERS: "Oh!"] I am not talking about the workers only, but about managements as well. That has to be recognised throughout this country and throughout all sides of industry. When the last speech has been made, this is the common task which confronts us, and it will be a most uncommon effort which will be needed to surmount it

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

I wish to raise a point of order. Yesterday afternoon the Chancellor of the Exchequer made an important statement with regard to the notification of vacancies. Immediately, our interest was aroused. I consulted the Clerks at the Table about the Order, and with the way in which they dealt with the matter I was completely satisfied. The Order Paper this morning states that the Order is being presented, but there is not a copy of it yet in the Vote Office, which means that the Order is not available to hon. Members; nor is it in the Library. Yet this matter has been discussed with the representative organisations outside—which I am not complaining about—and I say that it is most unfair to this House and to hon. and right hon. Gentlemen who have been elected to represent their constituents, that this important document is not available.

Photo of Mr Ness Edwards Mr Ness Edwards , Caerphilly

Further to that point of order. The President of the Board of Trade has made reference to this matter today, and it is referred to on the Order Paper. There is a Press hand-out in the Library from the Ministry of Labour, and there is a quiz, but no sign of the document itself can be found anywhere. I think that the House has been treated with very scant courtesy.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

Unless the document was laid I do not think it would appear on the Order Paper.

Photo of Mr Ness Edwards Mr Ness Edwards , Caerphilly

I have been in the Library now and seen the officer in charge of these Orders. He says that it has not yet arrived, although they have been given a number of other documents. The document itself is not there.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

One would wish to be of the utmost service to this House, and it was with that in mind that I gave a foretaste of this Order in my speech yesterday. I have made inquiries, and I understand that there are documents relating to the Order about in the building, and that the Order will be here very soon. I must make the apologies of my right hon. and learned Friend the Minister of Labour that it should not already be here. The object is that it should be here at the earliest possible moment.

Photo of Mr Arthur Woodburn Mr Arthur Woodburn , Clackmannan and East Stirlingshire

Is it not the case that, according to our Standing Orders, when a Minister refers to a document the House has the right to ask that the document be produced?

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

It is quite true, and I think that Ministers are doing their best to produce it.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

Further to that point of order. We are in the dark as to the nature of this Order. The President of the Board of Trade has referred to its as "The Control of Engagements Order," and I put it to you, Mr. Deputy-Speaker, that it is quite unfair to hon. Members, especially those on this side of the House, who may wish to intervene in the debate on manpower not to be aware whether this is a control of engagement order or something else. Is it not for the Government to give us the nature of this document or an assurance that they will devote a full day to manpower issues when this debate is finished?

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

This is not really a point of order for me. The document may or may not have been laid, but it is the Department who have to produce it. There will be a time-lag in getting it to the Vote Office. I gather that the document has been laid; otherwise, it would not have appeared on the Order Paper.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

Is it not the proper method to move, "That the debate be now adjourned" until the House is placed in the possession of all the documents upon which the debate is proceeding? If that is the proper method, may I move that Motion? It is really quite at variance with the time-honoured traditions of this House for a debate to proceed for a long time without hon. Members being placed in possession of the documents—or at any rate one of them—upon which the Government base part of their case.

The difficulty in which my hon. Friends find themselves is due entirely to the fact that part of the case which they have to meet is involved with this Order, which has been agreed outside, and has been made, and the substantial contents of which have been divulged to other people. The Order is within the cognisance of Ministers, but no other hon. Members have had the opportunity of seeing it at all.

It is a long time since the House of Commons has been asked to deal with an important national situation in such a casual and lackadasical way. It is only part of the contempt with which the Government have treated the House ever since the General Election, and I should like to move that this debate be adjourned until the House is placed in possession of all the documents which are relevant.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I called the right hon. Member for Huyton (Mr. H. Wilson), but a point of order now arises and the hon. Member for Nelson and Colne (Mr. S. Silverman) wishes to move the Adjournment. The Motion is only acceptable between speeches, and as I have called the right hon. Member for Huyton the Motion cannot be moved until his speech is concluded.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

We are between speeches, and that is why I wish to move my Motion.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

In my view we are not between speeches. I have called the right hon. Gentleman. The point of order was certaintly raised before his speech, but not before I called him.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

I should like a direction from you, Mr. Deputy-Speaker. I accept your interpretation of your duties in regard to the Order, which is a matter for the Government Department concerned, but the House of Commons should be very concerned about this important Parliamentary point. When a Minister makes reference to a paper, that paper should be laid. The Chancellor referred to this Order yesterday, and if it could not be laid right away it was reasonable to expect that it would be laid this morning, and that it would be in the Vote Office long before now, 20 minutes past Six o'Clock. We are entitled to ask for your views with regard to this matter.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

It is unfortunate that the document is not available in the Library. Mr. Harold Wilson.

6.18 p.m.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

The point raised by my hon. Friends is, unfortunately, one of the least of the sins of His Majesty's present Administration. I should like to draw the debate back to where it was when it was left by the President of the Board of Trade.

I found the right hon. Gentleman's speech a great disappointment. Any one in his position could have been expected to give some lead to industry about the export drive, saying what commodities we might succeed in selling abroad and the steps necessary to achieve that result. All that he has told us, apart from some very ominous references to the utility scheme, to which I will come in a few minutes, was that he thought our problems could only be solved in the long-term by some capital adjustment involving American investment in the sterling area in the hope of gaining a profit.

The right hon. Gentleman will not be in his position for very long before he discovers that that does not hold out any hope whatever of solving the problem which we are facing, and that if we are to get the right development in the sterling area and other undeveloped areas we cannot do it on a private enterprise profit basis, because most of the work that has to be done will involve investments, which for many years can, by their very nature, give no immediate return in terms of profit.

I should like to come to the picture painted by the Chancellor and by the President of the Board of Trade, and to express my feeling that they have not in any sense attempted to give us an economic programme for facing our present position. What they said yesterday and today is not an economic programme. It is simply and solely a betrayal—a betrayal of those who were misled into voting this administration into power on the basis of a false prospectus without precedent in British political history.

Now, the policy which they put forward is seen to be totally irrelevant and doctrinaire. They are using the crisis—we do not deny that there is a crisis—as an excuse for breaking all promises that they made and for launching a direct attack on the standard of living of the British people. The extraordinary thing is that neither the Chancellor nor the President made any attempt to analyse the causes of our present economic difficulties. They described some of the symptoms; they never attempted to describe the causes.

One significant remark was made by the Chancellor when he said that our position has been deteriorating for half a century. Of course, he is right. That must have been gall and wormwood to the Prime Minister to hear yesterday. In his 50 years in public life, there have been two kinds of administration so far as he has been able to tell us about them: those of which he was a Member, in which the country was prosperous and successful, and those of all parties of which he was not a Member and in which the country was bankrupt and facing disaster.

The right hon. Gentleman is quite right in saying that this crisis goes back a long way before the war. In fact, had we attempted a policy of full employment before the war, if the 2 million who were unemployed had been free to import the food that they needed and if we had had to import the raw materials for full employment, we should have had a major overseas payments crisis every year in the 1920's and 1930's. We know how much the war has worsened the position, chiefly because this country assumed far heavier burdens during the war than any other ally. We came out of the war a good deal poorer, and some countries, particularly the United States, came out a good deal richer. That position has persisted into the post-war world.

Since neither of the right hon. Gentlemen have tried to do it, let me say what, I think, are the basic factors underlying the present economic crisis. First, there are the very big changes in the consuming power of the United States. There was criticism of my right hon. Friend the Member for Ebbw Vale (Mr. Bevan) when he referred some time ago to the lurchings of the United States economy. The Chancellor expressed exactly the same thought last week in a public speech somewhere in London, when he referred to the United States as a giant which, whenever it stirs in its sleep, affects every one of us.

Unfortunately, the lurchings are not only the lurchings of the United States economy. There are also violent changes of policy on the part of the United States Administration. A year ago, when there was a chronic shortage of raw materials, the United States Administration was stockpiling—at the wrong time—creating further shortages, and pushing up prices. In the summer and autumn of 1951, when it would have been reasonable to have gone in for a policy of strategic stockpiling on the part of the United States, when some abnormal purchases were necessary to maintain the price of sterling area raw materials, such as rubber, tin, and so on, the United States Administration had in force almost a boycott on the importation and stockpiling of those goods.

The second basic fact, to which the right hon. Gentleman made virtually no reference, is, of course, the scale, extent and pace of world re-armament. The United States at present are sucking in materials on a prodigious scale and denying them to the rest of the world. We are finding not only steel scrap, but pig iron and iron ore, that would normally be coming to the steel industries of Europe, being shipped across the Atlantic to the United States because of her almost insatiable demand for these raw materials.

And yet we are finding that the prices of the goods we have to buy from the United States are being maintained partly by artificial methods and by artificial scarcities, while at the same time it has been the policy of the United States Administration to depress the prices of the goods sold from the sterling area to the United States, thus creating, or adding to, the basic dollar problem which is the common lot of the whole non-dollar world.

The third factor in this situation, to which the right hon. Gentleman did not refer as a cause of our problem, is our own re-armament. Yesterday, the Chancellor said that he would put the emphasis more on exports than on cuts in imports, and the President of the Board of Trade said today that that was where the emphasis lay. But where are these exports to come from? From what industries are we to get them? The President of the Board of Trade has very little hope of expanding our exports of textiles and clothing. He knows that the market overseas does not exist for them at present, particularly with the growth of Japanese competition, which is becoming stronger every month.

What the world wants today, and what the world insists on having if it is going to buy our products, is engineering goods. It is no good the President of the Board of Trade telling them that they must take textiles, clothing, aspirin tablets and all the rest of it. They want engineering goods. This is true not only of certain parts of the dollar area and South America, for instance; the sterling area requires engineering goods from this country.

The Colombo Plan, which is an essential part of the programme for developing the Commonwealth and for providing stability and peace in South-East Asia, is dead—unless the right hon. Gentleman can do something to release capital goods exports from this country to the Commonwealth. The Chancellor did not mention this yesterday, but I can well imagine that one of his biggest problems in the Sterling Area Conference was the clamour and requirement of other stering area countries for capital equipment from Britain—not merely the under-developed areas, but Australia and New Zealand, for example. The Chancellor knows perfectly well that if we cannot meet these requirements, those countries will go to the dollar area for purchases, and in time this failing to meet the requirements of the sterling area for capital equipment may well lead to the disruption of the sterling area, with all that that means.

Why do not the Chancellor and the President address themselves to this problem, because this is basic to our economic troubles? They approach the situation with a monumental degree of irrelevance. They think they are going to solve the export problem by charging a poor widow woman for her deaf aid. Does the President of the Board of Trade think, does the Chancellor really believe, that charging a man for surgical boots will send more switchgear to Canada? Do they really think that that sort of thing—charging for abdominal belts and other things—will send more tractors to Pakistan?

Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet

Is it not a fact that Sir Stafford Cripps, when Chancellor of the Exchequer, introduced the proposed charge in the Health Service in a speech which he ended by saying that the cuts then proposed were only a prelude to a new dollar drive, which was essential if our civilisation was to continue? Sir Stafford Cripps recognised the necessity for these economies to promote a dollar drive.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

I shall be delighted to answer that point in a moment, and I hope that the hon. Member will not be disappointed when I come to it.

I am trying to ask the Government: what is it that they are putting to the House? Are they saying that our export costs are too high? Does the President of the Board of Trade believe that our export costs are too high, that our prices are too high, and that we have to bring them down with all these fantastic and irrelevant cuts? Is that the suggestion? Or is it, as he was rather indicating a few minutes ago, the feeling that there is too much buying of goods on the home market and that somehow we must withdraw purchasing power from goods for the home market and drive those goods abroad? If that is what the right hon. Gentleman thinks, I suggest that he returns to Lancashire and asks Lancashire whether they think there is too much buying of consumer goods on the home market.

The whole approach is based on a misunderstanding of the situation in this country. The Chancellor of the Exchequer is in the position of an 18th century quack dealing with a case of tuberculosis and to cure it he has prescribed a crude course of blood letting. Blood letting as a means of curing tuberculosis is just as relevant as the Chancellor's cuts are to the present situation. The reason why we are not getting the engineering exports abroad that we need to at present is the overloading of the engineering industry and the shortage of steel and other products caused by the re-armament programme combined with a certain psychological feeling that exports are no longer as important as they were.

I draw the attention of the right hon. Gentleman to that very authoritative journal, the Journal of the Institute of Exports, which said in a recent issue: Although re-armament has not as yet occasioned any substantial decline in the monthly totals of export trade, exports, particularly of capital goods, would be very much larger than they are but for the effects of re-armament. Statistics tell only half the story. They give no indication of how shortages of steel and other materials diverted to re-armament may affect the production for export next year not only of end products but of a thousand and one essential components. But, particularly, they give no guide to what (for want of a better omnibus term) may be called industry's psychological attitude to exports. The right hon. Gentleman will find more of a guide to export problems in that journal and those remarks than in anything he has told us this afternoon.

The fourth factor in the economic situation is declining production in the country. The Chancellor made very little reference to production yesterday. My right hon. Friend the Member for Leeds, South (Mr. Gaitskell), commented on that. We are facing a situation today for the first time since the end of the war in which the country's production is declining. We have seen tremendous increases in production—the right hon. Gentleman gave the figures—and increases in exports, but in the last few months we have begun to see a decline in physical production in this country. That is one of the factors the right hon. Gentleman has to take into consideration.

The fifth factor, referred to by my right hon. Friend, is the problem of cheap sterling, of black market commodity deals and the rest of it which are going on on a considerable scale at the present time, as the Chancellor well knows. We have a big deficit with Europe, a deficit which, as the Chancellor knows, means payments as to 100 per cent. in gold very shortly. That deficit is being intensified by a hidden flight of capital going on at present, and the Chancellor well knows it. One factor about that is that it might be reversed at any time and greatly improve the situation, but I believe that the Government's playing up of this crisis in the way they have in the last few months has greatly intensified this flight of capital from the country and, therefore, our losses in gold.

If I am right in saying that that is one of our major problems, this is the worst time for the right hon. Gentleman to go in for an experiment of freeing foreign exchange. He argues two things; first that we have inflation and, secondly, that this inflation is the cause of our overseas problems. I beg this House and the Government, do not let us be hypnotised by this nonsense about inflation at the present time. Rising prices, yes, prices are rising due to world causes last year forcing up the price of raw materials and, to some extent of food. And, because we did not deal with those rising prices by a sufficiently radical policy of subsidies last spring, there has been set up something of a price-wages spiral.

But the position of the economy of the country at present is not one of inflation, but rather one of incipient deflation. No one can come and tell the story nowadays of too much money chasing too few goods. We know perfectly well from the slump in the consumer goods industries that that would be a totally wrong description. We have unemployment and short-time working in textiles, clothing, boots and shoes, furniture and a whole range of consumer goods industries for the reason that the average family, once it has paid the amount necessary for food and rent, has nothing left over for other consumer purchases. Now comes the right hon. Gentleman with a proposal to make that situation even worse. The sale of periodicals, beer, tobacco and cinema attendance all prove that we are moving into a situation of deflation.

The right hon. Gentleman has followed a tough policy in the City. He has tightened up interest rates and bank lending and has already started on a very big scale something he mentioned yesterday, the tightening up of hire purchase restrictions. He has done it already through the banks and it is already causing a great diminution of consumption and much greater unemployment, particularly in the development areas, in Wales, the North-East Coast, in Scotland and Lancashire. That is where the right hon. Gentleman at this moment, whether he likes to think he is doing it or not, is creating unemployment by his financial policy.

Of course there are economic theorists and financial journalists who say this is a good thing and that we want unemployment as it will help to direct workers into the engineering industries or the re-armament industries where there is supposed to be a shortage of labour. The shortage of labour in the arms industries is very largely a myth. There is no real shortage of labour in the arms industries; most of these factories could not employ additional workers because those sections of industries which can get orders, the defence industries, cannot get raw materials. A large section of industry is paralysed at present by the shortage of raw materials, particularly of metal.

The theorists say that we cannot have unemployment due to under-demand and unemployment due to deficiency of materials at the same time, but in this unbalanced, overloaded economy of today we have got both at the same time and, unless something is done, we shall move into a position of far more serious unemployment.

I must refer to what the right hon. Gentleman said about utility. I thought he was guilty of misleading the House by his reference to the appointment of that Committee. Both he and the Chancellor tried to give the impression—or succeeded in giving the impression, whether they tried or not—that the problems and unemployment in textiles today were due to Purchase Tax. They must know—their advisers must tell them—that that has nothing to do with it. A great deal of the unemployment exists through the failure to sell utility goods which are tax free and insofar as there is unsettlement or expectation that Ministers are going to start taxing utility, that would lead to a clearance in the shops and not to a slump. Really he should not try to argue that way in this House in the presence of people who know a little about it.

There is a tax problem, I agree with the right hon. Gentleman, and I can guess what will be in the Douglas Report. I shall not embarrass the right hon. Gentleman by saying what will be in it, but obviously we know what it is likely to be. Ministers must not use that tax problem as an excuse for destroying the utility scheme. I said this in Lancashire 10 days ago. The utility scheme is one of the best protections our housewives have, giving them some real assurance of quality. I announced in this House on behalf of this party that we intended to make it a permanent feature of the national economy, and I hope the right hon. Gentleman will do that. There are difficulties. I set up a committee under my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) to try to get rid of some of these difficulties, and I hope the right hon. Gentleman will go further in that direction.

I warn the right hon. Gentleman that any attempt to destroy the utility scheme will be fought vigorously not only by those on this side of the House but, I am certain, by housewives and consumers throughout the country. Even if he is going to do it let him be honest and say why he is doing it—because manufacturers do not like controls and price controls, and not come along with some story about taxation. The right hon. Gentleman knows perfectly well from the experience in the case of children's clothing, where there is no tax even on non-utility goods, that it is possible to maintain a utility scheme even without tax differentiation, and I commend a study of that to the right hon. Gentleman.

The right hon. Gentleman referred to the crises of 1947 and 1949. We got through in those years by increased production because the people accepted the fact that the Labour Government were giving them a system of fair shares and particularly a fair burden of taxation. We are seeing more and more evidence that it will be the intention of the Government to destroy that policy of fair shares. "Away with the nonsense of fair shares," says the hon. Member for Croydon, East (Sir H. Williams). We do not mind him saying it, but when we are getting it from the Government Front Bench it becomes much more serious.

The equivocal position of the Chancellor of the Exchequer on the food subsidies this afternoon, the ominous remarks of the President of the Board of Trade on the utility scheme, and the extension of the health charges, all show that the Government have not the remotest idea in their heads of trying to solve the problem on the basis of a policy of fair shares. The health charges are something which many of us on this side of the House regret. In the speech I made when I resigned last year I said: The principle of the free health service has been breached, and I dread to think how that breach might be widened in future years."—[OFFICIAL REPORT, 24th April, 1951; Vol. 487, c. 229.] The right hon. Gentleman is coming along now and widening that breach.

It is not only a question of widening that breach. The Government have made it very clear that because this House accepted—I thought it was wrong—the principle of this ceiling of£400 million, these new health charges, these squalid charges for abdominal belts, deaf aids and the rest necessarily flow from that decision to maintain the£400 million ceiling.

The Chancellor yesterday said that this was a moral issue. He is right, it is, and the first need is to tear away these veils of intellectual dishonesty which are preventing a lot of people at present from facing the real issue. The Government are not facing up to the real cause of our economic crisis. They are dodging it with doctrinaire, irrelevant and class-conscious measures.

We have this long-term problem about which we are all agreed. The main consideration about the long-term problem is some settlement of the American problem. It means above all world planning of raw materials, expansion of raw materials to avoid shortages as the world economy develops and some long-term arrangements for the purchase of raw materials putting a floor in the market when prices begin to sink, as they have been doing recently.

I do not say that this crisis is caused by re-armament. Of course it is not, but re-armament has intensified the problem and made it more immediate; we shall not solve this problem until the right hon. Gentlemen opposite and some of my hon. Friends on this side of the House stop clinging to this sacred cow of a£4,700 million armament programme. It is generally accepted now the whole world over as excessive. It is accepted in the United Kingdom by many who were reviling a few of us when we expressed that view a year ago. It is accepted in Western Europe.

France will not be able to accept this excessive armament programme on top of her bankrupt and overloaded economy. Belgium and Italy are not even trying. The position is accepted even in the United States that this policy is now impracticable.

Last July I said "the Emperor has no clothes. When will someone admit it?" We are getting to the position where everyone is admitting that the "Emperor has no clothes"—even the Prime Minister, the Emperor himself. But there is another danger, the danger that instead of deciding that there must be a short sharp cut in the re-armament programme and a re-allocation of the physical burden—I am not talking about the financial burden, there is too much of a disposition to suggest that if we go on the munitions will not be produced, the programme will drag on from year to year, it will take three or four years longer perhaps than we thought, and that it will not do any harm.

That is a very dangerous fallacy. Harm is done to the economy not by the number of munitions produced at the end of it but by the strain and effort of trying to produce munitions that cannot be produced. That is the problem which the right hon. Gentleman must face.

It is quite clear now that the arms programme we are facing is taking on more and more of the nature of a pretence. It has no relation now to military preparedness. If the Government Front Bench thought we were facing the immediate danger of war would they be running down stockpiles in 1952, particularly those stockpiles of bulk goods which we accumulated painfully and at heavy cost last year? If they really were trying to prepare for the danger of war they would recognise that those stockpiles in this country represent a certain saving of shipping space in time of war and a saving of dozens, perhaps hundreds, of destroyers and lives. Yet in order to cling to this re-armament programme they are willing to sacrifice an essential part of it.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

I do not think that the right hon. Gentleman ought to ignore what I said in my speech, namely that I did not believe that an essential part has been sacrificed.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

Would the right hon. Gentleman get up and tell us now what the stocks of timber were at the end of 1951 and what they are likely to be at the end of 1952 in view of the Government's programme? The right hon. Gentleman should know the figures. It was the Treasury that enforced the policy on the Ministry of Materials, and what is being done now means a deliberate running down of hundreds of thousands of standards of timber stocks. I am not saying that that is right or wrong, but if that is the policy of the Government it is ludicrous to pretend that their munitions programme is one of military preparedness.

My last point is this: the Chancellor yesterday referred to the acceptance of United States financial aid. This I believe to be a great blunder on the part of the Government and of anyone who supports the Government on this issue. It was right that there should be a re-allocation of the physical burden of re-armament, but to suggest that because we have taken on an unfair share of the arms programme we must be compensated with financial doles from America is a very dangerous proceeding.

There are some who delude themselves by thinking that there will be no strings attached. Perhaps there are no strings attached today. The danger of strings being attached is when Congress comes to appropriate in the summer. That is the moment, especially in an election year, when any hot headed Senator or Congressman inserts his particular nostrum in the Appropriation Bill, that aid shall not be given to any nation which fails to carry out what that Senator or Congressman wishes.

It is true, and we have always paid tribute to the fact, that Marshall Aid was given virtually without strings except on conditions necessary for the European recovery programme. That was legitimate. Now, American economic aid is under the control not of the economic departments but of the Pentagon. From now on economic aid will only be given to those countries which do as the Pentagon wants in military programmes and foreign affairs.

Only last week the "New York Times" a responsible paper, commenting on discussions between the Foreign Secretary and Mr. Acheson, said in a long account of their disagreement on certain aspects of foreign policy, the question about China and Formosa, the Japanese Peace Treaty, etc.—I will not go into it as that is appropriate to next week's debate: In the last analysis the British felt there was very little they could do. They could not break with the United States on the issue. They needed the financial and military help of the United States, so their tendency when this was written was to go along, even though they felt the decision was fundamentally wrong. That is the problem we are in danger of facing more and more as a result of the acceptance of American aid and basing our economy on this American aid. It will not be long before the right hon. Gentleman will have to face up to the Americans on the question of Imperial Preference. Schizophrenia is one of the occupational diseases of all administrations, and the American Government possess it to a very marked degree. At the same time when they were pressing us to increase our ability to stand on our own feet the theologians of the State Department were asking us to scrap Imperial Preference.

I told them last year that so far as I am concerned my party would not put forward any proposals for the ratification of the General Agreement on Tariffs and Trade on a permanent basis unless the particular paragraphs about Imperial Preference were taken out. I hope the right hon. Gentleman will support that view, but he will find it difficult if some Congressman puts down a clause in the Appropriation Bill telling him that he cannot do so. We had the Battle Act last year, one of the most serious developments in relations between the United States and ourselves. This was attacked by the "Economist" not only for its economic effects but also because this is no way for a Government to treat its allies.

What of trade with Eastern Europe. What is the Government doing about that? Is the right hon. Gentleman allowing rubber to flow to China? It was stopped last year until the end of the year. He has not told us whether he will now allow rubber to go to China, or what is happening in Hong Kong where because of American ideas the whole trade of the Colony is hamstrung at the present time and a very serious situation developing—at the very same moment when Japan is shipping freely to China because Japan is in the American sphere of influence. These are things to which the right hon. Gentleman should be giving his mind, because they have a more direct and important relevance to our economic situation than these charges on abdominal belts and deaf aids and so on. [HON. MEMBERS: "And children's teeth."]

We on this side of the House do not deny the crisis that exists, but it is the duty of the Government and of this House to get at the real causes and to face up to them. A moral issue is involved, says the Chancellor. Well, we should not shirk the duty of facing up to that moral issue and telling not only our own people, but also our allies what needs to be done in order to overcome this crisis to our civilisation.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

May I raise a point before the debate proceeds?

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

Is the hon. Member raising a point of order?

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

Yes, Sir. In your absence Mr. Deputy-Speaker dealt with a matter which we on this side of the House raised. We were very satisfied with the way in which he dealt with the matter. But yesterday afternoon as soon as the announcement was made by the Chancellor I was so disturbed about it that I raised it with the Clerks of the House and I was satisfied with the way they dealt with the matter. But as a result of that I expected the Order to be in the Library and the Vote Office this morning. The notification of this Order appears on the Order Paper, but up to a few minutes ago it had not yet appeared in the Library. I think the House is entitled to an explanation from the Minister.

Photo of Mr Ness Edwards Mr Ness Edwards , Caerphilly

Before the Minister answers I should like to put this point to him. This is a very important document controlling the whole labour power of this country. It was referred to yesterday as, "Regulations controlling labour." Today it is referred to as the "Control of Engagements Order." We discover by the Order Paper that it is the "Notification of Vacancies Order." The Press got a hand-out last night and there is placed in the Library today a printed pamphlet, called a "quiz," explaining this Order, and yet the Order was not available in the Library for hon. Members of this House, or in the Vote Office. It is only two or three minutes ago that the only available copy has been placed in the Library.

Some hon. Members have been looking for this Order since last night. Inquiries have been made in a number of directions, and I think it very discourteous to hon. Members of this House that the Press could get a proper explanation last night and this pamphlet could be printed, and the Order itself is not yet available. I think it reflects very greatly on the Department for which the right hon. and learned Gentleman is responsible.

Photo of Sir Walter Monckton Sir Walter Monckton , Bristol West

I should like to assure the right hon. Gentleman that if I have been guilty of discourtesy to the House nobody will be more sorry than I, and I certainly never intended it. Until about half an hour ago I had assumed that the Order which I made yesterday morning would have been laid in the ordinary way, and I have ascertained at once—to show that I intended no discourtesy to the House—why my assumption was not correct. To the best of my knowledge and information the Order was laid yesterday with the appropriate copies for another place and this House, the Library, the Vote Office and the Votes and Proceedings Office.

There is, I understand, a great accumulation of Statutory Instruments, and if the result—[HON. MEMBERS: "Oh!"]—so I am informed. All I can say is that the documents which it was the duty of my Department to bring to the House were brought to the Vote Office, and it was only because of some difficulties there that these copies did not reach the Library at an earlier stage. As I said before, I had no reason to assume, and I did not assume, that after my making the Order in the morning anything had occurred different from the ordinary way. If there has been a slip I am sure the House would wish me to have an opportunity of making further inquiries. It was not discourtesy to this House, for which I have the deepest respect.

Photo of Mr Ian Mikardo Mr Ian Mikardo , Reading South

Further to that point of order. Are we to understand from what the right hon. and learned Gentleman has just said that there is a great accumulation of Statutory Instruments, i.e., wicked controls and bureaucratic Regulations under a Conservative Government?

Photo of Mr Ness Edwards Mr Ness Edwards , Caerphilly

There is one part of my objection to which the Minister did not refer. This has been made available to the general public. Time has been found to print the "quiz," but apparently time has not been found to print the Order. Will the right hon. and learned Gentleman explain that?

Photo of Mr Aneurin Bevan Mr Aneurin Bevan , Ebbw Vale

Before the right hon. and learned Gentleman replies, do I understand that the Order was actually available in the Vote Office this morning?

Photo of Sir Walter Monckton Sir Walter Monckton , Bristol West

My information was that it was there—

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

It is not. Just excuse me. The facts are that I inquired for the document yesterday afternoon as soon as the announcement was made. It was not available to anybody in this House. Later on, it is true, a copy was presented to the Votes and Proceedings Office, which is not the Vote Office, and I was informed that it was not the practice to make one available to a Member. That was done in a most courteous way and I am not making any complaint.

I then understood the practice is, and the duty of the Minister is, to see that a copy is placed in the Library, and until a quarter of an hour ago there was no copy in the Library. I understand from Mr. Deputy-Speaker that there is one there now, and I understand that he carried it there, and that up to this moment there is not a copy in the Vote Office.

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

I think that the House will agree that as soon as the matter was brought to the attention of the Chair action was taken at once to remedy the position. There appears to have been some delay in laying the document in the Library. I would point out that when a document is ordered to be laid on the Table it is placed in the Library. That is what counts. There might always be delays in printing before it is available in the Vote Office. There appears to have been some delay in this case. About how serious it is, I would not express an opinion. I think that we had better proceed with the debate.

Photo of Mr Aneurin Bevan Mr Aneurin Bevan , Ebbw Vale

I do not want to press the point. Obviously there has been a slip-up in the machinery. One does not want to italicise it too much. Nevertheless, it is a very serious matter if members of the public and members of the Press are put in possession of information of this kind before Members of this House. In fact, it is a very serious breach. I can understand the desire of the right hon. and learned Gentleman to have the "Quiz" right so that people might not misunderstand the document. That is perfectly proper. Nevertheless, I think he should have seen that we were quizzed first.

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

I think that we can now continue the debate.

7.1 p.m.

Photo of Mr David Williams Mr David Williams , Neath

In rising to address the House for the first time I ask for the indulgence of hon. Members.

There are two points to which I should like to draw attention. The first is concerned with the reference that my right hon. Friend the Chancellor of the Exchequer made yesterday to the slowing down in the rate of rebuilding cities which suffered from aerial bombardment during the last war. I am sure that all of us who have the honour to represent such cities, as I have, realise that some cut must fall upon their plans; but I suggest that this can be modified to some extent if we examine the plans of the various authorities.

For instance, while we know that the shortage of steel for building is likely to be extremely acute in the next few years, there are large areas in my constituency which require rebuilding but which do not require steel. Many of these areas, which are of a business nature, were previously occupied by small shops, offices, and so on. I hope that when these cuts in the investment programme are examined by the Chancellor he will see that these areas are allowed to be rebuilt since they do not necessitate the allocation of steel.

The second point is the question of the best and fullest utilisation of our manpower. I am sure that both sides of the House fully agree about the vital necessity to maintain full employment to ensure that we get the maximum possible production. I am sure that most of my hon. Friends will agree with me when I say that I rejoice that the figure of unemployment has been kept so low since the cessation of hostilities in 1945.

But I am not altogether satisfied that the figures given necessarily provide the full picture. There are a great number of people who are not carried on the books of the employment exchanges. For instance, there are pensioners who have retired, some of them very early in life, such as people from the Armed Forces of the Crown who would like to continue working but who, for many reasons of their own, do not apply for employment at the exchanges.

The point we must bear in mind about such people is that it is extremely difficult for those over 40, and it is becoming almost impossible for people over 50, to secure employment. They find it extremely difficult to obtain work. The majority of the people who are unemployed in Exeter—I believe something like 80 per cent.—are within this age group. This situation is likely to worsen unless something radical is done in the next few years as the older age groups increase.

We cannot afford to ignore this development. I hope that my right hon. Friend the Chancellor will do what he can to persuade his right hon. and learned Friend the Minister of Labour to give special attention to this subject. During the Recess many men in this age group sought my assistance in getting employment. The manager of the local employment exchange has made every possible effort to get work for these people, but he is finding his task increasingly difficult as the weeks go by.

It will not be easy to solve this problem. There are many factors which contribute toward making it extremely difficult. I should like to refer to some of the policies followed by a number of the largest employers of labour—the banks, the insurance companies, the large industrial concerns and, of course, Government Departments. It is the almost invariable practice in such concerns for men and women to be laid off when they reach pensionable age so that younger people can get promotion.

Many of these older people would like to continue to work, but there is resistance from the other employees whose promotion they are likely to block. Surely, some steps can be taken to enable the older workers to continue in less important jobs in their businesses or Government Departments so that the rightful aspirations of the younger people are safeguarded.

I come now to the question of men and women over 40 who are seeking employment. I refer to people who are not in permanent jobs as distinct from those who are forced to retire on reaching pensionable age. One of the major difficulties in employing people of over 40 years of age is that firms are reluctant to take them on because they do not fit into their various pensions schemes. I ask my right hon. Friend whether he will make representations to employers' organisations to see if they cannot amend their pensions schemes so that these people can be employed.

There are many ways in which that could be done. It might be possible for the insurance companies which, in the main, carry the pensions schemes to permit people over, say, 40 years of age when they join a firm to stay out of the scheme and not to have a pension provided for them. On the other hand, it may be possible to introduce some modified scheme for employees in that age group. I am sure that if some step such as this could be taken we should find available a large reservoir of people who would like to play their part and help towards the recovery of the country.

7.9 p.m.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

It falls to my lot to have the pleasant privilege of congratulating the hon. Member for Exeter (Mr. Dudley Williams) upon his maiden speech. It is an ordeal for anyone who enters this House, and I say at once that the hon. Member has come through his ordeal with considerable merit. In his speech he followed the tradition. His speech was related to his constituency and it was not very controversial. I am sure that other hon. Members agree with me when I say that we look forward to more contributions from him during our debates.

To me the most significant and notable part of the statement by the Chancellor of the Exchequer yesterday was his announcement that the Budget would be introduced on 4th March. That made it abundantly clear that so far we have only had half, or I think rather less than half, of the whole story. Undoubtedly there is at present a very considerable vacuum in the remedies which had to be adopted. There are some steps which will have to be taken about which, so far, we know nothing at all, but, if we are to reach stability, that vacuum will have to be filled, and the sooner it is filled the better.

That brings me to the Amendment which, I understand from the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), is to be placed on the Order Paper tonight—an Amendment to the Motion proposed by the official Opposition, to the effect that the remedies proposed are inadequate, inappropriate and unjust. So far as we know at the moment, within their province, they may be quite adequate, but in themselves, of course, they are inadequate. Their appropriateness will depend on how they fit in to the general picture. As to their justness or unjustness, so far as I can see they are fairly adequately spread, with one exception to which I shall refer later.

At any rate, we have reached the position that it is recognised—if that Amendment is to be put down—that some such measures as these are needed, and that, apparently, if the Opposition were in power, they would make them more adequate and more appropriate, and, therefore, hit harder the general public.

With the Chancellor's statement about the gravity of the situation there now seems to be an agreement. The right hon. Gentleman the Member for Huyton (Mr. H. Wilson), agreed that there is a crisis, and the right hon. Gentleman the Member for Leeds, South, also said that the situation was as described by the Chancellor. Of course it is. During the last few months there has been not only a considerable, but almost an unprecedented, drain on our resources, and it is continuing today.

In spite of the check which the Chancellor attempted to put on in November, that position is continuing almost at the same rate today. If it is allowed to continue unchecked, can there be any doubt whatever anywhere that, ultimately—and ultimately would mean somewhere about next July or August—we would be landed in bankruptcy, and there would be a complete collapse of sterling—much the same kind of position as we know occurred some years ago on the Continent?

Moreover—and here I want to return to the speech of the right hon. Member for Huyton, who has now left the Chamber—in spite of what the right hon. Gentleman said, there is, here at home, a continued rise in the inflationary pressure, and that pressure is undoubtedly bound to rise even more sharply, even if the steps which the Chancellor indicated are about to be taken are, in fact, taken.

If these two matters, namely, our financial trade position with other countries and our own economic and financial posi- tion in this country, are not tackled, there will be a situation confronting us involving unemployment and hunger such as none of us would even like to contemplate. We are in a more vulnerable position than any other country in the world, without exception, having built up in these islands a population of 50 millions which today is faced with the fact that we can feed only two out of five of that population, and that we depend entirely for our greatest industries upon imports of raw materials.

That is our position. The Chancellor was right to point out that, in the main, the situation that confronts us is due to what this country has had to go through over a period of more than 40 years, namely, preparations for war, two mighty world wars and continued preparations for war today. We have had to fight these two world wars, and we had not recovered from the first one when we were face to face with the second. No sooner did we think that the second was over than we were again confronted with a situation in which we had to continue conscription from the end of the war in 1945 until today, and also embark upon a programme of re-armament which has been extended and extended into something never before undertaken by this country in peace-time.

Surely we cannot expect conditions to be normal. In addition to all that, we have poured out our very life blood without stint in the defence of our liberty. Nor can we expect things to be normal today when we have 840,000 young men—the most vigorous and capable young men whom one would prefer to see engaged in production—taken away from normal production and placed in the Armed Forces of the Crown. Nor can we expect conditions to be normal when, behind that 840,000, there is a far larger army who have the duty, not of producing consumption goods, but of making armaments, arms and ammunition, food, clothing and transport for that 840,000.

No wonder, therefore, that the situation confronting the Government at this time is an abnormal one. The criticism which I have to make of the Government which was in power since 1945 is that they did not take that abnormality into full consideration in the steps which they took. They would surely have acted differently if they had paid full attention to all that was involved in all this.

With the Chancellor's opening statement, setting out the general principles, I am in complete agreement. He said that restrictions and cuts are only palliatives. How right he was. Expansion and development will provide the only real and lasting remedies. I was glad to hear that statement coming from a Conservative Chancellor of the Exchequer, because it is quite new to me to know that now, on that Conservative Front Bench, restrictions of imports are a complete evil. That is my view, and it always has been. But there may be an evil which, sometimes, we have to contemplate and use, though only in very exceptional circumstances, such as those existing today.

It is interesting, too, that those who joined with the Chancellor in conference, and who were representatives of the other countries in the sterling area, took exactly the same view. How right they are that we must establish sterling once again on a sound and stable basis and make it convertible. I would remind the House that, until this country undertook these tremendous secrifices—greater than those of any other country, as the Chancellor himself said—sterling was the measure of values the world over, trusted by every country to which it was linked.

To establish sterling once more on a sound, stable basis and make it convertible, recognised by all the world as a measure of value, can best be achieved only when world trade in the sterling area is on a substantially higher level, with more trade flowing than is the case today, and when its position need no longer be supported by restrictions on imports. With that, of course, I can most fully and confidently agree.

If I may turn again to the Chancellor's speech, the main part of it was concerned with restrictions which, I agree, have to be imposed to meet the imminent peril in which we are today. It was right that he should devote so much time to that particular aspect, but I do wish that he had devoted more time to the other side of the picture. I also wish that the right hon. Gentleman the President of the Board of Trade had been more forthcoming on this point.

What do the Government suggest could and should be done to increase, expand and develop production which, after all, seems to be admitted by everyone to be necessary in order that we should conquer inflation at home and our indebtedness abroad? It is perfectly true that since 1945 we have increased production by 80 per cent.; but the rise has now become static and I am not at all sure that the right hon. Member for Huyton is not right in saying that it has begun a downward curve.

What does the President of the Board of Trade feel about the need to encourage more and more exports? What does he think those exports should be; where are they to go; who will buy them at what price? We do not know how the right hon. Gentleman can help us very much upon that; but be it also observed that those increased exports have to be taken out of home consumption without any effort being made at all to extend and expand overall production itself so that in time we can not only extend our exports but, rightly, extend the supply of consumer goods at home and conquer inflation, with more and more goods—more than the demand—so that gradually prices will fall.

We can now see the picture of the difficulties in which we are and which we have to overcome. We know, of course, the amount of our indebtedness and the pace at which that indebtedness has been and is increasing. We also know that if we limit still further—as we are to do—the amount of consumer goods here, with the spendable income remaining the same and possibly increasing the inflationary pressure will be bound to rise.

That is where I could not understand the speech of the right hon. Member for Huyton. Does he really deny that there has not been from 1945—really from 1939—a continuous inflationary pressure in this country? It was in 1945 that his colleague—the first Chancellor of the Exchequer of the Socialist Government, the right hon. Member for Bishop Auckland (Mr. Dalton)—invented the very useful phrase, "Too much money chasing too few goods." If he were not dealing with the subject of inflation at that particular time, in his very first Budget, with what was he dealing? Again, what was he and his successor, Sir Stafford Cripps, and even the right hon. Member for Leeds, South, doing when they were budgeting for a surplus the whole time, if it were not, as they said it was, to take money away from the pockets of the people—to stop them being tempted to buy goods which were in short supply?

There has, of course, been this inflationary pressure, and the trouble is that now, with these further restrictions, that is bound to come first of all by putting restrictions upon our imports and then restrictions upon the amount that will be available from what we have converted into manufactured goods in order that we may increase our exports abroad. There will be a still shorter supply—with other incomes remaining the same or increasing—than was the case before. It is what I should call a tremendous inflationary pressure.

Photo of Mr Henry Usborne Mr Henry Usborne , Birmingham, Yardley

My right hon. Friend the Member for Huyton (Mr. H. Wilson) is not here; nor am I qualified to speak for him; but I was here when he spoke and I think it is clear that what he was arguing was that whereas there probably has been—I think undoubtedly there was—inflationary pressure for a considerable time, curiously enough just now that is not necessarily the case.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

I am pointing out to him that his argument was quite wrong and his facts were wrong, because he was basing his argument upon instances of certain articles which are not being sold at the present time. There is bound to be a state of inflation unless there is a choice in almost every range for the housewife and the ordinary consumer to buy, and nobody suggests that that is our position today.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

It would be a pity if the whole situation were misunderstood. It was not only my right hon. Friend the Member for Huyton (Mr. Wilson), but also my right hon. Friend the Member for Leeds, South (Mr. Gaitskell)—both of them—who said that our situation today was not in the old sense inflationary at all, because whereas in those days people had too much money in relation to the amount of goods and it was necessary, therefore, to restrict them in order to export the goods instead of consuming them, today the situation is that demand is falling off because people have too little money in relation to the amount of goods and their prices.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

Their arguments cannot be right when they are saying two contradictory things. What they are saying is that the inflationary pressure is not in existence now because certain goods are not being bought. At the same time they are admitting that the money income has gone up and they are also saying that the production rate has stopped and is even turning downwards. That means there are fewer goods and more money. If that does not mean more money chasing fewer goods I do not know what it means.

Of the other side, the remedy side, at the moment we can only see—I have said already that it was less than half—about a quarter of what is needed to eliminate our indebtedness and bring about the stabilisation of sterling. At the moment it rather looks as if all that the Chancellor has done up to now is to stop leaks in the walls and in that, of course, all that he has done is to follow the precedent that has been set for him by his predecessors, the Chancellors of the Exchequer of the Socialist Government. The truth is that something much more drastic than a patchwork is needed, something far more constructive and lasting.

Before I come to the restrictions which are to be made I want to refer to one or two other matters. In my view it is right to see, first of all, that every effort is made to keep industry supplied with the raw materials that it needs. If we do not do that it is no good talking about anything else. We have to keep that production going. Further, the basic ration of food is to be maintained, there is to be no direction of labour or compulsion upon any man to take any particular job and there is to be no cutting of the school-leaving age.

I cannot imagine anything more uneconomical, more wasteful or more disastrous for the future of the country than cutting down the education of the young, and I was glad to get the Chancellor's assurance on this matter. I did not expect anything else from him, knowing the great part that he played when he was the Minister of Education, assisted by the right hon. Member for South Shields (Mr. Ede), when we passed that very great Act of 1944. I know the interest he has had throughout in education and his view that it should be on as full a basis as possible.

Photo of Mr Thomas Peart Mr Thomas Peart , Workington

Surely the right hon. and learned Gentleman knows that the Minister of Education has issued a cir- cular which envisages very severe economies in the education system and that if these economies are pursued, as they are being pursued, the main education system will be seriously jeopardised.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

If there were any danger of the main system being jeopardised, then I should protest most vigorously against it, but if certain things can be postponed for the time being without any irreparable harm being done, all well and good. Throughout the whole education system there are probably a great number of extravagances which might be looked at and done away with.

The President of the Board of Trade used words to the effect that we must sacrifice the future to save the present, but that is something which must not in any circumstances be allowed to apply to education. No sacrifices must be imposed upon the children of this country upon whom the whole burden of the future, a heavier burden than the one we are undertaking today, will fall.

I now come to the restrictions themselves. Like the right hon. Member for Leeds, South, I presume that the£22 million to be saved on the import of tobacco will be made up out of existing stocks. We all agree, of course, that the production of coal should be increased and that its import should stop. I think that as long ago as 1945 I was the first to say that if we could export 40 million tons of coal a year we should have no economic troubles and would be on top of the world. Today, even an export of 10 or 15 million tons would get us out of our difficulties.

I have already dealt with restrictions on imports of furniture, clothing, and so on, which are bound to lead to an increase in inflationary pressure. It is quite right to limit civil expenditure, to cut out waste, and to postpone those things which can be postponed without doing irreparable damage.

But now I come to a matter of which I cannot approve, the charging of the 1s. for prescriptions. [HON. MEMBERS: "Hear, hear."] I am very glad to hear the cheers from right hon. and hon. Members on this side of the House, but they have not a very good record in this respect. In 1949 an Amendment came from the other place which imposed this charge upon the general public, and, what was more, the right hon. Member for Ebbw Vale (Mr. Bevan) invited this House to agree with their Lordships' Amendment. I was one of the eight who not only protested against that Amendment, but voted against it. But we were voted down by the right hon. and hon. Members who were then supporting the Government. Therefore, their record is not a very good one.

In his speech yesterday the Chancellor said: We shall maintain the structure of the service, but we shall make charges where they can best be borne."—[OFFICIAL REPORT, 29th January, 1952; Vol. 495, c. 54.] That sounds very good, but does the Chancellor really think that such charges can best be borne when there is sickness in the house, when, it may be, the head of the family or some other member of the family has to consult a doctor and prescriptions have to be written out? Does the Chancellor think that is the moment for imposing such charges when there is probably less money available and more anxiety, and at a time, perhaps, when extra money will have to be spent upon other things which would not be required in the normal way?

Is this charge to be made on the first prescription or is it to be made every time the prescription is used, or what? When this was proposed in the 1949 Act, it was discovered at that time that it was impossible of administration. What has happened since to make it feasible? To my mind this is a retrograde step, the first retrograde step taken since 1911 when the first National Health Service for this country was introduced.

What is it going to save? It is estimated that it will save£12 million out of a total of£400 million. Again, some saving is also to be made on surgical boots, hearing aids, and things of that kind. I should have thought that to encourage the use of these things would be to encourage many people to take part in production thus adding to the wealth of the country and without which they could not do so.

I suggest to the Chancellor that if he wants to save£20 million he should rather look at the administration of the National Health Service. If he were to do that, I should be very surprised if he did not find that there was a good deal of waste and unnecessary extravagance, the cutting out of which would probably save more than the£20 million envisaged and tend to make available a more satisfactory service. At any rate, it would not put a charge upon anybody who could ill afford to pay it.

Then there is the restriction on plant, machinery, and vehicles. The Chancellor was right in describing it as severe and unwelcome. I would add that unless it is very carefully handled it might also be unwise. This country is still under-tooled, not only in the factories, but in agriculture, and what we need, as the Chancellor knows only too well, is not less production but more production. We are much more likely to get it if we have more tools than if we have fewer.

As I have said, the main part of the Chancellor's proposals are still to come, and it was absolutely right for him to bring forward the date of the Budget. I am hoping that when 4th March arrives he will be bold and courageous and will really try to deal with the position once and for all. This is not a time for half measures, but a time for full measures. There must be no more patching, but a steady long-term as well as a short-term policy so that we may clear up this matter once and for all.

Ever since the end of the war in 1945 this country has gone through some economic crisis nearly every year. The Government of 1946 did not heed the warnings of the great difficulties facing them at that time. They went ahead, and were saved then by the£1,000 million loan from America and the£250 million loan from Canada which we now have to repay. That money was supposed to last till 1951, but in 1947 there was another crisis and the Prime Minister came to the House to announce cuts similar to those announced by the Chancellor yesterday. What really, saved us then was not what the right hon. Gentleman said, our increased production, but increased production made possible by Marshall Aid.

We went on until 1949 when the greatest crisis of all took place, and again in that vital month of July of that year, the Prime Minister came to the House once more to announce that we were once again in difficulties. There were more cuts, terminating in September, 1949, with the devaluation of the£. Again, in 1951 there was another crisis which began somewhere about June and continued steadily through the latter half of the year.

These crises which crop up year after year remind me of an aged prima donna who was announced as being about to say her final good-bye, but who, before the cheering had died down, was announced as making positively her final appearance elsewhere. Is this to be positively the last crisis which will face this country? The Chancellor has a great opportunity before him. Let him seize it, let him be bold and courageous, and the country will be grateful to him.

7.40 p.m.

Photo of Sir Ian Horobin Sir Ian Horobin , Oldham East

Three months ago we inherited three wars and a world crisis, and our business is to prevent the coming of a third world war and an economic catastrophe. It is perfectly useless to discuss this situation in which we now find ourselves except against the urgent background of£ s. d. I am very glad the ex-Chancellor of the Exchequer, the right hon. Member for Leeds, South (Mr. Gaitskell), in a most interesting speech abandoned at once the leadership of the Leader of his Party and abandoned any suggestion that this was just a "phoney" crisis.

If proof were needed, may I remind the House of one or two figures. Reference has already been made to the fact that we have had three major crises since the war. If we take these three crises and measure the rate of loss of foreign exchange which brought them about we find that the first would have exhausted all our reserves at that time in 21 months. The second would have exhausted all our reserves at the time it occurred in 13 months. This third crisis would have exhausted all our reserves when it occurred in eight months. If this is a phoney crisis the gramophone record is a pretty strident one.

Next, the way by which we escaped from previous crises is no longer open to us, and it cannot be repeated too often that since the war, in the period of Socialist administration, this country one way or another has received over 6,000 million dollars from across the Atlantic. That most striking figure has not been given to us before in this debate, and that way out is no longer open to us even if we wished to take it.

The third point we must never forget—and I could not agree more with the right hon. and learned Member for Montgomery (Mr. C. Davies) than on this—is that the mere repetition of these crises shows that something fundamental is wrong. Of course it is the inflationary situation in which we have been living. We have to earn our living out of the great economic structure of this Island, and we stand about as much chance of doing it if we are subject to periodical jolts and crises as has an applicant for a job who is subject to fits. This situation must come to an end and come to an end now.

We have been trying to live on an American standard of living with an English standard of production and it cannot be done. In the early part of last year personal consumption was going up and not down. Throughout the whole of last year the wage bill went up by about£1,000 million. What is the use of going on lecturing the ordinary people of the country in those conditions? Their natural reaction is that if this is a crisis long may it continue.

At present it is common knowledge, or it should be, that we are eating up in increased consumption all of our increased production and we are not even preserving our capital intact in this country. Is it always realised that at this moment the United States are adding to plant and equipment for industry at about 10 times the rate at which we are doing it in this country? How can we long hope to compete? In the United States in the last year manufacturing industry has added in plant and machinery three times the total of the arms bill under which we are staggering.

It is perfectly useless for hon. and right hon. Members opposite, or for the country at large, to believe any longer that we can continue with the present standard of consumption when we are not only not paying for what we consume but are not keeping up in the race for capital equipment even with Russia, let alone with America. If that part of my argument can be accepted more or less by some hon. Members in this House I can now go to my next point. I want to remind hon. Members of a few figures.

Photo of Mr Thomas Peart Mr Thomas Peart , Workington

Did the hon. Member advocate that before the General Election? Did he say in his Election campaign that we should consume less?

Photo of Sir Ian Horobin Sir Ian Horobin , Oldham East

Yes, I did, but I hope that on this occasion we can stick for a moment to economics and not try to swap party points. However, if the hon. Member wishes to challenge me, I can tell him that at the largest public meeting in my constituency I explicitly reserved the right, if necessary, to vote against an Excess Profits Tax. That may be the reason why I won a marginal seat with 2,000 votes.

But let us get back to the economics of the situation. The next point is that if it be true, as I have argued, that cuts in consumption are necessary, it is perfectly useless for any of us to believe that it can always be somebody else who has to take the cuts. Ninety per cent. of the income of this country goes to people with an income of less than£1,500 a year, and three-quarters of the personal income of the country goes in wages and salaries. It is completely useless for hon. Members to believe perpetually that if there are to be cuts and sacrifices they must not affect the ordinary person on whom they depend for votes. They will affect all of us.

Further, it is perfectly useless for people to believe that capital cuts can be effected without capital cuts in Government expenditure. Even if we ignore housing, the amount of capital expenditure in this country by Government and nationalised industry is bigger than that of all manufacturing industry put together. It is useless for hon. Members to say, "Of course we realise there is a crisis but you must not cut anything in particular because a cut would be a moral outrage and must be avoided."

This country is in danger of becoming a dear producer and in conditions of inflation, conditions of wage inflation, conditions in which all incentive to greater economic activity and saving is taken away, it can no longer earn its bread and butter. It has very few months in which to put this matter right. One of the things I found most encouraging in the Chancellor's speech was that although he was faced with this urgent situation neither yesterday nor in November last did he omit the wider and longer-term issues.

In November the Chancellor found the situation and made certain minimum cuts. But he also made what was to my mind the most epoch-making financial decision of our lifetime, in freeing and restoring the old and tried monetary system of the bank-rate and restricting the liquidity of the banks, which is the only foundation for hope of getting out of the inflationary slush in which we have been bogged down for years. Again, yesterday, he not only made the necessary and unhappy cuts, but in relation to the Sterling Area Conference be made another epoch-making announcement with regard to the convertibility of sterling.

This country is a world trading country. The government of England today means the government of its money, and we cannot survive unless world trade is conducted more and more in sterling. I would suggest that the reason why England can never federate herself in a continental federation and why the sterling area is so vital to her may be easily seen if one comes down to the East End of London where I live and spends half an hour outside Canning Town station to watch the destination of goods on the passing lorries there. They are labelled Hong Kong, Halifax, Karachi, Takoradi, Port Swettenham: the whole geography book of the world, feeling its way in and out of the Albert Dock.

That is where dull statistics come to life, and where the Chancellor's measures either succeed or fail. That great problem of restoring as quickly and as far as possible the flow of goods from this country is the only justification of the cuts and other unfortunate measures we have had to take ever since we took over this damnosa hereditas. [An HON. MEMBER: "What does that mean."] Damnosa hereditas, as any ex-Wykehamist or ex-Etonian will tell the hon. Gentleman, is the Latin for Socialist finance.

Having said that, and having ranged myself firmly behind the Chancellor in the measures which he has put to us, may I make a reference to two very vital factors. First—and here again I follow the speech of the right hon. and learned Member for Montgomery—this really must be the last appearance. Frankly— and I know other hon. Members have found themselves in the same difficulty—I could not do the additions in the Chancellor's speech. Before this debate finishes, could we be given an authoritative figure of what is the total annual rate of improvement in the United Kingdom's foreign exchange position which we shall have to achieve in order to do what my right hon. Friend said we should have to do in the last six months of this year? That figure was not given in the Chancellor's speech and cannot be calculated from the figures he gave.

We start with a figure of£1,150 million per annum to the bad outside the sterling area in the last six months. We have got to get a rate of£200 million to the good in the sterling area at the end of this year. The difference between those would appear at first sight, to mean that we have a minimum of£950 million a year to make good. That figure is almost certainly too high. It is difficult to know what the correct figure is, and we cannot calculate it from the Chancellor's figures because he did not give us the estimate of our position within the sterling area in the last six months. The worst that could happen would be something of that order, but I think it is certainly too high. If it is the correct figure, then clearly the Chancellor's measures are quite insufficient.

But of course, there are also a number of reasons why he cannot just double the last six months figures of the year. For one thing, the last six months is the period when we repay American loans and interest. The terms of trade are getting back to normal as compared with last year. United States tin purchases are being resumed. We are getting over, or shall have got over some of the oil follies which have cost us so dear.

At a guess£750 million a year or thereabouts is the amount that we have to make good for balancing the accounts of the United Kingdom. At any rate, it seems to me vital that we should be told what the figure is, because, important as the sterling problems are, all we can do in this House is to deal with the United Kingdom position. If we may take it that in order to balance our position we have got to make an improvement of about£750 million a year by the end of this year, then I take it that the Chancellor is saying, in effect, that£500 million of that comes from cuts and£250 million of it comes from increased exports. I should like to say a few words on both of those.

The exports item is a very formidable undertaking. He expects those exports to be made mainly by engineering, vehicles and so on. The iron and steel, engineering and vehicles exports last year were of the order of£1,200 million, and an increase of£250 million would be 20 per cent. That is a terrific increase. On the other hand—I confess I was surprised when I looked at the figures—if we compare last year with the previous year in relation to those items, 20 per cent. was about what happened in some cases. It is, therefore, not impossible, but it is a terrific undertaking. If that is definitely the undertaking of the Government, it cannot be too clearly stated because, as the leader of the Liberal Party pointed out, we have had too much of setting our sights too low and even then not quite reaching the target.

Apart from the exports which we have to find, we have the£500 million cuts. We have discussed the£350 million cuts, but I find myself quite unable—and I have read the speech with great care—to find any indication of how the bulk of that new£150 million new cuts is to be provided. We cannot include any of the capital cuts in things like tobacco or by raiding war stocks or American assistance to our arms effort. That is entirely nonrecurring. What we have got to find is an annual saving of£150 million. I can find only three items given—tourism£12½million, coal£2½million, and the foreign side of the information services£500,000. Those add up to£15½million, though perhaps in a full year they may come to, say,£20 million. Where is the balance?

I am sure the Chancellor knows what he is doing and knows the answer, but he has not given that answer to the House yet. We must not be faced in a year's time with the explanation "I am sorry, I thought this was all right but because of Korea or the terms of trade or the procession of the equinoxes it has gone wrong and we have got to start all over again." That is the first question. Are these cuts and exports possibilities adequate and sufficient? If they are, I am certain the country will back the Chancellor.

The next condition is more worrying, because it is not being satisfied now. As has already been pointed out, it is quite hopeless to meet any of these burdens unless we can keep all our people employed. Last Christmas there were towns in Lancashire which had more unemployed than they had during the worst part of the slump. At the present moment there are 15,000 textile workers out of work in Hong Kong for the same reason. They are all the King's subjects. The Chancellor cannot handle this alone. The Colonial Secretary is concerned. In the last two years not one yard of Lancashire cotton has gone to the West African market. We are beginning to fear unemployment and loss of production owing to competition from Japan in particular. After all, we can talk about cuts, but half Japan's exports go to the sterling area.

We have not only that aspect of it, but we have to consider the raw materials position. At this moment Lancashire is unable to get the American cotton she wants, with the result that the price of inferior cotton is being boosted up to a ridiculous height. In the last few weeks India has bought nearly twice as much cotton as Lancashire will get this year. So the Dominions Secretary might have something to say. Then we turn our gaze to the other side of the world and we find that although we cannot get American cotton, Japan is getting it with American loans. The Foreign Office is concerned.

This is a global war against inflation and Communism, and they can only be overcome—and I am sure will be overcome—by a united effort by all the Departments concerned, with the united support from this side of the House and I honestly believe from a large section on the other side of the House, and certainly with the overwhelming support of the manufacturing people in this country. If anybody thinks we should get cheap support by persuading the country that there is an easy way out, our answer must be "We would rather be poor and independent." If any hon. Member opposite wants us to get out by cutting our re-armament, our answer must be, "We would rather be poor and free."

8.0 p.m.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

I think most of us would agree that the hon. Member for Oldham, East (Mr. Horobin), would have been well employed directing some of his criticisms, contained in the earlier part of his speech, before the last Election to those who now occupy the Government side of the House. That is because of the irresponsibility of much of their argument from these benches when they were in opposition, the complete lack of constructive proposals from them and their refusal to help in the education of the public about the problems which this country faced in the world and the changed relationship between this country and the rest of the world.

Many of us, I feel, were a good deal in agreement with some of the remarks which the hon. Gentleman made in the latter part of his speech. It is a great pity that he and perhaps others were not able to educate hon. Members opposite about these very real issues, which were so vigorously and clearly explained by the then Government before the last Election and which were treated with contempt by members of the then Opposition.

There seems to be a great deal of agreement in the House—perhaps rather belated agreement—on the fact that we have been living in a period of national strain over the last 50 years. It is a pity that recognition of that fact is so belated. Again, it would have made a great deal of difference to the general education of the public had insistence upon that fact been maintained during the last six years.

The great difference between the attitude of hon. Members opposite and the attitude of hon. Members on these benches lies in our approach to the problem of the social services and the Welfare State in a period of strain. We realise that not only have we been meeting a real strain as a country, because of our changed position in the world—although it has been masked for a long time—but also that this strain has been made worse by world re-armament, to which reference has been made by many speakers. But, unlike hon. Members on the Government side of the House, we on these benches believe that it is in a period of the greatest strain that the social services and the Welfare State are most vital to the maintenance of morale and, indeed, of production inside the country.

With that in mind, I wish to come to some examination of the rather sketchy outline of the proposals which the Chancellor put before us yesterday in relation, in particular, to the Health Service. It is clear to us that hon. Members opposite regard the social services and the Welfare State rather as something which they must at times concede because of pressure from working class opinion generally than as something of integral importance to our entire community. At the bottom of their hearts they do not believe in the desirability of the joint community provision of essential needs for the community. I do not think they have ever believed in it in their hearts, although they have been obliged to pay lip service to it from time to time.

Photo of Mr Richard Fort Mr Richard Fort , Clitheroe

Would the hon. Gentleman substantiate with a few instances the very serious accusation which he makes against my hon. Friends?

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

I should weary the House were I to attempt to give the whole history of the way in which the social services have been developed against the bitter opposition of the Tory Party and its supporters when those new provisions were being introduced, whether by the Liberal Party in the past or by ourselves more recently.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

One of the recent examples with which we on these benches are concerned and with which I have more than a nodding acquaintance myself is the attitude of hon. Members opposite to our Health Service. Indeed, they are showing once again the attitude which they have towards it.

It is clear that there are real limitations upon the speed of development of our social services as a whole. We all accept the fact. We know it is true and, when in office, we ourselves very often in face of bitter criticism from hon. Members opposite, recognised the necessity of limiting the calls made upon capital resources in vital fields of the social services—as in the Health Service. We had to face the necessity of holding back hospital development because of the demands made upon our capital resources as a whole.

We have always appreciated that fact, even though we were submitted to the most bitter criticism from hon. Members now on the Government side of the House when we carried out what we thought to be our responsible duty in that respect. Nevertheless, when we have done this we have done our utmost to ensure that we determined the essential priorities within the social services on a basis of need rather than a basis of money values.

I will take as an example some of the unfortunate cuts which we had to make in the field of our Health Service last year—cuts which were more than balanced, incidentally, by increases in other parts of the Health Service field. For example, there was the charge for dentures which we introduced last year. Those charges were made on the advice of the advisory committee to the Health Service as being desirable on other than monetary grounds—grounds which were explained and supported in the House at the time.

Indeed, the charges in the ophthalmic service, unfortunate as I believe they were, gave an opportunity for the development of an ophthalmic service such as was originally intended in the introduction of the Health Service Act, based upon specialist investigation and advice rather than, as at present, based upon the supplementary service.

During the last few days we have been presented with proposals based on grounds of financial economy alone, and upon nothing else. As my right hon. Friend the Member for Huyton (Mr. H. Wilson) and my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), have both appropriately pointed out, they bear no relation to the essential economic problems with which the country is faced. It is clear, for example, that the proposal, taking them in some detail, for a charge on dental treatment as distinct from the charge for new dentures which was introduced last year, is a very serious blow at what was generally regarded as an essential part of the preservation of the health of the people.

Although the Chancellor spoke of the transfer of dentists from this conservation work to the protection of children's teeth, it is clear from the financial savings which he hopes to achieve that in fact he does not expect much transfer to take place. Even if it were possible in this way to increase the attention given to children's teeth—an increase which we all desire to see—a good deal of that attention would be wasted unless we could make sure that it was maintained at a later age. That is one of the points which comes out so clearly from the most interesting report of those who went as an official committee to New Zealand to examine the dental services in operation there.

When we come to the charge which is proposed upon appliances of various kinds, we come to what can be called nothing more than a mean and contemptible charge. Here we had provided that such medical aids as surgical belts, hearing aids and so forth, as were necessary should be issued, not widespread, but on the basis of a careful medical check by specialists. That is now to be scrapped apparently and a very heavy charge imposed if the sums that have been mentioned are to be achieved. We would rightly ask what is to be done to ensure that the war disabled, who had a right long before the introduction of the Health Service to free provision of this kind, and the industrial and other classes, who need help of this character, will continue to get it.

When we come to the question of hearing aids, we think that this proposal is the most contemptible of all, because, quite properly, in the development of the hearing aid scheme we did our best to ensure that those who need hearing aids to be able to carry on their work and to take up new and more useful employment should have some priority and consideration. The result of that inevitably was that many older people had to wait longer. During the last five months an increasing proportion of the older people have been able to get hearing aids, because many of the priority cases have been dealt with. The position today is that the bulk of those who are waiting—and there is a long waiting list as we know—are those who are old and, therefore, it is the old who are to be attacked by this new charge.

We have not been told yet about particulars of the charge, but it must be severe if the sums mentioned are to be achieved. We all know that the provisions made through the Ministry of Pensions cost, according to the last corrected estimates, a figure of some£4 million a year, and the total cost of central purchases under the National Health Service in a year is also some£4 million, of which hearing aids amount to£1 million and various other appliances to another£1 million.

Yet in this category of provision under the Health Service we are told that by the Chancellor of the Exchequer that a total sum of some£20 million is to be raised. He did carefully say something about some other charges, and it is perfectly clear from this that there are many other charges which have not been mentioned so far. They must bring in a considerably larger sum than any sum it is possible to achieve even if we abolished the whole of the provision of hearing aids. Therefore, I would warn the House most strongly that the proposals we have heard about are not the end of the problem. They are far from it. They are merely the beginning of the proposals that perhaps have not yet been worked out by hon. Members opposite.

We ought also to make clear the reason for our bitter opposition to the prescription charge, even if we ourselves introduced into the House the enabling proposals some time ago. We believed it to be desirable to try and secure some correction of the abuse that was apparent in the provision of drugs and medicines. None of us would deny that there is still abuse in that field, but it became clear to us that in attempting to work out the administration of this scheme it would be impossible to apply it without overwhelming hardships to a vast number of people. I note that the Chancellor took pride and joy in stating yesterday that he would not be deterred from this proposal, whatever the hardship of individuals. Presumably that did not matter to him one little bit.

When we introduced this proposal we were prepared to listen to cases of real hardship and suchlike problems, which is something we should take pride in and not be ashamed of. I want to warn those who are responsible now of the very real problems that they face in this field. They have got to face them and they must not think them to be merely a matter of common joking. The first thing is, to what extent can a charge in this field correct abuses? It may correct abuses; it may deter a small minority who abuse the Service, but at the expense and cost of the vast number who do not abuse it. A principle of medicine is that we should do our best to encourage an early diagnosis, and yet this is something that will make it more difficult for the doctor to see patients at the time when he will want to see them. It will make it much more difficult to establish the early diagnosis that is necessary.

This clearly from our experience of the problem is tackling it at the wrong end. What we need to do is to make it more possible for the doctor to give an honest judgment as to needs, and that does involve the consideration of the revision of the method of payment to medical practitioners. I am glad that the discussions are being held on that subject now. They were started while the Labour Party were in office, and I hope it will be possible in those discussions to establish a system of payment of medical practitioners, which will enable them to give an honest judgment upon the medical needs of their patients, which they claim is not the position today.

Photo of Sir Isaac Pitman Sir Isaac Pitman , Bath

Surely the suggestion that the medical practitioner will not now see the patient and be able to give an early diagnosis must be false, because, in order to get the prescription at all, a patient must have seen a doctor?

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

The whole point I am making is that, in fact, very many people will be deterred from visiting the doctor because of charges of this kind. It was proved perfectly clearly that those who were in most need would not, in fact, go because of this charge. It is a very real danger and most doctors recognise it as well as most of us.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

In view of the fact that we spend about 12s. 6d. per week per man, woman and child on drink and tobacco apart from other things, is the hon. Gentleman really suggesting that this problem is so very widespread?

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

Of course I am, and we have no indication, such as when our own proposals were introduced, that there would be a concession for old age pensioners or any special treatment for the many special categories who are particularly severely affected, including, for example, war pensioners, those who are chronic sick, those who are diabetics, and so on, whose problem was with us so clearly when the matter was before the House yesterday. It is a problem which must be dealt with if we are to avoid very special hardships.

Photo of Sir Ian Fraser Sir Ian Fraser , Morecambe and Lonsdale

The hon. Gentleman has twice mentioned the war disabled. He was a Minister in the last Government, and he knows perfectly well that every ailment or condition which arises out of war service or which adversely affects the health of every war disabled pensioner is met by the Ministry of Pensions. If he is not aware of that he ought to be, and if he is he ought not to call that argument in aid.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

If the hon. Member had listened carefully to my earlier remarks he would have noticed that I said precisely that there was the right to free provision for war pensioners which existed before the National Health Service Act was brought in, and that it must be made clear that an exemption must be made in respect of those people. We have had no indication of that sort so far, and the very fact that we have to make such an exemption brings in all the administrative difficulties which we have to face, and these are not the only ones which need special protection. All those who are in receipt of assistance, those who are old age pensioners, those with large families, those who are chronic sick and all the rest require it too.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

No, I think I have given way enough, and perhaps it is time that I brought my remarks to a conclusion.

Perhaps the worst feature of these proposals, which I consider thoroughly bad, is the attempt that is made to cloak real need in this country. I have always said publicly that I regarded one of the great successes of the National Health Service to be that it enabled us to estimate more clearly than was possible before what the real needs of the community were. Under these proposals it becomes excessively difficult to do so. I have no doubt that we shall find that the waiting lists for hearing aids and other appliances will now fall, because people will no longer be prepared, or be able, to make the payments which will be required.

We shall then be told by hon. Members opposite that they have conquered a difficult problem. What utter nonsense that is. They will not have overcome it, but they will have pushed it down so that it cannot be seen. Those were the conditions that existed before the Labour Government came into power. There is the danger of cloaking the reality of need that exists, and that is perhaps the greatest crime of all in these proposals.

This type of policy, this attempt to attack the social services, is only the precursor, the start. Quite plainly, hon. Gentlemen opposite have many other proposals up their sleeves which they have not dared to mention in the House so far. This sort of policy stems from the mind of a rentier and not from the mind of people with working-class experience. The party opposite have not the moral authority to carry these proposals through, and on this side of the House we will see that the proposals are bitterly, violently, and persistently opposed.

8.22 p.m.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

The hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) will forgive me if I do not try to follow him into the details of the National Health Service, in which he is an expert. I know not nearly so much about those affairs as he does.

I want to take him up on two other small points. He seemed to say that these proposals emanated from someone who was of the rentier class and who was without experience of working-class conditions. Earlier, he said that the social services had been conceded by the Conservatives grudgingly to working-class people. I wish he would not take such a "Holy Willie" attitude. I came from a working class home. I left an elementary school at the age of 14. There are many more Members of the rentier class sitting on the Opposition Front Bench than when Keir Hardie was in this House.

I ask the hon. Gentleman not to be so sanctimonious and self-righteous. I would remind him of something said by Keir Hardie many years ago, which was that social security in this country was ahead of the world. That was long before we had to suffer a Socialist Party or a Socialist Government. I am quite prepared to admit the sincerity of what the hon. Member has said, but I would ask him not to have such a "Holy Willie" attitude towards us, because it is totally unjustified.

I shall pass from the hon. Member now, to the ex-Chancellor of the Exchequer. This debate is in danger of degenerating into a "de-feather-bedding" of the whole nation by stealth and by stages. Hon. Members may say, "Must there be de-feather-bedding?" I say "Yes, most certainly." I have the best authority to quote for that statement, no less a person than the ex-Chancellor of the Exchequer. I take it that hon. Gentlemen opposite will accept his evidence. In the debate on the Address, on 8th November last, the right hon. Gentleman said: I made it perfectly plain that cuts in imports would have to be made and that consumption at home would have to be kept down. I ask hon. Members to pay careful attention to his next words: I have repeatedly said that the standard of living would have to fall."—[OFFICIAL REPORT, 8th November, 1951; Vol. 493, c. 357.] The ex-Chancellor said that only last November. Why, then, is there all this high, sanctimonious self-righteousness from the other side? If their Chancellor had been in power today he would have had to do these things.

Photo of Dr Mont Follick Dr Mont Follick , Loughborough

And the hon. Gentleman would have opposed them.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

The ex-Chancellor made it perfectly clear that we should have them, not because the Socialist Government desired them but because we were living beyond our income and had to accept a much lower standard of living. The hon. Member who has just spoken made great play, as he was entitled to, with the speeches of Lord Woolton, the Leader of this House and the Chancellor of the Exchequer, about election promises. It is good electioneering, to catch cheap votes. Hon. Gentlemen opposite should ask their own leader in their own party meeting what cuts he was going to make. He knew they were essential because he had admitted publicly that they had to be made. Are the cuts made by the present Chancellor of the Exchequer any more anti-social than if they had been made by his predecessor?

Photo of Mr George Porter Mr George Porter , Leeds Central

The difference is that on this side we said before the Election that cuts would have to be made, and that on the Government side they did not say that cuts would have to be made until they were in power.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

That statement is quite untrue and I do not propose to follow it. The cuts were admitted to be necessary. [HON. MEMBERS: "No."] If hon. Members will look at HANSARD for 8th November, 1951, they will read the whole statement of the ex-Chancellor of the Exchequer when he was challenged in the House. It is no good the hon. Member for Fife, West (Mr. W. Hamilton) shaking his head. Here is the cutting from HANSARD.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

The ex-Chancellor did not say anything about these particular cuts.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

He said some cuts. He said, "I have repeatedly said that the standard of living would have to fall." Let us be honest with one another and with the country, and for goodness' sake let us face facts. The standard of living would have to fall. By how much?

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

The former Chancellor decided that he would cut dividends. That was one of the intentions on this side of the House prior to the Election.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

That intervention is not worthy of the hon. Gentleman. Is a cut in dividends a fall in the standard of living as understood by the Socialists?

Furthermore, let me put to hon. Members opposite a point which was made by the former President of the Board of Trade, the right hon. Member for Huyton (Mr. H. Wilson). He said that there would be no hope for us unless we can have a fairer share of raw materials with the Americans. [HON. MEMBERS: "Hear, hear."] Thank you; that support is exactly what I wanted. We must always have fair shares, said the right hon. Member, with people who have more than we have—that is the Socialist doctrine. India has a standard of life which is one-fifteenth of ours; Japan has a standard which is one-seventh of ours. Are hon. Members opposite prepared to go to their constituents and say that we are to have fair shares with the Indians and the Japanese—

Photo of Dr Mont Follick Dr Mont Follick , Loughborough

We want to raise their standards.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

—even if it means that we shall in future eat, as they do, as much in a week as now we are having in a day? Of course, hon. Members opposite are not prepared to do that.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

It is, surely, valid to point out that when the Labour Party were in office, they insisted on the provision of materials of all kinds for India, and that those very decisions were attacked viciously by the then Leader of the Opposition, now the Prime Minister.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

I am not asking about history. [HON. MEMBERS: "Oh!"] I am asking hon. Members opposite what they would do tonight. Are they prepared to go back to their constituents and say, "To have fair shares with the Indians, you must accept cuts of three-quarters in your rations"? [An HON. MEMBER: "The Government have done that."] There is not one hon. Member opposite who is prepared to do it.

The speech of the hon. Member who preceded me was typical of the danger that faces us in this debate: we are forgetting the background of the cuts in discussing the details of the proposals. I should like to remind hon. Members of one or two of the factors that have caused the present proposals to be brought forward. We all know that since 1939 this country has been living beyond its income. [An HON. MEMBER: "And before."] No, it did not. We have had Lend-Lease, loans and gifts. We have been eating, drinking and smoking more than we have earned.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

Quite, and the "more" is often on the other side of the House.

The position as revealed by the Chancellor, and not disputed on the Opposition Front Bench, is that last year we overspent by about£500 million. The only problem before us is whether we are to increase output by£500 million, and thereby maintain our standard of life, or whether we reduce our standard of life by that amount. Those are the two inescapable alternatives. Instead of concentrating so much on reductions, we should concentrate more, as a Parliament and as a nation, on increasing productivity, on increasing our output so that no cuts will be necessary. I liked the bluntness of Field Marshal Montgomery at his Alamein Re-union, when he said to the 7,000 assembled there, "We either work more or we eat less." That is the position that faces us.

Hon. Members will agree that the crisis with which we are faced is not merely a British crisis, but is part of a world crisis. Three things have led up to this crisis. The first is the rapid growth in world population, the second two destructive wars and the third the rise of nationalism in the East and the demand of coloured peoples for a fair deal. Hon. Members will agree that it is impossible for us in this country to insulate ourselves from the rest of the world, but I would remind them that in the last 150 years the Briton has been the economic herrenvolk. He has had a higher standard of life than anyone else and the privileges we have enjoyed as a race are going; they are going inevitably and going for ever.

Hon. Members must realise that two-thirds of the world's population, even today, are living at one-seventh of our standard. Put in terms of rations, we eat as much in one day as two-thirds of the world eat in a week. [An HON. MEMBER: "Not all of us."] All of us on an average and no one eats better than hon. Members in the House of Commons. Because of the world food position—and ultimately everything comes back to the question of food—a dark question mark is overhanging all mankind.

The question, ultimately, is will there be enough to eat for the enormously increasing world population? It is growing by 25 million a year, which means that every two years a nation as big as Great Britain is added to the world and has to be fed and maintained. I suggest that hon. Members opposite should look at their "Daily Herald" today and they will find next to the editorial column, a review of a book on world hunger. I commend it to them.

The United Nations Association, a week or two ago, issued a pamphlet on world food production which showed that since 1936 world food production has increased by only 7 per cent., but in the meantime world population has increased by about 15 per cent. There is less food to go to a bigger number of people and the disinherited peoples of the world are demanding a fairer and better distribution. [HON. MEMBERS: "Hear, hear."] I am grateful for hon. Members' support.

In India there are eight times more people than in these islands, but the income of India is one-half ours. Therefore, the average Indian lives on a standard of one-fifteenth or one-sixteenth that of the average Briton. Put in terms of food, which I agree it is oversimplifying the problem, it means that every day we eat as much as an Indian eats in a fortnight. If hon. Members believe the fair shares theory or gospel for abroad they should go back to their people and say that if we are to raise the standard of life for the Indian only twice, it would still be one-eighth of ours—and we would have to live for a week on what we have for a day's ration today. I do not believe that this country is prepared to do that.

Photo of Mr Archibald Manuel Mr Archibald Manuel , Central Ayrshire

Seeing that the hon. Member has put the position of the teeming millions in India is it not valid that he should show the other extreme at the top and indicate that America, with only one-sixth per cent. of the world's population, takes 42 per cent. of the world's wealth each year? Until we cure that kind of thing the in-between races will not be able to pay their quota to provide the greater share-out of which he is talking.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

The hon. Member, as a true Socialist, comes back traditionally to looking at those who are a little above him, rather than those below him, and asking others to sacrifice.

The United States' population is 150 million, and the income per head in dollars as calculated by the United Nations in 1949, was 1,453. Sixty-four per cent. of the world's population are living on an average income of less than than 100 dollars per head per year. If the whole of the American income was divided along that 64 per cent. it would make quite a small difference to them. What right have we to ask the Americans to make sacrifices that we ourselves are not prepared to make?

That is the horrible, dark world background which we have to face. That is the problem. How can we feed 50 million people here when our agriculture will not maintain more than 30 million? There are 20 million people too many in these islands for our own resources to maintain. Ultimately, we have either to expand our exports or have a much lower standard of life.

Hon. Members may have seen the figure given by the Financial Secretary to the Treasury in the recent Government. In the debate last November he said that in 1951 our food imports cost us£1,000 million. We had a deficit of£500 million. Therefore, we paid for only half of what we ate that came from abroad. Since 40 per cent. of our total foodstuffs come from abroad it means that if we had paid for everything we ate last year and had eaten only what we paid for, the whole rations of the people of this country would have had to be cut by 20 per cent.

These are facts and figures. It is no use running away from them. No matter what Government are in power those facts and figures have to be faced fairly and squarely. The Chancellor tells us that to get this food to keep us going we have to increase our exports. In a very small way I have been interested in exports and have a little experience of them. It is a most difficult problem today to sell British goods abroad, with the exception of certain categories.

The "Board of Trade Journal" of 26th January gave some startling figures. Exports for 1951 were two-thirds greater in volume than was the case in 1938. Our imports in volume were less and yet although we were exporting two-thirds more than we were in 1938 we were£500 million "in the red." The problem of selling abroad is a terrifically difficult one. It will not be solved by mere gibes across the Floor of the House.

I would remind the Chancellor and the House, at a time when he is telling us that we must export more, that in 1954 the American armament production drive will be ended and the great productive energies of America will be turned from armaments to civilian goods. The competition which our goods will have to face abroad will be far greater. At the same time Germany, Italy and Japan are coming into the market and we shall be very lucky indeed if we survive at all.

In the "Manchester Guardian" annual review issued at the beginning of this month it was shown that textile workers in Japan have an average wage of 7½d. per hour. In this country the average is 2s. 7d. We are already feeling the fierceness of Japanese competition. Hon Members should realise that today Japan has only 5½million spindles working. Before the war she had 13 million. If we fear her now, what are we to do when she is fully re-equipped and ready to go at full blast as she did pre-war—

Photo of Mr Emrys Hughes Mr Emrys Hughes , South Ayrshire

With American technicians.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

—with all the knowledge she has from American "know-how"? Hon. Members opposite cannot say that they want the peoples of the East to have a higher standard of life and then deny them the right to earn it. We must face these facts.

In view of this terribly dark picture there are two things I would suggest to my right hon. Friend the President of the Board of Trade. The first is that of a total number of people employed in this country in civil occupations, and there are 22,350,000, only 12½million of those are engaged in direct productive trades. If we allow for the three-quarters of a million in the Armed Forces we have over 10 million men and women engaged in what I would call non-productive jobs. I would say to the President of the Board of Trade that the labour overheads of the nation are far too high and there are far too many people doing all sorts of fancy jobs who ought to be back in productive industry. That, I think, is a thing which would help us in our production task.

The second suggestion I would make to hon. Members opposite, as well as to my right hon. Friend, is that I think it is our duty to go to the country and paint the economic picture in all its bleakness to make the people realise how much we are up against. I believe that the proposals which will have to be made in the next two years will make the austerity of Sir Stafford Cripps look like the proposals of a profligate spend-thrift.

I appeal to my right hon. Friend, at the very first sign of a recovery not to let any Minister go round the country saying he has "a song in his heart" or that "we are round recovery corner." Let us stick to the hard, grim task in front of us. This struggle for survival, for it is nothing less than that, is something which ought to be taken out of party politics for a period. If a Socialist Government were in power I believe they would have to take very similar steps to those which are being taken now.

Our task and the spirit in which that task must be taken up was best put by Sir Stafford Cripps in this House when he said: These economies"— 1949 and 1952, just the same— like devaluation, are a prelude and no more to a new surge forward to conquer the hard currency markets without which our industries, our standards of living, indeed, our civilisation itself, must fade and wither away."—[OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 1353.] Unless we can quickly produce more and get our costs down we shall suffer a tragic fall in our standard of living accompanied by all the demoralising uncertainty of widespread unemployment.

8.49 p.m.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

I feel that the hon. Member for Louth (Mr. Osborne), has survived the transition from this side of the House to that side very well without any great change in his style of speaking. He still gives us the rather bewildered homilies we got used to in previous Parliaments, but I think the substance of what he has to say has changed. Whereas he used to tell us about the dreadful state of affairs in this country, and the dreadful difficulties we were facing abroad and at home because of it, I do not remember hearing previously from him a great deal about the world crisis of which he has told us so much this evening.

First, I would agree with him when he says that the Labour Party are not prepared to say that we will level ourselves down to the Indian standard of living. Obviously, nobody can do that. Obviously, that is quite impracticable. But I am bound to say that during the period of the last Government one of the factors which made it most difficult for us to moderate our own standard of living in order to improve that of the Indians and the people of the other underdeveloped countries was the attitude which his right hon. Friends consistently took up—the attitude of exploiting every difficulty which occurred as a result of trying to pursue a policy of fairer shares in the world, the attitude of the right hon. Gentleman the Prime Minister of protesting bitterly against the release of sterling balances. It is really no good coming along and attacking us on this side of the House on that score.

I was rather amused to hear the hon. Gentleman say, at the end of his speech, that he thought the job of national recovery should now be taken out of the sphere of party politics. It might have occurred to many of us that that is something which might have been done a long time ago.

There has been a lot of discussion as to whether this crisis is more severe or less severe than previous ones. In some respects it is more severe; in some respects it is less severe. There is one respect in which it is less severe and easier for this Government, and that is that they do not have an Opposition, as we had, prepared to exploit every difficulty and to decry the position of the country; to make it seem worse than it was to people outside the country; to make them feel that we could not possibly recover so long as present policies were pursued; to make them feel in 1949 that devaluation was about to occur—an action which did a great deal towards bringing about devaluation.

This Government have the great advantage of having the right hon. Gentleman the present Prime Minister imprisoned as Prime Minister and, therefore, unable to talk about economic affairs and go about making speeches which make the crisis a great deal worse, as his speeches certainly did in 1949.

Our first charge against the Chancellor of the Exchequer must be the lack of an adequate diagnosis of our present difficulties. I thought that his speech was very deficient in that respect, very deficient in giving us any additional information about exactly why we are in this position except in such general terms that it added nothing to what we already knew. I remember that hon. Members opposite used to complain about the long explanations which Sir Stafford Cripps gave us on similar occasions. They were fairly exhausting to listen to, but they did tell us exactly what the position was in a way which the right hon. Gentleman the present Chancellor certainly did not. It seemed to me that he took as long but did not give us the facts.

The right hon. Gentleman the President of the Board of Trade was, I thought, a good deal worse than the Chancellor. He did not merely not give us an adequate diagnosis, but he denied the need for an accurate diagnosis, which I should have thought was very much the attitude of a bad doctor. He said that there had obviously been inflationary pressure and there was obviously a balance of payments difficulty but he made no attempt to relate the two at all accurately.

Nor did he make any attempt to distinguish between sterling area difficulties and United Kingdom difficulties or to show how measures which were being taken would lead to an improvement in the situation. There, of course, is the difficulty of not having an adequate diagnosis. If we do not have an adequate diagnosis we cannot possibly evaluate how adequate the measures are towards relieving the difficulties we have to face.

There was one point in particular which I was extremely surprised that the Chancellor said nothing about yesterday. That was the question of the terms of trade. After all, it is important to remember exactly how great a contribution the worsening of the terms of trade has made to the situation with which we are now faced. To begin with—and I am going back a little distance—if the terms of trade had been as favourable to us today as they were in 1938, we should have finished up 1951, on the same volume of exports and imports, not with a big deficit of£450 million, but with a surplus of something like£800 million.

Even if one takes the deterioration between 1950 and 1951, it is such that, if the terms of trade for 1951 had remained the same as the average for 1950, we would have had a deficit, not of£450 million, but of between£50 and£100 million, which would have been something quite manageable, particularly in view of the stockpiling that was going on at that time.

It is, therefore, the case that this dramatic worsening in the terms of trade, particularly when accompanied by our difficulties over Persian oil and the increase in our imports in 1951, which was to some extent inevitable, because we can now see that they were at an artificially low level in 1950—when one puts these facts together, they alone are quite capable of explaining our present difficulties.

If the Chancellor did not tell us much about the terms of trade in the past, he said nothing about his future view of them, and it seems to me to be absolutely vital in any discussion of how big the burden upon us is likely to be in the future. Fortunately, this is one of the bright spots in the situation. There is every chance, as I think the hon. Member for Oldham, East (Mr. Horobin) has said—I do not think I agree with anything else he said, but I do agree with him on this point—that we should by now be over the worst as far as the terms of trade are concerned, and that things should be a great deal better in 1952 than they were in 1951.

The terms of trade were at their very worst from our point of view by May, 1951, when they were 19 per cent. worse than the 1950 average. The average for the year was 13 per cent. worse, and by December of last year, they had come back to the position in which they were only 6 per cent. worse than the average in 1950. There is, therefore, a good chance that the improvement in that position will be held, so that, for 1952, as a whole, we shall have the terms of trade making a contribution towards closing this gap equivalent to about£150 million, or getting on for about 40 per cent. of the gap we have to close.

Obviously, we have a difficulty in deciding what the Chancellor was trying to do when he told us nothing at all about the assumptions upon which he was working on an absolutely basis question like this. Secondly, and still more important, he did not make it clear to us whether it was his view that an inflationary situation still persists in this country, and if so, exactly in what respects. There has been a good deal of discussion about that today.

I am sorry to note that the right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) was taking a very deflationist view, saying that we have been living with continuous inflation in every year since the war, and this was proved by the fact that we had to have a Budget surplus for a number of years past. I should have thought that it had nothing to do with this question at all. One had to have a Budget surplus if the total of private savings was not enough to finance the investment being carried out. If one gets a Budget surplus at an adequate level, one can finance invest- ments without any inflation, and such a state of affairs is perfectly compatible with a reasonably disinflationary situation.

I would have thought it quite obvious that we could not today say that there is an inflationary situation, in the usually accepted sense of the word, when, over the great range of consumer goods industries and particularly in textiles, there is just not enough demand. It is obvious that, if we damp down demand still further here, we will not increase exports—for markets are saturated here—unless we get deflation on such a scale as would produce a lowering of wages, and therefore, a great lowering of costs in those industries. In those circumstances I cannot see that any general deflationary policy can possibly produce an increase in textile exports.

Of course, it is perfectly true that the situation in another part of industry—the engineering industry—is very different. There, we do have not merely adequate demand but more than adequate demand. There is very great pressure on the resources of that sector of the industry. But I think we should also note that the exports of that part of industry did keep up remarkably well during 1951. They did very well indeed and our difficulties at the present time, to whatever else they may be due, are not due to any falling off in exports so far as this engineering group of industries is concerned.

Nevertheless, it is obvious that home investment, defence and exports are competing one against the other to quite an extent, but I think the lesson of this curious position in which we find ourselves when, broadly speaking, one half of industry is in a state which could not perhaps quite be described as deflationary but certainly is approaching that and the other half of which shows a very heavy pressure on resources, is that this situation is the last situation which can adequately be met by general monetary measures in relation to inflation.

Obviously, one wants measures which are selective and which will relieve the pressure on this sector of industry where it is heavy, but which will not further reduce the demand in industries like the textile industry. The only result of so reducing demand in that industry would result in more short time and people being laid off work. Therefore, this seems to be the last place to have anybody coming along and saying, "What we want to do is to keep away from these selective physical controls and have a general policy of monetary deflation." That would be the last thing which would accomplish what we want to accomplish.

There are, of course, measures other than physical controls which can be used to deal with such a situation. There are fiscal measures such as initial allowances which tend to reduce investment. There are measures such as the stepping up of Purchase Tax on particular products. I am bound to say that I should have thought that the Conservative Party, before they came into Government, were committed thoroughly against these measures and I cannot see how it is possible for them to come along now and say, "These are the ideal weapons from our point of view."

They fought bitterly, throughout an all-night Sitting, the proposal to do away with initial allowances. [HON. MEMBERS: "No."] Certainly, they fought it extremely hard indeed, and I think it was throughout an all-night Sitting. Now, of course, the Chancellor of the Exchequer calmly comes along and says it is very useful that he is able to use this weapon, together with his general monetary policy, to effect a reduction in investment.

I remember particularly well the Minister of Works arguing strongly that there was no comparison between these two things. He was in favour of stiffer interest rates. He did not for one moment admit that even in difficult circumstances the abolition of initial allowances was something which could be put alongside this monetary policy and which would have the same effect.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

I have listened with very great interest and I agree with what the hon. Member for Stechford (Mr. R. Jenkins) said about the engineering and textile industry, but has there been any falling off in demand for unessential imports? Surely that is the great point to be considered in relation to our policy with regard to our trade gap.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

I was arguing in favour of selective methods of choking off demand, as opposed to general methods, especially in the present circumstances, and it seems to me that what the hon. Member for Handsworth (Sir E. Boyle) has said bears out the point I was trying to make. It is, of course, necessary in the present situation to cut down the demand for inessential imports, and there are two ways in which this can be done. It can either be done by preventing the imports from coming in or by reducing demand at home through making money scarcer and reducing purchasing power all round.

The advantage of the first method is that it does exactly what one wants to do and nothing more. The advantage of the second is that it not merely prevents people from buying French ham, which one wants them to do, but also clothes from Yorkshire, which one does not want them to do, That is precisely why I say that the present moment is one when the emphasis should be on selective physical controls rather than on general monetary controls—

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

Surely the hon. Member will agree that physical controls are more likely to be effective when monetary and financial policies are moving in the same direction.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

Obviously we do not want to have a head-on collision between monetary and physical control policies. I certainly would not say that it does not matter in the least what we do with our monetary policy so long as we get our physical control policy right. But this is a peculiar situation where we do not have general symptoms of inflation. Therefore, let us use selective controls rather than the general control. I think that is a point which ought to meet with general agreement at the present time.

It is, of course, particularly difficult to judge the effect of these cuts about which we were told by the Chancellor yesterday because we cannot relate them, or at any rate have difficulty in relating them, to the general external position. But it is still more difficult to relate them to the general internal position. We do not know whether, when the Budget comes along, they are going to be accompanied by far more sweeping cuts, though it certainly looks as if they are.

I thought that the President of the Board of Trade, in his speech today, gave an indication that that was probably what was going to happen. He used a phrase very like that used in "The Times" leading article today. He called the Chancellor's statement of yesterday "an incomplete picture." "The Times," in its leading article, called it "an unfinished story." It is interesting to recall the passage which surrounded the phrase so reminiscent of that used by the right hon. Gentleman. The leading article read: The economies so far secured are insufficient by themselves. They will not diminish the inflationary pressure greatly nor will they do anything to ease the terrible burden which, as Mr. Butler said, 'has required the maintenance of absolute levels of tax so high as seriously to check incentives to work and enterprise.' This is an unfinished story. It conspicuously leaves vital work for the Budget to do. Some further taxes on consumption there may have to be; but from the subject-matter of yesterday's statement there was one notable absentee: the subsidies. Certainly if it is really not possible to find greater economies elsewhere, it seems inescapable that some scheme for substantial savings here, in conjunction no doubt with parallel measures to soften the blow, must find a place in the Budget. Of course, it is extremely important in considering the cuts which have already been announced, let alone those which may come along in the future, to know into what sort of general budgetary picture they are going to fit. We are against them on their merits, and I think we should be against general cuts on consumption in the present position so far as consumption goods industry is concerned. But particularly we should be against them if we did not know whether they were merely going to be used for the building up of a surplus to fight what the Chancellor regards as an inflationary position or to be used for the remission of taxation for certain classes of taxpayers. It is very important that we should know, and the Chancellor gave a strong hint in this direction yesterday.

I should have thought that the present time was the last not only in which to concentrate too much on a general monetary policy as opposed to one of physical control, but also to give "incentive" remissions of taxation to special classes of taxpayers, particularly those in the upper income brackets. After all, the Conservative case, such as it was, was that if for a moment one gave up worrying too much about how fairly one could share out the cake one would get a bigger cake because there would be more incentive and therefore bigger production. The Conservative case is not a case which has never had any facts to support it, but it is one that they have put forward. Surely, however, the present is a time when it applies even with less force than in recent years. Production at the end of last year was stagnating or possibly falling off a little for the first time since the war. The reason why that happened was not because there was greater disincentive than in 1947–50, the years when production was going up sharply. I do not think anyone can argue for one moment that the reason for the tailing off in production is that people have just woken up to the fact that since the war we have had a high rate of taxation. It is largely to do with raw material difficulties.

Therefore, we are in a position even if we accept, which I do not for one moment, the general Conservative thesis—that if we had a lower rate of taxation than we have had since 1945 production would have increased at a faster rate than it has done—it would not possibly apply at the present time because now we have a bottleneck lower down the bottle. That being so, the present is the last moment when one ought to consider cuts in the social services to give taxation remission to certain comparatively well-off sections of the community.

I return to the point with which I began. It really is impossible to judge how the Government are shaping up to this decision unless we get a far more clear diagnosis so that we can fit their proposals into the whole picture and see exactly what they are designed to do. I do not believe the Government want to give that diagnosis. They want to give a general feeling that there is a severe crisis, as of course there is, but they do not want us to know too clearly exactly what is the cause of the crisis because if we did we would know more clearly what the cure would be. The Government want to use the position to provide opportunities to introduce measures some of them necessary but a great number of which are unnecessary.

9.14 p.m.

Photo of Sir Ian Fraser Sir Ian Fraser , Morecambe and Lonsdale

I find myself in some strong disagreement with the hon. Member for Stechford (Mr. Roy Jenkins). I would have wished myself that my right hon. Friend the Chancellor of the Exchequer could have relied more upon financial, fiscal and other controls or methods of control which have a way of working themselves through the operation of the law of supply and demand rather than that he should have had to rely so much upon physical controls in his proposals. I believe that the sooner we can approach the freer economy in which these economic laws so long obscured and allowed to fall into desuetude can operate properly the more likely we shall be to secure proper adjustments in our affairs at home and in our financial affairs with countries overseas.

I should like to have seen an even greater step towards freeing sterling from the bonds in which it finds itself and raising the Bank rate to even higher levels than those which have been contemplated. The purpose of allowing the economic law to play its part is not to soak anybody but to enable the natural resources and abilities of this country to be released and freed for the earning of greater wealth for all.

Nevertheless the Chancellor of the Exchequer inherited many difficulties. Subject to one or two assurances which I shall hope to hear from him or from the Minister who winds up, I offer him my congratulations upon the way in which he has met his difficulties. I want to make some brief and, I hope, non-controversial comments on the particular proposals he has brought before us.

Photo of Sir Ian Fraser Sir Ian Fraser , Morecambe and Lonsdale

I shall come to that in due course, but the hon. Gentleman might possibly allow me to make my speech in my own order.

First of all, there is this question of notification of vacancies. I have no doubt that much will be said in this House and a good deal on platforms throughout the country about the fact that the Conservative Party, after all that it said when in opposition, is now itself using a method of advancing the mobility of labour and of encouraging labour to go to the places where it is most necessary, by these administrative means. I do not think that the man in the workshop will be any more impressed with the arguments which come from the Opposition now than he was with the arguments which came from the Opposition in the last 12 months.

If a man who is out of a job must go to a labour exchange—and every employer must go there to get labour—and if three or four jobs are placed before him, there is a very good chance that he will take one of those jobs without considering for one moment that he is being compelled or influenced in any way. Therefore, it is possible to guide and steer him into the place where he is most needed, without causing him any frustration or inconvenience. I believe that to be true. Nor do I think that the repetition of all the nonsense talked by any of the parties when they were in opposition will make the slightest difference to the man in the workshop.

I have one comment to make on the cut in the "never-never." I must say I think it is a good thing. Surely it is better that people should afford what they buy than that they should risk buying what they cannot afford. [An HON. MEMBER: "Never buy at all."] I agree it is better never to buy at all if one cannot pay for it. Therefore, I do not think that any great hardship will be caused; I believe that in the long run much hardship will be avoided by making it a little more difficult for people to buy in advance things to pay for which they have not yet earned the money.

I want to mention the effect of this in connection with one particular industry. It may, of course, apply to many other industries, but I want to illustrate it by reference to the radio industry. The radio industry is in somewhat of a difficulty now because they find that owing to doubts about whether Purchase Tax will or will not be altered, owing to this "never-never" being made more difficult, and for one reason and another, they are not selling their radio sets very freely. They do not know whether to make more radio sets for next season, because they do not know how quickly the orders for re-armament will reach them. They are in a position which I dare say is similar to that of many other industries. It would be very greatly to their advantage and, therefore, to the national advantage if the Supply Ministries could hurry up and could make up their minds about what they want to order from them.

May I make one or two comments upon the charges upon the Health Service? In a small way, I have had a great deal of personal experience in helping people who are in need, and I am convinced that there are certain cases in which all the help which can be afforded must be given generously and freely without too much inquiry, without upsetting the person we are trying to help, and to a great extent without counting the cost. Very often, the use of the utmost generosity at the right time is the best way to help solve the physical difficulties of a family as well as to encourage their psychological return to better health and a better state of mind.

I am equally convinced that there is a vast field in which the very fact that a thing is wholly free leads to it being less highly regarded than would be the case if there were some element of choice and decision and payment to be met by the person receiving it.

Photo of Mr John Jones Mr John Jones , Rotherham

Artificial limbs?

Photo of Sir Ian Fraser Sir Ian Fraser , Morecambe and Lonsdale

I am convinced that what I have said is true. A thing which is wholly free is taken for granted and is less highly regarded than something obtained after some effort, some sacrifice and some use of personal choice. I am sure that is true. I am also certain that where a thing is wholly free a great many people feel they ought to have it rather as if it were a ration than because their state of health of mind makes them need it. I am certain that that is true, too.

I am suggesting that a large number of people are affected in this way. They are not neurotic, although the number of neurotics is much larger than most people think. Free medicine and free treatment of every kind always was and is now a fundamental mistake; of that I am certain. It is not best to give these things free to everybody. They should be given free to those in need at the time when they need them, but they have better value and better curative effect if they are the deliberate choice of the people who need them. I do not object to these charges in principle at all, and I think they are reasonable, modest and sensible charges, accompanied as they are by an assurance that those who cannot secure proper treatment by paying will not have to pay at all.

The hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) made a great deal about what he described as the deplorable charges which were to be made for the treatment of teeth. Is a charge for the treatment of teeth so different from a charge for the provision of artificial teeth to replace the gap which results from the treatment? Is there any difference? I cannot see why there is. It is no good having the teeth pulled out if there is nothing to put in their place.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

Does the hon. Gentleman think there is nothing more to the conservation of teeth than pulling them out? That is surely an old misconception.

Photo of Sir Ian Fraser Sir Ian Fraser , Morecambe and Lonsdale

On the contrary, but is it to be said that to charge for pulling out a tooth is a crime Whereas to charge for putting an artificial one in its place is a good Labour doctrine? Surely, if it is right and proper to charge for the one, then in principle it is right and proper to charge for the other.

One or two speakers have made a point about the penalties which will fall on the war disabled people as a result of these cuts. If there were any such penalties I myself would be very grieved, but I cannot believe there will be, certainly for those who were disabled during war service, because that service is provided by the Ministry of Pensions quite separately from the normal Health Service.

One other thing I want to mention is the subject of foreign travel. I regret the limitations on foreign travel, because I think it is good for people to get abroad and see different circumstances and different ways of life. However, I do not think it can cause any hardship and any great frustration for a year or two. We may as well look at the brighter side. If there is to be less money about, let Morecambe, Grange and the other beautiful seaside resorts of our country take these people who are deprived of their visit abroad and make their holidays at home thoroughly worthwhile.

It should not be assumed that, because we support the Chancellor's proposals so far as they were disclosed in yesterday's speech, we do not have in mind some of the claims which will be made upon him, and which we hope he will find the money to meet when he comes to balance up his year's accounts and produce his Budget. There is an outstanding claim so often presented to this House, and to be presented again, that the pensions of some three-quarter of a million men victims of two world wars should be adjusted to the present rate of money values. If there are those who grieve that they may have to pay a shilling for their medicine or 7s. 6d. for their treatment, they may perhaps console themselves by the thought that they will be helping the national pool out of which the claims of disabled ex-Service men can be met.

Much has been said and will be said about election promises, and I want to say a word about it. I do not feel that the country will be very interested in this subject.

Photo of Sir Ian Fraser Sir Ian Fraser , Morecambe and Lonsdale

Hon. Gentlemen opposite think we should go to the country and see, but we have only just had a General Election and it was the second within a short time. If there is anything about the mind of this country as a whole, excluding, of course, the minority on the benches opposite, it is that the country does not want another General Election. What the people want is that this Government shall remain in office for three or four years. Judging from our behaviour and success in the short Session before Christmas, judging by what I know of our party and because of the shadow boxing to be expected from the benches opposite, in my opinion this Government will stay in office for three or four years.

Photo of Sir Ian Fraser Sir Ian Fraser , Morecambe and Lonsdale

I hope and I think it will be true, too. There is no particular need for the Chancellor to trim his sails, as was compulsory for the right hon. Member for Leeds, South (Mr. Gaitskell), who sat in imminent danger of a General Election which he feared he would lose.

There is therefore a great difference between this House and the last, where the Government sat precariously with only a majority of six. A majority of 20 is not much, but it is really quite a lot more. This Government are not so precariously placed, and there is no need for the Government to trim their sails or for the Opposition to get fashed about an election, because it is a long way off. It seems that we might look forward to a time during which there will be a little shadow boxing to help the boys along and when a little party stuff will be all that is necessary, while we set the nation's finances in order and prepare the way for a better future.

The test which I apply to the Chancellor's proposals is whether they and his Budget proposals will do what is necessary once and for all to place our country in the position where we are earning our living in the world and do not run into these recurrent crises. I agree with many speakers that we cannot really test their validity until we see the Chancellor's Budget. I think that he would admit that himself. If he can satisfy us on 4th March—I do not think he can well satisfy us before that date—that these proposals will achieve that purpose, I believe that the British people will not jib if many of the proposals are harsh and unpleasant and even if some of them are not wholly equalitarian. [An HON. MEMBER: "That's a good one."] I thought it rather a good one myself.

I judge these proposals from three angles. I rejoice that they are to a large extent Commonwealth proposals. Whatever is said and done in this House is part of a general scheme in which the Parliaments and Finance Ministers of the Commonwealth are playing their part. I was in South Africa only 48 hours ago, in touch with financial and other persons there, and with Members of Parliament. The whole country was waiting to see what would come out of the Finance Ministers conference. That, and good wishes for Mr. Churchill who was then returning from America, were the dominating themes in our minds. They said, "What will the Chancellor say on Tuesday? We will do our best to co-operate here." I rejoice that this is a Commonwealth effort to defend Commonwealth currency. That should give us heart and pride in meeting our difficulties.

I will offer my congratulations to the Chancellor on his broadcast. I did not hear it. [Laughter.] I did not have an asterisk in my speech at that point to pause for applause, and it did not occur to me that the remark would be funny. I did not hear the broadcast because I was in this House, but I have heard from many people that it was simple, clear and convincing.

It is hardly possible that until 4th March we can, from reason and clear insight, know that the proposals of the Chancellor are adequate. We shall not know that until the Budget discloses the other side and the other part of the plan, and we cannot, till then feel convinced that these proposals will cure us of our evils and ills and will start us off once again. But this good, convincing broadcast by my right hon. Friend, this attempt to operate a common financial policy throughout the Commonwealth and the sterling area and, finally, the political fact that we now have a Government fresh from an election and a long way from the next election and an Opposition which knows that to be true, lend the hope that there is to be found amongst our political affairs an opportunity for this Parliament acting more as a Council of State than did the last.

9.35 p.m.

Photo of Mr Thomas Peart Mr Thomas Peart , Workington

Well may the hon. Member for Morecambe and Lonsdale (Sir I. Fraser) say that from his point of view his constituency is not interested in election promises. I am not going to labour that theme—it has been mentioned before. It is obvious to the nation that the Conservative Party, since they have become the Government, have renounced their election promises.

Before I deal with my main theme, I wish to mention two points. The Chancellor yesterday in his proposals mentioned cuts in plant, machinery and vehicles for civil use. He said that the objective of the Government was to reduce the deliveries of plant, machinery, etc., to industry and agriculture by£150–£200 million at current market prices. Then, the Chancellor went on to make an appeal to agriculture to postpone its demands on the engineering industry.

I should have thought that if we are facing this crisis, which has been explained by various Members this evening, agriculture plays a very important part in our present economy. I remember, in the agricultural debates from 1945 until the last election, hearing hon. Members on the other side pleading for the Government to do something about marginal land and to give the farmers more equipment and assistance. Now, in a period when we need more production, and when there is an emphasis on food production, there is to be a very serious cut in the supply of implements and machinery for agriculture. I should have thought that the Government, who try to give the impression that they are the friend of British agriculture, should have thought very carefully before tampering with the supply of tools for the farmer to do his job.

Secondly, I should like to ask the President of the Board of Trade, or whoever is to reply to the debate tomorrow, a question on Development Areas. I hope that in the economies envisaged by the Chancellor, there will be no attack on any of the existing priorities for the building up of our trade and industry in these areas. These areas not only have provided a large measure of full employment for their people; they have made a great contribution to the export drive. In my local Development Area in West Cumberland, I understand considerable difficulty is being experienced regarding the prospects of steel allocation for this year. I hope we can get assurances that the Development Areas, at least, will have a high measure of priority, despite the economies that have been put forward.

Now to my next point. There is certainly a fundamental difference of approach to the present problem as between the Government and the Opposition. We have always thought that by sensible planning—yes, by coal nationalisation, by security in agriculture, by schemes of colonial development—we would be able to overcome after all what was a problem which existed even before war broke out in 1939. I think we achieved a large measure of success. Then the international situation changed; Korea, world re-armament, the effect of stockpiling created a new problem. But, if we are really to challenge our future we must certainly see how we can give our people that incentive to production. That is why we on this side of the House believe so much in the incentive of the Welfare State. We shall resist strongly the economies now put forward by the Chancellor of the Exchequer.

We are not shadow boxing, if I may use the term of the hon. Member for Morecambe and Lonsdale. He may think he is shadow boxing in this House, but we are resisting what we believe is a very formidable attack on our whole conception of the Welfare State. We have to make our choice. Whe are not ashamed to say we are Socialists. We have always argued that we can really create a better system of society than that which previously existed. That is why we are Socialists. We are not ashamed that from 1945 we have given our people a new moral incentive—the incentive of the Welfare State. It has enabled our people to break all kinds of production records. I am referring to production in the coal mines, steel works, factories and fields. We should not be ashamed of what our people have done and what our people have accomplished in order to challenge our post-war difficulties. These difficulties existed before a Labour Government came to power in 1945.

I believe this new threat to the Welfare State is of great importance. I wish, therefore, to speak of one important part of the Chancellor's speech. I am glad the Minister of Education is here tonight. I refer to economies suggested by the Chancellor in the field of education. He mentioned yesterday that there are to be economies in school building. That will create very serious difficulties in regard to school places. The problem is still acute even now. I was talking to a little boy today, well past the age of five, who cannot get a place in a primary school because of overcrowding. Because of the cuts proposed by the Chancellor that situation will be even more acute in 12 months', two years', and three years' time.

I believe that if the situation deteriorates the decision, which I know has been contemplated by certain Members of the party opposite, will be taken to meet these new circumstances. We have to remember that economies have been made. A circular has been issued, and we have had discussions on this already in the House, despite the reticence of the Minister of Education. Circular 242 has been issued to local authorities—it envisages very serious economies in educational expenditure.

Yesterday, the Chancellor talked about the threat to the school dental service and how he regretted what has happened—we all do—and how he says we must somehow try to build up that service. Already, because of Circular 242, some authorities have acted. I intervened, I hope to help one of my own Front Benchers, on a specific point of information. Already four counties, because of the initiative taken by the Minister of Education in that circular, have acted in relation to economies in the school dental service. The process will continue.

I have examined a detailed survey of economies already announced in the last few weeks as a result of the action by the Minister of Education. The economies do not just cover administration; they cover expenditure on teachers' salaries. They cover scholarship aids to students, technical education and, I am sorry to say, scholarships for boys who wish to go to agricultural colleges and institutes. They embrace nursery schools, school buildings, school equipment and various other items. In other words, the economy axe has already fallen on this major service. It is no use the Minister smiling and shrugging her shoulders.

Every responsible member of the professional side of education, every responsible professional organisation in the country and many responsible members of local government, who may even be supporters of the party opposite, have condemned Circular 242, and say that economies which have been envisaged by the Government will jeopardise the main structure of education. It is all very well for the Chancellor to come to the House, as he did yesterday, with a sob in his voice, and say that he wonders at the lack of faith of many of his educational friends. Action has been taken already.

Photo of Dame Florence Horsbrugh Dame Florence Horsbrugh , Manchester Moss Side

Would the hon. Member tell me what action has been taken? Local authorities have been asked to submit estimates of their suggestions for next year. Those estimates will have to come to the Ministry and no reductions will take place before this year, after April. I should like to know what action has been taken.

Photo of Mr Thomas Peart Mr Thomas Peart , Workington

Obviously, the Minister does not know her own circular. She did not know the timing of that circular; that was admitted by the Prime Minister yesterday. She does not even know the contents. That circular was sent to the directors of local education authorities not because of some game the Ministry was playing with education, but because the right hon. Lady asked for cuts in educational expenditure. It is no use her trying to pretend that the 5 per cent. means nothing or that the statement of the Chancellor yesterday re school buildings means nothing. It is a serious cut in the educational system, and it is no use the right hon. Lady pretending that it means nothing.

I go further. Because of the difficulties of school places, I am afraid that major decision which we were very afraid would be taken will be taken. We have it on record in a very interesting pamphlet issued by the Conservative Political Centre in which a group of Tories declare their point of view that if there is this difficulty re school buildings then we should make an attack on the entry age or school-leaving age.

They say: We do not want to see any reduction in the ten-year school period. If, however, we have to choose between lower standards, due to an excessive strain on teachers and accommodation, and on the other hand some modification in the present age of entry or leaving, we should have no hesitation in choosing the latter. To do otherwise would be to sacrifice the real interests of children and parents to political expediency. If it becomes obvious that such circumstances are likely to arise, the nation may have to accept the raising, temporarily, of the school entry age to five-and-a-half, or even six. Those are the views of a group of hon. Members opposite. It is rather interesting that the Chancellor of the Exchequer wrote a preface to that pamphlet. When he talks about his friends in the country letting him down, I would reply that we can only judge hon. Members by their actions. It is no use the Minister of Education shrugging her shoulders again. They have acted already. They have acted because they have always believed that if there is to be economy, if there are to be any attacks on the Welfare State, educational opportunity for the vast majority of the boys and girls of ordinary parents in this country must suffer.

We know that that has been the history of the party opposite. We know that is the experience of educationists. After all we had the May Committee of 1931, and the Geddes Act before that in 1921. Now we have the Chancellor today. I believe it to be foolish and wrong. I am certain the only way this country can overcome the difficulty, which we must overcome, of increasing the production and efficiency of our industries is by giving to industry and to our economy men and women to do the job who have the necessary educational skill and technique. Therefore education is important in this very serious economic difficulty in which we now find ourselves.

After all it will depend, as the present Leader of the Opposition said in 1945, not so much on the quantity we have, but the quality of our people, and on our ability to apply that skill which we know can be given to our great industrial economy. That is why we on this side of the House will resist cuts in the field of education. We believe that education is sacred. After all, if education is good enough for the dull son of a rich man it is good enough for the brilliant son of a poor man. That is our belief in educational opportunity.

Many hon. Members opposite may have enjoyed the advantages of a very expensive education—

Photo of Mr Thomas Peart Mr Thomas Peart , Workington

And on this side of the House too. Many hon. Members no doubt send their own sons and daughters to expensive kindergarten schools or expensive minor public schools, or otherwise. I have never heard it yet suggested there should be cuts in that direction. I have never heard appeals from hon. Members opposite for economies there. Only when it is a matter of primary education, secondary modern education, grammar school education, affecting the vast majority of our people, is there a demand for economy coming from hon. Members on the other side of the House.

I say to the Minister of Education that if she is really going to do something for education she must not hide herself behind a cloak of secrecy or hide herself behind the reticence we saw before the Christmas Recess. We ask her to "come clean" on this matter.

Photo of Mr James Griffiths Mr James Griffiths , Llanelli

Before my hon. Friend concludes his speech, to which we have listened with great interest, may I recall that tomorrow evening we have to vote on a Motion and on an Amendment which is to go on the Order Paper this evening; and may I ask my hon. Friend to press the Chancellor to say whether the Minister of Education is to speak before we vote tomorrow night?

Photo of Mr Thomas Peart Mr Thomas Peart , Workington

I was about to ask, in view of that reticence which we have experienced and the failure of the Government to declare their intention, whether we shall have a statement from the Minister of Education tomorrow, particularly on Circular 242 and its effect on education expenditure right throughout the country? According to her own statement this evening she does not know what the effect will be. After she has had an opportunity to get to know her own Circular, shall we have a statement, if not from the Minister of Education, then from the Chancellor of the Exchequer, on this very important matter which is so fundamental to the welfare of our children?

9.54 p.m.

Photo of Mr Richard Fort Mr Richard Fort , Clitheroe

The hon. Member for Workington (Mr. Peart) has worked up a considerable synthetic rage.

Photo of Mr Thomas Peart Mr Thomas Peart , Workington

I assure the hon. Member that my rage, if I spoke with feeling, was not synthetic. I feel it because I believe that the attack on education is wrong. I believe that the House of Commons has been badly treated on this question and that the Tory Party have a shameful record.

Photo of Mr Richard Fort Mr Richard Fort , Clitheroe

What the hon. Gentleman has just said goes to prove the point I was making. It was his own party, when they were on this side of the House who, I think in 1949, introduced Circular 210, the result of which was the same request for reductions in education estimates, as the Government have made recently. I am sure that the hon. Gentleman, with his expert knowledge of education, knows that we are talking about estimates, so far. They asked for the same cuts in estimates and, as he will agree, they carried through this House, despite some comment from the Opposition, an increase in the cost of school meals.

I am sure, too, that the hon. Gentleman will remember that it was the party which now occupies the Government benches which introduced the important Education Act of 1936 and, before many of us now in this House were born, the great Education Act of 1902. It was my right hon. Friend the Chancellor of the Exchequer who introduced and carried through all its stages the Act which will always be associated with his name.

Photo of Mr Thomas Peart Mr Thomas Peart , Workington

I do know that after the war, when it came to a question of implementation, we were warned from the Opposition Front Bench by Sir John Anderson, as he then was, that we were proceeding too hastily and that we should not raise the school-leaving age.

Photo of Mr Richard Fort Mr Richard Fort , Clitheroe

Not only the hon. Gentleman, but other hon. Gentlemen opposite, when we are talking about the Welfare State, of which the education service is but one part, will remember that it was the right hon. Member for Llanelly (Mr. J. Griffiths) who so truthfully and honestly said, in 1948, when discussing the newly introduced National Insurance and National Assistance Measures, that all parties in English history had contributed to the growth of our social services. Each one of us has added, as it were, one brick or a layer of bricks to the walls which all of us want to see holding away the cold winds from those who may be in difficulty and who want help. All of us have contributed, so let us not, as perhaps, understandably, we do at Election times, claim exclusive credit for our own party.

It is not only about education, which is one part of the Welfare State, that some misapprehension and some careless remarks have been made. The hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) made a long speech about the effect of the charges being introduced into the Health Service. I should like to warn hon. Gentlemen opposite that, in the eyes of the electors, the burden will be on their shoulders, that it was they who first introduced the principle of imposing charges for the National Health Service. If I may give them some advice, it is that they will waste a lot of time which, I should have thought, could be more profitably spent on other matters if they argue the niceties of who put charges on what. They were the first to do it.

When I hear some hon. Members talking about the party opposite giving up the charge on prescriptions because of administrative difficulties, I cannot help recalling the resignation speech of the right hon. Member for Ebbw Vale (Mr. Bevan)—

It being Ten o'Clock, the debate stood adjourned.

Debate to be resumed Tomorrow.