The striking feature of this debate has been the extraordinary change in the attitude of Conservative Members to the Budget. We knew before the debate started that the British people had seen through it. We knew that because of the county council elections. [HON. MEMBERS: "Oh."] Now we know that the Conservative back benchers are—to put it mildly—extremely uneasy about this Budget.

What we have had, with monotonous regularity, from the other side, is Speaker after speaker getting up and patting the Chancellor on the back in a perfunctory manner and then proceeding, in the most treacherous way, to jab him firmly in the stomach about the Purchase Tax and finish up with an uppercut to the jaw about the Excess Profits Levy. I want, a little later, to come to that, but I congratulate the Chancellor of the exchequer at least on this—on doing what the Prime Minister is so enthusiastic about—securing all-party unity: we are all agreed that this is a thoroughly bad Bill.

Before we come on to these matters, I should like to turn for a moment to the background of the Budget, which is now clarified by the Balance of Payments white paper. In passing, I should like to console the right hon. Gentleman by saying that we on this side at any rate are glad that we are eventually to have an Economic Survey. I think it is obvious that the delay in producing this document is due to the fact that there has been some controversy in the Government as to whether it would be wise to have an Economic Survey, and I am glad that the right hon. Gentleman has managed to defeat the more obscurantist Members of the Government, and also, of course, their supporters on the Government back benches.

Turning to the background of the Budget, my contention is, first of all, that the United Kingdom balance of payments position was not nearly as serious as it was made out to be; second, that the Chancellor's policy shows that this is the case; but, third, that our position has, for reasons that I will come to in a moment, become a good deal more difficult during the last few weeks. The balance of payments White Paper shows that the major causes of our deficit in 1951—a deficit of £500 million as against the £100 million which we anticipated—were, first of all, the decline in invisible exports, and secondly, the enormous increase in the bill for imports. This latter was partly due to very high prices, particularly in the earlier part of the year, and, secondly to a much greater volume of imports.

Now the Chancellor has, in his assumptions behind this Budget, taken it for granted that most of these adverse factors are temporary. That is, in fact, the meaning of the three assumptions upon which he based his Budget. It was on account of these three assumptions, which I will detail in a moment, that he was able to conclude that we did not have to reduce our standard of living at all this year. In the first place, he assumes an increase of £100 million in invisible exports; in other words, an automatic recovery from the decline in invisibles last year.

Second, he assumes again an automatic increase in the value of our exports from an improvement in the terms of trade of £150 million. That is £250 million taken together. Neither of these things have anything to do with Government policy; they are simply what he expects—and I am not in any way disagreeing with this—will happen. Third, he argues that we can save £150 million by not accumulating stocks this year at the same rate as we did last year.

Now that, it may be said, is, in part, a Government policy decision, but the plain fact is that even if there had been no policy decision it is very unlikely that stocks would have gone on accumulating at the same rate as last year. The interesting thing, therefore, is that we have no less than £400 million to assist us, which does not result from anything the Government have done, and which is really due to the fact that the adverse factors last year were purely temporary.

This left us, of course, with £200 million to cover out of the £600 million the Chancellor mentioned originally, and he proposes, as we know, that we should increase exports by £50 million and reduce the consumption due to import cuts by £150 million. When one takes into account that even after the £200 million for defence is added, that we are not having to reduce consumption at all, and that the whole affair is being taken care of either by these assumptions which I have mentioned or by a cut in investment plus the increase in production—a relatively small one—I am bound to say that, when the Chancellor speaks of sacrifices being involved in this, he is really misleading the country. There is no sacrifice. We do not have to cut our standard of living. It is not based on reality. The only sacrifice is the sacrifice imposed by an unfair Budget on those least able to bear it.

Before we come to the details of this unfair Measure we have, I think, to ask ourselves: Is the Chancellor right in taking all these risks, as they have been called? Can we feel, therefore, that we shall be able to get into balance on the basis of no cuts in consumption and a cut of £100 million in investments?

I would have been inclined to say until very recently that there was a fairly good chance that we should be able to. But since the cuts imposed by other sterling countries upon our export trade, I am much more doubtful than I was before, and this is, I submit to the House, the new factor which is going to make our whole position much more difficult this year than we might have expected it to be.

If we look at the February trade figures—I am a little surprised that no one has drawn attention to them—we find a gross deficit of £53 million between visible exports and imports, and when we adjust in the usual way to get the probable f.o.b. figures, the deficit cannot have been more than about £25 million in February. If we add the expected rate of invisible exports it is clear that in February we were, at any rate, very nearly in balance. Unfortunately, that was before the influence of the cuts by Australia and the other sterling areas could be felt. Neither, therefore, the trade figures, so far as they go, nor the unemployment figures in Lancashire and Yorkshire today reflect the consequences of these cuts.

The "Economist," the other day, gave some very interesting and, I think, extremely alarming estimates of just what these cuts would mean to us. Their estimate was that, in total, Great Britain would lose no less than £280 million of exports as a result—£75 million in vehicles, £100 million in textiles, £65 million in other consumer goods and £40 million in capital goods and raw materials. These are most formidable totals, and they mean, of course, that it is not a question of increasing exports by £50 million, it is a question of increasing them by nearly £350 million.

Not only that: there is no possibility now of increasing exports again, unless some change can be made to what, after all, have been our natural markets in the sterling area. We have to search and find markets for these goods, which we can no longer sell in Australia, New Zealand and South Africa, in the dollar area or in other non-sterling countries. One is bound to ask whether this will be practicable. For example, have we really much hope of increasing our sales in Europe? I believe that the cuts we have had to impose on imports from Europe may set up a chain of reaction there which will certainly not make it any easier for us to increase our exports again.

Now I come back—I make no apology for doing so—to the Sterling Area Conference where, I think, all these matters should have been thrashed out more satisfactorily. I believe that the real weakness and the real cause of what I have no hesitation in describing as the "failure" of that Conference was that each country seems to have been encouraged there to concentrate on its own balance of payments instead of all the countries concerned looking at the total dollar balance of payments in the sterling area.

I was astonished to read a reply given by the Secretary for Overseas Trade to my right hon. Friend the Member for Battersea, North (Mr. Jay), on 1st April. That may have been an appropriate day. My right hon. Friend … asked the President of the Board of Trade what representations he has made to the Australian Government as to the need in imposing import restrictions to ensure that cuts in imports from sterling countries are proportionately less than in those from the dollar area. The hon. Gentleman's reply was, "None." He went on to say: I am sure that the Commonwealth Governments are fully aware. …—[OFFICIAL REPORT. 1st April, 1952; Vol. 498, c. 111–2.] and so on.

It really is amazing to me that at the Conference in January nothing was said about the desirability of cutting dollar imports more than sterling imports. If it was, why did we have that answer? After all, these replies are prepared with some care, and I should be very surprised if the officials of the Board of Trade made out that there were no such representations if there had been.

There are other features in this situation which are really extraordinary. It will be within the recollection of the House that four days before the Budget the Prime Minister of Australia, Mr. Menzies, announced the Australian cuts on imports from the United Kingdom, and, of course, gave rise to a great deal of anxiety and disturbance here. It was not until 21st March, after the debate had taken place in this House, that Mr. Menzies said anything about dollar imports into Australia, and he then, belatedly it seems to me, said they would look again at the administrative controls under which dollar imports are controlled.

In the case of New Zealand there seems at least to have been a definite desire to discriminate against dollar imports and in favour of sterling imports, but, even so, we find that the European Payments Union area is treated as though it were part of the sterling area. We are paying 80 per cent. in gold for our deficit with Europe in the present circumstances, and it is to all intents and purposes in almost exactly the same position as the dollar area. Can the right hon. Gentleman give any explanation why this was done? Was not this kind of problem discussed at the Conference?

Finally on this matter, I am bound to say that if we fail as a country to achieve our overall balance because of this extraordinarily difficult problem of having to find non-sterling imports for another £300 million worth of goods it will not only be bad itself for us, but it is almost certain to mean that the dollar problem of the sterling area is not solved. We are supposed to balance our account with the dollar area, and balancing that account involves that diversion into the dollar market of all these commodities.

May I say one word about the dollar problem? We are relieved to see that the rate of loss had declined in March, but I think the right hon. Gentleman would agree that, while we will probably obtain some temporary improvement in the situation from capital payments, from the fact that people who have been delaying paying their Bills for imports from the sterling area in the hope of devaluation will at last be paying, and while we shall probably get in the next quarter a certain amount of dollar aid which was not in the figures for the first quarter this year, it seems to me that there is very little sign that the underlying problem of the sterling dollar balance has been solved at all.

Therefore, I hope that the figures will probably improve and I shall be extremely disappointed if, at the end of the second quarter, we do not get an improvement in our reserves; but I am afraid that unless we can have a clear and definite Commonwealth policy, which we understand as well as the other countries in the Commonwealth, we shall be running again into another dollar crisis later in the year or early next year.

I want to say a word now on Purchase Tax, because there is a close connection between the two. Our view on this subject was very clearly stated by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) in a very brilliant speech this afternoon. We approach this problem of the Purchase Tax in a responsible spirit, and I want to assure the right hon. Gentleman of that. We realise that it is an important and valuable source of revenue, and I may say at once that I have no patience with those people who cheerfully say, "Scrap Purchase Tax altogether," and do not tell us in the least where we will get the money to replace it.

We have always said that this was a tax that should be used in the interests of economic planning. Just as we cut down consumption deliberately when it is necessary, so if we want to encourage consumption we should be prepared to take it off. I believe that the time has come when we definitely ought to encourage the home consumption of textiles, and that is the first question which must be answered. Is that the view of the Government, or does the right hon. Gentleman think that the level of unemployment in Lancashire and other areas is only just what he wants to secure the turnover to defence? [HON. MEMBERS: "Oh."] It is a perfectly serious question.