The right hon. Gentleman is technically correct, but some of us have suspicions about the reasons for the withdrawal and the altered specifications; I see that the Chancellor has the same doubts. Certainly it is expected in the United States that the specifications will be altered in such a way that we cannot hope to compete. I hope that the representatives of the right hon. Gentleman the President in the United States are being very active at this time in calling the attention of the American Government to the feeling in all quarters of this Committee about what is going on.
It is unfortunate that the President of the Board of Trade should choose this moment for sacking his superintending trade consuls in the United States. Just at the time when we want to expand dollar trade, and when they have done a first class job in the areas in which they have been functioning, the right hon. Gentleman has had to give way, as I believe, to the pressure of the establishment department of the Foreign Office, who never liked them anyway. I was in Chicago a few weeks ago, and I gained some idea of the consternation which this decision has caused there, and the extent to which a lot of people over there think that it reflects on the determination of the Chancellor, which we all know is real, to have trade not aid.
I have referred to the United States. What of Canada? I said something about that in a speech in the House a few weeks ago. I think that our problem there must be that of expanding our exports of capital goods equipment. The market is wide open to anything we can sell, but we are losing order after order because of our long delivery dates; and, worse still, because delivery dates that are quoted are not honoured when the time comes. The previous Government announced, at the time of the armaments programme, that exports of engineering goods to Canada were to rank as of equal priority to defence orders. I hope that the President of the Board of Trade will tell us next Monday whether this Government have honoured that pledge which we gave, because the people of Canada are certainly very doubtful about it.
I do not know if we expect increased exports to Europe. I turn to South America, where only this week we see that the Argentine has defaulted on the undertaking it gave to provide a list of goods which it was going to import from this country. We see the position summed up in the Economic Survey, in which it is stated that there is little prospect of expanding world markets, and that, therefore, within existing world markets we have to struggle as hard as we can to try to get a bigger share. That is a very unprofitable business and a big struggle. The Government should be doing everything in their power not to talk about disinflation abroad and the condition of world markets but to try to expand the whole basis of world trade.
There is the whole question of East-West trade. We all know there the difficulties about the strategic list, particularly while fighting is going on in Korea, although I have felt for some time that a review of that list is now appropriate, indeed overdue. Certainly if and when the fighting stops in Korea, as we hope it will, the Government should be ready to dismantle a large part of these strategic controls. Unfortunately, the Government, with their unerring instinct not only for doing the wrong thing but for doing it at the wrong time, have chosen this moment to tighten up the blockade of shipments to China. They will realise the importance of expanding rubber sales and increasing the price of rubber and the importance of getting rice for the sterling area. That is why we should aim at wider trading areas.
We want more stability in international trade. I am glad that the Government made a real effort to get agreement on the International Wheat Agreement. Some of us were a little afraid that the Gov- ernment would pull out. They were right to make an effort, and they were right to resist pressure to pay more than they said they were willing to pay. I hope that that experience will not discourage them. I hope that they will go ahead to promote international commodity agreements for rubber, tin, cotton and a number of other commodities, and that they will make the fullest use of long-term purchasing arrangements also.
We had the extraordinary experience of hearing hon. Gentlemen opposite the other day cheering the bulk-purchase agreement with Cuba. It was all the more extraordinary when we recollect how the Conservative Press denounced the so-called "black pact" with Cuba negotiated by the Labour Government, and when we remember the fine fury into which the Minister of Transport worked himself in successive Questions in this House.
On the question of our balance of payments, I wish to refer to invisible earnings. It is a very serious matter that these worsened by £85 million last year. One looks at the figures to see what has caused that. There has been a £21 million increase in Government military expenditure in 1952 compared with 1951. I hope that we shall be told on Monday whether as a result of the arrangement made in connection with Germany we must expect a further big increase in that figure. There was a worsening of £21 million in relation to shipping. The most serious matter was an increase of £30 million in respect of increased interest payments on sterling balances in London as a direct result of the Chancellor's policy.
We rarely get through economic debates without someone opposite shouting "Groundnuts." The total cost of the groundnuts operation—[Interruption.] I hope that the hon. Member will read some references I have made in a book which has just gone to the printer—cost us £36 million. The Chancellor is losing us £30 million every year in increased interest payments, as a result of his monetary policy, for which we get nothing at all, not even a real attempt to raise the standard of living of the people and all that went with the groundnuts scheme.
There goes with this the fall in overseas investments—from £325 million in 1951 to £109 million last year. This shows that overseas investment in the Colonies is not a matter for laisser faire. If we have laisser faire and lack of control there is always the possibility of more capital going to South African breweries when we need more Government expenditure on the economic overheads of basic developments in the Colonies.
We welcome the announcement of the Chancellor about the 40 per cent. provision for mining development. I would ask the right hon. Gentleman to consider extending that 40 per cent. to all colonial and other Commonwealth development, because of the very high risk involved in this kind of activity. We can see that, as a result of his policy, there has been a very serious reduction in the rate of overseas development. In his annual report last year the Chairman of the Colonial Development Corporation made a very strong comment on the way in which the interest rate policy was tending to inhibit new colonial development.
Obviously the Chancellor is still very optimistic about the economic situation, especially when he is in the United States. But this is really a fair weather Budget. Although the Chancellor does not look the part, he is very like the grasshopper in the Aesop fable, who sported and played in the summer and made no preparation whatever for the winter that was certain to follow. I ask the Government, do they feel that we are less vulnerable to any possible change in the economic climate?
Does the Government feel that such a change is less likely to occur now than two years ago? All the facts and all the figures which the Chancellor has been able to quote about improvement in 1952 occurred on a greater scale in 1950. If we look back to the situation two years ago we would be able to acclaim much bigger and more exciting economic recovery in the balance of payments than anything the Chancellor has been able to report to the Committee this year. Yet we all know what happened in 1951.
Perhaps the Chancellor will tell us on Monday whether he thinks the same, but I would have said that we are in a very vulnerable position indeed if there is any change in what the right hon. Gentleman calls the economic climate. We are dependent once again on United States military aid. Our exports are dependent to a scale far greater than ever before on the sale of military goods abroad, which must be a very precarious market and which is going on at a time when we are losing our real long-term markets.
Above all, I consider we are vulnerable because of our dependence on a record United States boom. If that boom comes to an end one day, as most people expect it will, we know from experience that dollar earnings from the sale of sterling area exports such" as copper, wool, tin and the rest will collapse in a matter of weeks—almost overnight—and the whole economic policy of the Government will collapse with it.
Some of us have been warning the Government about that danger, and now I see that the "Economist" in a special supplement has started to elaborate this warning in rather more elegant language. But even before the recent developments in foreign affairs—with the change in the situation in Russia and China—there have been many American observers who foresaw an end to the American boom, perhaps after this year's harvest, with all that that would mean for this country.
And now of course we have a new feature, what some American newspapers call the "Peace scare." We have seen from the reaction in Wall Street that there are at any rate some American business interests who are not only scared of war but appear to be at least as scared of the economic consequences of peace. We know what it would mean to dollar balances were there a change in the psychology of the market, in the purchasing of sterling area materials on dollar account. Does this Budget, or even the policy underlying it, create conditions in which we can avoid such a crisis if it is forced upon us?
We agree with the effort of the Chancellor to give a boost to production, but we must ask whether this Budget will give that boost. Some of the measures will help enterprising firms to expand production and exports, but it does nothing to stimulate the less enterprising firms. A so-called incentive Budget—even if we ignore the repressive character of certain of its parts—operating against the monetary policy of the Government is not likely to be successful. An incentive Budget which is purely a Budget policy may be an adjunct to but never a substitute for the instruments of a planned economy. The economic crisis with which hon. Members on this side of the Committee believe that we are faced will require incentives to overcome, not only incentives to business men, but to workers as well. The experience of 1952 has shown us that it is no good appealing for increased effort from men already on short-time or who are in danger of working themselves out of a job.
This economic crisis demands a planned increase in production, in investments and in exports, and an active intervention, both at home and abroad, to create conditions in which exports can flourish. Finally, as I said a few minutes ago, it requires a social policy of justice and fair shares, because these things, in the conditions we are facing, are not only social objectives but essential conditions to reaching a position of solvency and independence which must be the first aim of our economic policy. I submit that against these requirements the Government's economic and Budget policy stands condemned.