We should never have allowed our stocks to get as low as they were before the outbreak of the Korean war. The great mistake was to let our stocks run down in the months after devaluation, so that we had to stock up after prices had risen sharply following the outbreak of the Korean war.
A more important point on which I should like to take up the right hon. Gentleman is the question of monetary policy. No one has ever denied that monetary policy, like other economic weapons, is a blunt weapon. From the point of view of the preservation of individual liberty it is a good thing that all economic weapons are blunt weapons. But it is broadly true to say that the monetary policy of the present Government has had the financial effects which we claimed for it, and that it has not been accompanied by the harmful effects which many hon. and right hon. Members opposite expected.
We always said that monetary policy would help to stem the drain on our gold and dollar reserves. I do not think that any hon. or right hon. Member opposite can deny that the drain on our reserves last year stopped abruptly in the months following the Budget, in which the Bank rate was put up to 4 per cent. In the first quarter of the year the drain was £227 million; in the second quarter it was reduced to £5 million, and by the third quarter there was no drain at all.
That was not solely due to import cuts and the improved terms of trade. It was also in part due to increased confidence in sterling and in part due to the fact that a higher Bank rate definitely discouraged and effectively checked speculation against sterling. In the early months of last year a number of hon. Members opposite—the hon. Member for Gloucestershire, South (Mr. Crosland) was one —laid great stress on the speculative movement against sterling which was taking place. By putting up the Bank rate to 4 per cent., we effectively helped to check this speculative movement.
There is a second point to be considered. One of the evil legacies which we inherited from the party opposite, and one which I think has largely been forgotten, was an economic situation in which our heavy industries were seriously overloaded. When we came to power we simply had not all the resources we required for home investment, for the export of capital goods and for our defence programme. One of the reasons we raised the Bank rate was in order to raise the cost of carrying stocks of goods against borrowed money, so as to slow down replacement orders and to lessen the burden on our heavy industries.
It has rather puzzled me that the right hon. Member for Huyton (Mr. H. Wilson), who is such an opponent of a higher Bank rate, should also be one of those who complains that our delivery dates for capital goods are still too distant. The cut in investment in stocks compared with the previous year, on which the right hon. Member for Leeds, South laid such stress, was therefore entirely in accordance with Government policy; but it is absolute nonsense to imply, as he definitely seemed to imply yesterday in his speech, and today in an interruption when the Economic Secretary to the Treasury was speaking, that the rise in the Bank rate to 4 per cent. was responsible for an increase in unemployment. That just is not true. In April, 1952, the unemployment figure was 467,871; that was very shortly after the Bank rate had been raised: in December, 1952, it was down to just below 400,000. I do not think that it is possible, on those figures, to claim that the higher Bank rate caused greater unemployment in this country.
The higher Treasury bill rate did not lead to nearly so big a charge on the Revenue as a number of hon. and right hon. Members opposite feared. The right hon. Member for Battersea, North (Mr. Jay), in a speech during the Committee stage of the Finance Bill last year, said:
I know that none of these things is as simple as it looks, but on rough arithmetic, … presumably an extra 1¾ per cent. would mean something rather over £75 million gross —say, £80 million, …"—[OFFICIAL REPORT, 27th May, 1952; Vol. 501, c. 1208.]
In fact, the figures given in the Financial Statement show that the extra cost of the higher Treasury bill rate was about £42 million, and substantially less than the right hon. Gentleman expected.
One other accusation is that the higher Bank rate has been responsible for pessimism and uncertainty. I do not agree, and I believe that if we had had a slightly higher Bank rate in the period between 1945 and 1951, we should never have had that panic buying after the outbreak of the Korean war which was so largely responsible for the severe textile recession at the beginning of last year. The trouble is that hon. and right hon. Gentlemen cannot understand that it is possible to have a higher Bank rate and at the same time to maintain a high and stable rate of employment.
I cannot help feeling that the real grouse on the benches opposite throughout the debate has been that we no longer have any inflation in our economy, and that total demand no longer exceeds supply. We on this side of the Committee have always held firmly to the view that inflation is the greatest evil which can afflict a trading nation like our own. I entirely agree with the views that Professor Lionel Robbins expressed in his Stamp Lecture, a year or two ago, when he said "Stop the inflation, stop it at all costs." Now my right hon. Friend has effectively stopped it, and, as the Economic Survey shows, we still have a high and stable level of employment in this country, and a percentage of unemployment which is little more than half of what both Lord Beveridge and the right hon. Member for Leeds, South recognised as a full employment standard.
I wish, if I can, to create a record for the debate so far today by ending my speech within 20 minutes of rising. I therefore wish to comment very briefly on two taxes which my right hon. Friend has decreased. I must first say how pleased I am that he has made an all-round reduction in Purchase Tax.
A few weeks ago I was responsible for initiating a debate on the jewellery and silverware industries. It would only be courteous on my part to thank my right hon. Friend for having specifically referred to those industries in his Budget speech, and for having referred to the silverware industry in his broadcast. I much preferred the attitude to those industries displayed by my right hon. Friend to the rather contemptuous attitude shown by the right hon. Gentleman the Member for Leeds, South yesterday when he referred to jewellery and furs as typical luxury trades. If he talked to some hon. Members opposite who supported the Motion I moved a few weeks ago, he would realise that there is a very strong case for doing something to assist those industries.
I am glad to see the 40 per cent. initial allowance for mining works. Some of us, including my hon. Friends the Members for Stafford and Stone (Mr. H. Fraser) and Oswestry (Mr. Ormsby-Gore) have in recent years put down Amendments or new Clauses on this subject. We once received the unexpected support of the right hon. Gentleman the Member for Ebbw Vale (Mr. Bevan) who was at that time in opposition, not only to us, but to his own Front Bench, and I hope he will be as pleased as we are about this relief.
I think this is a courageous Budget. I have no doubt some people will say that my right hon. Friend has taken too big a risk in giving reliefs of such a magnitude. I quite recognise that the position always looks less inflationary in February than in July. I also understand the fears of those who say that a reduction in taxation, coupled with the hope of higher production this year and the import relaxations which have been announced, may tempt us once again into taking a higher level of inessential imports than this country can afford.
I agree with the apprehensions which were expressed by the hon. Member for Gloucestershire, South last night. I am sure, however, that my right hon. Friend would not have acted without carefully weighing up all the various factors which have contributed to his decision. I have confidence that, under his guidance, this country will get through an odd-numbered year without a major economic crisis, for the first time since the war.
Finally, we can all be pleased at the improved position of the £, and let us remember that a strong £ is not only a security for the standard of living of the people of this country, but is also absolutely essential if Britain and her Commonwealth are to make a worthy contribution towards the leadership of the free nations.