Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 20 December 1956.

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Photo of Mr Derek Walker-Smith Mr Derek Walker-Smith , Hertfordshire East 12:00, 20 December 1956

During the last Session, I heard many speeches from the hon. Member for Stechford (Mr. Roy Jenkins) on the subject of the Restrictive Trade Practices Bill and the Copyright Bill, but in those days he was speaking from the back benches. I am not sure whether this is the first time that he has graced the Opposition Front Bench, but whether it is or not I am sure that all my hon. Friends will join me in wishing him a very long and uninterrupted tenure of that Bench.

The hon. Member has been more temperate in his approach than his right hon. Friend the Member for Battersea, North (Mr. Jay), who seemed to be rather infected by the vigour of the previous exchanges which, unfortunately, delayed the start of this economic debate. The right hon. Gentleman attacked on a very wide front and expended a very great deal of ammunition, but it is fair to say that he registered very few hits.

The debate has ranged over a diversity of topics. Both the right hon. Gentleman the Member for Battersea, North and the hon. Member for Stechford dealt at some length with the external position, the state of the gold and dollar reserves, and I think it would be wrong of me to leave unanswered any criticisms which go to this root question, because, as my hon. Friend the Member for Louth (Mr. Osborne), in his characteristically thoughtful and interesting speech, reminded us, The Times leader of this morning said that the basic thing in this debate was the question of the defence of sterling.

Having regard to what the hon. Member for Stechford said in the concluding sentence of his speech, I would recall his attention to what the Chancellor of the Exchequer said on 4th December in categorical terms: First, we will maintain the rate for the £ sterling at its present parity."—[OFFICIAL REPORT, 4th December, 1956; Vol. 561, c. 1053.] It is right that I should reiterate that straight away, in view of some of the observations made.

I do not want in any way to minimise the seriousness of the economic problems with which the country is faced. I think that my hon. Friend the Member for Louth painted the picture in rather too sombre colours; and I shall in a minute or two cite the evidence of an objective witness, whom, I am sure, he will respect, in support of that contention.

The problems with which we are faced are really two. We have a prospective adverse swing in our current balance of payments and an actual adverse swing in our position as a banker. On the second of these matters, at the end of July our gold and dollar reserves stood at 2,405 million dollars. At the end of November they had been reduced to 1,965 million dollars, the adverse trend having set in at the end of July after the seizure of the Canal by Colonel Nasser, and following, I would remind the House, a period of increase in our gold and dollar reserves during the early months of the year.

Faced with that position, we took prompt action to bring into play massive support for the reserves in the shape of the three-pronged approach with which the House is familiar: the drawing on the International Monetary Fund; the application for the waiver of the interest on the United States and Canadian loans, arising out of our feeling that we had satisfied the contractual conditions entitling us to it; and the initiation of a loan in the United States of America.

Those were criticised rather freely by the right hon. Gentleman the Member for Battersea, North. I am coming to the speech of my hon. Friend the Member for Dover (Mr. Arbuthnot) in a moment. If the House views objectively the effects of the policy so far, it will, I think, find it reassuring. So far, only the arrangements with the International Monetary Fund are an accomplished fact: but I am glad to say that since the announcement of the decision of the Fund to grant to the United Kingdom drawings and stand-by facilities totalling 1,300 million dollars there has been a substantial easing of the speculative pressure on sterling.

The success of this policy to date is recorded in the columns of the Economist. The Economist was quoted in another context by the right hon. Gentleman, and it is a fact that members of the Opposition Front Bench draw the more respectable parts of their arguments from its columns. That is perhaps why these quotations are relatively scarce in the content of their speeches. The Economist had this to say about the action which Her Majesty's Government have taken: An article in Business World"— that is one of the column features of the Economist—draws attention to the remarkable speed with which the Treasury has mobilised additional backing for the gold reserves; the departmental expedition that has been displayed both in London and Washington in these last ten days has been one of the great administrative achievements of financial history. I put that evidence against the ill-founded strictures of the right hon. Gentleman the Member for Battersea, North about the measures we have taken.