What matters is the judgment of the British people about their own currency. If the British people have no faith in it, no one else will have faith in it either. Over twelve years, with an occasional pause but without much intermission, the British housewife has seen prices going up and the pensioner and the saver have seen the value of their money fall. That is over a twelve-year period. This, then, is what inflation means: a decline in the internal and external value of our money. It is clear that we have got to beat it and it is clear that we must sacrifice other ends of policy to secure that aim.
This objective is not a party issue at all. [HON. MEMBERS: "Oh."] All parties treat the value of the £ as a national asset. The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) was saying so in a speech only the other day. All parties wish to defend it and our task here, as I see it this afternoon, is to discuss together quietly the best means of defending it.
Before I turn to the nature of the problem and the details of the measures which we propose, I want to be quite clear and to state quite clearly the nature of the struggle which lies ahead. Some people say that there will be a slump. They seek to suggest that all this talk about inflation is really a little out of date and that what is really wanted is the reverse, or something like the reverse, of the policies only recently outlined.
I would say just this about a slump. There may be some levelling off of activity in the world outside. Commodity prices have, in fact, been falling and a great deal turns upon the policy which is pursued by the United States and other creditor Governments. But even supposing that there was a falling off of demand abroad, that would not be an excuse for an inflation here in the United Kingdom—indeed, rather the reverse. A strong £ and the absence of inflation here is a prerequisite to riding the rise and fall of demand in the world outside.
I now turn to the problems, and I will start with the foreign exchange crisis. If the root of our problems lies here at home, it was the crisis abroad which highlighted our situation. For the last eight years we have maintained the parity of the £ at 2 dollars 80 cents in very disturbed conditions. There is much to be proud of in that period. Trade has steadily expanded, investment abroad has taken place on an impressive scale, we have given far greater freedom in international trade, there has been rising investment here at home and rising consumption and full employment. But, despite that record, which is a good one and one for satisfaction in all quarters, there has been constant anxiety about the position of sterling.
What are the fundamental reasons for this? The first is the one that the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) mentioned just now. It is that we came out of the war with large debts and diminished reserves. There is no need to apologise for that. [HON. MEMBERS: "Oh."]