That is correct. I thank the hon. Member.
In place of any economic analysis yesterday, the Chancellor said he would rather have a million dollars of gold than a lot of academic argument. It is, of course, possible to have both. The trouble about the Chancellor is that he provides us with neither.
I agree so far with the hon. Member for Eastleigh (Mr. D. Price), who said yesterday that the public outside is not so much interested in partisan dialectics, as in learning some of the economic lessons of the last twelve years. I therefore suggest, briefly, that that experience should by now have taught us at least these four lessons: first, as I have been saying, if the Government in the United Kingdom deliberately force up living costs, we shall crtainly have a price spiral, a loss of exports and a loss of gold to our industrial competitors. Secondly, the sterling area in its present form is unworkable with the pitifully inadequate gold reserve we now have. Thirdly—and I think the hon. Member for Aberdeenshire, East (Sir R. Boothby) will agree with this—if we recklessly weaken our external controls, we not merely invite crises, but we place the economic policy of this country at the mercy of foreign speculators. And, fourthly, if we then throw away internal and external controls altogether we are inevitably plunged into the dilemma that either full production and employment, on the one hand, or external solvency, on the other, has to be sacrificed.
First, about the reserve. Some hon. Members yesterday did not like the figures given by my right hon. Friend the Member for Huyton (Mr. H. Wilson) for the gold reserve. If they do not like this, let us not deceive ourselves, let us take the simple figures as published by the Treasury. So far as we know, on 30th September the size of the gold reserve was £661 million. Even if we give the right hon. Gentleman the benefit of the £200 million he borrowed last winter, it is still £400 million—nearly 40 per cent.—less than in October, 1951.
Actually, we have lost £390 million since the Lord Privy Seal invited us to, "Invest in success." We have even lost £185 million since July of this year, when the Prime Minister uttered that other stern warning that we had "never had it so good." In the present crisis, we have lost the whole of the £200 million worth of dollars that we borrowed to get through the last one only ten months ago.
The annual report of the International Monetary Fund has just produced some illuminating new figures, which show how ludicrous the present reserve really is. The industrial countries in O.E.E.C., and Japan, have a reserve averaging about 45 per cent. of their annual imports. The sterling areas' reserve was at the same date, only 20 per cent. of U.K. imports; and so must have been a still smaller fraction of the sterling area imports.
Secondly, with a reserve as pitiful as this, if we blithely cast away nearly all exchange controls, we are bound to have recurrent crises which end in the humiliating position of our external and internal economic policy being dictated by foreign bankers and traders.
Action taken by this Government on the exchange control front ever since 1952 has made this humiliating position inevitable. In 1952, the Government abandoned co-operative Commonwealth planning of dollar imports and, incidentally, as one result of that the U.K. itself is actually now taking 46 per cent. more dollar imports than in 1954 and only 10 per cent. more sterling area imports. In February, 1955, transferable sterling was made virtually convertible. The result of that was described, not by me, but by the City Editor of The Times on 23rd September this year, as follows:
The virtual convertibility of sterling through London commodity markets and through the officially supported transferable markets in New York, and Zurich thus enabled the Western world to satisfy its growing need for dollars at the expense of the £.
He went on:
The re-emergence of the world's dollar deficit found sterling with fewer controls than at any time since the war.…
As if that were not enough, in an article in Barclays Bank Review for August, 1957, the author gives a list of seven other major relaxations of exchange control, all tending to a loss of gold and dollars during 1956 and 1957, when the reserve was falling practically all the time. All this means, of course, that British workers and industrialists are being urged to raise productivity and increase exports, and a large part of the dollar proceeds are being lost through these experiments in "Conservative freedom."
I ask the House to look at what is known as the "Kuwait Gap," about which the Chancellor did not say anything yesterday. It appears from his Balance of Payments White Paper that tens of millions of dollars were lost through this gap in our controls earlier this year, until, at last, in July the Government took action. The Times City page, on 16th October, contained the statement that the sharp rise of about£90 million in what the White Paper calls long-term lending abroad between the first half of 1956 and 1957,
is a measure of the transactions through the Kuwait Gap which were stopped at the beginning of July.
I wish the Government would tell us whether the figure of £90 million is anything like the total of the gold lost through these transactions in Kuwait alone in these six months. If it is, it is equal to more than half the total proceeds of United Kingdom exports to the United States during the period. If it is only half that, it throws an astonishing light on the Government's management of our affairs; and also, incidentally, on the fable that, somehow, it is all due to the trade unions. I suppose Lord Hailsham will tell us that Mr. Cousins has been speculating in Kuwait all these last nine months.
What, to me, is particularly frightening about the Chancellor is that he takes all these risks when the whole dollar situation, as we have constantly warned the Government, is turning against us. A prudent British Government should have been especially careful in this last year. But when we said so earlier, the Prime Minister said how terribly pessimistic and gloomy we were. Now a minor U.S. recession is threatening, and the Sterling Area dollar earnings are falling. But all the Chancellor does is to go round repeating over and over again that the U.K. has a balance of payments surplus, as if that solved the whole problem. Does not the right hon. Gentleman realise—perhaps he thinks this an academic argument—that the very fall in commodity prices which is giving the U.K. a surplus at present is cutting down the whole Sterling Area dollar earnings, which are far more important?
Having both forced our costs out of line with those of other countries, and removed controls which alone could have protected the reserve, the Government found, as we always predicted, that they could check the crisis only by damping clown production. That is the reason why production had to be stopped rising in 1956. That is why we now alternate between rises in production, which throw us into a balance of payments crisis, and a few months' respite from balance of payments crisis achieved through stagnating production. That is the story of 1955, 1956 and 1957. In conditions of Conservative freedom there is no escape from that dilemma.
It is not surprising, but it is, nevertheless, disastrous that as a result we are, as a nation, falling back even further in the production race. Yesterday, the Chancellor did not give us the latest United Nations figures which show this lamentable picture. Since 1953, industrial output in Germany has risen 47 per cent. In France, it has risen 45 per cent, and in the U.K. only 16 per cent. All the following Western European countries have had a faster rise than the U.K.; Germany, France, Italy, Belgium, Holland, Norway and Sweden. Surely, all party argument apart, we shall not long remain a great nation if that process goes on.
Having deprived himself, for doctrinaire reasons of all other methods of meeting the latest crisis, the Chancellor pushes up Bank Rate to 7 per cent. At least he has this in common with Lord Hailsham. He has
only one notion for crossing the ocean
and that is to push up Bank Rate again.
Certainly, Bank Rate at this catastrophic level may stop a run on the £ for a few weeks. But at what stupendous cost. Does the House realise that the annual financial cost of the debt interest alone—let us not go into the other consequences—which was less than £500 million at the time of the Labour Government, must now be getting near £800 million a year? After five years of Bank Rate policy—this delicate instrument—we have nearly doubled the interest bill and nearly halved the gold reserve.