Orders of the Day — European Monetary Agreement Bill

Part of the debate – in the House of Commons at 12:00 am on 28th January 1959.

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Photo of Mr Morgan Price Mr Morgan Price , Gloucestershire West 12:00 am, 28th January 1959

The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) has referred in an interesting way to what happened in 1947, and we can agree that things have improved very much since that time. The difference between the two sides of the House is on the question whether this is the right time to take this step. We can all agree that some such step will be necessary sooner or later; the question is whether it is right now. In my few remarks I hope that I shall be able to give a few reasons why I think it is unwise.

I, and I think, also, my right hon. and hon. Friends on this side of the House, have no particular prejudice against the City of London, but I can remember the time that we were on the Gold Standard and the policy of Mr. Montagu Norman, the Governor of the Bank of England. He was a very strong man who certainly dominated the policy of the Government of that day. At that time, in the words of a famous American statesman, we were being crucified upon a cross of gold. I remember well Mr. Montagu Norman coming to this House and talking to a number of us about the financial policy of the country. He said that he would not like to be responsible for the direction of the Bank of England if we went off the Gold Standard, and within less than two months we were off it and have been off it ever since.

We all recognise the value of the City of London in earning money which supports our balance of payments in various ways, such as by interest and discount, and so on, on money coming here. On the other hand, there is no use disguising the fact that its activities can sometimes dominate the industrial interests of the country. I say that because an increase in the Bank Rate may enable certain operators in the City to earn money, and this may disastrously affect our industrial interests.

It is things of that kind which are responsible for those of us on this side of the House wondering whether we ought to take this step now. Only recently we have been through a serious crisis. We have shut down on expansion, we have even reduced production, and we have had a very high Bank Rate because of the position of the £ sterling. I will not say that some of those measures were not necessary, but we join issue with the Chancellor on quite a number of measures which he adopted to attain that end and which we think were wrong.

There can, therefore, be no doubt that at times the financial interests of the City, or of some people in the City, and the industrial interests of the country conflict. We have now a large section of our workers unemployed. It is true that this is not as bad as it was in the great financial crisis of 1931, when we had 1½ million unemployed, but this danger is always lurking.

The issue today is not quite the same as it was in 1931, since now we have a managed currency, but we are still in a difficult position. We are a small island, dependent on our export trade, and our balance of payments should be the lodestar of our financial policy. I would not object to the action taken by the Government in the Bill if it were clear beyond peradventure that no dangers lie ahead, but we on this side, who do not want to spread alarm and despondency, would be lacking in our duty if we did not point out the dangers which we think lie ahead and which make a step of this kind just now a rash step.

The Chancellor said in his speech that we cannot have a closed economy. I agree, but we cannot have an unstable economy, either. How can we be sure that the circumstances which have enabled us to get this large surplus on our balance of payments are likely to persist? I should say that they are most unstable. That is why the Chancellor ought still to retain a number of controls and means by which he can prevent things getting out of hand. We are glad to see that the commodity markets are now firm after their movements over the last eighteen months. That very fact, although it has enormously helped us in our balance of payments, meaning that we have lower debts with other countries, may bring trouble because former dependencies of ours which are now independent are unable, because of their raw material situation, to buy so much from us. There is a danger. Can we overcome it? The next six months may show whether we can. We all hope that we can, but it is by no means certain.

India, one of our former great dependencies, now has balances with us. She has an enormous five-year plan of development, absolutely vital for such a country, and she has to face the problem of a population increase out of proportion to the increase in her food resources, a very serious situation. We must help India in every way we can by letting her have all the balances possible and also helping her with loans and advances. This is one of our great duties, not only in respect of India but in respect of countries in Africa, for whom we still have responsibility or to whom we are still very close. All that means that there will be a severe strain upon sterling, because it means that we give credits but do not receive immediate payments. That is another example to show that the situation is by no means certain and why a step of this kind seems to be unwise.

The Chancellor reminded us that the contributions to the International Monetary Fund are being increased. I believe that we have to find £60 million. That is a further burden, a very right and proper one, because if world trade is to be on a sound basis we must assist the countries which cannot for a year or two pay for our exports and must give them credit. All these are difficulties which must be met.

Then there are our reserves. Are they such that we can feel quite confident about them? According to the Chancellor, we have considerable commitments in debts to the United States and Canada, to the International Monetary Fund and to a number of other countries and institutions, which have still to be met and will reduce the figure which he gave us. We still need a flexible policy to stop any danger which may arise from any of the circumstances to which I have referred. We must not have our hands tied and be unable to take steps when a danger of this kind arises.

There is the whole question of American investments over here and throughout the world, which have been very instrumental in assisting our balance of payments and assisting other countries, like France, which is always in difficulty with its finances. That is an uncertainty. We do not know what the attitude of Congress is likely to be. Congress is liable to have sudden waves of emotion and may suddenly take steps which the President and the State Department may be against, but which they have no means of stopping.

As the Leader of the Opposition pointed out, the great advantage of the European Payments Union is that it enables the European countries to help each other by credits. If there is a temporary difficulty, and payment cannot be made by one country to another without great embarrassment, credits can automatically be provided. That is an example of the flexibility to which I have referred.

The policy of the Government, however, like the policy of the Conservative Party generally, is to leave things to work themselves out. That may be all right when the weather is fair; but I am not so sure that the weather is fair. There are still some storms ahead, though they may not be as great as in the past. I believe we can see the dawn coming, but there are still some severe storms on this side of the horizon.

Private financial interests must not be allowed to have a free hand. The Chancellor must always keep the right to intervene in the public interest. I return again to the great crisis over the Gold Standard in 1931, when the interests of the City conflicted with the interests of industry and we had 1^ million unemployed. Miners, steel workers, engineers and others were passing through a very serious crisis of unemployment and depression. Although, in 1931, we were being crucified upon a cross of gold, I feel that the danger now is that we may be left to the mercies of a laissez-faire system.