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 Harold Wilson Mr Harold Wilson , Huyton 12:00 am, 28th January 1959

Yes. The Chancellor will be able to answer tomorrow for his repudiation of the Prime Minister.

In fact, the Chancellor, so far as he has gone, has not given us the true facts. I am sorry to have to weary the House—and particularly the Chancellor—with one or two figures, but I think it essential that these figures should be given. The visible trade gap in 1958 was £424 million, an improvement of £189 million on the 1957 figure of £613 million. So far, I am sure. I carry the Chancellor with me, because these are Government figures.

Last year our imports were £3,780 million. Those are Government figures which I hope the right hon. Gentleman does not deny. Again, according to the Government figure, import prices last year stood at the index figure of 99 compared with 107 the previous year, a fall in prices of about 8 per cent. I am sure that the Chancellor will agree that if prices have not fallen last year—if I may put it in arithmetical terms—our imports would have been

107/99 X £3,780 million.

I hope I am still carrying the Chancellor with me. I see that he is hurriedly doing calculations on the back of an envelope. I can assure the right hon. Gentleman that the answer which he will get, finally, is a figure of £4,085 million.

That is what our imports would have been last year, but for this adventitious aid of falling prices. That would have been £305 million more than it actually was. So, against an actual improvement in the trade gap of £424 million, we would actually have had a gap of £729 million. To put it in another way, the improvement in the balance of payments for which the Prime Minister so modestly took credit yesterday was £189 million, as I have just shown. But the effect of more favourable import prices was £305 million. So much, therefore, for the Prime Minister's claim.

What does this decision about convertibility mean in practical terms? First, for Europe. That was fully dealt with by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) this afternoon. The Government, having embarked a year ago on a policy of internal deflation, have, I am sorry to say, been the moving genius in this dash towards international deflation. My right hon. Friend made very clear that the European Payments Union provided a credit house for both increased trade and production in Europe. It was able to liberalise trade and take the chance of increased production without the nagging fear all the time of a balance of payments crisis. Now, under this new European Monetary Agreement, credit will be available only case by case and probably on very harsh terms, because the terms will be controlled by the international deflationists, the central bankers, and the rest of it.

I would ask the Paymaster-General—if he be the right person to ask—what about the position of France? France will be more than ever dependent on German economic aid. It may be that that will suit their political purposes, I do not know, but they have certainly lost a valuable economic aid with the going of E.P.U., and are in danger, as a result of what this Government and what the French and Germans have done, of becoming economically a German colony. I hope that the Government realise where this decision will lead them.

What does it mean for Britain, and for the sterling area? We are told that it is only a little change; that the real position was taken in 1955, and that the events of 29th December were merely conferring a de jure recognition of a situation which had long existed on a de facto basis. That is not what we were told at the time. It was then put forward as a purely technical move when my right hon. Friend and I criticised it as backdoor convertibility. Whatever changes there may have been, it is clear that the greater part of the loss of gold and dollars in 1956–57 was on the backdoor support of a transferable rate.

What is the basis of our anxieties? I should make clear that these anxieties go much wider than among members of the Opposition. They exist among people who do not agree with us politically. They share our anxieties about the convertibility movement. The main thing is that it makes us more vulnerable to a speculative crisis. The £ in London will be converted, as of right, into dollars, or other currencies without even the cushion of a drooping transferable rate.

The Chancellor may say that we were following the rest of Europe. [Interruption.]My right hon. Friend the Leader of the Opposition made it clear this afternoon that there was reason for thinking that the British Government were in the lead in this matter of European convertibility. Even if it is true that we had to follow the rest of Europe, which is very surprising, sterling is in a very different position from the currencies of other European countries.

No one holds French francs beyond his immediate trading needs. Sterling is held because it is an international currency and nearly half the world's trade is financed in sterling; so the holdings are considerable. If the situation occurred at any time that traders suddenly wanted to hold some other currency, dollars, Swiss francs or German marks, sterling will have to bear the brunt which most other countries would not have to do.

What happens if another run occurs? What this Government will do is to say, "Confidence is in danger and can only be met by deflationary methods in this country, involving restriction of production and an attack upon employment standards". [HON. MEMBERS: "NO."] That is what they said in 1957 before we had convertibility, and they will be forced to say this, irrespective of the state of production and employment in this country. This was the theme of a statement put out today by the General Council of the T.U.C. I hope that the Chancellor will study the statement, because he received a letter in October warning him of the consequences of convertibility. The General Council has made it clear that if confidence in sterling weakens, and the Government lack exchange control to defend the reserves, they will no doubt argue that forces outside their control compel them to restrict economic activity and cause unemployment.

That is the fear of the T.U.C. and represents the nub of the argument. It is a fear that exchange controls will be cast aside and that, at the margin, full employment and increasing production will be swept aside for considerations of international finance, and even of financial prestige. My hon. Friend the Member for Cheetham (Mr. H. Lever) said this afternoon that all these financial manœuvres were just a charade if we did not mobilise the full production power of the nation.

The decision of the Government of September, 1957, to sacrifice production and employment to the obsolete financial shibboleths urged by the right hon. Member for Flint, West (Mr. Birch) has gravely weakened this country. [HON. MEMBERS: "No."] We have often said, and we said at the time, that this was like the old eighteenth century quack doctor whose only remedy for any kind of disease was blood-letting, which was ultimately weakening.

What is the position in Britain? Production in Britain today is lower than in 1955 at the time of the last General Election. [Laughter.]Let me ask hon. Gentlemen who laugh whether they can name any other country in the world of which it is true that its production today is lower than it was in 1955. This is the country that the Prime Minister told us, on television, when he became Prime Minister, was to be made "Great" Britain, yet not one hon. Member in any part of the House can think of a single country being worse off than we are. They have had plenty of time to answer and I should have thought hon. Gentlemen would have thought of one now.

Take the figures of unemployment. The registered figure is 200,000 up on a year ago, but the registered figures are only part of the story. There are workers on the guaranteed week for whom no work can be found. Many miners are being kept at work by the nationalised Coal Board. About 75 per cent, of our factories are working below capacity. That is one reason why, if we get an expansion of production it may not lead to a corresponding expansion of employment. There are school leavers who cannot find jobs when they leave school, in this "Opportunity State" that we hear so much about from the Tories.

Apart from that, and apart from the national figure, some areas are very badly hit, yet the Government are putting out complacent statements. The Minister of Works, at a big employers' dinner, said that we should have boom conditions by the end of the year. Is that the Chancellor of the Exchequer's view? The Parliamentary Secretary to the Board of Trade said at Exeter that he thought the Government's measures to bring work to the depressed areas would soon be showing results. It sounded like the speech of the pre-war Tory Minister of Agriculture, who said that the agricultural policy of the Government was showing results in a number of fields. There will be no solution of this local unemployment problem unless there is a real head of steam in the economy, and the Government dare not create that head of steam because of fear of foreign repercussions.

The right hon. Member for Blackpool, North (Sir T. Low), in a characteristically agreeable speech, quoted our statement that the Labour Party will make the defence of the £ the first priority of our overseas economic policy. We utterly reject the Tory notion that the £ can be strong only if the economy is weak. I say that for two reasons. If the economy is depressed, if industry is working below capacity, then costs are increased. Furthermore, what is of great importance, productivity cannot increase unless industry is expanded. Secondly, if the economy is depressed we fail to extend and to modernise our economy and, in the long run, we lose ground to all our competitiors, be they Germany, the United States, the Soviet Union, Japan, or for that matter, China.

We believe that we could have a strong £ and a strong economy only on the basis of controls and expansion. The right hon. Gentleman seemed to find the idea of controlled expansion entertaining. Under the Government we have stagnated for four years. We need expansion—does anyone deny that?—but that expansion must be controlled, because without controls and purposive planning a free-for-all expansion will mean inflation, just as it did under the Lord Privy Seal. The slack incompetence of an unplanned economy must give place to the disciplined efficiency of rational organisation and control. [Laughter.]

I am sorry that hon. Members opposite do not accept that and find that thought shocking or amusing, because it is taken from a chapter entitled "Expansion" written in his expansionist days by the Prime Minister, in a book published in 1939, oddly enough by Macmillan.

Our Amendment says that the Government's decisions make more difficult the achievement and maintenance in Great Britain and Western Europe of industrial expansion and full employment. We are not trying, in the Amendment, to over-dramatise the situation. We do not say that this is the same as the action of the then Conservative Government, in 1925, in returning to the Gold Standard with the wrong parity although there is perhaps some similarity of motive—the feeling of prestige, the idea that the £ must look the dollar in the face and the rest of it. That decision in 1925 condemned whole industries, especially coal and cotton, to mass unemployment.

We do not say that this decision will have the same effect. For one thing, it is not of the same parity, but what we say is that the Chancellor's freedom to take the necessary measures to expand economy will be limited. If we need lower rates in this country for employment loans and, at the same time, there are rising rates in America, the Chancellor will be inhibited from taking the necessary measures because of the difficulty of chasing "hot money".

The real difference between us has come out plainly in the debate. We believe that both nationally and internationally finance, as my hon. Friend the Member for Edmonton (Mr. Albu) said, must be the servant and not the master of production, trade and employment. They look at it the other way round. They see nothing wrong with a system in which British financiers, as in September, 1957, could almost bring this country to its knees by freely transferring British owned capital out of the country, whether via Hong Kong or in other ways. The gentleman who said that it was "anti-British, but it makes sense" will find it just that much easier to do it again under convertibility.

I will explain what we feel to be wrong about these decisions—the kind of decisions taken in September, 1957, taken "on the grouse moor" and all the rest of it. What was it that was said? "Nigel was very depressing". What is wrong in our eyes is that these decisions led to unemployment a year later in Liverpool, Llanelly, Greenock and—I am sorry that the Prime Minister is not here—Stockton.

There is no middle way between the two views which have been expressed in the House, but I hope that we can agree on one point, whatever difference there may be about method. Even so, we certainly feel that the record of the present Government is pathetic in that? the £ today, after seven years of uniquely favourable international economic conditions, is only twenty-nine thirty-secondths of an American cent higher than it was in 1949, and we have avoided disaster and devaluation twelve years after the end of the war only by massive borrowings and a defeatist policy of industrial stagnation—twelve years after the end of the war, not two years.

Hon. Members are entitled to reject the proposals which we have put forward if they wish, but we have the right to demand that they do not bring the £ into their pre-General Election manœvurings or tactics. I know that I need not make this appeal to the Chancellor, but we need to make it to Lord Hailsham and certainly the President of the Board of Trade, if anyone were ever in danger of taking him seriously. I want to make it plain that even over Suez, when we fundamentally disagreed with the Government's policy, we rallied round the Government to the support of the £. [HON. MEMBERS: "Oh."] I challenge any hon. Member to produce any evidence to the contrary. In September, 1957, my right hon. Friend the Leader of the Opposition went on record with a speech strongly calculated to maintain the strength of sterling. [Laughter.]I know that the strength of sterling is a laughing matter to some hon. Members opposite.

If they are thinking of using it in the General Election, I remind them that talk of this kind is not only unpatriotic and anti-British but is fundamentally undemocratic. It means that whatever decisions the British people may take in an election, some people are relying on their friends at home and abroad to exercise a right of veto. As my right hon. Friend said, they will be voting with their bank balances.

This kind of talk can be a boomerang, as the right hon. Gentleman knows, and that is why we call on him to exercise his authority over his colleagues to stop it, because, as my right hon. Friend made clear this afternoon, the resources of civilisation are not exhausted. I hope that it will not be necessary to deal with a situation in the way that he mentioned, but I am sure that the whole House, in a somewhat cooler mood, would agree that we cannot tolerate a situation in which the economic destinies of this country are to be dictated not by the Government, not by the House, not by economic realities, but by decisions taken for the sake of a quick and unpatriotic profit at the expense of sterling and of the employment of our people.