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State Of The Nation

Volume 441: debated on Wednesday 6 August 1947

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Motion made, and Question proposed, "That this House do now adjourn."— [ Mr. Whiteley.]

On a point of Order. I see there is a Notice of Motion to suspend the Rule, in the name of the Prime Minister——

May we have some indication from the Leader of the House or the Prime Minister of the course they propose to take today? I understand there are a great number of hon. Members who desire to take part in this Debate. May we have some indication from the Leader of the House?

The Motion to which the hon. Member refers would not have affected the business now before the House because the Adjournment is not Government Business. The question is, "That this House do now adjourn," and I would remind hon. Members that on the Adjournment matters affecting legislation are out of Order. That may be somewhat difficult in this Debate but that is the Rule and it is my business, as far as I can to uphold it.

3.30 p.m.

I am sure that this opportunity to debate for two days the grave economic state of the nation will be welcomed on all sides of the House. It would, indeed, have been quite impossible for us to adjourn, whether for a short or a long time, without such a Debate taking place. I am sure that this opportunity is welcomed by none more warmly than it is by the Prime Minister, who will have this chance of letting the country into the secrets which, as rumour at any rate has it, hon. Members opposite have already enjoyed—[HON. MEMBERS: "No."] Then it will be an equal treat for all of us. It is unfortunate that in accordance with the rules of Order, of which you, Mr. Speaker, have just reminded us, it will be impossible for the Prime Minister to give any account of the Bill that was presented yesterday, and for the same reason, of course, it would not be possible for me to discuss it. We shall, then, have to wait until the Second Reading of that Bill to hear the Government's reasons for its introduction, their intentions for its use, and any limitations which they propose upon powers which, at all events at first glance, appear to be absolutely without limit. Only then will it be possible for my hon. Friends to come to any final decision as to their attitude to that Bill.

It is only three weeks ago that we had the last economic Debate, but a great deal has happened since then. Therefore, I make no apology for putting again today the two questions which I then put to the Chancellor of the Exchequer. The first question was: What is the actual position? To that question three weeks ago, the Chancellor of the Exchequer gave a definite reply. That reply was bad enough. He showed that we were drawing on our American, and I think, too, our Canadian credit, at the then rate of £800 million a year. Since then it would appear, from statements that have been made, that the position must have got worse. We should like to know how much worse, and why. In particular, we feel it essential that if the Prime Minister is unable to do so, the Chancellor of the Exchequer should, later in the Debate, give us some clearer information than we have now as to the actual reasons why this drain is continuing. All of us appreciate clearly the reasons for that part of the drain which is accounted for by our deficit on the material, the visible, export and import account. What we are not able to appreciate are the exact reasons which account for the large gap of some £350 million between that material deficit and the total drain of £800 million. There is, in all quarters, great uncertainty as to the reasons for it.

Quite frankly, that uncertainty has been increased by an answer by the Chancellor of the Exchequer on 29th July. In reply to a Question by an hon. Friend of mine, as to the extent of the drain on our dollar reserves since 15th July, he gave this answer:
"There has been no substantial change in the drain during the fortnight since 15th July compared with the immediately preceding period."—[OFFICIAL REPORT, 29th July, 1947; Vol. 441, c. 257.]
Yet on the very day he gave that answer we drew on our credit to the extent of £75 million, a bigger withdrawal than we have had at any other time during the currency of the loan. The right hon. Gentleman could not have been ignorant, when he gave that answer, that that withdrawal had either been made, or was to be made within a few hours. He could not have wished to mislead the House simply on the ground that there might have been a few hours' delay between the time of the answer and the actual time of the withdrawal. We are, therefore, driven to the conclusion that, for some reason or other, the right hon. Gentleman was not prepared to class this withdrawal as being a drain upon our dollar reserves.

It is essential, in view of the rumours which are not only current in this country but are becoming current in America, that we should, during this Debate, have a precise statement as to the amount of our dollar losses attributable to all the various causes, whether it be the process of convertibility, whether it is some other capital leakage which had not been foreseen, and, finally, whether some of it is accounted for merely by a transfer from the dollar credit to the dollar reserve holding in the Bank of England, and is, therefore, something which leaves our net position untouched. We do not believe that it is possible, intelligibly and intelligently, to discuss the remedies unless we can be supplied with that information.

The second question which I asked the Chancellor of the Exchequer three weeks ago is, What are the Government going to do about it? The answer he gave then on behalf of the Government was quite plain. They meant, at that time, to do nothing about it at all. With the exception of a few irritating but, in view of the magnitude of the crisis, derisory cuts, they were going to be content to sit and wait for help from America, as one might have sat and waited in the old days for manna from Heaven. This decision filled many of us with feelings of despair and humiliation. In saying that, I think it applies to Members in all parts of the House. In the first place, we did not feel that we were in a position to depend for our salvation entirely upon help from America. Secondly, many of us thought that, even if we were in a position to depend upon that American help, we ought not to be content to depend upon that and upon that alone, to restore the prosperity of this country. Nothing I have seen convinces me that we have any right to be as certain as the Government appeared to be in the Debate three weeks ago of future American help. In asking for it, we are asking for a great deal.

We have to drop—at least I hope we shall drop—any pretence that a further loan can be on a commercial basis, or that it would be within the capacity of this country, or within the capacity of other European countries, to repay such a loan on a commercial basis, within any reasonable period of time. It is easy to say that it is to America's advantage to lend us the money, that their future security and their future prosperity depend upon preventing Europe and preventing us from relapsing into chaos. That may well be true, but these truths, which appear very simple and self-evident from the receiving end, do not appear anything like so obvious from the point of view of those who are called upon to give. In fact, if the American people are prepared, in the future, to give us and others this help, with no expectation of commercial return, and with none of the stimulus of war, then indeed that will go down to history as one of the greatest acts of statesmanship and generosity possible.

In other words, American help is something for which we can dare to hope but it is not something on which we can afford to rely. To regard it as as a great act of generosity which may come to our help is, I think, both more fair and more wise than to treat it as it has been treated sometimes in recent speeches by certain people who appear to have adopted in place of the old adage the new and, I think, unsatisfactory one that rudeness is a lively sense of favours to come. But, even if we were today absolutely certain that we could depend upon getting from America all the help that we wanted and all that we needed, we should only be entitled to regard that help, in the famous words of my right hon. Friend the Member for Woodford (Mr. Churchill), as a springboard and not a sofa. It is inconceivable that this great country could calmly settle down to be the permanent pensioners of the United States, content to live for ever on her dole and her memories That is something which the vast mass of the people of this country would reject immediately.

As I say, this feeling in regard to the Government's answer three weeks ago was not only held and expressed by my hon. Friends on this side of the House but, I believe, it was held by supporters of the Government as well. We are delighted to learn that it appears at least to have impressed the Government. If I were permitted to use a racing metaphor, with which I am not entirely unfamiliar, I should say that in this race it has been: "The Opposition, first; the Government back benchers, second; the Government, third—won easily; a bad third." We are assured, then, that we are going to get today a different answer from that which we got three weeks ago; but we must point out to the Government now that whatever the Prime Minister says this afternoon it will be right for us to do in the national interest, would have been equally right three weeks ago—[An HON. MEMBER: "Two years ago."] It would have been equally right six months ago when we discussed the White Paper. It would have been equally right at least a year ago when the present crisis was not only foreseen but was foretold by so many hon. Members on this side of the House.

I do not intend in my speech to go back over the past except in so far as it is necessary to look at the past in order to decide what we are going to do in the future. There will be other places and other opportunities for allocating the blame for the grave situation which we have to meet today, but, at any rate, we must make it clear that there has been the usual rush in the last few weeks among Members of the Front Bench opposite to find an alibi. I am afraid that this time some of their old friends have failed them. The weather—I am afraid that old and tried friend of the Minister of Fuel and Power will be no good to them this time. The bankers' ramp—in view of the self-congratulatory statements of the Chancellor of the Exchequer, they cannot use that. Even the Tory legacy is getting a little thin. [Laughter.] I am glad that hon. Members opposite appreciate that. They appreciate, as I do, that it gets a little thin when the most prominent Members of their Front Bench have been clamped to that bench for the last seven years. It appears, finally, that they have decided to go down together on this one alibi: the rise in world prices. That is a specious one because there is some truth in it. There is some truth, but it is neither the whole truth nor even half of it. It is just about a quarter true.

Just look at the figures. When we discussed the American loan nearly two years ago the original estimate was that that loan and the Canadian credit combined would last for about five years. Since that date the rise in commodity prices has been in the order of 28 per cent., although against that we must put a smaller rise in the value of our own exports. Therefore, on this reduced value of the loan, it is fair to bring that five years estimated period down by one-quarter. The loan, therefore, should have been expected, on the original estimate, to have lasted for just under four years. As a matter of fact, here we are today just over a year after that loan came into effect, already contemplating its almost immediate exhaustion. When we look for the reason for that gap, we believe that it lies in causes which, in the main, were within the control of the Government and could have been arrested by them. The importance of that lies in the fact that if what we believe to be the bad practices of the past are allowed to go on, they will result in wrecking any new plan in the same way as they have wrecked the old.

In this connection, I must say one word about the Chancellor of the Exchequer. I pick him out because I consider him to have been the worst offender over these two years. They used to be called the "guilty men." We regard the sins which he has committed as being sins not of omission, like those of many of his colleagues, but of deliberate commission. We believe that he has actively encouraged the inflationary proceedings over the last two years; that that inflation has resulted in the distortion of our economy, and that to that we owe many of our shortfalls in production, and lack of buoyancy in exports. The most blatant mistake that he has made during that period has been the obstinate pursuit of an artificial cheap money policy. It has often been pointed out to him. We have often said, with regard to the methods that he has adopted, that any budgetary advantage that he might get from them would be more than outweighed by the resulting capital inflation; and that has taken place. Purely as a result of what he has done, Stock Exchange values have been forced up to a wholly unreasonable level. He gratuitously created an immense mass of new purchasing power and he widened quite needlessly the inflationary gap which already was dangerous enough.

I remember that only a year or so ago the right hon. Gentleman, in an ecstasy of self-praise, said to the House of Commons:
"The previous all time 'high' for old Consols before this Government came in and improved the national credit was 94 in 1935. Where are they now?"—[OFFICIAL REPORT, 16th May, 1946; Vol. 422, c. 2250.]
I can tell him. They are at 84, almost exactly the figure at which they stood when my right hon. Friend left the Exchequer and the right hon. Gentleman opposite came into office. All this trumpeting and artifice resulted, at the end of two years, in the Government's credit basis being exactly what it was when they started, but what damage has been done in the meantime? It is not only the injury which will be imposed upon individuals and, let me remind the House, probably on those individuals who have reposed, perhaps foolishly, the most trust in the statements of the right hon. Gentleman; it is not an injury to speculators, or those who hoped for capital gain; it is an injury to those who tried to find a wholly safe investment for their own funds and who are now faced with having, in the course of a few weeks, lost one-sixth of their holdings, a loss which, for gravity and rapidity, has never been equalled in peace time before. Indeed, Shakespeare may well have had the right hon. Gentleman in mind when he spoke of
"Folly, doctor-like, controlling skill."
We are told in all the papers that the Prime Minister talked last week and will talk again today on proposed cuts. Of course, for reasons of which I need not remind the House, we are not entitled to treat these reports as having the same authority as they had previously. We can regard them only as intelligent anticipation, but, when they coin-side upon this one matter, there is probably something behind them, and I will tell the right hon. Gentleman why. If he, in fact, is going to make some announcement this afternoon-we on this side of the House are prepared to consider on their merits any cuts that he is going to propose to this country. In the situation to which this country has been brought, we recognise that there may be no way out at all except the hard way, but what we are not prepared for is cuts by themselves. We are not prepared for a continuance of that policy which, up to now has meant pills for earthquakes, even though there may be bigger pills for very much bigger earthquakes. Cuts can only be accepted today if they are just one part of a general plan which is adaptable and effective in dealing with the whole field of our present economy. Therefore, while we shall listen with interest to any proposals for the cutting of imports which the right hon. Gentleman has to make, we shall attach greater interest and greater importance to what he has to say upon the general plan as a whole. It is to some of those points with which any plan must deal, that I now want to address myself.

The first thing I want to raise is what we might call the strings to the loan. I mean by that these provisions for convertibility which today are resulting in a drain on our dollar resources, and which are not represented by any import surplus, and which, therefore, bring no direct benefit, no material benefit, to the people of this country in return for the exhaustion of the loan; and to the provisions as to non-discrimination, which prevent us taking what may be suitable, and indeed the only, measures to correct the grave visible adverse balance in dollars. I do not want to shirk any share of the responsibility which attaches in varying degree to all those who did not oppose the American Loan and the conditions attached to it. At the time when we agreed to its passage, we were all aware of these dangers, and indeed, they were pointed out in Debate, but we took the attitude that there was an even greater and more immediate danger in having no loan at all, and we hoped that two years of world recovery might make these arduous conditions at least practicable when the time came.

Events have proved us over-optimistic. Two years have not seen recovery; they have seen nothing but deterioration in the European economy, and, therefore, all the grounds on which we hoped that these provisions would become capable of performance have been entirely destroyed. Indeed, under present conditions, I regard these obligations not only as dis- astrous to us, but, I must say, as of no advantage to anyone else. I could quite understand the Americans attaching a great deal of importance to the nondiscrimination provisions if the situation was that these provisions ensured that, if we wanted to buy from somebody else, we, at the same time, had to buy from them, but that is not the effect at all now. All that it means now is that we cannot afford to buy from anybody at all, and there is no advantage to America and a great loss to ourselves. Similarly, convertibility might have been, for them, a very valuable safeguard, if conditions had arisen in which there would have been a chance of our building up on the basis of frozen sterling, the great sterling block which would have been inaccessible to goods from the United States, but it appears to have no meaning at a time like this, when the whole world is clamouring for American goods in quantities and qualities which America is still unable to supply.

Therefore, we do ask the right hon. Gentleman with the utmost seriousness, what are the proposals of the Government for relieving us of these obligations. We fully realise the difficulties with the agreements into which we have entered, but we say that it is quite impossible to sit still and allow the country to drift to ruin because of an arrangement which was entered into two years ago in wholly different circumstances and with wholly different anticipations from those which have been realised. To do so would be national suicide, and we believe that the Government have the responsibility of taking definite steps to see that we are relieved of obligations which have become undesirable for the world as a whole and wholly impracticable for us.

I want next to deal with the question of inflation. I remember that we raised this point in the economic Debate some time last March. In that Debate the Minister of Defence took part, and his only reply was in language which, I think, he fondly believed was the language of the quarterdeck, for he described the whole thing as "piffle and poppycock." We gather that the right hon. Gentleman is not to take part in this Debate. The Government have apparently learned that, though they cannot make him strong, at least they can keep him silent. We hope, therefore, that this time we shall get a serious answer to what we, on this side of the House and many others in the country, believe to be a serious question. It is quite true that, on the one hand, that of capital inflation, the recent collapse of the Stock Exchange market has to some extent decreased the danger. But that, in any case, was only an extra, a voluntary. It was outside the situation—grave enough—presented by the economic White Paper. It was in addition to the inflationary gap of £1,000 million which that economic White Paper presented to us. We believe this inflation, as represented by that gap, to be one of the most potent causes of the economic disequilibrium in which we are today. It is quite true that by the exercise of rigid controls it is possible to keep it in check with regard to certain ranges of commodities; but the only result is that it bursts out with redoubled vigour in other places. To that inflationary pressure, we have to attribute much of that loss of labour and materials which have been drawn from the primary functions into the secondary channels.

Any proposal which the right hon. Gentleman is going to make this afternoon for cutting down imports or for increasing exports, are, by themselves, only going to add to the inflationary danger; they are only going to decrease the amount of goods available in this country, and, by that means, merely increase the inflationary gap. Unless proposals are going to be made, as part of this plan, for dealing with the other half of the problem—the amount of money available—then the danger, after any new proposals, will be not less, but greater. We want, therefore, as part of the plan, the decision of the Government upon the inflationary pressures, which the Chancellor of, the Exchequer himself admitted last spring, and which are now becoming rapidly intolerable. At the same time, we should be glad of an answer to the question which my hon. Friends and I myself have already put on several occasions to the Chancellor, and which, hitherto, he has always avoided answering. Can we avoid, or even control, inflation so long as something round 30 per cent. of the national income continues to be taken by the Chancellor in taxation?

Now I should like to say one word upon agriculture. It would appear to the ordinary person that in our home agriculture lies one of the best and readiest methods of reducing our dependence upon foreign imports. Can anyone say that, for the last few months, since this crisis first became apparent in all its severity, full use has been made of that agriculture, or that any real proposals have been put forward to reduce by that means the flow of dollars? It is said, and seriously, of our present crisis that, since the end of the war, home agricultural production has fallen by something like £100 million in value. Most of that, in order to maintain the standard of life of the people of this country, has had to be made up by increased imports. That figure alone shows how profitable this field could be for a cut.

I know that agriculture today suffers from all kinds of difficulties, difficulties which will be dealt with in much more detail by some of my hon. Friends behind me. Lack of labour, lack of houses with which to attract labour, lack of machinery, lack of spare parts for the machinery which exists, all those things make it difficult for the increased production to be attained. It is just as serious a problem as that of coal, even if we have seen in regard to it none of the publicised, if ineffective, energy which the Government have been showing with regard to the coalmining industry. But, above all, if we are to have any real, sound increase in agricultural production, we must have a bigger supply of feeding stuffs. I know from the answers of the Minister of Food that he finds himself unable to procure them for this country. And yet, in the last food Debate, the right hon. Gentleman gave to the House and the country a long list of countries from which, in the near future, he expected to get largely increased supplies of pig and poultry products—Poland, Denmark, Holland; indeed, the list extended far beyond that. How far were those countries going to be in a position to supply us with those extra products, except on the basis of imported feeding stuffs? How far, for instance, were Denmark and Holland self-supporting in feeding stuffs?

The real answer is that we have been outsmarted, or rather that the Minister has been outsmarted, and that we have got to pay for it. Surely, the time has come, in this grave crisis, for maximum agricultural production. If that is decided upon, it requires three things—maximum drive from the centre, maximum incentive on the farm, and maximum assistance from other Government Departments. Continual pleas have been made from this side of the House for those things to be done. Continual tributes have been paid to the importance of agriculture, but, so far, words, although kind, have not been followed by deeds. We hope today that, at least, some definite proposals are going to be made for the increase of our agricultural production.

Finally, I want to refer to the planning of capital expenditure. We believe that the failure to adapt the amount of planned capital expenditure to our actual resources has been one of the greatest causes of inflation, and one of the things most wasteful in men and material. We have seen instances all over the place of complete failure to relate capital projects to the grim realities of capital possibilities. All kinds of schemes have been planned, and, indeed, started. Labour, time, and materials have been used on them, but only a small proportion can, or, indeed, should be finished in the immediate future. In the last few days we have had a glaring example of this, and it comes from the part of the world which I represent. It is the question of the Severn Bridge. I have no doubt that it is an admirable scheme, and that when it is possible to complete it, it will add greatly to the convenience of people. If it were introduced in a period of deflation, it would provide valuable employment. But can anyone say that this is the moment to choose to announce an intention to proceed on a scheme which will use a great deal of steel and employ a great deal of labour? Is there anyone who does not think that within the next vital, critical year or two, that steel can be used to much quicker and greater advantage than for the very indirect and long-term benefits which are all we can hope for from a scheme of this kind?

I am appalled at the naivety of the Minister of Transport that he should have chosen the last few days in which to make this final announcement about the project, although it is true, and that is a good example—that, in fact, expenditure on this project has been going on at this rate for a considerable length of time. In the old days, before we had any planning, we used, on a matter of this kind of Government capital expenditure, at any rate, to have a plan. It was a plan enforced by the Chancellor ot the Exchequer of the day, who made Ministers stand in a queue at his door, and who, on a rough and ready estimate of what he thought we could afford, permitted or refused their requests.

Of course, today all that control has gone. Over the last two years Ministers have been not only allowed, but encouraged to branch off on all kinds of schemes which add much to the prestige of their Ministerial offices. Grandiose schemes have been announced. Time has been spent on them which has no relation to present capacity, and, as far as one can see, the chief aim of the Chancellor of the Exchequer has not been to curb these extravagances but to make sure that he gets some share of the credit for them. We therefore insist that, as part of any plan, there should be announced to the country definite machinery which will, first of all, reduce to real proportions present plans for capital expenditure, and ensure in future that nothing is done which it is not within the power of this country to complete within a reasonable period.

As I say, there are many other points which I hope will be dealt with. I want to say one final word. Recent speeches by right hon. Members on the Front Bench opposite—by the Lord President of the Council, by the Foreign Secretary and, it is rumoured, even by the Prime Minister—have all referred to a Coalition. Like President Coolidge and sin, they appear to be against it. But these constant reiterations give the impression that they have been under continuous pressure from other parties who have been annoying them with their solicitations. It conjures up entrancing visions of my right hon. Friend the Member for Woodford spending his days amorously camped on the steps of No. 10, or my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) spending his evenings in Carlton House Terrace seductively serenading an all too solid Juliet on the balcony. We do not complain. We believe that similar illusions are not uncommon with elderly ladies. It does little harm to others, and it is reputed to afford them considerable satisfaction. But the fundamental gulf which exists today between hon. Members opposite and hon. Members on this side of the House makes any such suggestions impracticable and undesirable. That does not mean that we on this side of the House desire to, or will, go to the other extreme. If we reject any such idea, we also reject any idea of opposition, for purely party reasons, to whatever the Government have to propose.

Whoever got us into this crisis, the fact is that we are now all in it together, and it is the desire of all of us to get out of it. Therefore, we shall support whatever measures the Government propose, which we are convinced are necessary for the salvation of this country, provided always that they are part of a general plan effected to meet all our difficulties, that they are suggested by reason and not by panic, and that they are designed to meet the facts of the crisis and not the desires of a political ideology. We on this side of the House are prepared to do nothing at all to save Socialism, but we are prepared to do anything to save this country.

4.15 p.m.

The right hon. Gentleman the Member for West Bristol (Mr. Stanley) has made a speech couched in very reasonable terms, illuminated by flashes of humour, in relation to a subject of immense importance. I do not intend to make a purely party speech this afternoon. It has been suggested that I ought to reply to a rather exuberant speech made by the Leader of the Opposition on Bank Holiday at Blenheim, but I do not think it would be useful at this time. The right hon. Gentleman is entitled to make speeches on those occasions. He hit around him very vigorously. Sometimes he hit at us, sometimes he hit at some of his friends opposite, and sometimes the ball rebounded on to his own head. But it would be wrong for me to follow that sort of speech today. I would say only one thing in that respect. I think there were some unfortunate remarks which will have repercussions elsewhere where it might do harm, which I am sure the right hon. Gentleman would not wish, to this country. I would allude to one in particular, in which the suggestion was made that we had frittered away the American Loan. [HON. MEMBERS: "Hear, hear."] Well, I shall proceed to show that that is not true.

The right hon. Gentleman the Member for West Bristol has made a number of points. I hope he will excuse me if I do not follow him point by point. I have noted them, and almost all of them are already covered by what I propose to say. Any other specific points will be answered by the Chancellor of the Exchequer or the President of the Board of Trade in the course of the Debate. I want today to give the House and the country as full and fair a description of our position as I can. I want to trace briefly the course of events, because it is always tempting to "job" backwards. I thought even the right hon. Gentleman did so, to some extent, in assuming that the position in which we find ourselves today could necessarily have been foreseen some time ago. [HON. MEMBERS: "It was."] Well, perhaps I might proceed to describe our difficulties.

Let us for a moment glance at the position of this country. It is familiar to all of us here. We want to put it on record that in this country of 45 million people we have had quite an exceptional economy built up over the years by our own home resources and other resources, and our skill and power to add value to raw materials from all over the world. We had quite an artificial position before the first world war. We all know we had to import food and raw materials and pay for them with goods and services, and with interest on investments abroad. We also know that in the first world war that economy received a serious shock. We had to pay for the war with an immense proportion of our foreign investments. Increased industrialisation abroad pressed heavily on us, and we found, instead of having a large export surplus after the first world war, that our balance of payments was only achieved with great difficulty.

The second world war has been more costly, and let us remember that for a whole year we stood alone. The greater part of our foreign investments had been sold; great debts accumulated; our export trade was reduced to less than one-third; we had great shipping losses; physical damage from air bombardment; and we had had to change the whole organisation of our industry for war. We got through the world war, we all know, with the help of Lend-Lease which was rightly described by the right hon. Gentleman the Leader of the Opposition as "the most unsordid act in history," but which left us in a most vulnerable condition. We had a vast task of reconstruction, involving the redeployment of our whole economy, and what we required essentially was time, in order to effect that change over.

The United States and Canadian loans were essentially measures to buy time—time for ourselves, time which was also needed for the rest of the Old World to recover. We know the amount of those loans—£937,500,000 from the United States, £300 million from Canada. We were deeply grateful to the United States and Canada for this assistance. The loans were acts of statesmanship beneficial not only to ourselves but to the whole world. But they were essentially designed and accepted in order to enable us to stand on our own feet. I entirely agree with the right hon. Gentleman opposite that it would be utterly wrong for this country to become dependent permanently on another, however friendly our relations. But these were steps taken on the road towards recreating the world of multilateral trade and convertibility of currencies. We and our friends across the Atlantic were both working to this end, and we think it to be the most advantageous system for the world, and especially for a country in our position.

We should have liked, we all know, a larger amount. We doubted then whether this loan would buy sufficient time. We had hoped the loan would last us not, I think, five years, as the right hon. Gentleman said: we hoped it would last us well into 1949, possibly into 1950, by which time there was a reasonable chance we should have redeployed our economy and been in sight of equilibrium. As things have turned out, it is now certain that the loan will be exhausted before the end of this year. This essential difficulty of our position has never been absent—indeed, it could not be absent—from the mind of this Government. It could not have been absent from the mind of any other Government. I recall that in my speech on the Address on 16th August, 1945, I said:
"Sooner or later, we have to face the fact that we can only buy abroad, if we can pay I for imports in goods and services. Therefore, we must set ourselves resolutely to the task of increasing our exports."—[OFFICIAL REPORT, 16th August, 1945; Vol. 413, c. 109.]
And this is what we did, and not without success. By the end of 1946 our exports had reached a level of over in per cent. of the 1938 volume. I think it is well to bear in mind the very great efforts which have been made by the people of this country. I am sure that no one, whatever his political colour, whatever his desire to attack the Government, will wish to underrate or to run down in the very least what has been done by this country—there is always the danger of denigration—whose people sustained the brunt of the war longer than any other. An immense amount of internal reconstruction has been done. An unparalleled redeployment of labour has been accomplished with very little friction. There has been a great effort to try to increase and to build up our production and our exports.

But there have been difficulties and disappointments. First of all, the output of coal has been less than that required to meet our own needs, much less than to enable us to help Europe as well. The run-down of the equipment of the mines has been far greater than we had supposed. The recovery of the industry has been far too slow. I am not going into the history of that: we all know the position of the coalmines. Second, though I think most people in the country have responded very well, there have been some sections that have not, perhaps. Undoubtedly, it has been difficult to get rid of all the practices we ought to get rid of. But we do not quickly get rid of bitter memories of past unemployment. Third, I would agree that it might have been better if we had had a greater concentration of effort. It may be we have tried to do too much in a short time. It may well be that we have relaxed controls too soon. But I would remind hon. Members opposite of their vociferous demands for every kind of thing to be done, and for a great many relaxations of controls. Fourth—I am trying to put this frankly before the House—there has been, undoubtedly, some failure on the part of some workers to realise that shorter hours and higher wages must be matched with higher effort. But I say, despite these things, that the record of the people of this country in these two years is one of which any country could be proud.

Then there came—I am putting it in proportion, because it is important to get these things in proportion, and I think that some of the right hon. Gentleman's points were a little out of proportion to other matters—then there came the unprecedented severity of the winter. The fuel crisis of February and March caused great damage to our agriculture and to our industry. I am putting that in its historical setting.

In these two years we have always had to give adequate weight to two conflicting considerations in this matter of our balance of payments—the need for maintaining our external financial position, and the need for maintaining the strength and the morale of our people at home. Our people were very tired by the end of the war, and the immediate imposition of very heavy sacrifices by forgoing loans might well have resulted in failure to reconstruct. Time was needed after the rigours of the winter before we could impose some of the things we had to impose. I am saying frankly we had pressure put on us to give our people more—more food, more of everything—and I do not think that it is unwise to hold a balance in these matters. Despite the cost, we had to get the food and the raw materials necessary. To have foregone that would have been shortsighted folly. We cannot get production without consumption.

I have said that there were adverse factors preventing our build-up, but there were severe adverse factors which were developing entirely outside our control. As I have said, we were trying to buy time, not only for the recovery of this country, but for the recovery of the world, particularly the recovery of Europe; and that recovery has been much slower than was anticipated. The economic disruption had been far greater than had been realised. The political position of both Europe and Asia has taken a very long time to settle down—if it has settled down yet. For reasons which the Foreign Secretary has often explained, our foreign commitments have proved heavier, and their continuance more prolonged, than we had hoped. There were bad harvests in many parts of the world which increased the too great dependence of the rest of the world on the Western Hemisphere for food and raw materials.

That is a factor which we ought to bear in mind very clearly, because this was already showing itself even before the war. The disequilibrium between the continents has resulted in a steep rise in prices. I must again correct the right hon. Member for West Bristol on the price levels. The facts as given to me are that the price of our imports has risen, on the average, by more than 40 per cent. since the loan was negotiated, and by more than 20 per cent. since we began drawing on it. We are compelled to buy largely from the Western hemisphere in dollars at high prices. But we were not the only people in that position. The rest of the world is suffering from the same difficulties. The failure of their production, owing to the damage of the war, means that they, too, were compelled to buy a large part of their essential supplies of food and fuel from the Western hemisphere, and they have to pay dollars. So there is a world shortage of dollars.

I think it fair to say that that world dollar shortage would have arisen earlier had it not been for U.N.R.R.A. and for loans provided by the United States of America to other countries. That temporarily enabled production and the flow of dollars outside America to have its effect on exchanges. U.N.R.R.A. was a great undertaking, but all these efforts have been,. to some extent, disappointing. Those efforts prevented starvation and enabled consumption goods to be distributed in Europe; but they have not had the effect which was expected—of enabling the balance of production between the Western world and the Old World to be restored. The consequence is that the exports we sell to other countries are paid for in currency which we cannot use to cover our deficit with the Western hemisphere, and the countries which receive sterling in payment for what they export to us immediately convert that sterling into dollars so as to cover their deficit in dollars. Now it has been particularly in the last few months that the effects of those adverse factors have shown themselves, with ever-increasing severity. The over-all adverse balance, which was £400 million in 1946, has risen to an annual rate of something over £700 million in the first half of this year. That is the over-all. But the salient feature of recent developments is the increase in the dollar deficit, and I now want to say something about that dollar deficit.

For the year 1946 our total dollar deficit was under £350 million, even if we include the Canadian dollar output. That was partly due to the shortage of supplies. For the first six months of 1947 our United States dollar deficit was £405 million, which represents an annual rate of £810 million. Of this figure of £405 million, £176 million represented our own trading deficit wth the United States of America. In addition, we spent in dollars £29 million in purchases from the U.S.A. for Germany. We had to provide £118 million in United States dollars as part of the payment for our own purchases from the rest of the Western hemisphere. We had also to provide in United States dollars £58 million for purchases in the United States by the sterling area countries, £10 million for purchases by the sterling area countries in the rest of the Western hemisphere, and £14 million for similar purchases by European countries.

The most serious aspect of the situation has been the acceleration in this dollar drain during recent months. That has been reflected, as was pointed out, in dollar drawings. Of that total credit of £937,500,000 we have, to date, drawn £687,500,000. By the end of 1946, on the contrary, we had drawn only £150 million. From the beginning of January to the end of March we drew £125 million, but in April and May we drew £162,500,000. In June we drew £75 million. In July there were exceptionally heavy drawings, which we should not take as an indication of the trend, and the drawings were up to £175 million.

Can the right hon. Gentleman give any indication why there were those very heavy drawings in July?

I will give all the figures. My right hon. Friend the Chancellor of the Exchequer will give any further details. There are certain seasonal factors. I will give the figures, and the Chancellor will explain them further when he speaks. I am trying to give the House the facts as fully as I can. I am stressing the gravity of the situation, but I do not want to paint too alarmist a picture. There is a difference between gravity and panic. It is a matter of gravity. There is reason to believe that that very heavy drain in July was exceptional. We have still the £250 million outstanding in the United States, there is the £125 million of Canadian credit, and we have ultimate reserves of nearly £600 million.

Perhaps the right hon. Member will leave that point till later. I do not want to be too long. It must be remembered, however, that there is a point below which these ultimate reserves, which represent the reserves of the sterling areas as well as our own, cannot be allowed to fall. It is clear, therefore, that the drain cannot be allowed to go on at this rate. It is sometimes assumed that all our difficulties have arisen because of the Loan Agreement with the United States, and in particular because of the provisions concerning convertibility and non-discrimination. I should like to explain how we view these matters. Convertibility is not merely, or perhaps not primarily, a matter of our Loan Agreement with the United States of America. It is a necessity of many of our commercial deals with other countries. These countries, due to the world shortage of dollars, are, as sellers, demanding either convertible sterling or dollars. In a sellers' market the buyers cannot be choosers, and so we have been driven to pay dollars or convertible sterling to suppliers. The problem of convertibility is really a problem of the world shortage of dollars rather than one arising particularly from the Loan Agreement. The Loan Agreement has its place in the general picture.

Before the war, sterling could be transferred in London to any currency for ordinary current use anywhere. That is the function of an international currency. A return to this position has always been an objective of the Government. The American loan was designed to help us to return to this position at an early date, and on this policy— whether in our own selfish interests or in the wider interests of world economy—we have no intention of turning our backs. But it is clear that in the world shortage of dollars the formal obligation under the Loan Agreement puts an increasing strain upon us.

With regard to non-discrimination, the provisions of the Loan Agreement have hardly been operative at all. It is because of low production in other countries that we have been driven to buy so largely from the Western hemisphere. But the position is now changing, and with the cuts I shall be proposing in imports, the question of discriminating purchases becomes of much more importance. It will be a very real factor in our future purchases of food and raw materials. We approached the problem of the postwar world with a view to establishing speedily multilateral trade and convertible currencies. They are not yet in sight. It is clear that, unless the multilateral system can be made to work, and is supported by adequate finance, it will become incumbent upon us to seek ways out of our present difficulties along other lines.

As for the steps that have been taken, there has been constant consultation between His Majesty's Government and the United States on these matters. There was a way open to us: to give notice under Clause 12 of the Loan Agreement, but this would not cover the whole field, and we proceeded, therefore, to seek a further consultation on the whole of the implications of the Loan Agreement and the other difficulties with which we are faced, against the background of the present facts of our position, its developments and the world situation. We suggested to the United States Government that, as a first step, there should be official discussions on these matters, and I am glad to be able to tell the House that Mr. Marshall immediately replied agreeing to these discussions. I should make it clear that these discussions will not cut across the proceedings of the Paris Conference.

I must emphasise the point that the world dollar shortage is fundamentally a problem of under-productivity outside the Western hemisphere, and that the only, permanent remedy is a restoration of the balance between production in the Old World and production in the New. We intend therefore to play our full part in the efforts started at the Paris Conference, to see how the countries of Europe can best help themselves and each other, and turn to the best advantage of Europe and the world the suggestions made in the speech of Mr. Marshall. Meanwhile, it is incumbent upon us to spare no effort, both to remedy our own immediate position, and to make sure that we are in a position to make the fullest contribution we can to our own recovery and that of the world.

I now turn to the measures we propose to take to this end. These measures must be both positive and negative, and I turn to the positive measures first, as being the most important. First, we shall apply ourselves to the further re-deployment of our resources at home. We must concentrate as much of those resources as we can on the reconstruction and development of our basic industries and services on which the whole of our economy depends; on production of goods for export, and on the production of all those things which save us imports. This will mean cutting out unessentials, and making sure that our objectives are in proper relation to our resources. Second, we must increase our total output so that we can stand on our own legs as soon as possible. Third, we will press ahead with our plans for the expansion of production in the Colonial Empire.

These are positive objectives. However great the effort, they will take time to achieve and time to develop in sufficient measure, and that time is lacking. It may be that the chain of events started by Secretary Marshall's speech will lead to further American help towards the recovery of the Old World, and that we shall share in this help. But we cannot and will not base our plans on that assumption. It is in this light that we have reviewed all our commitments and requirements which involve us in expenditure of foreign exchange, particularly in hard currencies. This is the negative side of our proposals.

On the positive side, let me first take our basic industries and services. There we are setting ourselves definite targets. First of all, let us take coal. The House is well aware how vital to the industrial recovery of this country, and also how vital a matter for Europe, is the production of coal. We must get enough for our own industries and domestic needs. Coal once made a great contribution to our balance of payments, and it can make it again, and to the recovery of Europe. With some of my colleagues, I have been in consultation with the leaders of the National Union of Miners and with the Coal Board. They are, I know, wholeheartedly with us in our desire to raise output. Since the beginning of the year, the number of wage earners on the colliery books has shown a substantial net increase—27,000. There is every prospect that we shall reach the target of 730,000 by the end of the year, particularly if the Poles, who are willing and available, are accepted in the industry.

We have put forward to the mine-workers' leaders a proposal that, while preserving the five-day week and the general regulations of the hours of labour, there should be, as an emergency measure, for a limited period an extra half-hours' work per day. We considered various alternatives, including Saturday work, but came to the conclusion that this was the best. I know, too, that earnest efforts are being made to try to bring down absenteeism to the lowest possible level. There are also local matters which need to be dealt with; particularly we need increased "stints," which were contemplated as part of the five-day week agreement. These have not been settled with the local miners, and we want them settled as soon as possible. Our aim is an average weekly output from, 1st September, 1947, to 30th April, 1948, of at least four million tons of deep-mined coal, and in addition we want as much opencast coal as we can get. That is for the seven months, but we have to go on from there and over the years develop more and more greater output as rapidly as we can.

Second, and second only in importance to coal, is steel. During the winter months production should be running at an annual rate of 13½ million ingot tons, and for 1947 as a whole production should reach 12½ million ingot tons. That is about the amount forecast in the Economic Survey. But this is not enough. Certain types of steel are particularly in short supply, and have been acting increasingly as a brake on production in the manufacturing industries. Our target for 1948 is 14 million ingot tons. We believe that this is within, although only just within, the capacity of the industry. It will mean a special effort on the part of all concerned, and that effort will be forthcoming.

Third, transport. Increased production will throw an additional strain on our transport system, and that has been heavily handicapped by depleted rolling stock, lack of repairs and maintenance during the war years. In applying general measures, the Government have in the forefront of their mind the need to provide the transport industry with the resources needed to enable it to overtake arrears and meet this additional strain. We must not fail to move all the coal which the miners can produce.

Inevitably, this will involve some cutting of the movement of other freight traffic. It will involve cuts in passenger traffic. We are closely examining the question of what traffic should have priority at all times, and what traffic should be next in order of acceptance. So long as there is this shortage of wagons, some restrictions on movements are necessary. We are concentrating our efforts, and we have been. I do not want it to be thought that all these plans have suddenly been thought of last week. I am indicating plans which have been at work, have been developed, and have actually been enforced. I want to bring the whole picture together to show the kind of task facing the nation. We want to supply more engines and more wagons for the railways. We shall see that the materials are delivered and the labour is found to speed up the construction and repair of transport equipment. I would say here that traders and industrial firms must play their part in reducing the turn-round time of wagons at the terminals. Transport is the conveyor belt of industry; it must keep pace with production. I make an appeal here to all transport workers to justify the pride they rightly have in their calling, and to repeat now their achievements in the war by making sure that transport does not fail the nation in its need.

I now turn to agriculture. The right hon. Gentleman the Member for West Bristol rightly stressed the importance of agriculture. It is a great potential dollar saver. We must produce a great deal more of our food at home to replace imports which we can no longer afford to buy, especially expensive dollar imports. I cannot accept the right hon. Gentleman's statement that we have been neglecting agriculture. The Government are setting a high target before agriculture—nothing less than an extra £100 million worth of food by 1951–52, an increase of 20 per cent. on present output. I realise that that is a tremendous task. It will involve an immense effort, on the part not only of the agricultural community, but of the Government itself, who will have to see that the industry is provided with the tools for the job. Much more labour will be needed on the land, and houses and hostels and the supply of agricultural machinery must be speeded up. Do not let us forget that agriculture is a highly mechanised industry. The maximum supply of feeding stuffs must be obtained. I do not accept the point about bad buying. We have been doing our utmost to get feedingstuffs. Our buyers are skilled businessmen. There are skilled expert buyers at the Ministry of Food, and they probably know better than the right hon. Gentleman the Member for West Bristol. We must get our production of beef, bacon and eggs expanded rapidly.

We must remove all hindrances to production, and we must have sufficient manpower. We are depending far too much today on prisoner-of-war labour. We have suspended the call-up of young men for agriculture, but we shall need 100,000 workers. We shall need a big capital outlay and heavy commitments on the part of agricultural producers. The Government will take account of that, and the Ministry of Agriculture will announce this month the new scales of prices for future production. This will give farmers confidence to embark on expanding production, and provide them with the additional resources required. The county and district agricultural committees will be asked to take the lead. I appeal with confidence to the organisations of farmers and workers, and all sections of British agriculture, to renew the spirit, enterprise and effort that earned it the admiration of us all during the war.

I am appealing to workers on the land. There must be many thousands of young men and women with the inclination, and often with the upbringing, to fit them for life on the land. We must get the prospects right. We are providing more houses in the rural areas than under any previous programme; hostels, technical education facilities, with chances to improve position; smallholdings policy for those suitable and anxious to take up this work. There are big opportunities. We are appealing to women as well, either through direct employment or the Women's Land Army. We are appealing to men either directly or through the agricultural executive committees. In our new drive for greater production first things must come first. Food is the basic and, therefore, we must make this appeal to all in agriculture.

I have spoken of these four basic industries, but what we are asking for is a national effort. We want this effort to run through all industries. Time does not allow me to mention more than a few, but two vital ones are the engineering and textile industries. Anyone who enters the textile industry, which is particularly short of labour, may be sure that he is doing a fine thing for his country, not only for our home supplies of textiles, but for exports.

That brings me to the question of exports. Throughout the years we have been seeking to expand our exports while, at the same time, seeking to increase the availability of goods for home consumption. We have sometimes been accused of too great a devotion to exports. I have heard many taunts hurled at my right hon. and learned Friend the President of the Board of Trade about his addiction to austerity. Was my right hon. and learned Friend wrong to insist on the importance of exports? At times, we have been accused of not being active enough in the export drive. It is obvious that we must lean still further to the side of exports. I am well aware that this will mean hardship to many people, especially to housewives, who have endured, with very great patience, many shortages. But I am sure that if everybody will tell them that these things are not the wanton act of the Government, but are necessary for the country they will take heart. In the Economic Survey the export target was put at 140 per cent. in volume of 1938 by the end of 1947. Owing to the fuel and weather crisis at the beginning of the year that target cannot be reached, but the measures for the general increase of production, and for the re-deployment of our forces, will have, as one of its principal objects, to get as near that target as possible.

For 1948 we must raise our sights. Our target will be 140 per cent. of 1938 by the end of the first half, and 160 per cent. by the end of the year. I do not disguise from the House that this will be a very difficult target to reach. But we must strive to get it. Our great difficulty will be the concentration of our exports into those markets which will most assist our balance of payments. My right hon. and learned Friend the President of the Board of Trade will be speaking later in the Debate, and because I do not say any more now I do not want anyone to think that this is anything other than an absolutely vital matter.

If we want to do these things, we must ensure that fuel, raw materials, labour, and industrial capacity are made available where they are required. For this we require two things—first, an increase in productivity; second, the direction of effort into channels where it will be most fruitful. This will involve an effort by all those engaged in industry, and some sacrifices of individual liberty, although as little as possible. It will involve some sacrifices by both employers and workers. We shall have to ask or, if necessary, issue directions to firms, to ensure that their capacity is used to produce not those goods which will produce the highest profit, but those which are needed in the interests of the national economy. We shall have to take some measure of control over the employment of labour. During the war, we had to use full powers of direction of labour. It has been the desire of the Government and the country to move as quickly as possible towards restoration of freedom of the individual to undertake the kind of work he prefers. As things have turned out, it may be that we have moved too far and too fast in this direction.

We propose to re-impose the control over the engagement of labour which was almost universal during the war, but has since been removed from all industries except coalmining, building and agriculture. This will enable all workers, leaving one job and entering another to be guided into that class of work in which they can best assist towards overcoming our economic difficulties. Control of engagement only controls the movement of those falling out of employment. To find necessary manpower for essential employment, it may be necessary to take steps to limit employment on less essential work. In addition, in order to avoid workers remaining unemployed or taking unessential work in- stead of accepting essential employment for which they submitted under the Control of Engagement scheme, it will be necessary to resume to a limited extent the use of powers of direction. This is not a resumption of the general powers of direction, but an essential supporting measure to enable the control of engagement to be effectively exercised.

My right hon. Friend the Minister of Labour is at this moment discussing the details of the measures to be adopted with the National Joint Advisory Council. We need a better balance of production, and we need more production. We must have it quickly, particularly in the most essential industries, even before re-deployment of labour and resources can show their full effects. We have decided, therefore that, as an emergency measure, we must ask for longer hours of work wherever longer hours of work contribute to increased production. What is needed, first of all, is the lengthening of the hours of work in those industries which have an adequate supply of raw materials and whose output provides exports or saving in imports or is essential to the expansion of other industries. As I have already said, I have put to the coalmining industry the proposal that an extra half-hour a day should be worked for a specific period, and we are making similar proposals to other industries in this category. Once the desired increase have been obtained in these basic industries, the Government will seek a similar contribution from other manufacturing industries which depend on them for materials and power.

The increase in production will also require some increase of hours in transport to enable the additional production to be moved and to prevent wagons from being left loaded at the week-ends. My right hon. Friend the Minister of Labour is discussing the issues involved in these proposals with the National Joint Advisory Council. I would like to make it clear to the House that there is no intention of interfering with the negotiating machinery of the industries concerned, and also that we regard these proposals as emergency proposals to be operated only until such time as we can begin to see our way clear on the economic front. Management, too, must play its part. In general—and I say this in all sincerity—management is out to cooperate with the Government in over- coming our economic difficulties. But such cases as there may be of avoidable inefficiency or lack of will to serve the nation's best interest must be dealt with. The Government will not hesitate to take firm action just as was done in the war.

I have indicated that, I think, at great length.

Perhaps most important of all is something which lies right outside the field of government; all we can do is to encourage it. That is good feeling between management and men and a determination to stand together as fellow-workers to give of their best. An instrument that can be of the very greatest importance is the Joint Production Committee. The number of these committees has diminished since the end of the war, and my right hon. Friend the Minister of Labour, after consultation with the National Joint Advisory Council, is taking steps to stimulate their establishment, especially in essential industries where they do not at present exist.

I have stressed the need for increasing our production here at home. We have also to look overseas. The House, I think, has heard with approval the far-reaching plans which the Colonial Secretary has initiated for making available to the world the potential wealth of our African Colonies; but those schemes must take time to mature. The measures that I have outlined for increasing our production cannot be expected to bear their full fruit immediately. Though not long range, they are at least middle range plans. I have stressed these positive proposals because in the long run it is to them that we must look for our economic salvation. They will not be enough to overcome our present difficulties.

Therefore, I must now turn to the proposals which we are making for the reduction of expenditure. There is, first of all, the very large sums which we are expending in Germany for the feeding of our late enemies. My right hon. Friend the Foreign Secretary stated on Monday very clearly that what we cannot do when this present scheme runs out is to spend any more dollars for this particular purpose. Therefore, it does involve discussions and a review, in order to devise other plans. I do not think that I need add anything to that statement.

I come next to our defence Forces. We can help here in two ways—by reducing numbers and, therefore, expenditure overseas; and by reducing the total size of our Forces at home and overseas, thereby increasing our labour force at home. At present, we have something like 500,000 men and women in the Forces overseas. A substantial proportion of this manpower has been needed to meet obligations under International agreement and in clearing up the position left by the war. That is to say, it is a transitional requirement. The Defence White Paper which we presented in February of this year was based on the assumption that during 1947–48 it would be possible to make substantial reductions in the level of our Forces overseas. It emphasised, too, that the review of our commitments and of the numbers required to sustain those commitments is a continuing process. We hope for successive decreases in the numbers of men required. We now expect to withdraw some 133,000 men from overseas by the end of December, 1947, and to raise the total withdrawals from overseas stations to over 200,000 men by the end of March, 1948.

In addition, we are now planning to return to their homes before the end of this year some 34,000 non-United Kingdom troops whose cost is being borne by the British Exchequer, and that yields a further saving. These very large-scale movements will require careful planning of shipping and other matters. I have been looking into this on the information given to me, and I believe that it can be done. I must emphasise that despite this acceleration in the rate of withdrawal from overseas stations, and although certain calculated risks are being taken, there is no change in our foreign policy or in the defence policy which underlies our foreign policy.

Let me turn now to the second point—the total strength of our Armed Forces. In the Defence White Paper it was estimated that between January, 1947, and 31st March, 1948, the numbers in the Forces would be reduced from 1,427,000 to 1,087,000. This estimate was based on certain assumptions about withdrawals from overseas and assumed the fulfilment of a large part of that programme which I have just announced. After the careful review which we have now made, in addition to the constant review we are making all the time, we believe that we can bring that down to 1,007,000 by that date. This means that during the 15 months down to March, 1948, the numbers in the Forces will have been reduced by some 420,000. These are net figures. The actual releases will be as high as 830,000. In short, the three Services will lose 60 per cent. of those who were in the Forces at the beginning of 1947. That is a colossal rate of turnover. It involves the loss of trained men and their replacement by raw recruits; and if the efficiency of the fighting Services is to be maintained, great effort must be put into reorganisation and training. I do not pretend that the Government can contemplate with equanimity the retention in the Armed Forces of so large a proportion of our manpower.

It will I am sure be recognised that we are in a transitional period when we are not yet free from obligations incurred during the war and as a direct result of the war. This is a period when it is not yet possible clearly to discern the shape of things to come, and a period in which owing to the large numbers due for demobilisation at one time, it is peculiarly difficult to achieve a balance between trained men and trainees. We have planned for the gradual run-down of these Armed Forces. It is very difficult without creating chaos to accelerate this run-down more than within a limited amount at one time.

The Minister of Defence and I are fully conscious of the imperative need to relate our Defence policy and the requirements of the Armed Forces to the hard facts of finance and economics as they are, and as they are likely to be in the years which lie immediately before us. The House has already been informed that an exhaustive inquiry has been instituted into the whole future of our Defence policy, and of the shape and size of the Armed Forces required to implement that policy. The results of this inquiry are receiving the most careful consideration from the Government as soon as they are received, and meanwhile we shall not relax our efforts to find any further means of reducing the numbers in the Armed Forces during the current financial year. I cannot give further figures on that matter.

I must now come to the import programme. The House was informed by the Chancellor of the Exchequer on 3rd July of the provisional import programme for the year mid-1947 to mid-1948, amounting in all to £1,700 million. This programme took account of certain cuts which the Government, in view of the balance of payments prospects at that time, had felt obliged to make in the programme as it would otherwise have wished to approve it. These cuts included some £2 million to £3 million through the restriction on the import of newsprint, and some £20 million from the reduction in the consumption of tobacco and the reduction of stocks to match the new consumption level. The Chancellor also made it clear that we should not be able to afford all the imports of foodstuffs for which we had hoped, and the cut which we actually made in our original programme under this head amounted to some £50 million. Both the Chancellor and the Lord President in his speech on 8th July made it clear to the House that this import programme was provisional and that further cuts might have to be made. The right hon. Gentlemen opposite make a great mistake in thinking that we sat down and did nothing. As I have already pointed out, this was provisional.

The Government have decided that the following further cuts must be made. The House recently gave powers to levy an import on films. The Government propose to limit remittances on foreign films to not more than 25 per cent. of the earnings of these films. In his statement on 30th June, the Chancellor said we would reduce our imports of petrol. A reduction of 500,000 tons would save approximately £4 million. We intend to effect at least this saving. This will necessitate a reduction of the basic allowance for private motorists by one-third and a reduction of 10 per cent. in supplementary allowances. We are anxious not to impede the movement of merchandise by road, but some reduction in issues of petrol for the use of commercial vehicles will be necessary if only as one method of ensuring that the coupons issued for this purpose are really used for the purpose for which they are intended. Issues for commercial vehicles will, therefore, be cut by 10 per cent. All these cuts will come into operation on 1st October next. Maximum economies will have to be made in the use of petrol by the Fighting Services.

The Chancellor proposes, as from 1st October next, to reduce the foreign travel allowance from £75 for 12 months to £35 for 14 months, with a corresponding reduction in the allowance for children to £20. Allowances for business men travelling abroad will also be more strictly limited. There will be a reduction amounting in value to £5 million in imports of miscellaneous consumer goods of the kind which is generally called the luxury type. It will be necessary to apportion this cut with very great care, so as to avoid the risk of damaging the economies of other countries and their power to take our exports and to give us increased supplies of essential goods. The field for saving in raw materials is very small if damage is not to be done to our productive effort and indeed to our whole economy. Some saving, however, must be made. We propose to cut the imports of timber by £10 million. The House will realise that this represents a cut not on the very low level of supplies we were able to import until recently, but on the considerably higher level which we had been hoping to reach. We hope we may make some saving by postponing part of our cotton purchases.

Finally, there is the programme of the Ministry of Food. From what I have already said about home food production, the House will realise that there will be no cuts in the imports of feedingstuffs, which must rather be expanded as increased supplies become available. We have decided that we must make an immediate and substantial reduction in our purchases of food from hard currency countries. We have, therefore, given instructions to make a reduction in the rate of purchases of the order of £12 million a month. Such a reduced rate of buying from hard currency sources of essential foodstuffs will mean that we shall confine our buying from those sources to essential foodstuffs. Our bulk long-term contracts for staple foodstuffs from these areas will not be interfered with, but for the present we must largely confine ourselves to such purchases as far as hard currency sources are concerned.

The House will wish to know what effect this decision will be likely to have on our level of distribution of foodstuffs in the coming months. That depends on a number of factors. It depends on the degree to which we are able to buy our foodstuffs from soft currency sources. So far as these soft currency sources are more favourable from the commercial point of view, the question of discrimination under Article 9 of the Loan Agreement will not arise. Where such purchases cannot be justified under the terms of the Loan Agreement, we shall be exploring the situation immediately with the United States Government to see what steps may be taken to enable us to obtain supplies from soft currency areas. The second factor which will determine the effect of the Government's decision on our rations is naturally that of how long this policy will have to be maintained.

It will be necessary at once to increase the points value of some of the non-basic foods, for they are largely distributed under the points scheme. As to basic rations we shall do everything in our power to maintain them and we shall not take risks with our stocks. If rations have to be reduced as a result of the policy outlined then the Government will introduce a differential rationing scheme designed to give preference to heavy manual workers. Preparations will be made forthwith against this contingency. Restrictions on consumption in restaurants and hotels will in any case be imposed forthwith.

I come now to the point on which the right hon. Gentleman opposite spent a great deal of time, namely, anti-inflation. I wish to say something on that, but I propose to leave the bulk of it to the Chancellor of the Exchequer. It is quite obvious that some of the measures I have outlined will restrict the amount of goods and services available for home consumption without any corresponding reduction in purchasing power, thus increasing inflationary pressure. We shall have to take such action as may prove necessary to prevent the unstaple purchasing power from creating an unbalanced situation. First, there must be a tighter control over both public and private capital investment; that is to say, we must concentrate on projects which will give quick returns in additional imports or in strengthening our industrial structure. Projects in themselves desirable will have to be postponed, while such investments as the re-equipment of our agriculture, power, supply and mines must take precedence. The right hon. Gentleman mentioned a bridge across the Severn. I understand that the work on that is merely taking soundings and borings in order to see what can be done on that as a future project. He was wrong in thinking that that would be put in hand at the present moment.

There will have to be a re-deployment and retiming, including some postponement, of our general building programme. This must be done so as to give first place to the building of homes for miners, agricultural workers and other key workers. I appeal to workers in all industries and employments not to press at this time for increases of wages or changes in conditions which would have a similar effect, especially where these increases are put forward on the basis of maintaining differentials between various categories of workers on the basis of former practice. Equally, I would appeal to employers not to seek to tempt workers away from essential work by offering higher inducements to work in less essential industries, thus creating a vicious spiral. I appeal to all those in control of industry and commerce to refrain from declaring high dividends.

It must be understood by all that if we wish to maintain our position in the export markets of the world, we must keep prices at a reasonable level. Finally, I would appeal to everybody to support to the utmost the savings movement which has been such a vital element in preserving an equilibrium between purchasing power and available commodities. In all these matters public opinion can do a very great deal. I am reminded that there is said to be a section of the public which renders no useful purpose and whose members contrive to make money in all kinds of dubious ways. We shall take all action open to us against these "spivs"—as I think they are called—and other drones, but I would say that public opinion can be a very powerful weapon here. We must also try to regain the habit of avoiding unnecessary waste and of collecting salvage which we developed so much during the war. Here I would, appeal to local authorities to redouble their efforts in this respect.

I have endeavoured this afternoon to set out, as fully and fairly as I can, the position in which the nation is today. I have not tried to conceal anything or to gloss over the dangerous features of the situation. I have stated the causes which have brought us to this position. The main cause of our present position is the fact that when the rest of the world was either defeated or standing aside from the contest, we of the British Commonwealth of Nations stood alone in defence of freedom and civilisation. I have stated the more immediate causes of our critical position in respect of our balance of payments and no one, unless he were blinded by partisanship, would deny that the major causes are outside the control of the people of this country and of any Government of this country. Whether the Government had been Conservative or Labour it would have been faced with this difficulty. No doubt this Government, like all Governments, have made some mistakes, and I am sure a Conservative Government would have made others, but if neither Government had made mistakes, we should still have been in this difficult position. If we had followed the various proposals put forward from time to time by the Opposition our state would have been worse, not better.

I have laid before the House the steps which the Government have taken and which they propose to take. I shall welcome any constructive suggestions, from whatever quarter of the House they come. I shall certainly not resent any reasonable criticisms, but I am not disposed for a moment to accept the proposition that had we not fulfilled our Election programme, but followed a Conservative instead of a Labour policy, we should now have been free from these anxieties. Nor do I admit for one moment the proposition that to unite the nation we must now follow a Conservative policy, whatever that policy may be—and I am not quite sure what it is. The policy of this Government is not based on ideological prejudice but on principles which I and my colleagues believe to be right and sound, and we shall continue to pursue them.

I was glad to note that the right hon. Gentleman, despite the strictures that he passed on us, said that the Opposition would support the efforts which the nation must now make. That is in line with our position. I agree that no question of Coalition arises. That has not been sponsored from either the Labour side or the Conservative side, but by some busy matchmakers in the Press. When, during the war, the Labour Party decided to support a Conservative Government, it did not demand as the price of its assistance that certain industries should be forthwith nationalised. Equally, I am sure that Conservatives would not expect as the price of their support that we should adopt capitalist principles. I am making my appeal to all sections of the nation, wage-earners, managers and technicians in industry, employers and workers in agriculture, mining and transport, to women as well as men, and to consumers as well as producers. I say to one and all, "This is your fight." We are a proud nation with a great achievement through the centuries. We have made a unique contribution to the world, and that contribution is not yet ended. Circumstances have placed us in a position of peril and anxiety. We must fight to regain our economic freedom just as we fought to preserve our political freedom.

In this uphill struggle we do not stand alone. Quite apart from the sympathetic interest which the United States Administration has evinced, we have kept our great partners in the British Commonwealth fully informed of our position and of the lines of action on which we shall be operating. As in the war, the free peoples of the Commonwealth countries have shown signal evidence of their wish to help us. I refer once again to the large-hearted effort, the heavy effort, which Canada made when in April of last year, she granted us a Canadian credit of £300 million in addition to the immense financial help which she had previously given us. The House is aware of the recent decisions of the Governments of Australia and New Zeal and to make a special contribution to our recovery by cancelling part of the sterling balances which had accumulated under war conditions. South Africa is also searching for ways of coming to our help. We are asking our Colonies to help us by restricting to essentials their claims on our foreign exchange resources, which are of course also theirs.

But I am speaking first of all today to our own people. I am appealing to all the people of this country to co-operate whole heartedly with the Government just as they did in the war. To win through we require the same qualities displayed during those long years—[HON. MEMBERS: "And leadership."] There will be hardship and a demand for hard work and self-sacrifice which will, I am certain, be forthcoming. We shall seek in this struggle to deal as fairly as we can with all sections of the community. We shall seek equality of sacrifice, and we shall seek, as in war, to protect the weak and the children. I cannot tell the nation how long it will be before complete victory will be acheived, but I am certain of victory. This is an economic Debate, but I should do a grave disservice to the country did I not stress the fact that we need more than an economic impulse behind this effort.

I am a profound believer in the British way of life, in our combination of order and liberty, in our respect for justice and for moral values. These are the things that unite us, though we may differ in the ways in which we seek to maintain them. We have, today, to get into the hearts of all our people the sense of urgency, so that they may do whatever tasks fall to them and may endure what hardships have come to them with a consciousness of the great issue at stake. The other day in Westminster Abbey, by a most moving service, we dedicated the young men who fell in the Battle of Britain. In 1940 we were delivered from mortal peril by the courage, skill and self-sacrifice of a few. Today, we are engaged in another battle of Britain. This battle cannot be won by the few. It demands a united effort by the whole nation. I am confident that this united effort will be forthcoming and that we shall again conquer.

5.30 p.m.

Despite the great gravity of our economic situation, the one thing which, more than anything else, affords us some slight satisfaction is that the Government have at last realised that agriculture is capable of making probably a greater contribution to our recovery than can any other industry. The Chancellor of the Exchequer made a statement a few days ago that the farming industry was the greatest dollar saver. Very seldom do I agree with anything that the Chancellor of the Exchequer has said, but on that occasion I entirely agreed. Unfortunately, his actions sometimes belie his words.

One charge which I wish to make against the Government is that they do not play as a team. The Minister of Agriculture has been endeavouring to place agriculture in the forefront in this country, but while he has been doing that, Ministers who should have been helping him have been acting in quite a contrary way. A few months ago, the Chancellor of the Exchequer, when concluding the Danish Agreement, told the Danish Government that he would do all in his power to assist them in the purchase of feeding stuffs. The Minister of Food has said he is going to buy in the cheapest markets in the world. The President of the Board of Trade thinks of nothing but the export trade, and is exporting agricultural machinery, spare parts and steel which are required for the agricultural industry. The Minister of Health, in spite of his protestations a few days ago, has done nothing towards providing cottages for farm workers.

What a team! Each of them is playing his own hand. They do not co-operate as a team. In all sincerity I suggest to the Prime Minister that he should call his Ministers together and that he should tell each individual one of them that if he refuses to play with the team, he will be sacked. In order to increase agricultural output two things are essential, confidence and labour. Until Ministers cooperate, there can be no confidence in them that they intend to see that we get on to full production. The Minister of Agriculture has just explained that the Agriculture Bill is a farmers' charter. It is nothing of the sort. It is machinery which is of no use until there is the right spirit with which to run it. It stands or falls by the annual price review. The farming industry has not been inspired by the prices which have been negotiated so far, because those prices have been niggardly and cheeseparing. The result of them has been that we have not got increased output from agriculture today. Our output has been steadily going down in the last two years, and it looks as though it will go down still further, unless we can get some encouragement.

For instance, taking the price of wheat, a commodity in which we are very short and of which the world has been short, the prices negotiated with the farmers of this country have been almost on the basis of a packet of cigarettes. We have been compelled to sell to the Ministry of Food our wheat at £10 to £15 a ton less than the Ministry is paying to other countries. That is not the way to get full production I want to make it clear that, in my opinion, this country can be very largely self-supporting. Let us remember that until 1873 we were self-supporting. We supported a population of 26 million people. It is my opinion that with the improved technical knowledge and machinery which we have available today, we can go a long way towards providing for the extra 20 million population.

It should be remembered that we can produce all the bacon, poultry, eggs, and vegetables that are required in this country—the whole lot, 100 per cent. We can provide a large proportion of the fruit and beef. What we want the Government to provide is the animal feeding-stuffs. I quite appreciate that the wheat for bread must be purchased from abroad so that the farmers of this country can consume their own cereals for their animals. For too long we have been mining our land, and going for cash crops and not returning to the land the fertility which it needs. That policy has to be altered, as it can be if the Government will go all out for the purchase of feeding stuffs.

At the present time, the Ministry of Food is making contracts all over the world to take surplus bacon, eggs and poultry. I suggest that those activities would be better employed if they were devoted to trying to purchase all the feeding stuffs which the world does not want. During the last two years many of us on this side of the House have called attention to the working of the International Emergency Food Council. We have never understood why other countries can produce bacon, poultry and eggs while we have to keep our pig and poultry houses empty. It is all nonsense to say that the feeding stuffs are not available. There is an export surplus of maize in Argentina this year of 6 million tons, although we have received only a few thousand tons from that country. Where has the rest of that maize gone? There is a record crop of maize and wheat in the United States. What has happened to the surplus? Are we leaving it to the International Food Council, or are we going to tell them that it is time they began to allocate some to us?

For too long we have been spending currency, either in the sterling area or the dollar area, on pears, pineapples and peaches—millions of pounds. That money would have been better spent on these feeding stuffs. What the housewives want is not pears, pineapples and peaches, but beef, bacon and butter.

They used to. More money should be pumped into the agricultural industry by raising the prices of all farm products. I trust that before the Minister of Agriculture indicates the prices which he will give for agricultural products in the course of this month, he will not have to consult the Chancellor of the Exchequer as to how much he can give. My feeling and the feeling of the agricultural industry is that in all price negotiations, the Chancellor of the Exchequer, in view of the enormous food subsidies he is called upon to pay, has always kept the prices down at bare board level.

While the output of farm products has been declining in the last two years, farmers' overdrafts have been increasing. I commend to the notice of the Government the National Farmers' Union survey of farm accounts for last year. That will be fairly illuminating to them. That shows that on a great proportion of the farms—I refer to the hill and marginal land which forms 80 per cent. of our agricultural area—the farmers have not been receiving more than a farmworker's wages. They have received nothing for management. They have no reserves, and the result is that they have no confidence to go all out and produce more food. Vast sums of money are to be spent on colonial development. That is a very worthy cause, and I say nothing against it. But why not spend something on home development? If the Government think our agricultural industry is properly developed, I should like to take them for a week-end and show them round some of the country I know where they will see plenty of land producing not 50 per cent. of what it could. Our hill farms are becoming derelict, and if something is not done, those men and women will be walking off the hills and leaving the farms. That applies to a great deal of the marginal land. Unfortunately, when the Minister goes out into the agricultural country, he is always shown some super farm and bases his views on agriculture on what is done on that farm. That is the same as the argument that every man who keeps a bicycle shop, will become a Lord Nuffield.

I ask the Government not to put too much faith in what they will receive in the way of surpluses from some of the countries which they are at present developing. I refer particularly to the African Continent. There is great scope for development there, but my opinion is that the population in that continent, which is increasing to an extraordinary extent, will absorb all the food produced there. The one problem facing Africa at present is to get the natives to work. The natives look upon two or three hours of work a day as sufficient. If that country is to be developed, the Africans have got to work. The first thing we have to do before the Africans can work is to feed them better. Therefore my opinion is that all the extra food which will be produced by this development will be absorbed by the population of that country and therefore the Government should not place too much faith in what may be produced for export.

Subsidies are a pernicious system. They were necessary during the war, but they should now be done away with as quickly as possible. Subsidies and controls mean black markets and officials, and it is my firm conviction that we shall never pull ourselves out of this economic mess until we let the economy of supply and demand play its part and allow prices to rise to somewhere near an economic level. The subsidies which are paid do not come from a hidden source of wealth. They have to be collected, at great expense, and paid back again, at more expense, and large numbers of people are kept in non-productive employment and hordes of people in the black market are making money to which they are not entitled. Until we do away with controls and subsidies, we shall always have that.

I know that on this question of food subsidies I am on a tender subject. My opinion may not be shared by all my hon. Friends. Food subsidies were instituted with the object of stabilising wages. They have done nothing of the sort. Since they were started, wages have risen by £1,500,000,000, and that enormous sum of money has been spent largely on drink, tobacco and gambling. Food prices should be allowed to rise to a more economic level in order to save this vast amount of money which has to be collected and paid back again, and some of the money now spent on these unnecessary luxuries should be spent on food. I realise when I say that that some of the lower range of wage earners and pensioners will feel hardship unless something is done to alleviate their position. The best way to tackle the problem is to give them assistance directly and not by giving it indirectly and keeping food below an economic figure.

Another problem facing agriculture relates to labour. We are losing our prisoner-of-war labour at a very rapid pace. Not too rapid for me, because I would like to see them all go back to their own country and all our people who are in their country return to work here. We are getting into a very dangerous position. We are losing this sort of labour but we are not getting regular labour in return, nor can we, until we get decent houses near where the men work. The Government should make an all-out drive and not play with the problem as they have done up to the present. It is no good saying that so many thousands of houses have been built in rural areas. They may have been built but they will not be occupied by farm labourers if the rent is 15s. or 16. a week. Houses will have to be provided at a figure the labourers can afford to pay or the wages must be put up to a figure which will enable farm labourers to pay those rents. It must also be remembered that if the wages are raised, the prices of agricultural commodities will also have to be raised.

The industry relies too much on casual labour. That labour is not responsible and is unskilled, and it is thoroughly unsatisfactory. We want to return to the days when we employed regular men day in and day out on regular work and taught them their job so that they took a pride in it. The casual worker will never learn his job and take an interest in it. We shall never increase output until we return to the old regular system. It is time the farm labourer was looked upon as the most skilled in any industry. It is time that other sections of the community, when they see the farm labourer's wage put up, do not want their own put up. They are the highest class of skilled labour, and they should be paid at that rate.

Before passing from the question of building these houses, I suggest we should turn our minds from building new towns, and use those bricks and mortar which would go to building prospective new towns in building houses in the countryside. We have too many towns in this country, but too few houses for people working on the land. I wish to say a word about the importance of agriculture from the defence point of view. During the two disastrous wars we have gone through too much of our time, too many of our men, and too many of our ships have been occupied in bringing food from abroad. If we were producing food in our own country, the ships and men would have been occupied in the jobs for which they were trained and provided and not in bringing food to this country.

If we are to pull through, we must have a resolute lead. Unpleasant things have to be done, and I can assure the Prime Minister that if he leads with a strong hand we on this side of the House will do all we possibly can to support him. All we ask is that he will take a resolute stand to pull us out of the present crisis. We want to get back to price mechanism and incentives and get away from the ideological dreams of the past two years. Make it worth while for the worker and employer to do a good job of work, and retain some of the results of his work. Increased home production will relieve the necessity for exporting many of the goods we are exporting at present, goods which we want for our own consumption. The housewife is tired and frustrated. She is fed up with queues, and when she sees an article in a shop window marked "For export only" she naturally goes off the deep end. It is time we put into shop windows things which are not for export. At present they are full of rubbish.

The hon. Member could not have heard a word of the Prime Minister's speech.

Increased exports will not close the gap. What will close the gap is increased home production, namely, agriculture. The Prime Minister said that he planned to increase home production by, I think, £100 million by 1951. We can increase our home production by £200 million by 1951 if there is wise planning and determination. We stand at a time of great crisis. Democracy is on its trial. Unpleasant decisions will have to be made. It will be for the people of this country to decide whether they will stand up to the decision. Let them understand this—we are one of the few democratic countries left in the world. We are on our trial. Let the people realise that the alternative to a democratic Government is a dictatorship of the Right or the Left.

5.54 p.m.

I think all hon. Members will agree that the speech of the right hon. Gentleman the Member for West Bristol (Mr. Stanley) who opened the Debate, and the speech of my right hon. Friend the Prime Minister, put the Debate on a very high level. I, in my humble way, will not attempt to do much; only to be very moderate. I think all will also agree that when the decision was made to accept the American loan, there were very few happy Members in the House. It was a bitter pill to swallow for this nation, a nation which had grappled with its economy first to hold up, and then to play a major part in destroying, Fascism in Europe. Whether the loan has been spent properly or not, in the light of events now known, is a debatable point. Yet no one can accuse this Government because price levels in America rose very highly immediately the deed was carried out.

During the war the labour and industrial potential of our country, so far as it applied to the actual production and physical necessities of civil life, was very small indeed. The war machine was hungry, and could not be satisfied. This country was and is a highly industrialised country with an export trade which is vital to our social economy. Almost our whole effort was directed to war purposes, and that had a twofold and profound significance. The more we put into our war effort to combat the immediate dangers of that time, the more we prejudiced our future economic position relative to that of our U.S.A. allies. Our American allies were certainly never mobilised to the extent that her people were reduced to austerity, or to a point where they had to reduce their social economy, or standards of life. One could have assumed that the mutual sufferings both countries had to face and to accept would mean some further national assistance for a longer period to enable countries to rehabilitate themselves. But no, the ideals of war became the hard economic facts of life, and for us the interim period between the ending of the war and our full industrial recovery has cost us 2 per cent. on £1,000 million.

The loan is almost spent, and we have not as yet, achived our maximum industrial recovery. It is an unpalatable fact and an unpleasant one, but it is the job of the Government and all our people to get down to the task of expanding our industrial effort, and rebuilding our political economy in as ruthless and determined a manner as may be warranted. Agriculture, coal, engineering, cotton, and exportable goods, must have a major place in our priorities Let me remind the House that those industries have in the past been exploited in an almost treasonable manner by those who held control at that time Among those priorities, I include houses and the health services. We, alone, can save ourselves from the economic consequences of the war and a decadent capitalism. It means work as never before, and not work to be exploited by individuals. Let us have no moaning whilst the job is being accomplished. Our people are a strong and resilient people, and, with the emotional urge and knowledge that achievement means our salvation and the attaining of a higher social standard for all, we can still enjoy our sport and recreation, and get on with the job of accomplishing what we have set ourselves to do.

We are a party Government, and I wish to remind the House once more that we placed our policy before the electors in 1945. We informed the electors that major changes would be made in the superstructure of our set-up if we were successful, and we were successful. The long winter we have experienced has affected our recovery—no one can truthfully deny that—and it caused much suffering and inconvenience to our people. But what a heaven-sent opportunity it was to the Opposition. I took particular notice at that time, and I never witnessed any anxiety on those benches about the condition the country was in then. The point that struck me was that there was a gleeful anticipation that something had happened which gave them a chance to bring down this Government.

The Economic Survey issued in March this year was, in my opinion, a first-class survey, but I regret that it was negative rather than positive. [An HON. MEMBER: "First-class?"] One can only speak the truth as one feels it. I was glad to hear our Prime Minister tell us, however, that that position will be altered. In that document we were told that there were over 20 million workers constituting the manpower resources of our country, and that goods and services were produced to a value of £8,500 million in one year. However, we had no clear picture of how many of the workers were producers, distributors or administrators. We were also informed at that time that there were 1,500,000 in His Majesty's Forces—a figure that I thought was far too high then, and evidence has since come to hand that others think the same. We were told that the object of planning was to use the national resources in the best interests of the nation as a whole, and only anti-social people will object to the using of our national resources in the most efficient and economical way in the best interests of the nation. I am still convinced that there are many such people.

If the above is accepted as a basis, then a capitalist economy is discredited. It has been patent for many years that the foundation of our social edifice, built on a capitalist economy, is unstable and cracking, and the root cause, as I see it, of our present industrial crisis lies in the fact that the capitalist economy has broken down, and indeed, had done so before 1938. The policy of "dog eat dog," of privilege and of most powerful positions held by those who by no means were the most efficient and industrious of our people, who in innumerable cases were the most unsocial, ruthless and unscrupulous individuals and groups, has resulted in masses of the people becoming unproductive units, living like parasites on others.

Useless and unjustifiable business, using much labour that could be used in essential production, has been going on for quite a long time in this country, and when the people who are doing a useful job—[An HON. MEMBER: "Where?"]—see the Government tackling that problem, then I am quite satisfied it will give great satisfaction and stimulus to those people.

I want to remind the House of one or two isolated points. I say to the Opposition that had it not been for the initiative of the President of the Board of Trade, I am wondering what condition the Lancashire cotton industry would have been in today. No one can accuse the President of the Board of Trade of not doing his level best to try to rehabilitate the Lancashire cotton industry. He has given an inspiring lead which had never been given before. It was left to a Tory Prime Minister in 1926 to tell the textile industry of Lancashire to cut out the dead wood then, and the attempt was never made. It had to wait until a Labour President of the Board of Trade took on the job, and I believe, owing to the exertions and the effort he has put into this job, that Lancashire will show that there is still life and initiative in our textile industry. It is one of our major exporting industries and in 1938 it was at its lowest ebb. That was not the result of a Labour Government. There were thousands of skilled textile workers walking the streets in my constituency and other constituencies in Lancashire with scarcely a shirt to put on their backs who could not get a job in the mills. Whose fault was it? The same thing applied to the coal industry. Our workers have bitter memories, as the Prime Minister said. They have not forgotten, and it is something which we have to wipe out. Today, I feel we can say to our people that the Government's action to increase production does not mean unemployment in the future. That is one of the things of which they were always afraid. Increased production and increased effort mean their salvation in the future, and I believe that when our people realise that, they will leave no stone unturned to do their part of the job.

What I am concerned about is whether the owners and the managers will play their part. Experience does not give us much hope that they will co-operate. Well, the Opposition say they will do so. Let me inform the Opposition again that, if we fall, very few will escape the deluge, but I do not think we shall fall. I believe that once again, the efforts of our workpeople will be such that we shall prove to the world that this England of ours is far from being down and out. In the last analysis, it depends on the workers and on no others, because there are millions of them and the others are few. If we can make them realise how serious is this situation, how essential it is that we should build up our export trade, that the time has come when we cannot expect to live on other people's good nature or on loans, I believe the people are ready and waiting for a lead. Today they have a lead, and I believe they will respond, but I am uneasy as to the reactions of other people who can play a big part in this job. I cannot say too forcefully that, no matter what may happen, no matter what other people may say, it is the colliers, the textile workers, the engineers, the transport workers, the shipbuilders, who really matter and who have to do the job.

I apologise—and agriculturists. Whose fault is it that the agricultural industry of this country is in the position it is?

There is more hope in the agricultural industry today than ever before because of the efforts of this Labour Government, and the time will come when the agricultural workers will again demonstrate the fact by voting in the right way—make no mistake about that. I make my final appeal, not to the House of Commons, but to the people outside who are listening anxiously and hoping that the necessary inspiration will come from here. I believe the Prime Minister has given them a lead, and I hope that the rest of the Debate will contribute towards it.

6.10 p.m.

With what the hon. Member for Oldham (Mr. Fairhurst) has just said I must strongly disagree, namely, that we have had from the right hon. Gentleman this afternoon the lead for which the country is looking and which it is eagerly awaiting at the present time. Indeed, in so far as there was a call from the right hon. Gentleman for national unity, my hon. Friends and I, and I am sure the whole of the country, will be with him to assist him, but the measures which he put for- ward will be regarded as thoroughly inadequate to deal with the situation in which we find ourselves. Those proposals which the right hon. Gentleman put before the House this afternoon are not a call to heroic action by people who are eager, willing and anxious to bring themselves into a position of safety at the earliest possible moment. They are one more turn of the austerity screw, a rejection, a reversal of Government planning of the past, which leads to no amelioration of the lot of the ordinary man or woman either immediately or in the foreseeable future. Is this a blue print of "Socialism in our time" which we have had laid before us this afternoon? Certainly not. It is the honest attempt of the Prime Minister to bridge a 12-foot gap with an eight-foot ladder.

On two occasions the Prime Minister said, "I do not know how long this will be." Again, he said, "We could not foresee this." But this is a Government of planners. One can plan for the future if one can foresee it, but if one cannot foresee one's future, one might as well not make plans for it at all. In my view this Government could be called a Government of reversers. All their triumphs of the past are reversed within a few months of their achievement. With a great shout, the five-day week was introduced for the miners. Certainly no one who is privileged to spend all his or her working time above ground could begrudge the miners the achievement of the five-day week. But what were the arguments with which the five-day week was urged upon the House at a time when some of us were keenly anxious about coal production?

The arguments were three-fold. The first was the health of the miner, that he should have this complete rest for two days, in which he could refresh himself in the sunshine. That seems an admirable reason. The second reason put forward was that team work was now so much a feature of the work in the mines that absenteeism on the part of one member of the team was likely to slow down production, and, therefore, by having wholehearted work on five days a week, production would be the same. The third argument was that the mechanical devices in the mines were now of such increased complication that it was necessary to have a five-day week so that two days might be available for servicing the mines. They all struck me as being admirable reasons why a five-day week should be introduced. We shall hope that the Government spokesman, later in today's Debate, will be able to explain why a Government of planners, which accepted those arguments and others so freely only a few months ago, now find themselves able to destroy those arguments, and put others more satisfactory in their place to urge that there shall be longer working hours in the mines.

The hon. Member says it is a five-day week, but in the past all the agitation has been for shorter hours in the mines, and quite properly so.

Let me take another matter. The Chancellor of the Exchequer made a great boast of the manner in which he had been able to reduce the rate of interest payable on money. He said that he had brought the rate down to 2½ per cent. and that it was the unpatriotic citizen who would not lend his money to the Government at that rate. What has happened to the patriotic citizen? Now that the rate has fallen to 3 per cent., the patriotic citizen has been left "in the cart" by the Chancellor, but the unpatriotic speculator has been able to avoid it. The Chancellor has not come to the rescue of his patriotic citizens. One is entitled to ask how much lower is the interest rate to go? The Prime Minister announced direction of labour. Let us be quite clear that we are getting back the direction of labour which the trade unions and the Labour Party urged, in time of war, should be regarded as wartime measures only. Now, two years after the defeat of Germany and the defeat of Japan, those measures are being reimposed upon the working-classes of this country.

The hon. Lady says there is still a crisis. I would agree that there will always be a crisis as long as we have the benches opposite occupied by their present occupants. But where did the crisis start? Has it ended since the time the war ended? If the hon. Lady says, "Yes," I would ask what has caused it to come back again. If she says, "No," I must ask her what caused this Government of planners to lift this control so many months ago? This direction of labour, let us be quite clear, is only to be imposed upon the working-classes.

Oh, yes, as I understood the Prime Minister's statement. I hope sincerely that it is not so. Nevertheless, as I understood the facts announced by the Prime Minister, what was meant was the re-introduction of the Control of Engagement Order. That is, that workers who fall out of one job will be—I think the euphemistic phrase is—assisted or guided into some other work. That means that a young man who has sufficient independence in savings or otherwise to be able to avoid the employment exchange, will not be liable for direction. It will be those who are compelled to earn their daily bread who will bear the brunt of this "guidance." [An HON. MEMBER: "We shall see."]

I do not believe that the measures which have been announced this afternoon will, by themselves, do anything to bring this country out of the difficulty in which it finds itself. I am sorry that the Prime Minister was not more courageous in his announcement. I believe that his proposals can be only regarded as the little measures of little men. Even then, we would have more hope if they had been accompanied by some efforts, some earnest, on the part of the Government that they were to put new men in control of certain key points. No one can complain of the direction of the general industrial affairs of the country which the President of the Board of Trade has exercised. For months he has been a lone voice crying in the wilderness, and been contradicted at regular intervals by the more irresponsible of his colleagues.

He has been attacked from this side of the House, but the President of the Board of Trade does not mind blows from the front. It is stabs in the back that wound him. Surely, the President of the Board of Trade should hold his place in this new drive that is going forward, but in the absence of the Prime Minister, I ask the President of the Board of Trade, does he really think that the country will have any confidence in any plan for the marshalling of its fuel and power, so long as the present Minister of Fuel and Power holds his position? Could anyone regard the retention of the present holder of that post as an earnest of the new attack upon this difficult problem? It is unfair to say much more against that right hon. Gentleman, because we all know that he is a falling star.

Would the hon. Member not agree that a cardinal necessity for increased production of coal is the confidence of the miner, and that the present Minister of Fuel and Power enjoys that measure of confidence to the fullest degree?

The hon. Member for Lichfield (Mr. C. Poole) says that the present Minister has the confidence of the miner. Every man has one friend, even if it is only his dog. I doubt whether the right hon. Gentleman the Minister of Fuel and Power has widespread support amongst any section of the community. There are two other Ministers who ought to go. The Minister of Food ought to go and the Minister responsible for housing ought to go. Nevertheless, I do not wish to be entirely critical—[Interruption.] Hon. Gentlemen opposite are delaying me. I would ask them to read some of the speeches made by two of the Ministers I have mentioned at a time when we were in office, not indeed upon their Tory antagonists but upon the occupants of their own Front Bench, many of whom still bear the marks in their hearts even to this day.

I welcome the Prime Minister's statement that there is to be a drive for agriculture. Why was it not done three months ago? This is not any new crisis which has come along. Already we see in the country that the harvest is being reaped. As soon as the sheaves are out of the fields, the ploughs must go in. How long will the ordinary farmer have to wait before he gets assistance and guidance about the crops which he must grow? Again, what steps have we taken to conserve the food when we have grown it? I come from that part of England which produces the greatest potato crop in the country. If the subsidy on potatoes was removed, I believe that there would be an enormous saving in consumption. The price of potatoes should be brought into proper level with the cost of production. It does no good to anybody to be able to buy any commodity at below the cost of production.

I say to the Prime Minister and the Government that so far as the proposed steps will assist the country, they will have our wholehearted support. We shall not flinch from taking our share in the difficult days that lie ahead. On the other hand, we do not regard these measures as sufficient. We believe that instead of being an abrupt, sharp attack which would enable us quickly to overcome our difficulties, it is an approach which will merely depress the country down to a level of austerity and misery, even lower than at present, without any practical results. Nevertheless, we will work hard, both in this House to correct the Government in their errors, and outside in the country to get rid of them.

6.24 p.m.

I was pleased to hear, when the Prime Minister made his announcement, that we are not to adopt the remedies which hon. Members operated when they brought into being the Geddes Committee in the 'twenties and the May Committee in the 'thirties. Their solution was to slash at the social services. They gave an unemployment benefit of 18s. a week with the miserable pittance of 2s. a week to keep the child of an unemployed man. I am pleased that the Prime Minister has not adopted that method. I want to speak particularly about coal. I can claim to know something about it, having spent 32 years in the pit and not merely having observed the pitheads from a railway carriage as it flies by on its journey up and down the country. Far too many speeches have been made by Members of all parties lecturing the miner as if he suffered from some kind of malignant disease. The miner is as patriotic as any other member of the community. The sooner this lecturing is stopped, the better it will be. The sooner the miner ceases to be told that he is not pulling his weight, the better will be the output of coal.

I want to deal with the question of manpower in the mining industry. I do not want to discuss what happened years ago, but to focus the attention of the House on the fact that in 1940, the best men were taken away from the mining industry and the mines were provided with a labour force which was directed. The men directed to the mines under the Bevin scheme hated the very sight of the pits. The result was that those of us who had to handle these men in the pits found that they did not care whether or not they came to work. They used to take Monday and Friday off and sometimes they took other days as well. Absenteeism started to increase. This system of direction caused an increase in absenteeism. I do not say that miners are angels by any means, but absenteeism arose as a result of forced labour in the pits. On the other hand, we miners taught our children a hatred of the pits, and I make no apology for that. We did it because we made up our minds that none of our children would suffer the iniquity and poverty which we experienced in the mining industry in the 'twenties and 'thirties.

Today we must face the position of poacher turning gamekeeper, and we must ask our people to send their young lads into the pits to take up mining as a career. Since nationalisation there has been an increase in the labour force of 27,000, after allowing for wastage. In the main, that is due to ex-miners returning to their work. It is a non-recurrent recruitment. Unless we can persuade juveniles to come into the pits so that when they grow up they can move to the coal face work, then in the next few years we will again face this terrific manpower problem. I am glad that the Prime Minister referred to the Control of Engagement Order as the limit of his powers in relation to the direction of labour. The direction of labour to the mining industry is no solution. It is no good sending a man or a boy to the pits if he hates the pit before he gets there. He will not make a good workman. Therefore, we are forced to face the only remedy, which is that we must give inducements and ensure security of tenure to those who take up mining as a career.

There has been much talk in this House about the employment of Poles in pits. It has been said that we ought to do this and that, but, when all is said and done, the National Union of Mineworkers and even the Ministry of Fuel and Power cannot force Poles upon a gang of men if they say that they are not prepared to work with Poles. We would lose more output by men taking a stand against working with Poles, than we would gain by allowing the Poles to work. If I were still working at the coal face on a machine, and my life depended upon the actions of the second and third men following that machine, I would have a voice in the matter. I would want a say in determining who should be my mates working on the coal face machine where my life was at stake. This loose talk about the employment of Poles in pits ought to cease forthwith. We cannot force our men to work with Poles'. It is their lives, and not ours, which are at stake.

There is one problem of manpower which I would like to put to the Minister. We are returning ex-soldiers to the pits. Many of these ex-soldiers now coming back, and particularly in my area, are the people I sacked during the war because they were no use to the pits. They were taken on by the Services, and now they are volunteering to come back, and they are coming back to districts where ex-miners are desirous of returning to the pits. These people are being given preference over the ex-miners who are willing to return. I suggest to the Minister that the labour director should be given more elasticity to enable him to determine which of these men he should employ in the pits, rather than bring back these wasters whom we had to sack because they were a nuisance to the trade union officials and the mineowners alike.

My third point concerns machinery. Unless we can get more machinery, with spare parts for the existing machinery, conveyors, tubs, cables and drills, we cannot expect to achieve such an output as will maintain our industries and give us something for export. What do we find? It takes two years and four months to get a Mecco Moore coal-cutting machine or an overhead bar machine. If a manager is planning a new development, by the time he gets out his plans, and the division has given its sanction, and by the time the machinery is delivered to him, two years have gone before any long wall face can be put into operation. That gap must be shortened as quickly as possible, and there must be a concentration on the provision of mining machinery to ensure that, where a new development of mining is planned, there must be adequate machinery available in time to achieve the increased output.

What is the position of an area manager? It may be thought peculiar that I should argue about an area manager, but I think this is a point which the Ministry ought to tackle. The area manager of, say, 16 or 17 collieries has only powers of capital expenditure of £2,500, and, if the development of a long wall face is planned and it involves over £2,500, which is bound to be the case, it takes four months before the division arrives at a decision, and that means that there is a four months' time lag before the machinery is applied for, and it is 14 months before it is delivered, and before it has any effect on the increased output of coal. I suggest that the Minister ought to raise that figure to an amount equivalent to the sum which would buy the full equipment for that long wall face, and that he would then be able to avoid this loss in output and time.

The most important point I want to emphasise is the shortage of tubs and spare parts. The machinery in the pits in England generally is very old, and, during the war—and no one is to blame for this—spare parts and tubs were very difficult to get, because of the demands of the war. In fact, we could not get replacements of tubs that were destroyed. The result is that, at the end of this year, there is a deficiency in the number of tubs as against the 1938 standard. I want the House to appreciate this problem. Due to the shortage of tubs, we have to pay, under an agreement, 10d. an hour plus a percentage, amounting to 157 per cent., for every hour of waiting because of a shortage of tubs. This actually means hours of coal production lost, and if we had sufficient tubs, we could eliminate this waste of man-hours at the coal face and considerably increase the production with the present machinery.

Another point which I desire to raise concerns the question of the five-day week. I listened to the hon. Member opposite on this subject, and there is no doubt that, in a mechanised mine, the five-day week is the essential thing. It takes from Friday night to Monday morning to look after the machinery, to get the face prepared and to do some work on the haulage roads that cannot be done during the week when output has to be fully maintained. Therefore, I want to put it to the House that the five-day week, apart from this crisis, is the thing that matters in the pits, and that, as time goes on, all the mines of the country will feel the benefit from it. There is an agreement which was in existence during the war, and of which I would like to remind the Government today, by which the miners, the owners and the Ministry all agreed that the men should stop an extra half-hour to ensure that the coal face was stripped and to ensure the complete cycle of operations for the next day's output.

I think this point ought to be considered by the Government again today. It does not mean to say that if we put an extra half-hour on the miners every day that we are going to get an extra half-hour's coal production, because the face can only give its specific yardage, and, if it is cleaned up in seven and a half hours, we cannot get one tub of coal more than we are getting now unless the faces are extended. If the Government are to extend hours, instructions ought to be given at every pit that there must be an extension of the length of face to meet that extra half-hour. My proposal to the Government is that mining engineering firms should be given priority for steel, and that they should also be given the raw materials to ensure that the necessary machinery is produced in quick time and delivered into the pits. On the question of spare parts, if the law of patents is standing in the way, it ought to be swept aside, so that other engineering firms can help in making all the spare parts to ensure that there will be a regular inflow of new machinery, as well as spare parts with which to maintain the existing machinery.

I suggest that inducements should be given to get more labour into the pits, that a greater allowance of capital expenditure should be given to area managers, and that the Government should appoint someone with full powers, like those which Lord Beaverbrook had for aeroplanes during the war, so that everybody concerned in this job can get on with this vital question of producing the necessary machinery. Where there is a shortage of tubs, I suggest that we might ask the union for an extension of the coal winding hours, so as to ensure that all the full tubs are out of the pits at night and that the pit is filled with empty tubs ready to start the next day's production.

If sacrifices have to be made for increased production, they should apply to all, and not to the miners alone. If these sacrifices are made, there should be a guarantee that, when this crisis is over, the people concerned shall return to their pre-crisis conditions. I ask that the added hours of labour given by the community shall not be used to make enhanced profits for the employers of labour. I also ask the Minister carefully to consider those suggestions in connection with the coal problem, because, unless something on this scale is done, it is very doubtful whether, in the future, we shall get coal in sufficient quantities to ensure that our industries are in full swing, and give us a surplus for export.

6.40 p.m.

The hon. Member for Houghton-le-Spring (Mr. Blyton) has made a very considered speech, containing a number of constructive suggestions on how to deal with the coal industry, on which he is, of course, a great expert. I shall have to leave it to other hon. Members on this side who are more conversant with the industry than I am to discuss what he has been saying.

In his speech this afternoon, the Prime Minister referred, among other things to measures which the Government propose to take to see that labour is guided into the right channels. I am afraid that I was left a little in the dark as to how far the Government proposed to go in this direction, and to what extent it was intended to guide labour and to employ the method of direction. It is generally admitted that one of the greatest problems with which we have to contend is the maldistribution of labour, which is just as important as the actual over-all shortage of manpower. The result of that maldistribution is that we now find discordant voices being raised in trade union circles. Some well-known trade unionists advocate a policy of outright direction which, in my opinion, is utterly repugnant, and which, I think, will always be repugnant to the majority of the British people in time of peace. Others, on the other hand, repudiate the policy of direction, and ask for what they call a "policy of incentives."

I feel bound to say, in passing—although it is never profitable to go back on the past—that if the Government had listened to the advice tendered to them some 18 months ago or more by quite a number of people, including myself, and had called a national conference of trade unions and employers' associations with a view to hammering out a wages policy on certain agreed principles—after all, a wages policy is one of the main elements in a policy of incentives—I do not think it would have been necessary for Mr. Deakin and others to have put forward such a drastic and panic proposal as the outright direction of labour at this very late stage. Personally, I hope the Government will reject this policy of direction, and will adopt one of incentives. Over and above this question of particular incentives, designed to draw people into certain specified industries, there is, of course, the question of general incentives calculated to make people work their hardest when they get into the right places.

What I suggest is that the Government should review the whole of the rationing system. I was interested to hear the Prime Minister say that, if it became necessary to reduce rations, the Government were proposing to introduce a system of differential rations by which workers in heavy industries would get more than other people. That, of course, means that a certain specified class of people will get more rations, regardless of whether the individuals within that class work hard or not; in other words, they will get extra rations, whether they do anything to deserve them or not. Under the present system, it is true to say that, with minor exceptions, everybody, more or less, gets the same amount of rationed goods at, again, more or less, controlled prices. Most of the prices of rationed goods are controlled, and therefore, to a large extent, there is really no object for many people to work beyond the point at which they have sufficient money with which to buy the rations to which they are entitled.

Many people find that there is no incentive to work hard, because it does not particularly interest them to spend their money in the limited number of other ways open to them. That is why I say, as I said at the time of the Budget, that if tobacco imports had to be cut—as, indeed, they had—the Chancellor was absolutely right to put a heavy tax on tobacco instead of rationing it, because the more things which are taken out of the price system and put into the rationing system, the less object there is in earning money. The only things which people want in the end, if everything is taken out of the price system and put into the rationing system, are coupons with which to buy the rations to which they are entitled. There is no object in earning money, and in the end the point is reached where people might as well be paid in coupons instead of money. Of course, the opposite applies whenever anything is taken out of the rationing system and put back into the price system; then, the incentive to earn money is increased.

As I think hon. Members will realise, I am no great admirer of the Russian ecenomic system, but I think that in one respect—and I hope that in this I shall, at any rate, have the support of the hon. Member for West Fife (Mr. Gallacher)—we could with advantage take a leaf out of their book by trying to make available additional quantities of rationed goods at higher prices. In Russia, there are special shops where people, if they can afford it, can buy rationed goods at much higher prices. It would not be necessary to resort to that particular type of machinery in this country; we could use our existing shops. But the point is that there is already a black market in existence in this country. It may be small. Its extent is unknown, and it is extremely difficult to gauge how big it is; but there is no doubt that people can get additional quantities of rationed goods if they are prepared to pay the price.

I can assure the right hon. and learned Gentleman the President of the Board of Trade that it is not unduly difficult to get clothes without coupons if one is pre pared to pay an additional price for them. I know for a fact that clothing coupons are being offered for sale within the precincts of the Palace of Westminster at 2s. each. I can also tell the Minister of Food, if he does not already know it, where he can get additional quantities of rationed foodstuffs, if he is prepared to pay the price for them. What I am suggesting is that there ought to be a legally and officially recognised black market in this country. That may seem a con tradiction in terms, but if it were recognised, and if it were legal——