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New Clause 2

Volume 927: debated on Tuesday 8 March 1977

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Report On Research Work Of The International Monetary Fund

'The Treasury shall lay before Parliament each year a report on the research work of the International Monetary Fund, on the application of the research to the Fund's operations, on the economic theories underlying those operations, and on the accumulation of evidence for and against those theories'.—[Dr. Bray.]

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

With this we may take Amendment No. 10, in the title, line 4, after '1962', insert:

to provide for the presentation of certain information with respect to the Fund to Parliament'.

My reason for tabling the new clause is to give us a further opportunity to discuss a matter which was ventilated in Committee, with echoes of it from Second Reading, but I do not think that we have adequately disposed of the matter.

I confess that I had the impression of an uncritical response to the IMF conditions in the recent drawing, not from the point of view of disliking conditions of any kind, which is an understandable attitude on the part of a debtor, but uncritical in the sense that the conditions were wrongly conceived. The conditions were working in the IMF's traditional monetarist framework, which would be an embarrassment to any serious monetary economist and an excrescence to economists who are not in any way monetary economists. The device imposed on us in the IMF conditions was that of domestic credit expansion.

This adds up to the fact that, if we fall behind in our recovery in the balance of payments along the path projected by the Treasury at the time when the conditions were negotiated, we shall have to squeeze our money supply. The further behind that we fall in our balance of payments, the tighter we shall have to squeeze our money supply. The idea that our balance of payments and money supply are directly reciprocal in nature, so that we can reduce the balance of payments by reducing our money supply, is unbelievably naïve in the real world.

The matter is not academic. It can be argued that the course projected by the Treasury was the best calculated course to take us out of an extremely difficult position in which we should never have landed ourselves, and that the best calculated course was to increase the constraints on public expenditure and so on.

Let us suppose that that course was the best-judged course for the recovery of the economy. If we then depart from that course in any way, the judgment on how we are correcting our policies to take account of the changed circumstances is crucial. The correction that we have had imposed on us is that of the formula of domestic credit expansion which I have outlined. We are bound to depart from the trajectory projected by the Treasury. We are already doing so. We do not know how it will develop later in the year.

We are faced with having this curious weapon of domestic credit expansion used against us. It can be argued that, if we come well within the IMF requirements on domestic credit expansion, it does not matter because we are free to run our policies as we like. If, however, we come comfortably within those figures, that will indicate room for a relaxation of policies in some way but within the specific IMF constraints.

It was suggested earlier that our rate of interest, for example, could come down, which would help investment and help to reduce the rate of inflation. I thoroughly agree that it would have a desirable effect in reducing the inflow of hot money into the country, but presumably one reason why the Chancellor is not reducing interest rates is that he is having to watch the targets set by the IMF, because strange things can happen to those variables in the coming months. Perhaps there is some hankering in his mind which tells him that if we get into a strong enough position we can somehow escape from the IMF conditions altogether.

It seems to me too hazardous a course to suspect any Chancellor or any Government to plan to repay the IMF loan with hot money and then transgress the IMF conditions, so that if we were in an exposed position next July, with a rewinding of leads and lags, and there was a rush of hot money out of the country, we should have no defence at all. I cannot believe that that is the strategy in the Chancellor's mind. It, must, therefore, be some worry about having to fulfil the conditions of the IMF loan as they are. The reason why we have had that strange halter of domestic credit expansion put round our necks is that it first appeared in the IMF staff papers by Mr. Polak, now director of research for the IMF, which seems to have been the basis of IMF operations in many countries for the past 20 years. That is one thing that I should like to see examined.

But another example of the uncritical attitude to the IMF's work has landed not only us but the international community generally in a less-than-happy situation. On Second Reading I asked the Minister whether, in the light of the integrated programme on commodities, the drawings by developing countries to finance their contribution to buffer stocks would affect their right to draw on other IMF facilities. I was assured that any drawing by any country to finance buffer stock facilities would not be taken into account in assessing its general credit position. I find that incredible. If it is true, all that the developing countries have to do is to set up a series of paper commodity schemes and open up a line of credit for themselves through the IMF to finance their contribution to a commodity scheme which in that event could be wholly producer-financed.

Presumably, a more considered reply would bring out that this was hedged about in various ways not only in UNCTAD but also in the IMF as it would operate in practice. But whatever the true position, the IMF has a crucial rôle to play through its buffer stock facility in the integrated programme on commodities. This is of grave economic importance to us, because one reason suggested for a certain softening of the attitude of industrial countries to the concept of a common fund is that they are worried about the possibility of a world recession. They see the financing of buffer stocks as a sensible means of enabling the developed countries to contribute to the reflation of the world economy in a way which has a sound economic basis. We would therefore be able to serve our own economic interests better as well as adopting a more constructive rôle in the common fund negotiations at the IMF, the World Bank or UNCTAD, by pursuing the appropriate studies and integrating them with policy to put us in a clearer position concerning the views of others about differing interests.

4.30 p.m.

To make it quite clear that it is in order in this debate to refer to the IMF's facilitiy to finance buffer stocks in terms of the current negotiation conference on the common fund, I have set out the background to why the IMF should put more effort into this research. The background to the current negotiations on the common fund was the Nairobi Conference in May 1976 which launched the integrated programme on commodities.

The idea behind the common fund is that the developing countries felt that progress on individual commodity schemes was held up because there was a reluctance to finance an individual scheme. However, they felt that if some source of funds through a common fund was available it would be more easy to finance the individual schemes as they came along. The UNCTAD IV resolution on the common fund does not lay down any principles for the common fund or for individual schemes, but these were considered in earlier reports by the secretary-general.

The pattern that emerges is that the case made by the secretariat recognised all the problems of setting up commodity schemes and argued that they were eased by having a common fund facility. But we do not have too much detail about how the schemes would work or about what tests would be imposed on a particular scheme to see whether it was eligibile for financing from the common fund.

Under great political pressure from the developing countries and the Group of 77, UNCTAD agreed to have this negotiating conference on the setting up of the common fund here in March 1977 before there had been any definition of the concept of the common fund, let alone any measure of agreement reached between the differing interests as to what the common fund would be. One can see the difficulties when one gets down to examining the preparatory meetings which have taken place on the particular commodities.

For example, the preparatory meeting on copper was followed by a meeting of intergovernmental experts on copper. That meeting listed some 27 different studies which needed to be carried out before anyone could say what a sensible copper stabilisation scheme would look like. The developing countries may well have assumed that this was mere procrastination, but when one looks at what the actual studies are about it is difficult to argue that they are not relevant to a copper stabilisation scheme.

For example, the list included a study of the structure of trade in copper, including the amount of copper moving through integrated operations, barter, long-term contracts and commodity markets. It went on to a description of marketing and pricing methods and the effects on the patterns of trade and the rôle of terminal markets, the capital requirements of new mining operations and related costs of production and long-term trends in demand and supply. These are all highly relevant to the design of a copper stabilisation scheme.

It is interesting that the reaction of the Secretary-General of UNCTAD after the meeting was to say:
"It is premature to draw any conclusions of a general nature from the two preparatory meetings and the one expert group meeting so far held. However, while the Secretary-General of UNCTAD fully appreciates the importance which governments attach to detailed studies and the fact that the amount of relevant preparatory work done prior to adoption of the Integrated Programme varies from commodity to commodity, he would like to stress the need to balance requests for additional studies against the need to move expeditiously towards negotiations within the time-frame set by the Conference in resolution 93(IV)."
That is a very understandable reaction. However, it is not clear what would be done when the studies were completed. Instead of simply pursuing a purely political programme of discussion on commodities, UNCTAD, or the IMF standing behind it with its financing facilities, or the World Bank or national Governments could have initiated a series of policy optimisation studies designed to see how commodity stabilisation schemes would operate. The practicalities of such policy optimisation studies might be illustrated from work on other commodities.

Smith and Schink, in the current issue of the Economic Journal, have done work on the International Tin Agreement. They say that the International Tin Council has had only the most marginal effect on the movement of tin prices or their stabilisation and that the larger pressures have been exerted by the United States strategic stockpile. They also show that the objectives of the stabilisation of income and prices are not necessarily mutually compatible.

Further work of a more wide-ranging character was done by Kim, Goreux and Kendrick for the World Bank, in this case on cocoa stabilisation. The main point brought out was that there is a conflict in the different objectives of stabilisation of price and incomes. The cost of such studies, which no doubt has been a factor in the mind of the secretariat, which can only pay its own salaries, is minute compared with the £6 billion that UNCTAD is asking effectively from the IMF in order to finance the common fund.

We therefore have the situation in which we go into the negotiations with grossly under-researched attitudes. One talks to Ministers who say that they have had the best possible briefing. The best possible briefing that I would want for commodities in London would probably, be from a body like the Commodities Research Unit. That body was commissioned by the State Department to give the American Government a briefing on copper in particular. It was not asked for any briefing by any Department in Whitehall. Let us consider the composition of the United Kingdom delegation to the UNCTAD expert meeting on copper, because one can then understand why no briefing was sought.

I do not believe in the conspiracy theory on any aspect of Government, and I do not take a sinister view of the operations of Rio Tinto-Zinc. It is interesting, however, that of the three non-governmental representatives on the British delegation, two came from Rio Tinto. The deputy chairman of that company is Lord Shackleton, a former Labour Minister and Leader of the House of Lords. It was Rio Tinto-Zinc which proposed the quite disastrous aluminium smelter scheme which was negotiated by the present Secretary of State for Trade in the late 1960s and was in my right hon. Friend's very interesting book as a prime illustration of how to handle relations between Government and industry.

It is natural that my right hon. Friend the Secretary of State for Trade, in looking for supposed experts on commodity stabilisation, should look to his friends in Rio Tinto-Zinc. But, frankly, that is not the source of the best guidance in terms either of the national interest or of the technical design of commodity stabilisation schemes. One should be able to expect from the British Government, and certainly from a Labour Government, a rather more critical attitude in the shaping of policy than we have seen displayed so far in the UNCTAD common fund and commodity negotiations.

Before leaving the subject of the British mining finance companies, would it not be appropriate to pay a tribute to the work they have done in ensuring supplies from some of the least-developed countries to consumers in this country of commodities such as copper?

It is also pertinent to refer to Rio Tinto-Zinc's experience in Bougainville. That company went through the whole gamut of developing a large copper deposit and putting a lot of money into it, and then found that the conditions under which it was operating in the host country were dramatically changed just as the loans had been paid and the mines were reaching production. Rio Tinto-Zinc has a wide spectrum of experience upon which to call when advising the Government on schemes for the stabilisation of copper.

I accept what the hon. Member has said, but there is more than one mining company. The staff of Rio Tinto-Zinc would be the first to say that they are not the only experts. Indeed, the company buys studies from the Commodities Research Unit. It is not self-evident that one should take as advisers the executives of one company. Other mining companies have contributed to the world economy. I am asking for a more critical attitude from the Government. The present system involves using the "old boy" network. There are other sources of advice available which the Government have not yet tapped.

I have made that point in correspondence with Ministers. It was suggested that I might have discussions with officials. One of them assured me of his wide experience through having been in charge of the commodities division of the World Bank. I referred to a study which was done in the World Bank. That official did not even know of its existence although he was in charge of the commodities division. There is a lack of communication between the study and research that goes on and the actual making of policy.

People do not do research just for the birds. They do it because they are concerned about seeking the best solution to the difficult problems that we face. But they are ignored by the people who are sent along by the British Government to the negotiating conferences. It is no wonder that we are floundering around in the dark.

This is immediately relevant to our current situation because the Prime Minister is going to Washington this week. He will not get much change from President Carter by any softening of the IMF conditions. He should say to President Carter that the United States places great emphasis on energy policy, which is a major commodity problem, and the stabilisation of some commodities—admittedly temperate cereals, including wheat and peanuts—but that there are also the problems of tropical and mineral products. The Prime Minister might ask about those. He should say that both the United States and the United Kingdom face the underlying problem of the stabilisation of exchange rates and ask how that is to be tackled. If the Government were to pick up their skirts and get down to the job of discussing these problems in the light of the academic analysis that is widely canvassed, and if they made that the basis of policy, we should not be floundering as we are today wondering about where we should go.

It has been suggested that if the new clause were passed some slight embarrassment would be caused to the Treasury. That is precisely the point. It would cause embarrassment if the Treasury were to maintain its present posture towards the use of research. That policy needs changing, and it is in the best interests not only of the Government but of the Treasury in particular to pay more attention to the underlying logic of the argument.

4.45 p.m.

We should be grateful to the hon. Member for Motherwell and Wishaw (Dr. Bray) for New Clause 2. Whenever I see the hon. Member I also see macro-economic models because I remember that in the long debate on the Industry Bill one of the few changes—perhaps the only one—made in the Bill was thanks to him. From the Gvernment Benches the hon. Member suggested that a macro-economic model should be produced by the Treasury each year and this was accepted. It was the only positive outcome of 140 hours of debate on the Industry Bill.

When I read in New Clause 2 on coming into the Chamber today:
"The Treasury shall lay before Parliament each year a report on the research work of the International Monetary Fund, on the application of the research to the Fund's operations, on the economic theories underlying those operations, and on the accumulation of evidence for and against those theories'."
I assumed that the hon. Gentleman would tell us about the advantages of having a semi-public disputation each year between the monetarists and the non-monetarists, between Friedman and Galbraith. I welcome the idea and I thought that it would be a useful public debate to have. I was all set to support the new clause, which I shall still do. But I did not realise that the hon. Member would lead us into a discussion on the common fund—a matter in which both he and I have an interest.

I shall make a few remarks in amplification of some of the hon. Members' comments about the common fund. It is particularly appropriate that we should be doing this today because a debate on the common fund opened in Geneva yesterday. Unfortunately, it broke up after 20 minutes because there was no agreement on who should be the chairman. Let us hope that that is not a presage of things to come.

There was an interesting conference in the Grand Committee Room last week at which the Under-Secretary of State for Trade spoke on the subject of the common fund. The kernel of the speeches made—although we heard a great deal for and against the technicalities of the common fund—came when the gentleman from the Commonwealth Secretariat referred to a remark by William Simon, late of the American Treasury, at a World Bank meeting last autumn.

Mr. Simon said words to the effect that the present world order system had served the world well for 25 years, so why should we change it. The gentleman from the Commonwealth Secretariat made it obvious that he was totally dissatisfied with that statement by William Simon. He and others in the Group of 77 wished to change the world order system because they wanted to transfer power and resources from the industrialised world to the less developed countries.

In all our discussions about the common fund, it is clear that we are entering the stage when we shall have to face the determination of the less developed countries to have more power, more wealth and more of the world's resources transferred to them. The mechanics of how that is done is less important than the end in itself. We could get bogged down in discussions about the mechanics when we should in fact be concentrating on the aim and on the ends that the Group of 77 wish to achieve.

That said, I very much agree with the remarks made by the hon. Member for Motherwell and Wishaw about the difficulties of the common fund and the difficulties of operating it. I do not believe—perhaps the Minister will refer to this matter—that there is any intention that present quotas within the IMF should be used for financing buffer stocks. It surely is the underlying theme that it is a new financial facility that must be made available, initially of $3 billion and, in the end, up to $6 billion. The purpose of this lies not only in financing buffer stocks, but in using the common fund as a means for arranging the mutual financing of stocks between individual commodities rather than creating 18 separate individual commodity agreements.

However, the difficulty here lies in the fact that, of the 18 commodities suggested, only five are suitable for buffer stock purposes, Most of the others, if not all, would be damaged in storage, are unsuitable for transport to a central storage point, or would wither away if stored in the country of production. I do not believe, therefore, that the basic concept of buffer stocks being financed through the common fund has been thought through.

In the particular commodity of copper—and here I must declare an interest as a member of the London Metal Exchange and a director of a mining finance company—it is a fact that the CIPEC countries have sought means of achieving a copper commodity stabilisation scheme for so many years now that I forget how man)—18 or 20. They have met continuously, notably in Paris. They have never reached agreement. Why? It is because the fundamental differences between the South American members of CIPEC, Peru and Chile, and the African members, Zambia and Zaire, are very great indeed. They wish to achieve different objectives through CIPEC. That is quite apart from the historic dislike and the different national characteristics that exist between the South American countries and the African countries.

Copper is one of the five commodities that I have mentioned that could be easily stocked. It has relatively few prodcuers. Very little copper is reclaimed from scrap, so the recycling problems of operating a buffer stock where much of one's material comes from scrap do not exist. Nonetheless, it has proved impossible over the years to arrange even one commodity stabilisation scheme, for copper alone.

Then there is the question of cost. It is said or copper alone that the cost would be about £600 million. We must stand back and ask ourselves whether this is the best way of using £600 million of international money.

I know that it is commonly said that we must not think of the common fund in aid terms. However, the fact is that at the end of the day, if commodity stabilisation agreements lead to higher prices—which I believe they do—it is the less developed countries which are producers of those commodities which will benefit most, and thus there is an aid element in this. If there is an aid element, we must pause and consider whether this is the best way to use £600 million that one wants to pass on, in any shape or form, to the less developed countries.

The hon. Gentleman is powerfully reinforcing the point that I tried to get across, namely, that the variety of instruments that have to be used in any commodity stabilisation scheme, incorporating not only the buffer stock but also policy towards production policy—if one does not talk of production control—and regulation of exports, and the regulation of investment, must go into the overall design concept of the scheme. The conflict of objectives can be clearly formulated only in the light of an optimal commodity stabilisation scheme. That has never been done in copper, despite all the negotiations within CIPEC. Finally, we do not know whether the cost is £600 million or a great deal more, or, taking into account its rôle within the common fund, possibly even less, because we need to look at how it interacts with other commodities and the overall timing of the trade cycle.

As the hon. Gentleman will know, a great deal of work has been done on the cost of financing copper stock. More study has been done on this single commodity—perhaps I say that because I know this commodity better than soft commodities—by, for example, economists of the Institute for International Studies at Sussex University than on any other. Therefore, we are further down the road in exploring the financing cost of copper stock than perhaps that of any other commodity. Yet, as the hon. Gentleman said, no one has been able to come up with a firm answer on the cost. It is estimated that it would be £600 million. We cannot be sure.

That is a pretty strong argument for not going with our eyes closed into a common fund. If we do not know the cost for one commodity, what will be the cost for 18?

Having been very much a bear of the common fund up to now, I must repeat what I have said previously. I believe that in the present negotiations this is a matter that we should look at with open eyes, and we should not have a totally closed mind about it. No other scheme has been put forward. Whatever the imperfections or unexplained aspects of the common fund, no other scheme that seems to have any chance of unifying the interests of the northern and southern hemispheres has been brought forward.

I hope, however—and here I support the view of the hon. Member for Motherwell and Wishaw—that British Ministers who will be taking part in these negotiations are very much better briefed than those at UNCTAD IV in Nairobi last year, and that they have not gone there with totally closed minds.

None of us can know what will be the attitude of President Carter and his Administration to this subject. I suspect that it will be very different from that of President Ford's Administration. That is another reason why we should not yet have made up our minds as to how in the end we wish to play the situation. I hope that we are keeping an open mind.

Above all, I hope that Ministers are properly briefed.

I hope that you will not be disappointed, Mr. Deputy Speaker, if I refer to New Clause 2. In passing, however, I should like to say that I found the discussion about UNCTAD and the common fund of great interest, although I did not come here briefed to take part. Perhaps I may be permitted a personal comment on it nevertheless as we seem to have turned our attention it it.

I think that there is a greater need for moves to be made, by whatever means, towards price stabilisation in the soft commodities than has been accepted by the industrial countries in recent years. I am not at all sure whether separate commodity agreements are really a satisfactory alternative to a common fund. However, I do not think that it would be very helpful to pursue that, except to say that I welcome the UNCTAD discussions that are now taking place and I hope that they will lead to more practical suggestions than the rather long-drawn-out theoretical approach which this problem has received.

The new clause appears to suggest that we should place a requirement on the Treasury to provide information which it would not of itself have at hand but which it would have to obtain from the IMF. I do not know what the 1MF's reaction would be if we were to pass the new clause and then the Treasury would be bound to produce each year a report on research work on economic theories and how they relate to the operations of the IMF.

It would be useful, and to that extent it is helpful that we have the opportunity to discuss it in this debate. It might even be a great deal more useful were the Treasury to indicate some of its own research and ideas on this subject. It would be to the enlightenment of all of us if we knew what research it was conducting into the relevance of its own policies and advice as to the conduct of economic affairs in this country. However, the new clause proposes that we should require the Treasury to provide information for which it would have to rely on the IMF. Therefore, to that extent the hon. Member for Motherwell and Wirhaw (Dr. Bray) knows that this is a theoretical new clause for the purpose of this discussion.

5.0 p.m.

The hon. Gentleman said he felt that, if the economic theories underlying some of the IMF's research work were applied to the IMF's policies on lending, we would not have the present arrangements for domestic credit expansion. The hon. Gentleman suggested that this was not a suitable instrument for accompanying the credit and financial facilities which the IMF would provide to countries in difficulty. Also, he suggested that this did not necessarily provide the best or even a suitable means of enabling countries to make the right economic recovery.

I agree with the hon. Gentleman up to that point, but I cannot go further with the assumption behind those suggestions because the IMF does not control our economic policy. I hope that it never will. However incompetent or irresponsible national Governments may be, they should ultimately, within a framework, have discretion on how they operate the economy of the countries for which they are responsible.

The only reason why any country has to resort to the IMF and has to satisfy exacting conditions about DCE is if, up to that point, it has mismanaged its financial affairs in such a way as to give rise to a particular crisis. That crisis is usually a balance of payments crisis which leads to and is almost inevitably part of a foreign exchange crisis. Therefore, the country in question needs foreign exchange facilities to get itself out of a critical position. In those circumstances, it is not unreasonable that the IMF, in providing those foreign exchange facilities, should impose conditions which may be counter-productive in other areas of economic development but which will at least restore credit in the area where the immediate crisis is situated, which is the current account on the balance of payments and on the foreign exchange market. It may be that over the years DCE restrictions will rot achieve that result.

Does the hon. Gentleman mean current account on the balance of payments or capital account, taking into account leads and lags? All that money supply operates on in the short term are leads and lags, which are in the capital account.

I said and meant current account. Usually, in my experience, movements on capital account respond more than anything to movements on current account. It is not usually difficult for a country with a sound current account balance to obtain proper funding for any temporary deficit on capital account. The factor at which the IMF must continue to look is the ability of a country to pay its way on its trading account and to sustain its currency at a reasonable level in world markets.

I do not think that I have in any way convinced the hon. Gentleman. However, I believe that the IMF should not get away from its fundamental objective of providing financial facilities for dealing with specific crises which drive countries and their Governments into its hands.

We have been driven into the IMF's hands because we have a persistent deficit on our balance of payments current account, which has encouraged leads and lags in sterling and which has been exacerbated by capital account movements. That has brought about a situation in our exchange rate over the past year which could not be corrected unless some supporting financial facility were provided by the IMF. It does not strike me as strange or improper that the conditions imposed by the provider of that facility should be designed to correct that defect in our economic performance.

It may be that over the years the DCE formula will not achieve that result. On the whole, experience in industrial countries has shown that it is a blunt but effective weapon. Therefore the IMF is right to continue to impose conditions which will solve the problems which it was designed to meet.

My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) again referred to the level of the research undertaken and the need to question the research carried out by a number of organisations and institutions which impinge upon Government agencies. My hon. Friend's record in the examination of these matters is probably unparalleled in the House. That is the tribute that we must pay to him for bringing these matters to our attention.

In the new clause my hon. Friend seeks to repeat the arguments, although I notice the change and widening of those arguments, which he used in Committee. My hon. Friend pointed to the relationship between the staff papers of 20 years ago relating to domestic credit expansion and the examination of the matter by Mr. Polak in one of those seminal staff papers. My hon. Friend pointed out that if those papers are to have any influence on action by the IMF, clearly they need to be examined with great care. So far, I am sure that the whole House will he in agreement with my hon. Friend. The difficulty comes in distinguishing the theories in those research documents from those which may be taken over and, to some extent, implemented by Government agencies and by the IMF.

I am sure that few will be better aware that my hon. Friend of the change which takes place when any document of that kind is translated into action. If one tries to see the reasoning behind the decisions arrived at by the Government, it is sometimes difficult to be sure just which theory they may be following because of the interaction between the various contending views which may originally have made their debut in a particular staff paper.

If my hon. Friend looks at the occasional papers which the Government Economic Service provides, or even those contributions made by the National Institute and other bodies, he will see that it is difficult for the Government to undertake to examine these various theoretical papers without at the same time getting into difficulties.

It is not easy to deal with the transition from theory to practice. I think that both my hon. Friend and the House will accept the advantage which we have seen in recent years of the Government taking note of the wide interchange of views which now takes place compared with what was available in the early 1950s. I suggest that it would be as hard for the Government to comment on the research work of the IMF, of which they are a member, as it would be for them to comment on the research work of the National Institute or on the occasional papers of the Government Economic Service. OF course, these are studied; lessons are drawn from them. But that is different from the Government engaging in direct controversy of a kind which would be a result of accepting the new clause.

Will not the Financial Secretary agree that there is this difference between the IMF and, say, the National Institute, that the IMF has agreed certain courses of action, certain criteria, which the British economy should follow, and which the Chancellor of the Exchequer has accepted? Presumably the IMF measures were based on a theory which the Chancellor accepts, because otherwise he would not have accepted the IMF remedies. Will the Financial Secretary confirm that the Government accept the IMF theories, for otherwise they would not have accepted the domestic credit expansion constraints and other measures? All that is being asked is that the Government should spell out the theories which lie behind their policies.

I had the advantage of reading through that paper by Polak a number of years ago and I addressed the House on one occasion—I think the attendance was about as thin as that which we have today—when I questioned the thinking behind it in a way which is not dissimilar to that which my hon. Friend the Member for Motherwell and Wishaw has in mind.

We are seeing not the implementation of the theory of Mr. Polak, as he enunciated it in 1957, but the IMF coming to an arrangement and specifying the ways in which repayment of those funds ought to be undertaken on the basis of a number of different factors, of which this one is hard to assess. It is hard to be able to determine the influence of any of the economists that lie behind a decision of this kind. I think that the main point of my hon. Friend the Member for Motherwell and Wishaw was the need for an active and wide debate, and he has contributed largely to bringing this about.

The hon. Member for Mid-Sussex (Mr. Renton) asked about the position of buffer stocks and dealt with this in some detail, as did my hon. Friend the Member for Motherwell and Wishaw. Clearly, none of us expected that this would be the main part of the debate, but I think that I can usefully inform the House of some of the problems which we see in this connection. Perhaps I might belatedly reply to my hon. Friend's question about the buffer stocks facility, because he was a little concerned that, if interpreted correctly, it might indicate unlimited credit for developing countries. Although he might be glad to see this, he understood that this clearly was not the position, so there was something wrong and some misunderstanding. Perhaps I can help to clear it up.

There used to be a limit on the quotas of kind that my hon. Friend knows and that have been removed. The position now is that the maximum drawing on the buffer stock facility is 50 per cent. of the quota, and there is, of course, the ability to make use of other drawing rights, such as credit tranches. The buffer stock discussions which are taking place at present are complicated by the fact that there are a number of problems of which we have seen echoes in the problems facing the European Community in its dealings with some of the stocks it has acquired in ever-increasing quantities. There are problems of perish-ability and the limited numbers of products which can be stocked.

There is the question of the intervention points, of surpluses, and the need, fundamental in all these matters, to avoid what might become, rather than a stabilising force, a destabilising force, as excessive stocks might be built up. I mention this merely to show some of the complexities that need to be discussed, because we are dealing with a much larger number of countries than there are in the Community, and the problems there have by no means been solved.

Perhaps I might deal finally with the position of the Treasury's own research work. I have mentioned that the Treasury undertakes a certain amount of its own research, but it also makes use of other bodies. Debates of this kind, and of the kind we had in Committee, help in the examination and questioning of some of the relationships involved in these matters. I think that we are now at a point where it is difficult to obtain the kind of relationship between the various variables which we used to take more for granted. The problem today is the control of the economy when there are large deficits year after year. They make the control of the economy much more difficult, because we can less readily operate surpluses and deficits, and through them demand management, in a way that used to be possible.

The debate continues here. I look forward to hearing more results arising from the activities of universities, the research bodies and so on, which will contribute to our understanding of these major problems.

5.15 p.m.

I wish to reply briefly to one or two points made by my hon. Friend the Financial Secretary and other hon. Members.

I entirely accept what my hon. Friend said about the complexity of the transition from theoretical argument to practicality. He himself quoted Keynes about being practical men and defunct economats. I am sure that he would agree that the more we can do to clarify the link between whatever theoretical concepts we may have and the making of policy, the happpier will be our position.

The hon. Member for Blaby (Mr. Lawson) is right in saying that implicitly, by accepting the framework of our IMF conditions, the Government are basically following their concept of how the economy works. The hon. Member for Hitchin (Mr. Stewart) said that he wanted to contain the rôle of the IMF, but to do that within one particular framework of economic theory would extend the rôle of the IMF unnecessarily and unwittingly into all sorts of areas of public and economic policy which it does not need to interfere at all.

My hon. Friend referred to the complexities of considerations which had to be taken into account in the design of commodity stabilisation schemes. They are precisely the complexities which can be related to each other in a policy optimisation study and in no other way. He referred to developments in our national economic policy, through the publication of Treasury forecasts and access to the Treasury model. I should be straying out of order if I went into that. But this illustrates the hazards of keeping things under wraps.

A committee of able academics which advises the Treasury has been working for a year on developments to the model, but the work is being kept secret by the Treasury despite the academics' wish that it be made public and the advice published with reference to tests on the Treasury model. The Treasury is making unnecessary difficulties for itself by preserving this secretive attitude at a time when Parliament has asked it to be more open.

Tomorrow there will be a meeting of the users of the Treasury model at which I imagine there will be interesting requests to the Government on their management of this facility. It is a continuing story and there will be further opportunities to debate this and other matters. I appreciate the care taken by my hon. Friend the Financial Secretary and his interest in these matters. I hope that he will continue to exert pressure in a constructive direction.

Question put and negatived: