ECONOMIC SITUATION

§ Mr. Speaker

Before calling on the right hon. and learned Gentleman the President of the Board of Trade to move the Motion on the Paper relating to the economic situation, I might inform hon. Members that, so far, about 120 have indicated their desire to speak in this Debate. In addition to that, there are 10 or 12 speakers on the Front Benches on both sides, and, therefore, I am afraid a great number of Members will be disappointed.

§ Mr. Bowles (Nuneaton)

May I ask, Mr. Speaker, whether you will now make it clear to the House that any hon. or right hon. Gentleman writing to you, gets no priority as regards catching your eye?

§ Mr. Speaker

Would the hon. Gentleman repeat the question? I did not hear it.

§ Mr. Bowles

I was wondering whether you would indicate to the House that an hon. or right hon. Gentleman in writing to you and indicating that he would like to try to catch your eye, gets no preference over other hon. Members by so doing.

§ Mr. Speaker

Naturally, one has regard to the chief speakers who are representing particular groups, but, apart from that, I only select Members who I think will best contribute to the Debate.

§ Mr. Scollan (Renfrew, Western)

Is it not perhaps preferable that hon. Members should put their names down on a list, instead of standing in their places and taking it for granted that they will be called?

§ Mr. Speaker

It is sometimes convenient to know the line which a Member will take, but I choose Members quite regardless of whether they tell me in advance or not.

§ Mr. McGovern (Glasgow, Shettleston)

May I ask, Mr. Speaker, whether a Mem- 964 ber, if he desires to catch your eye, must now send in his name?

§ Mr. Speaker

Certainly not. I have been rather discouraging that idea.

§ The President of the Board of Trade (Sir Stafford Cripps)

I beg to move, That this House welcomes the laying before Parliament of a survey of the nation's requirements and resources for the year 1947, is concerned at the seriousness of the situation disclosed, and will support the Government in all practical measures taken in co-operation with all sections of the people of the country to overcome the difficulties and to make secure the foundations of our industry so as to provide a high standard of living for our people. In laying before the House "The Economic Survey for 1947" set out in the White Paper, Cmd. 7046, it will probably be convenient to Members if I follow broadly the arrangement of the White Paper itself. This falls into three parts: First, the principles of and the machinery for economic planning in this country; second, the achievement of the first 18 months of peace up to December, 1946; and, third, the situation in 1947. But before coming to these three parts, I think it is necessary to say a word or two about the general setting in which we approach our economic problem, and it is, in particular, essential to bear in mind two antecedent periods—first, of course, the war years, and, second, the period between the two wars. That is the latest period during which we experienced what might be termed normal peacetime economy. I am sure it is not necessary for me to stress in any detail the effects of the six years of total war upon our peacetime economy. It has been equally serious upon our internal and external trade.

Internally, many of our civilian industries were heavily concentrated. Their factories were taken over for wartime use. their labour forces were dispersed, and there was no new entry of young persons who could be trained up to the required degrees of skill. Our transport and communications suffered from lack of maintenance and renewal, piling up a huge backlog which must be dealt with now. Wartime industry absorbed vast quantities of labour, and the whole balance of our industries was completely changed from its peacetime 965 pattern. The great destruction by bombing of houses, factories, docks, storehouses and other buildings left us acutely short of every kind of building, and with an enormous volume of repairs to carry out, apart altogether from the deferred maintenance which was postponed during all the war years. In our industries we had not only been unable to provide new and up-to-date machinery and equipment during those years, except where it was required for war production, but we had been unable to maintain the old machinery, much of which was worn out by long use. These and other direct effects of the war—a part of the price we willingly paid for victory—presented in themselves a very difficult task if we were to put them to rights in a reasonably short period of time.

In the matter of our external trade, the effect of the war was equally severe. During the latter part of the war our exports were cut to ribbons. We were forced to abandon a great part of our overseas markets so as to concentrate upon war production, with the result that at the end of the war when Lend Lease had to be discontinued we found ourselves with exports that could hardly pay for one-third of our then reduced standard of imports. It was in those circumstances that we obtained the lines of credit from the United States of America and Canada because the commodities we were bound to have, principally food and raw materials were not obtainable from any other part of the world and had to be paid for. Unfortunately, the position is still most difficult because we are taking 42 per cent. of our imports from hard currency areas, whereas only 14 per cent. of our exports are going to those same countries. In the result, not only are we still experiencing a deficiency of our general balance of payments due to the fact that we are not yet exporting enough, but there is a special and much greater deficiency in our dollar balances. That is another direct effect of our work for victory during the war. It was an inevitable result of the cessation of Lend Lease and the devastation of other countries from whom we had formerly been able to draw our essential supplies.

These internal and external difficulties directly resulting from the six years of war are, however, only part of the historical background to which we must look. In the period between the two wars 966 we had not, of course, fitted ourselves for the great increasing productivity which we now, in completely changed circumstances find to be essential to our economic survival. Nor had we pressed forward with the reorganisation of our basic industries, which were competitively out of date in many respects, especially in their mechanisation. In a condition of continual large-scale unemployment labour-saving machinery had seemed less necessary; indeed, there was a tendency to repeat the Luddite cry that machinery created unemployment, and "rationalisation" became a much suspected, and indeed hated word.

The large and continuous volume of unemployment reduced our own standards of living. Yet we were unable, in accordance with the then dominant economic theories, to utilise the available labour for the much needed reconstruction of our industries. It is this industry of ours, with all its wide diversification in buildings and equipment, that, after a further six years of war, we are now expecting to be able to expand at an unexampled rate, and in a properly phased manner. There is now a lack of balance in industry, which has grown out of the war and the inter-war years. Some industries tend to have more labour than they can fully employ with the limited supplies of material at their disposal, while others are short of the labour that is needed to meet their targets when they have ample supplies of materials. This is partly because during the war we were obliged to curtail and concentrate many of the industries making particularly consumer goods, in order to put our greatest possible effort into war production. In the textile and clothing industries, for example, we deliberately cut down production so as to allow workers to be spared for the production of munitions and for the Armed Forces.

The difficulty of rebuilding the labour force in those industries reflects the sacrifices that were made during the war. But it also reflects the long period of depression in the textile industries before the war. We have to start rebuilding those industries at a time when manpower is scarce, and when there are plenty of other opportunities for workers who would normally enter the textile industries. Even if the textile industries were highly attractive in their amenities, pay and so forth, they would still have to contend 967 with a famine in juvenile workers because of the fall in the birthrate and the raising of the school-leaving age, and a rather less obvious shortage which is rapidly approaching in women workers, which can ultimately be traced to the fall in the birthrate in the 'twenties. The same kind of problem has arisen in coalmining. It is obvious that even if the war had not come we should have had difficulty in arresting the decline in the number of coalminers, which everybody took for granted in the years between the wars. Sooner or later it would have been necessary to call a halt to the gradual process of wastage, and to increase the share of coalmining in the number of new entrants into industry.

The reason, I think, why a good many people have been alarmed and depressed at the facts set out in the White Paper is because they never have fully realised what effect two world wars within a generation have inevitably had upon our economy. The first world war struck us a violent economic blow from which, in fact, we had not fully recovered when we were struck by the second world war. We have not been able, in the period between the two wars, to readjust ourselves to our new economic situation, and the measure of that failure was the continual mass unemployment from which we suffered. It is not, therefore, any matter of surprise that we should emerge from the second world war—which was both longer in its duration and more intense in its dislocations than the first—with a more battered and distorted economy, and one for which the ineffective palliatives that were tried during the inter-war years would be even less effective.

Since this Government came into power hon. and right hon. Gentlemen opposite have often made the suggestion that we on these benches were unaware of the difficulties that were bound to face the country in this postwar period, and consequently did not disclose them to the electorate at the time of the General Election. Now, this is so contrary to the fact that I should like to dispose of the suggestion by quoting from a broadcast which I made, during the Election, on 20th June, 1945. I said this: While we have been fighting we have been hard put to it, and we shall be after the war, to get enough produce to support and protect our people. We need the same 968 determination and self-sacrifice, and the same sense of values that have brought us through to victory in the war. We know, and we emphasise, the difficulties that lie ahead. But we know, too, that the ordinary men and women of this country can overcome them if they will."

We do not depart one iota from those statements, which are as true today as they were when they were spoken, and were a not inaccurate forecast of the conditions as we now find them.

Let me turn to the first section of the White Paper, dealing with economic planning. The method of that planning must be worked out in accordance with our own democratic institutions and ideas, and also to fit the very complex economic structure that has been built up in this country over the last century. We cannot take a theoretical plan suited perhaps to some other country and apply it to our own very different circumstances. We shall work out our own method of planning in the empirical way that suits our temperament as a people. Hence the somewhat tentative nature of the machinery that we have so far set up. We must have experience of planning and its results before we can attempt to finalise the form of the machinery that we must use. There is one particular drawback from which we are at present suffering, and that is the lack of accurate statistical knowledge as to our peacetime production and distribution. The last relevant census of production was taken 12 years ago, in very different circumstances, and we have never yet had a census of distribution. Though our wartime statistics were far fuller than any that we had collected before, they are largely inapplicable to present problems, because they deal with wartime and not peacetime production. As the House knows; we are trying to make good these shortages by the Statistics of Trade Bill. But it will be some years before we can have all those fuller statistics, and in the meantime we must do the best we can with what we have got.

Another matter to which I draw the attention of the House is the way in which the possibilities of planning are determined by the measures available for enforcing the plan. There is a wide difference between what may be termed totalitarian planning, and democratic planning. The essence of the former is that the individual must be completely subordinated to the needs of the State, even to the 969 extent of depriving the individual of free choice of occupation. Democratic planning, on the other hand, aims at preserving maximum freedom of choice for the individual while yet bringing order into the industrial production of the country, so that it may render the maximum service to the nation as a whole. We are attempting to make a success of democratic planning, and, save for emergency measures such as were necessitated by the war, or may be necessitated by some urgent economic crisis, we have decided, in accordance with what, I am certain, is the wish of the country, not to employ, as a normal matter, methods of direction or compulsion of manpower outside the necessities of defence.

We must, therefore, adapt our methods of planning to our means of control and enforcement. We cannot plan our industries as, for example, we plan our Armed Forces. In that case, because we positively control the manpower intake, we can, with accuracy, lay down full details of all the Services to be available and the exact number of men to be employed in each. That is a precise and accurate plan, of which an exact estimate of cost is given in the Service Estimates every year. There is no question of buyers of the output: there is complete certainty that, one way or another, it will all be utilised. In planning our industrial production we cannot have such a strict plan. We must deal in broader classifications, and we must attempt to guide production into those classifications, not by direct control of manpower, as with the Services, but with other regulatory controls which are available, such as those of raw materials, capital, investment, machinery allocation, taxation, and so forth. But, apart from those various controls, we must also rely upon the individual co-operation of both sides of industry. It is of the essence of democratic planning that it is, to a very considerable extent, dependent for its implementation upon the willingness of employers and employees to join in working out the plan; and it is to deal with this sort of democratic planning, as I have defined it, that we have set up the machinery which is dealt with in the first part of the White Paper.

There are two important changes which we are making, on the basis pf our experience up to date, in connection with the reorganisation of economic planning. 970 These are changes since the White Paper. First is the strengthening of the staff for economic planning, and the second is the arrangement for ensuring the co-operation of industry in the planning organisation. The foundation of this economic planning work must, of course, be done in the departments concerned with trade, industry and economic affairs. In recent months these Departments have been constituting their planning staff. In future, it will be the recognised practice that each Department will have a whole-time planning staff under a senior officer, charged with special responsibilities in that field.

The most important development on which His Majesty's Government have decided is the strengthening of the interdepartmental planning arrangements. They propose, therefore, to appoint a joint planning staff, somewhat on the lines of the procedure that was so successfully developed in the war, as, for example, in the joint war production staff. The main strength of this staff will be departmental planning officers. But it is essential that the staff should work under effective direction from the centre, and it has been decided to make a new appointment of a full-time executive head of the interdepartmental planning staff. The man selected will need to be a man of very special attainments and experience. Each of the departmental planning officers will have on his staff at least one officer whose duties are so arranged that, while he does not lose contact with his own Department, he can devote a considerable part of his time on the central work of the joint staff. It is contemplated that these assistants will frequently meet together to work as special groups under the staff. Under these arrangements, the head of the organisation will not himself require to have any large staff of his own, but he will need a small, picked staff of persons with programming experience and a small secretariat.

The function of this inter-departmental staff will cover the whole field of forward planning; but they will also be specially concerned with the more immediate task of reviewing the programme for the rest of 1947 in the light of developing conditions, so as to weigh up the calls which that programme makes on productive resources, and to recommend how resources and requirements can best be brought into balance continually. The inter-departmental planning staff will, of course, work 971 in the closest relation with the other central organisations, in particular the Economic Section of the Cabinet office and the Central Statistical Office, both of which have important contributions to make towards economic planning. The arrangements outlined above are a development or evolution, and will be calculated to ensure strong direction from the centre, where it is needed, without interference with departmental responsibilities.

The second point concerns the arrangements to ensure the co-operation industry in the organisation for economic planning. There will, of course, be a very large number of questions on which the Government will need to consult with the representatives of a particular industry or group of industries, apart from problems which affect those industries in the planning of our economic affairs. That will be done, as now, through the Departments primarily concerned. But, over and above these particular questions, there are many wider issues on which His Majesty's Government feel the need of consultation with industry as a whole in regard to economic planning; and they intend to suggest to the various organisations concerned on both sides of industry, that there should be a small board representative of the Government's planning staff and of both sides of industry, which would meet from time to time throughout the year to follow development of the plan. The Government recognise that, if they are to get the best out of our forward economic planning, they must have the help of both sides of industry in formulating and carrying out the plan. Industry must be brought into the planning processes at an early stage, and must have before them the facts which the Government Departments have at their disposal. They must know the difficulties to be resolved, the gap between demands and requirements, and the results to our economy as a whole if we fail to bring the two into line. They must have all this, in order that their help may be obtained in the formative stage of planning.

As the White Paper states, the planning in the White Paper is based upon two main sets of facts—first, the actual division of the labour forces of the 972 country, and second, the allocation to various purposes of the gross anticipated national income. The total available manpower of the country is subdivided between the various industries, as far as possible, in accordance with the needs of the nation, and so as to achieve an allocation of the national income which is to the greatest benefit of the people as a whole. These so-called budgets are, of course, very different in their nature from the budgets of the Chancellor of the Exchequer. They are dealing in men or materials, even though the common denominator can be expressed in terms of money. They must automatically balance, and if they do not balance in accordance with some plan, they will, nevertheless, still balance by deficiencies appearing, perhaps, on the very things of which there is the most vital need. It is the task of planning to see that those deficiencies, if they must occur, fall in the least inconvenient places.

I now pass to the second part of the White Paper. This records the achievements of the country during the first 18 months after the end of the war with Germany, that is, down to 31st December, 1946. Looking back to what was expected and predicted in the spring of 1945, it seems to me that the technical processes of reconversion have been accomplished more smoothly and satisfactorily than we then expected. Nearly the whole of that 18 months has been occupied in the reconversion of industry and manpower from wartime to peacetime tasks. It must be borne in mind, that the disturbed conditions of the world have been such that it has not been possible during those 18 months to bring down the defence Services to peacetime levels. The occupation of Germany, the troubled conditions in the Far East and Palestine, and other inescapable demands have meant we could not reduce the Armed Forces below the level at which they stood at the end of last year. Despite this factor, we have, during the period, demobilised from the Forces over 4,250,000 men and women, and from munitions production upwards of 3,250,000. This process has been carried through with a minimum of industrial disturbance, due to the co-operation of industrialists and workers, and with only a very small percentage of unemployment over most of the country, though in the 973 Development Areas the rapid demobilisation of wartime industry has resulted in a higher and, unfortunately, a more persistent degree of unemployment.

What these 7,500,000 people, returning to peacetime work, have accomplished, after their long absence from production and other jobs they are doing, can be judged by the levels to which our production has risen over that period. By the end of 1946 the volume of goods exported had risen to about 113 per cent. of the prewar figure. Apart from shortages of raw materials and power, there is no doubt that we should have seen a further substantial rise in exports in the early months of the present year. So far as the home market is concerned, we cannot always judge the achievement in production by the degree of satisfaction of demand, because of the great increase in demand arising from the higher standards of wages and salaries, and the accumulated deficiencies of wartime, together with the large wartime savings. It is quite apparent, too, that the quality standards have risen generally in the country, which fact is, I think, not unconnected with the comparatively higher standard which so many people have experienced during their service in the Armed Forces. This pressure of demand has meant that even where production has risen well above the 1938 standard, there is still a shortage of supplies.

Table B on page 34 of the White Paper sets out the comparative production of a number of important commodities for the last two quarters of 1946 compared with two prewar years. Some important articles, particularly in the category of engineering, like motor-cycles, agricultural tractors, and commercial vehicles, show large increases on prewar production. The same can be said of merchant shipbuilding compared with 1938. On the other hand, textiles, with the exception of rayon yarn, show a large deficiency. The consumption of gas and electricity has greatly increased, as has the consumption of non-ferrous metal. Those are all signs of generally increased production, though there is a marked unbalance, with some severe deficiencies, particularly in the field of consumer goods. The summary in paragraph 58 shows what, on broad lines, we have accomplished during these 18 months, and in view of the war damage from which we 974 suffered, and our total mobilisation for war purposes, those are results with which, I think, the country can be reasonably satisfied. Moreover, we have been able to obtain some approach towards a balance between our different requirements, though it has not yet reached more than the first stage, and much remains to be done.

We have throughout this period been operating in circumstances of world shortages and of internal shortages as well, so that our margin of stocks in most cases has been fluctuating about a very bare minimum. It was liable to be upset at almost any moment by weather, or shipping difficulties, or labour troubles in other countries, as well as by the position in our own basic industries. We have had to impose bread rationing for this reason, and our coal and power situation has been growing increasingly dangerous as consumption leapt forward ahead of supplies. We have now over a series of years, as the House knows, been living on a coal overdraft. We drew on our stocks in 1943 by over 1,000,000 tons, in 1944 by 1,500,000 tons, in 1945 by 3,600,000 tons, and in 1946 by 4,000,000 tons. In addition, we have used up almost all the accumulated stocks of opencast coal which, at the end of 1944, amounted to over 2,250,000 tons. I will deal with the whole coal matter in detail later. These shortages of materials and stocks have not only meant the use of a good deal of manpower in rationing schemes of various kinds, but have also created an atmosphere of uncertainty which is inimical to high efficiency in production.

I now pass to the third and most important part of the White Paper. This is introduced by the sentence: The central fact of 1947 is that we have not enough resources to do all that we want to do. The Government have constantly emphasised that fact, and indeed we have often been criticised for too much austerity, for diverting goods from the home market for export, for not allowing more home consumption of goods, and for not doing this or that other extravagant thing that was considered desirable. I believe that anyone who reads the White Paper will now agree that the policy pursued was the right one; indeed, judging by some current Press and other criticism, our mistake has been that we have been 975 too easy-going. One thing, anyway, no one say say, and that is that they have not been kept acquainted with the facts. The "Monthly Statistical Digest," of which I hope all hon. Members have at least seen the cover, was published for the first time by this Government, and it gives monthly all the current information that is available. The fact is—and this must be made clear to all our people—that we cannot do everything at once, and that we must, therefore, make up our minds as to what it is upon which we should concentrate our resources.

The third part of the White Paper sets out to show how we should do that for the year 1947. It does not purport, of course, to be a long-term plan. That we shall get out as soon as we can with the staff that is available. Here, let me say that any one who looks upon this realistic picture as portraying disaster or forecasting catastrophe must completely misunderstand the temperament of the British people. It is a challenge to achievement by the people, and it is not a record of their failure or their impotence. As matters of first importance are the payment for imports—that is, of course, principally by our exports—and the basic industries and services without which the rest of our economy cannot function.

So far as payment for our imports is concerned, this raises two questions—the overall balance of payments, and the balance of hard currency payments. We can, and indeed, must, operate on both sides of these balances. Our imports are not a fixed figure, but can be varied to some extend according to our ability to pay for them in exports. There is, however, an almost irreducible minimum below which we cannot allow imports to fall if we are to have enough food for our people and maintain the flow of raw materials essential to our industry. The import programme for 1947 is set out in paragraph 69 of the White Paper. This is a little larger than the rock-bottom minimum in that it envisages a certain variety of foodstuffs, although not much more than at the present time, a small increase of consumer goods made from imported raw materials, and the continuance of the token imports and the war devastated region imports, which both come within the £35 million of imported consumer goods.

976 There are, too, the items tobacco and films as to which a number of people have made suggestions. It certainly is unfortunate that smoking has increased as much as it has since the prewar years. It is now between 130 and 140 per cent. of prewar, which is really much more than we can afford, and yet I am constantly being asked Questions about supplies, and suggestions are made that more should be manufactured. It is not an article that is easy to ration. It would take a very large staff indeed to do it because of the immense numbers of points of distribution. It is, moreover, a commodity in which a black market is very easily created and quite impossible to suppress. We, therefore, concluded that for 1947 at any rate we will not ration tobacco. We shall, of course, continue the policy of using all the Empire tobacco we can get. Films are an important factor in providing people with relaxation in difficult times. We shall have to introduce a new Cinematograph Bill early next Session because the old Act expires next year, and we do not feel we should embark upon any hurried policy of cutting such imports, even if that policy would have any effect. We are trying to counter this tendency to use too many foreign films and spend too much on them by improving our own output and by stimulating our own exports of films. In both these directions we are having very considerable success, so that the net loss on foreign exchange on films is falling. We must always remember, with regard to imports, that there may be extra emergency items that we shall have to include by way of imports, such, for instance, as coal for double bunkering at the present time. So much then on the import side.

How are we to meet that bill for imports? Our total need for foreign exchange will be £1,450,000,000 for imports and £175,000,000, the balance on Government overseas expenditure against receipts, making in all £1,625,000,000. We cannot, of course, cover all that by exports. Our net invisible income is estimated at £75 million, and if we fix the limit of our borrowing at £350 million for this year, we shall have to aim at £1,200 million from receipts from exports and re-exports. The proportion between borrowings and exports must, of course, be determined in the light of our capacity to export, but the fact that we have put borrowing in 1947 at so high a figure as £350 million shows that 977 we have not to the smallest extent exaggerated the need for exports. The 140 per cent. increase in volume over 1938 is not a wildly optimistic hope; it is the irresistible conclusion to be drawn from the fact about our balance of payments. We conclude, therefore, that our home consumption must be so adjusted as to enable us to reach our export target of 140 per cent. by the end of 1947.

So far, I have dealt with the balance of payments as a whole. I must now say a word about the hard currency situation. It is an unfortunate fact, but an inevitable sequel of the war, that, just at the tam when we are critically short of dollars and other hard currency, we are driven by circumstances over which we have no control to purchase a greater proportion of our import needs from those very countries whose currencies are the hardest for us to acquire. The position is, therefore, that although our overall balance shows a deficit to be met by borrowing of £350 million sterling, there is within that overall figure a larger potential deficit of hard currency, especially so far as dollars are concerned. It is not our choice, but the availability of commodities which determines where we buy. We must buy in the market where the goods are available, or else go without. In order to try to meet this situation, we have to do two things.

First, we must try to get back to purchases in soft currency or sterling 'markets as soon as ever the goods are available, and secondly, we must send the maximum possible amount of our exports to the hard currency countries. Both those steps are part of our plan, and are in fact now in course of being carried out. We are negotiating with many European countries to get as much as we can, not of luxuries but of necessities, in return for the goods we send there. At the same time, we try to encourage as large sales as possible of our goods in the difficult currency countries.

My right hon. Friend the Chancellor of the Exchequer and I have both urged industry to give their immediate attention to this problem. Detailed discussions with particular exporters and groups of exporters are now being started by the Board of Trade and the Ministry of Supply. There can, of course, be no question of a sudden and fundamental change in destination of all our exports; nor do we 978 intend to introduce a mass of new controls to force exporters into hard currency countries. Each type of export must be considered on its merits, and we shall have no hesitation in relying upon exporters to appreciate the seriousness of the hard currency problem and on their readiness to work out, in consultation with the Board of Trade, the precise steps which can best be taken for its solution.

It would take too long to go through all the reasons against a policy of indiscriminate re-direction of our exports to hard currency markets, but perhaps I may mention one or two of them. We have a long-term problem of markets ahead of us, as well as a short-term problem, and it would be foolish to throw away, perhaps for ever, a good long-term market, it may be in a Dominion, for the sake of a purely temporary market in a hard currency country. Then there is the question of our responsibility which we cannot burke, for the supply to our own Colonial Empire of essential goods. Nor would it serve any useful purpose to divert our exports away from a good sterling market overseas to a dollar market if the vacuum that would thus be created were to be filled promptly by exports from a dollar country. One fact which is perhaps not appreciated is that the proportion of our exports going into hard currency markets has increased by about i per cent. per quarter during 1946, so the trend is in the right direction, but we must try to accelerate that trend. I have every confidence that exporters will treat this problem as really urgent, important and vital in the national interest.

I referred just now to our long-term need for markets. Our 1947 target for exports is 140 per cent. by volume of that of 1938 by the end of the year, but our long-term target is 175 per cent, by volume of 1938. To achieve this when the sellers' market has gone, as it will have gone before very long, will be a task demanding all our traditional skill and enterprise as exporters, and all the competitive strength in price, quality and design that we can muster. Even so large an increase in our exports would mean that, unless world trade expands very appreciably, we should need to win an enormous proportion of the total world trade in manufactured goods, just about one-third, and that, of course, is impossible for any one country. That is why 979 the Government attach so much importance to the plan for an international trade organisation, with its declared objective of providing full employment and increasing the total volume of world trade.

We also believe that if this project is reasonably successful it will assist in putting right one of the causes of the world's economic ills which was noticeable in the 1930's and which can be seen in another form nowadays, accentuated as a result of the war, in the shape of a quite alarming disparity between exports from the Western Hemisphere to the rest of the world and the imports to the Western Hemisphere from the rest of the world. In saying that, I do not mean that an international trade organisation can put this right by, as it were, a stroke of the pen, but it can provide the essential framework to enable rectification of this great disparity to be gradually achieved. Here I should add that this country must have a great interest in seeing the disparity put right, suffering as we are from our own acute dollar shortage, which is an acute and special instance of the more general problem.

I am not suggesting that, in the long-term, if all goes well, there will be no need for us to pay special attention to our own exports to hard-currency countries. Though the problem may be especially acute just now the need for dollar exports will, so far as I can see, be with us permanently, anyway for the next 50 years. The four objectives of policy, so far as the balance of payments is concerned, are set out in paragraph 79. It is along those lines that we are now working. I would emphasise once again the point set out in paragraph 81. This export programme must be a prior charge on our resources, and we shall therefore have to content ourselves with what is left over. There is of course flexibility as between industry and industry. Some will exceed the target greatly, as they are doing now, and others will fall far short of it; as, for instance coal. Something like 25 per cent. of our manufactured goods will have to go abroad, if we can get them there, and we shall have to content ourselves with living on the other 75 per cent., together with such imports as our exports can earn for us.

I now pass to the all-important matter of our basic services. The fuel and power 980 situation has been debated fairly recently in the House, so that I need not deal with the present situation in detail. Coal, steel, power, and transport, together with the building industry, capital equipment and agriculture, are fundamental to our economic system. Upon their productivity will depend to a large extent how quickly we can achieve targets we set ourselves over the rest of the economic field. Our main task in 1947 is to get these basic industries and services right.

I turn first to coal and power. Ever since 1941, when a large number of skilled miners were withdrawn from the mines for the fighting Services, we have been in trouble about coal production. During the war, by measures of economy and by drawing on our stocks, we managed to make both ends meet, though each year there was growing anxiety as to whether we could get through the late winter period In 1942 a scheme for rationing was worked out, but it was never applied. We were lucky enough with the weather in the following years to get through the wood. Weather such as we have had this year must inevitably have meant breakdown.

So far as electric power and gas are concerned, during the war periods there was no marked increase in domestic use. Indeed, there could not be, as very few appliances were being manufactured, and generally, in order to get a new appliance, an old one had to be handed in in exchange. In addition to that, there was the economy of the blackout. When however a time came before the end of the war to plan the new housing programme, emphasis was rightly placed on the need for having up-to-date labour-saving houses. As part of the housing programme a very large manufacture of electric and gas appliances was stimulated. I remember when I was at the Ministry of Aircraft Production being asked to facilitate the turnover of some of the factories making aircraft accessories to the manufacture of those power appliances. That type of manufacture is very easily started and developed. As a result of those plans, one of the first civilian industries that greatly increased its production was that of electrical and gas household appliances, with the result that the domestic consumption of gas and electricity increased greatly, not only in the new dwellings but through the purchase of appliances by others

§ Mr. Churchill (Woodford)

Has not there been a corresponding reduction in the domestic consumption of coal?

§ Sir S. Cripps

No, Sir. The right hon. Gentleman is quite wrong. There has not been a corresponding reduction at all. Perhaps it would be easier if I were allowed to continue. There have been very large scale purchases of those appliances. It will be noticed in the statistical returns, Table 68, that the really big jump came between the third and fourth quarters of 1945, which had, of course, been planned much earlier. Electric fires jumped from 41,000 to 122,000, and electric irons from 79,000 to 170,000 in the same three months. At the same time, of course industry was being rapidly electrified and every scheme for modernisation included an increased degree of electrification. This, no doubt the House understands, is inevitable, because we look very largely to the substitution of manpower by electric power to give us our economy in our production programme.

The output of electric generating plant to come into operation this and next year meant orders being placed three or more years ago and power stations being planned and built. That was the job of the electricity generating undertakings, but, in the circumstances of the war at the time when the orders should have been given, it was impossible to place more orders. Under war-time Government control, a balance was struck between manufacture for the home market and for export, including I may say a great deal of much-needed plant for Russia. Contracts were made and planned on that basis, and they cannot now be gone back upon. Even if it were practicable to divert exports to home use, which it is not in fact, we would risk losing for ever one of our most valuable and stable markets for export. That would be the result if we were to cancel contracts. So we find ourselves today unavoidably short of genera, ting plant and unable to carry a peak load. We have, in fact, arrived at the point towards which we have been moving for nearly five years and during which demand for fuel has outrun supply, and no stocks remain to be drawn on, while at the same time electricity demand has swamped generating capacity.

The question is: Can we stimulate production so as to overtake the ever-rising demand? Successive Governments have 982 done their best, but we on these benches have always believed that it was only through a complete reorganisation of the means and the conditions of work in the coal industry that we could get the fuel we need. That process has now been set on foot under the National Coal Board. Although production has improved, it must be some years yet before the full effect of reorganisation can be felt. The target for coal production which is fixed in the White Paper, is 200 million tons in the present calendar year, but in order to achieve that target, a number of measures will have to be, or are now being, taken. I shall deal with them in a moment, the result of which it is not possible to foretell with certainty. We must have a new, planned distribution of output, at least for the next six years, and we must continue planning, not taking a target figure but a fair estimate. Otherwise we may find a deficit of one vital need, such as stocking up, through over-consumption for some other purpose.

The House will be aware that the holiday period falls chiefly in the six summer months. That is one of the reasons why the average production in those months is lower than for the winter period, though there are compensating factors, such as greater ease of transport and better health during that period. We have taken an estimate of 89 million tons as being available during the six summer months—83 million tons deep-mine coal, and 6 million tons opencast. Of this total, the first charge is for stocking up. We expect to start with 5 million tons of stocks, and we have decided the best we can do this year is to make that up to 15 million tons by 1st November. Ideally, it should be more—another 3 million to 5 million tons; but it we were to try and make it all up in this six months, it would mean so little was left for industry that the position would be made impossible.

I will now give the House the rest of the budget figures. In millions of tons stocking up, 10; electricity, 11.8; gas, 9.7; coke ovens supplying town gas, 5.2; water,.2; railways, 7; colliery consumption, 5.3; miners coal, 2.1; merchants disposal, house coal, 12.8; others, 1.2, larger non-industrial consumers, 1.5; Northern Ireland, 1.2; coastwise bunkers, .5; Service Departments, .5; miscellaneous, 1.3, leaving 17.6 for iron and steel, coke ovens not supplying town gas and other industries, making an inland 983 total of 87.9, to which 3.1 exports and bunkers are added, making 91 million tons, from which should be deducted a saving by coal-oil conversion of 2 million, leaving a figure of 89 million tons. These figures are based, so far as gas and electricity are concerned, on full industrial use, consistent with allocations of solid fuel to industry, and continued substantial restrictions on domestic and non-industrial users. We want to save an average of 80,000 tons of coal a week on domestic and non-industrial gas and electricity consumption during the summer. We have not yet finally decided how this shall be done, because we want to make the inconvenience and worry of that saving as small as possible. We must do our best to get that saving, and if we do not get it, it will mean a further industrial cut, as there is nowhere else the coal can come from. We shall certainly have to prohibit certain wasteful and unnecessary usages during the summer, such as domestic space heating. It may be we shall be driven to the necessity of a domestic fuel rationing scheme.

Transport is to be on the basis of a ten per cent. cut on passenger services as compared with last summer, and the introduction of the summer services a month later—1st June, instead of 1st May. As I have mentioned, we intend to save 2 million tons from the coal-oil conversion scheme; we shall also have to secure some saving from double bunkering and supplies of bunkers to depots abroad. On that basis, there is left for iron and steel and coke ovens and for all other industry, 17.6 million tons for current use, apart from stocking, which is exactly two-thirds of the total estimated requirement if industry were to be running full out.

If the output of coal rises above our estimate, that will mean more for industry, and if it falls below, there will be less. We are now going to examine with industry how best we can allocate this quantity to give the maximum output, while maintaining a proper balance between the industries. It is unfortunate, but inevitable, that when all the other users have been cut to a minimum, industry has to get what is left over.

The House will observe that with an extra 8.8 million tons, industry can get all it needs, so that our immediate production problem is to get an average increase of about 10 per cent. above the present 984 estimate in the next six months, if we are to maintain full industrial production. We shall do our utmost in that direction, and shall appeal to the miners to give up just that extra bit necessary to keep our industries going full out. Every extra ton will count. It is an attainable target, and I know that the miners will do all in their power to help in this vital struggle to keep their fellow workers fully employed throughout the summer, and to get the exports which are of such supreme importance to us at the present time.

I have not the time to go into all the details as to the various measures we are taking to increase production. They consist of two parts: To enlarge the total labour force, and in particular, the total number of face workers—that is the ratio of pit workers to other workers—to increase the output per man-shift, and secure regular attendance. Even with present limited pit room, there are vacancies for face workers in some mines. If we are to get a substantial increase we shall need more face-room, and that will be developed as quickly as possible, but it takes time. More workers will be trained. Ex-miners from the Forces will be encouraged to return to the pits and from other industries by more intensive propaganda, and by putting no hindrance in their way whatever work they may be doing. In the long run, we must depend on British miners to get the coal. We shall certainly fail to get our own people into the mines if we create the impression that it is such an unpleasant job that we cannot expect British people to engage in it, and so we must get foreigners to do it for them. By all means, as a temporary help, let us introduce Poles or any one else with whom our miners will agree to work, but our main purpose must be to make the industry attractive enough to recruit our own men into it. That is why we propose to exempt from call-up to the Forces for the next five years underground coal miners as well as to make the industry more attractive by the provision of houses, hurrying forward with pithead baths, the supply of more food and consumer goods in the mining areas and so forth.

To cope with the electrical situation, we require steps which are not merely coal saving, but which also deal with the problem of the peak load. We must, if we are to get sufficiency of production, avoid load shedding at the peak. To this end, 985 we have decided that a wholesale staggering of industrial hours is absolutely necessary, and we hope that the arrangement of two staggered day shifts will avoid the danger of large-scale shedding, without having to have recourse to night-shift working. This will only be so if we secure a very considerable economy in the domestic use of electricity, which is equally important from this point of view, as it is from the point of view of coal saving. We shall, at the same time, encourage the use of auxiliary diesel generating sets of about 50 kilowatts, or slightly more, which will make some contribution to the easing of the peak load. Before passing from the fuel and power difficulty through which we are passing, I should like to put it in its true perspective. This country has massive reserves of coal, and it has a strong, healthy and courageous population, amongst whom the miners have not always been recognised as men contributing a vital service to their country; perhaps latterly some of us, hearing stories of how they have struggled through deep snow to get to the pits to win coal for us, have gained a deeper appreciation of their contribution to our economy.

Our embarrassments at the moment arise through three causes—the running down of stocks during the war, the failure hitherto to get back to prewar levels of manpower and output and shortage of electrical generating plant. All these are temporary, and they will be put right because the British people will put their backs into this job as they always have done and do when there are difficulties to be overcome. The improvement required is marginal. A ten per cent. increase of output over the estimated figures would, as I have shown, clear us of all our internal difficulties as to fuel, provided that we did not indulge in the wasteful manner in which we used our fuel prewar.

The steel position is not quite so critical since the limiting factor will be coal and coke and we shall not be able to produce up to full capacity. Even so, if we balance the use of fuel by the iron and steel industry against that used by other industries we should be able to get through.

When we come to transport, we find that the railways are in a very difficult position. During the war their maintenance of permanent way, rolling stock and loco- 986 motives, had to be sacrificed to war necessities, while at the same time an ever-increasing load of traffic was thrown upon them. The utmost is being done to build up their wagon stocks, including the use of Royal Ordnance factories, and to increase the number of locomotives available, including the repair abroad of the wartime utility locomotives. The position regarding permanent way is particularly difficult. Here we are met with the impossibility of obtaining enough timber, although we have combed the world for it. Unfortunately, the Baltic and Russian supplies are not available at present, and that used to be our main source. We are doing what we can to provide substitutes and step up their manufacture, but the shortage is acute, and may have a serious effect upon traffic this year if it cannot be made good. Coal and industry will take priority over passenger traffic during this year, especially during next winter.

I now come to agriculture, which is an important priority as a saver of imports. I will not now repeat what our policy is in this field, but I would point out that our difficulties are labour and machinery. Hitherto we have been able to maintain a labour force by the use of the Land Army and large numbers of prisoners of war. The former is falling off in number, and the prisoners are being repatriated. This labour must be replaced if we are to maintain our output. Here we are anxious again to recruit our own people, but we are planning to get help, as far as possible, from foreign labour, especially where it can replace prisoners of war. So far as machinery is concerned, our own output has gone up very greatly since prewar years, and at the same time we are importing foreign machines which will improve our efficiency. We have, in fact, the most highly mechanised agriculture in the world. The prospects for agriculture are good, now that for the first time the industry is to have a stable basis, under the terms of the Bill now before the House.

I pass now to our programme for capital equipment. As to this, I think there has been some misunderstanding. The objective of the White Paper is stated to be that 20 per cent. of the national income, after allowing 7 per cent. for depreciation, should be expended upon capital equipment and maintenance. How that should be divided up is set out in paragraph 117. 987 By way of indicating the sort of comparison with prewar, it is pointed out that the 1947 programme will exceed, by at least 15 per cent., that of a normal prewar year. That is the programme for capital equipment, and maintenance, excluding housing and housing maintenance. No one doubts the pressing need for industrial re-equipment in this country, and so far as possible we want to provide our own machinery and plant. If we cannot, and it is urgently needed for our industries, we must import it from abroad.

I want to make it quite clear that there has never been any question of withholding scarce currency in such cases. The difficulty has been to get orders placed, and the very long delivery dates offered overseas. In the past, of the country's total expenditure on capital equipment and maintenance, not more than a quarter has normally gone on industrial plant, and a great deal of that was for the simple replacement of existing machines. The net addition to the stock of equipment was a relatively modest matter. That is why we find ourselves today in many ways ill-equipped to carry out extensive industrial re-equipment ourselves with new plant, and why we have encouraged the expansion of those industries which manufacture such equipment.

The proportion of the expenditure on capital equipment and maintenance that will go to supplying machinery to industry under the plan will be very much more than 15 per cent. over prewar. That is the figure assessed for the whole category, and within that category the proportion of machinery for industry would be much higher than prewar. It must not be forgotten that during the war the engineering industry had enormous access to new equipment, much of which is still available. The fact that the very large wartime surplus of machine tools has been disposed of so smoothly, without any interference to the machine tool industry, shows how eagerly this new equipment has been absorbed in other parts of industry.

To take another case, the cotton industry, we are trying to give Government assistance to stimulate the ordering now of new equipment which is badly needed. In another case, we have brought in the capacity of the Royal Ordnance Factories to assist with the building of special 988 machinery such as, for instance, that for fully fashioned silk hose. We should like to see re-equipment going forward even faster, and our greatly expanded engineering industry playing the major part in the re-equipment. So far as orders for goods from overseas are concerned, we, too, are disappointed that not more have been placed. Within this capital re-equipment scheme there are, of course, vital priorities, such as coal mining machinery and electrical generating plant, to mention two obvious ones, and we are taking steps to see that these two categories get a more complete and unequivecal priority than they have in all cases hitherto enjoyed. It is the old wartime difficulty of chasing through to each sub-contractor and sub-sub-contractor, and applying the same material priorities to his part of the job as to the main contract. On the whole, I believe that if this matter of re-equipment is examined, industry by industry, and factory by factory, it will be found that the cases where desired re-equipment has been held up, except by the length of time to execute the order, are extremely few, whether the machinery is manufactured at home or abroad. Indeed, we have been putting pressure on industry to re-equip, but there is a limit to the speed at which it can be done.

As to building, with special reference to new capital equipment and maintenance for industry, we have a sufficiency of labour provided the division between housing and other forms of building is kept sufficiently flexible, so that if materials are short in one category the labour can be switched across to another in which there is not the same shortage of bricks, timber, or steel, or whatever material it may be. There is, undoubtedly, a great deal of new factory accommodation which will ultimately be needed in industry in this country but it is not, at the moment, such an urgent priority—except in the Development Areas, where special efforts are being made—as raw materials, fuel, or machinery. In the building industry, perhaps more than anywhere else, there is an ample opportunity for increased output per man hour, and this is one of the cases in which we believe that a proper incentive system would have a marked effect.

So far, I have been dealing with those basically important forms of production 989 to which we must especially devote ourselves this year. Until these deficiencies are remedied we shall not become fully conscious of our acute shortage of manpower, but, as soon as they are, we shall find ourselves up against a manpower problem. I do not propose to deal with the manpower employed in the Defence Forces because that topic merits more than a cursory reference in what I am afraid is already an over-long speech, and it will be fully dealt with by my right hon. Friends the Minister of Labour and the Minister of Defence tomorrow when they speak in this Debate. In the total volume of manpower available, it is calculated that we shall be able, by the end of this year, to have got 100,000 foreigners to work They may be Poles, or other imported labour. That figure has been criticised as being too small. We could have written in a quarter or half a million if we had wished, but the figures would not have been realistic. In this country we are not, like France or other Continental countries, accustomed to use foreign labour in bulk, and it is essential to go carefully with its introduction, or more harm than good will be done.

It is not only trade unionists who are anxious about the introduction of foreigners. The same attitude rules in professional bodies, indeed everywhere where competition or unemployment is feared. Nor is it the slightest good to force foreign labour upon an unwilling industry. To do so will not increase, but reduce, production by the unrest and dislocation that it causes, The language problem is a very difficult one. In the mines, for instance, from the safety point of view, a foreign miner must be able to understand English. There is also the accommodation difficulty. We are most anxious to get in as much foreign labour and employ as many Poles as we can, but we believe that the realistic figure is roo;000 placed in industry by the end of this year. That, of course, is not a maximum. If the measures we are taking to get them are more successful than we anticipate then so much the better for everyone.

This gives us a total estimated manpower of 18,400,000, and a question arises as to how we want to see it distributed under the main heads. On page 29 of the White Paper there is set out the approximate distribution for December, 1946, and 990 December, 1947, the latter being appropriate to the plan set out for 1947. Substantially, what it comes to is this: We hope for 278,000 more people to be available in 1947 than was the case in 1946, and we have expressed how that extra labour is likely to be spread over the different uses, a small reduction being made in the public services, which is also added back to the other items. The changes are not large or striking, and an explanation of them is given in paragraph 129. I do not propose to go through all these items, with a number of which I have already dealt, but there are one or two observations I must make on them. This distribution of our labour force, although it is the best we can achieve, will not by any means restore our prewar position in a number of consumer commodities, particularly the textile group, where there will still remain a very serious and marked deficiency. We are going to do our best there to help with foreign labour, and hope for some success. We are also trying very hard to get the cotton industry moving on a plan of re-organisation and re-equipment which will, we hope, with a smaller manpower, give a greater production. But it is a very slow job, and as the weeks and months go by, without any final decision by the industry, the time for getting results is further and further postponed.

It will be noticed that the distributive and consumer services, other than transport, take up a very large volume of labour—4,500,000—and that it is recognised, in the plan, that that may slightly expand this year. The growth of the tourist industry, which we are trying to foster, will mean a growth of the labour employed in that industry. A large part of this industry is to be found in the distributive and wholesale and retail business, as to which, unfortunately, our present knowledge is very limited. In December last, 2,300,000 people were employed in distribution. While this represents an increase of 15 per cent. on the previous year, it is still well below the prewar figure of 2,900,000. As against this total, the volume of goods handled by the distributive trades was probably little less than prewar, so that there is already an economy of labour in distribution. More goods are now being handled per person employed. That, of course, we welcome, but we must go even further. 991 It is the national duty of those engaged in distribution to make every possible economy in the employment of man and woman power which may be used in productive industry. I am sure that they will recognise that, and shoulder that responsibility. We ask them for their cooperation. We should all like better distributive services, fewer queues, quicker service and better delivery, but we just cannot afford to increase the numbers employed in distribution while important industries, like textiles, have to go without.

Another item I may mention is public services. The figure of 2,130,000 is made up of: National Government employees, 1,016,000, of whom the Post Office and industrials number 615,000; local government, 1,014,000, of which the fire services and police number 89,000. The first total, 1,016,000, is under the direct control of the Government. The second is not. The target reduction for the combined figure is 80,000, but this will be immensely difficult, especially while the present shortages make rationing of many kinds essential. If fuel rationing is to be done in any form, we shall need additional manpower to administer it. Some part of this manpower is, of course, doing what used to be done outside Government service, and, therefore, is not an addition. Some of the staff of the National Insurance Department provide an illustration of that. Other staff is still employed in winding up wartime commitments — demobilisation, disposal of services, many matters connected with the occupation of Germany, and so on. A large block is employed in rationing food, clothing, furniture, and in the allocation of raw materials. These categories will, it is hoped, be reduced as soon as world and domestic shortages start to disappear. A good many of the minor controls have in fact already been got rid of, and others will progressively' be abolished as the supply situation improves. Having set out the desirable labour distribution for the end of 1947, this is related to the expected distribution of resources during the year, which is on page 31, paragraph 137.

The figures for 1946 are not yet available, but will be published in association with the Budget of the Chancellor of the Exchequer in the usual way, when the inter-relation of our financial and commercial situation can be more fully dis- 992 cussed in the light of the survey he will then make on the past year's financial policy, and any proposals which he has to bring forward for the coming year. The comparison, therefore, must be with 1945, which is not of much help owing to the very great change in circumstances—for instance, Defence falling from 49 per cent. to 11 per cent. The comparison with prewar is perhaps better. It shows a lower percentage on personal consumption, with a higher percentage expenditure on Defence, other public expenditure, capital equipment and maintenance.

I now come to what is of fundamental importance, and a matter which has led to a great deal of criticism, that is: How is the plan to be put into effect? The general line of criticism has been that, while setting out the facts, the White Paper fails to show how the difficulties are to be overcome. That is a very understandable criticism, especially from those who find it difficult to distinguish between totalitarian and democratic planning.

It is an interesting fact that most of this criticism is really inspired by the same unconscious reaction towards planning: "You need not worry about me, I will do my bit, so leave me alone, but make the other man do what he ought to do in the national interest." Employers urge that they should be freed from controls, but that labour should be disciplined. There is a demand for a wages policy, but not for a profits policy. Employees tend to take the view that employers should be strictly controlled in their profits, prices, and so on, but they, the employees, should be left free to bargain as best they can in what is now a sellers' market, so far as labour is concerned. The manufacturer would like the wholesaler's and retailer's profits regulated, but not his own profits; the retailer and the wholesaler, curiously enough, take the opposite view. This perfectly natural reaction of each wanting to be free, from restraint or control himself, but wanting others to be controlled so as not to affect him adversely, makes the idea of democratic planning somewhat difficult to implement.

Yet we all recognise that there must be some method of planning in the postwar world. The plan in the White Paper is very widely accepted but the crucial and critical question is: How far are we to use compulsion to enforce the carrying out of the plan? When a complaint is 993 made, that the Government have not shown how the plan is to be realised, it really means that the Government have not expressed themselves as ready to compel this or that section of the people to conform in their actions to the national interest. It is here that we believe that a clear distinction must be drawn between the lack of control over the individual in the choice of his occupation, on the one hand, and, on the other, the controlled use of those material factors which are necessary for production. The material factors are the social and economic instruments available to the nation, the use of which must, under modern conditions, be planned, and, therefore, to some extent, controlled by the community. The great difference between our present and our prewar economy is that labour, which before the war was looked upon as a comparatively cheap commodity in full supply, of which, in fact, there was always a surplus, has now become in very short supply—that is to say there will be an overall deficiency as soon as the supplies of fuel and raw materials are readily available. While there was a surplus, no one pressed for a wages policy, except in the sense of a minimum wage to protect the worker, because the ever present mass unemployment was in itself sufficient to moderate the demand for improved wages and conditions. Now, however, the circumstances have been reversed, and with the prospects of over-full employment and the pressure of the shortage of labour upon wages and conditions of employment, a demand is made for what is in effect a Government policy to restrain the employee from using the shortage to his own advantage.

In fact, the White Paper contains a wages policy, but not the sort of policy that some people are demanding. We are proceeding upon the basis that despite the difficulties created by full employment, employers and employees should remain free to settle the conditions of work or wages in industry, where the employers are private or public companies or corporations. But as is stated in paragraph 28 they must, we believe, take a much broader view of the national interest in their negotiations than has been done in the past. They must have regard to national economic tendencies and dangers, and not merely to those of their own industry. As stated in paragraph 131, the undermanned industries, the less pleasant 994 and heavier industries, must have their conditions improved, so that they become less unattractive. They certainly must not repel the manpower it is sought to add to them. That process has been going forward with Government help in the way of granting building licences and allocating materials.

Any question of increase in wages and profits must be accompanied by a corresponding increase in production. So again, it is emphasised that the nation cannot afford shorter hours of work unless the change can be shown to increased output. Finally, in paragraph 134, stress is laid upon the need for having some incentive element throughout the wages structure which will be an inducement to a higher rate of productivity. The policy, therefore, is I think quite clear: First, we cannot afford increases in wage levels or shorter hours unless they increase productivity per man year. Second, in the less attractive industries which are undermanned, there should be improvement in conditions to overcome the comparative disadvantages from which they suffer. This must not lead to a competitive race for improvement in all industries, or its purpose will fail. Third, incentive schemes should be introduced into wage systems wherever possible. Fourth, the Government will provide both sides of industry with all the information and assistance possible through the National Joint Advisory Council and otherwise, but they leave the implementation of the policy to the two sides of industry.

§ Mr. Boothby (Aberdeen and Kincardine Eastern)

Will the right hon. Gentleman say what the incentive must be?

§ Sir S. Cripps

Piece rate work, bonuses and other incentives, which vary greatly in each industry. The circumstances of today undoubtedly offer a great opportunity for inflationary tendencies to develop. The tremendous pressure of demand, with only a limited capacity to supply, means that there is a tendency to enter a price wages spiral. So far, we have been able largely to avoid this danger, and this has been to a great extent due to the restraint and good sense of the workers and their leaders, who have not pressed unduly their advantageous position in the labour market. It is more than ever necessary in the circumstances disclosed by this White Paper that the restraint and good sense 995 should continue, for if we were to experience a rise in wage levels or a shortening of working hours which seriously reduced the volume or increased the cost, of our production, we should undoubtedly risk a most serious worsening of our position. The policy, as I have said, is broadly agreed by everyone. The difference that exists is as to how it should be put into operation. We believe that the best way to get such a policy operating is to leave its implementation to the leaders of both sides of industry, in the light of a full knowledge of the economic difficulties of the country, and this is the course which we have decided to adopt in the plan for 1947.

So far, I have dealt with this one aspect of implementation of the policy. There are, of course, special steps which I have mentioned with regard to the various basic industries and services which are being taken to implement policy, but when it comes to the general question of the productivity of our industry, we must, of necessity, fall back upon the voluntary efforts of both sides in industry, except where a whole industry can be taken over and reorganised or can be persuaded with Government assistance to embark on a considered scheme of productive improvement. Broadly speaking, the job of production is divided between the management and the worker; the management providing the tools and the worker doing the job. By tools, of course, I mean not merely the machinery, building, finance, and so on, but also the skilled management whether it be works management, production, or personnel.

The condition of maximum production by the worker is determined by the environment in which he works, both physical and psychological. More and more it is coming to be realised that the worker's reaction to his daily surroundings will determine his morale and so his keenness and concentration on his work, and thus his volume of production. Without any mechanical change whatsoever in the present set-up of our industries, we could, undoubtedly, get a considerable increase in production if every worker were happy in, and keen on, his work. It is along these lines that there is still much to be done in the science of management, and it is for that reason that the Government, as part of their 996 plan to increase productivity, have financed, in its initial stages, the British Institute of Management, which will, we hope, help to develop to the highest point possible the management techniques of this country.

Another way in which much saving could be made is by redeployment of labour in our factories. In the past, with a plentiful supply of labour, this matter was not deeply considered by industry as a whole. The trade unions, anxious to keep their people in employment, looked upon it as an advantage if extra hands could be kept in employment, even if they might have been dispensed with by some rearrangement of the work. Now that there will be a shortage and not a surplus of labour, it is essential that we should study the deployment of labour in our factories to see what savings can be made. Such savings would not only conserve our labour reserves, but also reduce prices as well. In the long run, we should look to the raising of our standard of living along the line of reduced prices and stable wages, rather than on the basis of ever increasing wages and prices chasing one another, and so far as past experience goes, prices always winning. One of the uncertain factors in the situation about which there has been much discussion is the change that has taken place in the tempo of production or the rate of output per worker. All sorts of statements have been made as to the fall of production per man hour compared with either the wartime or prewar experience. The fact is that no figures existed upon which any general judgment can be based. I know of individual cases where it has gone up and where it has gone down. Even in two factories working side by side and drawing on the same labour force often wide differences of performance are to be found, influenced, for example, by the degree of skill of management in one factory compared to the other. During the dislocation of reconversion, with the attendant difficulties of the shortage of many raw materials and retooling, it would be surprising if there were not some fall in production per man hour, but it was little good to try to ascertain the facts until that stage had been passed through. We are now instituting inquiries to try to find out what these trends are.

In the concluding paragraphs of the White Paper we stressed the need for 997 getting rid of all those restrictive practices and ideas which may have been applicable to a condition of large scale unemployment, but which have no place in a time of full employment. We need a great degree of flexibility of mind on both sides of industry if we are to adapt our industries to the new economic circumstances. The Government have done their utmost to help along those lines. The production departments are in various ways suitable to the particular industries with which they deal, bringing the workers and employers together to work out ways and means by which each industry can improve its performance in production. The working parties and the Industrial Organisation Bill exemplify how this is being done. The Production Efficiency Department of the Board of Trade and the intensive course of education for foremen and others organised by the Ministry of Labour are other examples and they could be greatly multiplied. It is impossible to compel people to produce. We can persuade them and help them, and that is what the Government are trying to do, but the result will depend upon the response and co-operation of industry as a whole, and it is for that cooperation that we ask for in the White Paper.

I have tried to lay before the House and the country in some detail, and I fear at great length, the main lines of our economic situation as it has developed since the war, and as it now presents itself. There are, of course, many important points upon which I have been unable to touch, but they will, I am sure, be covered up by my right hon. Friends at a later stage in the Debate. There is no doubt that this is one of the most important if not the most important Debate which has ever come before this House. For the first time in this long democratic history, it passes in review, the economic condition of the country, and the steps that should be taken, as is stated in the Motion which I have moved, in co-operation with all sections of the people of the country to overcome the difficulties and make secure the foundations of our industry s as to provide a higher standard of living for our people. Democratic planning to this end is something towards which we must feel our way with care and we must not be driven along the path. upon which some would apparently have us travel of compulsion and direction, or into the jungle of chaotic 998 failure which luxuriated in the aimless and unplanned laissez-faire atmosphere of the period between the two wars. Nothing that has so far happened, leads us to believe that there is any better way than the way which we are now pursuing, and we shall continue upon it with, I hope, the support of the people and the co-operation of both sides of industry, whose help we shall need, and whose assistance we seek.

The picture is undoubtedly a dark one, but it is dark, not because it is hopeless of solution—let no one make that suggestion for one moment—but because the way to its solution is hard, and calls upon us all to make sacrifices of present comfort to the future stability and prosperity of our country. The defeat of our enemies in six years of total war preserved for us our freedom and opened the way to a democratic future of prosperity. But it also left us with the gravest deficiencies and the most tremendous tasks, if we are to take advantage of the opportunity which we had won for ourselves and for others. The first easier stages of reconversion are safely and successfully negotiated, and we have now come face to face with the real difficulties of the situation—difficulties which are not transitory in their nature, but which will require all our most determined efforts to overcome.

This is not the time for a supreme emotional call to service for some short time of emergency as in the days of Dunkirk, but rather for a steady drive like that which followed the Dunkirk period of the war, when the people, never sparing themselves, remorselessly drove forward production on every front, but particularly upon those which were then critical. Today, fuel, power, transport and agriculture are critical fronts, not for the destruction of an enemy but for the preservation of our own future. Never have the people of this island backed, helped and encouraged by the sister nations of our great Commonwealth, failed themselves or the world when, with native intelligence and with high hearts, they have gone out to meet and break through the difficulties that have confronted them. Today, they meet a new challenge, a challenge to their capacity. It is one which is well within their competence but which demands of them renewed efforts and sacrifice. They will meet that challenge as they have met others in the past; and history will recall these months through 999 which we are now passing, as a great opportunity, boldly seized and courageously undertaken by the whole British people.

§ Mr. Oliver Lyttelton (Aldershot)

We have certainly listened to a very painstaking and conscientious speech by the right hon. and learned Gentleman the President of the Board of Trade. It must have been a considerable feat of endurance to deliver it, but speaking for myself, I would not say that it was a feat of endurance to listen to it. There is much of it, however, which went into many details caused by the fact that the first things have not been put first, but with that I will deal later on. Just about a year ago, the Prime Minister, in reply to a speech which I had made on economic affairs, said: I must say I was a little surprised because I gather that he"— that is I— classed himself amongst the lively and optimistic people…I think it was rather excessively gloomy."—[OFFICIAL REPORT, 27th February, 1946; Vol. 419, c. 1951.] I wonder whether, if the Prime Minister had the opportunity of making that speech again in the light of the present conditions, he would hold the same view.

Personally—and I hope the House will forgive something personal—I have felt increasing anxiety about the future of our country three times in my life. The first was in 1918, in the battles in Flanders, when I thought that three German armies were going to overrun the Channel ports, and the second was when I first became a Minister in 1940, and realised how great our weakness was. I admit that my own personal fears and anxieties in 1918 were relieved by being in the battle itself and seeing the field grey of the German armies, 100 yards ahead and lapping round our flanks, and in 1940 by the incomparable leadership of my right hon. Friend the Leader of the Opposition, whose ringing words will, I believe, only perish with the English language. I am much more anxious now, because the enemy is invisible and intangible, and because the extent of our peril in peace does not bring with it, as it does in war—and for this the Government have to bear a share of the blame—that almost automatic national unity in our race, a race which can be disputatious, awkward, apathetic 1000 and even sullen in workaday times, but upon whose ears the alarums of battle and the silver snarling trumpet of battle, has never yet fallen in vain.

We heard the sound of the guns in 1918 and in 1940 and may we be given the hearing to hear the sound of our dangers now. We must all do what we can to help. These are not the times for faction and dialectics. They are times for a sane recognition of our dangers, and if I have a criticism of the right hon. and learned Gentleman's speech I think that it tended to underestimate the dangers, but with him I believe we are not going down. I do not think he underlined the dangers as he should have. This is not the time for carping criticism dictated by party interests, but I think a time for ruthless criticism, and only when we do that shall we be able to recognise our mistakes and set a new course. The White Paper makes a survey of our economic state. It shares the misfortunes which have disarranged many authors and writers before in that if was completely out of date when it was published. The White Paper was assembled, I believe, in October, November and December of last year, drafted in December, emasculated in January and published in February. By the time it came out silence reigned over a whole number of our factories and the hum of power was stilled. We witnessed the largest industrial dislocation which we have had since the General Strike.

There are parts of the survey dealing with 1945 and 1946 which are certainly complacent and tendentious, but I do not wish to stress those parts of the Paper, but rather to praise that part of the diagnosis which is blunt and clear. At least we can agree with any attempt that the Government may make to place a clear diagnosis in front of the people. I express the hope that every instrument of publicity will be used so that every man and woman in the country will be able to see the economic enemy as clearly as we saw and heard and felt the human enemy during the two wars. But in spite of what the right hon. Gentleman has said, it is when we turn to the cures that I confess to a feeling of deep disappointment which is not far from despair. It seems almost as if the diagnosis had been written by a team of competent officials and the part which deals with action by a team of Ministers. All through the 1001 document one gets the impression that the horse is being gathered and balanced to jump the fence, and that then, at the last moment, the rider has funked it and the horse has refused. I still believe that the Government, although at long last wishing to tell the people the truth, burk at telling thorn the consequences, and I say that the motto which is written all over the White Paper is, "Let us turn our backs on the future."

If I am not to over-try the patience of the House I must endeavour to concentrate my speech on what I consider to be the essentials, and it may be that the first subject upon which I should touch is that of controls. The House is aware that we on this side think that controls are overdone, that they go down too far, and that they are cumbersome and clogging. We think that although risks may be involved many of the down-the-line controls could be done away with altogether, but I will deal with this later. To suggest that we believe—and it is often suggested—that the Government should not have a central and overall plan for extricating the country from its present difficulties is manifestly absurd and insults our intelligence. To say that the Government must not have a plan would be tantamount to saying we must not have a Government at all, because plans are to Government like eggs are to omelettes or treaties to Foreign Offices; they are the nature of the thing.

But the Government in our circumstances must certainly ration their plans as well as other things. They must plan the key essentials; upon that we are all agreed. But they must also plan them right and must be prepared to enforce the key controls, whatever the consequences, whether they are popular or unpopular, and whether or not they inflict hardship. In the field of economic control the old slogan of Colonel Henderson, the author of "Stonewall Jackson", on which I was brought up as a soldier, remains doubly true: "Centralisation, the last refuge of administrative incompetence." Let me add that to imagine that centralisation by itself co-ordinates, simplifies and hastens action is the last refuge of intellectual ignorance and bewilderment. In my opinion, the Government have an over-elaborate mechanism—which they are making even more elaborate—and no plan. It is not concentrated on the essential strategical controls and orders without which our 1002 economy can never be brought into balance.

I do not ask the House to take it as a mere assertion when I say that I think that the Government have a mere elaborate mechanism and no plan. I want, if I may, to demonstrate that they have no plan by one or two examples concerning fuel and power. I cannot go very deeply into this, but I claim that when 2,200,000 men are put out of work, the greatest industrial areas in the country shut down, and almost every householder subjected to miserable discomfort and even hardship, and when we find that at the end we have saved less than one day's output of coal, then that means that there has been no plan. What of an economic plan—the right hon. and learned Gentleman has touched on this point—which, ends up, as it will, in having to ration our only indigenous raw material, namely coal, all of which is produced in our own country, and leaves untouched commodities like tobacco, every shred of which has to be imported from abroad, mostly at the cost of precious dollars? What kind of plan is that?

Then with regard to power. The right hon. and learned Gentleman, with all his forensic skill, tried to take the poison out of the arrow by owning up himself, but he cannot get away with it like that. It is well known that electrical appliances have been springing up all over the country like mushrooms, not made by big firms but chiefly by new manufacturers. The House will remember that in October, 1945, domestic cooking and heating appliances were exempted from Purchase Tax, and electric kettles in 1946. What was the song which Ministers were singing at that time? I will go no further than to quote the Chancellor of the Exchequer—since he is here—as reported at Nottingham in June, 1946: In the home market the country is forging ahead and goods of many kinds are now reaching the shops in greatly increased quantities. Compared with a year ago there is an increase of no less than 530 per cent. in household electrical goods. The right hon. Gentleman did not mention at the time that before the end of the winter there would be no electric power to work these appliances.

§ Mr. Skeffington-Lodge (Bedford)

It is easy to be clever now.

§ Mr. Lyttelton

I take that as a compliment.

§ Mr. Skeffington-Lodge

It was not meant to be such.

§ Mr. Lyttelton

I am only trying to prove that the right hon. Gentleman was foolish in the past; we are coming to the cleverness in the present. What are the key controls and the overall strategical plans which must be laid down right and upon which all else must depend? The first is the policy of the Government, which has not been mentioned, on the supply of money. The control of the volume of money is the first and most important instrument by which the whole economy of the country can be kept in balance. In fact, it affects every aspect of our national economic life. Let me examine briefly how the Government have used it. First, I think we agree that all wars in more or less degree are financed by inflation; they cannot, in fact, be financed in any other way; but as soon as a war is over it is necessary first to check the momentum with which money is being created, then to stabilise it, and then to move as quickly as possible towards a balanced Budget.

What has happened? I must trouble the House with some figures, and for convenience I add together the two modern forms of money—note circulation and clearing bank deposits. In 1938, the money of those two sorts in circulation amounted to £2,762 million. By January, 1946, that is over a period of seven years and largely due to the war, the money in circulation had risen to £6,077 million. That is, an average yearly increase over the war period of £475 million. But between January, 1946, and January, 1947, it rose by £806 million. In other words, the rate at which bank deposits and notes in circulation had increased fell not far short of twice the average rate during the war, and we are only a month or two away from the end of the second year of peace.

There are three main reasons for this having happened. First, continuing budgetary deficits on a huge scale, some of which are due to subsidies; second, a cheap money policy carried to excess; and, third, nationalisation, the effects of which have not yet been fully felt. Nationalisation has the effect of turning inert, unspendable assets into quick purchasing power. For example, a shaft, a head-frame and a washing plant in a colliery become over-night, as the result of the Government's nationalisation policy, a 1004 Government security which is quickly realisable. As I have said, it makes inert assets quick. One of the effects of all this has been a very sharp fall in the value of sterling abroad. We must just face this unpleasant fact. The extent of it' cannot be measured because the control of exchange and the pegged rates disguise the effect. I am not going to support this statement by actual figures unless I am pressed to do so. If we are to fight off the enemies which are surrounding us this fatal process must be reversed, and reversing it is going to be a much harder and much more painful task than if the Government had produced their economic survey and had had some kind of economic policy three months after they came into Office. And there was no reason why this kind of survey should not have been produced or such a policy formed.

Reversing the process means, above all, a reduction in Government expenditure. It means moving towards a balanced Budget as quickly as we can, and it means taxes designed to drive labour and resources away from the unessential and towards the essential industries and occupations. The present policy can only lead to one of two results. Either controlled inflation—and we have all to recognise that it is controlled inflation—will get out of hand and become uncontrolled, or further price controls, further subsidies, further rationing, and further licences will become necessary in order to keep the exiguous supply of goods away from the bloated supply of money. In that process of putting down further controls the last remnant of the ingenuity, liveliness and buoyancy of the British people will be finally suppressed. We have already gone a long way towards that dungeon. I make no apologies for talking on these financial, questions, because the idea that we can have an economic and manpower survey in isolation from a financial survey is quite nonsensical.

At this point a word is necessary about food subsidies, the cost of living and wage levels. I think I am right in saying that when the Coalition Government first introduced food subsidies they were about £50 million a year compared with £450 million today. Sir Kingsley Wood, who was then Chancellor of the Exchequer, said: I put this forward as a most important development of policy and I hope we may thus create conditions which will enable the wages situation to be held about where it is now 1005 Since the beginning of the war industrial wages have risen by rather more than 65 per cent., and food prices by 22 per cent. So some stark facts have to be faced. If this subsidy is allowed to grow uncontrolled it will end by defeating the very object at which it is aimed. A general inflation, to which this subsidy will make a great contribution, will so lower the purchasing power of money that the advantages of a low, pegged price of food will be swept away by huge rises in the price of other necessities, houses, clothes, boots and shoes, household linen, pots and pans, and so on. So to tackle the food subsidies is, in the long run, a protection to the people.

Unfortunately, here the Government were faced with a dilemma. What about the salaried classes, the clerk and the professor and the pensioners, whose salaries and pensions have not risen like industrial wages? What, for instance, is to happen to the small investor, who drew his income from shares in railway companies? So far from his having had a 65 per cent. rise in his income, his income has actually been halved by the compensation which is to be given him by the Chancellor. What will happen to him? We ask the Government what is the answer. They have to find the answer, but I can help them to this extent by saying that, in finding the answer, I do not for one moment suggest that the milk subsidy should be lowered. That is a thing which I think we all wish to see maintained at its present rate.

The most powerful instrument for restoring our battered economy is restricting the growth of money and ceasing to budget for deficits on the present scale. Too much money chasing too few goods, in the Chancellor's words. It is true; but it does not appear to have occurred to the Government that the first thing to do is to adopt the method of creating less money and progressively releasing sources of production to swell the volume of goods. In short, the answer is to make less money and more goods. The more money is created, the more controls over goods and services will be necessary. Create less money, and we will be able to reduce controls, and reduced controls will mean more goods. The last act of the Government's tragedy is full of dramatic irony: the only thing in the Socialist state which is cheap and plentiful is money, 1006 everything else is scarce and dear. The Government, like the Meteorological Office, has entirely misread the economic weather. They were on the crest of a scarcity boon, which calls for a check in the creation of money, but the Government have expanded where they should contract and have contracted where they should expand.

I turn to the next control, which is not at all a desirable form of control, but which is imposed upon us by our straitened condition—the control of foreign exchange. No one, I think, would contend that, today, we should allow anyone to spend dollars abroad as he likes or invest money abroad as he likes by selling sterling. Our resources are far too slender and are being diminished too fast to allow us to make any such freedom possible. But, if the Government are to ration foreign exchange, then they must inevitably assume some responsibility for seeing that that foreign exchange is wisely spent. This is common ground. The wrong way to do it, except, possibly, for certain foodstuffs, is by bulk purchase by a central authority and allocation by the Government down to the individual buyer and factor.

The result of this, despite what was said by the right hon. and learned Gentleman, is an ever-increasing army of officials, dealing with an ever-increasing range of commodities and with an ever-increasing ignorance of what they are doing. It is the operation of this policy which has meant the enormous rise in the number of people in the Government service. The Civil Service embraces three times the numbers employed in the coalmining industry, and, even if such numbers help production, instead of hindering, which they most assuredly do, we cannot afford it. We are continually saying that we are short of manpower. What is the right way—and I am talking about imported raw materials from abroad? It is, first, to open the commodity exchanges which are now closed and to ration their use of foreign exchange. This is what has happened in rubber. The fact is that the price mechanism, without the help of which no speedy distribution can ever be made, begins to operate.

Where very scarce raw materials, including those originating in this country, have to be dealt with, where there were no commodity exchanges in the past, the right thing for the Government to do is to 1007 allocate the exchange, in the one case, or the raw materials, in the other, in accordance with a rather simple statistical, or, if they like, "hit or miss," scheme. Let the industries through voluntary bodies, whether trade associations, the joint industrial councils or the right hon. and learned Gentleman's new found development councils, use them to redistribute raw materials to industry factory by factory. In these matters, it is a case of devolve or die—die strangulated by red tape or smothered in a bolster of papers—and that is just what is happening. The Government are taking just the opposite course by imposing more controls. I see an hon. Gentleman below the Gangway nodding his head. No doubt he will have something to say on that.

The building of a power station, to give one example, which is described by the Government as work of the highest priority, involves permits, licences, clearances and priorities from no fewer than eight different Ministries and public authorities, all at war with themselves and only united in carrying on a war with the applicants for the licences. The average period—and I have been at some pains to check this up—taken to clear such a project is little less than 12 months. That has nothing to do with the manufacture of equipment; it is the time which is taken to clear the project through the Elizabethan maze of Government Departments, priorities, forms and what-not.

I next turn to the subject of manpower. Today, I confess that I am more haunted by the fear of our production being held up, by shortages of raw materials, or a few of them, than I am by actual shortage of labour. I agree with the right hon. and learned Gentleman that, if and when we recover from the disaster of fuel and power, we shall again be faced with a shortage of manpower and the problem of the unpopular industries. It is the problem of how to act in a condition of full employment, when there are more jobs to do than there are men and women to do them, and the problem of how we are to keep up the supply of labour in the unpopular industries. We on this side of the House refuse to accept the direction of labour as a solution, and we have always done so. The last remnants of democratic institutions would follow freedom of discussion and would go by the board 1008 if we had to revert to the direction of labour. We rejected it, just as the Government have done, but, once rejected, as it must be, that is the end of economic planning of the sort to which this Government is wedded and in the sense in which those words are popularly used. The Government have at last had the courage in the White Paper, to own up to this inescapable and unpleasant fact. What does the White Paper say? Indeed, the task of directing by democratic methods "— I interpolate that that means without direction of labour— an economic system as large and complex as ours is far beyond the power of any Government machine working by itself, no matter how efficient it may be. That, again, is a kind of economic planning which the right hon. and learned Gentleman has been describing at very great length as quite impossible in