DEFENCE (GOVERNMENT PROPOSALS)

§ Mr. Emrys Hughes (South Ayrshire)

In resuming this Debate, perhaps I should explain that I am not beginning on behalf of the Government. It was due to an accident that I was on my feet at ten o'clock last night, and I wish to elaborate a few of my remarks and to outline some more points in the White Papers on Defence.

I understand that there is no opposition from the other side to these defence proposals, and that the Prime Minister and the Leader of the Opposition are really fellow travellers on the road to rearmament, which I believe will not lead to national security, but may be the will o' the wisp, the delusion, that may lead to the Slough of Despond and indeed to the City of Destruction. Throughout the speeches from either side, this has been the main theme. The leaders of both parties have argued that this is the way to prevent war; that if we go on increasing the Armed Forces on the lines suggested in these White Papers, if we increase the armaments of this country, we will then be in a position to carry out a policy which will cause any possible aggressor to hesitate to go into a possible war.

I have a very great doubt about that whole conception of policy, because in the past we have seen, especially over the last century, that two groups of great Powers have carried out the policy of power politics and both sides have explained to their peoples that they need their armies and armaments purely for defence. And so the race has gone on until it ended in the tragedy, the calamity and the horror of war. I remember on 1104 12th May, 1949, when the present Foreign Secretary, in putting the case for the Atlantic Treaty in this House, said that the Atlantic Treaty created a new situation which might well lead to a final settlement. His argument in asking the House to support the Atlantic Treaty was that once the Atlantic Treaty had become a recognised fact, it would mean a change in the policy of the Soviet Union. He even argued that as a result of the Atlantic Treaty we could look forward to a reduction in armaments, and he told the House that: instead of the old method whereby each nation provided great and expensive services, the pact will allow us to consider this problem … and rationalise it, and in the end provide for a reduction in the cost of armaments through comprehensive arrangements."—[OFFICIAL REPORT, 12th May, 1950; Vol. 464, c. 2018.] That was said on 12th May last year, but we do not find today that the Atlantic Treaty has resulted in a diminution in armaments. We are now asked to agree to increased expenditure by the United Kingdom to a total of £3,400 million during the next three years. We have to face that expenditure and to admit frankly that the Government's foreign policy, as embodied in the Atlantic Treaty, has not resulted in the Russians saying, "Yes, we must now change our policy." On the other hand, they, too, have built up their armaments, and there is now the possibility that, when the Russians come to consider their attitude as a result of this increased rearmament programme in all the western countries, they, too, may say, "Yes we must have greater strength and increase our armaments in order to deter the possible aggressor." They will use precisely the same arguments and put before their own Press and people the very arguments that are being advanced by the Government and the Opposition in this House today.

I understand that we are to have some statement from the Government about the economic effect of this increased armaments expenditure, and I should be very glad if we could have some further explanation of what the Prime Minister said yesterday about the effect which it is likely to have on the social life of the people of this country. He said that there was to be a diversion of labour from civilian employment and that this would mean a decline in the provision of radio sets and 1105 television sets, and a decline in the availability of various products of the engineering industry. He said also that there would be some demand on the textile, chemical and building industries. I should like to have some explanation of this last sentence.

How will this diversion of labour affect the building industry? To what extent are labour and material to be diverted from housing, which is the greatest social problem that we have to face? Does it mean that the people of this country are now to be told, "You have to be content with fewer homes in order that labour may be diverted to arms production"? Are the building trade workers still to be retained in the Armed Forces? Are the people on whom we rely to supplement our building labour force engaged on housing schemes to remain for a further six months in the Armed Forces, and does this mean that housing will recede? Certainly, we ought to have some greater indication of how these proposals will affect the social and economic life of the people of this country.

I have here a letter from a soldier at present in Korea; he says: Korea may be a side-show or it may be the start of a big war. I would not know, but I ask this of whatever Government is in power when it is over. If you make us promises this time, keep them. If you promise married quarters, give them to us, even if they are only 'prefabs.' Not having a home or a chance of one stopped me getting married two years ago, but I cannot blame the lass for that. Now, I may never get the chance. This letter comes from one of the soldiers fighting with the Argyll and Sutherland Highlanders in Korea. The soldiers who are at home and who have no chance of getting homes for 20 years have the right to know exactly how these rearmament proposals will affect the building trade of this country.

Then, we ought to know what is to be the impact of these proposals on the social services. In the "Daily Telegraph" of 4th September, on the front page, there appeared a paragraph headed "United States may ask for cut in our social services." Under this heading, we were told: The discussions between the three Foreign Ministers which open in New York tomorrow week will be aimed at reassuring Western Europe on Anglo-American defence intentions. America's expectations of full co-operation, even at the expense of social policies in other Treaty countries, will be considered. 1106 Does this mean that an American politician is saying to the Government of this country, to the Governments of France and Western Germany, as well as to other Governments of Western Europe, "You have got to curtail and cut down your social services"? If that is so, I foresee that as being the greatest possible argument that Communism will have in Western Europe, and I ask the Minister who is to deal primarily with the economic effect of the rearmament programme to give us some idea how it will affect the social services, and to reassure those of us who believe primarily that the welfare State should not be subordinated to the warfare State.

I ask how this policy of increasing the rates of pay for the Armed Forces will affect the industrial worker. How is it likely to affect the policy of the wage freeze? I believe this is very important. I should like to know, as representing a mining constituency, what is to be the Government's attitude towards the claims of the lower-paid miners. I believe that the miners in my own constituency—the people I saw going down in rescue squads last week—are just as brave and courageous as anybody who happens to be in military uniform. I want to know what is to be the impact upon these industries. Are the Government now going to say, "We are prepared to consider an alteration in our policy towards the lower-paid workers"? Anybody who has read the White Paper must realise that the question that will inevitably be asked by engineers, miners and lower-paid workers is: "Are we not also entitled to an increase? If the Government can increase rates of pay in the Armed Forces, why should we be expected to stay at the same levels and get no response to our demands?"

Then there is the question of the women workers. I suppose that the Minister of State for Economic Affairs has read the decision of the Trade Union Congress last week. In the White Paper it is stated that women are to get an increase of wages comparable to three-quarters of the increase for the male soldiers. Are the Government now going to agree to the decision of the T.U.C., arrived at democratically? Are they going to say, "The women in uniform, who will be posted at the anti-aircraft stations and who, perhaps, in the war will get into the firing 1107 line, are to be paid three-quarters of the rate paid to the soldier," or are they going to accept the democratic decision arrived at by the T.U.C.?

I will now deal with some of the points raised yesterday by the Leader of the Opposition. The right hon. Gentleman has been arguing in favour of rearming Germany and of Germany playing its part in a European Army. He says that here we have the Russians in Western Europe and that we need a greater potential military force to hold Western Europe against them. What I want to know is what part the Leader of the Opposition played in bringing the Russians into Western Europe. If the Russians are in Berlin today, if the Iron Curtain stretches along the banks of the Oder, and if our frontier is on the Rhine, then one of the architects of this policy is undoubtedly the present Leader of the Opposition.

I certainly do not subscribe to the idea that on matters of military organisation and strategy concerning international policy we must accept the doctrine of the infallibility of the right hon. Gentleman. The best military brains in the world do not do so. For example, Mr. Hanson Baldwin, the military critic of the "New York times" says: Unconditional surrender was an open invitation to unconditional resistance; it discouraged opposition to Hitler, probably lengthened the war, cost lives and helped to make an abortive peace. Unconditional surrender meant the complete disappearance of any European balance. War to the bitter end was bound to make Russia top dog on the Continent, to leave the countries of Western Europe weakened, and to destroy any buffer in Europe. As I have said, if the Russians are in Europe today, that is largely a result of the policy of the Leader of the Opposition, for which he must accept a great responsibility. I remember during the war hearing the same lurid descriptions of the Germans that we now hear today of the Russians. Having got the Russians into Europe in order to kill the Germans, the right hon. Gentleman now wants us to organise the Germans to kill off the Russians.

Let us examine some of the arguments which he put before us. He told us that the atomic bomb casts its strange but merciful shield over the free peoples."—[OFFICIAL REPORT, 12th September, 1950, Vol. 478, c. 989.] 1108 That is the most remarkable description of the atomic bomb that I have yet heard. One can imagine a Russian military critic reading reports of the speech of the Leader of the Opposition and saying, "If this merciful shield is spread over the Western democracies, then surely we are—"

§ Mr. Speaker

Perhaps the hon. Gentleman will address me, and not turn his back on me and address those behind him.

§ Mr. Hughes

I apologise, Mr. Speaker. I certainly had no intention of committing any affront to you at all. I thought when you rose that I was out of order.

I want to come back to this argument about the atomic bomb. As I was saying, if the atomic bomb is a merciful shield over Western Europe, we can quite imagine the Russians living in Leningrad and Moscow saying, "Well, if the atomic bomb is a merciful shield, why cannot we have some of these merciful shields so far as the U.S.S.R. are concerned?" Therefore, we get the situation of two nations preparing for the atomic bomb race and with that weapon in the possession of both potential enemies. The Leader of the Opposition seems to argue that the benefit is all on our side, but that is not the opinion of some of the greatest military writers in this country. For instance, it is not the opinion of Captain Liddell Hart who, writing on the strategy of the atomic bomb, said: While it may be difficult for Russia to catch up with the Americans' lead in the production of atom bombs or match them in a Russo-American bombing duel, she might more effectively use any atom bombs that she has produced to retaliate on Western Europe if the Americans bomb her centres. He points out that far from the atomic bomb being a military advantage to us, a few atomic bombs dropped on the capitals of Western Europe might cause much greater paralysis in those countries than a larger number dropped on the Soviet Union. If that is so, I fail to see the force of the argument which has been the keystone of much of the war strategy and advice of the Leader of the Opposition during the last five years. I do not think it holds good.

The next suggestion is that we should build up a huge European Army, but nobody seems to face the fact that the Russians may do the same. [HON. MEMBERS: "They have already got it."] 1109 Then they may increase it. If they look at the decisions in this White Paper and see that there is to be a new European Army built up with German assistance, is there not every reason for supposing that the inevitable result will be that the Russians will increase their divisions, will call upon their bigger reserves of manpower, with the probable result that we shall be precisely where we were before?

I would point out that the position regarding manpower is worse than was stated by the Minister of Defence. General Bradley, the Chairman of the Joint Chiefs of Staff of the United States of America, stated last autumn that Russia had 175 operational divisions. That has been the figure quoted from both sides in this House. He went on to say that Russia could increase this total to 300 divisions within 60 days and to 500 divisions within a month of mobilisation. If that is so, we have not only to face the fact that we have to build up a European Army to face 150 divisions, but that Russia and other countries east of the Iron Curtain can call up huge reserves.

If that is to be the reply of the eastern countries to the preparations of the western democracies, then the inevitable result will be that we shall not be in a position of greater superiority in two or three years' time; indeed, we have to face the fact that we may be even worse off than we are today with this huge crippling burden of armaments on our shoulders, and no nearer reaching superiority or even equality with the Russians. This creation of a Western army is not so easy as it sounds, because we have been told that the French armoured division are still to make do with obsolete tanks.

The impact of all this rearmament on Western Europe will have grave economic and social effects which will create conditions that will inevitably breed Communism. The immediate result of getting more divisions from Germany will be that the Governments of Roumania and Hungary and all the other occupied countries will say, "Yes, this is the German menace coming again." So I do not see at the end of this road any real security at all and I believe that this thing cannot be stated in nearly such simple terms as those in which it was presented to us by the Leader of the Opposition in his speech yesterday.

1110 I do not believe that this world can be divided into peace-loving democracies and aggressor countries which are in favour of war. If one reads the Russian Press and the American Press these days and listens to and reads the comments from American generals, one will find that from the point of view of bellicosity the Americans can beat the Russians every time. I want to quote the views of Major-General Orville Anderson, commandant of Maxwell Field Air War College at Alabama. [An HON. MEMBER: "He is not the commandant: he has been sacked."] I want to read the passage for which he was suspended, not sacked. He said: Give me the orders to do it and I can break up Russia's five atom bomb nests in a week. And when I go up to Christ I think I could explain to Him that I had saved civilisation. He was suspended, and rightly so, but that does not dispose of the fact that he stated, in crude and brutal terms, one of the essential aims of American strategic policy. President Truman has to repudiate some general every other day. He has actually had to repudiate General MacArthur, and I do not believe that if we follow blindly the policy that is practically dictated by the United States of America we are really making our contribution to the solution of this great international problem.

I warn the House that a good many of the fundamental ideas behind American strategy have been made nonsense by what has happened in Korea. Some of the greatest publicists in America are issuing this warning at the present time. There is, for example, Mr. Walter Lippmann, the famous commentator of the "New York Herald-Tribune," who has said: The additional forces we plan to raise do not begin to meet our new obligations. Measured in money the effort is almost a continuation of business as usual. Measured in military manpower, which is the acid test, it may not be enough to deal with the North Koreans. And yet our obligations have become greatly inflated because we have allowed ourselves to be drawn into a war on the ground on the Asiatic mainland. Mr. Walter Lippmann warns America and the world that, far from having reached security as a result of these so-called security policies America is in a more dangerous position than ever. He says: We are in this most dangerous position because the President and his Secretary of State 1111 have lost the control of United States foreign policy. They are captives of their critics. Let the Government beware that they do not become captives of their critics here, and that they do not have to play up to the Leader of the Opposition. Mr. Walter Lippmann said: They are carrying out unhappily and ineffectively a policy imposed on them by their political opponents. And they, in turn, though they are dictating the policy, have neither the power to make it work nor the responsibility if it does not work but leads to a kind of global Korea. With this prospect of a "global Korea" in front of us, is it not time we tried a new kind of diplomacy, a new kind of appeal to the so-called aggressor country and once more asked them to face the fact, as General Marshall has admitted, that neither side can possibly win another war? I believe that, even in the realm of diplomacy, it should be the business of the Government at the present time to outline a new world plan in which it could be clearly stated how the economic and financial resources of the world could be used for the benefit of all the nations of the world. I believe that is the main line on which we can hope to deal with this problem.

There is certainly no hope at all in the line that the Leader of the Opposition suggested yesterday—the further boycotting of Russian goods. We send machine tools to Russia, and, presumably, he wants that to be discontinued. Now, machine tools can be used for practically anything in industry, and if that argument is to be carried to its logical conclusion we are going to isolate East from West and create economic chaos in Europe. Economic chaos in Europe means hunger and poverty for Europe's masses, and inevitably conditions in which Communism will thrive and flourish. So I say that if the objective of our policy is to discourage Communism, we have to find an alternative policy to Communism, a policy which will appeal to the idealism in mankind. That will not be done by proceeding with the policies and methods that are outlined in this futile policy of bigger armies and more armaments.

§ Mr. Harold Macmillan (Bromley)

We have listened to a very individual view from the hon. Member for Ayrshire, South (Mr. Emrys Hughes) and, in my 1112 experience, the House always listens with respect, and even sympathy, to any view which is sincerely held. I hope, therefore, that the hon. Gentleman will acquit me of any discourtesy if I do not reply in detail to his points. Some of his very relevant and indeed searching questions on economic affairs no doubt will be dealt with by the Minister of State for Economic Affairs when he speaks. As for the animadversions upon the administrative and military qualifications of the Leader of the Opposition, I will certainly convey them to my right hon. Friend, who will no doubt deal with them.

Whatever differences may or may not emerge between us in the course of these Debates, I think we must all agree that they do throw a revealing if sinister light upon the state of the world today. We are met here for one purpose only. That is to devise measures to resist, if that be still possible, the most ruthless and heartless application of power politics that the world has known in its long history.

These measures are urgent, for desperate ills require desperate remedies and, as was clearly stated by the Leader of the Opposition, they will have our full support. There has already been general approval for the steps to improve the pay and conditions of our Regular Forces, with the double purpose of stimulating recruitment and inducing men completing their first term of regular engagement to extend their service; and I think the latter objective is by no means the less important of the two. It is also important to attract back into the Forces the right kind of men who can serve as instructors and non-commissioned officers. These changes in pay and conditions are long overdue and I am particularly glad that, after four years of pressure from these benches—[HON. MEMBERS: "Oh."]—wait until I finish the sentence—the Royal Air Force is to see a restoration of flying pay. We have asked for that in every Service Estimates Debate in the last Parliament and in this.

I do not intend to enter into the familiar argument as to whether recruitment in the past rose or fell with the general economic situation, particularly the employment situation. It is certainly arguable from the pre-war figures that large-scale unemployment did little or nothing to increase the flow of recruits. The graph which was debated shows that. I do not want to argue that, how- 1113 ever, for the point which I am making is this. Since the Second World War, whether because of or in spite of a Socialist Government—I do not pause to argue that—there has been what is called full employment. That is agreed. Yet during this period, as the White Paper informs us, recruitment fell from 95,500 in 1947 to 67,000 in 1948, to 52,000 in 1949, and in the first six months of 1950 to the annual rate of 44,000-odd. That is, from 95,000 to 44,000. The re-engagements are equally disappointing. Yet there has been little or no change in the employment situation in those years.

What, then, has changed? Is it not obvious that since 1947 the relative advantages, after proper allowance has been made for food, clothing and so forth, between what is being offered by the Services and what can be earned in civilian life have undergone a substantial change? In December, 1945, the Government White Paper, Command 6715, claimed that there was "a broad equality" between Service and civilian pay. That is not my claim—I have not the means to make these calculations—but it was the Government's claim. Whether this calculation was absolutely correct or not does not really matter; what matters is the relative changes which have taken place since then.

By October, 1949—and I quote the Ministry of Labour figures—civilian pay had increased by 28s. 6d. a week, but the pay and allowances of the average, married private soldier had increased in the same period by only 10s. 6d. a week. Surely the falling off in recruitment by half since 1947 must have some connection with this radical change in the position. Certainly, the Government now believe that there is a connection for the new scales provide for the same man—I take the average, married private soldier—increases of some 21s. a week; and, in the case of n.c.os. and warrant officers and skilled tradesmen, where the difference was no doubt greater between Service and civilian remuneration, the new rates, in my opinion, go some way to meet this by giving greater pay increases to these classes.

If that course is right now, why has it been delayed so long? As long ago as July, 1947, when this disparity between Service and civilian remuneration was becoming pronounced, my right hon. 1114 Friend the Member for Warwick and Leamington (Mr. Eden) called the Government's attention to this problem and prophesied the disastrous fall in recruiting which would follow. He made this appeal three years ago: Do not, please, leave it to the very last minute when you are approaching 1950 and find that it is too late to get the men."—[OFFICIAL REPORT, 30th July, 1947; Vol. 441, c. 507.] Ministers have left it to the last minute. They have left it to 1950. They have left it until it is too late to get the men, as their own White Paper shows—from 95,500 three years ago to 40,000-odd today. Those are, indeed, alarming, appalling figures. If increased remuneration is the cure for this malady, why does it take three years for the Government and all the planners to diagnose the disease and apply the remedy? Why this obstinacy? Why this delay? I think the answer is clear: they preferred to spend the money on other schemes more politically advantageous or more in tune with their Socialist philosophy. Now, by these proposals on which they are relying, they admit their error and stand, in a sense, self-condemned.

It is from this initial and fundamental failure that much of the confusion and frustration connected with the National Service system springs. Hence this chopping and changing—first 18 months, then a year, then extended to 18 months, now two years. In the Debate in July the Minister of Defence took some credit, and I think with perfect fairness, in that a Labour Government decided to keep National Service in peace-time. I agree. I think that decision showed courage and statesmanship. But he went on to doubt whether a Conservative Government would have done the same. Perhaps he will allow me, in turn, to doubt whether a Labour Opposition would have given a Conservative Government loyal and full support to Such a Measure. Indeed, I sometimes wonder what would have been the attitude of only a few of them, two or three, if the positions had been reversed. What if, after five years of a Conservative Government, we had come to the House with Measures similar to those proposed today? What would have been the scenes in this House about sending British lads to Korea and extending compulsory service to two years?

The Chancellor of the Exchequer is not in his place and we all much regret 1115 the reason, but what was his advice to the nation in similar circumstances two years before the last war?

In 1936 he said: Every possible step should be made to stop recruiting for the Armed Forces. He told the workers in 1937: Refuse to make armaments; refuse to use them. That is the only way to keep the country out of war. I think that is the view of the hon. Member for Ayrshire, South.

The failure to recruit sufficient Regulars necessarily results in lack of operational formations and the failure to make the best use of the National Service men, and perhaps the most dramatic truth of this lies in the fact that, with 364,000 men in the Army, we can hardly scrape together one operational field brigade group to send to Korea from this country today. The Prime Minister gave us—and we are grateful—some reassurance on this vital question of operational formations. We are to have one more division in Germany, one infantry division and one more armoured division here.

When will these rather modest ambitions be realised? Can we have an answer when the right hon. Gentleman replies? Will it be a matter of months or years. Then there will be 12 Territorial divisions—

§ The Minister of Defence (Mr. Shinwell)

To save trouble and to show that there will be no delay on this matter —a matter of months.

§ Mr. Macmillan

Well, I am very glad to hear that assurance. How many months? Six or nine months? All right, in a year? All right. We shall have 12 divisions in a year—

§ Mr. Shinwell

No. The right hon. Gentleman, now that he has got the answer for which he asked, must not confuse the issue. He asked, quite explicitly, as I understood him, about the division—the additional division—for Germany.

§ Mr. Macmillan

Yes.

§ Mr. Shinwell

He asked about the two divisions—the strategic reserve—in this country. The 12 divisions was not what he asked about.

§ Mr. Macmillan

The new divisions will be within the year. Right. That is very satisfactory, and I am very glad to have that reply, and I acknowledge it. Now we come to the 12 Territorial divisions of which he spoke. When will they come into being? Perhaps the right hon. Gentleman will tell us, either now or later —I do not press him—when they will come into being, up to strength and fully equipped.

§ Mr. Shinwell

I could, of course, tell the right hon. Gentleman and the House. It will take rather longer to tell him, so I shall tell the House tomorrow.

§ Mr. Macmillan

I am very much obliged to the right hon. Gentleman. Of course, it will not be forgotten that the additional six months of National Service will make a corresponding break—that is one of its disadvantages—in the flow of recruits to the Territorials. Meanwhile, this new and heavy burden of two years' service is to be placed upon our young men and—it is no good shirking this issue —two years is indeed a heavy and harassing burden for people in every class and walk of life, from the student to the labourer.

Moreover, there is already a feeling in many homes—and I think the Service Ministers ought to know it—that a great deal of the present 18 months is not altogether profitably employed. The Service Ministers have here a very great obligation. They must see that there are radical reforms in the organisation and training in all the Services. The frightful disease of bureaucracy, which has already invaded our civil administration, has not spared the Services. The tail, however often docked, seems to grow again with alarming and continuing strength.

I must also confess that I think something more than reform in pay and conditions is necessary if the Services are to retain their full vigour. The Regular soldier, sailor and airman, must feel something of the old pride and something of the old panache. We need bands and uniforms; pride in oneself and one's comrades; regimental tradition; smartness; discipline; confidence in n.c.o.s and officers; and, if I may add it, the consistent duty upon fighting officers to take care of the interests of their men—a duty which is not to be shuffled off upon welfare or educational specialists, however necessary they may be.

§ Mr. Ellis Smith (Stoke-on-Trent, South)

That is why we do not get recruits.

§ Mr. Macmillan

Let there also be an end to the continued disparagement of the military tradition, the denigration of the long and glorious history of our Fighting Forces, which has for so long been the stock-in-trade of what is called progressive thought.

§ Mr. Shinwell

I think, perhaps, that this has gone far enough. Perhaps the right hon. Gentleman—

§ Mr. Churchill (Woodford)

What does the Minister say?

§ Mr. Shinwell

I think this has gone far enough. Perhaps I may ask of the right hon. Gentleman whether he accuses the Government of having disparaged the military Forces of this country?

§ Mr. Macmillan

No. I would not accuse the Government of any progressive thought. In many respects they are very reactionary. I meant the "New Statesman" and all that sort of stuff that they rely on.

§ Mr. Shinwell

Not the Government.

§ Mr. Macmillan

Not the right hon. Gentleman. He has done very well.

We had a good example of reform last night. I was very glad to hear the hon. Member for Swindon (Mr. T. Reid) end his speech by singing to us the refrain of "Rule, Britannia." I was very glad to hear it. He may remember that the last Parliament was begun by hon. Members opposite singing "The Red Flag." [HON. MEMBERS: "Why not?"] I hope there is one other point upon which I may have—for I am sure it is agreed—a full assurance. I assume, that is, that any National Service man, however short his length of service, who is sent to a theatre of actual war will receive the full rate of pay—if he goes to an actual combat theatre—for I do not see how we can have men fighting side by side with different basic rates of pay.

Now I come to equipment; and on this I am naturally at some disadvantage, for although we have been denied a secret Session we have had since the war a series of secret estimates so far as equipment is concerned, and in the name of security the House of Commons has been given only 1118 the barest information on this vital head. I only wish that this self-denial had achieved security. We have, no doubt, made good progress on research and development. But what about production?

How far is the Navy fully equipped to meet the submarine threat? In 1939 we had 205 destroyers, frigates and corvettes; today, 276. In 1939 the Germans had 30 submarines. Today, the Russians have 360 submarines—or so we are informed, and so we believe. How many of these are capable of high submerged speed I do not know. I can only hope that very few are. Does the new programme, of which the Prime Minister spoke yesterday, mean new anti-submarine frigates and the like, or does it mean merely bringing these vessels out of reserve?

Have definite orders been placed for the construction of new types recently developed and based upon the latest designs? We have 13 aircraft carriers. At the time of the Navy Estimates, we had, I think I am right in saying, five on the active list. Can we know the number now? The construction of three aircraft carriers was suspended in 1946. Is the work starting upon them again? How many of these existing carriers are fast enough to operate now that new jet fighters are on order?

As regards the Army, the Minister of Defence admitted, in the very wide speech he made last month, weakness in antiaircraft guns and predictors, anti-tank weapons, specialised vehicles. Have new vehicles been purchased since the war? I understand that £15 million was spent last year on reconstruction. This is a large figure, and it may well be worth following the suggestion which was made by the Estimates Committee. This policy should be reconsidered. We have 6,000 tanks or tank engines in reserve. How many are serviceable? What guns have they got? Are they guns that can operate against modern heavy tanks? The new Centurion is described as being "in full production." How well I recognise this vague phrase of the old Ministry of Supply days.

§ Mr. Sydney Silverman (Nelson and Colne)

The right hon. Gentleman would.

§ Mr. Macmillan

That is what we used to say. I remember it well. I know the figure now, and except in secret Session, which we are denied, I would not state 1119 the actual production figure of the Centurion. If the Minister of Defence wishes to tell us, we shall, of course, be grateful. But I would ask him to make every effort —and I am sure he will—to achieve a very substantial increase in the number both of tank engines and of Centurions over the present figure, as I am sure he will agree that it is ludicrously below our need.

Now, as to the equipment for the Royal Air Force. We had a fairly searching Debate on this year's Estimates, so far as our information allowed. Moreover, I suspect that the right hon. Gentleman is worried about crews and maintenance staff, and getting a well-balanced force. I am, however, concerned about the strength in machines of Coastal Command. Are there enough Shackletons? We were surprised at being told that the Hastings was to be used for the job of Coastal Command in anti-submarine war, for we had always regarded that as a transport machine. Are the 15-year old Sunderland flying boats still in use; and will they be replaced by a new design? What about the auxiliary squadrons of Fighter Command? They are still, in spite of what the Secretary of State tells me, 50 per cent. under strength since they consist of one flight instead of two flights. They have got jet fighter planes, but not new ones. To the extent that they have them, they are old ones which are coming out of Service use after many flying hours.

§ The Secretary of State for Air (Mr. Arthur Henderson)

I should like to correct the right hon. Gentleman on one point. I understood him to say that the Regular Fighter Command squadrons—

§ Mr. Macmillan

No, I was talking about the auxiliary squadrons. To the extent that they have jet fighters, they are ones that have been used in Regular squadrons and have been given to the auxiliaries. Yet the auxiliaries are a vital part of any rapid mobilisation. I know this is an old story, but it is none the less a very sad story. The jet fighters have gone to Egypt and to the Argentine: they are part of the sterling balances or unrequited exports, of which the Prime Minister told us yesterday the chief purpose was to stave off Communism by helping the development of backward areas—although how the standard of life 1120 of the Argentinian peon or the Egyptian fellah is to be built up by sending him jet fighter aircraft passes my simple comprehension.

Finally, we are very much concerned about the radar position, especially about the man and woman power required to operate the system of control. We were told in the last Debate that the reservists could be called up; but having regard to the fact that a great part of this system was operated in the war by women I feel that we cannot rely upon getting these reservists, for many of them will be quite unable to leave their homes.

I pass for a moment to materials. What stockpiles have we of strategic materials? How do we stand for lead, tin, zinc, rubber, molybdenum and the rest? What arrangements are we making, remembering the desperate struggle of two wars against the submarine? Before and since the last war, and now again, Sir Arthur Salter raised this matter with all the weight of his authority and knowledge. Can we have some reassurance upon this vital point?

Judged, therefore, by their defence policy in its narrower field, the Government have failed and the nation has to pay the price. What of the wider aspects of defence? I do not intend to discuss at any length economic aspects, or the economic consequences of rearmament. So far the main contribution to this theme has been made by the Secretary of State for War in the rather infelicitous terms to which we are becoming accustomed, and which I suppose the Prime Minister has to bear with what patience he can command. I understand that the Minister of State for Economic Affairs, who has agreed to follow me, will deal with that subject. I shall therefore confine myself to one or two reflections.

We were carried through two great wars, broadly speaking, by the accumulated wealth of more than a century of uninterrupted economic progress and expansion. We lived upon the fat; but then, the nation had that fat to live on. How do we propose to finance this new expenditure? It seems that we have asked the Americans to pay for nearly half of it—to provide hard currencies, I think, is the technical expression. It is said that we have asked for £500 million in three years. What has been the reply?

1121 The Prime Minister was very cautious, I thought, upon this part of his subject yesterday. In any case, how do we propose to raise the huge new sums from our own resources? By more taxation? But indirect taxation, already a terrible burden upon all classes, can hardly be increased without becoming subject to the law of diminishing returns. Moreover, indirect taxation increases the cost of living, and, consequently, the demand for increasing civilian wages. But if these are granted the inflationary pressure grows, and the balance between the civilian and Service remunerations, which it is the Government's purpose to restore, becomes once more destroyed. By direct taxation? Does anyone suppose that large sums can be obtained by increases of direct taxation? Can anyone doubt that these burdens must fall upon the vast class of workers by hand and brain on whose energies we must most of all rely? Would not such increases destroy that very incentive which we wish to support?

I see that it is suggested in certain quarters that the reserves of industrial companies should be seized, not, it is true, for the Treasury but to increase the amount available for wages. It seems to me almost inconceivable that after all these years responsible trade union leaders should be ignorant of the need and purpose of industrial reserves if industry is not to fall into obsolescence and decay. We enter upon our task overtaxed, with excessive national and local expenditure, with no clear plan of priorities even in the field of social service, with all the fat gone and already down to the bone. No wonder the Prime Minister confessed in a moment of candour that it might have been better if we had had a greater concentration of effort, that it may be that we tried to do too much in too short a time.

We are seriously undermanned in our Fighting Services, ill-equipped in our armaments and materials, impoverished and overtaxed. How do we stand in regard to the creation of that grand alliance which it must be once again, as so often in our history, our peculiar task to organise and to lead? In the last Debate the Minister of Defence told us, with complete candour, that when the Socialist Government was returned to power in 1945 any question of rearma- 1122 ment or building up of military forces for defence against aggression would have been regarded as completely irrelevant. Of course; for those were the honeymoon days, when the Socialists were best fitted, in the words of the Minister of Health, to co-operate more and more closely with Russia; when it was only the wicked Tories, led by the Leader and Deputy Leader of the Opposition who would inevitably quarrel with Russia, who did not understand how to deal with or negotiate with the Kremlin.

It was a good line while it lasted; it won hundreds and thousands, even millions, of votes. "Left can speak to Left," I think the phrase ran, "in comradeship and confidence." I suppose the idea was that there would be a natural sympathy between two Socialist States-one, it is true, in esse and the other only in posse—just as there is a natural affinity between beer and shandygaff.

Nevertheless, it is true that all of us hoped after the last war and the joint resistance to Nazi aggression that the governors of Russia might have somewhat softened the asperity of their Socialist fanaticism; that they might have learned at least some measure of tolerance from experience, and that, enjoying all the benefits of conformity, they might adopt a new latitudinarianism, or even scepticism, as regards the application of their strict doctrine. In a word, that they might become content to preach Socialism but not to practise it. After all, the thing is not unknown elsewhere.

Certainly, this was the hope of the British people, the most generous and the most sanguine in the world. Yet all of us, of all parties, who had any inner knowledge of the events of the closing months of the war had, I am sure, feelings of foreboding and even of alarm. The Russian claims at Yalta, the brutal attitude towards Poland as the war drew to its close, were at once a warning and a shock. Potsdam did nothing to remove these apprehensions. There came the winter of 1945, and by the spring of 1946 the growing danger had become apparent. Yet so blind are those who do not wish to see that the Fulton speech, laying down the basis of what has since become the Atlantic Pact, was solemnly denounced—I have the words—as "inimical to the cause of world peace" in a pompous Motion signed by 100 Socialist Members. Some 1123 of them are, happily, no longer with us, and others have executed a series of breathless acrobatic manœuvres, leaving no stone unturned, no avenue unexplored, no cross undoubled in the search for the party line.

§ Mr. Shinwell

If all this is true, why was it that the right hon. Gentleman the Leader of the Opposition advocated a more speedy demobilisation?

§ Mr. Churchill

I advocated a more speedy demobilisation because I thought we were wasting vast sums of money in the first two years in keeping an inordinate number of men with the Colours, but the figure to which I said we should reduce is far higher than the one that the Government fell to in the years as danger grew.

§ Mr. Shinwell

Why did not the right hon. Gentleman himself answer?

§ Mr. Macmillan

I think it would be better if the right hon. Gentleman the Minister would leave his interruption to the Prime Minister. I am better trained than he is. We come to the next problem. The Zurich speech, pleading for the unity of Europe, or what remains of Europe, received similar treatment. Two years later the Brussels Treaty was signed, and in spite of all the petty jealousy and negativism which have caused such astonishment and dismay in Europe, the Council of Europe, with all its faults, but with all its possibilities, has come into being. Now, four years after Zurich, the Minister of Defence in a Debate on 26th July, used these words about the Atlantic and Brussels defence systems: A great deal of hard work and planning is proceeding and more will be required. But already it implies the acceptance by the participating nations of some modification of their sovereign rights to decide for themselves the kind of forces they should maintain."— [OFFICIAL REPORT, 26th July, 1950; Vol. 478, c. 473.] "Modification of their sovereign rights" —I wish that the Minister of Town and Country Planning would do a little joint planning on this question of "sovereign rights" with the Minister of Defence before he compiles and let loose upon an indignant world his next pamphlet on European unity.

All this time, the German problem has been awaiting solution, and once again 1124 the Government have shuffled and procrastinated. Once again, as so often before, the Leader of the Opposition was taking the necessary preliminary steps towards that reconciliation of Germany and Western Europe on which the survival of both depends. In the first meeting of Strasbourg, in August, 1949, at his instance and largely due to his insistence, representatives of every country agreed to the admission of Germany to the Consultative Assembly as a matter of urgency. They demanded a meeting, not later than January, 1950, for this single purpose. As usual, they were blocked by that veto which the Foreign Secretary finds so intolerable at Lake Success, but uses so freely at Strasbourg.

So the months went by, and in the same way, when the question of German contribution for the defence both of Germany and Europe was raised in March, 1950, by my right hon. Friend, he was dismissed by the Prime Minister with a peevish gesture and a querulous phrase. Even as late as July, 1950, the Minister of Defence seemed to be quite unaware of the realities of the situation. He said that the defence of Western Germany is at present in the hands of the United States, the United Kingdom and France. Security is thus provided for the Federal Republic and for Berlin.

At first sight, it is not apparent why it should fall to the victors to provide security for the vanquished against a new and common danger. It seems somewhat paradoxical that armies of occupation should be transformed into armies of protection without any corresponding contribution by the ex-enemy beneficiaries. Why should the British boys have to serve two years to "provide security for the Federal Republic," and German boys not be allowed or even asked to serve? In any case, what is this security? To those who live between the Elbe and the Rhine, and to those who live between the Rhine and the Atlantic coast, and—we may as well speak it frankly to ourselves and to the world—to those who live upon this side of the Channel there is no security.

The word is a hollow mockery, and it is to meet that situation that we are meeting here this week. In that task we dare not refuse aid wherever we may find it. In the interests of both Germany and of Europe, we must find some method by which the great population and great 1125 resources of Germany can be put into the common pool, without endangering the liberties of the German people or of ourselves by a revival of German militarism.

I assure the House that the Germans feel as acutely on this subject as we do ourselves. That is what their representatives meant when they declared at Strasbourg against a German army, but in favour of a European army, it is easy to criticise and make much of all the difficulties of a European army, to ask for precise information as to its organisation, supply and command—to underline the difficulties; yet with the immense variety and interdependence of modern weapons and ancillary services by land, sea and air, it is surely not beyond the wit of man to devise a system by which a combined force may be powerful and effective to fight as a whole, and yet so contrive that even if ill-will or treachery supervene no single part can be a menace to the other.

To me, the declaration at such a moment of British, German, French, Italians, Greeks, Turks, Belgians, Dutchmen, Danes and Scandinavians that they will serve together in a European army; above all the declaration of Frenchmen and Germans, the feuds of centuries forgotten, that they are ready to stand together in defence of all that 2,000 years of humanist and Christian civilisation has meant for the world—to me, such an event, even as a gesture, is a matter not for cynicism and sneers, but for deep thanksgiving.

Once more the Government follows the lead. I understand that now the raising of police forces in Western Germany is agreed in principle, and will be put in hand. It is believed that the question of German contribution to our joint defence will be at least discussed at the forthcoming meetings of Foreign Ministers, not on British, but on American initiative. The Prime Minister was rather indignant at being pressed on this matter yesterday. He said that it was very unwise to ask him to give any reply, that talks were just beginning. When I went out and read the evening papers I found that the Foreign Secretary had no such scruples, for while the Prime Minister trod, like Agag, delicately, the Foreign Secretary plunged in with both his feet: he told the Press reporters crowding on 1126 the Queen Mary what the House of Commons was not allowed to know—his opposition to German participation in a Western defence force.

Although the visible links which bind together the British Empire and Commonwealth are strong as ever, much needs to be done to mobilise in its most effective form the strategic and economic resources of the Empire. We heard with great pleasure what the Prime Minister told us of the visits and discussions which are going on, but I think something more than this, some permanent machinery, may be required to be devised. Certainly, if Britain's task is to lead and to inspire European resistance, her first duty and prime strength is based upon her position, not as an island fortress, but as a centre of that vast and unique combination of nations and peoples of which she is the head.

The situation is grave. We shall support these measures, by our votes if necessary. They are late; but better late than never. We are not asked for a vote of confidence in Ministers—that we could not give—but we cannot refuse to Ministers, even Ministers in whom we have no confidence, measures which they assure us and which we certainly agree are a contribution, however tardy, to the safety and survival of our people, and to the defence of freedom against the sinister combination of Marxist socialism and Russian imperialism.

§ The Minister of State for Economic Affairs (Mr. Gaitskell)

The right hon. Gentleman the Member for Bromley (Mr. H. Macmillan) was mainly concerned with the military and political aspects of the matters under discussion. I am quite sure that my right hon. Friend the Minister of Defence will deal very adequately indeed with such points of substance as arise from his speech. I have another task to perform today, but, before I begin it, I am bound to say this to the right hon. Gentleman. My right hon. Friend the Prime Minister, in his impressive survey of the position yesterday, was at pains—[HON. MEMBERS: "Impressive?"] Yes. It impressed "The Times," and most of the country, too. My right hon. Friend was at pains not to provoke in any way any party feeling on these matters. Even the right hon. Gentleman the Leader of the Opposition, prone as he is to great temptations in 1127 these matters, kept, I thought, a very reasonable control over his tongue. It is left to the right hon. Gentleman the Member for Bromley to make a really party speech in this Debate. We all of us believe in the party system, and no one objects to the cut and thrust of Debate, but I must say I think that on an occasion like this it is as well that criticisms put forward should be weighty and constructive, rather than mere debating points.

The Prime Minister explained yesterday the reasons why the Government have felt it necessary to put this new defence programme before the country. I shall be concerned today almost entirely with the economic consequencies of that programme, with the special difficulties it creates and how we think they should be handled. I realise, of course, that up to now the interest of the House has been mainly concentrated upon the military and political aspects of this question, but I hope the House will agree with me that we must devote some time to the economic aspects, which is my justification for intervening at this stage.

It will be apparent to the House, as the Prime Minister explained, that there are still major uncertainties which affect our planning, and that at the present stage all we can do in this matter is to present an interim report. The programme put forward for this, if one looks at it from the economic angle, divides itself into four parts. There is, first of all, the increase in Service pay, then the increase in Service manpower, then Civil Defence, and finally the greater production of military equipment and stores. The House will, I imagine, wish to know in the first instance how much we expect each of these will cost. I say "we expect" deliberately, because at this stage there are still too many uncertainties for me to be able to give a precise estimate in every case.

First, then, Service pay; the increase here, on the basis of the numbers in the Forces as they were a few weeks ago, will cost about £21 million in the current financial year and about £35 million in a full year. I should like to emphasise, in passing, two important aspects of this particular change. We must not forget that these extra millions of pay are being deliberately given to enable the men and 1128 women in the Forces and their families to enjoy a higher standard of living, to buy more food and clothing, more of other things in the shops, more of what the rest of us produce or of what we import. We hope, of course, that some of the extra money will go into savings, but some, increased claim on consumption goods there is bound to be, and we, the rest of the community, have to honour that claim. We can only honour it either by producing more or by cutting down correspondingly our own consumption.

I realise that this may seem obvious now, but there is, I am afraid, a regrettable tendency, when additional public money is spent in this way, to overlook the real costs which have to be met by the rest of the community. This brings me to the second point. These pay increases have been introduced avowedly to attract more men and women into the Forces by making the conditions of employment there more favourable relative to those of other occupations. Their whole purpose, therefore, will be frustrated if they are taken as a signal for demanding and conceding higher pay everywhere else. For the rise in prices will cancel out the effect of the improvement in pay; the claim will not be honoured and we shall have failed in our efforts to make the conditions in the Forces relatively more attractive. I am not at present concerned with the vexed and difficult general issue of personal incomes, of which I hope to speak later on. If is, of course, I recognise, closely related to this. The fact remains that if the improvements in the Services are followed by corresponding general increases in the rest of our economy, this measure which was intended as a bold move to increase the strength of our Regular Forces will not merely have no such effect, but will also prove to have pushed us back along the dangerous incline of inflation.

Next comes the cost of increased manpower. This arises from several sources-National Service men serving the extra six months, reservists recalled, time-expired men retained, either voluntarily or compulsorily, and finally the new Regular recruits we hope to obtain. The totals cost of increased manpower from these sources will, we think, amount to about £11 million in the current fiscal 1129 year and £34 million next year. I should perhaps add that these figures include pay at the new rates, allowances and emoluments in kind, such as food, clothing and maintenance, but not, of course, the cost of equipment. The total cost of higher pay and the increased manpower in the Forces thus amounts to £69 million, or, say, £70 million in the next financial year, which is the first full financial year.

The Civil Defence measures, which were announced shortly before the Summer Recess and were designed principally to provide for the basic needs of a Civil Defence organisation, such as command posts, the protection of communications and other essential services, should not add appreciably to this year's defence expenditure, but their final effects will come later, and must be covered in our estimates of the total defence effort that will be made in the next three years. We must allow in respect of them over the next three full financial years approximately £100 million. Finally, there is an increase in the programme of arms production and other military supplies and works services, the cost of which for various reasons is very much more difficult to estimate.

The Prime Minister explained yesterday the circumstances in which we made our proposals of 4th August for a total defence effort with United States aid of £3,600 million in the next three years. I need not go over the ground again, but I ask the House to note three things about this figure. First of all, it involves an increase of £1,260 million gross over three years, compared with our current rate of defence expenditure of £780 million a year—an increase of over 50 per cent. Secondly, one-third of this increase is due to the cost of pay, maintenance of the Forces, and Civil Defence, while about £850 million, or two-thirds of the increase, is attributable to the proposals for the additional production of armaments. In effect, this will mean that as the production programme gets under way, we shall be producing considerably more than double our present equipment for the Forces.

Thirdly, the full realisation of this programme, and therefore of the maximum effort represented by the £3,600 million, depends on two qualifications; first, we have to be sure that our capacity is 1130 correctly matched against the requirements not only of our own Forces but of the Forces of the other North Atlantic countries. In the second place, it depends on what United States assistance we can obtain.

We made this qualification regarding United States aid first of all because the invitation of the United States was precisely, "What could you do if you had assistance?" We made it, in the second place, because we felt it underlined certain developments with which we were faced First, the programme of rearmament itself to some extent will depend physically on acquiring the necessary special machine tools and other components from the United States. We may well need the assistance of the United States Government in obtaining the necessary priority for these things. Secondly, we must, I think, accept the fact—and I shall be dealing with this in greater detail later on—that the programme is certain to have an adverse effect upon our balance of payments. We have to import more in the way of dollar and other materials, and at the same time some interference with the development of our export trade is inevitable.

I feel that the House will agree that we were right to draw attention to these consequences. I do not believe it is the wish either of our own people or of the United States that, in addition to the sacrifices which must inevitably come upon us, we should also find ourselves at the end of this period, as we did at the end of the war, with our reserves depleted and our international debts increased—a problem to ourselves, a burden to our friends, and a major obstacle to the full restoration of world trade and exchange.

I will now try to sum up additional burdens which all these things involve First, there is the prospective effect on the expenditure side of the Budget. For the current fiscal year there will be the need for Supplementary Defence Estimates which will amount to at least £70 million. This does not represent by any means the whole cost of the work which will have been undertaken by the end of the financial year, but only that part of it for which payment must be made before 31st March. In the three following years, if the full production programme is carried out we shall have to spend on the 1131 average each year over £400 million more gross than at present. The incidence on the Exchequer will not be evenly spread throughout the years, but will rise as payment has to be made for work in progress and for completed equipment.

I have tried to give the House the fullest information available at this stage on the financial side, but hon. Members will realise that at present anything like firm forecasts are impossible. I have already referred to the two major qualifications —the uncertainty about the amount of United States aid and the adjustment of our production to match the requirements of North Atlantic Defence. There are other uncertainties which I must briefly mention. We cannot say exactly what change in costs and prices may occur over such a long period. The net charge on the Votes is clearly materially affected by our expenditure on arms for North Atlantic and Commonwealth countries and the sums we may receive in payment for such supplies. So I give these figures with the warning that they should be treated as pointers to the order of magnitude involved and definitely not as advance copies of Defence Estimates.

The process of financial scrutiny will take place on the Estimates of the Service Departments in the usual way over the next few months to try to secure all possible economies consistent with security. Subject to this, I see no prospect of the final figure for this year's Defence Estimates being less than £850 million, and no chance whatever that next year's Defence Estimates will fall short of £1,000 million. Indeed, they may well be substantially higher.

§ Mr. David Eccles (Chippenham)

Is it one of the principles upon which American aid is sought, that the non-military expenditure of the Government at present is untouchable and must continue exactly as it is?

§ Mr. Gaitskell

No, I do not think that comes into consideration. The reason we have asked for American assistance is because of the additional strain on our balance of payments—on the foreign trade position.

So much for the new programme and the direct costs which it involves. The Leader of the Opposition yesterday complained of the sudden change in our plans. I do not at this stage want to get involved in a long argument, because I have a great deal to say on the economic side, but I venture to point out one or two things to him. He has surely forgotten what was said by my right hon. Friend the Minister of Defence on 26th July in announcing the measures which cost an additional £100 million. My right hon. Friend informed the House: … this is no more than a small part of the cost which would be involved fully to equip our Forces to fight. Much larger sums would be required in order to put our Forces in a condition of readiness. Plainly, we can do no more from our own resources than make a beginning on such a programme."— [OFFICIAL REPORT, 26th July, 1950; Vol. 478, c. 481.] I should have thought that was a clear pointer indeed to what, in fact, subsequently took place. The statement surely indicated two things—that much more was needed, and that our own resources could not cover it. We were engaged at that time in discussions with our other North Atlantic allies in assessing the requirements of our common defence plan to match it against our requirements, and to ascertain what were the deficiencies and what share should be made between us. But on 26th July, the very day on which the Defence Debate took place, the United States Government 1133 took a new initiative with us, and, of course, with the other North Atlantic countries, by requesting information regarding the additional military production programme which could be initiated with their assistance. We were pressed to reply and to give this information within 10 days. We did so. We sent our reply on 4th August, indicating that with assistance the defence expenditure could be increased to £3,400 million. I am bound to say that I cannot see that there is anything very worthy of criticism or complaint in an extraordinarily swift reaction to this very welcome development from the American side.

There is one other passage in the speech of the right hon. Gentleman to which I feel bound to refer—his strongly-worded comments, delivered with more than usual vehemence, on trade with Russia and Eastern Europe. It seems to me that, in making those comments, he had not properly understood what my right hon. Friend the Prime Minister said.

§ Mr. Churchill

I understood as much as anybody else.

§ Mr. Gaitskell

The right hon Gentleman is certainly wrong there, because on this side of the House we understood perfectly what my right hon. Friend said. At any rate, he will now have had an opportunity of reading HANSARD.

My right hon. Friend made it clear that we shall stop the export of particular items of equipment, including machine tools, which we know to be required for our own defences and those of our allies. This means that, if necessary, and having due regard to any treaty obligations involved, we shall not hesitate to use requisitioning powers for this purpose; but we are not aware at the moment of any such equipment which we need for our own defence or that of our allies which has actually been exported to Russia or Eastern Europe.

This does not mean that this is the only type of control exercised over exports of this character. On the contrary, the export of a wide range of goods needed by ourselves for security or for economic reasons has been very strictly controlled since the war, it will be recalled that 18 months ago the President of the Board of Trade announced that the range subject to this control was to be substantially widened. What he said at the same time 1134 was, I agree, that this additional list should not apply where orders had been placed before February, 1949. In other words, he did not wish the ban to apply so as to involve firms in breaches of contract.

I do not recollect that when this announcement was made some 18 months ago—it is not very recent—there was any sign of criticism from the Opposition side that these contracts would be fulfilled. Recently, of course, the agreement of our Western European friends has been reached to a further list of goods to be subject to this export control. The necessary amendments will be made shortly to the control Order. It may even be that this process will have to be carried still further, but we cannot really charge into these decisions, which seriously restrict an important export trade, without paying due regard to all the possible consequences. The right hon. Gentleman said yesterday: Diesel engines, electrical plant, and many other kindred high-grade manufactures have been pumped out of this country in the last few years although they are greatly needed at home. This was done in the name of dollar balances or in unrequited exports."—[OFFICIAL REPORT, 12th September, 1950; Vol. 478, c. 982]. What the last sentence means exactly, I cannot say. I really do not see its relevance to the subject of trade with Eastern Europe in the slightest degree.

The fact is that those exports were sent in exchange for very valuable and important supplies of timber, foodstuffs and other things we needed and which it would have been extremely difficult to obtain elsewhere except at high dollar cost. We cannot get all our supplies of timber from Sweden. If hon. Members imagine that, it is obviously untrue. The right hon. Gentleman and his friends would have been the first to complain if the farmers had been told to reduce the number of their livestock because there were not enough feedingstuffs. One can quite well imagine what they would have said to my right hon. Friend the Minister of Health if the housing programme had had to be cut. We really must look at this undoubtedly complex and difficult problem in a sensible and reasonable manner.

It is surely obvious, too, that it is useless for us to pursue policies in this country in isolation There is no point in 1135 cutting down our exports, breaking contracts and imposing economic blockades, and risking the delivery of vital supplies, if the only effect is that the orders go elsewhere to other countries. We must, therefore, as far as possible, march in step with others. That is precisely what we have done and what we intend to go on doing.

I tried to give the House a few moments ago, before I was drawn aside from my main theme to deal with those two points in the speech of the right hon. Gentleman, a general idea of the scale of the increased expenditure involved. It is not my business to discuss this afternoon how precisely the funds necessary to meet these expenses will be raised. That, obviously, will be the job of my right hon. and learned Friend the Chancellor of the Exchequer when he introduces his Budget next spring. I want, first, to put before hon. Members some of the practical issues which the scale of rearmament involves and, later, some of the broader economic implications which follow.

I think that none of us would deny that the new programme must, as far as possible, be carried out in such a way as to damage our economic recovery as little as possible. We would surely all agree that if we can produce the additional equipment required from the extra resources of manpower and from unused capacity, so much the better. Clearly, too, we must also see to it, in so far as production has to be switched from civilian work, that as little damage as possible is done to our vital export trade or to the supply of key items of equipment for investment at home. Desirable as these things are we must beware of seeking a too great perfection in this matter. If we do, there is a very real danger that we may sacrifice what, in the present circumstances, is especially vital, namely, the speed with which the extra arms can be produced.

It is because we attach so much importance to this point that, as the Prime Minister has said, we are not waiting to see how much assistance we can obtain from the United States, but are proceeding at once to arrange for the production of a further £100 million worth of equipment beyond the first £100 million announced at the end of July. We cannot decide the exact character of our 1136 full programme until we know the extent of United States aid and what the requirements under the North Atlantic Treaty will be.

Here, too, we have to have regard to the time factor, and since we know that much of what has been included in the United Kingdom production programme put forward in August is certain to be needed either by ourselves or others, we can safely push on with the production not only of the short list of high priority items agreed at the Deputies' Council but with other items as well. [An HON. MEMBER: "What are they?"] I do not think I can be expected to go into details. The Prime Minister referred to a number of these items when he spoke yesterday. There are obviously security items involved as well. I should like to turn to some of the practical and administrative problems with which we are faced in carrying out the programme.

It is obvious that with an unemployment rate of about 1½ per cent., and with the number of unfilled vacancies reported to employment exchanges at nearly 400,000, the supply of labour is bound to present difficulties not so much in the earlier stages of the programme as when the industrial system begins to take the full load. Apart from anything else, some 77,000 young men will be withheld from industry for a further six months, and more will be lost, of course—and we welcome it—through increased recruitment to the Regular Forces. In addition, as the Prime Minister has pointed out, there will be a progressive increase in the numbers engaged in military production, rising to about 250,000 at the peak. Some of this will fall on industries which would otherwise have been declining in size, such as shipbuilding, and in such instances there will obviously be a minimum of industrial and social disturbance. Indeed, it is in a sense a beneficial measure and will ease a problem which might otherwise have given a good deal of trouble on the North-East coast and elsewhere.

Secondly, it will be necessary to find labour for certain specialised capacity not in the ordinary course of events fully used, for example, certain aircraft assembly works and the Royal Ordnance factories for which we must have additional supplies of labour, and we shall want them fairly quickly. In the third place most of the additional demands will fall upon 1137 the various sections of the engineering industry and will have to be met in the first instance by the transfer of manpower from civil to military types of work, much of it within the same firm.

How, it may be asked, are we attempting to meet these problems? I should like to tell the House what we have in mind. The ordering Departments will endeavour to place their contracts in such a way as to involve the minimum necessary transfer and the minimum interference with other essential work. Arrangements have been made for the closest consultation between these Departments and the Ministry of Labour, both regionally and at headquarters. Wherever it is possible, contracts will be placed in areas where the labour supply is relatively easy. Where that cannot be done, special precautionary measures have been taken already to minimise difficulties. For example, the Ministry of Labour has to be consulted before any order is placed which involves the recruitment of 100 or more workers in areas where manpower is extremely short and of 500 or more in areas where the situation is rather easier. For some time to come these measures should meet the principal difficulties but, later, when these difficulties become more acute, as they must, we hope that it will be possible to ease the position by the employment of more part-time workers in particular areas; but I must tell the House that the number of those already occupied in part-time employment is no fewer than 750,000, which is not very far short of the war-time peak.

Now I come to materials. We do not think that this programme is likely to give rise to new and serious difficulties in raw material supplies, though there were, of course, some problems in existence even before it was put into operation. Coal output should be sufficient for the increased industrial output envisaged, though I am bound to say that exports may very well suffer unless the tonnage mined goes up appreciably. Electricity shortages, again, should not interfere with the rise of output programmed, but there is this qualification, that it is obviously more than ever necessary that domestic consumers should not compete with industrial needs by piling on their own demands at peak hours.

We believe that any difficulties with steel will probably show themselves in 1138 relation to particular types of finished steel rather than total output, but it is difficult to say more about this until the impact of the new defence production on particular sections of the industry is known. Certainly, sheet steel should cause no difficulty once the new Margam works are in operation. Again, cement may give rise to some problems and we shall have to weigh very carefully the respective claims of export and home demand. The timber difficulty has been raised on more than one occasion in this House during the summer and we shall certainly have to pay very special attention to it. In other materials we do not at present foresee special difficulties, though, obviously, in a matter of this kind, with rearmament activity going on throughout the whole world and driving up demand everywhere, it is very unwise to speak without great caution.

Some people have asked why we are not going forward now with a scheme of controls. I dare say they have noticed the, measures announced by President Truman in the United States. I must emphasise that the situation here is totally different from what it was in the United States. As my right hon. Friend pointed out yesterday, we still have in operation a very large number of controls. Many commodities are still rationed, we still have building licensing, a number of raw materials are still subject to allocation and we have exchange control and import controls.

What the United States is now contemplating doing already exists in this country for the most part and so we do not need to take new steps in the same way. Even when the controls are not actually in operation, we still have most of the powers and could certainly reintroduce the controls themselves at short notice. In fact, it can be said with confidence that in this respect we enter this new phase very much better equipped by reason of the policy of economic control which we have followed—not without criticism—since the war. However, if circumstances make it necessary we shall not hesitate to re-impose any of the controls which it has been possible to lift in recent months. We shall do this if we need to do it, for example, to guide the economy towards the objectives now before us—if it is only in this way that 1139 we can get the necessary arms production and the essential export.

Equally, the House can be assured that we shall use controls wherever necessary to ensure fair, distribution of essential consumer goods to the people, but we have never been wedded to the idea of controls for control's sake, and if we can get the results required without them so much the better. Indeed, much of our effort—I want to emphasise this point— must be directed to avoiding as far as possible some of the circumstances which have made controls necessary. For example, controls have been necessary in the past over quite a wide field because of shortages of materials. Given the shortage, it was essential to have the control, but—let us have no illusions about it—the shortage was a thoroughly bad thing. There is no doubt that the ending of shortages of this kind in the last few years as our production and trade has steadily developed, as it has in other parts of the world, has played a significant part in aiding the increase in productivity. If the shortages return the contrary will be true and the reaction on productivity will be equally bad.

There is one other matter with which I can deal conveniently at this point, and to which the right hon. Gentleman made some reference, and that is the question of stockpiling and the international allocation of materials. The importance to this country of accumulating as soon as possible stocks of food and raw materials to provide some insurance against the risk of interruption of shipping and port facilities, to which past experience and future calculations alike suggest that we might be exposed, has recently been underlined in the Press. The same considerations have been in the mind of the Government and we fully recognise the strength of the arguments which have been used.

There is, clearly, everything to be said for taking any steps that may be expedient, in consultation with our friends, whose position in this respect varies to some extent but in other respects resembles our own. I cannot, of course —I hope the House will not expect me to—report exactly what we are contemplating and what we are doing—this is clearly a matter in which secrecy is essential—but we are also well aware that 1140 joint consultation may become necessary regarding the current use of commodities of which there is a great shortage. I must leave the matter there, assuring the House that this is not something that has been overlooked in any way.

§ Mr. Paget (Northampton)

Are our negotiations with the Americans intended to persuade them to keep a substantial proportion of their stocks in England? It seems to me that in the event of interruptions, stocks which they will be distributing here eventually would be much better kept in England.

§ Mr. Gaitskell

I must ask my hon. and learned Friend to leave the matter as I have stated it. I took some pains to say what I have said and I would prefer not to go beyond that at the moment.

The third main problem with which we shall have to deal is the avoidance of bottlenecks—I hope I may be permitted to use that very convenient word—in plant or capacity and of clashes between arms orders and exports of particular importance. I shall have something to say later about the general problem of exports, consumption and investment. There is no doubt in the mind of the Government about the priorities which, as a matter of general policy, we consider must be acted upon. Defence and exports to dollar markets must now rank together at the top of the list, exports to other Commonwealth countries coming a close second.

I want to emphasise that this policy cannot be implemented or carried out by a mere statement of priorities of this kind by the Government—by laying down general rules. All our experience in the war, as right hon. Gentlemen on the other side as well as on this side know quite well, is against that. It is, and must be, a matter for detailed examination and decision by the ordering Departments and for the active co-operation of industry itself. It will be the first duty of the ordering Departments to try to bring to light during their investigation of capacity for defence contracts any possible difficulties and clashes. In the case of direct orders, especially those placed with large firms, this will go a long way towards enabling the necessary measures to be taken.

1141 In contracts put out to tender, all invitations will be accompanied by an instruction to the contractor to report any clashes or labour difficulties which his acceptance might involve. Even with orders placed direct, however, Departmental initiative cannot go all the way. As we know, much of the work is done by sub-contracting to a wide variety of firms. Here, the Departments themselves cannot assume the main responsibility. They have not the large regional staffs they had during the war which were in close touch with these firms, and in present circumstances I do not think we have reached the stage when these staffs should be built up again.

Considerable responsibility, therefore, lies, and must lie, with industry itself. We ask all firms, large and small, not to accept arms orders which involve the abandonment or postponement of high priority exports or which may lead to labour difficulties, without referring back to the Departments with whom they are accustomed to deal. It is a matter of great importance to the national policy of achieving rearmament and economic recovery side by side that firms should accept these responsibilities and should set out to discharge them, not only individually, but through the various consultative bodies such as the Engineering Advisory Council.

In this and other important respects, it is obvious that close consultation between Government and industry is essential. This will have to be carried out not only through individual Departments, but also centrally between the Government as a whole and representatives of the national bodies of employers and the trade unions. Some weeks ago, as the House knows, I had preliminary discussions with these national bodies and arranged to meet them again later this month on some convenient basis.

Anot