(c) crown copyright
Catalogue Reference:CAB/129/79
Image Reference:0017
T h e circulation of this p a p e r h a s b e e n strictly limited.
It is issued for t h e p e r s o n a l use of
T O P S E C R E T
G...F.Q (56)
2 1 s t
.1.7
January
Copy No..
.
1956
a
CABINET
THE ECONOMIC
M e m o r a n d u m , "by t h e
SITUATION
Chancellor
of
the
Exchequer
1,
I n m y p r e v i o u s m e m o r a n d u m ( C P . (56)
7) I g a v e t h e r e a s o n s
w h i c h l e d me t o t h i n k t h a t t h e I n f l a t i o n a r y p r e s s u r e i n t h e e c o n o m i c
s y s t e m was s e r i o u s l y e n d a n g e r i n g our p o s i t i o n .
So l o n g as
inflation
c o n t i n u e s o u r r e s e r v e s w i l l he f u r t h e r r u n down a n d i n t e r n a l w a g e s
and p r i c e s w i l l c o n t i n u e t o he f o r c e d u p .
We m u s t n o w d e c i d e o n
t h e m e a s u r e s we m u s t t a k e t o r e m e d y t h i s s t a t e o f
affairs,
2*
Public opinion is not only ready for resolute action hut expects
it,,
I f we f a i l n o w , we s h a l l h e d i s c r e d i t e d a s a G o v e r n m e n t ,
If
w e s u c c e e d , i t w i l l m a k e a l l t h e o t h e r t h i n g s we h o p e t o d o d u r i n g
o u r p r e s e n t t e r m of o f f i c e v e r y much e a s i e r ,
3a
W h a t i s n e e d e d i s t o t a k e a s u b s t a n t i a l " b l o c k f r o m t h e l o a d now­
p r e s s i n g on our r e s o u r c e s ,
I " b e l i e v e t h a t t h e m e a s u r e s we h a v e
a l r e a d y t a k e n h a v e "begun t o r e d u c e t h e o v e r l o a d a n d w i l l "become
p r o g r e s s i v e l y m o r e e f f e c t i v e o n c e i t i s " b e l i e v e d t h a t we a r e ' s e r i o u s .
T h i s w i l l g i v e u s a t i d e i n o u r f a v o u r i n s t e a d o f a g a i n s t us
as
it
I s now.
B u t we c a n n o t a f f o r d t o w a i t .
N o r n e e d w e f e a r t h a t we
s h a l l overdo I t ,
The m e t h o d s of r e v e r s i n g a d e f l a t i o n w h i c h h a s
g o n e t o o f a r a r e w e l l k n o w n a n d " b e c a u s e t h e y i n v o l v e s p e n d i n g o r t a x
c o n c e s s i o n s a r e l i k e l y t o he o n l y t o o e a s y from a p o l i t i c a l p o i n t of
view,
f
k-9
Our
measures
must
satisfy
show t h a t
three
we
requirements
( a )
They must
intend
( h )
They must take e f f e c t q u i c k l y .
a f f e c t a c t i v i t y i n a y e a r ' s time
present
situation,
( c )
The Government m u s t
contribution in the
indirect
control,
he seen t o
f i e l d over
to he
firm,
Steps which w i l l
only
are useless in the
he making an
which i t has
adequate
direct
or
5$
I s t a r t hy s e t t i n g out very h r i e f l y the v a r i o u s measures which
I t h i n k we s h o u l d t a k e ,
I would hope t h a t d e c i s i o n s could he taken
on a l l t h e s e m e a s u r e s i n t h e v e r y n e a r f u t u r e and t h a t a s many as
p o s s i b l e of them c o u l d he announced t o g e t h e r a t an e a r l y d a t e .
For
r e a s o n s w h i c h w i l l h e e v i d e n t , n o t a l l of t h e m c o u l d h e s o a n n o u n c e d o
I d e a l w i t h t h e t i m i n g of t h e a n n o u n c e m e n t s i n t h e f i n a l
paragraph
of t h i s p a p e r .
I,
Credit
MONETARY AND F I N A N C I A L
MEASURES
Policy
6
I a t t a c h t h e u t m o s t i m p o r t a n c e t o t h e c o n t i n u a n c e of t h e
m e a s u r e s u n d e r t h i s h e a d i n s t i t u t e d h y my p r e d e c e s s o r .
Indeed,
it
i s n e c e s s a r y t h a t t h e s e m e a s u r e s s h o u l d now h e i n t e n s i f i e d ,
I will
n o t . e n l a r g e f u r t h e r on t h i s s u b j e c t
here;.
I may h a v e s o m e t h i n g
m o r e t o s a y t o my c o l l e a g u e s o r a l l y ,
I a l s o want t o mention the
e f f e c t on t h e c r e d i t s q u e e z e of t h e G o v e r n m e n t * s " b o r r o w i n g
/programme,
0
1
si O
programme, p a r t i c u l a r l y t h a t f o r the n a t i o n a l i s e d i n d u s t r i e s .
(My
s u g g e s t i o n s f o r r e d u c i n g t h e i n v e s t m e n t p r o g r a m m e s of t h e s e
B u t t h e p o i n t w i t h w h i c h I am
i n d u s t r i e s a r e i n p a r a g r a p h s 15-22).
i m m e d i a t e l y c o n c e r n e d i s t h a t t h e h e a v y " b o r r o w i n g programme of
these
i n d u s t r i e s - e s t i m a t e d a t a h o u t £275 m . i n 1956 - m a k e s i t m u c h m o r e
d i f f i c u l t t o i n t e n s i f y the c r e d i t squeeze and tends t o d e s t r o y any
"belief t h a t the Government w i l l s u c c e e d i n c u r b i n g i n f l a t i o n .
I am
t h e r e f o r e c o n v i n c e d t h a t we m u s t f i n d s o m e m e a n s o f e a s i n g t h i s
proDlem.
I am h a v i n g t h e w h o l e p r o b l e m e x a m i n e d u r g e n t l y a n d I h o p e
t o p u t s p e c i f i c p r o p o s a l s t o my c o l l e a g u e s a t a l a t e r
stage.
Hire
Purchase
7o
The p r e s e n t r e s t r i c t i o n s have h e l p e d t o check demand,
But
they can do more.
I am a s k i n g t h e P r e s i d e n t o f t h e B o a r d o f T r a d e
to consider additional measures.
F i r s t , t o t a k e the power to
control hire*
Secondly,, t o i n c r e a s e t h e minimum down-payments
r e q u i r e d for consumer goods.
I suggest that for motor-cars,
r a d i o s and t e l e v i s i o n s e t s t h e minimum d e p o s i t s h o u l d be r a i s e d f r o m
f o r f u r n i t u r e , "bicycles and cookers the
t h e p r e s e n t 33i
t o 50/Sj
d e p o s i t s h o u l d g o u p f r o m 15% t o 20$o.
Thirdly, to extend the
c o n t r o l w h i c h i s now c o n f i n e d t o c o n s u m e r g o o d s t o a r e p r e s e n t a t i v e
r a n g e of c a p i t a l g o o d s .
As a s t a r t i n g p o i n t , I s u g g e s t t h a t
the
range should at l e a s t include the c a p i t a l goods which are
subject
t o h i r e p u r c h a s e r e s t r i c t i o n s u p t o J u l y 195U - t h a t i s m o t o r
coaches, goods v e h i c l e s and office f u r n i t u r e and machinery.
But I
t n i n k i t i s important t h a t h i r e purchase c o n t r o l should be used to
e x e r c i s e a g e n e r a l c h e c k on i n v e s t m e n t demand j u s t a s i t d o e s now
on consumer demand.
I am t h e r e f o r e a s k i n g t h e P r e s i d e n t t o p r e p a r e
a comprehensive l i s t , but to discuss the contents with the Treasury
and o t h e r M i n i s t e r s c o n c e r n e d "before a c t i o n i s t a k e n .
;
Savings
8.
What t h e N a t i o n a l S a v i n g s Movement r e a l l y n e e d s i s an
a s s u r a n c e t h a t i n f l a t i o n w i l l be c h e c k e d s o t h a t money s a v e d d e e s
not lose i t s value.
Improved s e c u r i t i e s and inducements cannot
t a k e t h e p l a c e of t h i s a s s u r a n c e .
But I t h i n k i t i s r i g h t
to
see whether any improvements can be made.
In p a r t i c u l a r I have
in mind the scope for tax inducements and the need to provide
the
movement w i t h s o m e t h i n g new t o s e l l t o t h e p u b l i c .
I am c o n s i d e r i n g
various suggestions under this head.
9.
One of t h e s e i s t h a t t h e Movement m i g h t o f f e r t o t h e p u b l i c a
premium bond - n o t a l o t t e r y i n which the i n v e s t o r
loses his
stake
b u t a scheme i n which the money s a v e d r e m a i n s , i n t a c t ;
but
instead
of e a r n i n g i n t e r e s t , t h e e q u i v a l e n t of t h e i n t e r e s t i s
distributed
i n money p r i z e s drawn b y , l o t .
I t i s n o t worth s p e n d i n g time and
s t a f f on o r g a n i s i n g s u c h a s e c u r i t y u n l e s s t h e N a t i o n a l
Savings
Movement i s p r e p a r e d t o welcome i t and make i t a s u c c e s s .
I propose
t o d i s c u s s i t w i t h L e r d M a c k i n t o s h a n d g o a h e a d i f we c a n d r a w u p
a p r a c t i c a l scheme w h i c h t h e Movement w i l l a d o p t w h o l e h e a r t e d l y ,
but not
otherwise.
1
II.
INVESTMENT
10.
Much of o u r t r o u b l e s a r e d u e t o t h e i n v e s t m e n t b o o m .
t h e o b j e c t s o f t h i s i n v e s t m e n t m a y h e a d m i r a b l e , we m u s t g o
slowly in b o t h the p u b l i c and the p r i v a t e
sectors.
11.
In the public sector the n a t i o n a l i s e d i n d u s t r i e s are
t o d o 16% m o r e i n v e s t m e n t i n 1956-57 t h a n i n 1955-56, c e n
g o v e r n m e n t 17/o m o r e a n d l o c a l a u t h o r i t i e s 6% m o r e . .
Only
t a k i n g p u b l i c and p r i v a t e house -"building t o g e t h e r , i s any
;
Though
more
planning
tral
i n housings­
reduction
/foreseen,
o
f o r e s e e n , a n d t h a t of f a r t o o s m a l l an amount t o o f f s e t t h e s e m a s s i v e
increases.
Our f i r s t d u t y must he t o r e d u c e t h e l o a d w h i c h t h o s e
s e c t o r s of t h e economy w h i c h a r e d i r e c t l y o r i n d i r e c t l y u n d e r o u r
c o n t r o l p l a c e on o u r r e s o u r c e s ,
12.
We c a n n o t m a k e a n y i m p r e s s i o n o n t h e p r o b l e m i f w e r e g a r d a n y
p a r t o f t h e s e e x p e n d i t u r e s a s s a c r o s a n c t , n o r i f we r e g a r d
ourselves
as p r e c l u d e d from s t r e t c h i n g out programmes which have a l r e a d y
r e c e i v e d our a p p r o v a l , c o l l e c t i v e l y or i n d i v i d u a l l y .
Obviously,
it
would he s t u p i d t o d e l a y works which have a l r e a d y s t a r t e d . .
They .
s h o u l d he pushed aheado
B u t i f we c a n a g r e e t o d e f e r w o r k w h i c h
h a s n o t y e t s t a r t e d , we c a n " b r i n g t h e l o a d w h i c h i n v e s t m e n t
is
placing
on o u r r e s o u r c e s w i t h i n m a n a g e a b l e p r o p o r t i o n s .
13a
The a d j u s t m e n t s n e c e s s a r y t o do t h i s m u s t , of c o u r s e , he s e e n t o conform t o c a r e f u l l y c o n s i d e r e d p l a n s .
Postponements must have regard to the p r i o r i t i e s a p p r o p r i a t e in each case and the programmes must he p r o p e r l y r e p h a s e d .
T h i s i s p a r t i c u l a r l y n e c e s s a r y on t h e B r i t i s h T r a n s p o r t Commipsion's programme which i s r e f e r r e d t o i n p a r a g r a p h s 15 a n d 1 6 a n d w h i c h s e e m s t o me t o r e q u i r e q u i t e
radical reconsideration.
114*
1 a s k my c o l l e a g u e s
NATIONALISED
British
to
accept
these
broad
principles.
INDUSTRIES
Transport
Commission
15*
The i n v e s t m e n t of t h e r a i l w a y s i s
£6k m i l l i o n i n 1955 t o £9h m i l l i o n i n
r a i l w a y s have been h e l d back, and t h a t
.go a h e a d w i t h a m o d e r n i s a t i o n p l a n .
managed - p r o b a b l y f a r more t h a n t h e y
p r o p o s e t h a t a t l e a s t £20 m i l l i o n o f t
next year.
planned to i n c r e a s e from
1956.
I know t h a t
the
they have been encouraged t o
But t h i s i s more t h a n can be
w i l l be able to do,
I
h i s work be d e f e r r e d u n t i l
16.
The i n v e s t m e n t of the 3 , T . C . i n o t h e r f i e l d s
i n c r e a s e b y £17 m i l l i o n - a 100% i n c r e a s e .
Most
r e p l a c e m e n t of t h e B r i t i s h Road S e r v i c e s f l e e t .
l e a s t £10 m i l l i o n o f t h i s b e
deferred. National
Coal
Board
17.
This investment is planned to
i n 1955 b y a f u r t h e r £7 m i l l i o n ,
reduce the N.C.B.
investment, but
f o r some c o n t r i b u t i o n ,
I propose
should be c o n s i d e r e d f o r deferment,
Central
is planned to of t h i s i s f o r I propose that
at
Bile c t r i c i t y
i n c r e a s e f r o m n e a r l y £100
million
We h a v e n e v e r p r e v i o u s l y s o u g h t t o
t h i s y e a r I t h i n k we s h o u l d a s k
t h a t £7 m i l l i o n o f t h i s
investment
if practicable.
Authority
18
I n v e s t m e n t i n d i s t r i b u t i o n i s p l a n n e d f o r £72 m i l l i o n ,
almost
t h e same f i g u r e a s l a s t y e a r . ^ T h i s , t h a n k s t o t h e e f f o r t s of t h e
p r e v i o u s M i n i s t e r of F u e l a n d Power a n d t h e c o - j p e r a t i o n of t h e
C.E.A,, is already lower than the A u t h o r i t y had hoped f a r next
y e a r - a n d i t i m p l i e s " a s u b s t a n t i a l s l o w i n g down o f t h e r u r a l
e l e c t r i f i c a t i o n p r o g r a m m e " w h i c h we c l e a r l y m u s t a c c e p t .
B u t I am
a f r a i d t h a t we m u s t a s k f o r m o r e ,
I suggest that a further
£5 m i l l i o n - a b o u t 7%/o - b e
deferred.
0
19,
In addition, well over
stations.
Most of t h i s i s
p l a n t already b e i n g made, '
for s t a t i o n s to be s t a r t e d ,
within the year.
I cannot
b u t I do s u g g e s t t h a t t h e s e
£100 m i l l i o n i s p l a n n e d f o r
generating
f o r s t a t i o n s now b e i n g b u i l t and f o r
B u t some p a r t w i l l a l m o s t c e r t a i n l y b e
and f o r c o n t r a c t s f o r p l a n t t o be p l a c e d
q u a n t i f y the s a v i n g t h a t can be made,
p r o j e c t s be
deferred.
3
/South
of
South
of
Scotland
Electricity
Board
20*
Their investment i s s a i d t o he p l a n n e d t o i n c r e a s e from a
r a t e o f a h o u t £15 m i l l i o n i n 1955 t o n e a r l y £194" m i l l i o n i n
1956,
The B o a r d h a s o n l y r e c e n t l y a c q u i r e d an i n d e p e n d e n t e x i s t e n c e a n d
i t may h e t h a t e s t i m a t i n g d i f f i c u l t i e s h a v e s t i l l t o h e o v e r c o m e :
i n any e v e n t , I cannot h e l i e v e t h a t such an i n c r e a s e i s p r a c t i c a h l e
I s u g g e s t t h a t i n the f i e l d s h o t h of d i s t r i b u t i o n and g e n e r a t i o n
r e d u c t i o n s s h o u l d h e m a d e p a r a l l e l t o t h o s e we a r e a s k i n g f r o m t h e
Central Electricity Authority,
Gas
0
Council
£
21*
T h e i n v e s t m e n t p l a n n e d f o r 1956-5?' i s 5 6 m i l l i o n , n e a r l y £5
m i l l i o n l e s s t h a n 1955-56,
I am v e r y g r a t e f u l f o r t h i s
reduction,
which r e p r e s e n t s , I know, a v e r y r e a l e f f o r t .
But, none the l e s s
I s u g g e s t a f u r t h e r d e f e r m e n t o f £1 t o £1-g- m i l l i o n , a h o u t
2-g$,
?
The A i r .
Corporations
B , 0 . A , C . p l a n s t o s p e n d o v e r £16 m i l l i o n m o r e t h i s y e a r , a
22*
g r e a t p a r t i n d o l l a r s t o h u y D.C.7 a i r c r a f t on an i n s u r a n c e ,
B . E . A . p l a n s t o s p e n d £i+i m i l l i o n m o r e t h i s y e a r ,
I make n o
p o s i t i v e s u g g e s t i o n s , h u t I do ask t h a t t h e M i n i s t e r examine most
c a r e f u l l y w i t h t h e C o r p o r a t i o n s w h e t h e r some p a r t of t h i s
larger
investment cannot he d e f e r r e d ,
CENTRAL GOVERNMENT
23,
It is at present proposed that the total capital
expenditure
t o h e h o r n e o n V o t e s i n 1956-57 s h o u l d h e a h o u t £21+0 m i l l i o n ,
However e s s e n t i a l
all
n e a r l y £1+0 m i l l i o n m o r e t h a n i n 1955-56.
t h i s e x p e n d i t u r e m a y h e , we c a n n o t d e f e n d a t t h i s t i m e s o g r e a t
an i n c r e a s e ,
I a s k t h a t a l l my c o l l e a g u e s l o o k a g a i n t o s e e
w h e t h e r some p a r t of t h e s e p r o g r a m m e s c a n n o t h e d e f e r r e d .
In
p a r t i c u l a r , I have the f o l l o w i n g p r o p o s a l s .
/Hospital
Programmes
Hospital
Programmes
(Great
Britain)
£15,7 m i l l i o n i s t o b e s p e n t i n 1956-7 ( i n c l u s i v e o f
2k.
Scotland).
i;Ye a r e c o m m i t t e d t o p r o g r a m m e s w h i c h w i l l
raise
We h a v e t w i c e
e x p e n d i t u r e t o £21 m i l l i o n i n 1 9 5 7 / 8 .
r e i t e r a t e d t h a t t h e s e programmes w i l l not be c u t .
Neverthe­
l e s s , I m u s t a s k f o r a r e d u c t i o n t o £ l h m i l l i o n i n 1956/7*
I
m u s t a l s o a s k t h a t c o m m i t m e n t s s h o u l d n o t be made w h i c h w i l l
c o m p e l u s t o c a r r y t h e p r o g r a m m e a b o v e £15 m i l l i o n i n 1957/8Atomic
Energy
25*
This i s e x p e c t e d t o r i s e from over £28 m i l l i o n t h i s year
t o n e a r l y £hO m i l l i o n n e x t y e a r , t h o u g h s h o r t a g e of
staff
may a g a i n p r e v e n t t h e A u t h o r i t y d o i n g a s m u c h a s i t w o u l d
like.
I do n o t wish t o h o l d back t h i s v i t a l a c c i v i t y b u t
s u g g e s t t h a t l i k e e v e r y o n e e l s e , by t r y i n g t o do a l i t t l e
less
i n one y e a r , t h e y may h e l p e v e r y o n e , i n c l u d i n g t h e m s e l v e s ,
t o do a l i t t l e more o v e r a r a t h e r l o n g e r
period.
Post
Office
28o
A v e r y l a i ' g e i n c r e a s e , - f r o m n e a r l y £91 m i l l i o n t o n e a r l y
£99 m i l l i o n , i s p r o p o s e d .
I n t h e a l t e r e d c i r c u m s t a n c e s , I do
n o t s e e h o w we c a n n o w j u s t i f y a n i n c r e a s e .
The P o s t
Office,
l i k e o t h e r p a r t s of t h e e c o n o m y , m u s t t a k e a c c o u n t of t h e
n a t i o n a l s i t u a t i o n , and I must ask t h a t t h e i r programme s h o u l d
b e k e p t a t £91 m .
Development
Areas
27*
Wo a r e s p e n d i n g a b o u t £6 m i l l i o n a y e a r o n b u i l d i n g
f a c t o r i e s and e x t e n d i n g e x i s t i n g f a c t o r i e s in t h e Development
A r e a s - t h i s a t a t i m e when our t r o u b l e i s t o o much e m p l o y m e n t ,
not too l i t t l e .
We c a n n o t s t o p w o r k a l r e a d y i n h a n d , b u t I
s u g g e s t t h a t we o u g h t t o i m p o n e a 6 - m o n t h s t a n d s t i l l on n e w
commitments.
Government
Building
28.
In addition to the services mentioned above,
other
i n c r e a s e s in Government b u i l d i n g are proposed.
For example,
e x p e n d i t u r e on F o o d a n d P e t r o l e u m s t o r e s i s t o i n c r e a s e by
n e a r l y £3 m i l l i o n s , a n i n c r e a s e o f o v e r 60%.
I n v i e w of t h e
l o a d on t h e b u i l d i n g i n d u s t r y , I s h o u l d l i k e t o s e e u s s p e n d i n g
l e s s o n a l l G o v e r n m e n t b u i l d i n g i n 1956/57? b u t i f t h i s i s
i m p o s s i b l e we o u g h t a t l e a s t n o t t o s p e n d m o r e .
I am a s k i n g
t h e M i n i s t e r of Works t o l o o k c a r e f u l l y a t e v e r y p r o j e c t
in
conjunction with the Treasury with a view to p o s s i b l e
postponement.
Home
Defence
29*
I t w a s r e c e n t l y d e c i d e d t o p r o v i d e £55 m i l l i o n s f o r
Home D e f e n c e e x p e n d i t u r e i n 1956/57*
Of t h i s
total,
£28 m i l l i o n s w a s f o r t h e d e v e l o p m e n t o f v a r i o u s b r a n c h e s o f t h e
Home D e f e n c e o r g a n i s a t i o n a n d t h e b a l a n c e w a s f o r t h e s t o c k ­
p i l i n g of food, a n d o t h e r i t e m s , i n c l u d i n g t h e
consequential
storages,
I n v i e w of our p r e s s i n g c u r r e n t p r o b l e m s , I m u s t
ask f o r t h i s d e c i s i o n t o be r e c o n s i d e r e d .
I accept the need
for r e c r u i t i n g and t r a i n i n g t h e c i v i l defence and a l l i e d
services, for maintenance costs r e l a t i n g to the
existing
s t o c k p i l e a n d f o r f i n i s h i n g w o r k s t h a t a r e w e l l on t h e way t o
completion.
But in p r e s e n t c i r c u m s t a n c e s I see no p o s i t i v e
m e r i t - and indeed I see g r e a t disadvantage - in buying food,
/oil
o i l and medical s u p p l i e s for the s t o c k p i l e ;
i f we s t o p p e d t h i s
we w o u l d s a v e £7*5 m i l l i o n .
We n e e d n o t g o a h e a d s o f a s t
w i t h w o r k s f o r t h e s t o r a g e of o i l , a n d I s u g g e s t a c u t of
£1.5
million.
I t i s p r o p o s e d t o spend f a r more n e x t y e a r
t h a n t h i s on t h e p u r c h a s e of f i r e f i g h t i n g e q u i p m e n t , a n d I
s u g g e s t a c u t of £2.5
m i l l i o n ( f r o m a t o t a l o f £I+.5 m i l l i o n ) .
I w o u l d s t o p t h e b u i l d i n g of p r o t e c t i v e works f o r
headquarters
t o c o n t r o l r o o m s , s a v i n g £0.2+5 m i l l i o n .
And I w o u l d c u t
£1.5
m i l l i o n off the p u b l i c u t i l i t y works.
I would a l s o cut
t h e P o s t O f f i c e c o n s t r u c t i o n a l w o r k f r o m £9 m i l l i o n s
to
£5 m i l l i o n s .
By t h e s e or o t h e r r e d u c t i o n s I w o u l d b r i n g t h e
t o t a l f o r h o m e d e f e n c e d o w n t o a b o u t £38 m i l l i o n s .
No o n e
would r e a l l y be much t h e w o r s e f o r t h i s and t h e n a t i o n a l
f i n a n c e s a n d b a l a n c e of p a y m e n t s ( i n r e s p e c t of t h e b u y i n g of
food and o i l ) would b e n e f i t
considerably.
LOCAL
AUTHORITIES
Capital
expenditure
other
than
Housing,
Education
and
Roads
30.
T h e r e i s no C e n t r a l G o v e r n m e n t c o n t r o l o v e r m o s t of t h i s
except through the loan sanction.
I n v e s t m e n t i n 1955/56 i s
e s t i m a t e d t o a m o u n t t o £122 m i l l i o n o f w h i c h t h e m a i n e l e m e n t s
are: ­
£in.
Water
Sewerage
Miscellaneous Local Services
Health Services
Coast P r o t e c t i o n and D r a i n a g e
37.9
33.8
19.0
5.1
8.0
" M i s c e l l a n e o u s " i s r u n n i n g a t $0% m o r e i n 1955/6 t h a n
I n t h e f i r s t t w o q u a r t e r s o n l y £ 2 . 8 of
applications
rejected.
l95U/5*
were
31.
I must ask t h a t no f u r t h e r loan s a n c t i o n s
for
" M i s c e l l a n e o u s " S e r v i c e s b e g r a n t e d f o r a p e r i o d of 6 m o n t h s ,
e x c e p t t o e n a b l e p r o j e c t s i n p r o g r e s s t o be c o m p l e t e d or w i t h
t h e a p p r o v a l of t h e T r e a s u r y t o m e e t r e a l l y
exceptional
circumstances.
F o r W a t e r and S e w e r a g e t h e c o n t r o l s h o u l d be
o p e r a t e d t o r e d u c e t h e t o t a l v a l u e o f s t a r t s t o t h e 195^/5
level.
In both c a s e s t h e p o s i t i o n can be r e v i e w e d
after
6 months.
Housing
32.
The e f f e c t s of t h e c h a n g e s i n t h e s u b s i d y p o l i c y a n d
i n t e r e s t r a t e s cannot y e t be e s t i m a t e d .
My p r e d e c e s s o r
agreed
w i t h t h e M i n i s t e r of H o u s i n g and L o c a l G o v e r n m e n t t h a t he
s h o u l d work - so f a r a s he i s a b l e t o i n f l u e n c e m a t t e r s - t o
p r o d u c e a t o t a l o f 120,000 s u b s i d i s e d h o u s e s a n d 270,000
houses in a l l , the l a t t e r being a f i g u r e for Great B r i t a i n .
The n e x t s t e p i n h o u s i n g m u s t be t h e a b o l i t i o n of t h e g e n e r a l
n e e d s s u b s i d y a n d a r e v i s i o n of t h e R e n t R e s t r i c t i o n A c t s w i t h
t h e r a i s i n g of c o n t r o l l e d r e n t s .
33*
U n t i l t h i s h a s b e e n d o n e , we c a n n o t r e d u c e t h e
subsidies
on e x i s t i n g a s d i s t i n c t f r o m n e w l y c o n s t r u c t e d h o u s e s .
I
should have l i k e d to take t h i s next s t e p t h i s s e s s i o n but I
r e a l i s e that for various reasons this is impracticable.
But,
t h i s being s o , I r e g a r d i t as e s s e n t i a l t h a t a B i l l to modify
the Rent R e s t r i c t i o n Acts should be p r e p a r e d and g i v e n
first
/place
p l a c e i n t h e A u t u m n S e s s i o n .
T h i s m e a n s t h a t we m u s t d e t e r m i n e
t h e p o l i c y of the measure in t h e v e r y near f u t u r e because t h e
d r a f t i n g of t h e m e a s u r e w i l l i n v o l v e m a n y d i f f i c u l t
points.
We s h a l l n o t h e r e a d y i n t h e a u t u m n i f t h e B i l l i s n o t
suh­
s t a n t i a l l y complete before the recess.
I. w o u l d a s k t h a t
p r e p a r a t o r y work s h o u l d be p r e s s e d on and t h a t a M i n i s t e r i a l
Committee s h o u l d be c o n s t i t u t e d f o r t h w i t h t o d e a l w i t h
this
matter.
Education
3k.
I n 195k/5 £63 m i l l i o n o f w o r k w a s s t a r t e d .
Projects
c o s t i n g £ 8 0 m i l l i o n h a v e b e e n a u t h o r i s e d t o s t a r t i n 1955/6.
The l o a d
A c t u a l i n v e s t m e n t i n 1955/6 i s a b o u t £57*5 m i l l i o n .
o n t h e e c o n o m y i s r i s i n g a t a b o u t £5 m i l l i o n a y e a r .
For
1956/7 t h e p r o p o s e d p r o g r a m m e o f s t a r t s i s : ­
£m.
1 .
Primarj/
and
2 .
Further
Education
3 .
Other Education Services
(Training Colleges, special
h .
Minor
Secondary
Capital
Projects
Schools
57
9
schools
etc.)
3
(uncontrolled)
estimated at
11
80
.
'
35,
I n a d d i t i o n i t i s now p r o p o s e d t o i n c r e a s e t h e p l a n n e d
e x p e n d i t u r e on t e c h n i c a l e d u c a t i o n o v e r t h e n e x t f i v e
years
f r o m £ k 5 m i l l i o n t o £71 m i l l 3 o n *
lijX0 e n d i t u r e u n d e r i t e m k
may b e u n d e r e s t i m a t e d .
36.
I n N o v e m b e r , I95k t h e C a b i n e t a p p r o v e d t h e M i n i s t e r o f
Education's proposals for r u r a l r e o r g a n i s a t i o n which were then
e x p e c t e d t o c o s t a b o u t £20 m i l l i o n s p r e a d o v e r f i v e y e a r s ,
a n d l i m i t e d t o £5 m i l l i o n i n t h e f i r s t y e a r .
No l a r g e
scale
i n c r e a s e i n t e c h n i c a l e d u c a t i o n b u i l d i n g was t h e n p r o p o s e d .
£12 m i l l i o n o f r u r a l r e o r g a n i s a t i o n w a s s t a r t e d i n 1 9 5 5 / 6 ,
a n d n e x t y e a r ' s p r o g r a m m e i n c l u d e s £6 m i l l i o n .
There is
still
£22 m i l l i o n m o r e t o b e s t a r t e d i n t h r e e y e a r s .
The t o t a l
c o s t of t h i s p r o g r a m m e i s t w i c e a s much a s when t h e C a b i n e t
approved i t .
This work is not e s s e n t i a l to provide
school
p l a c e s f o r t h e b u l g e or f o r movement of p o p u l a t i o n .
In view
of t h e i m p e n d i n g i n c r e a s e i n t h e t e c h n i c a l e d u c a t i o n programme
I must
ask:­
( a )
T h a t L o c a l E d u c a t i o n A u t h o r i t i e s be i n s t r u c t e d t o
projects
d e f e r u n t i l 1957/8 a n y r u r a l r e o r g a n i s a t i o n
already authorised but not
started.
( b )
T h a t t h e r e s t of t h e r u r a l r e o r g a n i s a t i o n
programme
be d e f e r r e d u n t i l a f t e r t h e b u l g e has been
provided
for.
( c )
That
in
( d )
The m i s c e l l a n e o u s u n c o n t r o l l e d i n v e s t m e n t m u s t n o t
r i s e i n 1956/7 a b o v e t h e e s t i m a t e o f £11 m i l l i o n .
the
t o t a l p r o g r a m m e of e d u c a t i o n b u i l d i n g
starts
1956/7 b e r e d u c e d f r o m £80 m i l l i o n t o £70 m i l l i o n .
/37-
If
37*
If t h e s e p l a n s for the e d u c a t i o n a l programmes are
agreed,
i t may be n e c e s s a r y , i n o r d e r t o e n s u r e t h a t t h e new t o t a l
l i m i t s a r e o b s e r v e d , t o w i t h d r a w t h e p r e s e n t a r r a n g e m e n t by
which Local A u t h o r i t i e s are not s u b j e c t t o c o n t r o l for
projects
c o s t i n g l e s s t h a n £10,000.
I must ask the Minister
to
consider
this.
38.
A comparable reduction should
p r o g r a m m e of t h e S c o t t i s h E d u c a t i o n
a l s o he made
Department.
in
the
Roads
39*
We a r e a t p r e s e n t c o m m i t t e d t o a p r o g r a m m e o f
expenditure
o n m a j o r w o r k s a n d n e w r o a d s w h i c h w i l l c o s t £16 m i l l i o n s
in
1956/57 a n d r i s e t o a m a x i m u m o f s o m e £ h O m i l l i o n s i n 1 9 5 9 / 6 0 .
I a m n o t i m m e d i a t e l y c o n c e r n e d w i t h t h e y e a r s a f t e r 1956/575
w h i c h we c a n d i s c u s s l a t e r .
The M i n i s t e r h a s ,
however,
s u g g e s t e d a n a d d i t i o n t o t h e p r o g r a m m e o f s o m e £6 m i l l i o n s ,
I cannot
o f w h i c h a b o u t £600,000 w o u l d b e s p e n t i n 1956/57.
a g r e e t o s u c h an a d d i t i o n .
I t i s d i f f i c u l t t o s e e how r o a d s
c a n be e x e m p t e d f r o m m a k i n g some c o n t r i b u t i o n t o t h e
solution
of t h e p r o b l e m we now f a c e .
I must therefore ask the Minister
t o e x a m i n e w h e t h e r i t i s n o t p o s s i b l e f o r him somewhat t o
s l o w d o w n h i s p r o g r a m m e i n 1956/57 s o a s t o s h o w a p o s i t i v e
r e d u c t i o n o f t h e e x p e n d i t u r e p r e v i o u s l y a g r e e d f o r 1956/57*
PRIVATE
INDUSTRY AND COMMERCE
hO.
p o r t h e f i r s t t i m e t h e P r e s i d e n t of t h e B o a r d of T r a d e
h a s r e c e i v e d f r o m a l a r g e a n d r e p r e s e n t a t i v e s a m p l e of
firms
a f o r e c a s t of t h e i r i n t e n t i o n s .
T h i s f o r e c a s t , w h i c h we m u s t
t r e a t w i t h g r e a t c a u t i o n u n t i l we h a v e m o r e e x p e r i e n c e o f
its
r e l i a b i l i t y , suggests that private industry is planning for
at
l e a s t a s l a r g e a n i n c r e a s e i n i n v e s t m e n t i n 1956
as
occurred
Desirable though t h i s is in i t s e l f , i t is happening
i n 1955*
too
quickly.
hi.
S i n c e t h e a b o l i t i o n of b u i l d i n g l i c e n s i n g i n 195^,
we
h a v e n o m e t h o d of d i r e c t c o n t r o l o v e r p r i v a t e
investment.
We h a v e t o r e l y o n m o n e t a r y a n d f i s c a l m e a s u r e s , o n w h i c h , a s
s t a t e d i n p a r a g r a p h 6 , I p r o p o s e t o s a y s o m e t h i n g t o my
colleagues.
h2.
T h e c o n s e q u e n c e s of a c o n t i n u a n c e of t h i s
overexuherant
i n v e s t m e n t boom a r e s o s e r i o u s t h a t I h a v e b e e n
considering
w h e t h e r we s h o u l d n o t r e - i n t r o d u c e s o m e d i r e c t c o n t r o l o f
building.
The d i f f i c u l t i e s of d o i n g t h i s a r e a d m i t t e d l y g r e a t .
I t w o u l d r e q u i r e l e g i s l a t i o n of a m o s t u n a t t r a c t i v e
kind.
I t w o u l d b e n e c e s s a r y t o b u i l d u p t h e s t a f f of t h e M i n i s t r y
of W o r k s , a n d p r o b a b l y of t h e " s p o n s o r i n g " D e p a r t m e n t s a s
w e l l - a move w h i c h w o u l d t a k e some t i m e .
The c o n t r o l when
i n t r o d u c e d w o u l d n o t be f u l l y s a t i s f a c t o r y i n i t s
operation
for several months.
We s h o u l d p r o b a b l y h a v e t o b e g i n b y
a " c r a s h " o p e r a t i o n , p r o h i b i t i n g a l l new s t a r t s ;
t h i s would
i n e v l t a h l y c r e a t e a number of e m b a r r a s s i n g
individual
problems.
But t h e s i t u a t i o n i s such t h a t I f e e l I must p r e s s
o n w i t h a n e x a m i n a t i o n o f t h i s a n d I am a s k i n g t h e M i n i s t e r
of W o r k s t o w o r k o u t t h e o u t l i n e of a s c h e m e .
/i+3 *
But
JU3B u t w h e t h e r o r n o t we c a n t a k e s o m e m e a s u r e o f
direct
c o n t r o l o f p r i v a t e i n v e s t m e n t , a d e f e r m e n t of
capital
e x p e n d i t u r e of t h e n a t i o n a l i s e d i n d u s t r i e s ,
central
government and l o c a l a u t h o r i t i e s i s v i t a l .
Politically,
i f we i n s t i t u t e b u i l d i n g c o n t r o l , we s h o u l d h a v e t o b e
a b l e t o d e m o n s t r a t e t h a t t h e p u b l i c s e c t o r was b e i n g
created
comparably.
I f we d e c i d e n o t t o i n s t i t u t e
building
control, then the need to take adequate action in the
p u b l i c s e c t o r becomes t h e more i m p e r a t i v e .
III.
GOVERNMENT
EXPENDITURE
hlu
The r a t e of G o v e r n m e n t e x p e n d i t u r e h a s a d o u b l e i m p a c t
upon the i n f l a t i o n a r y p o s i t i o n .
In the f i r s t p l a c e , so far
as
c o n c e r n s e x p e n d i t u r e on c a p i t a l a c c o u n t , i t a d d s t o t h e b u r d e n
of a l r e a d y o v e r - l o a d e d , i n d u s t r i e s , e s p e c i a l l y b u i l d i n g and
engineerings
In the second p l a c e , a r e d u c t i o n in Government
e x p e n d i t u r e w o u l d d i m i n i s h t h e G o v e r n m e n t ' s d e m a n d s on o u r
labour and other r e s o u r c e s , and the p u r c h a s i n g power which
r e s u l t s from Government d i s b u r s e m e n t s :
and by making it. p o s s i b l e
for t h e Government t o borrow l e s s would a s s i s t our c r e d i t p o l i c y e
P r o m t h e s e p o i n t s o f v i e w I m a y f i n d i t n e c e s s a r y t o a s k my
c o l l e a g u e s t o e f f e c t f u r t h e r r e d u c t i o n s of e x p e n d i t u r e i n t h e
c o u r s e of t h e y e a r , w i t h i n t h e E s t i m a t e s a s f i n a l l y
approved.
/DEPENCJE
DEFENCE
2+5.
Defence i s t h e h e a v i e s t of our n e c e s s a r y b u r d e n s and
m u s t m a k e e c o n o m i e s w h e r e v e r we c a n .
It i s not too early
s e l e c t our o b j e c t i v e s .
I suggest the
following:
The
we
to
Navy
2+6.
I h a v e no s p e c i f i c p r o p o s a l s t o make a t t h i s s t a g e o n
t h e s t r e n g t h of t h e Navy o r t h e c h a r a c t e r o f i t s a r m a m e n t s .
I w o u l d h o p e h o w e v e r t h a t uhe d r i v e f o r economy w i l l n o t b e
r e l a x e d , a n d i n p a r t i c u l a r t h a t t h e Navy ( a n d t h e o t h e r
S e r v i c e s a s w e l l ) w i l l see t h a t t h e r e i s no u n n e c e s s a r y
accumulation of stocks.
The
Army
2+7.
The War O f f i c e h a v e a l r e a d y s a i d t h a t a g e n e r o u s p a y
award ( w h i c h t h e y have b e e n g i v e n ) might make i t p o s s i b l e
for
them t o manage w i t h s i x r e g u l a r d i v i s i o n s and f i v e
brigades,
I s h o u l d b e g r a t e f u l t o know how t h i s w o u l d be a c c o m p l i s h e d ,
by what d a t e , and what the f u l l c o n s e q u e n t i a l s a v i n g s would b e .
I n t h e m e a n t i m e I s u g g e s t t h a t we s h o u l d a i m a t r e d u c i n g t h e
Army b y o n e D i v i s i o n .
I f p o s s i b l e , t h i s s h o u l d be done by
r e d u c i n g t h e number of D i v i s i o n s i n Germany by o n e .
In this
w a y we s h o u l d s a v e n o t m e r e l y t h e c o s t o f t h e D i v i s i o n b u t a l s o
t h e b u r d e n on our b a l a n c e of payments of m a i n t a i n i n g a D i v i s i o n
overseas.
I f t h i s s h o u l d n o t p r o v e p o s s i b l e , we s h o u l d s e e k
o u r A l l i e s ' a g r e e m e n t t o r e g a r d i n g one of t h e D i v i s i o n s i n
Germany a s o u r s t r a t e g i c r e s e r v e .
The
R.A.F.
2+8.
I t seems l i k e l y t h a t a s t h e y e a r s go b y t h e a i r d e f e n c e of
t h i s c o u n t r y , so f a r a s i t i s p r a c t i c a b l e a t a l l , w i l l depend
l e s s a n d l e s s on m a n n e d f i g h t e r s a n d m o r e a n d more on t h e u s e o f
giiided weapons.
I s u g g e s t t h a t the Defence Committee should be
asked to consider t h i s matter with a view to recommending a date
b y w h i c h t h i s new c o n c e p t o f a i r d e f e n c e s h o u l d b e c o m e
effective
I n t h e m e a n t i m e we s h o u l d a i m a t p r o g r e s s i v e r e d u c t i o n s i n t h e
a m o u n t s s p e n t on m a n n e d f i g h t e r s ,
s t a r t i n g w i t h r e s e a r c h and
development into fighter
aircraft.
Defence
Research
and
Development
2+9.
Our e x p e n d i t u r e on Defence R e s e a r c h and Development g o e s
up and u p .
I b e l i e v e we may a l r e a d y h a v e r e a c h e d t h e p o i n t a t
which n o t only defence b u t t h e c i v i l economy s u f f e r s t h r o u g h our
e f f o r t to do too'muc.h.
I propose t h a t , as a f i r s t s t e p ,
an
o b j e c t i v e s t a t e m e n t s h o u l d b e p r e p a r e d of t h e impact on i n d u s t r y
a n d on o u r s c i e n t i f i c and t e c h n i c a l r e s o u r c e s of t h e S e r v i c e s
demands.
Here a g a i n e f f o r t must b e made more s e l e c t i v e .
1
/CIVIL
CIVIL
EXPENDITURE
Bread
Sup s i d y
50.
I propose t h a t the bread subsidy should be a b o l i s h e d .
It
c o s t s £1+1 m . a y e a r .
I t i n v o l v e s a s u b s i d y and p r i c e c o n t r o l
­
methods which have been almost e n t i r e l y abandoned by t h i s
Government as i n s t r u m e n t s of our economic p o l i c y .
The b a k e r s ,
l a r g e and s m a l l , want t o get r i d of i t .
The r e s u l t w e a l d b e a n
i n c r e a s e o f 1-g- p o i n t s o n t h e r e t a i l p r i c e i n d e x .
It is equal
t o 2jjd. o n t h e 1-f l b . l o a f ( w h i c h c o s t s 7-g-d.) a n d t h e a v e r a g e
e x p e n d i t u r e on. b r e a d p e r h e a d p e r w e e k w o u l d g o u p f r o m 1 s .
3d.
t o 1 s . 8d.
Milk
51 .
I p r o p o s e t h a t t h e r e t a i l p r i c e of m i l k s h o u l d b e r a i s e d
b y -g-d. p e r p i n t .
T h i s w o u l d s a v e £20 m . i n a f u l l y e a r .
The
r e t a i l p r i c e of milk has not b e e n changed s i n c e August
1954,
though costs o f d i s t r i b u t i o n have risen sharply.
To j u d g e b y
past experience, consumption should not f a l l s i g n i f i c a n t l y .
The
A l l I t e m s I n d e x w o u l d r i s e b y 0,h3
points.
Agricultural
Review
52.
T h e a g r i c u l t u r a l s u b s i d i e s w i l l c o s t a b o u t £210 m . t h i s
year.
T h e r e h a s b e e n a b i g r i s e i n costs a n d t h e f a r m e r s w i l l
p r e s s hard f o r an i n c r e a s e .
We'must r e s i s t t h i s and s t r i v e ' f o r
a positive reduction.
Moreover, whatever the t o t a l
figures,
we m u s t t r y t o d i s t r i b u t e t h e s u b s i d i e s i n w a y s w h i c h w i l l b e s t
h e l p our economy.
F o r i n s t a n c e , we s h o u l d g i v e a n i n c e n t i v e
to
the f u l l e s t u s e of home-grown f e e d i n g s t u f f s by e n c o u r a g i n g the
p r o d u c t i o n ' o f a n i m a l s w h i c h l i v e on t h e l a n d r a t h e r t h a n on
i m p o r t s - t h a t i s , c a t t l e and s h e e p r a t h e r t h a n p i g s and h e n s .
I n o r d e r t o a c h i e v e t h e s e o b j e c t i v e s i t may b e n e c e s s a r y ,
and
i n d e e d s a l u t a r y , t o impose a s e t t l e m e n t .
We s h a l l b e
considering
p r o p o s a l s about t h i s at the end of J a n u a r y .
Social
Services
53.
The o n l y p r a c t i c a l ways o f s e c u r i n g i m m e d i a t e e c o n o m i e s
l i e i n the investment f i e l d and have been d e a l t with e a r l i e r
in this paper. 5I4-.
There is also the question of school meals.
await a r e p o r t from the Minister of E d u c a t i o n . On
55.
I n t h e l o n g e r t e r m I h o p e f o r some e c o n o m i e s
e n q u i r y to be u n d e r t a k e n by the Lord P r i v y S e a l ' s
Ministers.
from the Committee of
Administrative
this
I
Expenses
56.
The C i v i l S e r v i c e h a s a l r e a d y b e e n r e d u c e d b y a b o u t s i n c e t h e e n d o f 1951.
B u t we m u s t d o ' m o r e .
The
P r i m e M i n i s t e r h a s p r o m i s e d a r e d u c t i o n o f 10-15,000 o v e r a period.
I f , a s I h o p e , we c a r r y o u t t h e r e c o m m e n d a t i o n o f t h e P r i e s t l e y Commission as r e g a r d s h o u r s and overtime and t h e r e b y g e t r i d of the p r e s e n t anomalous and e x p e n s i v e
arrangements w h e r e b y a l o t o f r e g u l a r o v e r t i m e i s w o r k e d , t h i s may mean t h a t D e p a r t m e n t s may h a v e t o b r i n g a b o u t a s l i g h t l y l a r g e r
reduction This
t h a n t h e 10,000-15,000 p r o m i s e d b y t h e P r i m e Minister.
r e d u c t i o n c o v e r s t h o S e r v i c e D e p a r t m e n t s a s well a s t h e C i v i l Departments.
50,000'
/57.
The
57,
The r e d u c t i o n p r o p o s e d c a n n o t h e b r o u g h t a b o u t b y a
uniform percentage cut over a l l Departments.
I f my c o l l e a g u e s
agree, I propose that the Treasury should in the f i r s t
instance
d i s c u s s w i t h D e p a r t m e n t s how t h e r e d u c t i o n c a n b e s t b e s p r e a d .
I am s u r e t h a t a l l my c o l l e a g u e s w i l l h e l p i n t h i s
essential
measure.
B u t i t i s c l e a r t h a t we c a n n o t b r i n g a b o u t t h e
r e d u c t i o n proposed simply by improved o r g a n i s a t i o n ,
although
t h i s w i l l make i t s c o n t r i b u t i o n .
To some e x t e n t
reduction
w i l l i n v o l v e t h e c u r t a i l m e n t o r even t h e a b o l i t i o n of c e r t a i n
m i n o r s e r v i c e s now c a r r i e d o u t a n d t h e l o w e r i n g o f t h e
standard
of o t h e r s e r v i c e s .
We c a n s a v e a l o t o f s t a f f b y d o i n g
certain things less elaborately.
A special scrutiny must also
be applied to s t a f f o v e r s e a s .
Here t h e r e i s a double
saving
to be secured.
Not o n l y a s a v i n g t o t h e E x c h e q u e r b u t a
r e d u c t i o n i n t h e b u r d e n on t h e b a l a n c e o f p a y m e n t s .
The t e s t
we m u s t a p p l y i s w h e t h e r t h e e m p l o y m e n t o f o f f i c e r s o v e r s e a s
is
e s s e n t i a l , net whether i t i s simply d.esirable.
I h o p e we s h a l l
a l s o make a c o n c e r t e d e n d e a v o u r to r e d u c e t h e s i z e of t h e
d e l e g a t i o n s w h i c h v i s i t s o many i n t e r n a t i o n a l
conferences.
58,
E q u a l l y I m u s t a s k my c o l l e a g u e s i n t h e S e r v i c e D e p a r t m e n t s
t o make a c o n t r i b u t i o n b y r e d u c i n g t h e number of S e r v i c e
personnel employed in t h e i r Departments.
IV.
Goal
IMPORTS
Supplies
55.
I have asked t h e M i n i s t e r of Fuel, a n d Power what c a n be
done t o r e d u c e t h e heavy b u r d e n p l a c e d upon our b a l a n c e of
payments t h i s winter by imported c o a l .
T h e M i n i s t e r t e l l s me
he h a s a l r e a d y arranged to r e d u c e the w i n t e r import programme
f r o m 6.5 m i l l i o n t o n s t o 5 . 3 m i l l i o n ' t o n s , a s a v i n g o f
1 . 2 m i l l i o n t o n s a n d o v e r £8 m i l l i o n , a n d i s
considering
u r g e n t l y w h e t h e r more can b e d o n e .
This w i l l be a b i g h e l p ,
and
I am g r a t e f u l f o r t h e M i n i s t e r ' s
co-operation,
60.
The M i n i s t e r w i l l s h o r t l y b e c i r c u l a t i n g a p a p e r on t h e
g e n e r a l f u e l and power s i t u a t i o n .
One p o i n t I w o u l d l i k e t o
s t r e s s at t h i s stage i s the importance, i n our present
difficulties,
of m a i n t a i n i n g o p e n - c a s t c o a l p r o d u c t i o n .
The
a g r i c u l t u r a l pros and cons and the compensation problems w i l l
have to be l o o k e d a t u r g e n t l y .
Steel
61.
The i m p o r t of s t e e l i s a l s o v e r y e x p e n s i v e .
The p r e s e n t
c o n t r o l of s t e e l p r i c e s c o n c e a l s t h e c o s t of i m p o r t s and
o p e r a t e s a s an i n c e n t i v e t o t h e e x p o r t of u n f i n i s h e d and semi­
f i n i s h e d s t e e l , t h u s t o some e x t e n t d i v e r t i n g s u p p l i e s
from
e x p o r t s w i t h much h i g h e r conversion, v a l u e s .
F u r t h e r m o r e , we
have t o remember t h a t h i g h e r s t e e l p r i c e s a r e b o u n d ' t o give the
s t e e l i n d u s t r y a s t r o n g e r i n c e n t i v e to expand s t e e l - m a k i n g
capacity;
and a l l t h e i n d i c a t i o n s are t h a t a s u b s t a n t i a l
expansion of c a p a c i t y i s going to b e b a d l y needed in the next
decade.
62.
I am, o f c o u r s e , a w a r e t h a t d e a r e r s t e e l w o u l d a f f e c t
the
c o s t of our e n g i n e e r i n g e x p o r t s .
B u t I am s u r e t h a t
the
b a l a n c e of economic a d v a n t a g e l i e s on t h e s i d e of e n d i n g t h i s
p r i c e c o n t r o l , and I t h e r e f o r e p r o p o s e t h a t a s t u d y should be
made a t once of what t h i s s t e p would i n v o l v e .
/Import
Controls'
Import
Controls
63.
The i n c r e a s e i n i m p o r t s i s one
I am t h e r e f o r e c o n s i d e r i n g w h e t h e r
import c o n t r o l s would he h e l p f u l .
colleagues t h a t such action, even i
i n any way h e a s u b s t i t u t e f o r t h e
proposing.
of our main
difficulties. some i n t e n s i f i c a t i o n of B u t I m u s t w a r n my f decided upon, could not o t h e r m e a s u r e s I am 6k,
The e f f e c t i v e n e s s of I n c r e a s e d i m p o r t c o n t r o l s
is n e c e s s a r i l y l i m i t e d hy such things as r e t a l i a t i o n hy other c o u n t r i e s and p o s s i b l e l o s s of confidence i n s t e r l i n g .
They
may a l s o g i v e r i s e t o t h e n e e d f o r i n t e r n a l c o n t r o l s s u c h a s allocation.
But I have already asked for t h i s question to he e x a m i n e d a s a m a t t e r of u r g e n c y , a n d I may s h o r t l y h a v e p r o p o s a l s t o p l a c e b e f o r e my c o l l e a g u e s . 65,
I f we h e s i t a t e t o t a k e t h e n e c e s s a r y s t e p s o v e r
internal
p o l i c i e s , a s i t u a t i o n m a y d e v e l o p i n w h i c h we m a y h a v e t o c a r r y
-out s o m e t h i n g i n t h e n a t u r e of e " c r a s h " p l a n of a most
drastic character to limit imports.
T h e r e i s no n e e d t o
c o n t e m p l a t e such, a c t i o n now.
But I propose to have a p l a n
p r e p a r e d to meet such a c o n t i n g e n c y .
I must, however,
warn
my c o l l e a g u . e s t h a t e v e n a r u m o u r t h a t t h e
Government'was
c o n s i d e r i n g such a p l a n might r e s u l t in f o r e s t a l l i n g , w i t h the
most a d v e r s e consequences for our "balance of payments.
V.
CONCLUS ION
66,
As I s a i d i n t h e o p e n i n g p a r a g r a p h s o f t h i s p a p e r ,
I
w o u l d 1 i k e t o a n n o u n c e a s many a s p o s s i b l e o f t h e m e a s u r e s
out at the e a r l i e s t p o s s i b l e moment. set
67.
I r e c o g n i s e t h a t some o f t h e m e a s u r e s p r o p o s e d
(for
e x a m p l e , c e r t a i n of t h o s e i n t h e d e f e n c e f i e l d ) n e e d a good
d e a l of shaping and working out b e f o r e they can r e a c h
the
stage of a p u b l i c announcement.
Nevertheless, I attach great
i m p o r t a n c e to a c t i n g a t once, and t o a c t i n g over as wide a
f i e l d as p o s s i b l e .
I t is clear that in carrying out the
m e a s u r e s c o n t a i n e d i n t h i s p a p e r s t a t e m e n t s made b y M i n i s t e r s
i n and out of P a r l i a m e n t , and i n s t r u c t i o n s t o l o c a l
authorities,
w i l l h a v e t o b e r e v i e w e d a n d new i n s t r u c t i o n s
given.
68.
A s I s e e i t , w e c a n n o t s u c c e e d u n l e s s we a r e r e s o l u t e
in
o u r d e t e r m i n a t i o n t o do w h a t e v e r i s n e c e s s a r y t o r i d
ourselves
of t h e i n f l a t i o n w h i c h , n o t w i t h s t a n d i n g t h e a p p e a r a n c e s of
outward p r o s p e r i t y , i s t h r e a t e n i n g the s t a b i l i t y of our
economic l i f e .
I s e e n o way o f d o i n g t h i s u n l e s s t h e n a t i o n a s
a w h o l e i s l e d b y t h e G o v e r n m e n t t o a c c e p t t h e f a c t t h a t we a r e
t r y i n g , a s a n a t i o n , t o d o f a r m o r e t h a n we c a n a c h i e v e , ,
that
the t o t a l i t y of our resources, is
overstrained,,
69.
This i s not a s i t u a t i o n which can be
here and a cut t h e r e .
So f a r as p o s s i b l e
n a t i o n a l a c t i v i t y must make a c o n t r i b u t i o n
readily t h i s proposition is agreed to, the
s h a l l have in c a r r y i n g out our p r o p o s a l s .
dealt with by a cut all fields
of
.
F u r t h e r the more l e s s d i f f i c u l t y we 70.
These p r o p o s a l s form t h e f i r s t p a r t of a programme,
which
w i l l have t o be judged as a whole in r e l a t i o n to t h e B u d g e t .
C r i t i c s may s a y t h a t m o s t a t t e n t i o n w i l l b e d r a w n t o m e a s u r e s
which w i l l i n c r e a s e t h e c o s t of l i v i n g and f a l l most h e a v i l y on
the p o o r e r s e c t i o n s of t h e community.
I t i s too e a r l y t o see
/what
what may h e n e e d e d i n t h e B u d g e t , though i t w i l l a f f o r d
an
o p p o r t u n i t y t o d e a l w i t h t h e g e n e r a l b a l a n c e o f my p r o g r a m m e
But i f our p o l i c y i s s u c c e s s f u l ,
it will produce a less
i n f l a t i o n a r y c l i m a t e , i n which l i e s the b e s t hope for
stable
prices.
I t i s n o t one o r two p o i n t s on t h e c o s t o f
living
which are at stake, but a h a l t to the c o n t i n u a l increase
in
p r i c e s which has been almost u n i n t e r r u p t e d since the end of
the war.
H.
Treasury
20th
Chambers,
January.
1956.
S.W.1.
M.