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HIS
DOCUMENT
IS
T H E
PROPERTY
Printed
O F ^ H I S ^BRITANNIC
for the Cabinet.
August
MAJESTY'S
^GOVERNMENT
1947
SECRET
Gopy Mo.
4 B
C M . (47)
68th Conclusions
C A B I N E T 68 ( 4 7 )
CONCLUSIONS
of a Meeting of the Cabinet held in the Prime Ministers
Room,
House of Commons, S.W. 1, on Friday, 1st August, 1947, at 2 - 3 0 p.m. Present:
T h e R i g h t H o n . C. R . A T T L E E , M . P . , P r i m e M i n i s t e r (in the
Chair).
The Right Hon. HERBERT MORRISON,
M . P . , L o r d P r e s i d e n t of t h e Council.
The Right Hon. ERNEST BEVIN, M.P.,
S e c r e t a r y of S t a t e f o r F o r e i g n
Affairs.
The R i g h t Hon. A R T H U R GREENWOOD,
M.P., Minister without Portfolio.
The R i g h t H o n . S i r S T A F F O R D C R I P P S ,
K.C., M . P . , P r e s i d e n t of t h e B o a r d
of T r a d e .
The R i g h t H o n . V I S C O U N T J O W I T T ,
L o r d Chancellor.
T h e R i g h t H o n . H U G H DALTON,
M.P.,
Chancellor of t h e E x c h e q u e r .
The R i g h t H o n . A . V . ALEXANDER,
M . P . , M i n i s t e r of Defence.
The Right Hon. J . CHUTER E D E , M.P.,
S e c r e t a r y of S t a t e for t h e H o m e
Department.
The R i g h t H o n . V I S C O U N T A D D I S O N ,
S e c r e t a r y of S t a t e f o r C o m m o n w e a l t h
Relations.
The R i g h t H o n . A . C R E E C H J O N E S ,
M . P . , S e c r e t a r y of S t a t e for t h e
Colonies.
The R i g h t Hon. J . WESTWOOD, M.P.,
The R i g h t H o n . G . A . I S A A C S , M . P . ,
The R i g h t H o n . E . SHINWELL, M.P.,
M i n i s t e r of L a b o u r a n d N a t i o n a l
Service.
The R i g h t H o n . A N E U R I N B E V A N , M . P . ,
M i n i s t e r of H e a l t h .
S e c r e t a r y of S t a t e for Scotland.
Right
The
Hon.
THE
EARL
OF
S e c r e t a r y of S t a t e f o r I n d i a a n d S e c r e t a r y of S t a t e f o r Burma. TlfiTAWTTT
M i n i s t e r of F u e l a n d P o w e r .
The R i g h t Hon. T. WILLIAMS, M.P.,
Minister
Fisheries.
of
Agriculture
and
T h e R i g h t H o n . GEORGE TOMLINSON,
M . P . , M i n i s t e r of E d u c a t i o n .
T h e following w e r e also p r e s e n t :
The R i g h t Hon. J O H N W I L M O T ,
M.P.,
M i n i s t e r of S u p p l y .
The R i g h t H o n . J O H N STRACHEY, M . P . ,
The R i g h t Hon. ALFRED BARNES, M.P.,
M i n i s t e r of T r a n s p o r t .
LORD
M i n i s t e r of Food.
PAKENHAM,
Chancellor
of
D u c h y of L a n c a s t e r .
Sir
EDWARD
BRIDGES,
Permanent
Secretary, T r e a s u r y .
Secretariat
:
M r . W . S. M U R R I E .
M r . S. E . V . L U K E .
[34134-1]
B
the
C A B I N E T 6 8 (47)
CONTENTS.
Subject
B a l a n c e of P a y m e n t s ....
T r a n s p o r t of G o o d s .
Capital Investment.
H o u r s of W o r k .
R e d e p l o y m e n t of L a b o u r .
Production Committees.
E f f i c i e n c y of M a n a g e m e n t .
E m e r g e n c y P o w e r s Bill.
C o n v e r t i b i l i t y of S t e r l i n g .
195
B a l a n c e of
Payments.
(Previous
Eef erence:
CM. (47) 67th
Conclusions,
Minute 2.)
T h e C a b i n e t resumed
by the Chancellor of t h e
( C P . (47) 221), a n d also
M i n i s t e r of L a b o u r ( C P .
a n increase of p r o d u c t i o n
in certain industries.
C M . 68
(m)
t h e i r c o n s i d e r a t i o n of t h e m e m o r a n d u m
E x c h e q u e r on the balance of p a y m e n t s
h a d betore t h e m a m e m o r a n d u m by the
(47) 220) covering a scheme for securing
t h r o u g h l e n g t h e n i n g the h o u r s of w o r k
The Minister
of Transport
p o i n t e d out t h a t , if t h e r a i l w a y s
w e r e to p l a y a full p a r t in t h e d r i v e for increased p r o d u c t i o n , i t
w o u l d be necessary to give p r i o r i t y to all t h e i r d e m a n d s for m a t e r i a l s
and equipment.
I t w a s p o i n t e d o u t t h a t absolute p r i o r i t y could n o t be given,
a n d t h a t the C e n t r a l Economic P l a n n i n g Staff, i n consultation w i t h
t h e D e p a r t m e n t s concerned, w e r e a l r e a d y c o n s i d e r i n g w h a t steps
w o u l d have to be taken to enable t h e r a i l w a y s to meet the d e m a n d s
w h i c h would be m a d e on t h e m d u r i n g the coming w i n t e r .
Capital
The Chancellor of the Exchequer said t h a t i t would be necessary
Investment.
to c u r t a i l t h e use of steel for commercial b u i l d i n g a n d t h a t some
slowing down of the h o u s i n g p r o g r a m m e would be inevitable.
The Minister
of Health said t h a t , w h i l e he recognised t h a t
t h e r e m u s t be some r e d u c t i o n in h o u s i n g , he hoped t h a t any cuts
w o u l d be selective.
T h e r e w a s general a g r e e m e n t t h a t the a p p l i c a t i o n of the
p r i n c i p l e t h a t c a p i t a l i n v e s t m e n t should be c u r t a i l e d should be
w o r k e d out by the C e n t r a l Economic P l a n n i n g Staff in consultation
w i t h t h e D e p a r t m e n t s concerned.
Hours of
The Lord President
said t h a t , w i t h the M i n i s t e r of L a b o u r , he
Work.
h a d a r r a n g e d to meet r e p r e s e n t a t i v e s of the T r a d e s U n i o n Congress
l a t e r i n the d a y a n d t h a t , if the C a b i n e t agreed, he would p u t
f o r w a r d suggestions for t h e w o r k i n g of longer h o u r s on the lines
i n d i c a t e d i n t h e A n n e x to C P . (47) 220. H e w o u l d also m a k e i t
clear t h a t i t would be a g a i n s t the n a t i o n a l i n t e r e s t for the w o r k e r s
t o make excessive claims for h i g h e r r a t e s of r e m u n e r a t i o n for any
o v e r t i m e worked.
T h e r e w a s general a p p r o v a l of the L o r d P r e s i d e n t s suggestion
a n d i t w a s a g r e e d t h a t the a p p e a l for longer w o r k i n g h o u r s should
be based r a t h e r on the c o u n t r y ' s needs t h a n on m o n e t a r y incentives.
The Minister of Transport s a i d t h a t the a d o p t i o n of the five-day
week in m a n y i n d u s t r i e s h a d imposed a heavy s t r a i n on t r a n s p o r t ,
a n d h e h o p e d t h a t so f a r as possible a n y e x t r a h o u r s of w o r k w o u l d
be secured by r e v e r t i n g to a s i x - d a y week.
The Chancellor of the Exchequer
said t h a t he w a s considering
w h e t h e r a n y modifications could be m a d e in t h e P . A . Y . E . scheme in
o r d e r to give w o r k e r s a g r e a t e r incentive to w o r k for longer h o u r s .
H e believed, however, t h a t t h e d i s c o u r a g i n g effects of P . A . Y . E . were
greatly exaggerated.
The Minister of Labour p o i n t e d out t h a t the b u i l d i n g w o r k e r s
h a d n o w accepted a scheme of p a y m e n t by results, a n d it w a s agreed
t h a t some reference should be m a d e to t h e d e s i r a b i l i t y of e x t e n d i n g
t h e system of p a y m e n t by results.
Redeployment
The Lord President
s a i d t h a t he also proposed to suggest to
of Labour.
t h e r e p r e s e n t a t i v e s of the T r a d e s U n i o n Congress t h a t in p r e s e n t
c i r c u m s t a n c e s some m e a s u r e of negative or positive direction of
l a b o u r w a s desirable.
Transport of
Goods.
The Minister
of Labour a g r e e d t h a t t h i s should be done. H e
also t h o u g h t i t would be desirable to t a k e u p w i t h the T r a d e s U n i o n
C o n g r e s s the question of f a c i l i t a t i n g t h e employment of Poles a n d
o t h e r E u r o p e a n volunteer w o r k e r s in u n d e r - m a n n e d i n d u s t r i e s .
I n discussion t h e r e w a s g e n e r a l a g r e e m e n t t h a t t h e Control of
E n g a g e m e n t O r d e r should be re-enacted and t h a t all employers
should be r e q u i r e d to e n g a g e w o r k e r s t h r o u g h the employment
exchanges.
Some doubts w e r e expressed a b o u t t h e wisdom of
a t t e m p t i n g to use powers of positive d i r e c t i o n u n d e r peace-time
c o n d i t i o n s , a n d it w a s suggested t h a t t h e M i n i s t e r of L a b o u r m i g h t
[34134-1]
B
2
explore f u r t h e r , in consultation w i t h t h e M i n i s t e r of Food, whether
it w o u l d be possible t o devise means, short of t h e w a r - t i m e direction
of labour, to e n s u r e t h a t all the c o u n t r y ' s m a n - p o w e r w a s usefully
employed. I n p a r t i c u l a r , t h e possibility of r e d u c i n g from four to
t w o d a y s the p e r i o d for w h i c h persons m i g h t s t a y in hotels without
s u r r e n d e r i n g r a t i o n c a r d s should be considered.
Production
Committees.
The Minister of Labour s a i d t h a t some reference should be made
to t h e d e s i r a b i l i t y of e n c o u r a g i n g the establishment of production
committees.
T h e r e w a s g e n e r a l s u p p o r t for t h i s suggestion, on the under­
s t a n d i n g t h a t s t e p s w o u l d be t a k e n to ensure t h a t such committees
devoted themselves solely to m a t t e r s connected w i t h r a i s i n g the level
of o u t p u t .
E f f i c i e n c y of
Management,
The President of the Board of Trade said t h a t cases would arise
i n w h i c h it would be necessary in the interests of production to
replace inefficient m a n a g e m e n t s .
The Foreign Secretary
suggested t h a t in any public statement
of t h e G o v e r n m e n t s i n t e n t i o n s there should be recognition of the
f a c t t h a t the m a j o r i t y of m a n a g e m e n t s were efficient a n d willing to
co-operate w i t h t h e G o v e r n m e n t .
Emergency
Powers Bill.
T h e Cabinet t h e n discussed the p r o p o s a l in p a r a g r a p h 39 of
C P . (47) 221 t h a t a n E m e r g e n c y P o w e r s Bill should be introduced.
The Chancellor
of the Exchequer
said t h a t Parliamentary
Counsel h a d advised t h a t a Bill would be necessary in order to
enable n e w r e g u l a t i o n s to be m a d e , since the S u p p l i e s a n d Services
( T r a n s i t i o n a l P o w e r s ) A c t , 1945, a n d the Emergency Laws
( T r a n s i t i o n a l Provisions) A c t , 1946, merely continued in force regu­
l a t i o n s w h i c h h a d been m a d e u n d e r the w a r - t i m e emergency powers
legislation. T h i s B i l l w o u l d be a short measure a n d could, in his
view, be passed before P a r l i a m e n t a d j o u r n e d for the Recess.
The Prime Minister
s a i d t h a t a Bill on the lines suggested by
t h e Chancellor of the E x c h e q u e r seemed desirable. The Cabinet
m i g h t consider a d r a f t of the Bill at t h e i r m e e t i n g on 5th August
a n d the O p p o s i t i o n should be consulted before the Bill was intro­
duced in order to a s c e r t a i n w h e t h e r they would facilitate its passage.
The Lord President
suggested t h a t consideration might be
given to the possibility of p r o v i d i n g in the Bill for the continuation
a f t e r 31st December, 1947, of t h e regulations covered by the Emer­
gency L a w s ( T r a n s i t i o n a l Provisions) A c t , 1946.
The Lord, Chancellor
said t h a t the co-operation of the Oppo­
s i t i o n would be more r e a d i l y obtained if the d u r a t i o n of the new
m e a s u r e were l i m i t e d to a year, w i t h p o w e r t o extend it for further
p e r i o d s by resolution of both H o u s e s of P a r l i a m e n t .
Convertibility
of S t e r l i n g .
T h e Cabinet t h e n discussed the effect on the U n i t e d Kingdom
dollar resources of the o b l i g a t i o n s w i t h r e g a r d to convertibility of
s t e r l i n g w h i c h h a d been e n t e r e d i n t o by H i s M a j e s t y ' s Government.
The Chancellor of the Exchequer said t h a t there w a s no evidence
of a m a r k e d i n c r e a s e in the d r a i n on our dollar resources since
15th J u l y , w h e n t h e o b l i g a t i o n h a d come i n t o force u n d e r the Loan
A g r e e m e n t to m a k e freely convertible s t e r l i n g receipts from current
t r a n s a c t i o n s of all s t e r l i n g a r e a countries. I t should be borne in
m i n d , however, t h a t before 15th J u l y w e h a d been obliged to agree
t h a t some of the s t e r l i n g receipts of i n d i v i d u a l sterling area
c o u n t r i e s should be convertible. Moreover, other countries such as
C a n a d a a n d t h e A r g e n t i n e h a d also insisted on converting into
dollars t h e i r s t e r l i n g receipts for supplies sent to us, and this
t e n d e n c y h a d been a g g r a v a t e d by t h e i n c r e a s i n g world shortage of
dollars. I n J u l y 1947 t h e r e h a d been a n exceptionally high with­
d r a w a l , a m o u n t i n g to 700 million dollars, from the U n i t e d States
c r e d i t , b u t he h o p e d i t would not be necessary to d r a w more than
a b o u t 300 million d o l l a r s i n A u g u s t . H e recognised t h a t we should
now have to seek relief from o u r convertibility obligations under the
r
197 C M . 68 (17)
L o a n A g r e e m e n t , b u t be w a s convinced t h a t i t b a d been w o r t h w h i l e
to accept these o b l i g a t i o n s in view of t h e a d v a n t a g e s w h i c h t h e
U n i t e d S t a t e s c r e d i t h a d given us in the p e r i o d of reconversion.
H e h a d a r r a n g e d for a special check t o be k e p t on s t e r l i n g t r a n s ­
actions a n d t h o u g h , so long as s t e r l i n g w a s ^ a n i n t e r n a t i o n a l
currency, it' w a s impossible t o o b t a i n a n absolutely precise balance
sheet at a n y given t i m e , he w a s confident t h a t the i n f o r m a t i o n
available t o the T r e a s u r y enabled t h e m t o keep a close w a t c h o n
movements of s t e r l i n g .
The Minister
of Health said t h a t he hoped t h e Chancellor of
the E x c h e q u e r w o u l d c i r c u l a t e a m e m o r a n d u m to the C a b i n e t
analysing t h e effect on our dollar resources of o u r c o n v e r t i b i l i t y
obligations both u n d e r the L o a n A g r e e m e n t a n d u n d e r a g r e e m e n t s
w i t h p a r t i c u l a r countries, such a s the A r g e n t i n e . T h e d r a i n o n
our dollar resources r e s u l t i n g from our convertibility obligations
seemed to be g r e a t e r by f a r t h a n a n y s a v i n g s which w o u l d be
achieved by the r e d u c t i o n s in e x p e n d i t u r e proposed in C P . (47) 2 2 1 .
F u r t h e r , t h e policy of a l l o w i n g c o u n t r i e s i n the s t e r l i n g a r e a to
convert s t e r l i n g i n t o dollars w a s d i r e c t l y c o n t r a r y to t h e i n t e r e s t s
of our e x p o r t t r a d e .
The President
of the Board of Trade said t h a t the object of
the convertibility provisions in t h e L o a n A g r e e m e n t h a d been to
stimulate the revival of w o r l d t r a d e a n d t h e d r a i n on o u r dollar
resources h a d arisen, n o t because of convertibility as such, b u t
because we h a d been u n a b l e to s u p p l y foreign countries w i t h t h e
goods they w a n t e d a n d h a d t h e r e f o r e been obliged to allow t h e m
to use t h e i r s t e r l i n g balances to buy goods from t h e U n i t e d S t a t e s .
H e had discussed our difficulties w i t h r e g a r d to convertibility w i t h
the U n i t e d S t a t e s U n d e r - S e c r e t a r y of S t a t e on t h e p r e v i o u s day,
a n d h a d also p o i n t e d o u t to him t h a t in o u r p r e s e n t s i t u a t i o n we
could not c o n t e m p l a t e b e i n g d e b a r r e d by the n o n - d i s c r i m i n a t i o n
provisions of t h e L o a n A g r e e m e n t from b u y i n g food in soft
currency a r e a s .
The Lord, President
said t h a t it w o u l d be useful if the C h a n ­
cellor of t h e E x c h e q u e r would give t h e C a b i n e t i n f o r m a t i o n about
the extent to w h i c h o u r dollar resources h a d been d r a w n o n for t h e
release of the s t e r l i n g balances held by c o u n t r i e s such a s E g y p t .
T h e Cabinet should also have an o p p o r t u n i t y of c o n s i d e r i n g t h e
proposed settlement w i t h r e g a r d to t h e I n d i a n s t e r l i n g balances.
The Foreign Secretary s a i d t h a t he h a d considered f u r t h e r t h e
suggestion m a d e a t t h e previous m e e t i n g ( C M . (47) 6 7 t h Con­
clusions, M i n u t e 2) t h a t a n a p p r o a c h should be m a d e to t h e U n i t e d
States G o v e r n m e n t w i t h a view t o i n i t i a t i n g discussions o n t h e
possibility of r e d u c i n g the d r a i n on our dollar resources r e s u l t i n g
from our obligations in r e g a r d to n o n - d i s c r i m i n a t i o n a n d con­
v e r t i b i l i t y a n d o u r financial responsibilities u n d e r the A g r e e m e n t
r e l a t i n g t o the A n g l o - A m e r i c a n Zone in G e r m a n y . H e felt t h a t i t
would be u n d e s i r a b l e t o give formal notice u n d e r A r t i c l e 12 of the
L o a n A g r e e m e n t w i t h o u t some p r e l i m i n a r y e x c h a n g e of views w i t h
the U n i t e d S t a t e s Government, a n d he hoped t h a t t h e C a b i n e t w o u l d
authorise h i m t o take t h e m a t t e r u p w i t h the U n i t e d S t a t e s Secre­
t a r y of S t a t e i n f o r m a l l y in t h e first i n s t a n c e .
I n f u r t h e r discussion i t w a s p o i n t e d o u t t h a t some s t a t e m e n t
would h a v e to be m a d e in the debate in P a r l i a m e n t on t h e subject
of convertibility a n d n o n - d i s c r i m i n a t i o n .
A n y such s t a t e m e n t
would have to be very carefully w o r d e d .
The C a b i n e t —
(1) A g r e e d t h a t t h e necessary resources should be m a d e avail­
able to enable t h e t r a n s p o r t i n d u s t r y to meet the
a d d i t i o n a l s t r a i n w h i c h would be imposed by increased
production.
(2) A p p r o v e d in p r i n c i p l e t h e p r o p o s a l t h a t t h e r e should be a
c u r t a i l m e n t of c a p i t a l investment p r o j e c t s o t h e r t h a n
those c o n t r i b u t i n g to e x p o r t o r t o i m p o r t saving.
(3) A g r e e d t h a t d e t a i l e d proposals for g i v i n g effect to the ^
decisions in (1) a n d (2) above should be worked out bv ­
t h e C e n t r a l E c o n o m i c P l a n n i n g Staff in consultation
w i t h t h e D e p a r t m e n t s concerned.
(4) A p p r o v e d t h e p r o p o s a l t h a t t h e L o r d P r e s i d e n t and t h e !
M i n i s t e r of L a b o u r should discuss w i t h the Trades '
U n i o n C o n g r e s s a scheme for i n c r e a s i n g production by
w o r k i n g longer h o u r s on the lines set o u t in the Annex
to C P . (47) 220.
' I
(5) A u t h o r i s e d the. Lord. P r e s i d e n t a n d t h e M i n i s t e r of Labour I
to discuss w i t h t h e T r a d e s U n i o n Congress the
possibility of r e i n s t i t u t i n g a positive or negative 1
d i r e c t i o n of labour.
(6) A g r e e d t h a t the C o n t r o l of E n g a g e m e n t O r d e r should be I
r e - e n a c t e d a n d t h a t the M i n i s t e r of Labour, in consulta- j
t i o n w i t h the M i n i s t e r of Food, should consider whether j
it w o u l d be possible to i n s t i t u t e some more positive
form of d i r e c t i o n of labour.
(7) Took note t h a t t h e L o r d P r e s i d e n t a n d the Minister ofj
L a b o u r , in t h e l i g h t of their discussion w i t h the Trades
U n i o n Congress, would furnish the P r i m e Minister
w i t h a s t a t e m e n t w h i c h he m i g h t make in the Parlia-1
m e n t a r y d e b a t e d e a l i n g w i t h the extension of hours of f
work, t h e r e d e p l o y m e n t of labour a n d the establishment
of p r o d u c t i o n committees.
(8) A p p r o v e d the p r o p o s a l t h a t the a p p r o p r i a t e Departments
should have p o w e r to take action where production was
being i m p e d e d by inefficient m a n a g e m e n t .
(9) I n v i t e d the Chancellor of the E x c h e q u e r , in the light of the
p o i n t s m a d e in discussion, to a r r a n g e for the prepara­
tion of a n E m e r g e n c y P o w e r s Bill, a n d to circulate a
d r a f t of the Bill for consideration by the Cabinet at
t h e i r m e e t i n g on 5th A u g u s t .
(10) Took note t h a t t h e Chancellor of the Exchequer would
c i r c u l a t e a m e m o r a n d u m a n a l y s i n g the effect on United
K i n g d o m d o l l a r resources of H i s Majesty's Govern­
m e n t ' s c o n v e r t i b i l i t y obligations (i) u n d e r the Loan
A g r e e m e n t , (ii) u n d e r any agreements made with
i n d i v i d u a l c o u n t r i e s outside the s t e r l i n g area, and
(iii) u n d e r a n y agreements for the reduction of
a c c u m u l a t e d s t e r l i n g balances.
(11) I n v i t e d t h e Chancellor of the E x c h e q u e r to circulate a
m e m o r a n d u m on t h e settlement which he proposed to
m a k e w i t h r e g a r d t o the sterling balances held in India.
(12) I n v i t e d the F o r e i g n Secretary, t h e Chancellor of the
E x c h e q u e r a n d the P r e s i d e n t of the B o a r d of Trade to
consider w h a t w o u l d be the best a p p r o a c h to the United
S t a t e s G o v e r n m e n t w i t h a view to t h e initiation of
discussions on the possibility of r e d u c i n g the dollar
e x p e n d i t u r e w h i c h H i s M a j e s t y ' s Government were
i n c u r r i n g as a r e s u l t of t h e i r non-discrimination and
convertibility obligations a n d t h e i r financial responsi­
b i l i t i e s u n d e r t h e A g r e e m e n t r e l a t i n g to the AngloA m e r i c a n Zone in G e r m a n y .
(13) I n v i t e d t h e Chancellor of the E x c h e q u e r , in consultation
w i t h t h e F o r e i g n Secretary a n d the P r e s i d e n t of the
B o a r d of T r a d e , to p r e p a r e a s t a t e m e n t which might be
m a d e in the P a r l i a m e n t a r y debate on the subject of
. H i s M a j e s t y ' s G o v e r n m e n t s non-discrimination and
convertibility obligations a n d t h e i r financial responsi­
b i l i t i e s u n d e r t h e A g r e e m e n t r e l a t i n g to the AngloA m e r i c a n Zone in G e r m a n y .
Cabinet Office, S.W.
1st August,
1947
1,