Page 180
(THIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENT)
SECRET
C. (52) 225
4TH JULY, 1952
CABINET
COPY NO. €2
THE DEFENCE PRODUCTION PROGRAMME
Note by the Secretary of the Cabinet
By direction of the Prime Minister I circulate a copy of a
minute from the Minister of Defence.
Cabinet Office, S. W.1.,
4TH JULY, 1952.
(Signed) NORMAN BROOK
PRIME MINISTER FROM MINISTER OF DEFENCE: MINUTE OF 2ND JULY, 1952
At this morning's meeting of the Defence Committee, the Service Ministers and the Minister of Supply drew attention to the need for an early statement of Government policy on defence production. They pointed out that it was already becoming known, particularly to the aircraft industry, that considerable readjustments of programme work were contemplated. Indeed, discussions had had to be started with the firms making Canberras to indicate to them that they were unlikely to get follow-up orders. It will soon become known, too, that considerable sales of equipment are being negotiated.
2.
Great efforts have been made over the last 18 months to accelerate production programmes, to bring in new capacity, and, generally, to stimulate industry to the maximum efforts in rearmament. The effect of cutting back orders, of changing capacity over to production for export, and of other similar measures, will be very bad indeed unless a clear statement is made of Government intentions and policy. All the steam will go out of the effort if industry is left to draw what will probably be quite wrong conclusions from administrative acts and actions consequent upon a policy which has not been explained to them.
3.
May I suggest that the situation should be discussed at Cabinet early next week. In the meanwhile thought can be given to the scope of any Government statement, and the method to be followed in making it,
Page 180
Page 180THIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENT
Page 181 circulation of this paper has been strictly limited 181 of 253
It is issued for the personal use of..
TOP SECRET
C.(52) 226
4TH JULY, 1952
CABINET
Copy No...
47
THE GREAT DEBATE:
FINANCIAL AND
ECONOMIC POLICY
Memorandum by the Minister of Housing and Local Government
Part I. "The Bankers' Ramp"
The authority of the City, and particularly of the Bank of England,
must always be great.
2.
Yet the most tender critic of the financial and economic policies proposed by successive Governors could scarcely maintain that the Bank has always given wise advice to the Government of the day.
3.
Lord Cunliffe's estimate of the capacity of Germany to pay reparations; the advice of Mr. Montagu Norman given to the Chancellor of the Exchequer of the day to return to gold at a parity of $4.86 to the £1; the long deflationary policy which caused a wave of emotional ill-feeling among the working classes against the capitalist class not yet expended; the events of 1931, and the apparent concession to American banking opinion of the standards of the unemployed; finally, the ill-advised return to convertibility in 1947 - all these raise at least doubts in many minds.
4.
While all sensible people must respect the authority, few can accept the dogma of the infallibility of "the world of Banking and Finance",
5.
Part II. "The Housing Cut"
It is suggested that housing must be offered upon the altar of sacrifice. Not only must housing be cut, but it must be known and publicly proclaimed to have been cut. It is said that this humiliating gesture will increase confidence. It will bring comfort to the acute speculators of Brussels and Zurich. But at what a cost.
6.
I have already started an investigation to see what timing of timber purchases can be made in order to help the balance of payments in the second half of this year. This is a practical and sensible way to help. But any retardation of purchases must be such as to allow the housing programme to be kept going at full steam (if necessary out of stocks). It may, perhaps, be possible to make further purchases in December of this year or, at the worst, in April of next year if things improve.