CAB129-52 — Page 180

Page 180

Printed for the Cabinet. June 1952

CONFIDENTIAL

C. (52) 196

CABINET OFFICE RECORD COPY

Copy No.

67

17th June, 1952

CABINET

ECONOMIC POLICY

MEMORANDUM BY THE MINISTER OF HOUSING AND LOCAL GOVERNMENT

This paper was prepared before the meeting of the Cabinet on 17th June. The discussion with Mr. Menzies encourages me to circulate it as a contribution to the problem. Objective, and therefore somewhat desultory, "researches" will not lead to any result. Investigations, to be fruitful, must be concentrated upon specific proposals and directed towards some definite plan.

I. Introductory

The economic situation disclosed in Cabinet papers C. (52) 166, and C. (52) 171 calls for urgent and radical remedies. These must involve fresh sacrifices. It is important therefore that they should be, and be seen to be, the right ones.

The Chancellor of the Exchequer's remedy for the crisis is to increase our exports to non-sterling markets by some 20 per cent.

This increase is to fall mainly on the metal-using industries and is to be made partly at the expense of the Defence Programme, and partly by reducing the Social Programme.

As a policy, this has the merit of simplicity. But is it either sound or practicable?

We are to reduce our defence programme and hence our power to maintain certain of our overseas commitments. We shall also have to slow down the building of houses, schools, and hospitals. We are asked, in fact, to sacrifice more of our influence in the world, and more of our election pledges, as a means of averting bankruptcy. But there is nothing to indicate that such a policy can produce any lasting solution to our problems. On the contrary, as the Chancellor himself says, "there is no hump' but a continuing mountain range of difficulties.' Meanwhile our position in the world, our influence in the Commonwealth, and the moral and material condition of our people will continue to decline.

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All this seems to be a continuation of the Cripps-Gaitskell progress from expedient to expedient." It is "the mixture as before.' But it is not what the people expect from us.

Is the course proposed even practicable? The Chancellor of the Exchequer is not himself very confident of our ability to increase exports to non-sterling markets by 20 per cent. The President of the Board of Trade is frankly pessi- mistic. Does anybody really believe that it can be done? If it cannot, then the prospect before us is not gentle decline but catastrophe. Should we not therefore consider some other way out? Any plan, however exacting or even revolutionary would be acceptable which gave hope, not merely of postponing disaster, but of rebuilding our national and imperial strength.

(1) Overseas Commitments

II.-General Considerations

Our economic survival in the next year or two will largely depend upon world confidence in sterling. This will depend, among other things, upon our ability to maintain ourselves as a great Power. The loss of Abadan, for instance, struck a

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