57

4th March, 1926

PERSONAL & CONFIDENTIAL

Dear Mr. Bruce,

MR. AMERY [1]

On Friday last I had an hour with Mr. Amery at Downing Street. He asked me to submit to him, for his personal consideration, my views on the possibility of certain increases of preference in the forthcoming budget. He outlined the limitations, i.e. no further tax on foodstuffs nor on any important raw material.

I promised to do what I could and I enclose a copy of my letter to Mr. Amery on this subject. He intends to submit a memorandum on the subject to the Chancellor of the Exchequer [2], more I imagine to keep the flag of preference flying in the Cabinet than in the expectation of results in the budget.

Mr. Amery told me that he had received from you a most helpful 'hurry up' cable and that you had expressed the view that Home Agriculture should have first place. [3]

He asked me for my views about British Agricultural produce and the �1,000,000 and I expressed them as set out in my last letter to you.

Mr. Amery gave me, in confidence, a rough outline of the Government's intentions in regard to the First Report of the Imperial Economic Committee but did not go into details.

H.M. GOVERNMENT AND THE IMPERIAL ECONOMIC COMMITTEE

On Tuesday afternoon Mr. Amery attended a meeting of the Imperial Economic Committee and gave the Committee a detailed account of the Government's intentions in regard to our First Report. He then invited questions and an expression of views.

I find that his statement to us was in very close harmony with the cable sent by H. M. Government to the Governments of the Empire.

[4] On two points Mr. Amery went into much more detail with the Imperial Economic Committee than in his cable.

The first was the constitution of the Spending Committee, or Executive Body. Mr. Amery expressed a desire that members of the Imperial Economic Committee should consent to serve on this Executive. He explained that it was proposed to use the parallel of the Board of Admiralty where only one vote ever counts i.e. the vote of the First Lord. On the proposed Body all the members, except either the Secretary of State or the Under-Secretary of State, would be there in a consultation capacity. This, in Mr.

Amery's opinion, avoided the difficulty of making overseas representatives responsible for spending British taxpayers' money.

As regards placing two representatives of British and Scottish Agriculture on the Spending Committee, Mr. Amery stated that the Government felt that it was most undesirable to allow a position

to arise which would lead British agriculturalists to feel that they were being placed at a disadvantage. He told the Committee that he had received a cable from you on this subject.

He then explained that only �500,000 would be voted this year, and �1,000,000 in 1926-27, justifying this on the ground that it would be difficult to spend the whole million judiciously in the first year of operation.

He further explained that H.M. Government was proposing to the Oversea Governments that British agriculture should be included in the expenditure under the annual grant and he invited our considered views as to what extent this should be done.

Finally he told us, with not a little satisfaction, that the vote was to be non-returnable and that this would free the grant from strict Treasury supervision.

After Amery finished, Mackinder [5] occupied a long period with vague generalities and although other members asked a few questions, little in the way of discussion with the Secretary of State occurred.

On Wednesday morning the Committee met to discuss Amery's announcement. The Canadian Delegation [6] were frankly hostile on two grounds:

(1) that the proposals envisaged the permanency of the Imperial Economic Committee.

(2) that overseas representatives would be placed in executive capacities.

There followed a long and dreary argument between Mackinder and the Canadians which finally resulted in the Canadians announcing that they would merely occupy the position of observers during further discussions. However by this time the greater part of the sitting had been taken up. I then proposed that:

(a) we should recognise that the question of the attitude of the oversea Governments to the Home Government's proposals would be settled by cable in the course of the next week, and that we therefore need not discuss that point.

(b) the whole question of the Imperial Economic Committee would be discussed in October at the Imperial Conference, and that the constitution of the Executive could also be fully discussed.

(c) we should discuss and settle what we had to recommend to the Secretary of State on the assumption that the Governments of the Empire did not raise fundamental objections.

These propositions were accepted by all the Committee, except Canada. We then started to discuss a draft prepared by Mackinder.

After a few minutes Mackinder proposed to redraft the document, and this ended the meeting. I am enclosing a copy of the amended draft which reached me this morning (this is for your private information). I have ticked in blue pencil the clauses of the draft with which I feel in agreement at the present moment and have left unmarked those which I think need considerable alteration.

Since Wednesday's meeting, I have been asked by a number of members of the Committee to discuss the situation with them. I had a long talk with Sir Sydney Henn [7] on Wednesday evening in the House of Commons and he raised the point that he thought that the Spending Committee would be sure to come in for serious criticism sooner or later and that it would, therefore, be undesirable for the oversea parts of the Empire to be represented on it, even with the safeguard that the Secretary of State was personally responsible for all expenditure. He felt, however, that there was no danger of any such criticism arising between now and October and therefore he agreed with me that members of the Imperial Economic Committee should consent to serve between now and October.

Today at lunchtime I met the South African representative [8], who is quite an excellent fellow but, being a Britisher, is somewhat nervous of the attitude of his own Government to himself. He tells me that Smit [9], the South African High Commissioner, is anxious to cable his Government strongly condemning the British Government's plan and suggesting holding up all action until the Imperial Conference. He told me that he hopes to be able to prevent this cable being sent.

The two Indian delegates [10] have just asked me to dine with them tonight in order to discuss the matter fully.

We are having another meeting of the Committee tomorrow morning at 11 o'clock, at which I hope to be able to get a decision taken on the following lines: that, as a temporary expedient, the Imperial Economic Committee is willing to nominate from its own members five constant representatives on the Executive Body and suggests that two further seats be reserved to be filled by members having special knowledge of subjects that may be under discussion.

I think that if this suggestion is accepted, my colleagues will prefer that we should not nominate members as from Great Britain, the Dominions, Crown Colonies or India, but that we should nominate members from the Committee as a whole.

In my letter of February 17th I gave you an outline of the type of body that was then proposed, and I feel that this would be a much better form than what the Government has proposed.

I see rather serious objection to the representation of Producers' interests as such upon the Spending Body, therefore while I warmly welcome the proposal to put a British Agriculture representative upon the Imperial Economic Committee, I dislike the nomination of the two Home Agriculturalists as such on the Spending Body. The appointment of, say, three oversea representatives as members of the Imperial Economic Committee does not appear to me to be open to the same objections.

FRUIT REPORT

The facts recorded above have resulted in delaying consideration of this report. On Monday, the Drafting Committee sat from 2.30 till 11 p.m. but Mackinder wastes such oceans of time that we have to spend much too long on that Sub-Committee. I now fear that the report will not be ready much before the end of this month.

FUTURE WORK OF IMPERIAL ECONOMIC COMMITTEE

When I saw Amery on Friday last, I impressed on him the need to settle with the Oversea Governments the series of subjects to be dealt with in the summer months. Amery promised to consult the Governments and to have the question settled before Easter.

CONSERVATIVE PARTY

The meeting with the Imperial Affairs Committee went off quite well. There was an important debate in the House and therefore only about 40 members were present. I was asked if I would prepare a summary of my address for private circulation to members of the Committee. I have had this done and enclose a copy herewith. [11]

TRADE UNIONS

I enclose a copy of a letter and memorandum which I have sent to Mr. Appleton [12], the General Secretary of the Federation of Trade Unions.

'NATIONAL REVIEW'

The article I sent you with my letter of February 3rd appeared in the March issue of the 'National Review', of which I know you receive copies. This article has attracted some attention from the press and I enclose a copy of the notice in the 'Morning Post'.

[13]

POLITICAL ECONOMY CLUB

At Mr. Amery's suggestion, this Club invited a Canadian and myself as guests last night. The Club is 120 years old, and includes Lord Hunsdon [14], Sir Hugh Bell [15], Harold Cox [16], Philip Snowden [17], J. M. Keynes [18], and other stalwart Free Trade economists.

The subject was a paper by Harold Cox on 'Can migration solve the problem of over-population'. Cox's address was provocative, especially to Australia, and I had a pleasant ten minutes answering him. Snowden spoke later and, after the meeting, I had ten minutes talk with Snowden. He asked me if I really meant that Australia admitted British cotton piece goods free while taxing foreign. I told him that this fact applied to over 99% of British cotton piece goods.

This fact about the tariff has been stated by me publicly at least twenty times and once at a Parliamentary Association meeting with Snowden in the Chair, so you can see how necessary is continuous educational effort.

Cox stated that the percentage of British goods taken by the overseas Empire had not materially increased during the last fifty years and Snowden supported this view. I had not got the figures at my finger ends, but I propose to get out a detailed return and will send a copy to Snowden.

I have to-day had the following data collected:

Empire share of the export of the produce and manufactures of the United Kingdom 1870-25.5%; 1880-34.5%; 1892-33.0%; 1904-1913 (average)34-75%;

1924-41.8% or excluding the Irish Free State 38.6%; 1925-43.2% or excluding the Irish Free State 40.2%.

MERCHANDISE MARKS BILL [19]

I enclose copy of the draft of the Merchandise Marks Bill which Cunliffe-Lister [20] has submitted. I would draw your attention to the marked portions on Pages 7 and 8.

In my opinion it is a mistake to give an alternative method of

marking goods and it would be very much better if it was made obligatory that the words 'foreign' or 'Empire' should be used and optional that the name of the country of origin should be added.

To illustrate the reasons of my objection I would take the instance of dairy produce. Under the present Bill, retailers would label Danish butter as 'Danish', which is already an asset. I should like to see it made obligatory to mark Danish butter as 'foreign' and optional to add the word underneath in smaller letters 'Danish'. This was the sense of the recommendations of the First Report of the Imperial Economic Committee.

I enclose a cutting from the 'Daily News' reproducing a cartoon from the Australian Manufacturer. This cutting needs no comment from me.

Yours sincerely, F. L. MCDOUGALL

[Handwritten postscript]

I enclose further Parliamentary questions.

1 Leopold Amery, Secretary for the Colonies and for Dominion Affairs.

2 Winston Churchill.

3 On 20 February Bruce cabled Amery, strongly urging the British Government to 'make a prompt and definite declaration with regard to the carrying out of the recommendations [of the Imperial Economic Committee]'. He added that 'any campaign launched in Britain should be on the basis of first preference to British producers' and that 'it would surely be verging on a national calamity if this golden opportunity were to be allowed to slip away, perhaps never to return'. The cable is on file AA:CP78/22, 224/1926.

4 Sent on 1 March. A copy is on the file cited in note 3.

5 Sir Halford Mackinder, Chairman of the Imperial Economic Committee.

6 J. Forsyth Smith and W. A. Wilson.

7 Conservative M.P.; representative for the Colonies and Protectorates on the Imperial Economic Committee.

8 J. H. Dimond.

9 J. S. Smit.

10 Sir Atul Chandra Chatterjee and M. M. S. Gubbay.

11 A copy of the address, 'Notes on Empire Trade and the Imperial Economic Committee', 23 February 1926, is in the records of the Dried Fruits Control Board, AA: B4242, vol. 1.

12 W. A. Appleton.

13 McDougall used statistics to support his argument that Britain should look for wider export markets in the Empire rather than elsewhere. The Morning Post of 1 March described the article as a 'heartening exposition'.

14 Merchant banker.

15 Colliery owner; company director; Chairman of London and North Eastern Railway Co.

16 Editor of the Edinburgh Review; writer on economic matters.

17 Labour M.P.; free trader; Chancellor of the Exchequer 1924.

18 Economist and scholar; Fellow and Bursar of King's College, Cambridge.

19 See note 7 to Letter 16.

20 Sir Philip Cunliffe-Lister, President of the Board of Trade.