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Letter from Hugh Dalton to F. W. Pethick-Lawrence

107 Albert Bridge Road, S.W.11.—Comments on Pethick-Lawrence’s budget proposals, with reference to his own, and recommends measures to be taken if a capital levy is ruled out for the present.



107 Albert Bridge Road, S.W.11.

Dear Pethick Lawrence,

I have nothing that can be called a criticism to make of your Labour Budget proposals. My own reply to Greenwood was less ambitious, as I made no attempt to estimate, or even guess, the revenue yield next year.

Several of my practical proposals, e.g. to halve all the food taxes, agreed with yours. An alternative, roughly equivalent from the revenue point of view, would be to concentrate on the sugar duty & reduce it by 75%.

The loss of annual revenue consequent on a Capital Levy is not easy to estimate. I have worked it out in some detail, so far as the inadequate available statistics allow, in my little book on this subject {1} which is now in the Press, & I don’t think I am far out of agreement with your estimates.

If Capital Levy is ruled out for the moment, the line to take in the House is, I think, simply the need to shift burdens, i.e. lower food taxes & more generous allowances etc for the smaller income tax payer and, on the other hand, more steeply graduated super tax and death duties.

Yours sincerely
Hugh Dalton.


{1} Presumably Principles of Public Finance.

Letter from Hugh Dalton to F. W. Pethick-Lawrence

107 Albert Bridge Road, S.W.11.—Is in favour of stabilising the price level and therefore does not believe the Treasury Minute should be abrogated at present (see 1/192), as it is a defence against inflation.

(Printed letter-head of the London School of Economics, which Dalton has enclosed in square brackets.)



107 Albert Bridge Road, S.W.11.

Dear Pethick Lawrence,

I should like a talk with you sometime before the next Finance Committee meeting. I regret to find that I shall again have to leave early, as I have an engagement at 6.30 on that day to dine with Charles Latham and the London Accountants.

Shortly, my view is the following.

I am in favour of stabilising the price level now & in the near future, though, looking further ahead, I hesitate to commit myself to a definite policy. Many factors seem to me to complicate the distant view.

I am more afraid of inflation in the near future than, I think, you are. I want stabilisation as a defence against the F.B.I., no less than against the old-fashioned deflationist authorities, who are, I think, the weaker of the two possible disturbers of the price level.

I don’t, therefore, feel happy about abrogating the Treasury Minute at this stage. It is our only real defence against inflation at present.

Nor am I so certain as, I think, you are that the Minute will operate to check a healthy, as distinct from a hectic & inflationist, trade revival in the near future.

Keynes said a few months ago at a Committee, of which I am a member, that he thought there was a good deal of margin in the situation, even with the Treasury Minute unchanged. In addition to the margin in the Currency Note Issue, he attached importance to the prospect, with reviving trade, of a more rapid circulation of bank deposits. I would add another factor, pointing in the same direction, namely the prospect of an increase in trade credits (between business men,—I don’t mean bank credits), as confidence grows.

Further, our situation may be eased by a rise in American prices, sufficient to restore the pre-war parity of exchange & lead to British imports of American gold. This has been long in coming, but it may come quickly, if the Federal Reserve Board’s stabilising policy gives way before the strong forces opposed to it.

My present feeling, therefore, is to pronounce in favour of a stable price level as our immediate objective, without committing ourselves to anything very general in the way of economic principles, & not to mention explicitly the Treasury Minute. Nor would I say that a future rise in bank rate is undesirable. If prices continue to rise as they have been doing lately, it may be desirable to raise bank rate in order to secure stability. My belief, (in opposition to that of others, I hear) is that you can stabilise any level of price you choose, & that there is no causal relation between the level chosen & the volume of unemployment.

If, for the time being, we could get the Govt to agree to stabilisation of the price level as a principle, and, implicitly, to whatever measures may be required to secure it, I should feel satisfied.

But I wouldn’t meet trouble half way, or give any encouragement to profiteers, by proclaiming in advance that more money shall be printed than the Treasury Minute allows.

Yours sincerely
Hugh Dalton.

Letter from Hugh Dalton to F. W. Pethick-Lawrence

107 Albert Bridge Road, S.W.11.—Is glad Pethick-Lawrence agrees with the line he took in the New Leader and would like to discuss the problem with him. Encourages him to address the Indian Majlis at Cambridge. Explains why he joined the Inter-Parliamentary Union. Has been preparing evidence for the Debt and Taxation Committee on points not connected with the capital levy, but will give evidence on the levy later and hopes that Pethick-Lawrence will do the same

Letter from Hugh Dalton to F. W. Pethick-Lawrence

West Leaze, Aldbourne, Wiltshire.—Discusses his correspondence about Thompson and the Budapest Legation, and refers to the forthcoming party conference.



West Leaze, Aldbourne, Wiltshire
Sept 24th 1934.

Dear Pethick,

I have been thinking about the Budapest Legation trouble, on which Hankinson has also written to me. As you know, I got in touch with the F. O. about it in July & I have a letter which I will show you, in confidence, at Southport. I don’t think there is ground for anticipating that Thompson will be reinstated. Technically, of course, he was not dismissed, but his engagement was terminated, as, under his contract of service, was always possible,—his was not an established post—on grounds of economy. Hankinson holds strong views on the merits of ths case, & on the Vice-Consul. In his last letter to me he is again rather rash in his statements, & he should, I think, be careful not to lay himself open, by what he says or writes to others, to a charge of slander or libel. But I think you had better see my letter from the F. O. & have a talk with me at Southport. I doubt whether further representation by Hankinson to the F. O. would be of any utility to Thompson, & whether they might not, in view of H’s strong views on this particular matter, diminish his possible influence on other questions connected with Hungary, on which, of course, we know him to be well informed. I feel it rather difficult to convey this to Hankinson directly. As he is an old personal friend of yours, perhaps you would convey to him something of what I have written, & perhaps you could add that you & I are going to have a talk about the case at Southport.

I have not answered his letter, owing to a sense of the difficulties which I have mentioned. But I do not wish to seem discourteous, & I should be very much obliged if you could let him know that I am in communication with you about his letter & about the case itself.

I think we shall have a good conference at Southport. The Socialist League have ridiculously overreached themselves and are likely, on all the main issues which they have raised, to be put to flight.

I think that the tactics used of old by Fabius Cunctator will be seen, when Southport is over, to have been the right ones to employ against them.

You speak of “autumn chores”. I am doing some too, digging holes in the chalk and carting good earth, and manure, and rot heaps, for the planting of new trees & shrubs! I find that this keeps me pretty fit.

With all good wishes,

Yours ever
Hugh Dalton.

[Added at the head of the letter:] P.S. Hankinson tells me that he put his view of the case to the F. O. Inspector who came out to Budapest. There is nothing more that he could tell the F. O. in London.

Carbon copy of a letter from Lord Pethick-Lawrence to the editor of The Spectator (Wilson Harris)

The circumstances under which Churchill became Prime Minister were not as L. S. Amery represents them in his review of Churchill’s book (The Gathering Storm).



11th. October, 1948.
To the Editor of “The Spectator”


The Churchillian Epic

In the interests of Historical accuracy I must express my dissent from the impression conveyed by the conculding† paragraph of Mr. Amery’s review of Mr. Churchill’s book {1}.

No doubt it is true that it was the decision of the three men on May 10, 1940 that made Mr. Churchill Prime Minister. But this decision was based on the political situation in the House of Commons.

It was generally recognised that in the national emergency there must be a Coalition Government. The Labour Party had refused to serve under Mr. Chamberlain. The question of serving under Lord Halifax never arose, but it is inconceivable that they would have agreed, first, because he was in the upper House and secondly, because he had been an active supporter of Mr. Chamberlain’s “appeasement” of Hitler. They were prepared to serve under Mr. Churchill. No other possible choice presented itself.

These facts may not have been positively known at the time by all the three men. But there was the strongest presumptive evidence that they were true.

Yours etc.,

The Editor,
The Spectator,
99, Gower Street,
London, W.C.1.


{1} The Second World War, Vol. 1: The Gathering Storm.

† Sic.

Carbon copy of a letter from F. W. Pethick-Lawrence to Hugh Dalton

Will try to speak to the Cambridge Indian Majlis (see 1/178) after his debate at St Catherine’s. Will send a copy of the evidence he intends to give to the Colwyn Committee nearer the time. Intends to go with the Inter-Parliamentary Union to the United States this year. Encloses a copy of a letter he wrote recently to Dr Lange.

Draft of a letter from F. W. Pethick-Lawrence to Hugh Dalton

Congratulates him on his appointment to the Privy Council, and comments on his radio broadcast. Wishes to discuss the purchase tax with him.



June 9
My dear Hugh

First let me send u my hearty congrats on your richly deserved P C {1}, th one honour which seems to m worth having & which does give one useful standing in the H/C {2} for more effective work.

Next let me tell you how much interested I was in your b-c {3} last night. I have been thinking all along tht it was H’s {4} petrol tank that probably wd give him his greatest trouble & it hasn’t escaped me how the B {5} bombers have gone above everything else for his petrol dumps. Your b.c strengthened my opinion & I imagine wd have th same effect on the B P {6}. In short I think your b.c was intended to say to the B P. “Hold on in good heart—if we can keep H at bay till Oct we are well on the way to victory.” I think you got this a x {7}

Now for a spot of criticism which I think a true friend shd always give. You struck me as being a little too dramatic & emphasised certain words too much, with the minor result tht those words did not come too well over the air & the major result tht you did not give as much the sense of strong confidence as you wd have done. You have probably noticed the difference between Churchill & D C & will understand when I say you were [there follows a mathematical formula representing ‘D.C.’ squared, divided by ‘Churchill’]. Finally I am not sure it pays to sound quite so venomous about the Germans as you did. It smacks a little of the Mikado & his boiling oil.

All this with your big heart you will take in the spirit in which it is written.

Ever yours

If you have any free time say Tuesday evening or Wedday I should much enjoy a talk w you about the purchase tax.

[I have myself copied this letter out & sent it to H D from Twys.] {8}


{1} Privy Councillorship.

{2} House of Commons.

{3} broadcast.

{4} Hitler’s.

{5} British.

{6} British Public.

{7} across.

{8} The square brackets are in the MS. This sentence was presumably addressed to a secretary.

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