1st December, 1927
PERSONAL & CONFIDENTIAL
My dear Prime Minister,
I have your letters of the 4th and 24th of October. 
With reference to the first, I shall hope to receive from you, in the near future, some word about your talk with Amery  especially on the subject of the Empire Marketing Board.
Last Friday's newspapers contained a report of Mr. Pratten's  speech in introducing the new tariff changes in Australia. Very considerable publicity was given to the speech, the best reports being in the 'Financial Times' and the 'Times'.
I was, naturally, very anxious to find out exactly what the tariff changes amounted to, especially as the reports of Mr. Pratten's speech indicated that, although there were a number of substantial increases in duty, yet the preferential advantages falling to Great Britain were also substantial. You will readily appreciate my disappointment when I found that the Customs Department at Australia House had only received a cable giving information of the increases in duties. The Customs Department were proposing immediately to issue this statement to the press, which would have resulted in the whole of the free trade press seizing on the increased duties on iron and steel and hosiery and making their usual song about the myth of preference. It was, however, arranged that an immediate cable should be sent to Australia asking for fuller particulars as regards the tariff alterations. These were received on Monday and issued to the press but have caused very little comment. It is, as you must be aware, quite impossible for the press to make any intelligent observations on a mere schedule of tariff changes unless they are also provided with the previous rates of duty and with information as to the actual volume of trade in the various items affected. You may remember that, in 1925 when the last large tariff amendment was presented to Parliament, I was able to give the 'Times' a reasoned article which had a very satisfactory effect. I have made a similar arrangement this time and am giving the 'Times' about 1,500 words for their Saturday morning issue. I have already given the 'Times Trade Supplement' a short article, a copy of which I enclose. This article is to be printed below the list of tariff changes and it will, of course, be issued unsigned simply as 'By a Correspondent'. So far as I am able to judge at the present moment, the new proposals will, if they pass through Parliament substantially unamended, result in doing rather more to benefit British trade than to damage it. The basis of this faith, as you will see, is contained in the enclosed 'Times Trade Supplement' article.
I have suggested to the High Commissioner  that he should communicate with you to the effect that it is highly desirable that when important tariff changes are made, the cabled information received in the first instance by Australia House should be full and complete and should at the very least contain as much information about the changes which are beneficial to preference as to the changes which are purely protectionist. Once a wrong atmosphere gets into the press, it is quite impossible to overtake it with the truth because so many of the free traders are only too anxious to attack us. 
I am enclosing copy of an article which I wrote on the subject of the special value of complementary trade to Great Britain. I think you will find this of some interest, particularly the two graphs which illustrate it. I am proposing to return to this subject at an early date because it seems to me a very valuable line of country to rub into the people here that an export trade in fully manufactured goods is far more advantageous to them than their export trade to Europe in coal and in such semi-manufactures as yarns, wool tops, etc.
Yesterday I had a long talk with J. H. Thomas  in which he was very expansive on the political situation. He was talking about the effect of the Liberals' determination to run 500 candidates at the next election, and I told him that I was prepared to bet him 1 that the Liberals did not secure more than 80 seats. He refused to bet on the ground that his own estimate was too close to mine.
He thought the Liberals would have a total of 95 seats.
I then asked him what he anticipated would be the Labour strength and he replied that he thought that Labour would hold from 260 to 280 seats, thus returning to Parliament as the strongest of the three Parties. This estimate would mean a Tory loss of no less than 150 to 160 seats. Thomas went on to suggest the possibility of a General Election in the coming Spring.
I do not attach any very great weight to these remarks. As you know I think Thomas is apt to talk rather wildly. Nevertheless I feel sure that you will be interested to hear these views.
My own feeling at the present moment is that the Tories will probably lose about 100 seats, leaving the Party in a position of practically no majority in the House but making the position of the Liberal-Labour Coalition equally impossible. The old proverb, however, that 'prophecy is a most gratuitous form of folly' applies with probably greater truth to political forecasts than most other forms of prophecy.
There was rather an interesting leading article in the 'Evening Standard' last night stating that the Government at last was giving serious attention to the idea of a Cabinet reconstruction and that it was generally anticipated that the New Year's Honours List would contain several interesting political elevations to the Peerage which would make way for a reshuffle in Cabinet. There can be little doubt as to the desirability of such a reshuffle but I am somewhat sceptical as to whether Baldwin  has any such intention.
Yours sincerely, F. L. MCDOUGALL