26th April, 1928
PERSONAL & CONFIDENTIAL
My dear Prime Minister,
After reading your long letter set out in double spacing , I have come to the conclusion that it would be very much easier for you to read my epistles if they were set out in that way. I, therefore, propose to adopt this practice in future.
The general feeling about the Budget is that at last the Tory Government has produced a really constructive series of proposals which, when completed, should be of substantial importance to the producers both in industry and in agriculture in the United Kingdom.
I was very interested yesterday to get Tom Johnston's  comment which was that the Labour Party would have to think furiously before deciding just how to oppose the Budget, for at least two- thirds of the proposals might well have been introduced by Philip Snowden  had he been in office. This, I think, is rather high praise of Philip Snowden, because it is fairly obvious that what is needed in this country is discriminating help in favor of the producer and Snowden, with his strong Free Trade convictions, would have tended to spread any assistance not only to the producer but also to the whole of the distributing trades. This would have spread the assistance very wide and very thin and would not have achieved the results which it is legitimate to hope may follow from Churchill's  proposals.
The Budget has had an excellent press and the Tories in the House of Commons are elated about it. There is not very much significance in the Budget so far as Empire Trade is concerned but I am glad to say that the Government has done what it can to meet us in two directions.
On Monday, the day before the introduction of the Budget, I received a very urgent cable from the Prime Minister's Department asking me to make further representations on the subject of sugar and the question of the 98 and 99 degrees polarisation.  This was indeed an eleventh hour instruction. I immediately got busy and found that Sir Francis Floud, the Head of the Customs, was engaged in a Conference at the Treasury with Winston Churchill. I therefore wrote a hurried letter embodying the points raised in the cable and sent it by hand to Sir Francis Floud, having first satisfied myself that it would be delivered to him while he was engaged with the Chancellor. I also got into touch with Amery.  In the afternoon I was able to see Floud and he was good enough to inform me just what action the Chancellor proposed to take.
Naturally he would not agree to my cabling this information but said that he had no objection to my cabling you to the effect that the Australian sugar. producers' fears were unnecessary and that the Budget statement would be substantially satisfactory on this subject. 
The sugar question is a very complex one and I do not pretend to understand exactly what the Australian difficulties were but, in effect, the Government has met the situation in the same way as it did in regard to wines last year by practically making a different demarkation for Empire and Foreign raw sugars of high polarity.
This, I think, was a useful precedent which we may find can be adapted to other types of produce.
The additional 6d. excise on British sweet wines is welcome and, if the information which the Customs gave me and which I forwarded to you in my letter of the 4th April [is correct], it is about as much as it was possible to expect. 
The Customs attitude now is that, with the additional 6d. excise, British wines are bearing the same taxation as Empire wines of a similar strength; that is to say, they support this contention on the following two grounds:
(a) that the bulk of British wines is under 27 strength.
(b) British wines pay the duties on ingredients-equivalent to about 6d. per gallon.
This 6d., together with the 1/6d. excise, brings the total impost to 2/-.
While on the subject of wine, I should like once again to urge that the Commonwealth Government should give to the Australian sweet wine export trade the bounty of 1/9d. Plus 1/3d. for a definite period of, say, 3 years, provided that the Australian wine industry immediately evolves a sound method of controlled marketing. I should like to see the Government take the line of no orderly marketing-no bounty but given orderly marketing, a stabilised bounty of not less than the present amount. I think the bounty on wine can be defended on the ground that the whole of the expenditure on the bounty is made by special excise taxation on the industry itself.
I am enclosing an interesting speech by the Spanish Ambassador on the question of wine and have marked one sentence which I am sure will amuse you very much. 
HUXLEY'S  DIARY
Huxley, who you will remember accompanied Amery on his tour, wrote for his own edification a most comprehensive diary of the whole tour which ran into some 600 pages of typescript. He lent it to me and I read it over the last two weekends. It is extremely interesting and well written but, unless heavily censored, quite unfit for publication. His summing up of the position in Australia was so much to the point that, with his consent, I abstracted the main portion of this summary and am enclosing a copy for your private information. There is undoubtedly some gross exaggeration, especially for instance in his reference to the Civil Service but, on the whole, I think that you will find it interesting.
COOPERATIVE WHOLESALE SOCIETY AND EMPIRE TRADE
Yesterday a most interesting development of Cooperative Wholesale Society policy occurred. The Directors of the Society invited persons concerned with Empire Trade first to inspect their premises at Leman Street and then to a dinner at the Hotel Metropole.
When you remember that only two years ago the C. W. S. was tending to concentrate on trade with Russia and was, if not hostile, at least indifferent to Empire Trade, the change that has occurred during this period is extremely striking. I attribute this in a very great measure to the influence of Sir Thomas Allen , my colleague on the Imperial Economic Committee and on the Empire Marketing Board. Ever since the formation of the I.E.C., I have sat next to Sir Thomas and have been immensely interested in the development of his appreciation of the immense possibilities to the future of this country of Empire Trade. Last night he made an admirable speech which, unfortunately, was not fully reported.
At the dinner I became more conscious than ever of the immense disadvantage to Australia of the presence of six Agents-General.
Three of them-Sir George Fuller , Mr. Huxham  and Mr.
Price -spoke, all saying almost exactly the same things and all ramming undiluted Australia down the throats of the audience, with the result that I am sure that the bulk of the people present left the room with a feeling of temporary hostility to the very name 'Australia'. There is little subtlety or tact about the State representatives. I am perfectly certain that one could most effectively help the people in this country to realise what Australia means by talking about the Empire but using Australia occasionally to illustrate very important points.
BRITISH MEAT SUPPLIES
On Tuesday (Budget night) I dined in the House of Commons with Sir George Courthope, who is a member of my I.E.C. Sub-Committee on Timber and the Chairman of the Agricultural Committee in the House of Commons. We discussed two points: firstly the importance of the agriculturists of the whole Empire jointly presenting their case to industrial Britain and, secondly, the question of Argentine meat supplies affected by foot and mouth disease.
On the former subject Courthope said that the one man who had really made solid contributions to enable the home farmer to realise that the Dominion farmers were potentially his allies and not his rivals was yourself. He spoke in the very warmest appreciation of your two speeches at the National Farmers Union in 1923 and at the Farmers Club in 1926. I have always felt that the work that you have done to enable the conception of Empire agriculture as a whole to become possible has been of very substantial importance and I was delighted to get this confirmation from a man occupying such a position as Courthope.
On the subject of meat, I found Courthope very keen and interested. I made a further suggestion to him as an alternative to my previous suggestion as to the restriction of Argentine meat in port areas. This suggestion was that all meat imported from infected sources should be compulsorily held in store in Great Britain until danger from infection had ceased. This would involve the freezing of the supplies of chilled meat received from South America.
Courthope suggested that, as it would be necessary to hold the carcasses for 100 days, such a policy would necessitate a large extension of cold storage accommodation in Great Britain. I told him that I was fairly sure that that would not be the case. At every port I had been impressed by the emptiness of cold storage accommodation. He agreed that his own experience as a Director of the Southern Railway, was that the Southampton Cold Store was always two-thirds empty. I pointed out that, at the conclusion of the war, something like a year's supply of frozen meat was in cold store in Great Britain. He promised to follow up the suggestion and see what could be done. He is intensely keen on (a) safeguarding British herds from infection through the introduction of infected meat from South America;
(b) enabling Great Britain and the Dominions to obtain a large share of the consumptive demand for beef in this country.
Courthope said that he was afraid that Walter Guinness, the Minister for Agriculture, would hate to be forced to take any sort of decision on this subject.
Yours sincerely, F. L. MCDOUGALL