My dear Prime Minister,

After reading your long letter set out in double spacing [1], 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 BUDGET

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 [2] 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 [3] 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 [4] 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.

SUGAR

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. [5] 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. [6]
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. [7]

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.

WINE

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. [8]

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. [9]

HUXLEY'S [10] 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 [11], 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 [12], Mr. Huxham [13] and Mr.

Price [14]-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