My dear Prime Minister,

On Thursday last I dined with Walter Elliot [1] in the House of
Commons and had a very long talk afterwards about certain aspects
of the political situation.

Elliot said that the outstanding feature at the present moment in
the Tory Party was the sudden recrudescence of a demand for
protection chiefly taking the form of a very vigorous movement to
try to force the Government to reconsider its attitude in the
matter of the safeguarding of iron and Steel. [2] The basis of
this was the rise in unemployment figures, which are causing the
most intense concern to Conservative Members of industrial
constituencies. He said that Amery [3] was giving this movement
his whole support and that he thought that it was absorbing all
Amery's real attention at the present time. So much was this the
case that Amery was reputed to have contemplated resignation from
the Cabinet in order to lead a protectionist campaign but Elliot
went on to say that, although Amery had actually made some such
suggestion, no one had taken it very seriously or had really
imagined that Amery would be likely to carry such a step into
practice.

I agree that there is little probability of Amery resigning for
this purpose but should he do so, I should not be in the least
distressed, because his failure actually to impress the House and
the country is one of the most serious difficulties which the
Empire Movement has to face at the present time.

Elliot went on to say that, in spite of this demand from not less
than 200 Members of the Party for the safeguarding of iron and
steel, it was generally felt that such a measure would approximate
so closely to a General Tariff as probably to involve
Conservatives in the electoral disaster which all their previous
efforts to introduce protection had encountered.

Elliot said that he had been considering the position and had in
mind the possibility of attaching some very stringent measures to
safeguarding so as to meet the main objections of free traders and
of the public.

We had a very long talk and I have put down on paper the main
points that Elliot made during this conversation. Elliot intends
to try the effect of these ideas on the Conservative free traders
and, if he finds that they react at all favorably, he will try to
get Baldwin [4] to consider the scheme. The idea of attaching what
might almost be described as Poor Law conditions to industries
applying for protection is so interesting and novel that I feel
quite sure that you would like to have the notes that I made. You
will, of course, understand that they are of a most private
character. I should be very glad if, at your leisure, you would
let me have any comment that occurs to you.

There is one point that I should explain. Elliot was of opinion
that the Imperial development loan [5] ought to be a radical part
of the scheme and he felt that, on the whole, this loan should be
more intended for Colonial than for Dominion development but when
we argued about that, he agreed that there was no real reason why
the Dominions should not also participate.

The idea of a priority list based on proportion of imports taken
from Great Britain was, as you will probably imagine, one of my
contributions to the discussion. [6]

Yours sincerely,
F. L. MCDOUGALL