Government Policy

Part of Orders of the Day — King's Speech – in the House of Commons at 12:00 am on 29th October 1947.

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Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot 12:00 am, 29th October 1947

—that is simply bringing the household face to face with the facts. That was a typical idiotic interruption. The Minister for Economic Affairs is well adapted by training and I think by appearance to play the part of the family solicitor in our national affairs just before the creditors petition.

Let me examine some of the positive measures that are now necessary. The first is the immediate arrest of inflation and the reversal of the present monetary trend. The Minister for Economic Affairs acknowledged this necessity in a notably courageous passage in his speech. He was talking about the curtailment of capital expenditure when he said that it was necessary to bring about a measure of deflation. So, as far as I know, this is the first time that the word "deflation" has found itself in the vocabulary of a Socialist Minister, but we must not be afraid of words. In a time of depression, of falling prices and receding business activity, inflation may be highly beneficial if it is controlled, and equally in a time of scarcity boom such as we are in now deflation may be equally beneficial. The monetary policy is the bloodstream of the economic body, and unless the bloodstream is purified, all the efforts of the Minister for Economic Affairs, the industrialists, entrepreneurs and the workers will be frustrated, and, at the same time, the social services on which every one in this House of all parties pride themselves as Britons will become a mere mockery. I have seen inflation at work at very close hand, and I can remember in the 1920's when the whole capital of the German Government before the war would not have sufficed to buy a man a ticket from Frankfurt to London.

If a man gets drunk every night of his life, it is no good trying to give him pills and purges, Swedish exercises, cutting off his meat ration or even depriving him of his basic petrol. The only way is to cut off the drink, and inflation is the drink of the economic system. The greatest paradox of all is that it is the doctor who gives the patient the liquor. It is the Government in the modern world which creates and controls the volume of money in circulation. The growth of bank deposits and currency notes in circulation has gone like this—in January 1946–I will lump the two together—they amounted to £6,345 million, and in August 1947–the last figure I have—they amounted to £7,311 million, or an increase of about £1,000 million.

Unfortunately, these figures do not by any means tell the whole story. For the last two years, the Chancellor of the Exchequer has had a powerful counter to inflation put into his hands. That is that we have received, without paying for them, 3,150 million dollars worth of goods and services. This is not a controversial point; these figures are beyond controversy. These goods and services have been bought and paid for in sterling in this country by the buyer of machinery or the film goer or the smoker or the consumer of food, and we have received these goods without paying for them. So within this country they have acted as a powerful sponge in mopping up the surplus purchasing power of the individual consumer; in other words, there are such things also as unrequited imports. We have had them in a very large measure and, to the extent that they now have to be paid for, to the extent that the loan is now exhausted, they will no longer be the counter-influence against inflation which they have been during the last two years. The longer inflation continues, the more necessary it is to clamp down controls and regulations and licences, the more necessary it is to invent daily new penalties and new crimes so as to prevent £7,300 million forcing up the price of £6,000 million worth of goods. That inflationary pressure will be greatly increased by the exhaustion of the loan. That is a thing which the country has to face.

I want to turn back again to the speech of the right hon. and learned Gentleman the Minister for Economic Affairs last week. It made a great impression on the House and, except that it made no mention of Work or wages, I must say I thought myself that it was a courageous, explicit and truthful account of our present difficulties, but it was no much more. Boiled down it amounted to this: We cannot buy any longer the things we have not the money to pay for, and we must export everything that the foreign buyer will buy and do without it. He then went on to discuss the export targets which he very fairly said he put forward in an optimistic mood. I must say quite frankly—I trust I shall prove to be wrong—that I believe them to be quite unattainable. That is a thing we must take into all our calculations. In other words, if we were to attain the volume of production we should either not find the markets or, if we found the markets, we should find them at lower prices, which would cancel some of the extent of the volume. It is no good living in this world of make-believe. Those targets are unattainable. Every word of that speech—as other right hon. and hon. Gentlemen have said today, sometimes not always meaning it—was a condemnation by bell, book and candle of the whole economic policy of his colleagues, a condemnation of the last two years of Socialist misrule.

Now let us be fair on the other side. Once having pursued the policy they have pursued up till now, and once having taken the first step in the wrong direction, the Government are compelled by the force of circumstances to take the very measures which they are now proposing. There are some of us who think that we would have done better in the early days to have timed our economic recovery on the Belgian model—I am one of them—and then, by being a little easier in the home market, we might have been able to put greater drive and greater momentum into the export markets later on. That is a conjecture into which it is not worth going; no one will ever know whether that was right or wrong. However, the right hon. and learned Gentleman and his friends are quite at fault if they think that we on this side of the House believe that, having taken this wrong turning, we should now increase the supply of goods to the home consumer. Once having misdirected the whole economic effort, and having gone in for a policy of monetary inflation and the strangulation of enterprise—and the two things go together—they are now faced with a situation in which it is manifestly impossible to increase supplies, to the home market.

And now at last, after two years, some attempt is apparently to be made to start a priority system for our capital commitments. This used to be the function, almost the main function, of the Treasury and the Chancellor of the Excheauer. It was his business to see that the sum or what the Departments wished to spend was within the resources of the country. I think I am right in saying that Lord Randolph Churchill, the father of my right hon. Friend, actually resigned his office as Chancellor of the Exchequer because he could not get his colleagues to trim their expenditure to the point he thought necessary, to match the national resources. I recommend the present Chancellor to read this recent piece of history.

Let us consider for a moment the number of things we are trying to do all at once—to re-equip the coal mines and some of our overworked, more important industries, like cotton and textiles, which had a great deal of unfair competition between the wars. We are trying to maintain, and, I think, waste, the largest Forces we ever had in peace time, trying to build a large number of schools, going in for the largest programme of house building this country has ever seen—only a programme, no houses. We are trying to set on its feet the largest national insurance and national health scheme of any country in the world, spending some hundreds of millions on colonial development, trying to rebuild our Mercantile. Marine, and export more than £31 million worth a month above our present rate, and we are expecting to maintain 600,000 more civil servants, local and central, than we did before the war, and lastly, to take in our stride the nationalisation of a number of industries.

No one with common sense, even with the Treasury behind them, can say that all this can be done at once. Nearly all these projects, except nationalisation and an increase of bureaucracy, are highly desirable, and even urgent. I do not for a moment deny that nearly all the things in that list is desirable, and urgent—they are. But I say that any man of sense knows that they cannot be carried out at once after two of the most exhausting wars in history. So if hon. Members who are seekers after knowledge, like the hon. Member below the Gangway, want to know what positive measures we advocate, I will tell them that the first is to curtail Government expenditure in the capital Budget. [An HON. MEMBER: "How?"] I cannot go into details.