We are a great manufacturing country and during the first three or four years after the war we could sell almost everything at almost any price but, unfortunately, that state of affairs does not now exist. There was one sentence in the Chancellor's speech yesterday which I hope all hon. Members will repeat ad nauseam to their constituents at every meeting they hold from now on. The sentence was this:
Unless we can all quickly produce more and get our costs down, we shall suffer a tragic fall in our standard of living accompanied by all the demoralising insecurity of widespread unemployment."—[OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 1354–5.]
We have been saying that in our constituencies for two or three years, but we were merely told that that was Tory economics, and pessimistic economics at that.
I do not know what is the definition of a "damp squib" in the Oxford Dictionary, because I have not looked it up, but if in any future editions reference should be made to the Prime Minister's statement on Monday as a definition of a damp squib, I should not quarrel with it. The nation was keyed up to expect some pretty drastic cuts. Ministers were rushing all over the place. The Lord President of the Council, when called away from some public function to attend a Cabinet meeting, said that quick thinking and quick action were required. But the cuts were totally ineffective and many of them will not come into force until well into 1950.
I believe that hon. Members in all quarters of the House will have failed in their duty if they do not convince the country how grave is the situation now and not merely how grave it may become in 1950. So long as the country believes that the cuts will not hurt very much, that all our economic difficulties are the fault of someone else rather than our own; that these economic problems are the intellectual playground of the experts to be discussed in a language the people do not understand, and so long as the Government take a negative and not a positive action, for so long I believe the response will be half-hearted. We are all well aware that we are not the only country suffering from dollar difficulties; of course we are not. That is not the point. If I am going bankrupt, it is comparatively small comfort to me to know that my neighbour is going bankrupt also, and it does not relieve me of responsibility for adjusting my own expenditure to my earnings.
Hon. Gentlemen opposite have been singing a rather different tune in the last 10 days from the tune they first sang about devaluation. They realise now that it was not some brilliant brainwave of the Chancellor to give exports a terrific boost and to close the gap. Devaluation was forced on him for the simple reason that the economic crisis is fundamentally a crisis of confidence, and unless devaluation is accompanied by greatly increased production and greatly reduced expenditure it is a completely empty gesture. It is just tinkering with the problem. One can tinker with the carburettor of a car so that in theory the performance of the car is improved, but if the driver, in this case the Government, proceeds to drive the vehicle in second gear with the hand brake on, the performance of the car after the adjustment of the carburettor is no better than before. That is what we are in danger of experiencing in regard to devaluation.
We have continual exhortations and advice from the Prime Minister, the Chancellor of the Exchequer and others about reducing costs. We have had lectures on management, leadership, salesmanship, etc. I wonder how they justify all that? I believe that one of the principal duties of the Government is to practise itself what it preaches to others, and in that respect I wish to put the Government to the test. In the handling of the dock strike, was the management and leadership completely above reproach? Has the price of coal, gas, electricity or transport been reduced since nationalisation? When we are told to reduce costs, I ask how it is expected that production costs are to be reduced when the Ministry of Supply have put up the price of copper by 30 per cent., the price of zinc by 38 per cent. and that of lead by 40 per cent.?
Does the right hon. and learned Gentleman really think that if the objective is to earn dollars the best way of doing so is to nationalise insurance? He knows the answer to that. Equally, does he think that the right way to encourage the American investor to invest his money over here is to clap on an additional Profits Tax and suspend bonus issues? He may not like bonus issues, he may not like profits being made, but if we wish to encourage individual Americans to invest money over here, as my hon. Friend the Member for Monmouth (Mr. P. Thorneycroft) said yesterday, the action which he has hitherto taken and which he now proposes to take is calculated to achieve a result directly contrary to the one desired.
In his broadcast last week the Prime Minister said the national effort was unequal. I think we all agree that it is. Two obvious examples are the coal industry and the steel industry. Is the right hon. and learned Gentleman under the illusion that the proposals to nationalise the steel industry will restore confidence in the pound sterling? I ask why on earth these cuts were not made two years ago? These are not merely idle questions. They are questions to which the country has required an answer for a long time.
I wish to say a word about incentives. That blessed phrase "increased produc- tivity," stripped of all its technical trappings, means persuading large numbers of men and women in any capacity in any industry to work a good deal harder than they wish to do either for existing working hours or for longer hours, I do not know which. But will these men and women, in whatever capacity they are engaged, respond with the knowledge that the more they earn, whether in wages, salaries and profits, the less they will keep? So long as Government expenditure is on a scale which necessitates a burden of tax which removes all incentive neither devaluation nor exhortations nor anything else will achieve the objective. The Chancellor of the Exchequer makes appeals about saving, but how on earth can the individual respond with taxation at its present rate; and if in successive Budgets the Chancellor discourages savings how can the nation collectively accumulate enough reserves upon which to draw on a rainy day or in times of crisis?
The mathematical formula austerity minus incentive equals nought, and the prospect of being invited to go on sharing a progressively smaller portion of a progressively smaller cake may be good Socialism but it is very bad psychology. Unless there is a real incentive to earn and a real encouragement to save, two things will follow as night follows day. The first is that the welfare State, which all parties have combined to build up, will topple over. I say that because if one insures one's house against fire one has to earn the money to pay the premium. If the nation collectively wishes to insure itself against the various vicissitudes of life—unemployment, sickness, old-age, accident, etc., and to maintain proper health and education services, the nation must first collectively earn the wealth with which to meet the financial cost of those social services. As the Chancellor reminded us in his Budget speech, the existing wealth is not enough. We must earn fresh wealth to carry the strain, and fresh wealth can only come out of profits, not out of losses. Does the right hon. Gentleman and any hon. Member opposite think that if all the United States industries had been nationalised and were all running at a loss, any Marshall aid, by which alone we breathe, would be available today?
The second result of failure to earn and save enough is that we shall be unable to fulfil our obligations as a world Power. If we fail in that because we are not financially or economically strong enough, I believe that the chances of avoiding a third world war are remote. The question which the country has shortly to ask itself is whether we can remain a world Power for any length of time so long as we are governed by men with small minds.