Orders of the Day — Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 10th November 1952.

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Photo of Mr Herbert Morrison Mr Herbert Morrison , Lewisham South 12:00 am, 10th November 1952

I beg to move, at the end of the Question, to add: But humbly regret that while the Gracious Speech demonstrates the determination of the Government to introduce confusion into basic industries which were in process of being integrated and developed in the nation's interest, it discloses no positive and effective proposals for dealing with the serious economic position of the country which is evidenced by the decline in production and exports, growing unemployment and short-time working and increased cost of living; and this House has no confidence in Your Majesty's present advisers whose policies threaten a return to the social conditions of the inter-war years. The debate starting today and continuing tomorrow will deal largely with economic matters concerning the economic Ministers and, above all, the Chancellor of the Exchequer who, so to speak, is the co-ordinating Minister between the various economic Departmental Ministers. I am sure that the whole House understands the absence of the Chancellor of the Exchequer and we should all like to express our sympathy with him on the death of his very distinguished father. No doubt the Chancellor will be here tomorrow. We shall be pleased to see him.

Our primary anxiety and complaint about the Gracious Speech is that it shows no signs, as far as we can see and subject to what Ministers may say, of the Government having a coherent, progressive, economic policy. I think that there is one thing above all that the British people desire irrespective of party—I am talking about the masses of the people—and that is the desire to get a decent living with reasonable security and without the fear of slumps, mass unemployment and destitution.

But they want that not merely for today and tomorrow: they want to feel that that is a permanent condition of our social and economic life. I do not think that the people are too much concerned as to the particular fashion or means by which that is to be achieved. They have no preconceived doctrinal or dogmatic ideas in their mind, but they have an ambition to be able to get a decent living, in return for which they are willing to work. They want that to be a condition of affairs which has a reasonable stability and permanence about it.

I submit that it is certainly our business today to engage in the perfectly proper and legitimate clash of party opinions and political differences. That is what the House of Commons is for. If we were all to agree and merely to echo each other, this would be a dull place, and the nation and everybody else would be disappointed. So it is proper and right that the clashes of principle and opinion which exist between the two great parties in the State should find expression. Nevertheless, I venture to add that I think that there is an equal duty to seek to examine the facts as fairly as we can and for all of us in all parts of the House to try to urge constructive and objective policies which are calculated to help our country in achieving economic progress and security.

Therefore, my own speech will be, I hope, largely devoted to that, though it will have something to say—a fair amount to say—as it ought, about the shortcomings, as we see them, of the Government. But when the party battle is done—and the party battle must take place—it is nevertheless the duty of all of us to remember that the collective well-being of our country comes first, that it ought to be the first consideration in our minds.

Two things are expected by the nation from Her Majesty's Government. The first is that they should have a coherent policy to deal with the short-term situation, and the second is that they should have an ambitious and well-conceived plan to build up the economic resources of our country. Looking at the short-run problem, or problems, with which we are faced, let me say straight away that we welcome the improvement in the gold reserve position, though I am sure that everybody will agree that there is room for further improvement.

I always thought when we were in office that there was a tendency on the part of the Opposition at that time rather to get a kick out of the misfortunes of the country; that if there were troubles and if economic difficulties arose there was an inclination to cheer and to jeer and to laugh about it, probably on the basis, "Well, that will hurt the Labour Government and do the Tories a bit of good." I do not take that view, and my hon. Friends do not take that view. If the country is in trouble, we are sorry about it, and if the country is doing a bit better in some respects, we are glad about it. That, I think, is the duty of everybody irrespective of party.

Therefore, I am glad that there has been some improvement in the gold reserve position. It is, I think, due to five main influences. First, there is some change in the terms of trade which has benefited us to the tune of about £200 million this year; that is to say, the average level of import prices has fallen somewhat, and that has helped us, together with some increase in export prices. I do not think that the Government would claim particular direct executive credit for that, it is a change in world conditions, just as in earlier years we suffered from conditions the other way round, partly as a consequence of the outbreak of hostilities in Korea.

Secondly, there is some recovery in invisibles. Thirdly, United States aid is some help to us. Fourthly, our exports to the non-sterling area, and especially to the dollar area, have not fallen as much as they have in other areas; but there are falls in exports that ought to give us pause and must give us some cause for anxiety.

Fifthly, there have been import cuts made by administrative action, through economic controls by the Government. That has also assisted in this situation. And despite the fact that there was from time to time great denunciation of economic controls and planning as a philosophy and instrument of Government, I think that the present Ministers quickly learned when they came into office to say, "Thank goodness the Labour Government left us the power of economic control and some degree of economic planning."

All these import cuts are presumably the result of direct Government action. Nevertheless, there is a limit to the amount of that medicine which the nation can take. It has resulted in some diminution of the variety of food available to the people, despite promises at the election that there should be a greater variety of food. Imports cannot be cut beyond a certain point. It must not be assumed that the remedy of cutting imports by order is one which can be carried on without limit, partly because there is a limit and partly because it might have a bad effect on the health of the people and on the economy of the nation.

As to United States aid, this is always a matter of some uncertainty. It has been a matter of uncertainty under the existing United States Administration and it will be a matter of uncertainty under the new United States Administration. Therefore, no British Government can assume that the level of United States aid at any point is a certainty as to continuance in the future. We must keep that in mind.

Moreover, we cannot assume a continuance of the improvement of the terms of trade. Therefore, I would warn the House and would warn Ministers that it is never wise to engage in excessive rejoicing about short-period improvement. It is liable to be dangerous. We had some periods of improvement during our term of office and some periods when things were not so good. The tendency, of course, was for us to rejoice about the short periods of improvement and for the Opposition perhaps to rejoice a little about the other things.

The truth is that if we are talking serious economic business, we had better not rejoice unduly about short periods of improvement. We had better assume, for it is wise and sensible to do so, that it may not last, and therefore we should make every conceivable preparation for that possibility and build up against less fortunate times. A small change in world conditions could lead to a worsening in the terms of trade, or the conditions of our export trade could bring about a new balance of payment crisis quite easily, a crisis which might come out of the blue. I am sorry to say, and I think everybody will agree with me, that we are not free from these troubles yet. I wish we were, and I am sure that we all wish that we were.

There is a new difficulty about exports. We took the view, as a Labour Government, that if our economy was to be dealt with in the circumstances which were obtaining, we had to economise in imports. We had also to restrain the home demand so that more could go for export. This was not an easy operation. It meant that we had to say to the British public, "We are going to stop deliberately the import of things which you badly want. You cannot have them." We had to say further, "We are going to export things that you would very much like to have, but which we must export for economic reasons." And we explained those reasons.

This was not an easy thing to do. It was open to considerable political misrepresentation. In a way we had to hurt our own people for the sake of their general and ultimate good. That is the test of Government; it is the test of statesmanship. So long as it is explained, it is right to hurt people for the time being in order to protect and preserve their ultimate good.

This problem of exports and imports is really a very simple one. We have to export for the sake of employment and for other reasons—certainly in order to develop our standard of employment. [An HON. MEMBER: "To live."] An hon. Member interrupted to say that we must export to live. We must export to live, because we have to import. We have to import in part to fill our stomachs, because we are not yet growing enough food to feed ourselves. But we also need to import materials to go into the stomachs of our factories, as it were. Without those imports we cannot go on, and economically cannot stand up. But if we are to import we must pay for our imports by exports, because the foreigners need to be paid. Those really are the reasons why a prosperous and developing export trade is absolutely vital to our well-being.

There are some signs that it may be difficult to export. The non-dollar countries are tending, again by administrative action I think, to cut their own imports from us. We have had that experience with Australia and in other countries outside the Commonwealth. Moreover, we must contemplate increased competition in the export field—developing competition from countries that are improving their economic and productive efficiency. Certainly we must look forward to an increasingly competitive condition of affairs in the export trade.

Under the Labour Government we were on the whole increasing our exports, but it is the case today that, as a whole, exports are not increasing. They are tending at the best to stand still. Some exports are going down. Unless we fight very very hard for our export markets, which means an increasing efficiency and productivity in our home industrial production, we may well find our exports going down to disastrous levels.

So again it is not merely a matter of the exports diminishing. It is a matter that, without the exports, we cannot import, and without the imports we cannot live as adequately as we ought to do. There are no signs at the moment of a surplus essential to our safety and one which will enable us to play our part in the development of the backward regions of the world. We cannot play that part adequately unless we have a surplus in the balance of trade which enables us to make the necessary investments so as to carry through the necessary assistance.

I come now to production. Here again, there are signs which give us some cause for anxiety, if not for alarm. In 1949 production went up by 6 per cent. on 1948. In 1950 production went up by 7½ per cent. on 1949. In 1951—a politically mixed year—it was up by 3 per cent. on 1950, noticeably not so good. [Interruption.] I am only mentioning that it was a mixture politically in order to be fair, because we were in office during a material part of the year, though not the whole year. Hon. Members opposite should not be so niggling, because I am only mentioning the point in order to be fair to hon. Members opposite.

In 1952, however, we are 3 per cent. down on the first nine months of 1951, and that is a positive turn to the bad. We have a relative decline in exports. We have a fall in textile production, and a steel shortage which has contributed to this rather serious state of affairs. Therefore, it is the case that production was going up; the increase then diminished in rate, and this year it has reached a point of positive decrease. What will happen in the immediate months ahead, I do not know. Production may conceivably improve or it may go up and down, but at any rate in none of these figures is there any ground for complacency. Our production needs to go up by more dramatic figures than any of them, and certainly any positive decline in production is an exceedingly serious state of affairs.

I would point out that the Government's own Economic Survey, at page 45, paragraph 115, states: The Government hopes that the increase in production, which was halted early last year, will be resumed in 1952, and that as a result national output in the financial year 1952–53 will be about £250 million greater than in 1951–52 at the prices ruling in the latter year—not a very large increase to set against the additional claims on resources. There was what the Government describe as a relatively modest increase in production. But the fact for the first nine months is an actual and positive decrease in production. That is a serious state of affairs. It is a regrettable development, and moreover it must be remembered that it is a development which follows the Chancellor's Budget which he himself described as a Budget calculated with a main eye to improving production. It has not done it, and if anything, the figures indicate the reverse consequence.

We ourselves thought that it was really a most unwise policy to cut the food subsidies, which was bound to create a noticeable increase in the cost of food—an increase which people notice very much, especially the housewives, and which was bound to stimulate demands on the part of the trade unions for wages increases, for which they really could not be blamed. They had tried to be restrained. They had promised the Government that they would not treat them in any way worse than they had the Labour Government because they were a different Government, and I do not think they have.

But if the cost of food noticeably increases, and especially if it noticeably increases as a result of direct Government action, it is inevitable that there is pressure on the wives of working men, perhaps first of all, then from the working men on their trade union branches, and then on their trade union leaders. They cannot help it. The thing is bound to happen. When, as a consequence, we get disturbing wages movements we further upset the whole economic apple-cart.

We did not accept the view that the Budget was calculated to improve production. The Chancellor, the Government and their supporters said that it would. The facts have indicated that we were right and that the Chancellor was wrong. Whatever view is taken about present production prospects, it is not yet certain that we shall have the pick-up in production which the Government have counted on. Indeed, we have had the reverse in the first nine months. The Government plans are, to put it modestly, running seriously behind their schedule, and that is very bad and very serious for the general economic well-being of the country.

This, of course, is a Government which does not believe in economic planning as a matter of principle. I am sure they will admit this; if they do not, I hope they will say so. Let the Minister of Labour tell me if I am wrong. Of course, I admit that he is a little bit above the party battle. In fact, when he goes home at night he probably wonders why he is a Minister at all. I am sure we understand that and sympathise with him. But I wish he would tell us whether the Government believe in economic planning and controls or not.

My own assumption, in the absence of anything to the contrary, is that the Government do not believe in them, and that they are contrary to their philosophy. They do not like them, and in so far as they are using these things it is only because they cannot help it, and it is with a sense of regret and apology that they do so. Therefore, as soon as ever they can give up economic planning and controls, as soon as ever they can revert to a state of affairs where things are allowed to rip, they will do so. That is, in part, the justification of that part of our Amendment in which we say that there is cause for apprehension that we may go back to the chaotic conditions of the 1920's and 1930's.

The Government do not believe in planning, and in so far as they are engaging in it, it is a concession for the time being. There are rumours of the intention of the Government and the Bank of England to make the £ convertible. I wish the Minister or perhaps the Chancellor tomorrow could consider whether either of them could give us an assurance that it is not the intention of the Government to make the £ convertible, or, if they do intend to make the £ convertible, say why they propose to do so, and how.

Our view is that making the £ convertible would involve going back to the inter-war years, namely, balancing our trade at a lower level of economic activity than before, for then we could only balance our trade if the Government were to pursue deflationary policies at home. Indeed, the choice for the Government is between full employment, in which case it must accept economic planning and controls, or convertibility, in which case we must expect the consequences of the deflationary policies as in the interwar years. The choice is between the use of physical controls over imports and their replacement by a decrease in purchasing power.

The other proposition is that there should be cuts in expenditure, marching with convertibility—and the consequences of that are reaction and a return to the conditions of the inter-war years. It is interesting to note that at the Scarborough Conference of the Conservative Party a decision was reached which was officially supported by the platform and which meant that the wild men of the Conservative Party had thrown over what was said by the Chancellor of the Exchequer in his speech at that Conference. A resolution was passed which said: That in the opinion of this Conference public expenditure has increased, is increasing and ought to be drastically diminished, —language which, I have the impression, was borrowed from the Liberals of earlier years in another connection. This resolution was passed with acclamation and with the approval of the platform—[HON. MEMBERS: "Hear, hear."] Its mention its being received with acclamation here, and that confirms the view that there is great back-bench pressure on the Chancellor of the Exchequer to live up to that resolution. But before that resolution was passed the Chancellor, at the Scarborough Conference, said something else. He said: I am not in favour of a Geddes Axe … if you have got to have big economies you can only get them by big changes of policy. But the hon. Member for Solihull (Mr. M. Lindsay) said, at the Conference—