The right hon. Gentleman is saying exactly what I attributed to him. He is seeking to introduce that sort of element into this discussion, and that is, I suggest, no more pertinent to this than the benevolence of his right hon. Friends to stockbrokers during the previous Administration. The issue between us is whether it is right to do as the late Government did—from the highest of principles, I am sure—and adhere to a cheap money policy regardless of circumstances, or whether to use the monetary instrument together with and in co-operation with others in order to achieve one's financial and economic ends.
I know that cheap money has a kind of theological significance for a certain number of right hon. and hon. Gentlemen opposite. It is more a matter of faith, faith in the Shavian sense of believing in what one knows is not true rather than relying on reason. By that very fact hon. Gentlemen opposite deprived their last Government, as they indicate they would like to deprive a future Socialist Government, of the capacity to use this instrument by insisting that, whether the economy be deflated or inflated, there must be cheap money in all circumstances.
The hon. Gentleman should study the policy document of his own party which has just been issued. There, after a very clear statement to which no one could take exception, to the effect that both budgetary surplus and monetary policy are instruments for affecting the economy in the direction in which one wishes it to go, the document rejects the monetary instrument and then uses the remarkable words that Labour's Budgets were planned to keep down spending so that enough investment could take place without inflation and that steps were taken to ensure that the right amount of investment was not held up either by lack of credit from the banks or by interest rates being too high.
I am sure that Labour's Budgets were planned to keep down spending and inflation. The only thing is that they did not check inflation. The reason why I am suggesting that, with the best will in the world, they failed to check inflation was because they fought inflation with one hand behind their back, with one instrument, the monetary instrument, voluntarily not used. That is the reason why all the devotion, skill and thought that went into successive financial proposals by successive Labour Chancellors of the Exchequer failed to check the general inflationary tendency. They were righting inflation with one hand behind their back, and inflation won.
It is clear that we have here a difference between us which as I said—I said it in no offensive sense—amounts almost to a difference in doctrine or faith. There is a refusal by right hon. Gentlemen opposite to use the monetary instrument, in whatever circumstances it may be. We, on the other hand, concede that this is a flexible instrument and that there are deflationary circumstances in which cheap money is of great advantage and inflationary circumstances when dearer money is of great advantage. But hon. Members opposite stick to cheap money in all circumstances. They resemble the gentleman who went for a walk without a mackintosh and got caught in the rain, and then walked about in a mackintosh through a long heat wave so that he should not be caught again, to the detriment of his health and comfort.
I am content to leave the question to be judged by the results. It is a fact that my right hon. Friend's policy, of which this is an important part, has broadly achieved the purpose for which it was conceived by, first of all, rescuing our economy from the grave balance of payments crisis which we found, and, as part and parcel of that process, by checking the steady inflationary process which, broadly, had continued since the war. It is on those facts that I suggest that this policy should be judged.
I do not wish to weary the Committee with figures with which most hon. Members are probably familiar, but it is a fact that, whereas the cost of living indices during the term of office of the late Administration rose in all by 40 per cent., in the 14 months which have elapsed since the Bank rate was raised to 4 per cent., the increase has been only 4 per cent., and hon. Members on both sides of the Committee will be glad to observe that the latest figure shows a decrease of one point.
Surely it must occur to hon. Gentlemen opposite that this is not merely coincidence. The fact that our overseas balance has been so immensely improved and the inflationary process so conspicuously checked, despite their most devoted efforts without this instrument to do the same, must convince them that this instrument is in contemporary circumstances part and parcel of the sensible management of the economy. Once one concedes that argument, most hon. Members must agree with the budgetary element here as money very well spent. It is money spent on getting the whole economy of this nation into better trim and on dealing with the most practical and urgent problems that face the nation. That surely is the justification.
But if one looks at it even from the narrow budgetary point of view, which it is quite proper to do during the Committee stage of the Finance Bill, one has at once to admit that the narrow budgetary consequences are not to be limited or confined to the effects of the Clause. Had this provision and this policy not succeeded in checking the inflationary pressures in this country, it is clear that other parts of my right hon. Friend's financial provisions would, as a result of rising prices, have had to be much ampler than is, in fact, necessary. The provision in this Clause clearly saves expenditure in others.
It is equally a fact—I agree with the right hon. Member for Dundee, West— that the alternative to the use of monetary policy in this way is a much bigger Budget surplus. We can argue—and it is an interesting intellectual argument—whether a larger Budget surplus and no use of the monetary instrument is better than a smaller Budget surplus and the use of the monetary instrument. But it only obscures that argument to say that the method which we prefer, and which is embodied in this Bill, is, from the budgetary point of view, much more expensive, because if by putting this provision in this Clause we diminish the necessity for so large a budget surplus, we have to that extent relieved the economy of the taxation to be imposed in order to secure the surplus.
On that score, therefore, the budgetary point of view as I put it in support of the argument for this provision is very strong.