Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 22nd April 1955.

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Photo of Mr Harold Wilson Mr Harold Wilson , Huyton 12:00 am, 22nd April 1955

I think the Chancellor understands this point fully, but I wish that before the Minister of Supply had left the Treasury the Chancellor had given him a little simple instruction on the point, because, obviously, he went badly wrong on it yesterday.

Basically, it is not short-term movements in finance that measure the economic position of the country: it is the movements in exports and imports. I think the Chancellor will agree with that, and would agree also that the figures for January, February and March have been very sombre indeed. In the first quarter of this year, our average exports were £247 million, against average imports of £335½ million. We know that those figures cannot be compared directly because of the f.o.b.-c.i.f. complication, but to compare like with like and comparing 1955 with 1954, we find on the Board of Trade figures that exports were up by 10 per cent. over the corresponding period in 1954 but that imports were up by 23 per cent. over the same period of 1954.

Comparing like with like, the gap between them has worsened by about £35 to £40 million a month—a worsening in the situation compared with 1954, which, we all know, was a bad year. That means that if this continues there will be a worsening in our balance of payments on export-import account of about £400 million a year. Figures of that kind cannot justify the complacency that we have had from the Chancellor this week.

Why do we have these serious trade figures? To illustrate what is happening in export markets, I should like to refer simply to two industries, one of them an old-established industry and the other one which has increased a great deal since the war: cotton and engineering. In the case of cotton, as we have often had cause to remind the House, exports of cotton piece goods last year were the lowest, apart from the wartime years, for any time since 1840, when the figures were first collated. We all know the reasons—Japanese competition, the effect of Purchase Tax, and serious fears about raw material prices.

It is very significant that Lancashire's export trade is being paralysed by these fears about raw material prices when we were assured a year ago that the establishment of the Liverpool Cotton Futures Market would deal with all these problems. In fact, all that that market has done is to cause the country to break off its long-term contracts with Commonwealth countries for cotton, so that even last year, when some of the contracts were still running, the percentage of cotton coming to this country from the Commonwealth fell from 34·9 to 26·7 per cent., while the percentage coming from the dollar area rose from 28·3 to 34·6 per cent.

In Lancashire, the Liverpool Market now is nothing more than a bad joke. It is being by-passed by the mills, who are buying direct from America. It has led to a fall in raw cotton stocks in this country to the lowest figure, during war or peace alike, since the American Civil War. This means that if there is any kind of emergency—I refer not only to international affairs; one might think of a dock strike, for example—the Lancashire mills would be stopped because of of the improvidence and doctrinaire actions of the Government in setting up the Liverpool Cotton Futures Market.

In the case of engineering, which since the war has been our largest export industry and which has borne a very high degree of responsibility for the increased exports in the immediate post-war years, we see from the Economic Survey what is happening. Table 27 in the Economic Survey, which deals with the distribution of supplies of metal goods, is one of the most significant commentaries on the economic policies of the Government.

The Government took over a thriving industry. In 1951, production was £3,720 million. In 1954, largely as a result of investments which had been made under the Labour Government and the new factory buildings, production had increased to £4,120 million, an increase of £490 million in our engineering production. One would have thought that the greater part of this £490 million should have gone to two things, to exports and to investment. In fact, the amount that went to investment increased by only £25 million, an increase of 2 per cent. That is to say, our production of engineering goods for investment in British industry increased by only 2 per cent. between 1951 and 1954. The amount that went to export did not rise at all. It actually fell by £30 million.

Where did the increase go? First, of course, it went to defence, which accounted for an increase of £190 million. Then there was an increase of £135 million in cars for the home market. Then there was an increase of £80 million on consumer goods for the home market. There we have the test of how the Government carried out their responsibilities in relation to the country's biggest industry from the export and import investment point of view. We have seen a negligible increase in investment and a fall in exports, and the industry has been devoted more and more to the production of consumer goods and cars for the home market.

Yesterday, the Minister of Supply said how pleased he was to see the increase in exports of cars abroad. We are all delighted about it. It brings back to the minds of some of us on this side the experience of the late Sir Stafford Cripps, when he called upon the motor vehicle industry to push up its exports to only 50 per cent. of its total production. That was a moderate demand, but Sir Stafford Cripps was howled down by the manufacturers at their annual beanfeast at the Grosvenor House Hotel, and their action in howling him down was endorsed by the previous Prime Minister, the right hon. Member for Woodford (Sir Winston Churchill), in a speech which he made from the Dispatch Box a few weeks later. In fact, it was because of the controls and the planning which we had that the Minister of Supply yesterday was able to rejoice in the increase of car exports.

Another big development in our export markets which was due to the action of my right hon. Friend was the development of exports of refined petroleum. We put a great volume of resources, which we would dearly have loved to put in the housing programme or elsewhere, into developing an oil refining industry in this country. That saved us hundreds of millions of dollars that we were having to pay out year by year for imports and, at the same time, it created a vast export industry which is now returning, in the Chancellor's financial returns, very large export figures.

Indeed, as soon as the Chancellor gets out of the election period, and is able to return to private life or private business, I think that in his more sober moments he will be the first to confess—at any rate to himself, if he does not do it publicly—that a considerable proportion of the exports that are being recorded today are possible only because of the action we took in developing the export trade and in building export factories in the old Development Areas, where before the war there was nothing for the workers except unemployment, and because of what we did in expanding the basic industries. We did those things in very difficult conditions. The Government now in office, in easier conditions, have been able to reap the harvest from them.

Therefore, if nothing is to happen in the export trades, where are the Government hoping to obtain increased earnings? They talk about invisible earnings, but another serious thing which is shown in the Government's White Papers is the reduction in invisible earnings over the last year or so. United Kingdom invisible earnings in relation to the rest of the world in 1951 were £490 million and, in 1954, £471 million, so we are now getting less on invisible account under this Government than we had in 1951 under the Labour Government. Why is that? When these commodity markets were reopened for cotton, metals, and all the rest, we heard a great deal about their going to increase our invisible earnings, but those earnings have, in fact, fallen under the present Government and the removal of controls over the commodity markets has made us more vulnerable.

If we turn to investment, my right hon. Friend the Member for Leeds, South gave figures the other day of total investments and estimates which were produced before the Royal Statistical Society. Let us look at them in more detail. I am using here figures of net investment after depreciation, with all figures at constant 1948 prices. One finds that whereas, in agriculture, there was a net investment of £12 million a year in the last three years of the Labour Government, there was, under the present Government, in 1953, a net disinvestment of £5 million a year in agriculture. In the case of coal, gas, electricity and water, the net investment in our last three years was £89 million whereas, under the present Government, the net investment was £101 million. In other words, the one thing in respect of which net investment has risen is nationalised industry.

The figure for manufacturing and distribution under the Labour Government was £247 million but under the Conservative Government the figure in 1953 was only £191 million, and we know that a great deal of the investment which has been made under the present Government has been of an inessential character, on factories to make Coco-cola and that kind of thing. Factories put up under the Labour Government, under a strict system of licensing control, were, in almost every case, essential factories, making a real contribution to our balance of payments position.

When we consider the distribution of manpower, we find that, last year, agricultural manpower fell by 21,000. There was no improvement in mining, but distribution was up by 77,000. The Government, of course, are very pleased that those employed in national government are reduced in number by 14,000. We all remember the speeches from the benches opposite on how essential it was to release the bureaucrats from Government offices into productive work. Fourteen thousand of these bureaucrats were released, but the number engaged in professional, financial and miscellaneous services rose last year by 46,000. They are not engaged in production. In some cases they are engaged by reputable bodies like the Stock Exchange which, however, is not engaged in production. They are also engaged in the commodity markets, price rings, trade associations, and all the rest. Therefore, that is another Tory pledge which has failed to come off.

The Chancellor is making a great deal of the fact that there has been increased consumption. How much has consumption increased under what the "Economist" has called "batsman's wicket conditions"? If we exclude cars and private motoring, there has been an increase of 5 per cent. in consumption over the past three years. The biggest proportion of increase in consumption has been in cars and private motoring. There is not very much to write home about there. The Financial Secretary was giving some highly selective examples of food figures the other day. We find from the Government figures, however, that the consumption of animal protein was still less in 1954 than it was in 1950 and that the consumption of fats has only just now recovered back to the 1950 level and gone ahead a little.

The consumption of dairy products, after being below the 1950 level right through the lifetime of the present Government, last year managed at last to pass that level. The consumption of eggs and egg products and fresh vegetables is down. Therefore, after all the propaganda, the figures are nothing like the figures which the Government had suggested. I can only use Government figures, and if hon. Members who appear to be amused can produce better figures, we shall be very glad to see them.

The greater part of the increased expenditure on food has been swallowed up in higher prices. Last December my right hon. Friend the Member for Leeds, South mentioned figures which the Government had provided showing how much of a family's increased expenditure on food must be attributed to higher prices. Between 1951 and 1954 there was an increase of £823 million in the national family expenditure on food, according to Government figures, and of that expenditure £659 million represents increased prices and only £184 million increased quantities of food consumed. An average family of four spends 25s. a week more on food now than in 1951, but of that sum 19s. 6d. represents increased prices and only 5s. 6d. increased quantities. Against these increased prices, all the Chancellor has given has been this beggarly 2s. 6d. a week or 2s. a week in the case of a married couple receiving National Assistance.

This is the indictment of the Government and their economic policy. In 1951, they took over an economic and industrial system which under Labour planning had recovered from war and pre-war neglect in a manner unparalleled in Europe. The Chancellor cannot deny that he has boasted about it abroad. They took over an industrial system geared for higher and higher exports, with our basic industries expanded in most cases to a level far greater than pre-war. The financial crisis with which they had to deal—serious as it was—was not produced by any policy emanating from this country. It began in the commodity markets of the world, especially in the United States, and ended there without any help or intervention by the Chancellor. For three years since then the Government have had easy economic conditions. Terms of trade have been worth £600 million a year to the Chancellor. Investment in industry has been ready to yield greater and greater production.

Yet, against this favourable background, what has the Chancellor done? He has let the position drift while his Government have sought to give handouts to brewers, landlords, steel masters, and all their other friends. Gold and dollar reserves are still below the 1951 level. Exports have increased by a lower proportion than has been the case in any other country in Europe. Half the world, in the East, is still cut off from our trade. Economic links with the Commonwealth have been seriously weakened as long-term contracts for Commonwealth goods have been ended to clear the ring for market speculators.