I am much obliged to the right hon. Member, and on another occasion I should be glad to respond to his invitation. I have a certain amount more to say, and I think it would be desirable now for me to pass to the next part of my speech.
I want to come to grips with the most important point which the right hon. Member has made. I refer to the question which he asked yesterday, as to whether my right hon. Friend was
satisfied that the monetary policy in which he believes really does have a sufficiently sharp enough effect upon consumption generally, or whether, by this means, he is not cutting back investment very much too hard."—[OFFICIAL REPORT, 25th July, 1955; Vol. 544, c. 830.]
I want to say a word on the subject of investment because that is extremely important. There is no dispute in the House about the enormous importance of a high rate of investment in productive industry if we are to maintain our position as a trading nation in a competitive world.
It is really not fair for hon. Members opposite, like the hon. Member for Islington, North (Mr. Fienburgh)—whose speech I much enjoyed—to blame us because, as he said, the figures for investment were so unsatisfactory during the first two or three years of Conservative Government. I am sure the hon. Member knows perfectly well that his right hon. Friend the Member for Leeds, South suspended the initial allowances in the 1951 Budget. That suspension only took effect in the following financial year, 1952–53. Hon. Members opposite must not underrate the effect of the policies of their own Government.
When we came to power in 1951, as hon. Members will recall, we found a state of affairs in which our metal goods industries were very severely overloaded. We simply had not all the resources we needed for exports, defence and home investment. It was therefore quite impossible for my right hon. Friend, in the Budget of 1952, to take special steps to encourage investment in productive industry. We also had an extremely serious balance of payments crisis at that time.
In the next year, 1953, my right hon. Friend restored the initial allowances and reduced Income Tax, but that only had its full effect in the following financial year, 1954–55. I think it fair to remember, also, that the Excess Profits Levy was still operative during the financial year 1953–54. So it is not surprising and not in any way discreditable to this Government that it has only been during the last year that investment in productive industry has gone up so encouragingly.
My right hon. Friend gave the figures this afternoon. The expenditure by private manufacturing industry on new factory building rose by approximately £25 million between 1953 and 1954, an increase of about 25 per cent. There is every indication that that rise is still going on. As I say, it is of the highest importance that we should have a high rate of investment.
The point was made to me the other day, and there is much in it, that there are certain real advantages in some large companies planning important items of investment at a time when labour is short because that encourages them to put the most modern up-to-date machinery in their factories. I think there are real advantages in that.
Having said all that—and none of my hon. Friends will wish to deny a word of it—the fact remains, however, that it is a great mistake, in times of boom, to try to do everything at once. We simply cannot plan our rate of industrial expansion regardless of our external economic position. The Government, from the moment we took office, have always realised the intimate connection between our economic policy at home and balance of payments abroad. There can be no question about that at all. If we overstrain the economy by trying to do too much at one time, the inevitable result must be that once again we shall get into balance of payments difficulties.