Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 27th October 1955.

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Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth 12:00 am, 27th October 1955

I rise to reply to the speech which we have just heard from the right hon. Member for Leeds, South (Mr. Gaitskell), a speech which was delivered with all his usual vigour and force, and I want to deal straight away with one or two of the points he raised. It seemed to me that at the outset of his speech the right hon. Gentleman was criticising my right hon. Friend for the introduction of the Budget. He asked how the position had changed. He claimed that there had to be some dramatic change in circumstances to justify a Budget and he instanced, rather bravely, the situation that arose in 1947. That is the very error into which the right hon. Gentleman has always fallen. Had he had the courage to introduce a Budget in the autumn of 1951, millions of pounds of foreign exchange would have been saved to this country.

The right hon. Gentleman based a good deal of his argument on the question of what was said or not said at the time of last April's Budget. Indeed, anybody who listened to the right hon. Gentleman today might well have imagined that he had voted against taking 6d. off Income Tax and fought the Election on a policy of austere retrenchment and conservative finance.

The right hon. Gentleman is, as we all know, an honourable man and he would, I am sure, be the last person to wish any such false impression to creep out to the public. For my part, I intend in the course of my remarks to recall what the right hon. Gentleman himself said at that time and the policies which he himself was pursuing. I understand that he has an engagement outside the House which makes it difficult for him to stay and listen to everything I have to say but I hope that he will stay as long as possible.

This debate would not be serving its proper purpose if the right hon. Gentleman and I were to occupy most of our speeches in discussing what was said six months ago. I shall refer to it, but it is not the main tenor of what I wish to say. Let me start, at any rate, with the situation as we see it today, what is good in that situation—for there is much good in it—and what are the dangers in that situation, because we all agree that there are some dangers. Then, I propose to meet some of the criticisms which the right hon. Gentleman made and to conclude by some reference to the more controversial aspects of his speech.

Let me, then, start with the situation of today. I think that the question that the man in the street would ask at this moment is why, when everybody is so well off today, there is a problem at all. That is the question that most members of the public would ask. How could anyone describe the booming prosperity about us as in any sense of the term a crisis in our affairs? Whatever else is said about it, it seems to me that that is the question to start with.

Let me take, first, what is good in the existing situation. I shall start with consumption. As my right hon. Friend the Chancellor of the Exchequer forecast last April, consumption has risen more slowly in 1955 than in 1954 but the gains for the ordinary man and woman are very considerable. Since 1952 there has been a rise of 7½ per cent. in the volume of consumption per head. Household goods are up 26 per cent., food is up 6 per cent., clothing 5½ per cent. and motoring nearly 50 per cent. Those are all gains and they represent a measurable advance in the standard of life of people in this country.

Let me take next employment. Today, there are one quarter of a million more jobs than there are people to fill them. The term "over-full employment" is politically dangerous, but of some areas, areas where the pressure of employment is such that there is a real and difficult shortage of skilled labour which is hampering essential production, one could say today that in those areas over-full employment certainly exists.

When we look at the problems which are created by an employment situation of that kind, we might all do well to remember for a moment the problems that confronted a previous generation. If these post-war years have given us the problem of full employment coupled with a steady tendency to inflation, in the prewar years there was a general absence of inflation accompanied by a continuous large-scale unemployment figure. [An HON. MEMBER: "Whose fault was that?"] I do not think that any of us would wish to exchange the problems of today for the problems of 25 or 30 years ago.

Thirdly, incomes. Since 1938, the real value—that is, in terms of purchasing power—of dividends has sunk by one-third, while—[Interruption.] I am not considering what ought or ought not to have happened; I am giving the facts of the situation. Since 1938, the real value of dividends has sunk by one-third, while the purchasing power of wages and salaries has risen by one-third. Whatever view one takes about that, it does represent a very real transfer, not of wealth, but of purchasing power.

Since 1946, more money has been paid out both in dividends and in wages. Dividends are up by £280 million, wages are up by £2,900 million, and these gains in money incomes represent the measure whereby people, in all walks of life, seek to give themselves a better standard of life. They are pleasant things but, clearly, they lead to increased pressures of demand.

Lastly, as to investment. A very large investment has taken place since the war, over a very wide field and under both Governments. There exist today more than two million more new houses, and those new houses make a deal of difference in the human happiness of a very large number of people. In houses, in hospitals and in schools there has been a great and welcome accretion of social capital. It is plain, as the right hon. Gentleman knows, that at this moment a very substantial upsurge of manufacturing industry is taking place. Indeed, between the first quarter of 1954 and the first quarter of 1955, there has been an increase of over 60 per cent. in the area of industrial building that has been started. The same sort of picture is shown by the orders upon the engineering industry, in the form of plant and machinery.

In my judgment, all those things are good. They are certainly not matters for condemnation. It seems to me that the problem which we have to face today is to examine by what margin they exceed now—and, what is equally important, by what margin they might exceed in future—the national resources which we can make available for them.

The first important thing to recognise is that that margin is, perhaps, narrower than many people appear to realise. The balance between trying to spend too much and tipping over into inflation and balance of payments difficulties, and trying to spend too little and tipping over into deflation and declining investment and unemployment, is a very fine one and it alters very quickly. Much hangs upon judging it aright and, above all, in having the courage to revise one's judgment as time and circumstances change.

The resources which this country has to dispose to meet demands of this nature are, of course, very large. We are a great trading and manufacturing country. We have a gross domestic product of £16,000 million, increasing in real terms by something between 3 and 4 per cent. a year. That is one measure of the wealth that we have and the standard of living we can command. But it is not the only measure. We depend for our existence not simply on what we make here, but on trade overseas to the tune of a turnover of £6,000 million a year, and it is in the nature of that situation that, dependent as we are to so large a measure on external trade, quite small variations in the trading pattern can have a phenomenal effect on our situation.

In recent months we have imported what are really quite marginal amounts of those basic materials which we normally expect to produce for ourselves, in particular, as the right hon. Gentleman the Member for Leeds, South knows, coal and steel. Coal and steel alone have cost us more than £100 million on our balance of payments and, as the "Financial Times" pointed out in a leader on 21st October, while these figures are small indeed relative to our total trade or total production, yet a few figures of this kind can be decisive in determining whether we will build up our reserves, or start running them down at what might become, if left unattended, a dangerous rate. So much for the size of the problem. It is certainly within our compass to achieve those margins.