Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 20th February 1956.

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Photo of Mr Harold Wilson Mr Harold Wilson , Huyton 12:00 am, 20th February 1956

I beg move, to leave out from "House" to the end of the Question and to add instead thereof: recalling that the policies of the Government have held back our exports, swollen our imports, forced us into a balance of payments deficit, helped to reduce our reserves by a quarter and driven up our domestic price level, has no confidence in Her Majesty's Ministers or in the measures now proposed by them to overcome the economic crisis. As the Chancellor of the Exchequer said, those words are not original. They have been taken from his own verdict on what he has just called the "four good years" that he inherited from his predecessor. They are his own words used in this House last Friday.

The speech of the right hon. Gentleman has been a profoundly disappointing one. One would have expected him at so critical a time to have given the House a calm, sober appraisal of the economic problems which the country is facing and some attempt at any rate to justify the measures that he has introduced. Instead we got a mixture, the usual mixture, of some very slight arguments, which, I might say, could be put far better by the Economic Secretary, and, apart from that, some of the right hon. Gentleman's knock-about debating which I thought he would not have been using in his present capacity.

The right hon. Gentleman made an appeal to the Opposition. He said he hopes that, whatever we think about his policies, we shall do nothing to inhibit the success of what he is trying to achieve. I am prepared on behalf of my right hon. and hon. Friends to give him this assurance, that whatever we may think of the right hon. Gentleman, we shall not treat him as his party treated Sir Stafford Cripps. In his concluding words, the right hon. Gentleman appealed to the trade unions to rise above self-seeking and sectional interest. Those words sound nauseating to us coming from the mouth of a Government responsible for last April's Election Budget.

In the earlier part of his speech, the right hon. Gentleman attempted, rather slightly I thought, to justify his decisions about certain physical controls, import licensing and building licensing. I hope to deal with those arguments a little more fully in a few moments, but, since the right hon. Gentleman was kind enough to quote what he called my "bonfire of controls," perhaps I might be allowed to put him right on that. That was not my phrase. It was invented by the Press, rather naturally, because the announcement was made on 4th November. What I was doing was to get rid of a great number of war-time controls which were based on quotas, themselves going back to pre-war days, which prevented any expansion or elasticity in industry because many firms were restricted in their imports and production to some percentage of what they had been doing ten or more years earlier. But we maintained the key strategic controls which were necessary over the location of industry, price control, import control and building licences. I shall come to that again in a few moments' time.

With last Friday's statement we have now had three crisis statements and two Budget statements in less than a year, and Friday's statement was described by the Daily Telegraph as a semi-Budget. It is now less than four months since the autumn Budget. It is only a little over two months since the friendless Finance Bill left this House for another place.

In the few weeks that have elapsed since then a number of things have happened. We have had a change of Chancellor, for one thing. We hoped that this would mean a change in the disastrous policies of the last four years. So far all that we have had is a change in the metaphors and the clichés with which these problems are introduced.

The previous Chancellor favoured equestrian and horticultural metaphors; he went round "curbing the spirited horse," "pruning the roses," and pausing only to "blow off the froth" from time to time. The present Chancellor is on an entirely new tack. We congratulate him on his very homely metaphor of the electrician, blowing fuses and pulling out plugs. I see that last Friday in his own constituency it was "sprats to catch mackerels."

We hoped that the change in Chancellor would mean more than this. We hoped it would mean a change in policies. We hoped that a fresh mind, or a reasonably fresh mind—we would all want to give the right hon. Gentleman credit for that—would want to sweep away the flyblown, discredited notions of his predecessor, but it is clear that the Chancellor is not a free agent. Whatever conclusions the Chancellor may have reached, he was not free to carry them out. The Lord Privy Seal is watching over him. In fact, the Lord Privy Seal warned him in advance. Two weeks ago, addressing a gathering of advertising interests, that master of the elegant backhander, the Lord Privy Seal, had these words to say. I quote from the Daily Telegraph:We should support my successor as Chancellor, Mr. Macmillan, in any continuation of the policies I thought necessary to adopt. He has my support and encouragement, and so has the Government, in the attack on inflation. "In any continuation of the policies he thought necessary to adopt"; not "in any policies the Chancellor might think necessary." I suppose that if the Lord Privy Seal had been feeling really enthusiastic he would have called his right hon. Friend "the best Chancellor we have."

It is really a matter for sympathy. We can all see the cruel dilemma with which the Chancellor was faced. Either he had to continue the disastrous policies of his predecessor which had brought the country to the brink of financial ruin, or if he struck out on a bold new line he would immediately be repudiated by his most formidable colleague. Therefore, we see the financial policies of a great nation dictated by the personal relationships between the two right hon. Gentlemen. Right hon. and hon. Gentlemen opposite talk about dissension in the Labour Party. We are amateurs at it compared with the professionals of the Tory Front Bench when they get going.

However, I am sure that the House will agree that the crisis is far more important than the rivalries and jealousies of two right hon. Gentlemen opposite. The first and stark fact—and the Chancellor said very little about this—is the state of our gold and dollar reserves. Last year they fell by 642 million dollars. As the Chancellor said, in his own little private dig at his predecessor last Friday, they fell by a quarter in a single year. They have, in fact, fallen by 30 per cent. since June, 1954. They were standing at a little over 2,100 million dollars: 1,120 million less than when this Government took office—34 per cent. down. The whole House will agree that these reserves are dangerously low. The country could not stand another drain in 1956 of the intensity of last year—600 million. There comes a point—I do not wish to venture to suggest what it is, some say 1,500 million and some 1,600 million—when confidence factors can cause such a run on sterling that a Chancellor is forced into devaluation.

I want to repeat what I said to the right hon. Gentleman when he took over the Treasury. We on this side of the House are as determined as is the Chancellor to preserve the exchange value of sterling, because the exchange value of sterling is not a party asset, it is a national asset. It is in fact even more. Half the world trade, as we are frequently reminded, is conducted in sterling and so, as the Chancellor fairly said, our quarrel with him is not about objectives but in the aim of achieving them. The drain last year was an extremely serious one. It may not have struck the Chancellor that it was in fact in a single year worse than the average of the three years 1949–51. We lost more gold and dollar reserves last year than over the average for those three years, 1949–51.