Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 18 April 1956.

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Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland 12:00, 18 April 1956

I wish I could believe that the hon. Member for Langstone (Mr. Stevens) was right in his last remarks. All other speakers on this side of the Committee are trying to persuade the Government to plan a Socialist State. That is an uphill task. From my point of view, I am only anxious that they should do more planning for a free enterprise State. I agree with what was said by the hon. Member for Scarborough and Whitby (Mr. Spearman) that free enterprise involves a certain amount of planning.

The chosen instrument of the Government and of those who believe in the system of free enterprise is monetary control. But the Government seem to deny that they have any control. They try to pass the responsibility for inflation on to all sorts of other people. I must confess that I think their popular booklet on full employment is lamentable. It is no use saying that inflation falls like dew from Heaven or that it is everybody's fault, because as soon as one says that something is everybody's fault no one thinks it is his fault.

It is obvious, in the first place, that it is the Government's responsibility. There were perhaps signs in the Budget statement that the Chancellor was beginning to take a little more responsibility. But we have to examine the Budget statement with the whole economic policy of the Government not only to see how far it is going to achieve the negative task of stopping inflation at this moment but also whether there are any further signs of a positive and creative approach to our future problems. I am afraid that the discussions during the last two days and the statements made by the Government will mask the difficulties. I doubt whether people realise how serious they are. The serious matter is not only our position at home, but the fact that in a boom year we have failed entirely to build up reserves to support our trade—far less to create a surplus to invest in our Empire or in the free world in general.

The Chancellor yesterday said very little about the present effect of the credit squeeze, the high Bank Rate, and the policy of driving the local authorities into the market. He did mention that the dearer money policy had increased our liabilities to creditors at home and abroad. To my mind, the creditors abroad are extremely important, and I hope that the Government will tell us how much this liability to pay interest to overseas holders has increased and also how much of the money that has been attracted to London is what is called hot money and is likely to go out again if the Bank Rate is brought down.

The Chancellor mentioned a significant figure when he said that there is a decrease of £143 million on that part of the National Debt covered by Treasury bills. It is also true that as a result of this dear money policy, the rate of industrial building has slowed down considerably. That is important because it was the upset in industrial building which was one of the most noticeable features of the inflationary situation which grew up last year.

It also seems that the local authorities have raised £17 million in the open market and about £135 million on mortgage. I do not know what estimate the Chancellor has made of the effect of his new savings drive on that kind of operation. I should have thought that one effect of it would be merely to divert savings from one place to another.

Now we do not know whether the right hon. Gentleman is satisfied on the whole with the result of the credit squeeze. I do not know whether he feels that its effects, on, say, factory building are too much or too little. Personally, I should have thought it would be considerable and that the time may be approaching when it will be dangerous to cut down any further productive investment in this country.

None of us wants to compell the Chancellor to become an astrologer as well as a croupier, and the right hon. Gentleman made it clear yesterday that he did not want to make any precise forecast about the future. Yet, if we are to discuss sensibly the affairs of the nation we must know a little more about the current effects of the general monetary policy of the Government than we know at present. We must have some estimate, too, of what increase in private saving is expected. Then, nothing was said about that important branch of spending, hire purchase. This may be because there are so few statistics, but it is fair to ask the Economic Secretary to say a word about the Government view of the effect of their restrictions on hire purchase.

The Chancellor objected to various suggestions made, for instance, that he should alter or fix the liquidity ratios. I was one of a deputation which went to see the right hon. Gentleman about that and about one or two other matters and he was, of course, courteous and gave us a sympathetic hearing. I admit that it is not a matter which can be examined by a committee sitting for years and years, chewing over the situation. However, I believe that not only is the statistical information available to the Government inadequate but that it is vital to review the whole of the financial machinery at the disposal of the Government. I say that because, clearly, the creation of the sterling area, our obligations to it, the finance of the nationalised industries and the great weight of Government expenditure have altered the situation out of all knowledge since the days of the late Lord Keynes.

That brings me to the question of the nationalised industries I have always taken an interest in the means of financing their capital requirements, and I am glad that the Government are now to attend to that. Obviously, the finding by the nationalised industries of large sums of money by short-term borrowing has be-devilled the anti-inflation campaign of the Government. It is a prominent example of the inconsistencies of much of the Government's policy to see them encouraging the Transport Board to increase its deficits further and further. That is directly inflationary.

On the other hand, the Government are turning to the butcher, the baker, the candlestick-maker and the small farmer and saying, "Now, my boy, you must get rid of your overdraft of £300 or £400 at your local bank." It is not understood in the country why it is a good thing to push transport down the primrose path of inflation and yet to tell every small businessman and farmer that he must reduce his overdraft or go bankrupt.

Some important questions seem to have been left unanswered about the new policy by which these industries will be financed directly by the Treasury. I hope that the Chancellor is sincere when he says that it is his intention that at least some of them should finance their capital requirements in the ordinary commercial manner. I do not see why, in the case of electricity, the right hon. Gentleman thinks that that cannot come about reasonably soon. We all, however, agree that special arrangements must be made for at least some of the others.

In answer to a Question, I was told yesterday that there was £89 million owing to the banks from nationalised industry and £267 million to the Treasury. My understanding of the new policy is that the industries will continue to borrow from the banks. So it is their long-term borrowing which will be affected primarily, and this new policy will enable funding or the issue of loans to be carried through at moments convenient to the Government. Again, I think we should have more intimation from the Government about what is intended.

If it is simply an alteration in timing, there will be no alteration in the inflationary or deflationary effect; indeed, it will continue to be extremely inflationary. Again, is it intended to exercise more control over these industries? Will they be brought under ministerial control more on the model of the Post Office? If they are, we should be told, then, at what rate of interest the Treasury will lend them money? That is extremely important.