If this nation could be saved by words alone, I think that our economic problems would have been finally solved by the Chancellor's speech last week. As he led us up one verbal blind alley after another, I was reminded of the words of King Lear, when he boasted:
I will do such things—
What they are, yet I know not—but they shall be
The terrors of the earth.
We are to have economies of £100 million, but we do not yet know where. We are to have some lottery bonds, but we do not know when. We are to have improved Government statistics, but not until the Chancellor can find the time.
On the other hand, I would defend the Chancellor against one charge which is being widely made against him in this debate. That is the charge that he has cunningly drawn a veil over the events of last year in order to conceal the blunders of his unhappy predecessor. Since the present Chancellor took over, we have had a series of official Treasury documents laying bear the follies of the Lord Privy Seal with a candour that, surely, can hardly have been accidental.
It all began with the February issue of the Treasury Bulletin for Industry. This is such a bitter attack on the Government's record that it might have been written by Mr. Randolph Churchill. It says this:
World conditions were as favourable for trade last year as this country can reasonably expect. Total world trade was rising fast, and there was no significant shift in the terms of trade in favour of primary products and against manufactures. Yet Britain's trade gap was nearly half as wide again as in 1954.
In the Economic Survey the new Chancellor pursues his attack against the Lord Privy Seal with a frankness which is worthy of a speech by Mr. Khrushchev about Marshal Stalin. No more than Mr. Khrushchev, apparently, does the present Chancellor believe in the old maxim De mortuis nil nisi bonum. He says this in his Economic Survey:
In 1955 world economic conditions were highly favourable. Output was growing rapidly in all the major manufacturing countries … the total gold and dollar holdings of the non-dollar world rose substantially during the year.
And what happened at home? The Chancellor piles on his indictment against the Lord Privy Seal in these words:
Although the world economic situation was favourable to the United Kingdom in 1955, the balance of payments was unsatisfactory and the gold and dollar reserves fell by over one-fifth. This external weakness was the result of home demand rising to the point at which our productive capacity was over-strained. …
What was the cause of the excess demand which led to all the trouble? Here are the Chancellor's own words:
The difference between the increase of domestic expenditure and the increase of domestic product amounted to about £100 million … and it contributed to a significant worsening in the balance of payments on current account.
And that £100 million was just a bit less than the tax relief which the Lord Privy Seal, in his own words, "gave away" in April a year ago.
So there is no need for us to criticise the Government's record this year. It has all been done for us by the present Chancellor. Indeed, I am not sure that there ought not to be a society for the prevention of cruelty to ex-Chancellors. I do not know whether it would be in order for the Lord Privy Seal to get up now to say of his successor that he is the best Chancellor we have.
However, the Chancellor's indictment of the Lord Privy Seal, whether fair or unfair, is, of course, literally true. Last year excess demand in this country, due to the electioneering Budget policy and reckless scrapping of controls, pushed this nation and the sterling area into an acute balance of payments crisis while almost the whole of the rest of the world was prosperous. Conservative freedom certainly had its finest hour last year. It achieved what, perhaps, that other widely read writer, Mr. Richard Strong, in the Evening Standard, would call "its crowning glory."
I want now only to emphasise what is, perhaps, the most serious result of these mistakes. The sterling area gold reserve now is not merely 700 million dollars less than it was in October, 1951. It fell at the end of 1955 to 2,150 million dollars at a time when the French reserve had risen from 950 million to 2,120 million dollars, and the German from 1,984 million to 3,120 million dollars. The German reserve, which was barely half ours in 1951, is now nearly 50 per cent. greater.
The Chancellor said something about the relation of our present reserve to sterling area imports, but he did not give the comparison over the years. I will just give these figures. The sterling area gold reserve at the end of 1955 was down to only 20 per cent. of the United Kingdom's imports comprised with 45 per cent. in 1950 and 93 per cent. in 1938; and the reserve was also, at the end of 1955, only a little over 20 per cent. of sterling area's imports from the non-sterling world, against 40 per cent. in 1950 and 90 per cent. in 1938. In the words of the London and Cambridge Economic Survey for March—and I think they are true—
As a backing for current trading at the present levels of prices and volumes, the reserves are, clearly, miserably small.
On top of this, these reserves are equal to only four-fifths of the short-term claims by non-sterling countries on the United Kingdom. This is surely, to use no stronger language, a serious situation which the country really ought to understand. I doubt whether the public will be helped to understand it by the President of the Board of Trade's description of it, in the debate on Wednesday, as a situation of "unexampled prosperity."
What, however, has the present Chancellor really done in his so-called Budget, when his proposals are stripped of all the abundant verbiage, to set us on the road back from this rather deplorable plight? When, first and foremost, the country wanted some- thing to halt the rise in prices, he has raised the price of bread and tobacco. Once again, to get the cost of living down, the Government push it up. May we be told—perhaps the Economic Secretary will tell us—why it is part of the great battle against inflation to keep railway charges down, but to push bread prices up? This is as puzzling to the ordinary man as how the Chancellor is helping recovery by pushing local authorities' borrowing from the Budget on to the City and nationalised industries' borrowing from the City on to the Budget.
On the wireless, the Chancellor said this was all part of a big plan. While we are glad to know he believes in planning, I do feel that in a corner of a two hours' speech the existence of this plan might have been divulged to Parliament. Unless it is a secret plan, the Economic Secretary is the ideal man, I suggest, to explain it to us this afternoon. He is, after all, the author of "Boyle's Law," which lays down that in conditions of Conservative freedom, when prices are pushed up, they go down. Will he tell us how things are to work out under the Chancellor's plan? Will he explain, in particular—and this is what puzzles me—why "Boyles' Law" applies to bread and postal charges and not to railway rates?
Of course, this new rise in the price of bread and tobacco will not just affect wage rates and export costs. It will also, before long, raise the salaries and wages which the Government pays, thus raising Government expenditure. It is because the Lord Privy Seal raised living costs last year that the Post Office had to raise wages last month, and the Postmaster-General is having to raise his charges this month. Indeed, the constant action of the present Government in raising living costs is one of the main reasons why Government expenditure has risen faster under this Government than it did under the Labour Government—to the terrible chagrin, of course, of Sir Bernard Docker, who is, I believe, resting at Monte Carlo in order to recover from the crushing effects of the taxation imposed by the present Chancellor.
We are now told that £100 million is to be saved "this year", in the Chancellor's own words. If that is really possible, why was it not done by the Lord
Privy Seal? He always told us he was making all possible economies. Last April, he said:
During the past year we have maintained a vigilant watch on both the totality of Government expenditure and its detailed distribution."—[OFFICIAL REPORT, 19th April, 1955; Vol. 540, c. 50.]
What has the Financial Secretary been doing at the Treasury during these last eighteen months? The Chancellor himself has been in office from December to the middle of April; one would have thought he might have been able to save some part of this £100 million. Sir Bernard Docker thinks that he can save only £47 million. I find it hard to believe that the Chancellor, even inspired by his lottery bonds, can do twice as well as Sir Bernard who, after all, has had a life-long experience of the casino at Monte Carlo.
I see only two possibilities, and I really think we ought to know which the Chancellor has in mind. One is that the Government are producing some very secret aeroplanes which will be unable to fly or to shoot—we have had a lot of saving in that way during the last few years. The other possibility is that they intend to make new attacks on education, housing and health, as the Financial Secretary more or less openly hinted last week. If this is the case, the Chancellor should have had the courage to say so in his Budget speech. If there are not to be these economies and cuts in education, housing and health—and the mere suggestion of them causes anxiety in many people's minds—he should give us an assurance tonight. Unless one or other of those two possibilities is to be pursued, I do not believe, judging from the Lord Privy Seal's performance, that the Chancellor—to use his own austere, Gladstonian phrase—has a "cat in hell's chance" of getting this £100 million.
Will he also tell us whether he is counting into his present estimates the £50 million which we are asking Germany to contribute towards the cost of our troops in Germany, and which Germany has, so far, flatly refused to pay? If Germany is not induced to pay all or part of that £50 million, is there not already a large loss to set against this hypothetical £100 million? And is not the £670 million estimated for debt interest for 1956–57 in the Financial Statement, even though it be £155 million above what the Labour Government spent in 1951–52, an optimistic estimate of what interest will cost this year?
Last year the Government spent on debt interest £38 million more than the Lord Privy Seal's estimate in the Financial Statement a year ago. I wonder whether the Chancellor could tell us tonight what this £670 million would be if the Treasury bill rates now prevailing were to prevail throughout the rest of the year; he must have made some assumption about that.
But the harshest effect of this new rise in living costs will be upon the old-age pensioners and others living on fixed incomes, as the hon. Lady the Member for Tynemouth (Dame Irene Ward) pointed out in the debate last week. Their plight is particularly ironic, at a moment when the Chancellor is at least succeeding, whatever else he has or has not done, in bringing the casino spirit into the Stock Exchange.
We ought not to allow our minds to be diverted from the plight of these people by all the various tricks, trifles and trivialities in the Chancellor's speech. Do hon. Members opposite realise that there are now about 1,650,000 people again on National Assistance—which, counting couples, probably means 2½ million people? Those figures were given by the Minister of Pensions and National Insurance in answer to a Question by my right hon. Friend the Member for Middlesbrough, East (Mr. Marquand). During the debate in December, 1954, the previous Minister of Pensions and National Insurance said this:
It has been very distressing to see year by year a growth in the numbers having to seek help from the National Assistance Board."—[OFFICIAL REPORT, 21st December, 1954; Vol. 535, c. 2679.]
He then said that in deciding to raise insurance benefits the Government's policy would be "guided" by the aim of getting people off National Assistance. Since there is now very nearly the same number on National Assistance as there was when the previous Minister made that statement, we ask whether it is still the policy of the Government to get people off National Assistance. And, if so, what are they going to do about it?
We on this side feel this matter is pressing for one compelling reason, if for no other. The Chancellor, in refusing the old people even the 2d. tobacco relief, has really singled them out for the worst treatment in the whole Budget. We cannot accept this. We shall take every possible step throughout the passage of the Finance Bill to put this injustice right; and we shall confidently count on the powerful support of the hon. Lady the Member for Tynemouth both in the Chamber and in the Division Lobby.
Then there is the Chancellor's lottery, which, we gather, the Financial Secretary, like the hon. Member for Louth (Mr. Osborne), does not very much like. I suppose the Chancellor thought that as he was making bread dearer he had better make circuses cheaper at the same time. Though it is rather odd, even in this Government, to have the Financial Secretary deploring on Friday night what the Chancellor announced on Tuesday, I am not sure that the Financial Secretary may not prove the wiser of the two.
There are many people in this country, whatever our personal views may be, who do not like this kind of thing. According to the News Chronicle this morning—I do not know how accurate it is—31 per cent. of the electorate disapprove. Is it wise or dignified for a British Chancellor of the Exchequer, who has to ask people for sacrifices and, therefore, needs a bit of moral authority, to offend these people's feelings? Could the right hon. Gentleman not at least have left it to the Postmaster-General?
I thought that the Chancellor perhaps had the Postmaster-General in mind when he said:
Lyndoe or Old Moore may turn out just as reliable as Professor What's His Name or Dr. So and So."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 865.]
Will not a great deal of money for this raffle, like the money for the Chancellor's other saving attractions, be not really new savings at all, but be switched out of the Post Office, the building societies and perhaps the Co-operative societies? Incidentally, one wonders what the justification is for exempting the first £15 of Post Office funds and not doing so for funds in the Co-operative societies.
The Chancellor might have been wiser not to put this proposal in the Budget speech. He might, at any rate, have found out what the National Savings workers thought about it. I am not sure that we in this Committee realise how grateful we ought to be to the National Savings movement, which has had to put up with a great deal, including the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke).
Secondly, do we really want to encourage people to think that we can somehow get over the country's difficulties by some form of gambling? I should have thought it more desirable to ask the practical questions, why we have got into our present economic plight nd how we can avoid this sort of crisis in the future. I will briefly have a shot at answering those questions myself.
What has been the real cause of the 1955–56 crisis? Basically, it has been the care-free attitude of relaxing too soon and under-rating the economic difficulties facing the country. This has taken many forms. There has, of course, been an element of sheer muddle. The hon. Member for Aberdeenshire, East (Sir R. Boothby), who talks so much good sense in these matters that he ought to cross the Floor of the Chamber, described the actions of the Lord Privy Seal in 1954–55, in relaxing all sorts of restraints when our gold was flowing away, as being those of a "blind man wielding a bludgeon."
There is also the familiar element, never absent from Toryism, of surrender to various shady vested interests. What can we think of the patriotism of a Government which, in September, 1955, after fifteen months of gold losses, launched into a crazy scheme of commercial television advertising?
An even more important cause has been the doctrinaire belief of the Government that getting rid of controls, and, in particular of import controls, was an earlier priority than building up the gold reserve. I quote the Financial Times of 4th April about the hasty removal of controls on European imports:
Over 1955 as a whole France managed to add to her reserves a considerably larger sum in gold and dollars than Britain lost. Yet the French have only now raised their percentage of liberalised imports to the level which Britain maintained throughout the period of heavy gold losses.
The President of the Board of Trade cannot sustain his argument that all the extra imports in 1955 were essential food,
raw materials or even semi-processed manufactures. Many were; but there were also these rises in 1955: imports of paper, paper board and manufactures rose from £33 million to £65 million during the year. No doubt much of that was newsprint, and no doubt it is very important that the principle of the freedom of the Press should be vindicated by Mr. Pierrepoint's memoirs in the Empire News. Even so, I doubt whether Mr. Pierrepoint's reminiscences are worth their weight in the nation's gold reserves.
Motor car imports in 1955 were up from £820,000 to £4,704,000. Clothing, footwear, travel goods and handbags were up from £8,600,000 to £18 million, and these were not the only items. The oddity of this is that the Government in any case now, and rightly, maintain import quotas on a large number of dollar goods and goods from other sources. The Minister of State, Board of Trade, said a fortnight ago that he was maintaining import quotas for balance of payments reasons on apples and pears. As far as I know, that has not compelled him to ration apples and pears in the home market.
The next cause of our difficulties over the last five years has been the ostrich-like belief of hon. Members opposite that, somehow or other, preferably by tax reliefs, the wealthy minority in the country can regain the share of the national wealth which they had in the years before the war. They cannot. And their attempt to do so, which led the Lord Privy Seal so much astray last year, is bound to undermine the economic stability of the country for a reason on which I beg hon. Members opposite to reflect, particularly the noble Lord the Member for Dorset, South. If Surtax payers and the property-owning few attempt, by higher dividends or prices or tax relief, to regain their pre-war share of the national income, the wage earners will hit back—as in conditions of full employment they can do—and prices and the cost of living will go up.
This means that unless the party opposite is prepared to abandon full employment, it cannot have both economic stability and a rising share of the nation's income for the wealthy few. It is the refusal of hon. Members opposite to face that dilemma—and not any world events—that got us into our difficulties last year. The Chancellor's popular booklet asks,
Must full employment mean ever-rising prices?
The answer is simple: if we try to go back to the pre-war distribution of incomes, it certainly must.
Thirdly, I blame the Government's doctrinaire belief in getting out of balance of payment difficulties almost solely by the Bank Rate method, which inevitably involves lower employment, production and investment than could be secured if we used other controls as well. The country cannot afford to lose production and investment due to these methods, which incidentally even Lord Chandos calls "indiscriminate". The United Nations Economic Committee's Report shows that this country invested only 6 per cent. of its net national income against 22 per cent. by Norway, a country with a high degree of planning and equality, which had the best figure in Europe. Russia is investing probably at least 25 per cent. of her national income.
Just because we rightly detest Russian methods, and rightly suspect her statistics, we should be extremely foolish to underrate her economic challenge. The evidence strongly suggests that Russian production is increasing at about 10 per cent. a year. America's production is increasing at 3 per cent. or 4 per cent. a year. Can the Chancellor tell us whether, after the redeployment activities of this Government in the last few months, our production now is more than 2 per cent. at the most above what it was a year ago? At that rate, the real standard of living in Russia may equal ours in perhaps fifteen years, and even that of North America in a period probably twice as long. What is more, do not let us ignore the fact that Russia, in the not far distant future, may become an importer of food and an exporter of manufactured goods, with ominous effects on our terms of trade.
Faced with this challenge from abroad, what should we do as a nation to profit by our experiences since 1945 and to build up our economic strength in the future? It is not really hard to answer that question. First, I suggest that the sterling area must now achieve an adequate gold reserve. I suggest about 10,000 million dollars as a target. That must be the primary aim to be achieved before we make any more experiments in dismantling import quotas or indulge in foolish talk about convertibility. In the past few years we have repeatedly made the mistake of trying to liberalise first and to build up the gold reserve afterwards.
Secondly, to build up this reserve we must, as a first priority of internal policy, achieve a steady balance of payments surplus of about £300 million a year. I am glad to see that the Government still pay lip service to this, though very little more. This means, inevitably, that we must hold down the level of luxury imports.
Thirdly, we must have a larger investment programme. In the light of what both America and Russia and most of Europe are investing annually, we ought in future to regard our own industrial investment not as the first thing to be cut every time excessive spending pushes us into a balance of payments crisis, but as a steady priority to be maintained year in and year out.
It is certain that we shall not get both high investment and a balance of payments surplus without these two things. The first is high production. That means full employment, which I unashamedly interpret in 1956 as meaning less than 2 per cent. unemployment. Of course, if we try those methods of readjustment or redeployment, or whatever the Government call it, which involve short-time and unemployment, then we shall not get high productivity. Unemployment is the enemy of productivity and the father of restrictive practices.
We must have a positive export drive, at least inspired and guided by the Government. I ask the President of the Board of Trade to believe that if we are to regain the share of world exports which we have lost in these last two or three years, we need something of the spirit, though not necessarily the methods, of the wartime production drive and of the export drive in the years immediately after the war.
If there were more time I would go into this in detail. Now, however, I will only draw the attention of the President of the Board of Trade to an article in his own Board of Trade Journal for the month of April. There, a British manufacturer tells of his success in the Canadian market and says this:
It was not until 1950, when the Government urged a concerted export drive to dollar markets that we in our firm embarked on the enterprise of trying to sell goods to Canada.
That is just one instance of where the Government supplied the original impetus.
To encourage exports, one thing that the President of the Board of Trade ought to do is to tell the motor car industry that though we in this country can probably afford to have a large car industry selling mainly abroad, we certainly cannot afford a large car industry selling almost entirely in the home market.
Finally, what are the immediate practical steps necessary in that rather formidable task? I think that the first is an honest recognition that we must maintain restraints on superfluous spending, partly by private saving, of course, but also by taxation on company profits and capital gains, and by a genuine Budget surplus.
I thought that the most foolish passage in the whole of the speech of the Chancellor was where he sneered at public savings. What the right hon. Gentleman said then contradicted what he said elsewhere in his speech. It contradicted the conclusion he reached, and it also contradicted the excellent speech of the Economic Secretary at Droitwich a fortnight before, when the hon. Gentleman used these words:
For a long time to come the Government will have to do quite a bit of saving by itself. We must get used to rather larger Budget surpluses than we have had in the past.
The hon. Gentleman was perfectly right, and I only wish that the Chancellor would listen to him. Indeed, the right hon. Gentleman seems to be gravely out of touch with both his Economic Secretary and his Financial Secretary.
Therefore, I submit, that the only way to end inflation, and to preserve full employment, is to achieve again the sort of collective agreement on restraint by all sections of the community which the late Stafford Cripps attempted in 1948