Orders of the Day — Government Expenditure (Economies)

Part of the debate – in the House of Commons at 12:00 am on 3rd July 1956.

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Photo of Mr Harold Wilson Mr Harold Wilson , Huyton 12:00 am, 3rd July 1956

The hon. Member has taken my point with more than his usual speed.

Production has increased by 88 per cent. and exports by only 7 per cent. Year by year we warned the Government that the nation could not afford it. The Minister of Supply, who was then responsible for the motor car industry, said in a debate on the Election Budget on 21st April last year: We were told … that the main increase in production has been in motor cars. Why not? I am delighted to see the increase taking place in production by the British motor industry, which really is a magnificent achievement. It is already selling abroad as much as British ingenuity and enterprise can enable it to sell. Why should the manufacturers not use enterprise to produce more cars for the home market?"—[OFFICIAL REPORT, 21st April, 1955; Vol. 540, c. 358–9.]

That was on the eve of the Election. Immediately after the Election we had the President of the Board of Trade, fresh from the hustings, with his imperishable statement of Tory faith. He said: What about consumption? Do not let us be too afraid of our people consuming things. Referring to a speech which I had made, the right hon. Gentleman said: Sometimes, to hear the right hon. Gentleman, one would think it was terribly shocking for our people to be consuming things which ought to be all going into the export market."—[OFFICIAL REPORT, 10th June, 1955; Vol. 542, c. 162.]

Thus encouraged, the motor manufacturers roared ahead with expansion plans. In 1955, capital investment in building by the industry was two-and-a-half times that of 1954. A sum of £52 million was spent on industrial expansion, a 77 per cent. increase on 1954. A further £67 million was planned for this year as part of a total programme of £250 million. In the investment boom which took the Government by suprise last year, the motor car industry led the field. There was no Government planning, no regulation, no controls, and the biggest expansion took place in the industry where it was least needed, in the motor car industry.

I am sorry if the Minister of Education does not agree with this statement. These are the Government's own figures—I know that the Minister of Education always likes to have his own private figures which do not commit the Government—but these are the Government's own figures. The rest of the story the House knows. The Economic Survey said: It became clear that a considerable upsurge in the capital expenditure of industry was being superimposed on the buoyant level of consumers' expenditure—a check to the expansion of investment was necessary. And so we had the weary round of increased Bank Rate, increased Purchase Tax, restrictions on hire purchase.

The measures forced on the Government by the reckless and uncontrolled expansion of this and other industries have had, as their first effect, the creation of unemployment in the industry that sought to expand. The credit squeeze is the price of industrial expansion in the motorcar industry and other industries and it has had to be pushed to the point where it now forces contraction in that very industry. Meanwhile, the investment programme goes on, and the motor car industry continues to expand in its investments.

That is not economic planning; that is the economics of Bedlam. I know what the Chancellor of the Exchequer will say. He will say that there is nothing that we can do about expansion in the motor car industry investment programme; that would mean controls and building licensing, and although we note that the Chancellor is getting a little more receptive to the idea of building licensing, his colleagues will not let him introduce it.

In a speech that the Chancellor made at Leeds a few days ago—a less expensive speech than the one which he gave at Newcastle because it did not cost the country any dollars at all—he said then that he had an open mind on this question, but, of course, building licensing could not work in time. In time for what? It could not work in time for the economic crisis this year. I agree, but we were suggesting this to him last year. It is no good his using the argument about not closing the stable door because the horse has gone, if there are more horses in the stable. He should introduce building licensing this year to avoid next year's crisis. It is no good his saying that the thing works too slowly. After all, his Premium Bonds will work very slowly indeed, and yet he thinks that they will solve the economic problem.

It was the same with imports. Time and time again, we warned the Government that we could not afford the import of dollar sheet steel for an industry that had lost the momentum of its export drive. But no control was exercised by the President of the Board of Trade, so last year 450,000 tons of sheet steel were imported into this country, half of which was for the motor industry. Now the economic realities have caught up with the industry and with the Government. They are seen in the shape of 6,000 men queuing this week at the employment exchanges. Short-time working is spreading. We saw on the ticker tape today that it has even spread to the Prime Minister's constituency and that the night shift has been taken off at the Lockheed brake works, at Leamington.

As the House knows, the satellite empire surrounding the motor car industry is enormous and no one can say where this will end. What is the position of the Government on this? Apart from an impressive display of short temper about the short notice given last week, they are not in a position to have any feelings about this matter. This is what they wanted. This is what they have sought to create. The President of the Board of Trade admitted that the Government policies were, at any rate, partially to blame. On 15th March, he said: I do not stand here in any way to apologise for the measures introduced by Her Majesty's Government which I think are entirely appropriate to the situation."—[OFFICIAL REPORT, 15th March, 1956; Vol. 550, c. 533.] Does he still think that they are "entirely appropriate"? He appears to be nodding, so apparently he does.

I hope that the Chancellor will tell us this: has this unemployment gone far enough in the Midlands to achieve his ends? Does he need more? Is he yet satisfied with his handiwork? We are told that this is the credit squeeze biting. This is what is needed to secure the right distribution of the labour force in the right jobs. What hypocrisy this is. If the motor car industry is not the right industry—if we have to have this uprooting—why did the Government allow the industry to expand so much last year? Because they put private profit and party dogmas above human values and above the national interest. Do they believe that this will secure the right redeployment of the labour force? What machinery have they to secure it?

To dismiss people from the wrong industry does not guarantee re-employment in the right one. We have heard a lot from hon. Members opposite about the need to cut down the Civil Service, and we were told that they would all be redeployed in work of national importance. In four years, the Civil Service has been cut by 57,000 men and women, but they have not gone to the coal mines or the factories; they have gone into advertising, the speculative commodity markets, and trade associations; and, while there has been this reduction of 57,000, there has been an increase of 176,000 in employment in the miscellaneous professional and financial services.

I make this suggestion to the Minister of Labour. This is supposed to be the kernel of the Government's economic policy—the redeployment of the men who are being put out of work. I ask him to keep records of these 6,000 and to tell the House, after the Recess, where he has placed them, if he has placed them. We shall be able to judge then the effectiveness of this instrument. We may see, for instance, how many are in distribution or in industries no more important than the one they have been driven out of. I say—and I am sure that both sides of the House agree—that we stand, as Sir Stafford Cripps did, by the doctrine that full employment does not mean a guarantee to every man of permanent security in his own job. But we believe in economic planning, and not in the blind forces of the market, as the means of influencing the final outcome. That is the difference between us.

No man knows where all this will end. The motor industry is at the centre of a vast economic complex, and in the very week of this grave announcement we heard the news that Australia has cut her imports once again—a 50 per cent. cut in motor vehicles. But it is no good the Government wringing their hands about this. This is not an act of God; this is another Government chicken coming home to roost. We cannot sacrifice the interests of Australian producers to the free policy of the speculative commodity markets and expect them to be able to go on buying from us at the same rate.

The Government abolished bulk buying of primary produce from Australia and elsewhere. It may suit Mr. Rank to buy his grain in dollar markets and others to buy in the Argentine. This Government have severed one by one the economic links of the Commonwealth and our export industries pay the price.

I do not propose to refer to the decline in production in any detail. Last week we had confirmation of what most of us suspected, that production is now falling compared with last year. This is a direct result of the Government's policy. During the Budget debate, I asked the Chancellor what was his policy about production. Did he want production to increase, decrease or stay the same? He was very shy; he did not know. The Economic Secretary was not so coy; he told us that he was counting on an increase of production this year. When I asked the Chancellor, a week or two ago, about this, he said that he was sure that what the Economic Secretary had said was very wise.

This is not good enough. The Government's economic policies seem to us to be deliberately aimed at a reduction in national production—unless the Chancellor reassures us on this point this afternoon. We must warn the right hon. Gentleman that our production was already lagging behind that of almost every other country. We shall not solve our economic problems on the basis of declining production.

The House will want time to study the gold and dollar figures for June which are 16 million dollars up, I understand. That is exactly equalled by the 16 million dollars we received from E.P.U. on the previous month's trading, but in June this year we were in deficit to E.P.U., which means heavy gold payments next month. As the right hon. Gentleman knows, this is the time of year when we should still be in surplus. We have to face the difficult months that lie ahead.

I do not know to what extent temporary factors are at work. The Chancellor's Newcastle speech cost us a great deal, we were told, which perhaps might flow back in the course of time. We are approaching the difficult months of the autumn with far too small a margin. There are factors on our side. As a nation, we can afford to run down our stocks of imported materials for one year, but not for more than one. Invisible imports ought to improve over last year's showing, while exports are slowly, painfully, rising. We must all hope that these measures will work in time.

The Chancellor knows that the testing time is getting near. When we hear him at that Dispatch Box week after week we are worried about his frivolity, the irrelevance and the irresponsibility of his approach to these dangerous economic problems. He has told us that he stands or falls by the fight against inflation and national bankruptcy; in that fight he must get away from playing with words and get back to first principles. The first principle is that all expenditure is potentially inflationary. Nothing is sacred of itself, whether it is public expenditure or private expenditure. The test should be, not "Is it public or private?", but "How essential is it?"

This is why the economic cuts are a statistical irrelevance. What is the merit in cutting £50,000 on this or that social service if millions arc spent on some industrial expansion scheme which the Government, by their actions, condemn as frivolous? The Government have slashed the school-building programme and cut back on the maternity and health centres, as we were told yesterday. Perhaps the Chancellor will explain why a school and a health centre are inflationary while a vast block of offices is not inflationary.

Why is it not inflationary for the oil companies to spend millions on their distribution facilities when the Minister of Housing and Local Government stands at the Box week by week and tells us that the country would be ruined if he were to sanction expenditure of £1,000 upon a public convenience or a sewerage scheme? Perhaps the Chancellor will tell us why a dollar export factory in a Development Area is inflationary whereas a private factory producing frivolities for the home market is not inflationary.

Why is it essential, under "Boyle's law," to charge more for bread, milk, pots and pans, passports, county-court fees, house rents and telephone services, while, at the same time, in the name of stabilisation, nationalised industries are to be compelled, in defiance of statute law and economic sense, to price their services below cost? These are the things that the Chancellor should tell us.

How much longer will the right hon. Gentleman cling to this doctrinaire reliance on monetary policies which no longer serve the interests of the nation? How much longer will he cling to the notion of sterling as an international currency when Commonwealth countries cannot borrow here and are being driven to foreign money markets to meet their requirements? When will he stop passing the buck to the trade union movement and accept responsibility for the economic destiny of the country? When, in short, are the Government going to govern and not stand on one side in a posture of economic abdication? These are questions which the Government ought to be answering this afternoon.

The Chancellor knows this, because I have warned him already. The day of reckoning for him and his Government may be very near. Let him realise that the strength of the £ and all that goes with it are not a party asset, but a national asset. Indeed, they are more than that. On our economic strength rests far more than our material wellbeing, our employment, or our standard of living; more, even, than the maintenance of the Commonwealth as an economic unit.

The nations are now moving from the negative postures of the cold war into an active era of competitive coexistence. The Soviet Union, which has been transformed in less than 40 years from an illiterate peasant economy into an advanced industrial nation, is flexing its muscles for its first entry into world markets for industrial goods. The warning is there for all of us. I remember giving the House a warning in a debate on German rearmaments nearly two and a half years ago. I had just come back from Moscow and I said: I wonder if we are not arming against the wrong danger and if, ten years from now, hon. Members will be saying that the danger is not Russian military power but German military power, and not German industrial power but Russian industrial power. The Soviet Union is expanding her economic production at such a rate that it is a very real danger of which we in this House have to be aware. We have to be aware of weakening ourselves too much economically in order to meet the Russian military danger and then find in the end that we are defeated by the Russian economic potential which has been rising all that time."—[OFFICIAL REPORY, 25th February, 1954; Vol. 524, c. 601.]

It is two and a half years since I said that. The Government, slowly, haltingly, are coming to realise that this is a much bigger and more incalculable danger than anything they have yet recognised. Therefore, as I have said, more than economic issues are at stake, so let the Government and the Chancellor, before it is too late, give the nation the lead that it is seeking or if, as we believe, they have not that lead to give, let them make way for those who have.