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Debate on the Address

Part of Orders of the Day — Queen's Speech – in the House of Commons at 12:00 am on 12th November 1956.

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

I beg to move, at the end of the Question, to add: but humbly regret, in view of the serious economic problems facing the country, which have been aggravated by the effects of the Government's policy in the Middle East, that your Majesty's Gracious Speech gives no indication that your Ministers intend to pursue policies adequate to deal with the situation. For the past fortnight the House has debated the cost in political and moral terms of the Government's action in Suez. Today, we have to count the reckoning in economic terms as well. When I say "economic terms" I do not mean merely the cost in terms of Government expenditure. We are no longer in the days of the nineteenth century colonial wars, when the cost of these ventures could be reckoned in terms of another 2d. on the Income Tax or another 1d. on tea, and while I hope that the Chancellor will be frank in telling the House what the events of the past two weeks mean in terms of national expenditure, I think that the whole House will be much more concerned to assess their wider economic effects on the balance of payments, on the gold reserves, on the strength and position of sterling, on exports, on production, on employment, and on our ability to aid Commonwealth development—if hon. Members opposite can be persuaded any longer to take an interest in the Commonwealth.

I have just said that I hope that the Chancellor will tell us this, but I learned with some concern a few moments ago that the Chancellor does not intend to speak in this debate until he winds it up tonight. It is an extremely serious thing, when the whole country is waiting to know the economic effects of the Government's ventures, that the Chancellor should refuse to tell us before then; and, without any disrespect to the Minister of Supply, I think that a Cabinet Minister should tell the country at the earliest possible moment what the economic effects will be, instead of our having to wait, as, no doubt, we shall have to, for the usual knockabout turn by the Chancellor in which he always indulges at the end of a debate.

Before we come to the cost of Suez, what we all have to realise is that this is an additional economic burden, the strain of which the Chancellor himself has said, is: a strain which is more than we can bear. Those were his words a few days ago. This burden has to be borne by a country which was already, as a result of five years of Tory financial stewardship, facing a desperate economic crisis. I doubt whether there is an hon. Gentleman opposite even who, even before this latest action of the Government, in his private thoughts and private conversation, was not fearing a further economic crisis, not excluding the possibility of devaluation, in 1957.

Is there a single hon. Gentleman who could say he was not fearing such a crisis even before the Government's action in Suez? Certainly, international financial opinion had written sterling down as something which it was unsafe to hold before the Suez invasion. So I think that we can better appreciate the additional and crippling burdens which the country has to bear as a result of what history will no doubt call "Eden's war" if we spend a little time surveying the position we had already reached, say, in September or October, after five years of Conservative Government.

For four of those five years the Lord Privy Seal was responsible for the nation's economic affairs. We all know the economic consequences of the Lord Privy Seal. They have been set forth for all time in the imperishable words of the present Chancellor, who is always so refreshingly frank about his right hon. Friend. He summed up the main achievements of the Lord Privy Seal, in his statement of 17th February, as having … held back exports, swollen our imports, forced us into balance of payments deficit, helped to reduce our reserves by a quarter, and driven up our domestic price level."—[OFFICIAL REPORT, 17th February, 1956; Vol. 548, c. 2666–7.] If that did not convince you, Sir, the Chancellor in the following months issued the Economic Survey, 48 pages of frank assessment of the legacy that he had inherited from the Lord Privy Seal.

That was the record of the Lord Privy Seal. What about the present Chancellor? It is too early yet to get the results for a full year, and I have no hope that next year's Economic Survey, if by any mischance the Chancellor is still here at that time, will be as frank and objective as the last one was, but enough is already known to summarise, at any rate, the interim achievements of the right hon. Gentleman, and this I propose to do for a few moments under a number of heads.

First, the gold and dollar reserves. At 31st October they stood at 2,244 million dollars, an increase of 124 million since 1st January, and after netting 177 million from the Trinidad oil sell-out. Does the Chancellor still think that it was right to sell this year one of our principal Commonwealth oil assets? Is he as proud of that sell-out now as he was in June? But for Trinidad, we should have been 50 million dollars down on the year so far, and I emphasise the words "so far."

In June, the Chancellor told us that the Trinidad dollars would enable us to make new investments in Commonwealth development. In fact, they were poured out in less than six weeks' run on the gold and dollar reserves. That is where Trinidad went. In the three months, August to October, we lost 338 million dollars from our gold and dollar reserves against 247 million dollars in the same period last year. Over the last quarter we have been 90 million dollars worse off in our drain on the gold and dollar reserves.

The Chancellor has boasted in recent speeches in the country that the export trade has increased. So it has, but a great deal less than the export trade of our main rivals. Britain's export trade is not keeping pace with the growth of world trade, and our share in world trade is shrinking. Before the right hon. Gentleman gets too complacent about the export performance I should like to give three recent examples.

First, it was pointed out in the Economic Survey last year that 1955 was a bad year for Commonwealth trade. Our exports did not keep pace either with the expansion of total imports into the sterling area or with the rates of increase in sterling imports achieved by our main competitors. Therefore, it is not a good year to take as a standard of reference, but, taking it, we find that imports into the sterling area in the first half of this year increased by 7 per cent. over last year. They increased from Western Germany by 23 per cent.; from Japan by 23 per cent.; from Western Europe other than Western Germany by 11 per cent.; from the United States by 5 per cent., and from this country by 2 per cent. That is one export test.

The second example is contained in the figures recently published by the International Bank showing the amount of money spent on capital goods for world development. These show a reduction last year compared with the previous year of 50 per cent. in the amount spent in Great Britain. In 1954–55, 24 per cent. of the total loans were spent in this country. In the year just ended only 13 per cent. was spent in this country. Our proportion has fallen from 24 per cent. to 13 per cent. whilst that spent in Germany has risen from 6 per cent. to 14 per cent.

German exports of machine tools last year were £60 million in value whilst our exports were £20 million, although the total sizes of the two industries are not very different. The Germans are exporting 60 per cent. of their output and we are exporting 25 per cent. of ours. The ground which we are losing in motor car exports to other countries is another example, although that is only too well known to the House. What we are getting with all these examples in the export markets of the world this year is the pay-off for Tory freedom.

The Chancellor, no doubt, will tell us of the £144 million surplus in the balance of payments in the first half of this year, a figure with which he warmed the hearts of the bankers of the City of London at their annual dinner; but that figure was very largely contributed to by increased earnings from the sale of Middle Eastern oil. Therefore, if the right hon. Gentleman intends to quote that figure tonight I would ask whether he expects the total for the second half of this year to be anything like as good.

So much for exports. We come now to overseas investment. The Lord Privy Seal set a target of £300 million a year on overseas investment, which, at present prices, would take £400 million to £450 million to achieve. In the first half of this year, our overseas investment was £50 million, against £125 million last year and £175 million the year before. Therefore, we are going back, not forward. Our investment in the sterling area was £25 million in the first half of this year against £100 million for the whole of last year and £175 million for the previous year. Another thing which the Chancellor did in that half-year was to sell Trinidad. So much for overseas investment.

What about production? The Chancellor has halted the increase in production which had been going on almost continuously since the end of the war. We have now complete stagnation in production. This is where the right hon. Gentleman has reached his plateau. There has been no increase in the ten months since he became Chancellor, and all the signs now are pointing to a fall. Since this is what he set out to achieve, it cannot be marked down among his failures. It is one of his successes. If the Lord Privy Seal were here—and we can understand why he is not—I would say to him that we cannot double the standard of living in twenty-five years on falling production.

As to manpower, we were told that the idea of cutting back production was to get manpower where it was most needed. We on this side of the House warned the Government that merely to squeeze workers out of the wrong industries did not mean that they would get them into the right ones. Where have they gone? The January-June figures for those consumer industries, which the Government set out to contract, show that employment fell by 112,000, but employment figures in manufacturing industries as a whole fell by 116,000. Therefore, there was no increase in the rest of manufacturing industry.

In the engineering and electrical industries, mainly producing plant and equipment for exports and for priority capital investments in this country, the increase over this period was a miserable 8,000, but over the same period 40,000 went into professional, financial and miscellaneous occupations—presumably more miscellaneous than professional. I should think that many went into advertising and into some of those "spiv" trades which the Government have been encouraging over the last year or two.

The final test of the Chancellor's economic policy is investment. The right hon. Gentleman set out to cut investment. He has done so. New industrial building authorisations in the second quarter of this year fell by 52 per cent., compared with the second quarter of 1955. In Germany, they were up by 20 per cent. Therefore, while we are cutting our investments, Germany is increasing hers, and such expansion as there has been in our investment has been mainly in less essential industries.

There is the Government's record, the Chancellor's interim report in terms of gold reserves, exports, overseas investment, production, manpower and investment. Oh, yes! There is also the cost of living. With world prices stationary over the last year, the cost of living has risen by between 4½ per cent. and 5 per cent., and the Chancellor, obviously not satisfied with that increase, has made his attack on bread, on milk, on rents, and all the rest.

There we have the Chancellor's success story, covering the period before Suez. He will tell us, of course, that, because he has not done as badly as the Lord Privy Seal, Tory freedom is working, but that is not really fair to the Lord Privy Seal. In the crucial matter of gold reserves it would not have been possible for him to do as badly as the Lord Privy Seal—for a very serious reason. The run on sterling, because of the Lord Privy Seal's improvidence, was at a time when sterling holdings were relatively high and, therefore, the run on them was great. This year, we have been told by The Times and in the City columns of other newspapers of the establishment—though I do not know whether The Times still represents the establishment after this morning—that sterling was technically strong.

If you, Mr. Speaker, have the same difficulty in appreciating the meaning of this phrase as I had when I first saw it, perhaps I should explain that when sterling is technically strong apparently it means that the world opinion of sterling is so low that nobody who can avoid holding it will hold it. In fact, European traders and financiers have kept themselves so short of sterling that even in a crisis of confidence, such as we have had this autumn, there was less sterling to sell short, and, therefore, the Chancellor could not have expected to have done quite as badly as the Lord Privy Seal.

The right hon. Gentleman will tell us, of course, that at least his credit squeeze is working. "Hard pounding, gentlemen," he said at the bankers' dinner. But it is not the bankers who are getting the pounding. It is the old-age pensioners, it is those on small fixed incomes. I know that this always bores the noble Lord—