Economic Affairs

Part of the debate – in the House of Commons at 12:00 am on 12th February 1957.

Alert me about debates like this

Photo of Mr Donald Chapman Mr Donald Chapman , Birmingham, Northfield 12:00 am, 12th February 1957

I take the point very well. I am not saying that it is against the public interest, but this was supposed to be a purposive reshifting of our labour into the export trades, yet nothing of that kind occurred. The Government slashed and cut, and squeezed, but with this result and the figures bear me out very substantially.

Lastly, investment is expected to level out in 1957. As the hon. Member for Cheadle said, no one can be satisfied with the level of investment we have now, but the hon. Member ought to be even more worried about the fact that everyone accepts that it is going actually to decline compared with 1956, or at least to level out in 1957.

To sum up, on one side we have a surplus in our balance of payments and certain things which are useful in that respect, but when we look at the other side of the picture we see that we are paying the price of achieving the balance by a lower level with no real hope for the future for expanding production and the very grave danger of stagnating investment. What are the lessons we can learn about this? I ask the right hon. Gentleman what his reflections are and how we are to get on once the Suez crisis is over and we are back to the normalcy which the Government were trying to create by the credit squeeze.

How are we to maintain the disinflation we have achieved? Pressures are now being put up throughout the economy. Every manufacturer is demanding that as soon as the oil crisis is over and we are through the misadventure of Suez we should get back to a reduction of the credit squeeze, that we must reduce the Bank rate and that all that has to be behind us so that we can begin to let up. I believe that is very dangerous. I believe with my right hon. Friend the Member for Huyton that we cannot allow that to happen. I want to know how the Government are to prevent it once they have accepted that it ought not to happen.

As the hon. Member for Cheadle said, interest rates are not so effective in the long run. The monetary weapon is useful for the short term as a danger signal for holding something back when it has got out of hand, but not as something permanent, not only to keep us on the present level in our balance of payments but to help us towards a £350 million surplus. How are we to carry on once the mood in the country is that we ought to begin to let up? I predict that in the final quarter of this year every manufacturer will be clamouring—as they are already beginning to clamour—for tax cuts, which is the only sort of incentive to investment they know. They will clamour for relaxation of the credit squeeze, the withdrawal of directives to bank managers and all those things.

In my view we cannot maintain those things beyond the danger period, we cannot have them as a permanent system, yet how are we to be able to stop using them? So far the measures taken by the Government are only producing a precarious balance, yet we have to go on to a £350 million surplus. If we once begin to relax we shall be in danger of inflation reappearing and the balance of payments again getting out of hand. Then we shall have to start tightening up on credit all over again.

We must know, for a start, what we can have as a permanency in these matters as opposed to the temporary measures of the last two years. I have a feeling that these measures will not be effective any longer once it is felt, in the latter part of this year, that the immediate crisis is passed and that there ought to be some let up. How are we to achieve that? If the Government give way, as I believe they will, how can we keep up the export drive on the Government's present policy? How can we prevent an exporter saying, "The Government have let up on the home front. I will allow more of my goods to go into the home market because it is much easier to sell them there without having all this sweat in the export trade."

How are we to do it? The question must be answered, because if the Government cannot do it we shall be in a permanent period of monetary control and credit squeeze. We must have a compromise between the methods of my Government in their day and the methods of the present Government. There has to be a compromise between the pure monetary control of the present Government and the physical controls that we had in the previous Administration. Only in that way shall we move towards anything that will be like permanency.

What exactly do we mean by that? I do not mean that we are back to steel rationing and to making everybody apply for a building licence to put an extra bedroom on the house. I am not going to be sidetracked into all the political rubbish of electioneering about what we mean by rationing. I am sure that it does not involve that, although it means several things. It first of all means that the Government must have a sense of purpose in what they do and an interest in what happens in particular industries.

The Government have to say, as Sir Stafford Cripps did in his time, "We think it is for the good of the country that such and such an industry should expand by so much." We must make estimates. Of course they will go wrong, as did the Chancellor's estimate of the Budget surplus this year, but at least they will be coherent and we shall be trying to move towards something with a sense of purpose. Then we can help to get labour into those industries instead of doing what the right hon. Gentleman has done, cut first and hope for the best as to where the people will go.

We have to have a certain control over building and in the export trade a certain exhortation procedure that my right hon. Friend has mentioned. We must get manufacturers together and tell them, "If we once begin to relax the credit squeeze you must not allow your goods to come on the home market. We believe from our investigations that you can expand your exports in such and such an area by roughly so much. We believe that you must set yourselves a target of that extra percentage." In other words, when this period of emergency is over we must try to marry some relaxation of the credit squeeze—which there must be because industry and the population as a whole will not stand it forever—with the sort of physical controls and exhortations of the kind that Sir Stafford Cripps tried to carry out.

Once this period of Suez crisis is over we must try to get, as a major feature of our longer-term policy, a greater level of savings in general and a higher level of investment. I do not see and I am sure other hon. Members do not, how we can get a higher level of investment unless we get a much higher level of saving. If once we let up the credit squeeze, any tendency to increase consumption must be diverted into increased savings. That is vital for our economy but how are we to do it?

I do not know. It is a problem that faces every Chancellor of the Exchequer. I will say three things. One thing we must do is to extend, as far below into the ranks of society as possible, superannuation schemes such as now apply to the middle class and better-off people. Superannuation must become as soon as possible an accepted practice so that we do not just have retirement pensions. granted by the State, of a minimum amount. There must be a universal superannuation scheme. I do not say that one scheme should apply to everybody but that there should be superannuation schemes covering every member of the community That will be one of the greatest aids to personal savings and a means of moving towards industrial re-equipment through investment of those savings.

Secondly—I am not sure how we can do this because it is one of the greatest problems of all—we have to encourage an even greater emphasis on home purchase. One of the best forms of saving up is to buy your own home. I do not know how we can do it, on the Government's present policy. If we have penal rates of interest, home purchase is not attractive. I do not know how we can do it, but we must find some way of insulating the building societies against high rates of interest and of helping the home purchaser to save his money. He must have every encouragement to buy his own home.

The one other point on saving I do not expect will be universally popular. My right hon. Friend the Member for Huyton is not very fond of the Prime Minister because of the gimmicks that the right hon. Gentleman, when Chancellor, put into his last Budget, and particularly the Premium Bonds. I have no love for Premium Bonds at all. The failure of the Premium Bond is not because of its basic idea but because of the fainthearted way it was done. I would like something much more thoroughgoing in the way of channelling into investment some of the money that goes into gambling every year.

I will be quite blunt about it. I would like to see some form of national lottery attached to the savings movement. It may sound like heresy to Non-conformists, but we shall not get out of our future problems by mere orthodoxy. We want one or two bold men to have a go at channelling into savings some of the money now frittered away in other directions.

When all is said and done, and looking at the post-Suez era, when all the clamour to reduce the credit squeeze begins and the Government begin to give the concessions that we all have to fight to resist, we must keep down consumption, increase savings and keep the investment rate up. The Government will not do any of these things, and particularly will not do anything in getting peoples energies and enthusiasm behind them, unless they have a sense of purpose in what they are doing in the economy and unless they say to people, "We have a sensible plan in what we are trying to do. We are trying to get certain industries to expand; and we shall prevent people squandering wealth on things, because wealth gives them the right to have things that the rest of the people are restrained from having." I refer to building of petrol stations, reconstruction of public houses and other inessential forms of activity in the community.

If we go into the post-Suez era wanting a sense of restraint and of harnessing energy and enthusiasm to a very difficult period of restraint in consumption, these things will be done only if the Government adopt a compromise between their methods and our methods. That will give a sense of purpose to the economy and a feeling in the ordinary people which does not apply when those who have the riches can always have what they want while the rest have to practise restraint. Our only hope of survival is for the two parties to meet to that extent in trying to plan the salvation of our economy.