Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 15th April 1957.

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Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South 12:00 am, 15th April 1957

As my hon. and learned Friend said, it is variety, but, like the other variety to which I referred earlier, the net result is not very good for us.

The President of the Board of Trade spoke of the expanding demand for motor cars and referred with pride to the fact that the motor car industry had been warned by the steel industry that the steel industry would be unable to meet its demands for sheet steel in the autumn. Is that a ground for comfort? Is not this exactly what happened in 1955? Was it not followed by an enormous increase in imports of sheet steel, and was that not one of the major reasons for the balance of payments crisis later in the year?

It seems to me that this is where we came in. [HON. MEMBERS: "Where the Labour Party went out."] My right hon. Friend the Member for Lewisham, South (Mr. H. Morrison) says "denationalisation". I think we might say that there is a board of control even under a Tory Government. I should like to know what is being done to expand the investment of the steel industry so that it may meet the additional demand of the motor car industry. I should also like to know how much of this additional demand is really from exports and how much from the home market.

Finally, is it really necessary to take such a defeatist view about the possibilities of expanding investment when the Government have proudly proclaimed their cuts in the defence programme? The cuts in the defence programme are bound to release additional capacity in the metal and metal using industries. Can we not ensure that at least that goes to investment and not to consumption?

All this leads me to the conclusion that the Government have made a mistake, and a very serious mistake, in not taking the opportunity this year to restore investment allowances. It may be that the immediate impact would be too great, but the Chancellor could at least have said that they would be restored, say, as from a year hence He would then be giving notice to industry generally that we wished for a revival of investment as soon as the capacity set free by the cuts in the defence programme was available. Looking at the whole question of the way in which manpower has moved in the last two years, and the opportunities which were offered, it seems to me that we are losing a great chance to get the rate of investment in this country up to the sort of level which is essential if we are to have increasing productivity and the opportunity to compete effectively with other countries.

I turn to the third question, that of inflation. Here I must say that the Budget seemed to me to do no better than it did on inflation. I need hardly remind the Committee of the continued fall in the value of money; certainly, it occurred when we were in power and continued under the present Government. But there is this one difference: whereas the cost of living rose between 1946 and 1851 by 32 per cent. import prices during that period doubled they went up by 103 per cent.— between 1951 and 1957 the rise in the cost of living was almost exactly the same, 28 per cent., but there was no increase in import prices which actually declined by 3 per cent.

I ask the Chancellor, who. strangely enough, made no reference to the prospect here, what he thinks will happen to prices in the coming year. Are we still on the plateau, or is it still a gently rising slope? Does he think that it will go up rather more steeply? He will recall that the plateau, if that is still the word to be used, was connected with a plea to the nationalised industries not to raise their prices for a year. They agreed to do that, but that year has now come to an end. Does he expect that those prices which have been, so to speak, artificially held down, will now go up? I will venture the prophecy that the rise in prices this year is certain to be as great and probably greater than it was last year, that is to say, it will probably be at least 5 per cent. over the year.

If that is so, that is a rate of increase which is really continuing inflation. Yet the Chancellor says nothing about this. He does not make any attempt to deal with it, because in his prdget speech—