I am looking at the hon. Member's bench, anyway.
Another suggestion about the real cause of the trouble has been made by the Government. We have heard from the Prime Minister in his speech at Bedford that there is only one thing necessary to a solution of the problem of inflation, and that, he says, is to increase production. At first sight it always appears good to say that we should increase production, but I cannot help being a little puzzled when I compare what he said then on the relationship between inflation and production with what he said in his own Budget speech fifteen months ago and what the Chancellor said in his Budget speech this year The Prime Minister was then defending the fact that production had not increased. He was pointing out that it was necessary in order to curb inflation that production should go down, or at any rate be restricted.
The Government should make up their mind on this matter. Do they want production to increase or not? Do they regard an increase in production as a solution? For what it is worth, I do not think that increased production is necessarily a cure for inflation. If it is due to increased productivity, it helps enormously, of course. But if it is simply due to the re-expansion of industry after a period of stagnation, it is then certainly not a cure for inflation, unless, first, we have no trouble about our balance of payments, and we do not get what the Chancellor has warned us about, namely, a situation where, as production expands, imports increase and exports do not rise correspondingly, so that we are back again with a balance of payments crisis. And we shall certainly get no solution to the problem of inflation if, as production expands, prices do not remain stable. We must face the fact that in a free economy, in which hon. Members opposite believe, increased production very frequently accentuates the problem of inflation.
What has happened in the last two years? I do not think that anyone studying the question can doubt what it amounts to. In 1955 we were told by the Government that production was rising too fast imports were coming in too fast there was therefore a balance of payments crisis, and therefore there had to be restrictions and a credit squeeze. There was the autumn Budget of 1955, and then the policy of stagnation. The Government claim that this policy of checking expansion and keeping down production has succeeded in putting right our balance of payments problem. I conceded in April, and I concede again now, that there is some force in that argument. It was, however, at a very heavy price—the price of a severe loss in production and, correspondingly, in consumption and investment.
What is perfectly plain is that, while the Government's policy may have had some success in this direction, it failed completely to prevent inflation, because although we have had stagnant production, we have had also rising prices throughout this period. I have not the slightest doubt that it is because the Government discovered this and came to the conclusion that the deflationary policy in which they profess to believe was not working effectively in keeping down prices that they changed their policy and decided to let production rise.
That is the position in which we are today. Having had this policy of stagnation, we are probably now moving into a boom period. There are certain advantages in that. Production is beginning to go up—about time, too—but if any hon. Member opposite, or the Chancellor, believes that in a free economy and without any Government intervention this is going to evade further rises in prices and eventually, I am very much afraid, a further balance of payments crisis, he has his head very much in the air.
The truth of the matter is that hon. Members opposite have believed—I do not doubt that they have believed very sincerely—in a free economy. "Conservative Freedom Works" was the great slogan of the last Election. Is Conservative freedom going to solve the problem of inflation? I believe that there is only one way in which it can. If you have a free-for-all and a free economy, you can prevent continuous inflation only if you create enough unemployment to prevent the inflationary forces really getting to work.
The interesting thing is that we have had an experiment in this direction. We have had the country going through a period of stagnation with the Government watching the position. But now they have made up their minds, apparently, that the game is not worth the candle. If that is the case—and a great many critics on their own side do not agree that it is; if one reads the financial columns of the newspapers one sees that the criticism of the Government is that they have not continued deflation long enough, and have been too easy on this matter—where in a free society, will the Government turn to prevent inflation?
The answer which we had today from the Chancellor was that this was a combined operation. "We must all work together," he said. "We are all in it." It is not enough to say that we must all work together and that there must be a combined operation. If the right hon. Gentleman believes that cost inflation is the trouble, what does he intend to do to get the collaboration and co-operation of the organised workers of this country? I speak very bluntly, because I think we ought to; and we all know that that is the problem.
What has the right hon. Gentleman offered today? He has offered an independent council. I do not say that there are not some circumstances in which a Government, if they were doing the right things in other ways, might find some body of this kind of value. Personally, I think that it is a mistake to make it an independent council. I believe that the best thing is to get both sides of industry together, and I believe that it would have been more sensible to have allowed this to develop out of the Joint Industrial Council.
Moreover, what worries me is this: will this body be independent? What sort of people will be appointed to it? They will not be people from the union side, they will not be industrialists. Who will they be? Will they be people able to make genuinely independent pronouncements? The fact of the matter is that if they are simply to draw attention to the facts in the economic situation, there is no need for them at all. We have all the facts that we want in the blue books, green books, White Papers and all the rest. If they are to offer advice on policy, then I do not believe that a body of this kind appointed by Conservative Government will be independent at all.
The Trades Union Congress has reserved its position on this matter, but most certainly it has not welcomed the Chancellor's proposals. One would have thought that today he would have taken the opportunity at least to make some gesture towards the unions, but one cannot describe his speech as an olive branch to the T.U.C. There are to be no import restrictions—not that any of us said that import restrictions were a cure for inflation; they are an emergency measure which one may have to take to protect the balance of payments. There is to be no building licensing and no price control. In passing, let me ask the Chancellor, in view of his opinions on this subject, whether he will now say that the Coal Board should be free to fix its prices as it likes, without asking the Government.
The right hon. Gentleman said that there was nothing wrong with his Budget. He said that the Surtax remissions were, of course, in the national interest and have nothing to do with the problem of cost inflation. What a delusion he suffers from! The T.U.C. surely has made it abundantly plain, as we have made it plain again and again, that if you want to get a combined operation you must have policies which appeal to the organised workers of the country. The T.U.C. has made it perfectly plain that the right hon. Gentleman never listens to what it says, that he has rejected its ideas on planning and refused its conception of social justice. The T.U.C. cannot be expected to collaborate in those circumstances. Why should it? Why should we have control of wages and no control of profits and dividends? Why should the unions be prepared to exercise restraint when there is no restraint on tax remissions to wealthy people? Even if the leaders could do it, which I very much doubt, will their members be prepared to exercise such restraint?
The truth is that the Government are now utterly bankrupt of policy. Logically, what they should do is pursue their deflationary policy further. Logically, what they should do is create enough unemployment to weaken the unions, never mind the cost in industrial disputes, in order to prevent the pressure for higher wages and in order to reduce the share of labour in the national product. But they dare not face that, because they know the political consequences. Yet, at the same time, all they can do is to appeal to everybody for help, appealing without the shred of an idea of what policy they should pursue.
Let me tell the Chancellor—and the Prime Minister—that unless he is prepared to throw overboard the doctrinaire ideas of Conservative freedom; unless he is genuinely willing to try to create a society of social justice; unless he is prepared to use fiscal policies which attack the spivs who get away without paying taxation—not the people who pay-as-you-earn, but the people who pay-if-you-care; unless he can introduce such measures as a capital gains tax, for which, in our view, there is an overwhelming case today; unless he deals with the evasion and avoidance of taxation which is taking place today; unless he is prepared to adopt policies which unite the country; then under this Government there is no chance of defeating the powerful forces of inflation. Because, in view of his utterly negative, utterly complacent speech, there is no hope of any move in this direction, we shall be obliged to divide the House tonight.