Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 23rd January 1958.

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Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford 12:00 am, 23rd January 1958

We have all listened with interest to the speech just made by the hon. Member for Spelthorne (Mr. Beresford Craddock). We were particularly glad that, although he first said that he had not thought that the debate would be worth while, he decided before the end of the speech that it was. One of his more interesting statements was, I thought, that the pressure against sterling during the late summer and early autumn was to be accounted for almost exclusively by a cost inflation in this country.

In view of the facts, that seems to be an extraordinary position to take up. After all, there were movements in favour of or against other currencies. There was a particularly strong movement in favour of the mark yet, during the summer, to a greater extent than at any other time for a great number of years, German costs were moving up relative to ours very rapidly indeed. That was an entirely new position. If we are to try to decide the causes of a particular movement it is the relative change that is important, and if one compares British and German wage movements over the last few years one sees very little difference between the two, but a very great difference in increased productivity.

As I say, one sees a very similar movement in wages but with increased productivity in Germany, while here, largely as a result of Government policy, there has been practically no increase in productivity at all. Therefore it would, in the first place, be very mistaken to start with the assumption that the only, or even the main, cause of our difficulty was cost inflation; and I believe that even if it were the main cause it should not be discussed in terms of wage rates unassociated with production.

Earlier this afternoon we listened to a most impressive speech from the right hon. Gentleman the Member for Monmouth (Mr. P. Thorneycroft). It was a speech of great force and considerable restraint—and, perhaps, of considerable generosity towards some of his ex-colleagues—but I certainly endorse every word that my hon. Friend the Member for Sheffield, Park (Mr. Mulley) said about our attitude to this and previous speeches of the right hon. Gentleman.

However, I am sure that the right hon. Gentleman would not wish it to be thought that, because he has retired from his previous position, he is in any way insulated from controversy. It would be very sad from the point of view of his political future if the outlook were as dim as that. I am bound to say that, although it was a very powerful speech and although it gained a great deal in form from the absence of the Departmental brief, I thought it had lost something in substance, because his analysis was, for the most part, extremely unclear, and where it was clear it was mistaken.

I understood the right hon. Gentleman to say that the root of our problem was that we were doing, and had been attempting for a long time to do, a great deal too much. I am not quite sure what he means by that, and I think that there can be two possible interpretations. It could be said that we were trying to do too many things in the sense of trying to do incompatibles, trying to adopt the posture conjured up by the catchphrase "Trying to ride two horses at once". If that was his meaning, I would, to some extent, agree with him upon it. I think that we are trying to do too much when we try both to run our own economy at home, as we ought, at a high level of activity, and at the same time try to keep sterling as a world currency, carrying the dollar needs of most of the rest of the world upon our own backs. To that extent, I think, we are trying to do incompatible things.

If the right hon. Gentleman means that we are trying to do too much in the sense that we have been consistently overstraining our economy, and still continue to do so, then I do not follow him at all. My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) produced a number of figures to suggest that, so far from our economy being overstrained at the present time, it is being under-used. Whatever else may be said, there has surely been less strain on the economy, in the sense of capacity being fully used, in the past two years than in most years before then since the war. Since the earlier credit squeeze came into operation and since production ceased to go up, the strain has been less.

Have the advantages, which the right hon. Member for Monmouth thought would automatically flow from a substantial further reduction in strain, begun to show themselves as a result of what has happened in the last two years? Since the economy has been subject to rather less strain than previously, we have had not one foreign exchange crisis every two years but one every year. During the last three years, we have had a foreign exchange crisis every year. This is a new development.