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

The rate of turnover is very fast, and it is difficult to keep one's tenses exactly right. It is the ex-Minister of Agriculture, Fisheries and Food to whom I wish to apply my remarks at this stage.

The new Chancellor, in his speech this afternoon, said that, coming to the Treasury, he found it in some ways a perplexing situation and he wished to take a new look at our problems. I should like to suggest to him two aspects of our present problems which it would be very desirable for him to consder with a fresh and unprejudiced eye. They are, in a sense, two paradoxes in our present situation, and I should like the right hon. Gentleman to look very carefully at them and consider what the explanation for their existence might be.

First, we have at present a very strong balance of payments position, largely to be accounted for by the decline in our import prices, but, nonetheless, a very strong position; at the present time, I suppose that the surplus is running at an annual rate of somewhere between £300 million and £400 million. It is an extremely strong position. Why is it, in these circumstances, that we had, such a short time ago, a very serious foreign exchange crisis? Why is it that gold is even now coming in at such a slow rate? Why is it that anyone who looks at all seriously at our situation must be very worried about the prospects of sterling next summer and autumn, when we have at the moment this extremely strong balance of payments position?

I suggest that the trouble we had last autumn and the trouble we may have to face again is associated with a good deal more than our own internal troubles, whether cost inflation or whatever elese they may be. Our difficulty is that we find ourselves with a strong internal balance of payments position but with a very weak currency from the standpoint of foreign exchange, in a world which, it is becoming increasingly clear, is slipping dangerously near deflation and a slump situation. There is room for argument about what is happening in this country. There is no argument about what has been happening and is still happening to world commodity prices. There is not room for argument about the fact that what is happening in America must, at least, cause considerable doubt and concern.

In these circumstances, we, as an important country in the world from an economic point of view, with a strong balance of payments position, ought to be urging the rest of the world to re-inflate. We ought to be urging the United States to set her economy going up again as quickly as possible. We ought to be playing our part in stopping this extremely dangerous slide in world commodity prices. But we cannot do that because, despite our strong balance of payments position, we have created a situation—largely, I think, by pursuing the myth of sterling being a world currency at all costs—in which our currency is still in extreme danger. At a time when there are these strong deflationary factors at work in the world, the former Chancellor of the Exchequer—the rest of the Tory Party, to some extent, supporting him—nailed his standard to the mast of trying to stop the decline in the value of the £ at all costs and above everything else; and this afternoon, he reaffirmed his view and left his standard even more firmly attached.