Economic Situation

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

Alert me about debates like this

Photo of Mr Herbert Butler Mr Herbert Butler , Hackney Central 12:00 am, 23rd January 1958

On that matter I might be betraying the usual channels by saying that I have already sent an answer to the Opposition that I will give them an answer tomorrow.

I was saying that when we come to that debate we shall remember the remark of the night hon. Member for Huyton about my right hon. Friend the Member for Fint, West (Mr. Birch) being on the grouse moors. We shall enjoy our shooting much more than the right hon. Gentleman enjoyed his.

The Leader of the Opposition was the only one to break his silence. He broke it shortly after the events that we are debating partially tonight to the extent of issuing a statement saying that the Government were crumbling and calling upon them to resign.

I can assure the right hon. Gentleman and his hon. and right hon. Friends—I have been reading the memoirs of Lord Attlee on the subject of resignations in his own Government and studying the story of Lord Attlee's Government which ran away from the financial difficulties in 1951—that, so far from finding that the Government are crumbling, he will find here a united front and an unassailable square against which he will direct his fire in vain.

When the right hon. Member for Ebbw Vale (Mr. Bevan) resigned in April, 1951, he said that his party had been—these are his own words— reinvigorated by it and not debilitated. That was generous since, at the time, the party lost not only him but the right hon. Member for Huyton.

The sort of definite action of which we had an example today in the moving speech of my right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft)—I am not commenting upon the merits—and the manner in which my right hon. Friend spoke enhanced the value of our public life. Whatever views we may have, and it is obvious that we have had very definite differences between us, it is not unsuitable for me to say at the opening of my remarks that this debate has been dignified by events which add another chapter to the history of Parliament. We may all feel, using the words of the right hon. Member for Ebbw Vale that, following upon the speech of my right hon. Friend, we are re-invigorated and not debilitated. That applies not only to the House of Commons, but also, in particular, to Her Majesty's Government at the present time.

What do we find in the party opposite? We find that the renegades resigned on a comparatively small number of millions of pounds—not nearly as high as the £50 million that we have been talking about in recent days, but under the £20 million mark. The right hon. Gentlemen who then resigned are reunited in an uneasy alliance with the Leader of the Opposition. What is the basis of their alliance? They have pledged themselves to the most inflationary programme ever invented by a political party in modern times, costing hundreds of millions of pounds—far more inflationary than any we have ever experienced. This is a matter to which I may return if I have an opportunity before resuming my seat.

It is important that I should now turn to answering some of the points made by the Leader of the Opposition and by other hon. Members in the debate. Before I do so I should like to pick up another pearl which fell from the right hon. Member for Ebbw Vale. He also said in Margate in October, 1951, after the distressing events: The important thing is not that there are differences of opinion in the council chamber, but that there is unity on the battlefield". That is precisely the position tonight. We are on the battlefield here and now in this debate. We intend to win an overwhelming victory against the other side. We also intend to win the battle against inflation. We do not intend to have an Election. We intend to see the job through, unlike right hon. and hon. Gentlemen opposite who fled from their task in 1951. We intend to stay and do our job, because it is in the interests of the House and the country that we should win.

May I also take up a sentence in the speech of my right hon. Friend the Member for Monmouth, who said that it is not only a question for us, but a question of the effect upon the living conditions of the whole population. While we may have our differences and divisions tonight, we must remember that this battle is one upon which the whole prosperity of our country depends. I say to my hon. Friend the Member for Solihull (Mr. M. Lindsay), who expressed anxiety about whether or not he could go into the Lobby—and I realise that there are hon. Members who are feeling like that—that on this issue the Government policy in defence of the £ is such that they can legitimately and honourably support it.

The Government welcome this opportunity to re-state their economic policy and to emphasise the unaltered character of its short and long-term objectives. These are, first, to defend the £ sterling as a strong and reliable currency upon which we and the world can count; secondly, to create the necessary climate of restraint and responsibility at home so that the battle shall be won and the highest possible level of employment maintained; thirdly, to resume, when we are ready, upon the firm base of an honest and trusted currency, the healthy expansion of our economy. It will, therefore, be seen, as was borne out by the Chancellor of the Exchequer in opening the debate, that a change of Chancellor does not mean a change of policy.

The policy which my right hon. Friend the Member for Monmouth commends is not a different policy from that of Her Majesty's Government. [HON. MEMBERS: "Why did he resign?"] That is a matter for my right hon. Friend. The differences which have arisen are differences of emphasis, of timing, and, I believe, of patience. Such differences as recall words which I once read in the works of Ralph Waldo Emerson. Perhaps he was thinking about such differences when he said that men "boil at different degrees."

The present position of our economy is broadly as follows. We have greatly improved our United Kingdom trade balance. I am glad to say that our exchange rate remains high. We are still gaining reserves. Provided that we pay back what we have borrowed and go on to build up our reserves, we shall be in an improved position.

The "record" to which the Amendment refers does not take account of the recent trade figures, published this month, which show that in the past year our underlying trading position in the United Kingdom has been very sound. The figures show record exports for the year as a whole and a visible trade balance which in the last two months was better than for many years. In 1957 exports and re-exports rose by 5 per cent. to no less a figure than £3,458 million; that is a 2 per cent. rise by volume. This is in face of stiffer competition and increased restrictions on our exports to certain countries who are anxious about their balance of payments. This seems to me a pretty good advertisement for the working of Tory freedom. In fact, our exports have risen by 25 per cent. by value and 16 per cent. by volume in the last three years.

It is, I think, particularly encouraging that our exports to the dollar area were up by no less than 9 per cent. in 1957. That is a matter which has always caused anxiety to all those who have held the post of Chancellor of the Exchanquer or President of the Board of Trade. The visible trade gap, which had been reduced in November to the lowest figure for many years, was even lower in December. Taking our invisible earnings into account, there is no doubt that we had a substantial surplus on our balance of payments.

The Leader of the Opposition referred to a fall in import prices. Of course, this has helped, but I would point out that although import prices have been falling during the year from the peak which they reached a year ago, the average cost of our imports in 1957 was 1½ per cent. higher than in 1956.

I turn now to our gold and dollar reserves and the strain on sterling. Thanks largely to the measures which we took under the initiative of the late Chancellor of the Exchequer, we faced the exchange crisis of last year firmly and resolutely. The economic measures which we took had an immediate effect. Every month since September our reserves have risen continuously, and the £ is notably stronger in world markets. So much for the preposterous claim that we have not established our record in this field.

I turn now to the Amendment. It refers to … expanding production, full employment and a stable pound. Hon. and right hon. Members opposite have questioned our capacity to maintain full employment every single year for six years. I remember the words of the right hon. Gentleman the Member for Blyth (Mr. Robens), whose prognostications proved to be totaly false. Extravagant prophecies on their part have always been falsified. We have had full employment all along, and last year the average level of unemployment was no more than 1½ per cent. In particular, the motor industry has staged an impressive and significant recover.

As to expanding production, there is, of course, no dispute about the general desirability of expanding production, but in the face of the undoubted inflationary tendencies that we have witnessed, it is essential to secure a stable base so that we can move forward again surely, resolutely and effectively.

I do not accept at all what the right hon. Member for Huyton says about stagnation at present in our production situation. Our production during the past few months, and over the past year, has, in fact, improved. It compares favourably with that of the great North American economies, and the second and third quarters of last year show figures of a higher production than ever recorded in the history of the country. When the right hon. Gentleman brings forward his usual league table, which he does at this time—and as he and the Leader of the Opposition do in almost every speech they make—I would point out that at the bottom of the league table stands the United States of America, an economy of the most expansive and powerful type in the world.

I would take also some detailed figures—and I will come to the position of the United States in a moment. Manufacturing output for the first ten months of last year was 5 per cent. up on 1956. Motor car output made a spectacular recovery, and was nearly 22 per cent. higher than in 1956. In the first ten months of last year, mechanical and electrical engineering output was up by no less than 5 per cent.; food, drink and tobacco was up by no less than 3½ per cent., and agricultural machinery was also up. These are not the signs of stagnation, and the claims of the right hon. Gentleman that our production is stagnating simply do not bear examination at the present time.

Now I come to the point made by the Leader of the Opposition in relation to the position in the United States of America. According to our latest information, the figures of industrial production in the United States indicate a distinct percentage fall below the level of last year. I remember such a fall in 1953–54, when conditions were rather different, and when the United States administration took the most definite steps to cause a recovery in production. We have every confidence that they will take such steps now, but, in shaping our policies against this shifting background, it is obvious that rushed decisions, or once-for-all estimations of the situation are not appropriate today. In steering our course between the risk of acute deflation and the undoubted presence of inflation in the system, I must say—I will be perfectly clear—that our first and main task must be to win this present round against inflation itself.

I have no particular reason to quote The Times, but it is refreshing to find a sentence in its leading article today with which the Government most heartily agrees. It runs: … it is not a had thing to finish stopping inflation before starting to revive it. That leading article in The Times goes on to say: … it is altogether too comforting to suppose that this country, with its tiny reserves, can spend its way out of a world recession. I shall be coming in a moment to purely financial matters on the Estimates, but I should like to say in answer to my right hon. Friend the Member for Blackpool, North (Sir T. Low) and to the hon. Member for the Stechford division of Birmingham (Mr. Roy Jenkins) that if we are to have increased production, and that is clearly the desire, as expansion should be the aim for any healthy economy, particularly our island economy, it must be from a base from which inflation has been eliminated, and we must provide a sure and sound basis on which we can go forward again.

I will also say this. I have probably had as many years as any one else in this House grappling with these problems. I am fully aware of all the difficulties. I am fully aware of ail the mistakes I may have made. I am fully aware of the great variety of advice available in the world from all manner of experts and statisticians. I voice here a sentiment expressed by my right hon. Friend the Member for Monmouth. Anyone who has ever held this burden is, I hope, modest about it.

When I attempted to give a fillip to the British economy, with such modest things as the investment allowance—they were really quite modest, and the Budget in which I introduced them was regarded as very dull and unimportant—I felt that they were at that time almost too much for the economy in that form. We cannot be too careful, before we give additional fillips or incentives, to ensure that we are not encouraging inflation instead of encouraging expansive demand and production. Therefore, I can speak from my own experience in saying that I am determined, as are my colleagues, to win the battle against inflation before we attempt to stride forward again.

I come now to next year's Estimates. The House will realise that I cannot give specific figures in advance of the Vote on Account. This is what has always made the prospect of this debate a difficult one. One cannot prove one's words by deeds. That harks back to Question Time and foreign policy. One cannot quote the figures.

Our purpose, which, I am convinced, will be fulfilled, is to contain expenditure on the Civil Estimates in line with the Prime Minister's letter to my right hon. Friend the Member for Monmouth, that is to say, within the figure he mentioned of the difference between the Estimates for the coming year and the Estimates and Supplementary Estimates for the current year. I trust that, when these figures are published, we shall be seen to have done this in ways which will be thought to be fair, in view of the paramount necessity to restrict the volume of money and create the right climate in which to break inflation.

I have been asked, in the course of this debate, whether our policy on wages remains unchanged. I unhesitatingly repeat the words of the ex-Chancellor on 29th October last, when he said: Wages increases unrelated to, and going far beyond, the general growth of real wealth within the country are by far the greatest danger we have to face, and we should be deceiving ourselves if we pretended otherwise."—[OFFICIAL REPORT, 29th October, 1957; Vol. 401, c. 57.] So far as a Government can have a wages policy—and anybody who has studied the matter or been at the Ministry of Labour knows the limitations—it will be our duty by our example and by our actions to carry out that principle and see that it has its effect.

We shall achieve the results I have mentioned over the whole range of Civil as well as Defence Estimates. One or two hon. Gentlemen have mentioned the Defence Estimates. I forecast that we shall be seen, when the Defence Estimates are published, to have combined a holding down of expenditure with our aim of arranging our defence Forces on more effective and economic long-term lines. This, we believe, can be achieved by our proposals for the ending of National Service and for organising the defence Forces once more on a professional basis.

We gave definite undertakings to this effect in the Defence White Paper, when we undertook to make life in the Services more attractive. We shall carry out what is said in paragraphs 53 and 54 of that White Paper. I am convinced that our policy is right, both from the point of view of the strategic and tactical needs of the day and in order to provide our industrial economy with more skilled manpower.

Having considered our Estimates, I should like, in the few moments that remain, to examine the estimates of the party opposite. After all, the one difference between our Estimates and their estimates is that ours will not be published for a few weeks, whereas we have a full opportunity of examining the estimates of right hon. and hon. Gentlemen opposite. I shall be quite impartial in examining their estimates. I propose to call in aid the ex-Financial Secretary, my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) whom, I know from my own experience, no one will accuse of mathematical inexactitude. We certainly never found him inexact in the examination of our Estimates. This is what my hon. Friend said about the Socialist estimates: The Socialist policies, at the lowest estimate, would put £1,000 million a year on the Budget and several thousand million pounds of additional Government paper on to the market. That statement was made in August, 1957.

What are the details of this policy? They are the abolition of the Health Service charges and the increases in contributions, the plan to acquire shares in about 500 large companies, the re-nationalisation of iron and steel and of road haulage and the nationalisation of 5 million houses. Do hon. and right hon. Members opposite really believe that that would be an anti-inflationary policy? This illustrates the absolute insincerity