Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 17th April 1958.

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Photo of Mr Fred Mulley Mr Fred Mulley , Sheffield Park 12:00 am, 17th April 1958

That is the attitude of many people, if they can get away with it.

We all know, surely, that it is elementary common sense that if we want to reduce the price of something we do so by increasing the number of the articles we produce. We also know that when businessmen in the retail and other trades, who all need to make a living on their turnover, find their turnover reduced, they seek to get a higher margin of profit on each article with which they deal. Any restriction in production will surely add, to the cost of each individual item. Lord Keynes said that the workers were "sticky" about the reduction of money wages. I am quite sure that many sections of industry are "sticky" about reductions in money profits, and will indeed so organise themselves that if their turnover is reduced they will yet obtain roughly the same amount of return.

An interesting phenomenon of the last twelve months is that the Conservative Government have discovered the virtues of a stable cost of living. One might almost have thought they had in 1951, when they plastered the country's hoardings with posters to this effect. What happened to this ideal of a stable cost of living between 1951 and now? If the Government put up the bogy of the cost of living only to knock it down, they are only criticising themselves, because they have been in charge of the economy for a very considerable time. The taunt about the misrule of the Socialists has surely worn rather thin by now.

I should like, but have not time now, to develop this, but in considering the reasons for inflation and particularly the reasons for the crisis of last autumn, I believe, although no one would he dogmatic about this, that it is absolutely unproven to say that wages or costs have been the major factor in inflation. Again, on this particular point, I am very happy to quote Professor Lionel Robbins in support. It is a technical and difficult argument to deploy, and I will not attempt to do it. But I think that the majority of economists would agree that there is no basis at all for the popular public meeting argument of Conservative Members of Parliament that the whole blame for inflation rests on wages. Wages generally have tended to follow increases in prices, and have not tended to be a factor in producing increases in prices.

The other interesting features of last autumn's crisis were that it took place when we were running a very reasonable balance of payments surplus of over £200 million, and that it took place at a time when the terms of trade were running very strongly in our favour. If we cannot avoid an exchange crisis in these favourable circumstances, what will be the position if these trends, as they very well may be, are reversed?

I should like to make some observations about our responsibilities to the sterling area, where we have liabilities of almost £4,000 million. I would make a guess that we could not raise more than £1,200 million even if we took all the dollar securities of private citizens and every bit of foreign exchange that we could raise. I was rather shocked by the Paymaster-General when he made play of the very clear statement by my right hon. Friend yesterday about supporting sterling. We have consistently done, and we shall consistently do, our utmost to maintain the purchasing power and the international reputation of sterling. Any other view would be quite suicidal, and it is because we see the present Government's policy undermining the future of the sterling area that we are so extremely concerned.

I should like to hear from the Government, either now or next week, what they are going to do about trying to get some agreement on the sterling area position, because, as we all know, the greater part of the sterling area liabilities are on demand. Frankly, I think it was a miracle that, during the Suez crisis, newly independent countries in Africa did not demand the full payment of their sterling balances.

In view of the late hour, I will not do more than make one comment on the other most unsatisfactory aspect of the Government's economic policy, namely, their failure to deal with the export position. We all know that our exports are extremely vulnerable, and I was very impressed by a table of figures which I saw recently showing the shares of world trade in manufactures. If we compare the position in 1950, when the share of the United Kingdom of total world trade was 25·6 per cent., with the latest figures, which are for January to June of last year, we find that the figure has dropped to 18·3 per cent. I will not take up the time of the Committee by reading out the rest of the figures; obviously, the shares of West Germany and Japan have increased, but every country except Switzerland held its proportionate world trade position except ourselves.

Yesterday, the President of the Board of Trade asked: if production is expanded, where do imports come from, and what about a balance of payments crisis? I would put to him—and he ought to be concerned himself about it, because he is the President of the Board of Trade—that if a Conservative Government had only been able to hold, let alone increase, the United Kingdom share of world trade in 1950, there would have been another £1,200 million in exports, not only enough to pay for the extra imports but to give us a balance of payments surplus big enough to deal with the whole of our economic problems.

If I may sum up the position, in our view, the Government's economic policy, either by design or incompetence, is directed towards unemployment and does nothing to assist exports or raise production. If the Chancellor and the Government are either unwilling or unable to take effective action to deal with our serious economic problems, they should get out now, as is the wish of the whole country, and let in a Government who will.