Orders of the Day — Finance Bill

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

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Photo of Mr Harold Wilson Mr Harold Wilson , Huyton 12:00 am, 12th May 1958

I did not realise that the hon. Member for Kidderminster (Mr. Nabarro) had contributed to it.

As I was saying, the theme of the debate was expansion versus stagnation. This was so clearly the issue that the Paymaster-General, the President of the Board of Trade, and, at the end, the Chancellor himself, devoted a great deal of time to defending the Government's stagnation policy and trying to prove that expansion was a dangerous thing to advocate. I will not weary the House by repeating the contrast between this country and the rest of Europe, where steady expansion has not led to crisis. Right hon. Gentlemen say that we cannot expand this year, or two things will happen: first of all, there will be a boom and a price increase, and, secondly, there will be an import crisis.

It is a fact, of course, that the cost of living has risen most in this country despite stagnation—indeed, in our view, because of stagnation. I will not repeat either the figures or our arguments to show that stagnation leads to higher and not lower costs. I will put to the Chancellor this question, to which I hope he will reply tonight. If he really believes the argument that expansion will mean crises of the kind he described, what will happen next year if the Government permit expansion then? On their arguments, will we not then suffer the inflation and the higher prices? It is all very well the Chancellor saying, "We would like to swim, but we will not because we might get wet; we will stay on dry land and keep as dry as we can", because, when we do finally dive in, according to his argument, we shall still get wet. How, therefore, does the right hon. Gentleman think that, by waiting, we shall be less likely to run into crises when we do expand?

Even more ludicrous is the argument about an import crisis. Right hon. Gentlemen say that, with expansion, the demand for imports will shoot up and there will be a balance of payments crisis, to be averted only if we have import controls, raw material allocations, rationing of materials, higher export cost, and so forth. That was the burden of the speech of the Paymaster-General. The trouble is that right hon. Gentlemen opposite are still obsessed by the fate of the Lord Privy Seal. The 1954–55 boom led to an import crisis because it was uncontrolled, but, since then, the basic industries have slowly expanded their capacity and, in my view—I put this to the Chancellor—we could have a 5 per cent. increase this year quite safely without running into a balance of payments crisis. I will give three reasons to show that that is right.

So far from there being an import problem in steel and coal, we have today a surplus of steel—we hear of steel works going on short time—and there is certainly no question of our having to import coal. We have a surplus of coal and steel, and we have that surplus precisely because of stagnation in the rest of industry. Secondly, in the so-called "Butler" boom, the biggest import demand came from the motor car industry for sheet steel. Today, within stagnation, the motor car industry is booming more now than before, yet there is no crisis in imported sheet steel. I suggest, therefore, that we could expand, especially if we were to expand in terms of investment goods, without having that crisis. My third reason is that, even if more imported materials were needed as a result of expansion—there would obviously be some increase—the very favourable terms of trade would enable us to import 10 per cent. more materials this year than last without adding a penny to our import bill.

The year 1958, so far from being a dangerous year for expansion, presents the most favourable, uniquely favourable, conditions for it. On the Paymaster-General's argument, we must have stagnation for ever and ever. I utterly repudiate his argument that expansion would lead to crises and import licensing. We do not envisage import licensing, except on dollar goods. We have import licensing on dollar goods now, and it does not lead to all the dreadful consequences outlined by the Paymaster-General. Where he entirely fails to grasp the essential point is in his failure to see the difference between an uncontrolled, "Butler" boom and a planned expansion.

If we were to take over now, with an economic system a long way below capacity, we would not envisage a rip-roaring free-for-all, consumption boom. The Chancellor is quite right to resist that. We would plan for increasing investment, first, in the public sector, in roads, railways, and so on, and, in the private sector, by investment allowances and other fiscal incentives. Above all, we would encourage, by every means open to a civilised modern State, expansion in those sectors which could do most to help our balance of payments.

A recent very remarkable book by the City Editor of the Observer, Mr. Shonfield, points out how very backward the shipbuilding industry has been about expanding to meet overseas demand. Help to the ship builders would have been a direct aid to our exports. The same might be said of sections of the machine tool industry. When we were in power, we had a problem with an important section of the building and civil engineering equipment industry, which would not expand until we gave a guarantee that we would purchase any units it could not sell. Those concerned went ahead and expanded. The next time I saw them, so far from wanting us to honour our agreement to buy any units they could not sell, they asked if we could find them a 7 million sq. ft. factory to produce some more. Private enterprise is very often extremely cautious in meeting world demands of that kind.

Equally, we would plan for expansion in import savers. During the Paymaster-General's speech, I referred to two instances. This was not simply import licensing. We invested in a carbon black factory which saved us from having to import carbon black. We greatly expanded the size of the sulphuric acid industry of this country, using indigenous raw materials in place of imported sulphur. This enabled the chemical and other industries to expand without automatically putting a big strain on our dollar balance of payments. Therefore, expansion does not mean just import licensing and allocations. A planned expansion means making ourselves more independent of imported supplies.

I hope that the Chancellor will consider expansion again. We have a suspicion that his arguments—I am sure that he would be the first to agree if he thought about them—will not stand up for a moment and they are really a part of a carefully planned strategic manoeuvre. I am sure that the Chancellor is not himself responsible for it; it bears all the marks of the Prime Minister's work. Obviously, he is holding down demand this year and holding down production this year, ready to have a rip-roaring boom in time, next year, for a General Election so that we shall have, as we had in 1955, a boom, full employment, overtime, no short-time working, leaving, the consequences of an uncontrolled boom to be dealt with immediately after the General Election.

In 1955, of course, having denied during the Election that there was any crisis at all, the Government were faced, on getting back to office, with a crisis which has not ended or even been in suspense during the three years which have followed that Election. After the next General Election—no doubt, this is the policy which they are secretly hugging to their breasts—the mess will have to be cleared up by my right hon. and hon. Friends on this side of the House.