I beg to move, at the end of the Question, to add:
but noting with concern that the policies of Your Majesty's Government have led to a fall in industrial production, a continuing increase in unemployment and a failure to make full use of our industrial capacity, humbly regrets the omission from the Gracious Speech of any measures directed towards the expansion of production and employment while maintaining stable prices.
I should like, first, to present to the House these facts as a background to the debate and this Amendment: unemployment in this country today is around the half-million mark, excluding a great deal of short-time working and concealed unemployment of one kind or another, such as the guaranteed week and the fact that many firms are still holding on to labour which they cannot fully use; unemployment is 200,000 more than it was a year ago and has increased in real terms every month this year; unfilled vacancies at the employment exchanges have fallen by 100,000, with the result that there are now three unemployed men for every unfilled job; industrial production has fallen this autumn to a figure 4 per cent, below even the stagnant level of a year ago and it stands today at a figure of only 4 per cent. above 1954—four points in four years; steel production has been running as much as 20 per cent, below last year; coal is being stacked on the ground at an enormous rate because the coal requirements of our sluggish industrial machine are down by 8 million
tons this year compared with last year—and I ask the House how many miners are working today who would be swelling the ranks of the unemployed if we had the private coal owners back and if this stacking of coal on the ground were not going on; in manufacturing industry 79 per cent. of the firms covered say they are working below capacity; the Board of Trade's estimates for capital investment next year show a prospective fall of 16 per cent. in investment by manufacturing industries, 25 per cent. down in building work and 10 per cent. down in plant, in machinery and in vehicles, and already the building industry, machine tool and other capital equipment-producing industries are feeling the draught.
In the Budget debate last April I described the Chancellor's economic policy, including his Budget, as an assignment with deflation, and I think that the figures which I have just given justify that warning. I must remind the House that we have been warning against the development of this situation for several years past. Even when the Lord Privy Seal was Chancellor of the Exchequer, my right hon. Friend the Leader of the Opposition warned him that the premature dash for sterling convertibility would lead to a situation in which the £ could be preserved only by internal deflation and unemployment. I must repeat those same warnings to those who today, on the basis of a very short-run windfall gain in our balance of payments position, are talking of a further move towards full convertibility—including, of course, the Chancellor himself.
Also, year after year, we warned that a Government which placed undue reliance —over-reliance—on the monetary weapon as its main instrument in fighting inflation, would one day be driven to extremes of policy that would bring deflation and unemployment in their train. That situation was reached, a year ago, with the crisis of September, 1957. We warned the then Chancellor in the clearest terms that the policies he was pursuing would lead to unemployment. We told him, a year ago, that the problem was no longer one of inflation, but that not only in this country but in the world economy as a whole it was deflation that we were facing.
In the economic debate that followed the 7 per cent. crisis, I remember warning the House that it was commodity prices and not Wall Street or the London Stock Market that we should all be watching. I then forecast three developments, and I remind the House of this only to show the dangers that we are facing today; particularly the dangers resulting from Ministerial complacency on the situation.
The first effect will be one which appears favourable to us, an improvement in Britain's terms of trade, import prices will fall and export prices will be maintained, or rise. This, in fact, is already happening and it will generate more Government complacency.
That forecast, I think, has already been justified. We have had the improvement in Britain's terms of trade, resulting from the fall in import prices, and we have certainly had the Ministerial complacency, pressed down and running over.
I went on to say that the second stage would be that the dollar earnings of the other sterling countries would suffer. That has happened. For the third stage, I warned the House that as a result of the fall in commodity prices our biggest difficulty would be in selling our exports abroad. As I said then:
That has happened in every internal depression for a century and a half. Unemployment in this country always began in the export trades and the export trades lost their markets because of monetary depression in the primary producing countries."—[OFFICIAL REPORT, 29th October, 1958; Vol. 575. c. 68.]
That is certainly happening at the present time. Exports which, in the first six months of this year, were only 2 per cent. down on last year, have, in the last three months, been 7 per cent. down on last year—and are still falling.
Our criticism of the Government, against this background, is that in a rapidly changing world they failed to take action in time. Just as in foreign affairs they have carried over the sterile and negative attitude of the cold war into a world of opportunity, so, in a world and a nation calling for economic expansion, they have continued the negative and restrictive policies to fight an inflationary situation that has long passed. In every economic debate—in January, in the Budget debate, in the various stages of the Finance Bill—we warned them that they were missing the tide.
I want for a moment to deal with the Tory legend, because we have heard a good deal of this Tory economic legend in the last few weeks; and not only at Blackpool, and we shall no doubt hear more of it in this debate. This is the legend. The story that we are first asked to believe is that this Government came to power only in January, 1957, with a new and immaculate Prime Minister—Minerva sprung ready-armed from the forehead of Jupiter—and this Government, of course, inherited a dreadful situation. They never clearly said from whom they had inherited it, of course. There was no reference in the legend to Suez, for example, or to the Lord Privy Seal's policies, or to Tory freedom, or, indeed, to the disastrous failures of the Prime Minister himself when he was at the Treasury.
The implication is, somehow, that in January, 1957, more than five years after the Tories took power, they inherited a catastrophic situation from the outgoing Socialists. Indeed, such is the Prime Minister's obsession with 1951 that the years from 1951 to 1957 are to him rather like the lost years of a person suffering from amnesia.
Then, carefully forgetting the 1957 Budget, the hand-out to the Surtax payers, the decontrol, and the Kuwait Gap, and so on—the legend takes us on to the September crisis. Then it was the strong man acted; not afraid to be unpopular, to lose votes, even by-elections, confident that the country in time would understand. Actually, in the legend there is now very little reference to the right hon. Gentleman the Member for Monmouth (Mr. P. Thorneycroft) who took the action, because his position in the Tory legend is rather like that of the late Mr. Beria in the Soviet Encyclopaedia. He is the one we do not mention. They have turned Peter's face to the wall.
The legend goes on that this firm action brought immediate results—improvement in the gold reserves, the balance of payment surplus, the price plateau, with the result that we can now ease up, expand and be joyful, and the credit squeeze, hire-purchase controls, the investment restrictions can now all go and every one can live happily ever after—or, at least, until after the next General Election.
That is the legend. We do not, of course, mind the Conservative Party
deceiving the electorate—that has been their stock in trade for a century and more. The danger for the country comes when they start to believe in these delusions themselves—then one reaches the point where one has to call in the psychiatrist. Take, for example, the President of the Board of Trade on the removal, last Monday, of hire-purchase restrictions. This is what he said:
We can give you this extra bit of freedom"—
We—and I emphasise "we"—can give "you" this extra bit of freedom—the cheek of it!
because the credit squeeze and the other stern measures we took a year ago have worked.
Other Ministers suffer from their hallucinations. The worst victim of all is the noble Lord, Lord Hailsham. This is the kind of thing that he believes. I should like to quote from a television interview that he gave at Blackpool just before the Tory Conference. He then said:
The whole ethos of our conference is based on responsible discussion and sensitivity to other people's opinions.
The noble Lord went on:
In our conference it is very often the minorities that count a great deal.
Lord Hailsham concluded:
If you've ever been to a Quaker meeting you'd find the sort of atmosphere prevailing, of sympathy, understanding and responsible discussion.
Of course, if the Government will believe that, no wonder they believe the economic legend.
Let us turn now from the legend to the reality. The crisis of 1957 was a speculators' crisis, caused by the decontrol over movements of speculative capital and, in part, a flight of British-owned capital to the North American stock market. The crisis ended, as we said at the time, as soon as it became clear that the International Monetary Fund meetings, in Washington, would pass without either devaluation of sterling or the upward revaluation of the Deutschmark; the 7 per cent. and the capital investment cuts in the nationalised industries, the intensified cuts in local authorities, the spiteful little manoeuvrings with the Health Service employees—all these cuts were as irrelevant to the problem as the Cohen Council Reports are to the twentieth century.
In fact, September, 1957—and this was clear from the Washington pronouncements of the then Chancellor, the one we do not mention—marked the date when the Government finally decided to sacrifice full employment to the fight against an inflation which had already passed. That is very clear from what the then Chancellor said.
What has happened since? The gold reserves have risen we welcome that. We predicted that. [Laughter.] This is on the record. It is in the OFFICIAL REPORT of 29th October, 1957. I said:
This is bound to happen…The further the tide goes out—and it went out a very long way in August and September—the higher it usually comes in."—[OFFICIAL REPORT, 29th October, 1957; Vol. 575, c. 65.]
The reserves are, in fact, more comfortable today.
I say to the Prime Minister: go on like this and they will be as high as they were in 1951, although, of course, if one excludes the Suez borrowings, last year's borrowings, help from the Monetary Fund, Adenauer aid and all the rest of it, they do, in fact, stand lower today than at the time of devaluation in 1949, only four years after the end of the war.
What about the balance of payments surplus? Do Ministers really take credit for this year's balance of payments surplus? I know that back benchers do, but Ministers, I think, probably know the facts. The Financial Times, not a Socialist newspaper, said:
It is an achievement, of course, which has been made possible only by sharp drop in commodity prices.
It pointed out that this had caused a fall in imports of £191 million while exports had fallen by only £29 million. Comparing the first half of this year with the first half of last year, the improvement was £180 million, and the improvement in import prices was £190 million.
If it were not for the Prime Minister's "little bit of bloomin' luck"—£190 million worth of it—our balance of payments in the first half of this year would have been no better than it was in the first half of 1957, when things were pretty bad because of the post-Suez imports.
On prices, on which Ministers preen themselves these days, the Treasury Bulletin, issued a month ago, pointed out that in the first half of 1958 compared with the first half of 1957, import prices fell by over 10 per cent. and retail prices rose by over 4 per cent. So it is not a very creditable record.
Speaking generally, if one were being charitable, as I usually like to be, one would say that Ministers have been complacent about the favourable effects of a shift in the world economic position and have been far too slow to alter direction to avoid its unfavourable effects. But, in fact, the present situation has been created not so much by incompetence as by the deliberate, wrongly-conceived restrictionist policies of a year ago and earlier. To claim credit for a belated reversal of those measures, as the President of the Board of Trade did last week, when even Ministers can now see the harm they are doing, is pretty cool, even for them.
Very often during the imposition of these restrictive measures we have likened their economic policies to the medical practices of an eighteenth century quack whose only remedy for all kinds of complaints was a prolonged course of bloodletting. The Government have now carried the bloodletting so far that they have gravely weakened the patient, and now they have claimed credit for the fact that they have had to administer a blood transfusion.
Let me now tell the House what they should have done and what, I can honestly say, at each stage in this rapidly developing situation we have said that they should do. It is not being wise after the event. We have said it at each stage in the debates over the past year. In fact, it was clear eighteen months ago that the investment boom would shortly come to an end and the newly installed capacity was not being used.
In the Budget debate, in 1957, we suggested to the then Chancellor that he should announce that he would restore investment allowances in the following Budget, in April, 1958. We felt that if he had made that announcement it would have given industrialists time and the assurance necessary to enable them to plan their investment programmes ahead, so that they would be able to take up the slack that was likely to develop in 1958–59. But the then Chancellor, in April, 1957, refused to accept our proposal. Even more surprisingly, this year's Chancellor in this year's Budget refused to restore investment allowances, and actually voted down an Amendment to the Finance Bill for the purpose of restoring investment allowances, on the ground that the economy was not strong enough to stand it.
Once it was clear that demand inflation was out of the system, we pressed for a full expansion of industrial production—not haphazard or uncontrolled, not a Lord Privy Seal type of "boom and bust," but a purposive expansion weighted heavily in favour of increased investment. It will be within the recollection of the House that that was the theme of all our speeches last autumn, last winter and in the spring. Indeed, I think I can claim that we said that precisely because of the improvement in the balance of payments resulting from the favourable turn in import prices, this year 1958 was the year for the great surge forward.
As we said at the time of the Budget, there was no danger of an import crisis if we proceeded to increase production, partly because of the payments surplus and partly because the steel and coal industries as well as other marginal importers were working below capacity. But while we went on hammering these points at the Government month after month, the Chancellor dillied and dallied to the point now where investment has sagged so much that he can avoid a slump now only by stimulating con- sumption—indeed, by promoting a spending spree.
We maintain that action taken earlier could have maintained full employment by means of increased investment which is what the country needs. But now, because he missed that opportunity, he has to gamble on a consumption boom. It is widely admitted now that he cannot even get an increase in investment from manufacturing industries without an increase in consumption first. Industrialists will not put in new machines when their existing ones, including the so far under-used installations of the so-called Butler boom, are still working below capacity.
As a result of this delay, the Government are now giving the wrong twist to the economy, just as the Lord Privy Seal did a few years ago. We all remember that after years of failure to stimulate investment, the Lord Privy Seal finally brought about a boom in investment but so much of it was the wrong kind of investment. It was plant and machinery to produce consumption goods and not to strengthen our investment industries.
If the House compares the direction of the Butler boom with that of recent German development, we find not only that year by year German industrial investment has been higher than ours, but a much higher proportion of that has been in the basic and heavy sectors of the economy, industries themselves producing for investment and for exports, and a much smaller proportion than ours in building up the consumer goods industries. If we are to maintain our place in the world we need to stimulate not consumption but investment.
We all said that, on both sides of the House, in the debate on the Free Trade Area, two years ago. I do not know whether there is to be a Free Trade Area or not. Black smoke is still issuing from the proceedings of the Maudling Committee—thicker than ever—but, Free Trade Area or no Free Trade Area, we have to face the inexorable and menacing rise in industrial production in Russia and China, as well as in Germany and Japan.
In this document "Onwards In Freedom", the Prime Minister repeats his great thought. He says:
First and foremost, we believe in the continuing greatness of Britain,
and he talks of the part our people must play in what he calls "the new industrial revolution, scarcely less exciting than the first one"—exciting for some people, I suppose. We do not achieve industrial greatness with a stagnating economy. We do not achieve industrial greatness with a frothy consumer goods boom. When the Government took over in 1951—not 1957—we were the second industrial Power in the world. Now, we are about the fourth. We have been passed by Russia and Germany, and Japan and China are putting on the pace, while we are drifting about in the shallows of an industrial depression and an induced consumer goods spree.
The plain fact is that the Government have let deflation go too far over the past year, and, as we have warned them, while it is one thing to stop a boom, it is another to stop a slump. Many months ago, we reminded the Chancellor of the saying which is used in America that one can pull a piece of string, but not push it. We may, perhaps, for a period of time, get a temporary increase in production by our induced consumption boom, but we must ask the Government, in view of the speeches we have had from them, what it means in terms of the continuation of the inflationary danger, of increased imports, of the home market's pull on goods that ought to go for export, and of our competitive power.
For three years, until a few weeks ago, the Government did not even dare to think of industrial expansion, because of their fears of inflation. Now, they have suddenly taken the lid off. I hope that we shall hear nothing from the Chancellor this afternoon about the fight against inflation. What could be more inflationary than the banks falling over themselves with their personal loans schemes, unprecedented even in the years of the prewar slump? Or hire purchase? It is really no good preaching the inflation sermon any more. There is nothing more inflationary, after all, than buying this year's goods out of next year's income.
Of course, these panic measures are completely inconsistent with the Government's determination to cling to other measures which were introduced in the past in the fight against inflation. They still have not dared to reintroduce investment allowances, which were scrapped by the present Prime Minister. We must, apparently, go to any lengths to increase consumption, even to the point, as I have said, of buying this year's goods out of next year's income, and yet maintain the wages freeze. Last Tuesday, the Prime Minister talked of the increase in personal savings. Does he want the increased personal savings to continue? Does he want consumers to go on increasing their savings, or to save less and consume more? Will he tell us how a hire-purchase boom helps increased national savings? These are the things which the Government should get clear in their minds and should tell us about.
What about investment in the public sector? When the private sector got out of hand a few years ago under the Lord Privy Seal's boom, the Government tried to redress the situation, not by controlling the private sector, but by cutting the nationalised industries and the local authorities. A year ago, the then Chan cellor made further cuts in the investment programmes of the nationalised industries, and, with their typical bias against public industry, it is these cuts which are the last to be removed. We scrap the whole credit squeeze, but still leave control on the nationalised industries.
I hope that the Chancellor will tell us this afternoon, since he is taking the lid off everything else, that the investment programmes of the publicly-owned industries will be free from control. They ought to have come first, not last, because these are essential investment programmes. Then we would ask about the Post Office investment programme, and I hope that the Chancellor will refer to it, because it was cut last year and is still suffering.
Now I must ask the Government what about the local authorities? They have been the whipping boys of four successive Tory Chancellors—three of them still sitting on the Front Bench opposite. On top of all the cuts of 1956–57, and they were very severe as far as the local authorities are concerned, we have been reading right up to the present time of further cuts by Ministers of the local authorities' capital programmes. In July, for example, the Minister of Education cut the L.C.C. educational building programme to nearly one-third, including a cut from £900,000 to £265,000 in a major scheme for improving the teaching of science and mathematics. How does that square with the Prime Minister's great speeches? I hear similar reports from Lancashire.
I hear on the radio of a statement that we shall have slashing cuts in the county roads programme in the South-West—cuts which are severe even by comparison with last year. How do the Government reconcile these cuts in essential local services with this "free-for-all" for the banks in the hire-purchase business? Again, we must ask, if the Government are to make substantial allowances to the building societies, whether they are to include the local authorities in that scheme. Are there to be the same facilities provided on equal terms for the local authorities, or is this purely restricted to private enterprise? I hope that we shall be told something about that.
Let us take the question of the social services, and I put this direct question to test the sincerity of that self-styled expansionist, the Prime Minister. Two years ago, when he was playing his "Mac the Knife" rôle, he introduced as part of his so-called anti-inflationary policy a series of mean and vicious cuts in the standard of life of those least able to make sacrifices. There were not only the food subsidies, but the meanest and most vicious of all his economies was the individual prescriptions charge on the old-age pensioners and the chronic sick. We were told that that measure was essential for fighting inflation.
Now, the fight is off. The real enemy is identified as a lack, not a surplus, of spending power. In these circumstances, will the Government now remove the imposition introduced by the Prime Minister, because unless the right hon. Gentleman really believes in it as a means of disciplining the sick against taking too many prescriptions, or disciplining the doctors, unless he believes in it on these grounds, the excuse he gave for it when he introduced it—the need to fight inflation—has, on his own admission, gone.
What is now happening? It does not add up to a policy at all. It is a combination of panic measures and political cynicism. It creates unemployment and slack in the economy, so that he can then offer a series of Election bribes, culminating in an Election Budget, compared with which the Lord Privy Seal's 1955 Election Budget will look like the very soul of fiscal integrity. Again, I think we can claim that we foresaw this strategic manoeuvring in our debates last spring. I think then that I gave credit for it, not to the Chancellor, who would not be capable of such a thought, but to the Prime Minister himself. The trouble is that the present stagnation in British industry measures the damage which they are prepared to inflict on the economy to create the room for this political manoeuvring.
I have given the figures of unemployment. Does the House realise the remorseless growth in unemployment month by month? In January, there were 13,000 more than in the previous January; in February, the gap compared with a year earlier had risen to 44,000; in March to 70,000; in April to 101,000; in May to 134,000; in June to 165,000; in July to 167,000; in August to 180,000; and in September to 209,000. As I said, these are figures which understate the real position because of the very heavy degree of under-employment which is going on. Let there be no doubt that these men and women are unemployed as a result of decisions taken on the grouse moors by Tory financiers and discredited politicians a year ago.
Hon. Members will, no doubt, underline the position in different parts of the country. In Scotland, unemployment has increased by more than a half. It is now 3·7 per cent., and in parts of Scotland, Greenock and Port Glasgow, for instance, it is 7½ per cent. In Wales as well, it is 3·7 per cent., with pockets of unemployment very much higher than that. In Wales, against over 35,000 workers out of work, there are less than 7,000 unfilled vacancies at the employment exchanges. This is less than one vacancy for every five people on the dole.
How does that born expansionist the Prime Minister reconcile these facts with the speeches we keep on hearing from him? I gather that, because of tradition, he is not speaking in the debate on this Amendment; I think that it is unusual for the Prime Minister to reply.