Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 8th April 1959.

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Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet 12:00 am, 8th April 1959

I do not see how the right hon. Gentleman can confuse the aid received by the rest of the sterling area with the capital account of the United Kingdom. He is confusing these matters. The point is that the gold reserves increased by over £ 280 million and the capital position of the United Kingdom improved by about £ 219 million in 1958. The second answer is that prospects for world trade are improving. The United States has made a rapid recovery which the right hon. Gentleman did not foresee last year. Europe is showing signs of expanding again, and the fall in commodity prices appears to have been checked and in some instances reversed. Internal prices have remained virtually stable for ten months, and we hope that wage rates will remain stable.

It is important to emphasise once again, as my right hon. Friend did yesterday, that if a return to expansion means a return to conditions in which wages expand faster than productivity the inevitable result must be an increase in prices. It is clearly desirable before encouraging re-expansion to have confidence that that process will not again take place. My right hon. Friend the Chancellor has moved cautiously forward, testing the ground as he has gone. How right he surely was. Is it not far better to move cautiously and confidently rather than to dash ahead, as the party opposite did so often between 1946 and 1951, ending either with the dissipation of the dollar loan, devaluation of the £, or with throwing in their hand and having a General Election?

The party opposite and the right hon. Member for Huyton talked a good deal about an impending General Election. and they obviously regard themselves as the alternative Government. I think that in those circumstances they should begin to live up to their responsibilities and stop advocating the sort of bogus policies which appear in their party documents. A common myth, to which the right hon. Gentleman himself gives so much publicity, is that by some change of policy the Labour Government could increase national output by £1,700 million and, as a result, produce another £450 million of tax revenue without an increase in the rates of taxes. But even £450 million would not be sufficient to cover the expenditure which they envisage and the overall Budget surplus to which the right hon. Gentleman committed himself last year.

The argument itself is fallacious. They say that if they were in power they would go back to the rates of expansion achieved between 1946 and 1951, but in the years after war, when industries were regrouping and recovering, obviously rates of expansion would be high. I agree that a return to Labour Party policy could lead to some expansion. But clearly it would also lead to a return of inflation, a balance of payments crisis and a run on the reserves. The party opposite says that it can now prevent that happening It claims that it can now pursue a policy of expansion without inflation. Right hon. Gentlemen opposisite did not do it in the past. What reason have we to suppose that they can do it now?

I have studied the speeches of right hon. Gentlemen and the party documents and have tried to find the answer to the question of how they can achieve this great expansion and pump into the economy all the purchasing power that they talk about without a return to inflation, rising prices and a crisis of balance of payments. Let us turn to their official document and see how. Not, apparently, by a wide system of price control. All that they are going to do about prices is "watch "them. That seems to me a rather unprofitable procedure. How are we to have expansion without inflation? Their first proposal is to end Tory restrictions on production. What Tory restrictions on production are there at present? I cannot think of any. I should be most grateful if right hon. Gentlemen opposite would tell me. Possibly rates of interest may be what they have in mind. If so, that confirms what one suspects; that they will return to a Daltonian era of artificially cheap money—" lubricating the economy with a sufficiency of purchasing power ", with the consequence that inevitably follows.

Their second step is to … launch a plan for capital investment which will put more horse-power at the elbow of workers in industry and in agriculture. What is meant by a plan for capital investment? In the public sector we have one already, and it is, of course, based on estimates of future demand. Would the right hon. Member for Huyton plan capital investment greatly in excess of likely future demand? Right hon. Gentlemen opposite probably would, and a very wasteful process it would be. Then how would they plan the private sector? Surely, the private sector determines the level of capital investment in the light of probable demand, but if the gentlemen in Whitehall are to determine the capital investment programme we shall finish up with an excess capacity in some sectors and an inadequate capacity in others.