Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 9th April 1959.

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Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth 12:00 am, 9th April 1959

I intervene for a few moments in this debate. It is some months since 1 spoke in the House of Commons, and my first words should be to congratulate my right hon. Friend the Chancellor of the Exchequer in part upon his Budget and in part upon the background to the Budget. He will know that it could give no one greater pleasure than myself to see the favourable turn in our affairs or to see the notable part that he himself has played in achieving it.

Despite the epitaph which has just been written by the right hon. Member for Battersea, North (Mr. Jay), a few more favourable words could appear upon the tombstone: the £sterling, the balance of payments, the rising reserves and the record savings. This is a notable economic achievement. Even in the role of unemployment, the record of this country in a recession is something far better than many men would have conceived possible to achieve in a recession of these dimensions upon a world scale.

To the extent that we have kept the situation more under control than might have been feared, we must give credit to the fact that we entered this recession in a position of strength. If we went into a recession with the economy wobbling, teetering on the brink of an exchange or balance of payments crisis, it would be quite impossible to take the reflationary measures which have been open to my right hon. Friend.

My right hon. Friend knows that he has my support. If I utter a few words of warning or make any criticisms, they are not designed to detract from the solid achievements that he has made. He has introduced the Budget against a background of strength, and the decision that he has had to make is the decision which all Chancellors have to make—how much he should borrow and how much he should tax. It is nice to assume that one can borrow as much as one likes, or even as much as one can, but it is a dangerous assumption, because even Governments have one day to repay what they borrow and no Government can borrow more than their public confidence will command.

It seems to me that the central problem of the Budget and of the question of confidence is, as I think the right hon. Member for Battersea, North said, how we should expand without inflation. It is, perhaps, worth while pausing to contemplate who is expanding without inflation. The Russians are expanding without inflation. Let us take the world as it really is. The Russians have been able to put up their production, to increase their money wages and to reduce their prices at the same time—and, of course, they have had substantial advantages. The picture in Russia is a little less rosy than that painted by the right hon. Member for Battersea, North. In truth, the standard of living there is very low. They have the easier task of building it up from a very low level and with all the advantage of an enormous enclosed market of their own. Perhaps the key to their success—and I think that the right hon. Gentleman stumbled on a part of the truth—is the control of wages. While the right hon. Gentleman praises Professor Galbraith, he should study the proposals carefully. I think he will find that the control of wages is probably the main control that Professor Galbraith has in mind. In any event, the key to the Russian experiment has been to keep the increase in money wages well within the increase in production.