Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 6th April 1960.

Alert me about debates like this

Photo of Mr Peter Thorneycroft Mr Peter Thorneycroft , Monmouth 12:00 am, 6th April 1960

I shall not this afternoon address my remarks, Commander Donaldson, even through you, to the Opposition. I hope that they will not take it amiss, but I can hardly regard the party opposite in financial matters as an opposition to Her Majesty's Government. I want to address my remarks to the Treasury Front Bench and to say a few words affecting them. If I should happen to say anything at all critical of that Front Bench, I hope that hon. and right hon. Members opposite will take it, double it and apply it to themselves because, heaven knows, if my right hon. Friends take any risk with regard to inflation, right hon. Gentlemen opposite would be quite reckless on that subject.

My purpose is not to criticise the detailed proposals of this Budget. I do not share the view that in the situation in which my right hon. Friend finds himself, or has been left by his colleagues— put it how one will—he has room to reduce taxation. I do not hold with that. I do not believe that he is a man who is prepared to ignore the situation in which he finds himself. I think that he has enough courage and common sense—and all those who know him will share that opinion—to take the position as it is and try to do the best with it. I want to talk about the policies that led him into that position; that have, if I may say so, led this country to that position in the past, and that will, I believe undoubtedly lead it to that position in the future unless something is done about it.

First, let me say a word about the background. We have had two years of considerable prosperity, described in glowing terms by the Chancellor of the Exchequer; investments, incomes, consumption, production, wages, profits, savings, revenue, exports—all of them up, and all of them up with stable prices. That is a very satisfactory picture, and I think that everyone can claim a share in it—the technicians, the workers, the managers, the boards, my right hon. Friend himself: even, perhaps a little low on the list, those whose measures two years ago did something to re-establish faith in sterling may claim a modicum of credit.

How come, that after two such years we should reach the point where taxes have to be raised and vague threats of further restrictive measures have to be held out? Nobody who listened to my right hon. Friend could have had any doubts as to the gravity with which he viewed the situation. Indeed, it is all painfully familiar to all of us on both sides of the Committee, with demand tending to outrun resources, with the balance-of-payments situation incapable of sustaining, even at the existing rate— let alone an increased one—our investment overseas.

My right hon. Friend the Chancellor really declared his hand on this situation some weeks ago, with the Bank Rate put up, with the Governor stating publicly that equities were overpriced, with the Government spokesman in another place—who bears the title in private life of Hereditary Standard Bearer of Scotland—saying that gilt-edged were overpriced, and with the Government broker stepping out of the gilt-edged market. With all those things going on, I cannot think that anyone applying his mind to the subject could have expected an easy Budget from my right hon. Friend.

The Chancellor's view, the view of the so-called authorities, was plainly that they were faced with an emergent crisis and they thought that this time it would be better to act soon rather than to act late, and I say that they were right in that judgment. The only thing is that that action, action in this Budget to the extent of imposing additional taxation this year of some £40 million, might have been matched by some reduction in the increased expenditure of £350 million on a Budget of £6,000 million. It must have been a grave disappointment to my right hon. Friend that he was unable to persuade his colleagues on something that he must have pressed with the greatest urgency upon them.

The question that we should discuss, therefore, is how we get to this position, and how we should avoid it in the future. Have we really got it so good that we can never hope for effective and consistent lowering of taxes without running into another crisis? The history of the last ten years under any Government, and I make no difference between any of them, certainly prompts that question and entitles all of us on both sides of the House to demand an answer.

It seems to me that there are two views that the Government can put. They can say that they are the creatures of circumstances; that this situation swept suddenly and unexpectedly on them; that they discovered half way through the year that imports were coming in a bit too fast. Some official comes in and says that the figures—like the shipping figures—are a little unfortunate. That is a possible approach—strong men battling against undeserved adversity.

On the other hand, they can say that they are the architects of the situation; that they are rather proud of it; that they like it; that this rather drab Budget and these threats of restriction are the price we pay for continuing expansion. The Chancellor leant rather to the first approach, the President of the Board of Trade rather to the second; but I should like to put my own view. Here, may I say that I recognise the truth of what the Economic Secretary said in a very able speech today, which is that what happens in this economy is decided by thousands of individual decisions, about when to invest, when to stop, when to save and when to spend. But what all these people do, and above all when they do it, depends to a very large extent upon what the Government do themselves—how much they borrow, how much they tax, how much they spend.

Last year we budgeted for a deficit of over £700 million. We planned to spend a great deal more money. We plan to spend a great deal more money this year. We are embarking upon a round of wage increases backed by demands for a shorter working week and, at the same time under the pressure of demand, competition for labour in the factories is driving up current earnings. And we are doing all this at a time, as the Economic Secretary has said, when it is unlikely that production will go on increasing at the same pace as it did last year.

Against that background, one does not have to look very far to see the origins of the present situation or the necessity of the present Budget. I recognise—I think that I recognise as well as most —the pressures on the Government to spend for defence, a noble cause, though one sometimes wonders whether we are all that safer for spending an extra £100 million, to spend for roads, always popular, and if for roads then for railways—true they may run parallel with the roads—and another £1,000 million is planned for investment in them.

Then there is the Health Service, though the less said about the finance spent on the Health Service the better. [HON. MEMBERS: "Why?"] For the sake of brevity at least. Then there is education. I think that the cry is now "Education at any cost". Then there is the Welfare State, peculiarly designed for the early years of the present century; indeed, directly attuned to the situation of widespread unemployment and poverty which was endured during those years—but any reflection upon that is regarded in certain circles as a dirty word.

In any event, for some years these emergent and growing claims have been irresistible to the Government. During the last five years of Conservative Government spending has gone up by something like £1,000 million. Naturally, during part of that time and largely under the pressure of this spending the value of the £ has been going down, and this year against a background of stable prices a planned increase of £350 million is contemplated.

All these objectives of expenditure are no doubt, in a sense, as the President of the Board of Trade said the other day, justifiable, all of them are desirable, but the truth is that we must either pay for them or give some of them up. It is the attempt to get them for nothing or to try to get them at something below their real cost that has driven this country inexorably over the years from one crisis to another.

Nothing is more boring in a speech than personal reminiscence, but may I just remind the House that two years ago I did leave the Government? At that time the public relations of the Government found it convenient to spread the story that I had left for what they called "a mere £50 million." I observe that today, in conditions of incipient inflation, the sum has risen to £500 million. But the truth is that I did not part with my hon. and right hon. Friends on figures; I parted with them on principle.

I held the view then—I still hold it. and may I say to the House quite frankly that I admit it to be a minority view, though I still feel that I am entitled to put it—that the interests of the economy as a whole should be put above the interests of the individual spending Departments. I hold the view that the avoidance of the risks of inflation, or the defence of the £ as it is sometimes called, should not only be stated to be a priority but that we should act as if it were a priority.

I hold the view that the Government have spent, are spending and are certainly planning to spend a great deal too much money. As I understand the Government, they appear to hold a slightly different view from this. They will, I think, tell the House if they are pressed that what they spend is, after all, the consequence of policies approved by the House of Commons, pressed on them by the Opposition, pressed on them sometimes by the Conservatives, that the increases are inevitable, that costs have gone up, or that wages have gone up, or that the value of money has gone down, but that any way they are keeping employment high and that if they eased spending it might risk employment falling in some areas.

These are different approaches. They are honourable views on both sides of the House, but I think that they are views which in all honour ought to be expressed freely and openly in the House of Commons and in this Committee, because much of our future may turn on the choice between them.

What advice, then, would I offer to my hon. and right hon. Friends? What I have to say I do not pretend is popular, but I would like to say it. First, in their central financial policy, I would ask them to keep their eyes fixed not on the development areas but on the country as a whole where the unemployment figure is dipping below 2 per cent. Spend by all means—this is not always agreed—in the development areas, with special aids to Scotland or elsewhere, but do not try to run the whole country as though it were a declining coal mine somewhere in South Wales, because if we do that it will soon become like a declining coal mine in South Wales.

Secondly, give an assurance now that in about the most highly taxed country in the world tax reduction forms an important part of Government policy, and not only that it forms a part but that it is the determination of the Government to include the taxpayers in a high place as claimants in the future. Thirdly, let us have a little more frank speaking about what the Government intend to spend. If the existing policies mean increased spending this year, next year and in the years to come, then much better say so.

At this very moment orders are going out from the Ministry of Defence for new weapons and matters of that kind. It is impossible for back benchers to have detailed information on these matters, but I think that it would be right for the prospects of future expenditure to be outlined very freely and frankly to us by the Government. They must have some idea of what these expenditures would look like on the basis of existing policies, leave aside flying saucers in the Ministry of Transport or the awful thought that space travel might enter into the head of the Minister of Science. On the basis of existing policies, what would this expenditure look like?

That would represent one line, a steeply rising one, upon a graph. They could make some assessment on what real production is likely to be in the future. Have they thought whether these policies and prospects clash or not? Do the lines on the graph cross? Is there, in fact, a gap between them which would permit of tax relief in the future; which would leave enough room for us to carry out our responsibilities as a principal investor in the British Commonwealth? I believe that the Government must accept responsibility for these matters and that unless and until both the Prime Minister and the Chancellor are prepared to plan the country's spending and to set some limits to it these things will continue to cripple us, with all the side effects on the rest of the economy which we know so well.

It so happens that we cannot run an economy of this kind unless at regular intervals we are able to borrow very large sums of money from the British public. We cannot borrow that money unless the public has confidence in the British Government. If once the suspicion gains a hold that inflation is regarded as something which is tolerable or, at any rate, the avoidance of it is put not as a first priority in high quarters in the British Government, they could lose that confidence, and perhaps lose it for a very long time. I say this with all urgency to my right hon. Friend; he is much nearer to that point than he should be for comfort at the present time.

These are, at any rate, my opinions. I ask my right hon. Friend to realise that though they are minority opinions they are held by other people in this country. There are those who would prefer to out our coat according to our cloth; to ask for rather less or pay something a little nearer to the cost of it; to live honestly up to our overseas obligations; to avoid the intermittent crises from one year to another; to see the Government themselves take the advice which they offer to others in exercising some modicum of restraint. But the leadership, the suggestions for saving, the limits on spending, cannot come from back-bench Members in the House of Commons; they can come only from the right hon. Gentleman himself.