At that time it was necessary to give first priority to saving the £ sterling. I assure the right hon. Gentleman that in both the private and public sectors the policy of encouraging investment was pursued far earlier in 1958 than is realised by hon. Gentlemen opposite.
There is much in the point made by my hon. Friend the Member for Cheadle that we would not have had this prospect of increased investment but for the tax reductions in last year's Budget. It is unreal to suppose that one can get investment going without businessmen feeling that they have an expectation of reasonable profits for a term of years.
I am not blaming the hon. Member for Stechford, but I noticed with interest that, unlike many of his hon. Friends, he said nothing about pensions. The party opposite must decide what is its first priority. Is it first and foremost a party which wishes to increase the proportion of the national income going to investment, or a party which is more ready to respond, all the time, to appeals for greater social service expenditure? If we try to do all these things at once the effect can only be to return to a state of overstrain, in which we place the £ sterling in danger, which would be the greatest of all enemies of economic progress.
I come back now to the principal object of my right hon. Friend's Budget. As the Committee is aware, it is to exercise a moderately restraining influence on the rate of expansion. As my right hon. Friend's Budget speech showed, this rate of expansion is likely to show a continued upward trend in total demand, with consumption, public authorities' expenditure, investment and exports all expected to rise. At the same time, as we all know, the country no longer has the reserves of labour and unused capacity which existed a year ago.
Unemployment over the whole country is below 2 per cent., and in the Midlands and the South labour shortages are beginning to develop. Quite clearly, there are dangers that expansionary forces could lead to an overloading of demand. If this were allowed to happen, it would, first, destroy hopes of maintaining price stability and, secondly—and perhaps still more dangerous—it would have an adverse effect on our balance of payments.
I must make it clear that my right hon. Friend is not seeking to stop the economic expansion which has been so striking a feature of the last twelve months. There is no doubt that total demand, and particularly capital investment, will continue to increase. I emphasise that the Budget is designed not to curb the revival of industrial investment, but rather to make room for it. We want to live within our means as a nation, and fortify our balance of payments, without hitting at the roots of our future earning capacity in a competitive world.
On the other hand, the Government have shown by the decision to increase taxation and by their declared readiness to use monetary policy, that they are determined not to allow the economy to drift once again into a condition of excess demand, inflation, and balance of payments crisis. In other words, we want to hold on to the twin advantages of growth coupled with stability which we have enjoyed during the last twelve months.