So far, the figures do not reinforce what the hon. Gentleman has said.
To me, the most frightening thing about this whole debate so far has been that so few hon. Members have mentioned the balance of payments. Even the Chancellor—though, of course, he said something on the subject—seemed to me to be making light of the situation. He never mentioned the fact that in the last three months of last year, indeed at the time of polling day at the last General Election, we were already in a balance of payments deficit. On 8th October, the balance of payments were not having it good at all, although the public was not told this until March of this year. So far as I can see from the visible trade figures, we have probably still been "in the red" since January.
Our gold reserve is lower than a year ago. Sterling balances are higher. The terms of trade, as was rightly said by the hon. Member for Louth may easily get worse. We are at the beginning of the awkward time of the year for sterling. With that background is the Chancellor really sure that he has done enough to forestall trouble this autumn? This summer he may have to face some even more harsh realities than the hon. Member for Kidderminster. The total deflationary effect of the Budget is only £13 million, as I think the right hon. Gentleman would agree.
It is not necessarily by fiscal measures alone that the Chancellor might have resisted this new slide into deficit. Was it really necessary, as the gold reserve dwindled last year, to make repeated unilateral concessions to dollar imports without getting any relief in return, for instance, on the wool tariff quota which the right hon. Gentleman knows very well? Though, heaven knows, we needed the expansion last year, was it really necessary for so much of the expansion to come by the wild inflation of bank advances of £700 million, going largely to enable people to spend beyond their earnings and, to some extent, to buy equity shares on the Stock Exchange? It is mainly the selling of gilt-edged by the banks to finance these loans which has forced up interest rates and made it difficult for local councils to build more houses.
The Chancellor said that this had been an annus mirabilis for the saver. It has not been an annus mirabilis for the holders of gilt-edged, as I think he will agree. The Chancellor should have checked this inflation earlier by direct requests to the banks and not by hints, nods, winks, nudges, and so on, which produce so little effect.
What really was the point of his mysterious Delphic warning last Tuesday about possible credit restraint which, so far, has had no effect other than to push gilt-edged prices down even further? If it turns out later this summer that credit and import policies are inadequate to check this slide into deficit, I should be prepared, rather than to face an autumn crisis, to accept a higher Profits Tax— I am saying this to the President of the Board of Trade, in particular—a capital gains tax, more drastic measures against evasion, and a complete withdrawal of the initial allowance on cars. Surely, to mention one point, there is this merit in a capital gains tax, that it brings in the biggest revenue in years of boom, when we want to exercise restraint and obviously lower revenue in the years of recession.
The Chancellor may argue that everything is all right because production is rising. Certainly, the 10 per cent. rise in the last year is better than the three years of stagnation we had after the Home Secretary's declaration that he was going to double the standard of living in twenty-five years, and the one year of outright decline after the Budget speech of the right hon. Member for Monmouth, which he introduced with the words, "Our theme is expansion." All the same, it is not the least bit impressive, if we look back a few years, and if we look abroad outside this country.
The incredible truth is that our industrial production is only 10 per cent. higher now than it was at the end of 1955, a rise of only 2 per cent. per year since then. If it is really true that demand is now pressing against capacity after a rise of only 10 per cent. production in five years, there must be something seriously wrong with the development of British economy in the last eight years of Tory rule.
If we look abroad, as my hon. Friend the Member for Grimsby (Mr. Crosland) did yesterday, the figures are even more shattering. I give a few in addition to those he gave. Since 1953, industrial production in the United Kingdom is up by 27 per cent., but Western Germany's industrial production is up by 72 per cent.; that of France by 70 per cent.; and Italy's by 68 per cent. That in itself is an interesting comment on our lack of success in negotiations over the Common Market. Certainly, we shall not remain a great Power for long if that goes on.
We must ask ourselves: what is the cause of our failure? First, of course, it is the lack of investment; and, secondly, it is the deliberate deflation of demand in the home market, which has held back production and investment for so many recent years. Indeed, it is that very deflationary policy which the right hon. Member for Monmouth and the hon. Member for Wolverhampton, South-West practised, and even now still preach, which has done most of the damage. The trouble about right hon. and hon. Gentlemen is that they are so obsessed with money and finance that they hardly look at the realities of production and employment at all.
I wonder, also, how many hon. Members realise that the volume of exports from this country last year was only 10 per cent. higher than in 1950. The volume of imports, at the same time, was 30 per cent. higher? As the hon. Member for Louth rightly said in the debate, it is only the remarkably favourable terms of trade which are saving us today. The terms of trade are actually today nearly 25 per cent. more favourable than they were in 1951. Indeed, if we had the present volume of imports and exports, with the prices of 1951, we would be £1,000 million in deficit at the present moment.
So, although we welcome the Chancellor's few pink-and-white Socialist proposals, I do not think that he has a great deal to be complacent about. He has presided over a year in which profits and dividends have steadily gained at the expense of wages, in which gilt-edged prices have fallen to the lowest levels ever, in which the gold reserve has fallen and sterling balances risen, and in which we have slid into a balance of payment crisis with the most favourable terms of trade ever known. That does not seem to be an annus mirabilis, even by Tory standards. Once again, we have learned that under this Tory freedom system, with all its capital gains and never-never booms, we cannot have expansion and full employment without getting into a crisis within twelve months.
I have one more direct question to ask the Chancellor, who is to rise to speak within half-a-minute. The Economic Secretary said yesterday, talking about old-age pensions, that performance is better than promise. The Tory election manifesto, in a passage which I have read tonight, gave a direct promise that the pensioners would be assisted. Will the Chancellor tell us tonight when that pledge will be honoured?