Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 11th July 1960.

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Photo of Mr Richard Marsh Mr Richard Marsh , Greenwich 12:00 am, 11th July 1960

The hon. Member for Portsmouth, Langstone (Mr. Stevens) is a typical example of the terrifying complacency which exists about this country's economic situation at present. He said several times that there is no crisis now. This is the operative question. This is the point which worries so many of us—not that there is a crisis now at this moment, but that a very serious crisis is around the corner. Many people feel that the right hon. Gentleman's present proposals and his policies in the past are not so far steering us away from it.

Some of the arguments which the hon. Member put up and then proceeded to demolish were fascinating. He champions the cause of higher rates of industrial investment. No one on this side denies that. The Labour Party fought its campaign at the last General Election primarily upon the economic argument that there was a need for a much higher rate of investment and that that higher rate of investment is not taking place at present.

The hon. Member mentioned, as other hon. Members opposite mentioned, the controls, restrictions, and difficulties with which this country was faced between 1945 and 1950. It is a rather sad pass when a Government in 1960 look for comfort upon a comparison between 1945 and 1950 when this country was emerging from the biggest war in history, with its industrial potential wrecked.

I have only this to say on those "wicked" Socialist controls. Many countries in Europe did not have such Socialist controls at the end of 1945 to 1950, and the majority of those countries finished up with very large Communist Parties instead. If the Labour Party can claim credit for anything in its economic record, it can claim credit for the fact that its policies and the controls it imposed gave people at least a minimum standard of living, which enabled them to maintain their faith in democracy, which people lost under many Right-wing Governments elsewhere.

A number of tributes have been paid this afternoon to the Chancellor of the Exchequer, with which from a very limited experience of his speeches I would very much like to be associated. I am sure that all the other new Members agree with me in that. His charm, his courtesy, are the envy of all and an instruction to many.

That, however, is a feature of the whole Government economic team. The one thing that can be said of all those on the Treasury Benches is that they are a charming, courteous, pleasant group of people. One echoes the words of Bishop Crichton, who said of one of his parishioners: He is as good as gold and fit for heaven, but of no earthly use. That statement might well be applied in that direction.

The most dangerous thing about this crisis is that it has a dreadfully familiar ring about it. It is already becoming a regular pattern of the economic system. In January, we have restraint. In April, we have a Budget that seeks to put matters right. But it is based on the assumption that everything will go in our favour and, unfortunately, that never happens. Then, in the early summer months, we have credit controls and, recently, we have been faced with higher interest rates. We had it in 1955 and, to a lesser extent, in 1957.

The trouble is that by the time the remedies are applied the complaint is changing. By the time we have met the boom, the economy is already moving—as I think it is now—towards a recession. This type of machinery is all very cumbersome. It is very easy to reverse the Bank Rate when one has applied it—and its effects are quite rapid—but the efficacy of special deposits is, to say the least, dubious, and, in any case that step takes longer to take effect and is much more difficult to reverse once it has been put into operation.

Several times today we have been told that this is something that will always be with us; that there is no escape from it; that the maintenance today of a low level of unemployment allied to a relatively high standard of living makes this perpetual economic tightrope part of our existence for all time. If that is the case, then, by the very nature of things, by the very law of averages, at some time a mistake will be made.

The Chancellor makes the point—I think, very fairly—that the degree of manoeuvrability is very narrow; that at any time he has either just hit the mark or has just missed it. But to base the future economy of 52 million people on that is to ensure that at some time in the future, in a rapidly changing society, we shall be faced with a serious economic crisis. It is regrettable that hon. Members should go away from here pleased with themselves because, at least, there is no economic crisis at the moment. The biggest present necessity is to plan far enough in advance to avoid an economic crisis later.

Many gibes have been made at the tendency of the Government to manipulate the economy in order, it is suggested, to enhance their General Election prospects. The Chancellor and some of his hon. and right hon. Friends get very annoyed at this allegation, and one can understand it. If it is a true allegation, it is an extremely serious one. If, in fact, any Government, of any political complexion, is prepared to endanger the economic well-being of a nation to enhance their electoral prospects. they are guilty of most serious offences.

If that allegation came only from this side, one might, perhaps, dismiss it as pure party propaganda. But the right hon. Gentleman knows full well that it does not. During the Second Reading debate on the Iron and Steel Bill, on 18th February last, the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) intervened—he and his hon. Friend the Member for Kidderminster (Mr. Nabarro) played a notable part in that debate. The noble Lord said: What I am certain this country does not want to see again is the sort of violent rise in prices which occurred after the 1955 Election in consequence of the economy having been dressed up for that Election…—[OFFICIAL REPORT, 18th February, 1960; Vol 617, c. 1486.] The noble Lord can be accused of many things, but incipient Socialist sympathy is not one of them, and I think that one is bound to give some weight to statements made by hon. Members opposite that their own party—they themselves—was guilty of rigging the economic scene for the last General Election.

The biggest problem we face results from that pre-General Election boom—this artificial boost to hire purchase. I am one of those innocent characters who was brought up as a child on the simple doctrine that if one could not afford something one did not have it. I married an economist, so I have to treat them very gently, but I think that economists tend to complicate economic affairs too much.

There is much similarity between the economic well-being of a country and the economic well-being of a family. Any family that gets up to its ears in debt will have a wonderful time—until the day of reckoning dawns. It was much easier, as hon. Members opposite will appreciate, to start the hire-purchase boom than it will be to stop it. It was much easier to turn the country into a national "slate club", living on "tick", and almost turning that into a form of patriotism—much easier than to turn it away from that.

In April, the hire-purchase debt went up by£29 million, and the country as a whole now has a hire-purchase debt of£949 million—nearly£19 of debt for every man, woman and child. While I think that it is morally wrong to give people the impression that they can live on things for which they do not pay—and which they have not earned—it is also economically stupid to base the prosperity of a country on something so transient.

The increase in the hire-purchase debt in February, March and April was£76 million, over£10 million more than in the same period of 1959, despite the fact that the burden of hire-purchase repayments, quite apart from its economic effect, is having a serious social effect on many of our people who, for whatever reasons—and one can criticise them—are being encouraged to take on a degree of debt that they are not capable of bearing. That is something for which the Government bear a very great responsibility.

The other problem that we face is the complete inability of any industry to plan its future with an economic policy that varies from day to day. At one time we are faced with a Government policy which, in a matter of six months, becomes the reason for an economic crisis. The hon. Member for Langstone said that he did not think these variations adversely affected industries, but we recently had the classic example of Hoovers. That is a typical company, whose financial structure is based on hire purchase. In response to an artificial boom in hire purchase. Hoovers had just prepared to expand production, but were suddenly told "Sorry, the Government have changed their mind and are now going into reverse"——