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 Harold Wilson Mr Harold Wilson , Huyton 12:00 am, 11th July 1960

Within nine months of the election we have had in quick succession a tough Budget, hire-purchase restrictions, the reintroduction, of the credit squeeze, an announcement about cuts in Government expenditure and now a crisis level Bank Rate of 6 per cent. I notice that hon. Members opposite are much more silent now.

This is 1955 all over again, because within nine months of the 1955 election we had the present Home Secretary's autumn Budget. He need not be so shy; I am glad to see him here. Within the same nine-month period, and as the first fruits of the reign of "Super-Mac" at the Treasury, we had the credit squeeze, a 5½per cent. Bank Rate, the clampdown on production and the scrapping of the investment allowances. What is going on now is all so sickeningly familiar.

It has happened simply because we increased production. After three years with no increase at all, the boom which they engineered for the election has proved too much for us. One thing is very clear. After eight and a half years of stewardship by right hon. Gentlemen opposite, the economy is so weak, so vulnerable, so narrowly based, that we cannot stand even a single short-lived spurt in industrial production. Production, even in 1959, was only 22 per cent. above the figure for 1951, and it was still the worst record in Europe.

During the years of the great stagnation I more than once gave the House the comparative figures for Europe. Hon. Gentlemen opposite should have the figures today after a year's boom, because they are still as bad. West Germany has shown an increase of 91 per cent. since 1951; Italy, 82 per cent.; Austria, 63 per cent.; France, 61 per cent.; The Netherlands, 51 per cent.; Finland, 40 per cent.; Norway, 38 per cent.; Denmark, 35 per cent.; Britain, 22 per cent., with only Sweden at 21 per cent., Luxembourg at 17 per cent., and Belgium at 12 per cent. lower. I ask hon. Gentlemen to contrast those figures with those for 1945 to 1951, when year by year Britain proudly led Europe.

For a few brief months, we tried to join the European race, but our muscles and wind are in such poor shape that the effort was too much for us. We have had to retire from the race. We are back once again to restriction, to the Prime Minister's 1956 policy of clamping down, and, worse still, of mortgaging the future by holding down investment.

The truth is that our economy is too weak to stand a sustained expansion of production, simply because Ministers squandered the great opportunities of the 1950s and squandered the chance held out to us by the most favourable world economic conditions we had since before 1914. A recent speech by the Parliamentary Secretary rather regretted the lost opportunities.

Let us look, then, at the economic position today, nine months after the election, eighteen months after the beginning of the election boom. First, we find the Government hag-ridden by the fear of renewed inflation. There are some of the old familiar signs—a depressed gilt-edged market; war loan has reached its lowest-ever figure, lower even than it was under the right hon. Member for Monmouth (Mr. Thorneycroft); and Consols are at almost the lowest level for forty years. So much for the Tory concern for the small investor and for the Home Secretary's call to "Invest in Success".

It was the labour position which caused the panic. The Bank Rate went up to 6 per cent. on the very day when, for the first time for nearly three years, the number of unfilled jobs equalled the number unemployed. Under this Government, whenever we have reached a position when there was no longer a surplus of men running after every job, we have had a foreign exchange crisis. Here we are, fifteen years after the war, and we are still so vunerable that we cannot achieve full employment without lurching into crisis.

Because of a shortage of manpower in the Midlands and the South, the blunt instruments by which the Government seek to regulate the economy—nationwide as they are in their effects—mean that areas where unemployment is still heavy have to suffer equally—indeed, in all probability more than equally—with the prosperous areas. The Government's failure, despite all their talk, to plan the location of industry means that some areas have still not tasted prosperity, even at the moment when these blunt, non-selective policies are applied to the economy as a whole.

The other flashing sign which stirred the Government was the round of wage claims. Last year, while productivity rose by 6 per cent. compared with the previous year, wage rates rose by only a little over 1 per cent., wage earnings by 5 per cent., profits, of course, by 11 per cent. and dividends by 13 per cent. But at the very suggestion that wages should rise to a level comparable with the rise in productivity which is possible to the country, the whole Treasury Bench react like a crowd of frightened sheep. Here we are again—after eight years of Tory government, Tory freedom breaks down if the wicked trade unions ask for a fair share of the prosperity their members have created. I am surprised that the Conservative trade unionists whom the Tory Central Office is so active in returning to the House have not protested to the Government at what is going on.

Let us look at the worsening overseas position. Here, the plain fact, and an ominous fact, is that exports are failing to rise as fast as imports. In the first five months of this year exports rose by about 11½per cent. over last year and imports by about 18 per cent. I know that the balance of payments for visible trade, as I am sure that the President of the Board of Trade is only bursting to remind us, are not as bad as the crude trade figures would suggest, but there is great anxiety even about them for the second quarter.

What seems to be happening is that, while imports are, as we hope, levelling out, exports are very disappointing indeed. Let us look at the figures for trade with the United States, about which Lord Rootes, the chairman of the Dollar Exports Council, has recently expressed very grave concern. In the past Ministers have been rightly pleased about exports to the United States, particularly of motor cars, and we have joined in their satisfaction. But in the first five months of this year, compared with the first five months of last year, exports to the United States have increased by only 9 per cent., while imports from the United States have increased by 58 per cent., partly the result of the liberalisation.

Taking the month of May alone compared with May last year, exports are 7·4 per cent. up and imports 94·8 per cent. up compared with a year ago. Putting it in another way, taking the crude balance of trade figures—this is just a bilateral balance between Britain and the United States—in January-May of last year we had a surplus with the United States of£15 million. In the same period this year we have a deficit of£49 million. Taking May alone, the last month for which we have figures, in 1959 we had a surplus on trade account of£8·8 million and in May, 1960, a deficit of£12·1 million. This represents a worsening—a turn-round—of about£21 million for one month alone.

All of us are, as I am sure that the President of the Board of Trade is, rather anxious about the future of our exports, both to the United States and to Canada, because cars, which have been the staple of our recent increase, now tend to he piling up in stock in North America. We all know that there are certain protectionist moves on in Canada against British export trade in motor cars to that country.

In general, our exports are lagging. We see it in the figures of our share in the total of world exports of manufactures, which have been falling year by year. We now account for 17 per cent. Only a few years ago we accounted for about 22 per cent. of world trade in manufactures. Even in the protected sterling area, our exports fell by 4 per cent. last year and by another 2 per cent. so far this year, and we are seeing Germany and Japan taking our trade on an alarming scale.

The plain fact is that the internal boom is exercising a pull on our exports. Delivery dates are lengthening. The President of the Board of Trade has expressed concern about that, and it is affecting not only our exports, but essential re-equipment at home. For example, the British Railways' electrification programme—no one would deny the importance of implementing that programme—has had to be held back because private enterprise is falling down on the job of delivering the equipment on time.

Another effect of the boom is to suck in imports. The obvious case is sheet steel, on which my hon. Friend the Member for Newton (Mr. Lee) gave the figures to the House a fortnight ago. Imports of sheet steel in the first five months of 1959 were£4·7 million. In the same period of 1960 they were£18·1 million. The same is true of consumer goods. The liberalisation of consumer goods at a time when the Government had not got the economy in balance has led to some-think like a flood of consumer goods coming into the country. For instance, imports of refrigerators are up 50 per cent. this year on last. Imported washing machines, at a time of growing depression at home, are now a sizable proportion of the total production.

Then there are cars. In the first five months of this year 30,000 cars have been imported, five times as many as last year. Imports of cars under 1,000 c.c. have increased more than tenfold compared with last year. Hon. Members opposite, when they are drooling about nationalistation, should remember that by far our biggest car import is the Dauphiné, a product of the nationalised Renault undertaking. The Dauphiné is still coming in in large numbers in competition with our own production over what is virtually a 45 per cent. protective duty. A similar argument applies, of course, to aircraft sales, where our exports have been hit by competition from the nationalised Caravelle.

Faced with all this situation, what have the Government got? The Chancellor, like a tired and discredited witch doctor, has given us his usual ritual incantation, ending with a 6 per cent. Bank Rate which is the last refuge of every Tory Chancellor. We all know that this is the Chancellor's last economic debate, and I want to say on behalf of my right hon. and hon. Friends that however much it has been our duty to criticise his policies, on personal grounds we regret his retirement from the office that he holds. Whatever our differences—and they are, and have been, fundamental—we have nothing but the highest praise for the courtesy and consideration that the right hon. Gentleman has shown to us and to the whole House at all times. In every personal sense, we wish him well.

Our feelings about the right hon. Gentleman's retirement, of course, are not eased by rumours about his successor—[An HON. MEMBER: "Which one?"] There are quite a number of aspirants. Some people say that the Foreign Secretary will get a Department of his own at last. Others, with a grotesquely misplaced sense of humour, say that we shall get the Minister of Education.

The Member for Shipley (Mr. Hirst)—whom I see is in his place—after making a personal attack on the Chancellor in a recent statement in terms that I personally would deplore, goes one worse. He wants to bring the Prime Minister back out of the misty stratosphere—in which, of late, he has been disporting himself, with singularly little result—and get him to put his oar in here. May I say, and this cry comes from the heart, "For heaven's sake, spare us from that."

The Prime Minister's year at the Treasury was, without exception, the most disastrous in our financial history. Even the present Home Secretary—nay, even the right hon. Gentleman the Member for Monmouth—appeared in shining raiment by comparison. The economic problem is too serious for there to be put forward such frivolous suggestions as that made by the hon. Member for Shipley. The hon. Member knows, as, indeed, every hon. Member knows, that for four years the Prime Minister's stock in trade has been an elegant improvisation—