Public Investment

Part of the debate – in the House of Commons at 12:00 am on 9th November 1960.

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Photo of Mr Frederick Lee Mr Frederick Lee , Newton 12:00 am, 9th November 1960

I am sorry if I was treading on any toes. I had no thought in that direction.

Can we really believe that the political cowardice which encourages booms in consumer goods industries to coincide with a General Election, which of itself then creates the very conditions which, under this Government at least, enforce curtailment of investment in the public sector, will cease so long as the Government have their present approach to investment in the public sector? They do it, as I have tried to show, without regard to the long-term damage which they inflict upon it.

For instance, one of the prices which we are now paying for the cowardice of the period prior to the last election is that between April and September we experienced six months of stagnation in industrial production. I have been reading as much as I can of the advice which the City editors and the financial pundits in general submit to the Government. It is worth noticing that the orthodox approach which they have—in other words, which coincides with the Government policy—is such that hardly any worthwhile suggestion as to how we can break through this high-level stagnation, as the Americans call it—the malady from which we are now suffering—are forthcoming from any of the orthodox financial pundits.

The fact is that given a reliance on purely monetary manipulations, I do not believe that there is any answer. There is a basic unbalance in our economy. Periods of credit squeeze and of high interest rates to damp down investment merely exacerbate that unbalance in terms of our inability to export. At the end of such periods, permanent recovery is further away than ever as our competitors increase the efficiency gap between their industrial methods and our own. I am not arguing that we can do all the investment that is required over a relatively short period. I am saying that we must plan carefully the direction of our investment and ensure that we get our priorities right.

That being so, we see that the political dogma of the Government becomes an insurmountable obstruction to the logic of the requirements of our economy. One of the main conclusions of the P.E.P. reports, to which the Chancellor of the Exchequer referred, states: Not only has Britain been investing a smaller proportion of her national product than most other countries, but the yield on the investments undertaken has been disappointingly low. It goes on to point out that if the present trends continue they would leave Britain with a lower standard of living than several other European countries within a few years. It is, therefore, necessary for us to start at the point that a high investment economy is utterly essential to this nation if 50 million people are to enjoy good living standards in a small island which is not particularly well endowed with indigenous raw materials.

It is in the light of these requirements that I view the White Paper and the main lines of the Government's lack of policy in investment in the public sector as quite inadequate and indicative of an attitude of public investment which is doctrinaire, irresponsible, short-sighted and incompetent. Indeed, the Government appear to be a little shy of using such words as "planning" even in the White Paper. They make no attempt to look more than a year ahead, even though the need for longer-term planning is admitted. No attempt is made to include the private sector, which accounts for over half of our total investment. No attempt is made to ensure that investment is adequate in total or concentrated in the right direction to provide adequate economic expansion, to protect the balance of payments or achieve any other clear objective. Nor is any attempt made to set priorities between different kinds of investment, still less between the needs of investment and the claims of other social or economic policies.

The only aspect of the Government's intentions that emerges is their continued determination to sacrifice national needs to party prejudice. Public investment, it would seem, will continue to be cut arbitrarily and repeatedly to balance the fluctuations in unregulated private investment and to cover up the failures of the Government's other economic policies as they stumble along from one unnecessary crisis to another. Their planning is not only belated and reluctant it is mischievous and highly irresponsible.

I have said that there is no long-term planning. The tendency of the Government seems to be to dither and drift along from one short-term expediency to another in the absence of any clear, long-term purpose or sense of direction. The statistics of public investment which we have been given extend only to 1960–61. In paragraph 11, for instance, the Government, by inference, admit that no serious attempt is made to co-ordinate investment plans or even to assess the size of the total until the summer of the previous year. While doing that, they admit, in paragraph 9, that a crucially important requirement for efficiency in investment planning is that the programme should be carried through steadily over a long-term period and not be subject to short-term changes in pace or direction.

If forward planning is desirable at all, why cannot we plan over, say, a five or ten-year period? Other countries do it. In France, for example, the Government publication of long-term investment plans has been a major factor not only in ensuring a continuous high-level of investment, both public and private, but also in ensuring proper co-ordination within the total. As we all know, in France there has often been weak Government or no Government at all. This is evidently preferable to the impediment of having a Conservative Government in power.

We have reached the stage where the Government have elevated abdication to the level of principle. Consider, for example, a matter which we have discussed at Question Time. The Minister of Transport told us on 26th October that we were to have a cut in the railway programme. There was no argument from him that this was necessary on the ground that the railways themselves do not require the money. He merely told us that the maximum expenditure on the railways would be £140 million compared with the £160 million originally agreed for the current year and that the Transport Commission will be cut from £200 million to £175 million. And yet the same Minister asserts from the Dispatch Box that he can plan a road programme for five or more years ahead. Surely it is far more difficult for those who are trying to plan a railway system to be able to do so successfully and adequately on a year-to-year basis than it is to conduct such operations in a road undertaking.

Therefore, why it is not possible for a long-term programme to be announced for the railways which will not be cut down merely because of the problems of the balance of payments, I have never understood. One would like to hear the Minister of Transport explain this. The Chancellor of the Exchequer said just now that some elements in the public sector have to be cut because they do not show an immediate return. How does that apply to, say, the railways? Is it to be the case that whereas we can have modernised track, we must put up with an old one and draughty station because the one gives a quicker and better investment return than the other. The phasing of the whole programme gets out of balance once one begins to indulge in that kind of thing.

I suppose that the restrictions on the economy, including the holding down of public investment, are primarily due to the very unsatisfactory state of the balance of payments. While it is necessary to have increasing exports—and we all know that the export drive has failed lamentably—we must also consider the effects of the rapidly increasing imports of unnecessary goods which mistakes in Government policy have now brought about.

Let us take one example in that respect—the enormous increase of fuel oil imports to levels which are quite unnecessary in view of the plentiful supply of home-produced fuels. While we are on the subject of White Papers, I think that we should have one showing the precise effect of these huge imports of fuel oil on the balance of payments. I know that there is scope for great argument here, but my own feeling is that those imports are a very great drain on the balance of payments and that it is high time that the House had an objective survey of the precise effect on the balance of payments of those huge imports. Their free admission is in direct contrast to the policies pursued by countries such as the United States, Germany and France, whose Governments have imposed restrictions to protect home resources of fuel.

Last Wednesday, I gave figures of the vast increases in these imports of fuel. My party has already produced a short-term policy statement on the need for a national fuel policy. We have circulated it and we believe that it shows the right approach to what is now a serious problem. For this country, the genesis of industrial and economic health lies in a properly planned fuel and energy policy, a modern machine tool industry, a modern transport system and a large expansion of scientific and technical training. None of those is in sight.

The P.E.P. report mentioned a suggestion by Sir Ivan Stedeford, who is greatly trusted by hon. Members opposite and who said that there should be a central organisation to forecast the nation's capital needs for a few years ahead and then to issue warnings in good time when plans incompatible with the economy were being shaped by the public or private sectors. Can we know whether Sir Ivan's thinking on this subject is being considered by the Government? Can we know, before the end of the debate, whether we can expect any move in that direction?

I prefer the much more positive suggestion in the report that the Government should plan the contribution towards our economic growth by each of our major industries. Much longer-term plans for the public sector must be announced and adhered to. It is ridiculous that the public sector which is responsible for about 40 per cent. of all public investment, should be treated in the hand-to-mouth way which has been customary under the present Government. It is the Government's quite doctrinaire unwillingness to use effective physical or budgetary controls or to control consumption which results in investment in the public sector being the one which always has to be cut.

The lack of the kind of policy of which I am speaking has been a major factor contributing to the economy's poor performance in recent years. In the absence of effective Government action, investment to meet long-term future needs has readily been sacrificed to cover short-term crises, and the average level of investment in both public and private sectors has been far too low.

In consequence, expansion of the economy has been slower than that of almost any other industrial country—I have already given the tables to the House. Our exports are increasing more slowly than those of our competitors and our share of world trade is declining every year. The weakness of the economy makes it vulnerable to periodic balance of payments difficulties and speculation against sterling. The perpetual threat of inflation has been one of the features of so many of the post-war years and I do not believe that we can get over it merely by short-term expedients which do not recognise the basic unbalance in the economy itself.

I have said that we need new and effective policies to deal with the problem. I was extremely disappointed that the Chancellor seemed quite complacent and of opinion that all that needed to be done was to have periodic high interest rates and a credit squeeze, then letting the economy rip and, within a short time, again having high interest rates and another credit squeeze, and so on. We suggest other methods. We believe that a consistently high rate of investment must be aimed at and given very high priority against competing claims for resources. The investment programmes of the public industries must be drawn up well in advance and provide for a steady expansion over long periods. A national investment board needs to be set up to ensure that they are related both to each other and to other national objectives.

A national investment board must also secure from the private firms details of their investment plans so that it can analyse them and ensure that they are adjusted to accord with national objectives for the private sector. Special emphasis must be placed in both sectors on investment likely to save imports, increase exports, reduce local unemployment, help to finance underdeveloped countries, or further social or political aims of that kind. Where investment cuts are unavoidable, they should be concentrated on the frills rather than the fundamentals of the economy and, in particular, on the types of investment which can readily be adjusted at short notice without serious loss.

Balance of payments difficulties are likely to be a diminishing problem with industry expanding and gaining in competitive efficiency, but in so far as the immediate effect of expansion may be to increase imports more than exports the balance must not be adjusted at the expense of investment. There are many alternatives to the Government's policy of panic cuts in long-term investments—measures to reduce inessential imports, maybe the temporarily running down the reserves, lowering interest rates to reduce their burden and reviewing our overseas defence commitments. Those are suggestions which we feel now to be essential if the country is to make a permanent recovery from the stagnation which Government policies have brought to us.

Balance of payments problems and rates of investment in the public sectors of industry, and so on, are not subjects which spark a flame of enthusiasm in millions of breasts. It is up to my hon. Friends to say that failure in those things is a reflection of the complete collapse of the only type of economic policies which the Tories are prepared to consider. Dogma and prejudice now threaten economic stability and advance. This is, therefore, an issue upon which we must indict a weak and vacillating Government.

The economic policies for which we stand are the only alternatives to stagnation and a lowering of the living standards of our people. We are particularly concerned, when we think of peace and war, that two-thirds of the world's population live below the starvation level and that this country is ineffective in being able to do anything to remedy those things so long as the Government are reduced to the levels which I have described.

It is, therefore, a great necessity for Britain that the Labour movement should again become imbued with the great enthusiasm which we once knew, for only by reflecting it in that way can we again convince the British people that the peace of the world depends upon the type of expansive economic policy for which only the Labour movement stands.

I have said that these issues may well not be of the kind which stir men's breasts. I am sure that if my hon. Friends can put it in this way—the production of a great surplus which we can then use to help others less fortunate than ourselves—this kind of thing can be used as a great way to unification and a great way forward to the day again when a huge concourse of devoted Labour Members can sit on the benches opposite and a great Labour Government can show the way forward from poverty and stagnation to decency and peace.