Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 6th February 1961.

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Photo of Sir John Morris Sir John Morris , Aberavon 12:00 am, 6th February 1961

I listened with great respect to the strong plea made by the hon.Member for Peterborough (Sir Harmar Nicholls) for financial aid to exporters. He said a great deal which was worthy of consideration, and if action were taken along the lines he suggested, a positive lead would be given to exporters, something which is needed at the moment.

However, the hon. Member said at the beginning of his speech how much he valued the message which he had heard from the Chancellor of the Exchequer this afternoon, and how incisive the Chancellor was. I think that the last thing one could do would be to describe the speech of the Chancellor as incisive. It was muddled. He put up a whole series of Aunt Sallys one after the other, and then attempted to knock them down.

The hon. Member for Peterborough suggested that he had had a very clear message from the Chancellor. I feel that the last thing we had from the Chancellor was a clear message.

Every hon. Member in the House must be concerned at the present financial state of the country. Although hon. Members opposite may not go with us with our Motion of censure, everyone agrees that there is cause for anxiety—with the possible exception of the Prime Minister, who has been so long in pursuit of the settlement of the world's problems that he has forgotten the problems facing his own country. He is now, we understand, temporarily grounded in an attempt to solve the problems of the situation in which we now find ourselves ten years after the return of a Tory Administration.

Many chickens have come home to roost today, one being a statement made by the Prime Minister at the last General Election, when he said: I do not remember any time in my life when the economy has been so sound and the prosperity of our people at home so widely spread. I wonder whether the Prime Minister would endorse that today as a summary of the state of the country. When the historians of the future turn back the pages of history and look at the 1960s, they will be amazed at the hollowness of the so-called prosperity of the never-never land in which we live. Not only will they be amazed at the brinkmanship of the late John Foster Dulles and his foreign affairs policies in the last few years, but also at the brinkmanship of the financial policies of this Government.

It has been described as a brake and throttle policy. The policies of the Government deserve the attention of the Minister of Transport. Does anybody think that these ramshackle financial policies of the Government could ever hope to pass the ten-year test of safety; that they could ever hope to have a road worthiness certificate as being a safe vehicle in which to travel? If I might change my metaphor, if it were a horse, it would hardly qualify for a certificate of being sound in wind even though the jockeys are not lacking in this commodity.

The electors at the last election mounted 'this vehicle at their peril, and now they are benefiting from the return to the father-figure's bosom of the unprodigal son in the person of the Minister of Health. They are reaping the benefit of increasing the stamp rate, doubling the prescription charge, and even robbing 'the babies of their orange juice and cod liver oil. I do not know whether the unloved Surtax payer is waiting for whatever succulent pods the Chancellor of the Exchequer is eager to hand to him. There is not even a fatted calf to celebrate the return of the unprodigal son to his inheritance. He is attempting to save a total of £50 million this year and £60 million in a full year. It would be no accident if the level of Surtax rates were raised from £2,000 to £6,000 a year that that figure would amount to £60 million in a full year. It is the same figure as will be saved by the Minister of Health by his revised Estimate.

The Financial Times which, as Shakespeare would have said, is full of wise saws on these matters, says: A concession of this order may frighten the timid,"— and well it might —"but it can safely be made in the next Budget, whatever the state of the Exchequer accounts or of the national economy. This is a blank cheque which one of our leading newspapers is able to give to the Chancellor for his next Budget. It goes on: one suspects that the sound and fury with which the Opposition would greet any really worthwhile Surtax concession would bear no relation to the actual feelings of the electorate. I can well imagine the bonfires being lit in South Wales when the Surtax rates are raised; when the electors throughout the industrial constituencies hear the glad tidings of the Chancellor of the Exchequer raising the Surtax rates and at the same time the Minister of Health robbing the Health Estimates of £60 million in a full year. If there is a connection between these two matters, I assure the Government that there will be an outcry throughout the length and breadth of the land.

In the short time at my disposal, I should like to deal with one or two aspects of the present day policies in the motor car industry and its effect on the steel industry, in particular, its effect on the sheet-steel industry, and the effect that it has had on our balance of payments in the last year or so. There are other hon. Members far better qualified than I am to discuss the situation in the motor car industry. Short time working is one significant feature. One must not be too pessimistic, because most of the men in the motor car industry have hung on to their jobs. That is a mark of the confidence of the men themselves. If one looks at the Stock Exchange shares, the shares have remained comparatively buoyant despite the present crisis in the industry. One sees this if one compares the price of B.M.C. shares now and back in 1957. That is a mark of confidence of the Stock Exchange in the recession, and we should like to know whether there is a real crisis and how long it will last. What is the prognosis of the Government as regards the motor car industry?

The recession has at last begun to hit us in South Wales. Further west than my division, at Trostre and at Velindre, they are already working short time, 16 shifts instead of 20. The Steel Company of Wales in my division has introduced short-time working involving a large number of men.

Last Saturday there was a statement by the chairman of John Summers, a firm employing 10,000 men. The firm is now cutting its working hours because of the continuing fall in the orders for sheet steel, and the extent of that cut is being discussed today. The chairman, Mr. Richard Summers, states: We cannot say how long this reduction will be necessary. That really is the sting of the issue. No one knows how long the present recession is going to last. There is a cautionary note by Sir Andrew McCance in his annual report published last Friday. If one looks at the report of the chairman of Richard Thomas & Baldwins of 25th January, it refers to the general easing on the demand for sheet steel in the first few months of the financial year.

The cuts we have had in South Wales in the sheet-steel industry are chicken feed compared with the cuts which the motor industry has suffered already. The fear of the workers in my division is about the extent of the recession; not what has happened, but what might happen. We would like an assurance from the Government about what is going to happen. All our eggs are in one basket. We produce sheet steel and very little else. If there was a major or long recession the result would be deplorable and disastrous. At the moment there is only a small cloud in the sky, but if that grows into a big storm the extent of it would be catastrophic.

I will not go into the basic problem of boosting exports and the need to lower imports, but it is interesting to note that all the major areas, with the exception of the United States of America, took more British goods in 1960 than in 1959. If one looks at it from the angle of steel and sheet steel, the North American exports of steel to the United Kingdom jumped from £3½ million to £38 million last year. Sheet steel was scarce, and there were vast imports at the beginning of the year.

It is interesting to note the fantastic growth in imports of sheet steel from 1958 to 1960. All these matters have added to our balance of payments situation. In 1958 less than £13 million of sheet steel was being imported. It went to £16 million in 1949, and in 1960 over £40 million worth of sheet steel was being imported. More sheet steel was imported in June and July, 1960, than in the whole of 1958.

After all this, because of the crisis in the motor car industry, there was a spectacular drop, and the merchants were cutting their contracts as rapidly as they could, and by December a mere £750,000 was being imported. There are heavy stocks at the moment, and that is another matter which is causing concern to the sheet steel producers.

What is the reason for these huge imports? The reason is obvious and apparent to everyone. At the beginning of the year there was a lack of capacity in the steel industry. We had the highest imports since 1955, and that was a year of crisis. The balance of payments situation in that year was to a large extent caused by the import of sheet steel. There is a balance of payments crisis now. How far is it due to the increased imports of sheet steel? Indeed, if the motor car boom had lasted past August into the latter months of the year, what would have been the effect then on our balance of payments situation had the same rate of imports of sheet steel continued at about £6 million worth a month instead of falling as they did after August?

On 24th March, 1960, the Financial Times was able to say: The shortage of home produced steel is not confined to sheet and includes among other types, light rolled products and structural steel. It went on to say that steel was being diverted from exports to the home market, imports were mounting, and delivery dates were lengthening. These were three matters of embarrassment to this country because of the lack of capacity in the steel industry.

The lack of capacity in the earlier part of the year was predictable. It was predicted by the Iron and Steel Board that because of the clash of interest between the Board and the Federation there was a delay in the building of plant, and that it would be some years before that plant was available. The Government are responsible for this situation, but they are happy with the present system of dichotomy of control between the Steel Board and themselves, and the Federation. The steel producers, through the Federation, are able to ride their own hobby horses regardless of the nation's interest. If the capacity had been there, as the Board said, there would have been no need to import such a great amount of sheet steel last year. I am sure that our balance of payments situation would then have been much better.

The Government were saved from a worse catastrophe by the recession in the motor car industry and the consequent end of the need to import further stocks of sheet steel in the latter part of the year. There is a complete lack of planning in relation to this aspect of the steel industry. It may be that we are leaving a period of under-capacity for one of over-capacity. We are continuing with the building of two new plants at Colvilles and Richard Thomas and Baldwin at Llanwern. No one knows how much steel is really needed. The Government give no indication of when the industry's capacity will be used, and the last statement of Colville's chairman is a worrying one. He says: It is significant that both in the United States and Canada there is a growing uneasi- ness that the expansion of capacity has overtaken rather too rapidly the expansion in demand…. This fear may or may not be soundly based, but it is a warning that must be most carefully considered. My indictment against the Government is that they have no cohesive plan to match the capacity of the industry to the demand. It will be amazing for the historians to look back and think of our economy as being perched on a knife edge, so that the slightest recession in the motor car industry is sufficient not only to drive a crisis through the whole industry but also to upset the steel industry and our balance of payments. We are dependent on that one product, and the figures from America are rather disturbing in relation to our future prospects for exports to that country. They are now producing their own compact cars, and they are also choosing the Volkswagen in preference to our cars. That is the crux of the problem.

Let us look at the figures with regard to the export of some of our motor cars to America last year. The exports of B.M.C. were down by 14 per cent.; Fords of the United Kingdom were down by 41 per cent. over eleven months; Rootes were down by 40 per cent., and Triumph by 22 per cent. Volkswagen were up by 38 per cent.

That is the situation we have to face. It is said that one of the difficulties Americans find in regard to British cars is the lack of proper servicing facilities. American importers and our own exporters have spent a great deal of money on these servicing facilities, but I am told they are not enough. The Government should pay attention to this point and see whether they can give direct assistance to our car exporters for the building up of proper maintenance and servicing facilities in the United States and other countries to which we export cars.

Another disturbing article in the Financial Times was to the effect that the United Kingdom was also suffering from the fact that the sales of the key importers—Ford and Vauxhall—which dropped by half last year, are handled by United States dealers under American parent companies. It was said that this had been working out most unhappily since United States dealers had received their compact cars. There has been a clash of interests, and the figures in respect of Fords and Vauxhalls are a crushing indictment of the present marketing system in these cars.

I do not want to adopt a Luddite attitude towards the integration of British and American capital, but the Government should pay serious attention to the problem and be on guard whenever American firms ask permission to take over shares in large British companies in circumstances where there is a clash of interests, as there is in the case of Fords and Vauxhalls, whose figures are worse than for any other cars. The Minister will be aware of the connection between the rival American and British parts of these companies.

In an interesting article in the Sunday Times, Sir Miles Thomas says that he finds the reports of the performance of British cars disturbing; that there were serious shortcomings in the assembly of cars, and that they lacked detailed finish. I do not wish to canvass this issue further, it would only do harm, but I hope that motor car manufacturers will investigate the matter and see whether there is any truth in what Sir Miles says. He has had twenty-seven years' experience in the car industry, and if what he says is true the matter should be attended to. This is a matter upon which we should not bury our heads in the sand.

I would ask the Government whether their present plan to resell the steel industry is necessary. In view of the present state of the market there will be a loss to the public if the huge firms in which public money is invested, such as Richard Thomas & Baldwin, are sold. I was proud of the vast profit which that firm announced the other day, and that this great publicly-owned industry was able to put another nail in the coffin of those who say that public ownership can never pay.

I now turn to the activities of the Iron & Steel Holding & Realisation Agency. Llanelly Steel was sold for £1¾ million and Staveley Iron & Chemicals for £6 million. Both sales were announced in the Summer Recess; on 5th August in respect of Llanelly Steel and on 13th September in respect of Staveley Iron & Chemicals. There seems to be a "close-season" for the selling of publicly-owned companies. If the House is sitting they are either not sold or the sale is not announced. The sale of S. G. Brown was announced during the Whitsun Recess. Will Richard Thomas & Baldwin also be sold during the Easter or Whitsun Recess, or shall we have to wait until the Summer Recess? There is a deliberate pattern of holding back the announcement of these sales until the House has gone into recess.

Yesterday's Sunday Express refers to a trade row which may develop because of the "on the quiet" export of thousands of tractors to China by Massey Ferguson. There is a clash between that firm and the American holders of patents in relation to these tractors. Is any American pressure likely to be brought to bear to stop our export of these tractors to China? There is a great market for them in China and Africa. It is amazing that in a largely hungry world, where vehicles are wanted nearly everywhere, workers in Coventry should be working on short time. It is amazing that the Government have no policy for making our vehicles more adaptable to the needs of the world today. That is one of the things to which we shall have to attend in future.

The Government have no order of priorities. We have gone through periods of industrial stagnation at the same time as we have had luxury building and fortunes made in take-over bids, and a poll tax on health. The policies of the Government are rotten to the core, and this country can never hope to look for leadership from the present Administration, headed by the rather pathetic figure of the Prime Minister who, like Mr. Micawber, seems to be hoping for something to turn up, although nothing ever does.