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 Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby 12:00 am, 6th February 1961

The hon. Member for East Ham, South (Mr. Oram) made a very fair point when he said that we could not, without cutting consumption to ribbons, put as much to investment as are other countries that are spending far less on defence. I believe that our defence contribution—at any rate, in conventional weapons—is absolutely vital, and I hope that it will be possible on some future occasion for the hon. Gentleman and myself to take part in a defence debate, when we can discuss our views on that question.

The right hon. Gentleman the Member for Battersea, North (Mr. Jay) com- plained, as he has done often before, of the stagnation in our economy, and I thought that my right hon. and learned Friend the Chancellor blew that myth to pieces. From the various interruptions, and from succeeding speeches—including the speech which we have just heard and that of the hon. Member for Grimsby (Mr. Crosland)—I also gathered that the Opposition had rather changed their ground and were now saying, "It is not stagnation, we admit, but we are not getting on as fast as other countries are". That is quite a different matter.

I agree that the figures show that, but we must get the matter into its right perspective. Let us remember that Western Germany, for example, has had an enormous increase of strength through the refugees who have entered that country. There have been millions of them. A P.E.P. book, comparing the growth of different countries, said that this had been a tremendous windfall for Western Germany. Let us remember, too, that France, Germany and other European countries have a far bigger proportion of workers in agriculture who have been drawn into industry, and that has made their industrial expansion easier.

We should also remember the different state of growth. The United Kingdom and America have now reached a state where a great deal more is spent on services than is spent in these other countries and they, of course, are not open to the same expansion by further mechanisation. I suppose that if I wanted to make a debating point with the hon. Member for Grimsby I would say that taxation on the top level in Germany is 57 per cent. and that in this country it is 88 per cent. I would also suggest that if we compare the expansion in industry in this country with the United States of America, which I think is a fair comparison, it stands up quite satisfactorily.

The Opposition Motion criticises the Government for failing to expand exports, but unless the Government employ the methods of Hitler or of Schacht they cannot compel foreign countries to buy our goods. I agree that they can do a lot to help, but in the last resort it depends upon industry, workers and management, producing the goods that people want to buy, at the right price and quality.

It is not only from the other side of the House that the Government are continually pressed to increase money incomes. That is easy and agreeable. They reduce taxes, increase pensions, and pay subsidies to people who are in difficulties, sometimes through force of circumstances and sometimes through their own fault. But unless production goes up at least as much as money incomes rise, prices must rise and we shall have a balance of payments crisis. I think that the Leader of the Opposition would agree with that, because he has often said so.

I should like to say how much I regret that he is not here today, not only because of the reason for his absence—it is one which affects even those of us who put far less strain on our voices than does the right hon. Gentleman—but also because any economic debate here loses by his absence particularly because it is very rarely that he descends to making just purely debating speeches. I am sure that the right hon. Gentleman would agree that if money incomes go up and production does not rise as much, then prices must rise because demand outruns supply, or else we have a balance of payments crisis because imports rise and we consume at home goods that ought to be exported.

I believe that some hon. Member, probably the right hon. Member for Battersea, North, would tell me that we could push up production here because there are many reserves of labour, but those reserves are not where they are wanted today. It is no use making things that people do not want to buy. Also, much of this labour is not specialised, and specialised labour is what is wanted. I am sure that, as in the war, industrialists can always squeeze a little more production if they try, but only if they bring in part-time labour and use rather antiquated plants. Industry will only do that if demand rises so much that profit margins are much wider, which means that costs will continue to rise. I can think of no worse way of helping the export trade.

Therefore, I think, there is fairly general agreement that the only safe way of pushing up production is to increase capacity to produce. I am convinced that growth in the economy is larger if there is sufficient excess capacity to ensure competition. I was very glad that the hon. Member for Grimsby referred to the need for competition. Personally, I believe that if every industrialist in the country could sell everything that he made there could not be enough competition to keep down prices or keep up efficiency.

I can quote in support of the need for excess capacity rather surprisingly, from the last chapter of the Economic Review. The writer of this chapter appears to have learned wisdom as he went through the chapter. Having started off, as has already been quoted, by saying that if there were no external payments problem the British Government could safely encourage a faster rate of consumption, then, at the end of the chapter, and after referring to the need of this country for sufficient spare capacity, the writer says: Without sufficient slack, external adjustments would be futile. These considerations would rule out an immediate policy of expanding internal demand. I think hon. Members opposite will have to give up that document in support of their case for speeding up the economy. I do not think that capacity in this country is increasing as quickly as it should; neither do I think there is anything to be complacent about, as I am sure my right hon. Friend the President of the Board of Trade will agree. But the picture is not quite so black as it is painted—perhaps as it suits hon. Members opposite to paint it. In 1948 and 1953, when the Opposition were largely responsible, capacity was growing at the rate of 2½ per cent. In the last five years, it has been going up at the rate of 3¼ per cent., which is rather more than the average in the United States and double what happened in this country before the war.