Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 18th July 1961.

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Photo of Mr Harold Wilson Mr Harold Wilson , Huyton 12:00 am, 18th July 1961

I am grateful to the hon. Gentleman for the phrase I was trying to work towards. Yes, he is.

Now, we read in the Conservative Press the ominous news that the Prime Minister has decided to intervene in the economic crisis. This is no idle threat. No one bears more responsibility than he for our economic crises. He was the first to propound the doctrine that the right way to fight inflation was to hold production down. On becoming Chancellor, he was panicked into abolishing the investment allowance, and this caused a stagnation in our industrial investment which lasted for three vital years. As we all know, the Prime Minister is more responsible than anyone else for the smug complacency which has pervaded the nation as a result of successive speeches he has made. While his own Chancellor has been telling us how serious the economic situation has been, the right hon. Gentleman has been travelling the country saying that we have never been so well off, and all the rest. [An HON. MEMBER: "He said it today."] He said it again today in the House.

One of the most serious features of the Prime Minister's leadership—if that is the right word to use in speaking of the right hon. Gentleman—is that he has been speaking all over the country, degrading, debasing and debauching our national life by preaching the gospel of the free-for-all, the gospel of grabbing all one can. His is the gospel of the self-regarding affluent society where, as I heard a distinguished churchman say the other day, the verb "to have" means so much more than the verb "to be". That is the affluent society which hon. Members opposite have preached, and many of them are here now only because of their success in preaching that doctrine at the last General Election.

Now, safely in mid-term, counting on the short memories which throughout history have always been the Conservative Party's greatest asset, right hon. Gentlemen opposite tell us that we must stress the moral aspects of our national life. The Home Secretary is another notable absentee tonight. I do not blame him.

What did the Home Secretary say: Nations gain their right to rise.By service and by sacrifice. This from a Tory Minister!— The devil was sick, the devil a monk wou'd be". This from the Home Secretary, the architect of the 1955 election Budget, who fought the 1955 election on the claim—what was the proud claim of the party opposite in its manifesto?— We have broken away at long last from the regular cycle of crises. It was six years ago when the party opposite made that claim.

What has the Leader of the House and Chairman of the Conservative Party contributed, or indeed what have any of them contributed, in the name of service and sacrifice to the solution of our economic problems? One thing which the right hon. Gentleman the Home Secretary has created for us is the betting shop. Is that a contribution to service and sacrifice? What service and sacrifice do we get in an economy where the genuine hardworking business men, executives, scientists and salesmen are subordinated under a system which exalts the take-over bidder, the tycoon, the financier, share-pusher, speculator and property racketeer and in which some of our staple industries have so declined—[HON. MEMBERS: "Hear, hear."]—I am delighted to welcome the right hon. Gentleman the Home Secretary.

I commend this thought to the Home Secretary: Nations gain their right to rise, by service and by sacrifice;So Britain aims to reach the top with capital gains and the betting shop! I ask the right hon. Gentleman: what service and sacrifice does he see in a situation in which industries, like the shipyard industry on Clydeside, cannot offer security to their workers who are emigrating to Hamburg where things ate better?

Some workers are coming to this country. The Ministry of Labour has just issued labour permits for some very important key workers who have been lured here by the Home Secretary—croupiers to run the gambling dens! This is a great society in which millions of decent, hardworking people pay their taxes with no tax dodging, yet an organisation exists to persuade rich men to invest their capital in tax havens abroad in order to dodge Estate Duty.

As my right hon. Friend the Leader of the Opposition said, we have land racketeering going on affecting not only housing and town redevelopment. I ask the President of the Board of Trade: with present land prices, how will we build the new factories which we shah need for our export trade? Has the right hon. Gentleman been into that?

I now turn to the Chancellor of the Exchequer. No Chancellor has ever had a bigger build up in the Tory Press. This is—and here I quote the Sunday Times—"the economic master mind", the man who, we were told last December was going "to break the cycle of squeeze and ease." Three months ago we had his Budget. Tonight, while we are all itching to know what he will say, he will be silent. He will talk for twenty minutes, but will say nothing. We sympathise with him. He will say nothing because he is already in a condition of pre-Budget secrecy before the Finance Bill which covers his last Budget receives the Royal Assent. We are facing an Autumn Budget in mid-July. The right hon. and learned Gentleman has out-Butlered the Home Secretary.

The Chancellor of the Exchequer is going round the country by various unconventional means of transport—a fine commentary on the Government's road building programme—making frightening noises about what he is going to do—a twentieth century King Lear: I will do such things—What they are yet I know not; but they shall beThe terrors of the earth". Tonight, the Chancellor does not have much to say, so I will ask him specifically to answer two questions. First, does he still think that he was right to make this vast Surtax hand-out in April? Secondly, does he feel after this hand-out that he has any moral night or standing to appeal to the nation for sacrifice and, as my right hon. Friend said, to the workers for wage restraint? We shall expect answers from the Chancellor about that.

Last week, the Home Secretary said, after he got from poetry back to prose: Out of our economic difficulties good may come, especially if our party gives a lead to the country in calling for moral values to emerge instead of materialist appetities. That was after materialist appetities were sated to the tune of £83 million last April for the Surtax payers only. Is it the argument of the Government that their friends can gorge themselves to the full while they themselves now preach the virtues of fasting and restraint to the rest of the community, with one-fifth of the manual workers getting less than £11 a week? It is they who have to exercise restraint.

We were told that this hand-out, indefensible as it is on grounds of social justice, was done in the sacred name of incentives and that production would bound and exports expand. Is there any evidence that this is happening? We have not seen it in the figures yet. During the Committee stage, we found that a substantial amount was being given to Schedule D Surtax payers on their last year's earnings, the first case known to fiscal history of incentives being retrospective. We found that £19 million was going in Surtax relief on unearned income. Where is the incentive there?

When the Chancellor commended his Budget to the Committee at the end of the Budget debate, he said: I think that the proposals I have put forward will strengthen our economy, encourage our exporters and gain confidence in sterling at home and abroad, and I ask the Committee to accept them."—(OFFICIAL REPORT, 20th April, 1961; Vol. 638, c. 1518.] Is that still the Chancellor's view?

The reason for the right hon. and learned Gentleman's silence tonight, while still awaiting for the Royal Assent to the Finance Bill, is that he has already decided that he needs more taxation and that to his April Budget he now needs to add 3d. on petrol, 4d. on cigarettes, 5d. an ounce on tobacco, 10 per cent. more on Purchase Tax, ½d. on beer, more on pools, television advertising, wine, spirits and vehicle duties, because that will be the effect of a 10 per cent. surcharge on indirect taxation.

Did the Chancellor think in April that he would want all this additional taxation? If so, why did he not put it in his Budget and his Finance Bill? I do not believe that he had any idea then. I acquit him of bad faith, but he is guilty of the most prodigius miscalculation. On the Report stage two weeks ago we challenged the Chancellor to put his tax demands in the Finance Bill. He refused. This is muddle and miscalculation beyond all the precedents even of this Government.

When the right hon. and learned Gentleman has finally broken his silence, what will he do? The surcharge on indirect taxation will fight inflation by putting up prices. The Chancellor should not think that the prices will go down again when the surcharge goes, because the one thing we have found when prices have gone up for one reason or excuse or another is that they stay up. Does the Chancellor think that this increase in the cost of living will help his appeal for wage restraint, or is the aim simply to cause the consumer durable industries, cars and the rest, to lurch once more into unemployment?

To me, it is almost beyond belief that the Chancellor can increase commodity taxation, which is the most regressive taxation, bearing on all the ordinary families, with no surcharge on direct taxation. If he does this, would not the corollary have been not to reduce Surtax but to have increased it? To reduce Surtax in April and to increase indirect taxation in July is about as regressive as the Chancellor can get, and that is saying a lot.

I do not think that many of us expect him to introduce his other regulator, the payroll tax. This has been universally condemned for all the points on which we attacked it in April—unfairness between industries and between areas, its anti-social penalties on apprenticeships and industrial training, and its effect on local authorities, hospitals and other essential services. It has been so universally condemned by industry, and, indeed, by his own party, that the Chancellor has, no doubt, been told to take it out and drown it like an unwanted kitten.

While the Chancellor is still pondering his announcement for next Tuesday—assuming that it is not already drafted—let me give him these warnings. First, I appeal to him not to cut aid to the under-developed areas, whether inside or outside the Commonwealth. It would be a standing reproach to this country if we were to cut supplies necessary for fighting the war on want and poverty all over the world just because we have failed to control our own economy and our own greed.

Secondly, I appeal to him not to follow other Tory Chancellors by thinking that the right way to fight the crisis is by placing burdens on those least able to bear them—the old, the sick, the disabled, the children who take school meals, and the rest. During the weekend, a newspaper said that to do this would be comparable to a board of directors, which had steered its company on the rocks, trying to get out of the difficulties by increasing the price of meals in the factory canteen.

Thirdly, I urge him not to cut essential investment. In crisis after crisis we have had crippling cuts in essential investment by publicly-owned industry and the local authorities, while far less essential building and other investment have been going ahead. To cut local authority housing and allow the office blocks to continue to go on would be doctrinaire, anti-social and inhuman.

Fourthly, I appeal to him, as did my right hon. Friend the Leader of the Opposition, not to have a wage squeeze in the public sector. Nothing would do more harm to the country than the Government's taking it out—as they have done before—on the National Health Service employees, probation officers, firemen, teachers and others, just because they are in public service—where they may be worth a great deal more to the community than many in the private sector.

Above all, he must remember the warnings of the experience of past crises—do not impose restrictions which will make the next crisis more certain and worse when it occurs. I hope that the Chancellor will take heed of these warnings.

We are not now debating the Common Market, but I say to him that the decision has to be taken on its merits, and should not be taken as an act of escapism from our present economic ills. Whatever the long-term case for going in, whatever the problems of safeguarding entry for Commonwealth goods, the decision to enter is bound to place immediate additional strains on sterling. Imports are likely to exceed exports; there will be freedom of capital movement; and even though it may be considered anti-British to do so, to many people it will make sense to transfer their money to Western Europe as a devaluation hedge.

The condemnation of ten years' rule by Members opposite is that they have left this country in a position of desperate economic weakness when the decision on whether or not to enter the Common Market has to be taken. It is not much use posturing about whether one is to go into the Market or not when one has been driven to one's knees by the Government's economic policy.

Unless we take the steps necessary to refashion our economic policy and recapture the lost dynamic drive then, as we say in our policy statement, whether we enter the Common Market or stay out will only settle the question of whether we are to be a backwater inside Europe or outside it.

The Chancellor will make his announcements next week. I hope that they will include the things suggested by my right hon. Friend—repeal of the overseas trade corporation provisions and of the Surtax concessions. I hope that they will include some measure for holding back less essential building, a capital gains tax and a tax on land racketeering. I hope that the Chancellor will also do something about dividends and revert to the two-tier system of Profits Tax which we had until 1958.

In the long run, however, the problem will not be solved unless—and here I again use the Home Secretary's words—we can get back to a spirit of service and sacrifice in our national life. Members opposite, after ten years, are now beginning to wish again for the voice and leadership of a Cripps.