Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 27 July 1961.

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Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley 12:00, 27 July 1961

I rather resent armchair critics who, after knocking back their third gin, turn to their neighbours and deplore the rising standards of living.

The right hon. Gentleman, in his own comparison, showed an extraordinary lack of understanding of what the period between the wars was like. He said that this prosperity had always increased year by year. He should have lived with us on Tees-side thirty years ago. We have made more progress in ten years than we made in the forty years before, and all I would say is this: if I were asked, in order to improve the economic condition of the country, to try to revert to the old conditions of poverty and unemployment, then neither I nor my colleagues would have anything to do with it.

The proposals of my night hon. and learned Friend the Chancellor of the Exchequer have been fully debated, and I will not do more in the time that remains than touch upon salient points. As regards the short-term pressure on sterling, he has acted firmly by orthodox methods of proved efficacy—Bank Rate, special deposits, and monetary restraint. His other proposals affect longer-term policy.

First, military expenditure. Almost alone of the European countries in N.A.T.O., we carry heavy burdens not only in Europe but in the Far East and in the Middle East. We have recently had to take action in the Middle East to defend principles from which the whole world gains. We have to look again at this expenditure and see what reductions can be made, even if this involves some changes—and radical changes.

As regards N.A.T.O., changing conditions have made it inequitable for us to continue to pay these immense sums over the exchanges year after year. After all, it is worth remembering—we are always running ourselves down—that the total German surplus is the exact equivalent of what they receive for American and British expenditure in Germany.

After all, there have been some big changes in the European scene since N.A.T.O. was devised and we entered into W.E.U. obligations. Obviously, with the Berlin problem looming up, we ought not, and do not want, to raise this question until the spring, but it is only right that we should give due notice of the position that we intend to take, and I believe that our European allies will recognise its justice.

We must also put some restraint on the growth of aid. We dislike doing this, because aid is one of the biggest contributions that we can make to the peace of the world. However, we have gone from £110 million to £180 million a year in these last three years, which is not a bad record.

Next comes direct encouragement of exports by various ways. Very interesting proposals have been put on both sides of the House for further measures which we might consider. But meanwhile a great deal bas been done, and I should like to pay tribute, because it is only fair to do so, to those devoted men who have worked on the Export Councils, both the European council and the one in America.

The Government have done a great deal to overhaul and improve the credit system for exports. We made a general reduction in premiums. We have introduced, just after the winter, various new guarantees including provision for the small exporter. Last year saw a marked increase in the use which traders were making of these facilities. The volume of orders covered rose by £48 million over the previous year, and during the last three months we saw a further increase of £28 million compared with the same period last year.

Another field in which Governmental action is needed and is being taken is in the expansion of the volume of world trade. We are not ashamed of our record in giving a lead in liberalisation. We hope that, as a result of the next round of negotiations in G.A.T.T., there will be a further reduction in tariffs to free the flow of world trade.

All these measures are, of course, vital, but we need something more. Much had to be done at once. I think I may best describe that—for the tutor must always bow to the master—in the words used by the Leader of the Opposition when he was Chancellor of the Exchequer. This is what he said: We also have to be sure that the problem of expanding our exports is not made more difficult by excessive monetary demand at home. That demand comes from many sources, including Government services.

The proposals which my right hon. and learned Friend has put forward for containing the growth of Government expenditure and keeping it in line with our resources are well conceived. They will have the full support of the Government and I ask the House by its vote tonight to show that it shares the Government's determination to see this through. But none of the measures we have taken is, of course, I think we know that, a substitute for—although they may help—a greater effort to increase productivity and increase exports.

One can lay the blame where one will —on the Government, of course, on the employers, on the trade unions. The right hon. Member made a very interesting contribution today on that aspect. There are some people who feel that British industry is not bold enough; it is too eager to seize profits easily earned in the home market and not modern enough and not flexible enough. Others contend that the trade unions in recent years have lost control of the situation; that there are too many foolish disputes and strikes about nothing; too little flexibility; and that restrictive practices based on long departed conditions—conditions in this happy period of which the right hon. Gentleman reminded us when we had 2 million or 3 million unemployed, which he thought so splendid—[An HON. MEMBER: "And Tory Government."]—those restrictive practices are quite out-of-date today. It has been widely recognised that these obstacles exist and I accept that the Government must play their part in tackling them.

As regards the structure of our economy and guidance, what is ordinarily called planning, I have little to add to what my right hon. Friends have said yesterday and today. I can only say that I have nothing against planning. I once wrote a book about it. I was happy to see when I was reading it the other day that nearly everything I had recommended has since been done. However, if more is needed to meet changing conditions, it will have my support, but we must be sure that it is the kind of planning which suits our political and industrial habits and institutions.

I think, quite frankly, that if we were to ask any ordinary man or woman in the street, they would admit—for they know it to be true—the enormous gains which have been made in these ten years for everybody, but I think they would also agree that perhaps in the last year or the last eighteen months we have gone a bit too fast. We have tried to do a bit too much. If that is so, we must pause, preserving the essentials which lead to growth and discarding for the moment the inessentials—and that is all that we have asked people to do, whether they draw salaries, wages or dividends. The managers and owners of businesses must make an extra effort themselves and must be prepared to see smaller profit margins and reduced dividends. Salary and wage earners must pause before they make another demand on wages, unless these can be shown to be the fruit of real increase in productivity.

There are some, I have no doubt, who might say that we could quite easily avoid our troubles and could easily get "in the black" if we gave up foreign aid and if we gave up those enormous miiltary commitments; if we abandoned all those, it could be said, there would be no problem, no threat of balance of payments. This is a possible solution. But this is not the future which I see for this country, and I am certain that it is not the future which this country sees for itself. We know in our hearts that we must continue to play a great part in the world, that it is our duty