Economic Situation

Part of Orders of the Day — Queen's Speech – in the House of Commons at 12:00 am on 7 November 1961.

Alert me about debates like this

Photo of Mr James Jones Mr James Jones , Wrexham 12:00, 7 November 1961

The hon. Gentleman ought to read the speeches made by Ministers in the last fortnight. He will find that what I am saying is justified. The hon. Gentleman should read the speeches of Ministers. If he does that I shall be satisfied. If it is a sober thought to the Minister of Labour, it should be a sober thought to hon. Members opposite.

Coming to shipping, this was at one time a most lucrative source of income. We were well placed on the Western seaboard of Europe. Our ports were near the sea and our industrial areas were near the ports. What is the position now? It is logical to say that all ports are not always near the sea. I can see hon. Members opposite laughing, but it is true to say that some ports are near the sea whereas others are very distant from it. In this country we have our ports near the sea. In addition to that, we have our industrial areas near the sea. All that is conducive to shipping, but we have lost £50 million from our shipping. At one time shipping was a source of income whereas now it is becoming a liability.

Turning to exports again, we hear a great deal about costs. We are told that if wages were stabilised or, better still, reduced, our prices would become more competitive. But let us see. Speaking in the debate on 18th July, the then President of the Board of Trade said: I do not think the effective level of industrial costs of this country and of our Continental competitors varies very much. If that is correct, then it disposes of the costs argument. The right hon. Gentleman went on to say: Turning to exports, the fact is that we are doing a good job in exporting, but not just good enough by a noticeable margin. Fair enough. If costs are approximately on a par with our European competitors and if we are doing a fairly reasonable job in exporting, what can be wrong with our exports position? That is a very fair question. The then President of the Board of Trade tried to give the explanation. He said: The best British businesses and the best British business men sell as hard, as well and as effectively as those of any country in the world, but, generally, one cannot help getting the impression from reports from overseas ports and visits to other countries that more consistent sales effort, more consistent follow-up, better after-sales services and more deliberate study of the needs of the customer are essential if we are to maximise our export effort."—[OFFICIAL REPORT, 18th July, 1961: Vol. 644, c. 1088–90.] What do we learn from that? We learn that there is a substantial section in the exports field which is doing a good job, but, at the same time, there is a substantial section which is not doing its best: it lacks consistent and persistent effort. In other words, the people concerned are dragging their feet.

What does the Chancellor do? To this class of person he hands the Surtax reliefs as an incentive to bigger effort. The human nature of this class must be considered. Purchase Tax and the wages pause, on the one hand, but a promised handout to these people on the other. This is so true to pattern. In 1956 the present Home Secretary, then the Chancellor of the Exchequer, applied the same principle. On the one hand, he restricted hire purchase and, on the other, he handed nearly half the Budget surplus to industry. The Chancellor is applying old remedies which are really no remedies at all.

The conflict between the £, on the one hand, and the economy on the other remains. In attempting to strengthen the £ the right hon. and learned Gentleman is weakening the economy. It is no use denying this fundamental fact. Last Thursday the Bank Rate was reduced from to 6 per cent. The reaction of the Press was universally the same. One newspaper stated: On the home front the lower rate will help industry which has been hampered by having to pay very high interest rates on its bank and other transactions. If a reduction of the Bank Rate helps industry in November, then the raising of the Bank Rate in July must have hampered industry.

To continue the quotation: Exporters in particular will welcome a return to slightly cheaper money. Many of their efforts have been frustrated through high interest rates on credit. If a reduction of the Bank Rate helps exporters in November, then the raising of the Bank Rate in July must have hampered exports. For ten years the Government have been relying unduly on the monetary weapon and they must not blame the chickens if they are coming home to roost.

In conclusion, what is the position? As the Bulletin of the Bank of England puts it: To sustain a satisfactory rate of economic growth and, at the same time, restore external balance, an increase in exports of some 10 per cent. per annum may well be required for two or three years, assuming no change in the terms of trade. We need an increase of 10 per cent, in exports immediately. Time is running out. Yet, as Mr. Samuel Brittan, the Economic Editor of the Observer, wrote on 15th October: The number of industrialists who plan to cut their expenditure on new plant and equipment exceeds by a clear 10 per cent. margin the number who are planning increases. Again, the Economist on 7th October confirmed this point. It stated: Investment inside the British economy has been showing advance signs of decline in 1962. This is no evidence of expansion in our productive capacity. This is no evidence of growth. On the contrary, it is evidence of continued contraction.

The Government have been relying unduly on the monetary instrument all through the years, and now no less a figure than Lord Cromer has expressed his concern about this disproportionate use of monetary measures. He has asked the following most pertinent question: Have the money rates we have seen in this country in recent years been the most appropriate to achieve the rate of progress we would like to see? Ten years of monetary policy and a lack of economic policy have been weighed in the balance and have been found wanting.