Economic Situation

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

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Photo of Mr William Stones Mr William Stones , Consett 12:00 am, 7th November 1961

I know that a number of other hon. Members wish to take part in this debate. I shall therefore not take up time by attempting to deal specifically with arguments which have been adduced by hon. Gentlemen opposite, but I hope to deal in a general way with some of them.

I am interested in those parts of the Gracious Speech which refer to the proposals for maintaining a sound economy, overseas trade and the balance of payments.

Similar statements appeared a year ago in the Gracious Speech. I do not complain about the similarity of the economic proposals in the two Speeches. In themselves they are quite good and no one could quarrel with them, because it is essential that we should seek to maintain a sound economy, high and stable employment, stability of prices and the balance of payments. The Ministers responsible for the preparation of the Queen's Speech are to be commended on their use of laudable words, but words are not enough.

Despite the Chancellor's speech this afternoon, I am still quite sceptical about the ability of the Government and the responsible Ministers to give effect to those proposals in the Gracious Speech. My scepticism arises from certain facts that I believe will be quite readily understood. I know that the House does not like to be bored with a lot of statistics, but I must point out that in not one single year since the Tory Government took over has our national industrial production increased at a rate comparable with that of the six countries which form the European Economic Community. It has not even kept pace with that of the rest of the countries of the European Free Trade Association.

Our share of world trade has gone down. Cmnd. 1506 shows that despite the fact that there has been some improvement in the balance of payments, in the first half of this year we were down by £83 million. These figures take into account both visible and invisible trade. It is very alarming to learn that our invisible trading, which in the past has helped us in no small measure to maintain our balance of payments, has fallen from £285 million in 1958 to £59 million in 1960 and to £25 million in the first half of 1961.

These facts show quite clearly that we are seriously lagging behind other industrial nations in our share of world trade and in our industrial production. Tory spokesmen, of course, are putting forward the usual excuses for failure to keep in step with our major overseas competitors. They mention high wages and strikes-official and unofficial. The cost of the Welfare State sometimes comes into their picture, as does the lack of incentives to industrialists because of high taxation.

The facts are these. In certain competing countries, wages are increasing even more rapidly than in the United Kingdom. Those countries are catching up with our standards, and, in some cases, even surpassing them. As to strike action, the Prime Minister himself had to admit some twelve months ago that our record was comparable with that of any other country except Western Germany.

We are told by the political and economic planning people that there is no evidence whatsoever to show that the Welfare State cost has had any significant effect on our economic problems. Neither is it true that the total amount of taxation expressed as a proportion of our national income is higher than that of any competing countries. In Western Germany, taxation accounts for 34 per cent. of the total national income; it accounts for slightly less than 30 per cent. here, and both France and Sweden are ahead of us in this respect.

It might be said by advocates of our entry into the Common Market that the Six have advanced more rapidly than we have because of the Common Market itself. Again, the facts are that by far the greatest increase in world trading and industrial production occurred in the countries of the Six between 1950 and 1958, before the Common Market came into operation.

The responsibility for the failure to measure up economically lies on the shoulders of the Government and of our industrialists. It lies with the Government for their doctrinaire refusal to plan our economy. In the time at my disposal I shall not start to justify planning, but I have here a broadsheet, issued by the Central Office of Information, showing conclusively that planning was very successful in the years following the war. It was successful then; it could be equally successful now. The industrialists can be blamed for their exploitation of a booming home market and a consequentially lesser drive in the export markets. It seems to them to be more profitable to deal at home than abroad.

I do not often quote from the Press, but I should like now to quote from an article in the Guardian on 19th October, dealing with German shipbuilding firms. It states: In the last few months some German shipbuilding firms —those not associated with the steel industry —have been trying to purchase steel plates and sections in Britain where plates at any rate are up to 10 per cent. cheaper. They have come up against an unexpected difficulty. While they were able to place orders for sections, British steel companies were reluctant to sell any plates to Germany. It appears that there is a gentleman's agreement between British and German plate producers to leave each other's home markets alone. I believe that the Government are at last beginning to recognise that the remedial measures adopted in the last ten years to deal with recurring crises are merely temporary, and quite ineffective in the long run. The credit squeeze and high Bank Rate have been mentioned. Cutting back investment in industry may help slightly and temporarily, but, in the long run, it reduces our power to compete in the world markets. The cost of high Bank Rate to industry has been specifically mentioned today, but there is also its cost to the Government, both internally and on the foreign exchanges —not to mention higher cost to local authorities.

The credit squeeze and the hire-purchase restrictions exercise a measure of restraint on home demand, but they do not release goods for export. Industries are running below capacity as a result of falling home demand. As a result, costs of production have gone up, again making it less possible for us to compete on favourable terms in the world markets. Further, the poor prospects in the home market have failed to attract investors. The whole thing simply cannot materially affect invisible earnings. These things actually reduce output and make matters much more difficult.

I do not profess to be an expert economist, but when prices of imports are down and those of exports are up; when prices of primary products have fallen since 1951, and the prices of manufactured goods have gone up —-and I am told that such a situation is very favourable to a great manufacturing country like ours —I wonder why the United Kingdom cannot keep pace with other countries. How in the world can we expect to give effect to the proposals for economic advance contained in the Gracious Speech in the face of facts which seem to me to indicate an inability on the part of the Government to do so?

I read in the Press on Sunday that the Government intend to make drastic cuts in spending at home and abroad. No one will complain if that saving is effective as long as it is done without a corresponding cut in certain services. I think, in particular, of services designed to bring about more friendly relations with other countries which are likely to boost our exports.

The Government should do everything possible to make available to our industralists information on other services that are likely to be of use to them in their efforts to regain and retain markets abroad. That has already been mentioned this afternoon. The measures to be adopted and provided are controversial, but, nevertheless, whatever is being done in that direction, I believe that the Government should endeavour to do even more. I believe, too, that the Government, if they are to give effect to the proposals, should give every encouragement to industrialists and investors to invest in the United Kingdom rather than in countries outside the Commonwealth. To do this there should be greater differentiation between the taxation on undistributed profits and on distributed profits where the investment of the undistributed profits takes place at home.

It follows that in a capitalist society the profit motive is a very decisive factor. Industrialists and merchants will invest and manufacture and trade in industries which are the more profitable and which give a speedier and greater return on capital investment. Not all of them will take into account the economic welfare of the nation as a whole. I am not accusing all industrialists and capitalists of profit making irrespective of the good of the nation. When one reads of the shipbuilding abroad on British orders and the clamour for cheaper fuel, oil, methane and even coal from the United States and other countries without regard to our indigenous resources of coal, I am amazed at what appears to me to be an entire lack of regard for the nation's welfare.

If we are to expand our economy and overseas trade and balance our trade figures, we cannot rely on exhortations and appeals for balanced production, for restraint of importation of the less essential goods. Likewise, if we are to increase our production of goods for export and make a greater drive for overseas markets, exhortations and appeals will not bring about the desired results. There must be some measure of both physical and monetary control. I believe this is essential to the planning of our national economy.

The economic planning council, which the Government propose to set up, will be absolutely futile, in my opinion, without such control. It should be made possible for credit to be given to the less efficient firms of this country dealing with goods for export to replace obsolete plant, because quite often it is the inefficient firms that are going along with obsolete plant. Credit should be given to them to replace such obsolete plant and to become more efficient. On the other hand, if credits are for less essential projects, they should be refused. It may be necessary to restrict the import of certain commodities, but I cannot see how this can be done without giving the proposed economic planning council these powers. These proposals will not meet with the approval of certain hon. Members opposite, but I believe them to be necessary.

I turn to another paragraph in the Gracious Speech which tells us: My Minister will continue to seek the co-operation of both sides industry in the better co-ordination of the national effort with a view to promoting faster economic growth … Again, I regard this as quite laudable. But I tell the Government, in all sincerity, that if they follow up their present policy of wage pauses, interfering with the conciliation machinery and with arbitration to the detriment of the wage earners in industry, in administration and in the social services and, at the same time, make no effort to ensure equal sacrifices all round, they will again be doomed to failure. If the Government desire cooperation with the workers and there has to be sacrifice, there must be equality of sacrifice. Our trade unions —I speak as a trade unionist in constant touch with the trade unions at home —believe that, in general, the workers are of the opinion that they are the first that have to make sacrifices in an economic crisis and the last to profit from a booming economy. They see the increased incomes from rents, interest, dividends, capital gains and particularly from land speculation without restraint while they are being asked to sacrifice in the best interests of the nation. In the face of this very deep feeling —and I assure the House that there is very deep feeling about it —how can the Government expect the necessary co-operation?

We on this side of the House believe, as do hon. Members opposite, that we simply cannot go on spending more than we earn as a nation. We know that constant chasing after higher wages and better conditions without increased productivity will benefit nobody in the long run. There may well have to be restraint if we are to get out of the mess which the Tory Government have got us into, but let those who can afford the most make the greatest sacrifices and those who can afford the least make the lesser sacrifices. If the Government are sincere in their proposals as contained in the Gracious Speech, I ask them to consider what I have said. I have said this not as an expert but as a layman, but I believe that I am expressing here the thoughts and desires of millions of people throughout the country.