Like the hon. Member for Eastleigh (Mr. D. Price), I will concentrate on the second half of the Amendment—the country's economic weaknesses. In view of the hon. Gentleman's argument, much of which I accept, I am surprised that he says that he will not follow us into the Division Lobby on our Amendment—and I hope that he will not think me churlish in saying that.
I begin deliberately with the question of the balance of payments because the Chancellor's remedies can be assessed only by reference to the problem which they seek to cure and because the Chancellor's speeches have consistently shown that he has misconceived the problem. The true significance of the now famous Leicester speech—I am sorry that the Chancellor is not in the Chamber—was not the correction controversy, fascinating though that was, but the fact that the Chancellor justified his July measures on the ground of pressure on domestic resources and stated that he had counted on increases in incomes not materialising. This statement was nonsense, as the Chancellor's Economic Survey of 1961 and his Budget speech show—and I have the references here.
If we re-read what the Chancellor said earlier this year we see that he had allowed for certain increases in incomes and demand and that, if anything, they were much less than he had expected. What happened—and I draw the attention of the House to this—was that the Chancellor had apparently not reckoned with a crisis of confidence in the £, although he had been given ample warning from these benches. The immediate result of the July measures, especially the increase in the Bank Rate, has been superficially, and only superficially—as the hon. Member for Eastleigh has shown—to restore the position. The gold reserves are being built up, but once more at the cost of attracting hot money to these shores. There is bound to be a reckoning. I was very glad that the hon. Member for Eastleigh touched on the overriding question which remains, which is whether the Chancellor of the Exchequer's prestige policies—because we are pursuing prestige policies as an international banker on our scale—are within the capacity of the real balance of payments resources of this country. The answer is that of course they are not.
I want to refer to the third quarter's balance of payments figures, which were issued last week by the Treasury and on which the Chancellor of the Exchequer commented. They are very disappointing figures, and the right hon. and learned Gentleman was very complacent this afternoon. There has been no improvement in the balance of payments. Most of the improvement is hot money coming into this country. After allowing for invisible exports, we still have a deficit in the third quarter of £25 million. out of which we have to finance capital investment overseas. I could say quite a lot about this very disturbing result, the first result after the Chancellor of the Exchequer's measures. It is fair to say that exports are very disappointing. Secondly, I refer to the imports position, because what will happen to our balance of payments position when imports start rising again? The account has gained from a fall in imports and also in import prices.
There is a further component of the recent balance of payments accounts which is worth referring to. That is invisible earnings. Earnings on invisible account have fallen. There has been a catastrophic fall in invisible earnings over the past ten years and in the last quarter once again invisible earnings are going down.
I should like to hear from the Government speaker something about my plea for the publication of further balance of payments statistics relating to the international earnings of the oil industry. Invisible earnings are decreasing and we are not being provided with any figures relating to the oil industry. This is bound to be a case for concern. It is a very unsatisfactory situation.
I suppose that the most serious comment on the last lot of balance of payments figures is the Government's failure to earn an adequate surplus on current account to provide for our overseas investment. Every year that passes we have commitments which are beyond our needs. The only year when the balance of payments situation was in balance and when there was a surplus to finance overseas expenditure was 1958, when the economy was working at 7 per cent. to 8 per cent. below capacity. This is the measure of the Government's failure all along the line, and especially their failure to boost exports.
The Government's answer to this problem is to damp down demand. The Government do this every year or two. As some hon. Members opposite have recognised, this is a counsel of despair because it means, as happened in 1958, putting up not for a few months but year in and year out with a level of unemployment of labour and capital which would be quite unacceptable politically to the country as a whole. There is no doubt that this is the logical conclusion of this policy.
The Government's record of production resulting from their policy of damping down demand is a shocking one. My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said that production at last started to crawl upwards in the first and second quarters of this year. Now, as a result of the Chancellor of the Exchequer's squeeze, it is falling back again. I warn the House that it is bound to take several months before production recovers again.
However, production is not the full story. Consumption has fallen as a result of the Government's July measures. It is interesting to note that the Economic Review of the National Institute of Economic and Social Research says that on the present form the consumption position will not be restored until half-way through 1962. This is a grim outlook.
But production and consumption are not the full story. Investment in the private sector is tailing off now, and the indications are that there will be a turndown in 1962. In particular, I draw the attention of the House to the figures of the Federation of British Industries relating to intentions for increases and decreases in investment in plant and machinery. These figures show that the ratio of these two intentions has gone back once more to the position obtaining in 1958. It is not surprising to learn, in view of all these figures, that there is a tremendous amount of spare capacity in the country. Many industries are working below capacity at present—the steel industry, the motor car industry, and now even parts of the textile industry.