I congratulate the right hon. Gentleman on his being so persistent a reader of the gossip columns. I am not at all abashed by the accusations of disloyalty or lack of courage or panic. These taunts are natural. Obviously, they are very easy to make, but, curiously, two exactly opposite attacks have been made on me since I became Prime Minister. I have been accused during my years in office of excessive loyalty to old friends and colleagues and unwillingness to introduce new blood into the Government. I have also been accused of a detachment amounting almost to disdain. Now I am accused of taking violent action in a moment of panic.
These contradictory accusations do not move me. I am content to be judged by those with whom I have worked during nearly fifty years of active life—in the Army, in business, here in the House of Commons and in Government.
But what has distressed me is having to make a number of decisions which are unhappily necessary from time to time, affecting long friendships. My right hon. and learned Friend the former Chancellor of the Exchequer has worked with me in close partnership for six years. He has held the high offices of both Foreign Secretary and Chancellor of the Exchequer. We all recognise the courage, single mindedness and patriotism that he has shown. Last July, with my full support, he embarked upon an operation made necessary by the fierce pressures on sterling which were then being developed. That phase of the battle is over. We have achieved a sound basis for growth and we must confirm that and move to a new phase.
I have decided that for this new phase there must be some new commanders. These decisions are, as all those who have held this office know, one of the greatest burdens that fall upon a Prime Minister. I can assure the House that they are much easier to evade than to make. There is no inconsistency in all this. To take the decision and to face its consequences does not detract in the slightest degree from the sincerity of my tribute to the work of my right hon. and learned Friend, which, I believe, will be shared by all hon. Members on this side of the House.
The reconstruction of the Government has also involved my parting with other colleagues, many of them very old friends. But in any Government changes have to be made from time to time. The reconstruction of a Government is, at the same time, more necessary and more difficult when a party has been so fortunate as to receive on three successive occasions the support of the electorate and to have governed for a period of nearly twelve years. I have no doubt that we shall be faced with a similar problem in 1966 or 1967. So much for the personalities.
The only clear policy that the Leader of the Opposition seemed to recommend is the dissolution of Parliament. But before that we have a lot to do and we mean to do it. I would have thought that an Opposition demanding an election would perhaps have given some indication of their own policy. Suppose we take the right hon. Gentleman at his word and the Opposition had an election on Europe. What would happen then—still on the fence? The right hon. Gentleman's attitude throughout has been prudent but not very inspiring.
Then there is the question of defence, to which the right hon. Gentleman referred. My right hon. Friend the Member for Woking (Mr. Watkinson) has done a very fine job. [HON. MEMBERS: "You got rid of him."] My right hon. Friend informed me some time ago of his willingness to make way in any reconstruction of the Government when it was made. He can be proud of the fact that during his period of office he has presided over the most difficult of all operations, the transition of the Armed Forces of the Crown from a compulsory to a voluntary all-regular basis. We believe that the recruiting figures will justify his policy. He has maintained a firm unity on defence policy between ourselves and our partners, the United States, and in N.A.T.O., and the Defence White Paper which he presented in February had the full support and has the full support, of the Cabinet.
As to the question of the deterrent, there has never been any change in the Government's view, but what the Opposition's policies are to the deterrent would need a very specialised student of political history to find out.
What about economic policy? There, we had just a little bit of the professor, as usual, but not very convincing. The Opposition accept the need, I am told now, for an incomes policy in principle, but they have done their very best to frustrate it and undermine it in practice. In the debate last December, they were challenged as to what their incomes policy would be. It was the same cry, "Wait and see. Wait until we have worked one out, and then we will tell you about it at the General Election." So we must not have the General Election too soon.
As I say, before we have an election there are a number of things we mean to do which we believe to be in the national interest, and which will, we think, lead to further progress. Meanwhile, I must remind the House, as the right hon. Gentleman has done, of the progress that has been made. The right hon. Gentleman gave an account of Britain over the last eleven years which, I think, would be unrecognisable by anyone who really made an objective study of the country. His was not a history, but a caricature. Let me give my own picture, which is much closer to the actual facts.
The standard of living in this country has risen more in the past ten or eleven years than it did in all the previous half-century. That is not what the man in the street calls stagnation. It has been achieved at a time when we have been devoting an increasing proportion of the national income to social services, capital investment and, I am happy to say, to overseas aid. On the average, the level of unemployment since the war has been lower than, I think, that in any other industrial country with, perhaps, one excepted. As a measure of confidence in our administration, personal savings have risen twentyfold since 1950. That is what the ordinary people think about the Government. That is helping to finance our present great programmes for the modernisation of industry, transport and commerce.
Our exports have reached a record level, largely due, I agree, to the firm measures taken last year. They have expanded every month this year and, of course, the pay pause has helped to make our costs competitive. It has helped us to expand our exports and preserve full employment and, as a result also, our gold reserves have risen by about £350 million. We have beaten off last year's attack, and although we have continued our aid to the full, and our other overseas expenditure, although we have played our part in the arrangement for giving financial help to Canada at a critical moment, we have been able to pay off a large part of our emergency borrowing.
The social services have expanded during this period rapidly and continuously. Expenditure on them— [Interruption.] We have had the caricature, so hon. Members opposite may as well have the true picture. Expenditure on the social services in the past ten years has nearly doubled in money terms, and has gone up by at least 50 per cent. in real terms. As for housing, I really never thought that the Opposition would ever taunt me about houses. During all those years we have averaged 300,000 houses a year, a figure that was described by the opposite side as being neither desirable nor possible. Of course, there is still a great need, and we are driving forward for this last clearing of the slums, and so forth. If ever there was a story of which the party of which I am the leader had a right to be proud, it is the story of housing.
Let me come to education. An extraordinary desire always to denigrate this country seems to fill the right hon. Gentleman. We are spending on education more per head than any other country in Western Europe except, perhaps, Sweden. We have managed to cope with the birth-rate "bulge" without resorting to the shift system in education which most other countries have had to adopt. Large and necessary expansion is going on at every level, from primary school to university. We are getting better value for money through improved design, and an interesting figure is that building costs per school place, owing to this great skill shown, were less per place last year than in 1949.
The hospitals and local services have been greatly improved. The hospital service has been transformed by the new building programme, and the elderly are sharing, as we always intended that they should, in the prosperity they helped to create. Pensions have not merely been raised to meet rising prices, but today have 50 per cent. more purchasing power than they had eleven years ago. The elderly need care as well as cash, and our programmes have provided for a growing number of suitable homes and services in the home, as well as looking to their special needs in hospital treatment.
That is the true story of the eleven years of the Administration—[Interruption.] Inevitably, the speed of our advance has developed stresses—personal and public, economic and social, national and international—which must be remedied if they are not to hinder expansion and future progress. At the same time, there has come about all over the country a growing awareness that a high standard of living cannot be our final goal, that it carries with it obligations to the outside world which we have in these years, with all our difficulties, done our best to meet, and which we are determined to meet on an increasing scale in the future; and that we must find a way—because that is what the old world must do—to redress the economic balance of the new.
All this can only be achieved, and the right hon. Gentleman knows it, from a firm economic basis at home, and this the Government are determined to maintain. Through the establishment of the National Economic Development Council we have taken an important step forward to find ways of achieving a steadier and more rapid rate of expansion. We are giving full support to the firm, though sometimes painful, methods and measures by which the nationalised industries must improve their efficiency.
Yet there still remains—and the right hon. Gentleman just touched on it, and only just touched on it—the great economic question today, the problem that faces ail advanced countries today. The four main objectives are really the same; I imagine we all share them. They are full employment, steady prices, a strong currency and expansion, or growth. In a country like ours, where there is, broadly speaking, full employment—or, at any rate, where there are no massive reserves of manpower as there are in some of the European countries, or have been—expansion can be achieved only in two ways—by the rapid transfer of manpower where it is available from declining to expanding industries, and by the removal of any obstacles to growth.
Secondly, we must make sure—and for this we look to the National Economic Development Council for vital assistance—that the most efficient use is made by management and labour of all the vast complication of machinery and techniques which modern science has made available. For example, if the nation as a whole pays itself in increased wages, salaries and dividends more than is justified by increasing production, it is surely accepted that costs will rise and exports fall. In that event even the increase in individual incomes will be but Dead Sea fruit, for they will not realise their true value. I should have thought that that was self evident.
An incomes policy is, therefore, necessary as a permanent feature of our economic life. It is not, of course, the only element in our economic policy but it is an indispensable element in the foundations on which to build a policy of sound economic growth. If costs rise exports will fall and the weight of imports will correspondingly increase and lead to a balance of payments crisis, so that the rise in prices will inflict great injury on those whose incomes are in fixed terms or cannot be readily advanced to meet the rising prices.
How to reconcile an incomes policy in a free society means digging right down into the roots of our philosophy. [Interruption.] I should like the House to consider this matter seriously, for this is the reason why we have been considering what form the next step should take. I will now answer the questions put to me by the right hon. Gentleman the Leader of the Opposition. Even in war —with controlled prices, rationing, the direction of labour, 100 per cent. Excess Profits Tax and post-war credits to reduce the impact of increasing wages and the rest—we did not have a wholly successful incomes policy. One of the results is the immense debt we now carry.
Even after the war, when the Labour Government of the day inherited this highly-controlled system which had been brought about by the siege economy inevitable to an island in war, they found themselves baffled by the same problem. Many of us remember how they resorted, as we have, to appeal and exhortation and many of us remember the immense energy and enthusiasm which Sir Stafford Cripps devoted to this purpose. [HON. MEMBERS: "Hear, hear."] But even he was not successful and now that we have a much freer economy it may be that the task is more difficult. I freely admit that.
But that is not to say that the efforts of successive Governments have altogether been in vain. Public opinion—and the debate we had the other day showed this —has developed over the years. People are beginning to understand much more readily what happens if one sector tries to gain some undue advantage over the rest and how fatal will be the result if all together insist on pursuing increasing incomes without regard to their real value. We can claim that our actions over this past year have given the economy a real advantage and have helped to keep our costs reasonable compared with other countries. What we need now is a new machinery or mechanism and a new advance.
In a free society an incomes policy cannot, in my view at any rate, be imposed. It can come about only by general acceptance, and if it is to be a permanent feature and not a temporary thing in a difficult crisis, as I believe it must be if we are to achieve our four objectives, then it must be regarded both as necessary and as fair. This is the problem to which the whole House must address itself. It must not, as a permanent feature, be rigid. A temporary measure must necessarily be somewhat rigid and sometimes unfair. A permanent policy, however, must be flexible so that it can take account of the different conditions and needs of different services and industries and of the intervals that may have elapsed between the last increase and a new claim.
It must have regard to better ways of working or new responsibilities. It must be capable of providing a workable system of adjustment of pay, not only in those occupations where the ordinary forces of the market apply but in the wide area of the public service where they do so to only a limited extent. First of all, the Government must continue to inform the country from time to time as to the rate of increase in total incomes which is compatible with the growth of total production.
This does not mean that the general figure will be the appropriate figure in every particular case. For example, there may be a need to increase rates of pay in a particular industry to build up its manpower relative to other industries, or some special increase may be justified by the fact that workers in a particular industry are able to make a special contribution to greater productivity and efficiency. And, as I have said, the history and timing of earlier pay increases may properly need to be taken into account.
What is essential, however—and we may as well face it or otherwise we shall fail to obtain our four objectives—if we are to meet the national interest is that every case should not be regarded as a special case and that the broad matching of incomes and production should, in fact, take place. Our experience over the past year has shown clearly that it is not enough for the Government to offer guidance in general terms. What we need is an impartial and authoritative view on the more important or difficult pay questions given by a body which can see these questions both as they affect individual interests and the nation.
To fill this need we have decided to set up a National Incomes Commission. This, of course, will be a permanent body. Before I describe its functions I should like to say this. There is no intention to deprive any man of his right in a free society to sell his labour or hire other men's labour as he may wish. It is inherent in our plan that free negotiation shall continue and that the right to withdraw labour or withhold employment shall remain unimpaired. Nor is there any intention of dismantling or abandoning the machinery of arbitration. The present working of the wage-council system will continue. The wage-council system is the modern form of a machinery developed over a great number of years which protects those classes of workers who, for various reasons, are least able to protect themselves.
The main features of the Commission will be these. It will be given terms of reference requiring it to inquire into and to express views on claims of special importance. In so doing it will take into account not only the circumstances of each claim but also the wider considerations of national interest such as the need for increases in incomes to be matched by increases in production. It will carry out this work, so far as possible, in public. It will publish its findings and its reasons for them in full and this is important, for one of our main needs today is to mobilise and inform public opinion.
Much that happens now in the sort of dim industrial twilight might well be brought into the clear light of day. The Commission will deal not only with prob- lems in industry but also with public and other services, the value of which cannot be measured by purely commercial considerations.