I have no doubt that the hon. Member when he comes to speak will have some criticism of his Front Bench because the Government have not given him an opportunity to line his pocket with increasing values of shares. [HON. MEMBERS: "Withdraw."] All right, I will withdraw it. Let me say to the hon. Gentleman that he has had experience of this subject for a long time, and he probably is of the opinion that unless growth is of such a nature that it will give a fillip to the Stock Exchange the Budget proposal will not succeed. That is precisely what my questioner at Slaithwaite was getting at. If Government action will increase the value of the shares on the Stock Exchange, he wanted to know why he could not have his cut beforehand as well.
Yesterday, the Chancellor went a tremendously long way towards making the climate of opinion for the introduction of an incomes policy. If ever a Chancellor gave a hint to institutions such as the Stock Exchange that it could not expect another 1958, 1959, 1960, it was yesterday. I think that he went some way towards creating a climate of opinion where he could start again with his in- comes policy, because I am certain that unless we have an ordered incomes policy in an expansionist economy we cannot succeed in our aims.
There are two or three principles involved in this. There is the principle of automatic compensation for rises in the cost of living. No one could disagree with that. Another is that differentials should be maintained. Where the difference arises is what labour receives as the fruits of productivity. My personal view is that if we could get down to an understanding and arrangements for an agreement on this, irrespective of a looming General Election, it would go a long way towards saving this country in the struggle that lies ahead. Anybody who does not assist in this endeavour is not doing what he should to help the country through its difficulties.
I admire the way in which the Chancellor put over his speech yesterday. He stated certain desirable objectives on which both sides are agreed. We may differ on how the proceeds of prosperity should be divided, but we are agreed on such fundamentals as the stability of the £, the avoidance of substantial inflation, full employment, a high standard of living now and a rapid rate of growth. We agree that a fluctuating exchange rate would be bad and that periodical devaluations are disastrous, but the status of the £ and the avoidance of substantial inflation go together. If we assume that we have no control over the flow of goods, and over prices and incomes, we are left with fiscal and monetary action as the two main instruments of policy.
For many years we have not been able to keep the £ stable or inflation within bounds without sacrificing growth and full employment. There is an inconsistency here. It seems as though, when we go for one objective we lose out on another. We have sought compromise in moderate inflation, fairly full employment and a moderate rate of growth, but the status of the £ has always been a stumbling block. The £ has remained vulnerable. As a result, one or more of the objectives that both sides of the House agree are desirable has had to be discarded according to the economic or political state of the country, and the Government have had to act.
We remember the incentives given to the economy in 1958–59. As I have repeatedly said, those incentives were a fraud. They were not dependable, and they made many people in industry, particularly in the north of England, suspect that we are approaching the time for a "phoney" boom. That is what they call it. We have to do a lot before we can restore confidence, because businessmen are looking cynically at what the Government are doing. I will not detail all that the Government did in 1958, 1959 and 1960—that has been done before by myself and by others more competent. Suffice it to say that the result of the stimulation given in 1959 and 1960 was one of the most catastrophic drifts into wage increases that the country has ever known.
Many people again expect a release of purchasing power and a boom, but I do not think that the Government will get it this time. Many of today's factors are quite different from those of 1959. For instance, we will not have the banks going into the hire-purchase business as they did then for the first time in a big way.
Will the Chancellor's measures be successful or not? He has made it clear that he accepts a rise of 3½ per cent. per annum in terms of income increase. He has accepted the growth rate of 4 per cent. Whether he will postdate the 4 per cent. target to 1961 as the N.E.D.C. did he did not say, but it is certain that if he wants to achieve what he seeks by 1970 the growth rate must be more than 4 per cent. from now on.
If we doubt whether the Chancellor's measures will be sucessful, it is only fair that he should state why. I think that the right hon. Gentleman is vulnerable on two points. He is vulnerable, first, in regard to manufacturing industry. As a result of the spending boom in 1959–60, investment by manufacturing industry on capital equipment amounted to £1,195,000. There has been a large decline in 1962. Unless the Chancellor can get a correspondingly high investment in the private sector of manufacturing industry he cannot possibly get his growth figure, because the two are tied together.
Some experts say that the money spent in 1960–61 has been largely wasted. Have we had a return for it on the basis of profits? No. Have we had a return on the basis of growth? No, because growth has been comparatively stagnant, with much plant idle. As profits have gone down so this has directly affected the decisions that managements are likely to take to reinvest and to take the inducements offered by the Chancellor in the shape of investment allowances last autumn. The figures show that a colossal release of purchasing power—more than, has been injected by this Budget—has been needed in the past to get substantial investment under way. The lesson of a balance of payments crisis preventing manufacturers from using all the resources has been learned.
The machinery makers are left frustrated, their development is discouraged, and they very often just tick over until the next boom will enable them to sell their old models. We cannot afford this, and the only way to avoid it is a steady flow of capital investment so that machinery makers can carry the cost of development all the time. Whether we like it or not, this is where central planning will have to come in.
Thought is being given to this problem. For instance, the machine-tool industry is waking up to the fact that it needs something like this in order to make progress, and it has suggested that, in fat times, there should be a syphoning of its profits into a reserve, as in Sweden, so that in lean times it can take advantage of what has been saved.
N.E.D.C. has assesed the growth prospects of 17 industries. That is first-class as far as it goes, but why cannot the Council now proceed to an investigation in depth of the industries that supply the manufacturing industries with their machinery, in order to make certain that the productivity of the machines supplied over the next decade is well in advance of growth targets? An investigation like that will give us some shocks, but unless we make it we shall not be sure that our resources are used to the best advantage. We want, too, to know whether the development of the machines in which manufacturing industry invests and on which it depends will be channelled to the growth industries on which the country will depend as a spearhead in the export trade.
Let me give an illustration. The wool trade is a first-class export industry. It exports £160 million worth of goods a year, and will continue to do so. It has 10,000 looms which run at a rate of 96 picks a minute, but the best looms in the world run at speeds ranging from 138 picks to 250 picks a minute.
Is it not the Government's concern that this should be remedied? Is not the N.E.D.C. the instrument to find out why this is not done, and is it not up to that body to provide the answer and say how it should be done? This illustration can be multiplied many times over the face of British industry. In terms of manufacturing industry, investment should now be on the basis of quality and productivity rather than in terms of capacity, as it was in the boom years of 1959, 1960 and 1961.
I have lately been to Japan and have had the opportunity of studying what the Japanese do about their export trade. My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) drew our attention to an article published in The Times this week. I should like to say to him and the Committee that what the professor was advocating in The Times this week the Japanese have been doing for ten years. If any advanced country has a new industry or a new technique, the Japanese want it. The Government, workers and everybody in Japan are enthusiastic about going forward.
When the Japanese hear of a new product or patent in any part of the world applications for licences to manufacture are applied for. The Japanese know precisely what the shape of their export drives will be for the future. In 1953 they began their planned exports. The British Government will have to do the same if they are to succeed in the efforts announced this week. The Japanese are switching over from light industry to heavy industry all the time. The authorities there show very little interest in industries which, although they are exporting successfully now, are likely to decline in the future.
The cotton industry in Japan is not regarded as in the forefront of their exporting industries. The Japanese have already stated publicly that they expect the under-developed countries to take on the job of making cotton and other textiles. The way in which the Japanese get down to the assessment of trade figures is ingenious. They take the percentage of world trade in a commodity and then assess their own share of that world trade and give themselves a rating. If world trade in the commodity is rising, then Japan's index must rise, too. If their specialisation index is high and world demand is not rising they just do not care about the industry concerned.
Now a word about aids. The Japanese give exemption from corporation tax on profits on a new product. They give freedom to import "know-how" in growth industries. They provide tight protection for infant industries. They give low rates of interest in connection with goods for export. They provide low discount rates for bills of exchange. They give 80 per cent. relief of Income Tax on export profits. If any firm exports 50 per cent. of its products it qualifies for 80 per cent. relief of taxation as well.
Just as the Japanese know the precise shape that their export trade is likely to take, there is no reason why we should not know the same here. What is to prevent us from getting down to this task and finding out which industries will be the exporting industries of the future and stimulating them? We have had too much "stop and go" and action afterwards because palliatives are needed.
It is up to the Board of Trade to show that it has some ideas which are out of the rack of platitudinous repetition given to us this afternoon. It must show this by generating energy in planning our export policy. If it does not, then all we have to say today of yesterday's. Budget speech is that it was just another waste of time. It is up to the Board of Trade to prove that it can perform this task.