Orders of the Day — Ammendment of the Law

Part of the debate – in the House of Commons at 6:18 pm on 15th April 1964.

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Photo of Mr Brian O'Malley Mr Brian O'Malley , Rotherham 6:18 pm, 15th April 1964

I am in complete agreement with my hon. Friend the Member for Colne Valley (Mr. Duffy) when he says that he cannot join in the congratulations to the Chancellor on his Budget which have been paid by a number of hon. Members opposite. It seems to me that the verdict of history on this Budget will be that, in the stormy twilight of a moribund Administration, the present Chancellor avoided his real long-term responsibilities to the nation.

One central problem has caused an enormous difficulty in our economy throughout the 1950s. Whenever we have had an expanding economy, whenever the wheels of industry have begun to turn and we have had full employment, within a short time we have had inflation and a balance of payments crisis on our hands. As long ago as the time when the present Foreign Secretary was Chancellor of the Exchequer we were told—these were the right hon. Gentleman's words at the time—that we could no longer allow this country's economy to go at full tilt for long periods together.

In dealing with the central problem of growth, which has been so adequately described by my hon. Friend the Member for Colne Valley, this is the obstacle to be overcome, the obstacle which the present Administration have failed to overcome. We have seen a number of Measures, all equally ineffective, taken by the Government to deal with the shortened trade cycle. Indeed, many hon. Members opposite often give the impression that they believe that this shortened trade cycle has almost a ring of inevitability about it, just as in the last century and the early decades of this it was thought that the decennial trade cycle, coming every seven to ten years, was almost a rule of nature about which one could do nothing.

This Administration, in 12 or 13 years, has tried a number of things. There was the interesting experiment, which can best be described briefly as "Boyle's Law", to keep the cost of living down by forcing prices up. This was the dictum put forward by the present Minister of State for Education and Science. The Tory Administration, in I think 1955–56, abolished the subsidy on bread and lowered the subsidy on milk. In 1956, Purchase Tax on household goods was increased. The full burden of restraint, just as in later years, was laid at the door and made the express responsibility of the wage and salary earner.

A few years after that we had the plateau theory, then the theory of high Bank Rate. Now in 1964 we are in a boom period fostered to coincide with a General Election, but the Government are no nearer to solving what any of us would admit is the tremendously difficult problem of dealing with this shortened trade cycle of stop-go which we have experienced for a number of years.

I should have thought that one of the most important things which the Chancellor should have proposed in his Budget was to put into operation measures to control and deal with this problem of the cycle of stop-go, the cycle of recession and slight growth, which we have with regular monotony every 12 or 18 months or two years. Hon. Members on both sides would seem, on the surface, to agree that one way of solving this problem of the shortened trade cycle is through a national incomes policy.

I agree with the hon. Member for Bodmin (Sir Douglas Marshall) that there are important outside influences beyond our control which from time to time put strains and pressures on our internal economy because we are a trading nation which is largely dependent on world trade for making our living. The long-term task of any British Administration is to see what can be done to increase international financial liquidity so that we can sell more of our goods overseas, particularly to the under-developed nations, which, if they are to get out of the take-off period and raise the level of their economics, will need all the benefits of credit and increased liquidity. But this does not exonerate the Government from at least attempting to play their part in dealing with the shortened trade cycle which we have been experiencing.

A few weeks or, perhaps, months ago, the Federation of British Industries issued a statement about the problem of an incomes policy and prices. It did precisely what the Chancellor of the Exchequer did yesterday. The right hon. Gentleman agreed in principle with a national incomes policy. He agreed with many other things in principle. He examined all kinds of situations and then said why he could not do anything about them. The right hon. Gentleman says that we must have discipline and a national incomes policy. Part of the Government's difficulty in attempting to implement an incomes policy is the fact that the trade unions can have little trust in a Government who have dealt with legitimate claims over a number of years in the manner of this Government.

What makes the situation particularly difficult is that one cannot go to one's trade union branches—and certainly as a trade unionist, I have no intention of going to my union branches—and say that we will operate only a wages policy. We must genuinely operate an incomes policy dealing not only with wages and salaries, but, at the same time, with profits, dividends and capital gains. The fact that the Government have failed even to begin to plan an incomes policy can be soon in the fact that no suggestions have come from the benches opposite about how to implement a national incomes policy. At the Labour Party Conference last year, the unions said that that would agree to a planned growth of wages. How can one expect them to do this unless there are suggestions for a form of incomes policy for other kinds of income? As yet, I have heard nothing from the Chancellor of the Exchequer or from hon. Members opposite about how, by tax or other means, w e are to implement an incomes policy which is really an incomes and not a wages policy.

I should like to refer particularly to the steel industry, its growth and some of its problems under the system of what I call not private enterprise but private ownership, for which the Government, the Minister of Power and the Iron and Steel Board have some responsibility. Yesterday, the Chancellor said that the steel industry was booming. I am pleased that in my constituency the short-time working that we experienced a year ago has disappeared. The right hon. Gentleman said that production was 30 per cent. higher than a year ago. It should, however, be pointed out that a year ago steel production was running at the 1959 level.

It is not enough for hon. Members opposite to argue, as they have done, that the difficulties of our steel industry arise from a surplus of capacity throughout the world. This is, obviously, a factor which has influenced the steel industry the world over. We have a situation in our steel industry in which the men who work in it have lost millions of pounds in wages precisely because of the failure of the Government to deal with the shortened trade cycle which we have experienced in the 1950s and in the 1960s.

Although the hon. Member for Somerset, North (Sir E. Leather) was opposed for league tables, I must use some of them. When the hon. Member said that such tables were dangerous it should have been pointed out to him that when looking at some of the production figures and comparing the rate of growth in our steel and other industries with industries abroad, from the viewpoint of the Government and their chances of being returned to power at the polls in October or whenever the General Election comes, they are very dangerous.

It is worth examining the growth of crude steel production and comparing it with the growth of production in other countries of Western Europe and beyond. Because I would not want to lay myself open to the charge that I was choosing a particular year or combination of years to quote tables and statistics, I consider it useful to look at a period of nine or ten years in which we have seen several times over the working of the shortened trade cycle from which we have suffered in recent years.

The lesson of the information from such tables is clear. When production of crude steel everywhere has been rising, ours has been rising at a slower rate than that of countries overseas. Between 1955 and 1957, for example, it was increasing in the E.E.C. countries by about 13·6 per cent. In Japan—but I would not make a lot of this—output was up by 35 per cent. In this country it was up by 9 percent.

Then came the period of recession in the world steel industry. Production in 1958 dropped by 11 percent. in the United Kingdom. It also fell in the E.E.C. countries but by nothing like as much—only by 5 per cent.

The pick-up came in 1959–60 a situation comparable with that of 1963–64. The British steel industry increased its production by 20 per cent., the West German industry by 29 per cent. and the Japanese industry by 80 per cent. By 1962 our steel industry was back to the level reached in 1959. There were general surpluses of steel capacity in the world and difficulties in the E.E.C. countries as well as elsewhere. Nevertheless, the rate of production of steel in the E.E.C. countries in 1962 was 15 per cent. up on 1959. A similar kind of situation prevailed in 1963.

This example is a serious indictment of the Government's economic policy. The growth rate of industry in this country—of which the figures I have quoted are an illustration—has been much lower than in most other European countries.

Then there is the problem of raw materials. We are large-scale importers of raw materials. Sometimes the amount of such imports constitutes a serious danger to our balance of payments. In the 1950s, the working of home ores was the subject of prolonged wrangling between the Iron and Steel Board and the iron ore mining concerns. I think that it is now generally accepted by hon. Members that more home ore should be used by the steel industry.

We shall import increasing tonnages of foreign iron ore rich in iron content but, nevertheless, although this is an industry over which the Government have supervisory powers under the 1953 Act—I do not blame the Iron and Steel Board, for it has not the teeth that it should have—they have not been able to persuade the iron ore mining concerns to put the necessary capital investment into the development of underground mining.

The Government have great responsibility for the present cost of importation of foreign ores. The British Iron and Steel Corporation (Ore) Ltd., either directly or indirectly, has spent in the last 10 years about £60 million on bulk ore carriers but these have been limited to ships of 8–9,000 tons and 15–16,000 tons. Yet, at the same time, the Japanese have been building bulk carriers from 40,000 to 75,000 tons. The smallness of our vessels has added several shillings a ton to the cost of foreign iron ore.

At the tail end of 13 years of the Conservative Administration, we now have the National Ports Council, which is beginning to deal with this problem. But the fact remains that perhaps £60 million has been spent on ships that were out of date before they were even completed. This is the result of the inadequacy of the Government's investment programme and their failure to direct investment into essential public services. If the right policies had been pursued, so much could have been done to help our balance of payments situation.

The Financial Times only yesterday mentioned that growing imports of foreign steel were causing concern among some members of the National Economic Development Council. It is notable that steel imports have been climbing steadily since last August, rising to more than 55,000 tons in February of this year. The Financial Times went on to say: It has publicly stated that the situation is significant for the balance of payments position because additional imports of the order of import ingot tons might cause a deterioration of some £15m.–£20m. per annum'.Council members will also try to discover what possibilities exist for producing in Britain and on a competitive basis, goods of the type now coming from overseas. While fully appreciating some of the price cutting which has been going on in steel in world markets, I would have thought that one of the reasons why we were suffering from this kind of difficulty with the imports of finished steel products was that the steel masters, through their conferences, have been using and putting into operation the maximum prices which have been fixed by the iron and steel industry and that in this industry maximum prices have always been minimum prices. This is part of the difficulty.

On 2nd September, last year, the Financial Times quoted the estimate of one shipyard which said that by using British steel for a 50,000 ton vessel, £140,000 was added to the total cost of the estimate. I am not being dogmatic about this, but when the Government clearly have a supervisory responsibility for the industry and for pricing in that industry, when that kind of situation starts to raise its head—and it has been going on for some time—and when shipyards are making that kind of complaint, at least more than a cursory examination should be made of steel prices. Now that the steel industry is to benefit to the tune of about £2 million in the reduction of the cost at which the nationalised coal industry will sell it coking coal, I hope that that production will be reflected to some degree in the prices at which steel is sold in this country.

At a time when we are particularly concerned about imports, it is surprising that the Government seem to have made no examination of the restrictive agreements which the steel owners have made. I understand that there is clear evidence that cold rolled sheets and tin-plate exports are being held up because of restrictive agreements of this kind. I would have thought that any Government, seeing the fall in the exports of steel products to the Commonwealth which this country has experienced while other countries have been increasing their exports, would have looked to see what was wrong with the industry. Between 1961 and 1962, while E.E.C. countries expanded their steel exports to the British Commonwealth by 62 per cent., United kingdom steel exports to the Commonwealth fell by 28 per cent. This kind of situation should have been investigated a long time ago.

I know the importance of the arguments for looking at regional planning and making regional proposals to avoid distortion and the situation when we are putting on the brakes when we still have endemic and chronic unemployment in some areas. But what is most important to these regions and for the long-term prosperity and growth of the country's economy and the single most important problem which the Chancellor should have faced in the Budget is that of beginning to implement and beginning to create the atmosphere and conditions for a national incomes policy. This the Chancellor has failed to do and it is this failure for which he will be remembered.