Debate on the Address [First Day]

Part of Sessional Orders – in the House of Commons at 12:00 am on 3rd November 1964.

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Photo of Mr Harold Wilson Mr Harold Wilson , Huyton 12:00 am, 3rd November 1964

I have referred to the formula in the Gracious Speech: Other measures will be laid before you. This is no empty formula. It has been regularly used by Governments. In the last Session the right hon. Member for Bexley (Mr. Heath) introduced an unintended Hire Purchase (No. 2) Bill and other more controversial Measures. We shall certainly have Measures not listed in the Gracious Speech. I refer to one now which I welcome and have fought for for many years. No one will welcome this Measure more than my right hon. Friend the Government Chief Whip. This is a Bill to restore the right of municipal transport undertakings to provide free and reduced fares for old-age pensioners. It is a striking reflection that it took a General Election to give this Bill a chance of getting on the Statute Book. We look forward to the enthusiastic support of the shadow Minister of Transport, the right hon. Member for Wolverhampton, South-West (Mr. Powell), who has also returned to the Opposition Front Bench.

The House will not expect me to go on at length about the proposals contained in the various parts of this very full legislative programme. All of us on this side of the House spoke at some length in the election campaign about the important proposals, particularly those dealing with land shortage and land prices by the establishment of the Crown Lands Commission, our decision to repeal the Rent Act and provisions for the old-age pensioner and Service pensioner. The right hon. Gentleman the Leader of the Opposition wanted to know when he would hear more about these things, the earnings rule and so on. My right hon. Friend, if he catches your eye tomorrow, Mr. Speaker, will say what our proposals are in this field.

It is our hope to end prescription charges and to take the steel industry into public ownership. The Leader of the Opposition referred to the competitive force in the steel industry. I am sure he will realise, if he will study the evidence given to the Restrictive Practices Court by leading members of the steel industry, that whatever else may exist in steel there is no price competition whatsoever. On the question of steel, my right hon. Friend the First Secretary of State for Economic Affairs will make a further statement later in the debate.

On the general question raised by the Leader of the Opposition, the question of mandate, there is one extraordinary argument being peddled in Conservative circles and by the Conservative Press. The essence of statesmanship, we are told, is measured by the extent to which a Government—at any rate a Labour Government—disregards the programme on which it was elected and rushes to adopt the programme of right hon. Members opposite, a programme in which we do not believe and which the country has decisively rejected.

There is the growth of this new doctrine of a majority without a mandate applying only to a Labour Government and requiring us to allow our policy to be dictated by those who consider that they sit there with a mandate, even if they have not a majority. This doctrine was not advanced by Members opposite in and after 1951. The right hon. Gentleman opposite denationalised steel and road haulage and introduced prescription charges as well as many measures for which they had not even sought a mandate, and after an election in which they got fewer votes than we had and in which their popular vote was over one million less than that of their opponents. In 1955 they still had a minority of the popular vote, but that did not stop them embarking on the Suez operation and the Rent Act, which they were in fact pledged not to introduce; and still in 1959 they had a minority of popular votes, but we never heard of Conservative newspapers questioning their right to act as a Government. So I hope we shall hear no more of an argument which advertises nothing but their insincerity. We have a mandate and will carry it out.

We intend, therefore, to introduce early legislation to deal with pensions, pensions as of right, not in the spirit, I would remind the Leader of the Opposition, of condescending charity. We shall proceed with equal speed to deal with the insensate Rent Act. When that Bill was introduced the right hon. Member for Wolverhampton, South-West told us—seven years ago—that we were within six months of an equation of supply and demand for houses and that the Rent Act would end the housing shortage and even in London: the rents which it will be possible to obtain for this large number of rented houses coming on to the market at the same time will not be much in excess of the rents which will be permissible … for houses remaining in control."—[OFFICIAL REPORT, 21st November, 1956; Vol. 560, c. 1770.] So far from reducing rents, freeing accommodation, helping tenants or solving the housing problem, the Rent Act has aggravated the situation. The number of homeless in London has risen after eight years of the Rent Act to record figures. The Act has precipitated a stream of evictions and imposed harsh rent increases on tens of thousands.

So far from stimulating the landlord to put his property in order, it has permitted large numbers of them to pocket higher profits and let their properties sink further into decay. But we shall not try to put the clock back to where it stood in 1957. We see this as a great opportunity for moving forward to a new, juster and more humane relationship between landlord and tenant.

Turning to health, we shall, as a major step, end the prescription charges. One of the most unjust things of the past 13 years has been the disposition of right hon. Gentlemen opposite every time their election booms ran into difficulties to put fresh burdens on the old and sick. We had it in 1956 with the individual prescriptions charge. We had it in 1961 with the doubling of the charge. Somehow when things began to improve as the election drew near and hundreds of millions of fiscal largesse emerged from successive Chancellors' despatch cases there never seemed to be any money to relieve these burdens. "From each according to his means, to each according to his needs" is the principle on which we approach this situation, and this principle applies as much when things are tough as when they are easy. It is, in our view, a principle which is mandatory when the country is faced with economic crisis.

It is to the economic crisis that I now finally turn. Just over a week ago the Government issued our first statement on the measures immediately necessary to deal with the disturbing export-import gap. Let me say right away—I have in mind particularly our friends in the Commonwealth and E.F.T.A. and Europe generally—that we, all of us, deeply regret the necessity which has been forced on us of imposing these temporary charges on imports into this country. A freer trading world is the aim of all of us, and we shall work for it, but we had to stop the bleeding, and by the most effective means.

Of course we recognise that if we had imposed physical quotas, quantitative restrictions on imports, we should not have incurred the criticism which not unnaturally arose both in G.A.T.T. and in E.F.T.A., because technically quotas are permitted in both those trade groupings. But we felt that they would have done more harm than these temporary charges. I have some experience of administering a quota system which was carried on from wartime into the immediate post-war shortage, and it has always been my view that it imports rigidities into the system where we want to get the maximum flexibility of response. Clearly, the endorsement given by G.A.T.T. and E.F.T.A. to quotas, to the exclusion of surcharges, suggests the need for modernisation of the rules.

I want to make this clear again. These charges are temporary. My right hon. Friend the Chancellor of the Exchequer will in due course have something to say about the legislative arrangements. The second thing I want to make clear is this. I hope that we have underlined our firm determination that these charges be not regarded in any protectionist sense, shoring up, sheltering, feather-bedding industries which by their lack of competitiveness are the main contributors to the worsening in our balance of trade. This is why we have laid such stress on urgent measures to make industry more robust and competitive, by purposive investment, modernisation, innovation and by an attack on restrictive practices wherever they are to be found. The right hon. Gentleman the Leader of the Opposition, who referred to restrictive practices—he congratulated me, rather kindly, on having said it for the first time, I think—may find that I dealt with this at rather considerable length at a place where I do not think he has dealt with it—at the Trades Union Congress at the beginning of September.

Equally, I hope that it will be understood that home industries which greet charges on their overseas competitors by unjustified unconvenanted increases on prices are acting in a sense completely contrary to the public interest, and we shall not hesitate to deal with it. The Government's economic statement declared our intention to set up a price review body, and we mean it to be effective.

I hope, therefore, that our friends abroad will take these measures as we intend them, as urgent, necessary steps to deal with a serious situation, even if they are seen as measures which are acting in a sense contrary to what we want to see happening—freer world trade and greater competitiveness in British industry. I hope, too, that they will recognise that they were not lightly decided upon. The Government did not face a simple choice between doing this and doing nothing. Whatever we did, we were faced with a choice of evils.

One choice was rejected. We decided firmly against going back to stop-go-stop policies. Some of our friends in Europe I think feel that we should have dealt with the situation only by internal measures. [Interruption.] I did not hear that. If the hon. Member is suggesting that we have lost friends by what we have done, I will come to that point in a little while, because we had the authority of the right hon. Member for Barnet (Mr. Maudling) for the measures taken. They were his measures. Some of our and their friends in Europe feel that we should have dealt with the situation by internal measures, by deflation.

Let me say what this would have meant. The effects on their exports to us would have been just as great as the effects of what we have done, and more prolonged, because we have bitter experience that a decision to slam on the brakes leads to a prolonged stagnation and a prolonged restriction of imports. Secondly, we have learned the hard way that deflation and contraction, so far from making us more efficient and competitive, have the opposite effect—costs rise; essential investment is discouraged; restrictive attitudes on both sides of industry are encouraged; a policy which relates incomes to expanding production is made infinitely harder to achieve. Thirdly, we are not prepared to accept the unemployment and loss of production which economic defeatism of this kind entails.

The House and the country are entitled to know the situation which forced the Government to take this action and the reasons for it. The best estimate available for 1964, with no change in policy, was an overall balance of payments deficit of at least £700 million, possibly up to £800 million, with a continuing overall, if reduced, deficit for 1965. This clearly could not be allowed to go on. It meant that we could get through this year and next only by running down our reserves and by prodigious borrowing. This year we have been kept going with aid from the Commonwealth in the shape of increased sterling balances, which we have supplemented by borrowings in New York and in Europe.

No one will suggest that we can go on like this. Even if it were tolerable, it would not even be possible, for unless we took urgent measures first to stop the bleeding and then to build up our physical strength, those from whom we have borrowed would understandably have doubts about extending further accommodation.

I would ask the House to discount suggestions in some papers last week that certain countries intend to make International Monetary Fund borrowing more difficult, except on the condition that we accept an interference we are not going to accept in respect of our economic and social policies. There is no foundation for these stories. Our friends realise what this kind of attitude would mean for the future of the Western trading community, and indeed they understand the constitutional implications of this kind of talk.

But they have a right to know that we are going to take measures, of our own volition and choosing, to limit in extent and in duration our dependence on them for help. What the House must realise, I think, is what this borrowing means for us. What it has to realise, too, is equally the responsibility of those who knew the facts but who failed to take the measures and were prepared, for political reasons, to avoid taking those measures and to disclose the situation until 15th October was safely past. I make these charges not lightly but in possession of the facts, and. if I may say so, as one who throughout this year sought to warn the then Government and the country what the facts were, only to have my speeches rigorously denied from every member of the late Government from the Prime Minister downwards.

The first fact is that after thirteen years of the easiest world economic conditions this country has known for half a century we are reduced to an unacceptable degree of dependence on international borrowing, and this, I remind the Leader of the Opposition, from a party which tried to fight the election on the issue of an independent foreign policy. There is no dependence without economic strength. Secondly, throughout this year warnings went unheeded, and action which should have been taken was rejected or postponed because of the election situation. Thirdly, for the same reasons, the country was lulled into a false sense of complacency inimical to the kind of effort and aggressiveness which we urgently needed to see in our production and exports.

Having stated the charges, I now propose for a few moments to justify them. In the early months of this year it became clear, not only that exports were failing to rise sharply enough, but that imports were rising ominously, and at a time when on the official figures the preelection boom, we now know, was losing its momentum. On 25th January, in a speech in Swansea, I stated these facts. I said that while a financial crisis, in the sense of a run on sterling, could always be met by use of the reserves and international borrowing, urgent action was imperative to get exports and imports into balance in the long run. That speech was made before the grim January figures, but the warnings that I and my right hon. and hon. Friends then issued were rejected.

The then Prime Minister, whose successive pronouncements on the economic situation throughout this year have touched a new low in irresponsibility, went on record as saying that the economy has seldom, if ever, been stronger. That is what he said right through this year. It is what he said when he knew the January trade figures. I refer to a book of speeches of his which says this: The depressing trade figures for January 1964 gave the Socialists an opportunity to predict economic crisis. The Prime Minister's reaction was to go over to the offensive. Hinting that the next set of trade figures would show a dramatic improvement, (as they did) he drove to Coventry … Then this is what he said in Coventry: It is almost a shame to disappoint them, but I must tell you … 1964 should be a record year. It has been all of that. Taking seasonal variations into account, an adverse balance of trade for the first half of the year of £237 million compared with a figure for the first half of 1963, a favourable balance of £17 million; an adverse balance of payments on current account for the first half of the year of £182 million, overall of £341 million; and an estimate today of £700 million, and possibly more, for the whole year.

Right hon. and hon. Gentlemen opposite have spent the last 13 years dining out on nostalgic memories of 1951. Let them realise that the trade figures for 1964 are almost exactly the same as in 1951, despite the fact that more favourable terms of trade are worth anything from £1,000 million to £1,500 million a year favourable to our balance of payments compared with 1951. The then Ministers wrongly attributed our 1964 trade gap to restocking of materials, but the fact is that it was in 1951 when imports were rising through restocking. Let us have no more stones flung at 1951, because right hon. and hon. Members are living in the 1964 glasshouse and are not in a position to throw them.

We had the right hon. Gentleman's Aberdeen speech in April. He said: You would think they really look forward to a gloat at the possibility of an economic crisis in the autumn. Well, they will be disappointed. They will not get either their crisis or their Government. So much for the former Prime Minister. While it is possible that he might, on these matters, be able to sustain a defence that it is not really his subject, that defence cannot be advanced by the right hon. Member for Barnet, nor his right hon. Friend the Member for Bexley. In the Budget debate the then Chancellor described the prospect for exports as encouraging. He rejected any idea of controls on imports of manufactures. Expansion now", he said, is heartening and vigorous. That was in April. In fact, there has been, on the official figures, no increase in production since January. He continued: The possibilities are great and the prospects exciting."—[OFFICIAL REPORT, 14th April, 1964; Vol. 693, c. 274.] In April—and this should be said to his credit—he fought an unsuccessful campaign to get an early election. He was right in asking for it, but he lost. Having seen the figures, we now know how strongly he must have felt. Having lost, he said in June: I think our economic prospects in the short term are certainly good. In July he explained away the trade gap by saying that increased imports were due to stockbuilding.

The right hon. Member for Bexley sung the same tune in the Budget debate. We all remember his impressive speech. He said that exports were steadily increasing and that imports are high to support expansion …"—[OFFICIAL REPORT, 15th April, 1964; Vol. 693, c. 469.] Imports were rising and exports were expanding. He then spent five columns of HANSARD denying that there was any problem about manufactured imports.

The fact is that the Board of Trade returns show that in the first nine months of this year imports of manufactures were £350 million higher than in the same period of last year—an increase of 31 per cent. But we were told last Monday by the former Chancellor, when discussing our measures to cut imports of manufactured goods, that we have inherited both his diagnosis and his remedies. We were very glad when he said that, because he was not only contradicting the right hon. Member for Bexley; he was repudiating the whole misleading complacency of Conservative leaders in the election campaign. Now we are inheriting their remedies. He means that short-term measures were in preparation under his direction to cut imports.

But what did his leader say at his final Press conference on 3rd October? Referring to the then Chancellor, he said: think he is convinced, and everybody seems to be agreed, that short-term measures are not now necessary. On 3rd October short-term measures are "not now necessary." At the end of October the Chancellor said that the measures we are carrying out were the measures that he had prepared. The country knows now what it suspected then, that their whole story of a soundly-based prosperity was based on national borrowings not of £1 million a day, but £2 million a day. Not since Stanley Baldwin's "sealed lips" confession after another election have we had such a conspiracy to mislead the public, a Prime Minister who had no other thought than to fulfil his pledge of a year ago that every act of Government and every speech be made with the election in mind, a Chancellor who knew the facts and suppressed them—