I said that I could not get in touch with him. I was notified that I was to speak immediately, but I left the Chamber and tried to get in touch with him.
I do not think that it is good enough—to put it as strongly as I can—for the right hon. Gentleman to confine his analysis of our economic difficulties to the last few days without looking back over the last few months, much less without taking up the challenge of my right hon. Friend the Chancellor and saying what he would have done had he been in office. At no time in his speech did he say what he would have done in this situation.
I also noticed that the right hon. Gentleman spoke of some inconsistency on the Government Benches between what we are saying now and what we said about the possible effects of the 7 per cent. Bank Rate on investment in 1961 when the Bank Rate was last raised to this level. What he did not point out was that the measures of his right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) were accompanied by a credit squeeze. There is an entirely different situation today. He knows that there is a vital difference. Nevertheless, he made no allowance for it, and repeat that that is not good enough.
On the other hand, I believe seriously—and I intend to defend these beliefs—that my right hon. Friend's Autumn Budget is right socially, economically and technically. It is right socially because the Finance Bill sets out to find money for welfare benefits for the old, the neglect of whom during the 1950's has been one of the most disagreeable features of our society.
The Budget is right economically because it eases the balance of payments crisis by discouraging imports and encouraging exports. It is right technically because it is deflationary to an extent which I must confess I did not at first quite understand. The extent is £220 million, a figure which I do not believe any of the pundits during the last few days even guessed at. This is appropriate, given the surcharges. It is appropriate because it more than fills the gap between the withdrawal of supply and the withdrawal of purchasing power.
But I hope that the surcharges will be temporary. One can recognise the need for them but also recognise, at the same time, that they are likely to lessen the stimulus of competition in our economy. They will encourage manufacturers to concentrate on the home market. They will increase industrial costs when the tendency for such costs will be upwards anyway. They will induce flabbiness in our economy. One therefore hopes that these surcharges will be temporary. On the other hand, one hopes that they will be associated without delay with an attack on monopolies, mergers and price rings as well as on the restrictive practices about which hon. Members opposite were so concerned when the right hon. Member for Barnet referred to them.
I think that the Budget is right to encourage exports because prospects for exports are bright. Despite the changing trade conditions and the fact that markets are becoming savagely competitive, the prospects for exports are good. Our comparative cost position is not unfavourable, and the inability of the late Government to exploit this position was, in my view, their most striking failure. The United States apart, wage rates have increased much more rapidly in other industrial countries, especially in Western Europe, than in the United Kingdom, as the labour supply everywhere in Europe has dried up. Western European countries, in particular, are experiencing full employment and are beginning to look to the possibilities of an incomes policy in their countries. In this year Britain has been admirably placed to steal a march on the Western European countries and has failed to do so.
Exports are therefore the key, and I am glad to note that attention to them occupies a central place in the Finance Bill. I was glad to hear my right hon. Friend say that he and his colleagues will neglect no opportunity of encouraging exports. I am glad to note that such encouragement will be associated with price scrutiny through the Price Review Body. I set great store by the Ministry of Economic Affairs and by the Ministry of Technology. I see as their main task what must be the greatest hope of this country—the long-term hope of stimulating the underlying growth of our economy.
There are three sets of conditions for such growth. The first is the over-riding need in the present situation to restore confidence, especially abroad, and this has been done by the higher Bank Rate. The second condition is to stimulate investment. The third is to try to stabilise prices—and we are all agreed that this can best be done through an incomes policy.
It has been rightly pointed out that, unhappily, the measures to restore confidence and the need for greater investment must in the short term be in conflict, and the higher Bank Rate is, unhappily, also an obstacle to both exports and economic growth. But in view of the capital outflow this year, which is responsible for perhaps half of the £800 million deficit which we expect at the end of this year, it was inevitable that some such action would have to be taken as was taken yesterday.
A body of opinion holds the view that this action should have been taken at least a month earlier. I think that it is to the Chancellor's credit that he delayed taking this action. Certainly, as my hon. Friend the Member for Woolwich, West said, it does not lie in the mouths of Tory Members to chastise the Government for not taking action sooner, because they had ample opportunity to take such action months ago. My right hon. Friend the Chancellor was right to delay action because the global control of demand in our economy is not appropriate to our difficulties. What are needed are selective stimuli in the economy, for example—regional development. And its expansion calls for capital formation, which in turn requires a high level of investment—and this, again, calls for more saving.
Unfortunately, the higher Bank Rate is likely to have just the opposite effect. It was rightly said by the right hon. Member for Barnet that the Budget has had the additional effect of transferring income from potential savers to potential spenders. This creates an additional need by the Chancellor to increase private savings and to stimulate Government savings. But he was right to delay to the last possible moment anything which might have had an opposite effect. I know that fixed investment is up in the present year on last year, but it is up much more in the public sector than in the private sector. It is up by 20 per cent. in the public sector and only by 10 per cent. in the private sector. I do not regard this situation as satisfactory. We must have higher investment, and this means that we must have more savings.
It may be argued that savings have remained high, but, expressed as a percentage of personal disposable income, they seem to have been on a plateau since 1961, and I hope that the Chancellor will do all that he can to stimulate savings. I hope that he will seek methods a good deal more novel than any that the late Government were prepared to consider. I do not think that the National Development Bond, if it is still on the stocks, can be regarded as the final answer. I want to see a State unit trust and a national equity. I want to see ordinary people, for whom anything that smacks of high-level finance still has terrors, taking part in this saving.
There are new layers of potential savings being brought into existence nearly every year in our affluent society, and at the moment they are not being tapped. The Government are admirably placed to encourage these people to start saving, and I want the Government to exploit every possible opportunity, no matter how novel, of increasing the number of savers in our society in order to get the higher investment and the underlying growth of our economy which I think hon. Members in all parts of the House agree is the long-term answer to our problems.
The Chancellor was right to emphasise the need to stabilise prices and to get an incomes policy, and it is to that that I want to finally address myself. I think we are all agreed that it is essential to have an incomes policy to keep costs competitive, but there are two conditions which cannot be repeated often enough. One is that an incomes policy must be established on just grounds, and another is that our policy must facilitate rather than hinder productivity. There is an urgent need, of course, for agreement between trade unions, employers and the Government to limit the rate of increase in wages and profits to a level compatible with growth and output and long-term price stability.
The Budget makes a start at establishing the right climate of opinion, and, therefore, it is not irrelevant to the present situation. But any agreement must avoid keeping wages below a competitive level and thus stimulating excessive demand for labour and higher profits. In other words, such an incomes policy and such an agreement as the Government may arrive at must not be at the expense of wages but must be—I say this not emotionally but on perfectly defensible grounds—on the grounds of efficiency and the future health of our economy. I emphasise that we must not arrive at an incomes policy which is at the expense of wages.
The persistence with which we run into shortages of labour, as well as the wage drift, which has not been mentioned in the debate on the Budget statement or so far in this debate, could prove to be the Achille's Heel of an incomes policy. The persistence with which we run into shortage of labour in wages terms when our economy starts to move is due to our inherent inability to use labour effectively. We still do not know how to put labour to the best use in our economy. Moreover, conditions of artificially low wages and high profits would keep inefficient managements in business. Our country cannot afford inefficient business men and low wages, riot merely on grounds of equity, social policy or even demand, but also on the ground of efficiency, especially if we are to speed up automation, and I hope that the Chancellor is already thinking about new ways of encouraging and providing more incentives for automation.
Because I want to take a balanced view, I think we need a fresh approach not merely on wages—I am arguing for a high-wage economy—but also on profits. So I welcome the Chancellor's announcement in this connection in the Budget statement. There is a need to weed out business men. Consequently, I welcome the Corporation Tax. I believe that if it is properly framed it will show trade unionists that a larger share of the national cake does not go to profits compared with wages and salaries. I can readily see that a Corporation Tax can play a positive role in an incomes policy, but there will be a real temptation to draw up a Corporation Tax that will subject distributed profits to higher tax.
This would help the slowly growing company which can satisfy its capital requirements entirely from its own resources but would penalise the rapidly growing company which has more capital than it needs. It would induce those companies whose capital needs are smaller than their resources to retain the profits for which they have no use. But, whatever the difficulties—I have indicated one or two of them on the side of both labour and capital—the search for an incomes policy must be persevered with.
Judged by this yardstick, the Budget has made an essential contribution. Also, the Budget recognises in its social aspects that an incomes policy, to be successful, must be all-embracing and that the national product must be distributed on terms a good deal more equitable than any that we have known during the past 13 years.