Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 12th April 1965.

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Photo of Mr James Callaghan Mr James Callaghan The Chancellor of the Exchequer, Member, Labour Party National Executive Committee 12:00 am, 12th April 1965

That includes the Government's £1,000 million; it is £10,000 million private. If, after having invested some £10,000 million overseas, the volume of our exports of manufacturers has dropped from 20 per cent. to 13 per cent. of total world exports in the last 13 years, how much more do we have to invest overseas in order to get it back again?

Frankly, I think that the problem is different. It is not the amount invested overseas which determines the nature or quantity of exports, but the attitude of one's exporters and the opportunity for reward which they have. It is to this that the Government have to turn their attention.

I am a little astonished when I hear hon. Members opposite rebuking us for the absence of aid to exporters. I readily admit that I have not solved all the problems connected in suggestions which I used to put forward from that side of the Committee; there are still one or two left. But when I remember that within six months—[Interruption.] I am telling the Committee what we have done, not what we are discussing.

We have improved credit facilities, which we were told was not possible. We have introduced a lower borrowing rate for exporters, which we were told could not be done. We have improved the export facilities through E.C.G.D. We have rebated indirect taxes amounting to over £80 million in a full year. My experience is very different from that of the right hon. Gentleman. I am finding that exporters are beginning to appreciate this as a very valuable concession. If it is not, I do not know what we are spending £80 million for, because it is a lot of money, and certainly some of the industries concerned are getting a substantial rebate from it.

There are still one or two things waiting to be done. I am told that this Budget has not provided any incentive to exporters. If the Opposition wants to take both Budgets together for the purpose of criticism, perhaps I can take them together for the purpose of putting my side of the story. If we are taking them both together, £80 million is not a bad sum. A number of other proposals are afoot which we are considering to see in what way we can improve export facilities and rewards.

But if I had to give the overriding reason why domestic producers should export, it is not the return that they will get on their exports, because I think that it is almost always rather thinner than they will get on the home market. It is because they will not keep the home market unless they export. This is the basic reason which we have to get across. It is a difficult one for people to follow, but it amounts to this. Unless our products, whether they are sold at home or abroad, have a competitive edge, then sooner or later we shall be brought up against the stop-go which we have had so many times during the last 13 years.

This brings me to the point about confidence in sterling. It is argued that the Government could have avoided the so-called crisis of confidence. Hon. Members opposite do not seem keen to take up the point now, but it was certainly argued during the debate. Do they still believe that it would have been possible to avoid it? [HON. MEMBERS: "Yes."] Why did not they avoid it in 1960 and 1961? Which Government was it in 1960 and 1961 in which the foreigner did not have confidence? In 1960—if the right hon. Member for Flint, West (Mr. Birch) would listen—there was a deficit of £460 million. In 1961 there was a run on the £. There was a 7 per cent. Bank Rate. Purchase Tax was clapped on. We had a "stop-go" policy by stopping a great many productive investments which were then going ahead. Why did not the Government avoid that crisis in confidence? I will tell hon. Members opposite why.

I believe that the reason is the same as that which afflicted us last November, and it is one which the Committee should face. There comes a time—it happened in 1961 and again in 1964—when foreign countries really begin to wonder whether British industry has competitive edge which will enable us to climb out of our difficulties. This is the truth of the matter, and every hon. Member knows that it is the truth of the matter. I believe that we can climb out of these difficulties. I believe that our export prices are not out of line. I certainly do not believe that our currency is over valued. It would be absurd to suggest that it was. I am very grateful for the statements saying this which have been made in a long succession of speakers from the Opposition Front Bench during the last three or four days. I could have wished for some help a little earlier, but I am very glad to have it now. There is no doubt that when the leaders of the Opposition get up and say responsibly that they believe that there is no case for devaluation of the £, this helps a very great deal, just as it hurts when they are silent or whispers are going round that perhaps it ought to be devalued.

My view is that, as the result of this Budget, as the result of a changing attitude on the part of management and others, we have now reached the stage when not even the most doubting Thomas believes that the £ is likely to be devalued. Not only is there no case for it, but in my considered view I do not believe that anybody can force us to devalue. The nature of our reserves is such that, if we are tough enough as a nation, we can stop anybody from forcing us to devalue.

Having taken the necessary decisions in this Budget—the necessary decisions to ensure that there is room for exports in the economy and to ensure that we are able to redeploy our resources to get the exports—I believe, and we on this side, and, I hope, the whole Committee, take the view, that we should be justified in using our reserves to ensure that we are not required to devalue.

As a part of this process, over some months, as the right hon. Gentleman the Member for Barnet (Mr. Maudling) will know, we have been liquefying our dollar portfolio in the United States. The right hon. Gentleman began the process; I am continuing it. I think it is right to do so. As some members of the Committee will undoubtedly know, it is about 1,250 million dollars. I believe that the process of making it more liquid, which has been done with the full knowledge of the United States Government, will mean that there is a considerable reinforcement to our reserves. It is right that the world should know that that reinforcement stands there. Behind that there stands the upwards of £4,000 million of private portfolio investment, which is not so easily made liquid but which can be used to preserve the value of the £.

My view is that because the economy is moving in the way that it is at present, because our economy is capable of paying its way and because we can get the payments balanced, there will be no need to use the reserves once people realise that we are resolute and determined so to do.