The part of the speech of the right hon. Gentleman the Leader of the Opposition with which I found myself in most agreement was his courteous and agreeable congratulations to my two hon. Friends who moved and seconded the Address in reply to the Gracious Speech. My hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) spoke with his accustomed wit and with unaccustomed brevity. I well remember the occasion—I think that it was at this time of the year—when he kept the House going, with fascinated interest, for three hours on the Film Finance Corporation Bill—November, 1953. I remember that I missed a train in consequence, because I was in charge of the Opposition Front Bench at the time. My hon. Friend the Member for Woolwich, West (Mr. Hamling), who has settled down in the routine and work of the House as few others have, certainly in our time, made a speech entirely worthy of the new approach which he is bringing to the work of the House.
I do not intend to spend a very long time on the right hon. Gentleman's speech. The one point at which he felt really confident in what he was saying was his certainty that there was to be an election this year. I remember that when he flew on that wild trip to Scotland between Christmas last year and the New Year he said at the airport that there would be an election "this January"—that is to say, last January. What is more, he had an election policy all ready. No one was more certain that there would be an election in March. Later on, it was to be June, but still we never saw that policy. Finally, when we had it in October—well, I will deal with that later.
He had a certain amount of fun with some of my hon. Friends. I hope that he enjoyed it; we did. He was trying to suggest that there were differences among some of my hon. Friends on the back benches. When I come to a later part of my speech, I shall concentrate not on his back benches, but on his Front Benches. The last thing I want to do is to interfere in his little private feud with the Leader of the Liberal Party, remembering that the right hon. Gentleman relied on the Liberal Party to support him in the Lobbies in more than two-thirds of the Divisions on the Finance Bill this year.
I thought that I heard him lecturing the right hon. Gentleman the Leader of the Liberal Party on what he called the dwindling support which the Liberals were getting in the country. The significant thing about the right hon. Gentleman's speech is that he has quite obviously convinced himself and at any rate some of his colleagues, while the only people he has failed to convince are the people of the country with whom he is losing support day by day and week by week. All I would say to the right hon. Gentleman is that this formidable army of "Whiz Kids" who spend their time grubbing through speeches written in 1952—all vastly entertaining—might be better directed to trying to produce a policy for the right hon. Gentleman so that he might then begin to put himself on the road to where he wants to go, although I doubt it.
Although I intend to devote the greater part of what I have to say to the legislative programme foreshadowed in the Gracious Speech, I will follow the right hon. Gentleman in one sense by referring immediately to the Rhodesian situation. Hon. Members will have seen the message which I received from Mr. Smith on Saturday amounting to a flat rejection of the proposal for a Royal Commission. They will have seen also the terms of my reply on Sunday when I repeated what I believe to be the views of the whole House—that we cannot here and now in advance of the Commission prejudice the rights and, indeed, the duties of Parliament at the end of the day.
The House will have noticed, too, the deep concern which I expressed in the Sunday message—and I am sure that that concern is shared by the whole House—about the declaration of the state of emergency last Friday and its possible effects on the ability of the Commission to obtain a free expression of the views of the people of Rhodesia as a whole It is for that reason that I suggested to Mr. Smith that Sir Hugh Beadle, whom both of us agreed to recommend as Chairman of the Royal Commission, should come and discuss these matters in London preparatory to a further meeting which I would propose to have with Mr. Smith.
I think that the House is aware that Sir Hugh Beadle made his wise advice available to both Governments during my stay in Salisbury and that he has been in regular consultation with the Rhodesian Prime Minister since I left Salisbury. All of us welcome Sir Hugh to this country not only for his sagacity, judgment and humanity, but also as a man with the courage of a lion—and it will be needed in this situation. I have already seen him for a brief discussion this morning and I intend to have full discussions with him later today and tomorrow. I hope that it will then be possible for Mr. Smith to agree to a further meeting. I do not think that the House will expect me to say more at this critical stage, and I assure the House that we have reached an extremely critical stage.
I agree that it would have been agreeable to have had the agreed Minute to which the right hon. Gentleman referred, but the meeting which my right hon. Friend and I had with the Rhodesian Cabinet was very difficult. The right hon. Gentleman under-rates the difficulties of a meeting with a Cabinet already set for U.D.I. within a matter of hours if we had not put these proposals. We had the greatest difficulty getting discussions on the new plan. There is a lot the right hon. Gentleman does know and a lot more I can tell him. I do not want to prejudice the position further by going into this, but when I say that we still have not got agreement about the Minutes of the discussions of the right hon. Gentleman the Member for Kinross and West Perthshire (Sir Alec Douglas-Home) with Mr. Smith in September, 1964—and we are most anxious to publish these discussions, to which the right hon. Gentleman has generously and very fairly agreed—the right hon. Gentleman will appreciate our difficulties in the very difficult situation a week last Friday. It is understandable that not only the Government but this House have been concerned with this very grave situation.
The House will realise that this has not been at the expense of the very full consideration that the Government have been giving, day in and day out, to other serious international developments, particularly the situation in the Indian subcontinent. Here I think that the right hon. Gentleman's reference to this was a very irresponsible statement. I think that when he comes to consider it he will feel that it was not a very helpful remark, neither helpful nor true. Then there was the development in the situation affecting Malaya and Singapore, a disturbing situation in Cyprus, and of course the grave situation which was developing in Aden.
I would have liked to have dealt with all of these at some length this afternoon, and I hope that the House will have the opportunity of going into these questions, and indeed of going into other perhaps more constructive questions, on overseas affairs, including the initiative Her Majesty's Government have taken in disarmament and in measures to stop nuclear proliferation. I hope that there will be the opportunity during the debate on the Address for this to happen.
I think that the House will agree on one thing—that pressing and grave though these issues have been, pressing and grave though the Rhodesian situation has been—I do not think that anyone in this House is prepared to see us getting into a situation, indeed it would be undesirable, when we were to allow the Rhodesian situation, and all the difficulties arising from it, to monopolise our attention, to the exclusion of the vital economic and social questions which figure so largely in the Gracious Speech. Certainly, whatever attention we pay to Rhodesia, the political life, and political controversy in this country goes on, and it is right that it should. It is, therefore, to the Parliamentary programme that I now wish to turn.
I should perhaps first make the usual comment on private Members' time. My right hon. Friend the Lord President of the Council will on Thursday move a Motion proposing that the House set aside the usual 20 Fridays, and in addition the four half-days, for which provision has been made in recent years. The House will not expect me to go through all the Bills foreshadowed in the Gracious Speech, though I always felt, in my 20 years here, that the most useful speeches we have listened to at this stage are those which have dealt more fully than the Gracious Speech does with the main proposals of some of the principal legislative proposals. It would perhaps be helpful to the House if I dealt with this in relation to some of the main themes with which the Government have been concerned over the past year and will be concerned in the coming Session.
Economic policy, industrial policy, housing, social services and questions affecting freedom and the legal rights of the individual—these are the main points. Starting with economic policy, the Gracious Speech gives pride of place to the priority Her Majesty's Government are giving, and will give, to ensuring that balance in our external payments is restored next year and that the strength of sterling is maintained.
I think that the whole House will agree, and will take satisfaction in agreeing, with the improvement recorded since the Gracious Speech of November, 1964. Exports this year have been running at a rate of 6 per cent. above the figures for the same months of 1964, imports at about the same level as last year. The balance of payments deficit in the first six months of this year was £102 million, against £312 million in a similar period of 1964. Of this improvement of over £200 million, half is on current account and half is on capital account. While we have not yet got the figures for the third quarter, there is reason to think that the improvement, compared with last year, has continued. Sterling is strong, employment is strong, and the economy is becoming stronger.
Not every hon. Member, I think, thought that by this time we should be able to record a strong £, and a strong employment situation at the same time. Last winter we were warned time and time again that the measures which had to be taken to strengthen the balance of payments, to strengthen sterling, would mean depression and unemployment in the spring. When it did not happen then, it was going to happen in the summer, and when it did not happen in the summer, it was going to happen in the autumn. I do not believe that this combination of a strong £ and a strong employment situation would have been possible but for the actions that we have taken over the past year, and which have been criticised for the most part by right hon. Gentlemen and hon. Gentlemen opposite. I want to particularise these measures.
First, there were our measures to redeploy the economy by cutting out defence projects which were irrelevant to our defence needs, and too costly for the economy to bear, and the Opposition voted against them. Secondly, there were the sustained measures of disinflation in the November and April Budgets, which they would have had to do, combined with the tightest grip over Government expenditure that we have seen for many years. Action was taken regardless of political popularity and in the face of continuing opposition by the very men who were responsible for the situation we face. They knew that the improvements were necessary, but for political reasons they refused to face up to their responsibilities, in no way more than by their long postponement of an election. Yet the right hon. Gentleman is talking about an election after we have been one year in power.
The third point was the two Measures designed to take the overloading off the construction industries by controls over less essential building, and some highly desirable projects I agree, in both the private and the public sectors. The fourth factor that has led to this is the Finance Bill, bitterly fought and bitterly contested, especially the Corporation Tax. This, and the Finance Bill, together with other financial measures introduced in April and July, to deal with overseas investment, and the investment currency market, have resulted in a reduction in the net capital outflow by more than £150 million a year. Fifthly, I do not believe, in the wider sense, that the confidence in sterling would have been restored had we not presented to Britain and the world, not so much the image but the fact of a Government determined to take whatever measures were necessary, irrespective of political popularity, to strengthen the £ from the attacks of those who, for whatever motive at home and abroad, sought to manoeuvre us into devaluation.
I have to remind the House, and I think it is fair that I make this point, that in the fight for sterling it was not merely the inherited deficit with which we were dealing. There were also two new factors to contend with last year. The first was that whereas in 1964 the overseas sterling area balance of payments was strong, and the sterling balances were rising, this year, because of the fall in sterling area commodity prices, combined with a sharp rise in imports in other sterling area countries, these other sterling area countries have been drawing very heavily on their balances.
The House will have seen estimates, in the financial Press—I am not going to confirm or deny them—running into very large figures indeed, of an additional strain on our gold reserves because of the accumulated difficulties of other sterling area countries.
The second factor was the effect on sterling, indeed on the whole non-dollar world, of the measures taken by the United States to get their dollar balance of payments right. It was always clear, I remember warning about it some time before the election, that at any moment the United States would take vigorous action, for example about the Euro-dollar situation, and that this might produce very serious results, damaging for us and for others. In the event, when the Euro-dollar squeeze began, when the President urged American companies here and elsewhere in Europe to remit to America as much as possible of their working balances and to borrow on this side of the Atlantic, it was quite clear that this had quite a serious effect on Britain, because, creating, as it did, a shortage of dollars in Europe, it led some countries to draw on their holdings of the world's only other reserve currency, namely sterling.
So we have had these two additional strains to face, and I think that economic comments, or still more, political controversy which has sought to explain our payments problem purely in terms of domestic economic policies or internal politics, have failed to recognise the weight of these two additional external factors, which neither we nor any other British Government could have done anything to control, because they were external events.
I think that the House will agree that all of these developments have served to underline the need, repeatedly stressed by all of us on both sides of the House, for action to deal with the problem of world liquidity. This has been a very strong illustration of the need for action there. I have referred to the improvement in sterling and to our balance of payments. The House will agree, certainly we say this, that we have still a long way to go. All our problems, particularly the problem of industrial competitiveness abroad, are not solved. I think that the House would agree that it is irresponsible to talk of vote-catching increases in public expenditure, or of reductions in taxation, until a sound economic basis for such measures has been earned and is seen to have been earned.
In the development of the economic situation, two problems, in particular, demand the attention of the House and have dominated the work of the Government for many months. The right hon. Gentleman referred to both of them. The first is prices and incomes policy, and the second is the need for increased investment and investment incentives, particularly investment in the most modern type of equipment in British manufacturing industry. The central rôle of both of these was stressed by my right hon. Friend the First Secretary of State in his speech last week commending the National Plan to the House. In that very remarkable debate, right hon. Gentlemen opposite succeeded in reconciling then-great and admitted differences in one formula—a vote to welcome Labour's Plan.
One thing which we have all said, including many right hon. Members opposite, although not so loudly so recently—we said it in government after the war, we have said it in opposition and we say it in government again—is that we cannot for long pay more in incomes, be they wages, salaries, profits, dividends or rents, than is earned by the national dividend represented by the growth in productivity. We have always insisted that a policy for incomes must be a policy for all incomes, not just those accruing to labour. We have insisted that we cannot appeal for restraint in one area of the economic process unless we first take action by our general incomes policy and by a taxation policy which attacks the arrogant citadels of fiscal privilege in order to create a climate of equity and justice. [HON. MEMBERS: ".Oh."] I can understand the sensitiveness of right hon. and hon. Members opposite. They have always voted against this.
We have also insisted that we cannot appeal, still less legislate, for restraint in incomes if the purveyors of goods are free arbitrarily and irresponsibly to raise prices when there is no case, save the pursuit of profit, for price increases. We have insisted that to stress only the negative aspects of a prices and incomes policy without making an all-out effort to obtain maximum productivity is economically frustrating and socially unjust. This is why we have repeatedly called for an attack on every nationally manifested restrictive practice we have been able to identify. Right hon. Members opposite talked a lot but did nothing about restrictive industrial practices.
We have tackled the problem of opposition to liner trains, problems in shipbuilding, problems in the docks—[HON. MEMBERS: "Oh."] When did right hon. Members opposite ever deal with the problem of liner trains? We have given authority for the liner trains to go through and have made the Government's position completely clear to the trade unions. As I say, we have tackled problems in shipbuilding, in the docks, printing, newspapers, and in the manning of commuter line trains. We have not only called for action on these things. At every point we have taken action and identified the process of government with the attack on these practices, just as my right hon. Friend the Minister of Labour has taken action in the motor car industry and, more widely, for dealing with unofficial disputes and has been attacked by right hon. Members opposite for doing it.
But, as the House knows, there is the other side of this. My right hon. Friends and I have been engaged for many months past on the urgent examination of measures to deal with the other side of this productivity medal—the problem of incentives for new capital investment and modernisation in British manufacturing industry. That is why, side by side with the legislation which we are introducing on prices and incomes—I do not underrate the difficulties which this legislation raises for the House and both sides of industry, but for all that it is necessary—we intend to introduce two important Bills designed to assist modernisation in industry.
The need for this will have been shown to any hon. Member who has studied the comparative international figures of the proportion of the gross national product devoted to investment in industry. We are lagging far behind most other countries, and have been doing so for several years. In fact, this year it has increased but not enough. Fixed investment by manufacturing industry in the first six months of this year was 7 per cent. above the level of the second half of 1964 and 12 per cent. above the comparable figures for the early months of 1964. The most recent survey of manufacturers' intentions by the Board of Trade confirms earlier indications that in 1965 as a whole investment should be 10 per cent. up on 1964 and that in 1966 it will be a little higher still.
We have said on a number of occasions that we are holding a review of the present methods of giving incentives for investment. My right hon. Friend the Chancellor of the Exchequer mentioned this in his Budget speech last April. Last week my right hon. Friend the First Secretary of State said that we wanted to ensure that the system would provide the most effective inducement for the investment which British industry needed. The existing system of investment allowances was first introduced over ten years ago. They were suspended for a time in the financial crisis of 1956 for a couple of years or more and the rates have been varied from time to time. There have been suggestions from various quarters that for one reason or another they may not be operating as effectively as we all hoped they would.
The Government's review of incentives and of the means of creating other selective policy weapons to encourage investment and modernisation has made good progress. I cannot, for obvious reasons, announce today the line of our conclusions, but we intend to publish a White Paper in the near future indicating what they are In the meantime, we shall be discussing with the C.B.I. the results of the inquiries which that body has been making among its members, and when our plans are ready for announcement I think the House and country will then agree that we have worked out a system giving full effect to our pledges to stimulate the modernisation of British industry—and in this the accent is on modernisation.
Certain of the powers in the Local Employment Acts are due to expire in March, 1967, and when we put forward the legislation, as we are going to do, required to extend these Acts we shall at the same time take the opportunity to provide new and dynamic special incentives for bringing work to these areas.
Other action is needed apart from financial measures in industrial policy. I have referred to an all-out attack on outmoded practices and methods of working. The Gracious Speech outlines a comprehensive series of measures designed to promote modernisation in industry and agriculture. My right hon. Friend the Minister of Agriculture will introduce legislation to give effect to the proposals in his two White Papers of last August.
A Bill is to be introduced to assist in modernising both the financial and industrial structure of the coal industry, and the manufacturing establishments of our publicly-owned industries will be freed from the vexatious, not to say ideological, restrictions on their ability to make a full contribution to our national production drive, including exports.
Hon. Members will have read the devastating Report on the docks submitted by Lord Devlin and his colleagues. They may have wondered, when they read it, why this Committee was not set up years ago. But they will, in any case, have been impressed, I think, by the speed and energy with which my right hon. Friend ensured that the momentum created by this Report was not lost but has been directed under the leadership of my noble Friend, Lord Brown, towards urgent comprehensive action to settle these problems in the docks. They will have been no less impressed by the statesmanlike co-operation of the leaders of the unions concerned with the dock industry and the employers and the dock authorities.
To carry out the Report will require legislation. This will include the introduction of a licensing system for port employers designed to ensure the required reduction in the number of employers so that only those able to meet the responsibilities of management in a modernised port service will remain in business. There is another aspect of the Devlin recommendations—the provision of proper welfare amenities for dock workers. It will probably require legislation to ensure that these amenities are provided.
This is not mentioned in the Gracious Speech, but we have not yet had the report of the Plowden Committee and I cannot rule out the possibility of legislation on the aircraft industry when we have their Report.
The right hon. Gentleman the Leader of the Opposition asked about steel.