I beg to move, at the end of the Question, to add:
But humbly regret that the Gracious Speech contains no measures likely to redeem the failure of Your Majesty's Government's economic policy and, in particular, of the policy on Productivity, Prices and Incomes, which imperils the standard of living and savings of Your people.
By tradition, no Opposition has any more confidence in the Government than the Government have in the Opposition, and at the end of the debate on the Gracious Speech it is customary for an Amendment to be moved by Her Majesty's Opposition which expresses that particular point of view. I should make it clear at once that this is an Amendment moved by the official Opposition. The Liberal Party will no doubt explain, as usual, at the appropriate moment, why it is going to support the Government, and I congratulate the Prime Minister on the cheapest piece of political horse-trading in this century. Yet he has not even had to pay the price, as I understand it, of the electoral pottage which the Liberal Party hoped for.
There are three Amendments referring to steel which are not being called but which are, of course, relevant to this debate. I was naturally delighted that steel had not been a feature in this Gracious Speech—
Oh, yes, I am; and we know the reason which was given, the reason of priorities, which echoes the famous Socialist phrase which we all remember, and it is not surprising, perhaps, that the hon. Member for Ebbw Vale (Mr. Michael Foot) found that rather hard to take; but the point I want to put to the Prime Minister—I know he has to go in a few moments, and I am grateful to him for giving me notice of that—is a sentence he used when he spoke on 9th November, when he said:
Actions taken in good faith within the industry and in the normal course of business are unlikely to be challenged."—[OFFICIAL REPORT, 9th November, 1965; Vol. 720. c. 39.]
I hope he will take the opportunity, or that one of his Ministers will, to delete that word "unlikely". The steel industry is in quite enough uncertainty at the present time. He has said, if I correctly understand the exchanges he has had with his own side of the House, that steel nationalisation remains part of the policy of the Socialist Party.—[HON. MEMBERS: "Hear, hear."] Let us wait and see. I think he would agree that it is desirable that all the actions that can be taken and are taken in good faith should not conceivably attract any penalty in any circumstances in future.
The other point which my right hon. Friend the Leader of the Opposition mentioned, and which perhaps the Chancellor of the Exchequer might like to refer to when he winds up the debate, is in the paragraph in the Queen's Speech which says:
Steps will be taken to improve the arrangements for providing incentives for industrial investment…
I ask again the question which my right. hon. Friend asked. Are those words, "arrangements for providing" simply tautologous, in which case what will be
improved—I hope they will be— are the incentives themselves, or is all that is planned some improvements in the arrangements? That is a small point which the Chancellor can make clear tonight, but I think it important.
I turn to our Amendment. I shall not spend too much time tramping over the ground we have debated so often, and will debate again no doubt when the next General Election comes, of the exact responsibility and where it lies for 1964 and 1965. I think the House will agree that the start of this particular period of reflation which came to a halt in the first quartet of this year—I think I am right in saying that the production figures for September were released a few minutes ago and are down again. [HON. MEMBERS: "Oh."] I think that is correct. The figure, I am informed, is 131, dropping from the 134 of January. This particular period of reflation clearly started. I think we will all agree, mainly with the Budget of 1963. That Budget stimulated consumer demand by about 2 per cent. The public investment programme was increased in line with the proposals made by the N.E.D.C. for its 1961–66 targets and private investment was at the time encouraged. Looking back, with of course hindsight, the verdict of the O.E.C.D. on the two years is as follows:
In retrospect then, the expansionary policy measures taken at the beginning of the expansionary phase must clearly be judged to have been excessive. That they were so was not apparent to many observers at the time.
Indeed, that is so, and it is also true, as the O.E.C.D. admits, that it itself was amongst those who did not judge them excessive at the time, as the Report for 1963, the annual survey, makes clear.
At all stages, as the Prime Minister will know, he agreed with the analysis of my right hon. Friend the then Chancellor of the Exchequer when he said in April, 1963, that economic expansion would entail a temporary rise in imports. The Prime Minister then said:
I think it is perfectly reasonable and sensible to finance such a movement out of our reserves or out of our borrowing facilities in the I.M.F. and elsewhere.
The Swansea speech endorsed that approach and when my right hon. Friend —turning now to the 1964 Budget—
warned of the possibility of a deficit on the balance of payments and said:
Provided that it is temporary this should give rise neither to alarm nor dismay. … it is a predictable accompaniment to a vigorous rate of growth which all of us are committed to seek.
Over and over again the Prime Minister, in interviews, in speeches, in his speech, for example, to the T.U.C. on 7th September, endorsed that analysis. He said at the time:
this trade gap means a deficit on our current balance of payments of £500 million a year.
In fact it turned out to be £412 million. The clear evidence of that is that the Prime Minister knew very well all the time what the figures were. He knew how the problem was being dealt with and he thought that the right methods were being selected to deal with the problem. He knew that there was no crisis and he said so, and called for no restrictive measures before the election. Nor did he scale down the Labour Parly's lavish preelection promises.
There is one small point which should be made. On two occasions the Prime Minister and my right hon. Friend the Member for Barnet (Mr. Maudling) have clashed in this House on the question of the issue by Her Majesty's Treasury in the middle of the election last year of the United Kingdom balance of payments, the article which was published in "Economic Trends". When my right hon. Friend said that he had published this in the middle of the election, the Prime Minister replied:
Yes, and in the middle of the night.
If that meant anything it was an accusation either against an unnamed civil servant in the Treasury or against my right hon. Friend the then Chancellor of the Exchequer. He was asked to withdraw it and he refused to do so. Now we have the comparable paper for 1965. I have it in front of me. It was issued by Her Majesty's Treasury and it says, in red type:
please note embargo. Not for publication broadcast or use on club tapes before 0030 hours.—
in the middle of the night.
We came to the General Election in 1964 without a crisis of confidence. As the Prime Minister knows very well, sterling held throughout the election and held throughout the immediate post-election period and on into November. Then the mistakes began. In our view, the first of those mistakes, although it did not affect confidence, was the formation of the Department of Economic Affairs.
I personally had no objection; indeed I think it an excellent thing to refresh the still waters of Whitehall from time to time with some people coming in from outside. I did not object on those grounds at all. But the result of this was that the Chancellor of the Exchequer was, for a time at least, reduced to counting candle-ends. He was removed from his chairmanship of the N.E.D.C. and removed even from membership of the N.E.D.C. He was the first Chancellor—his Budget in April was proof of this—who had no true responsibility for the economy. The Chancellor would be less than human if he did not resent this, and he is a very human man. I am bound to say that he was saved. He was saved partly by the pressure of events and also saved by the skill of his Department, because the Treasury knights slew the foreign dragons by one of the prettiest pieces of knifemanship we have seen for many years. I think the Chancellor would be less than human if he did not chuckle a little about that.
Secondly, there was the handling of the import surcharge. I understand that we are to have a day's debate on that in a few days' time and I need not develop my argument on that particular theme, but what the House as a whole must know beyond doubt is that, apart from the merits, the handling of it came as the gravest possible shock to confidence abroad.
Finally in this particular phase, we had the autumn Budget. That autumn Budget, as many of my hon. and right hon. Friends have pointed out, was basically inflationary. It was an inflationary Budget imposed upon a potentially inflationary situation. It was not inflationary in the figures and it may not have been inflationary in intent, but it was inflationary in effect.
The Chancellor, and indeed many hon. Members, will have read in the May issue of the National Economic Review an extremely interesting article which shows, I think with great clarity—the point was well made by my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) in the first day's debate on the Address—that if in theory we balance consumption and taxation, they may be balanced for the first year, but immediately after that the inflationary effect becomes very marked.
The last point I want to make about the errors of those early months was the double-talk that went on from every single Minister at all times. The classic example of this was the Chancellor himself saying that he hoped the 7 per cent. Bank Rate would not work through to the domestic economy. One might well ask what the object of it was. The observations that he made helped to weaken confidence abroad.
So, viathe Budget of April, we came to the July measures. It has never been cleared up yet, although the Chancellor and I have had at least one exchange on this in the House of Commons, why these appeared in their particular guise and with this particular timing. The Chancellor will remember the famous sentence he used when he said that he was restraining himself from taking further measures. He in fact restrained himself for about a fortnight and then we had the measures which came at the end of July. It was put around at the time that he had added this sentence as it were to his brief, or impromptu notes, because he was tired.
I took it from the Press. [HON. MEMBERS: "Oh."] I thought it was the kindest explanation there was; I cannot think of any other. If the Chancellor has any, by all means let us have it.
What is quite clear is that that one unguarded sentence of his did the country a very great deal of damage indeed. There is no question that once more the tide of confidence turned in full measure against the £. It is my belief, and I have heard no refutation of this, that that stemmed exactly from that particular sentence in that particular speech.
We have had a very expensive year's education as far as the Chancellor is concerned, because there can be no doubt that part of the load which this country has to bear comes from the folly of the words and part from the fragmentation of the action that in this year the Chancellor has had to take. Let us see what the position is at the moment. I hope that when he speaks the First Secretary of State and Secretary of State for Economic Affairs will be able to confirm or deny the information I was given about the production figures.
The two main claims of the Government are that they have saved the£ and the balance of payments position has substantially improved. As far as the first is concerned, what they have been able to do is to obtain extended overdraft facilities. The Bank of England—and this is quite right—acting with the assistance of the American Treasury, persuaded the bankers of the world—I am delighted that they did—that devaluation was against international interests, and therefore these facilities were provided. The test comes now whether we can properly use that time so provided to strengthen our economy. When the Chancellor said that the battle for the £ was won but the battle of the economy still had to be won, I understood the distinction he was making, but I am sure he will agree that he cannot be confident about the first until the second objective is also secured.
What, therefore, of the second claim, that the Government have substantially improved the balance of payments situation? Here we must look at the two aspects of the balance of payments; the capital account and the current account. What is happening on current account is that the penal taxation which the Government are proposing to apply to our overseas investments has forced the sale of some of those investments and the money has come back to London. This is of immediate short-term help, but, of course, in the long term it weakens the nation. And the improvement on capital account is largely due to the Government forcing investors to sell part of the £11,000 million of overseas investments of which the Prime Minister boasted in New York last March. I wish he had boasted of those assets a year ago.
On current account, although month by month there is a considerable adverse balance of trade—our imports are far higher than our exports—the Government point to the improvement that has taken place. It is of the first importance that we should be clear just what the reasons are for that improvement. One of the main reasons is, of course, that the prices of our exports have gone up and the terms of trade have moved sharply in our favour. The price index of our imports in September was lower than in January, whereas the price index of our exports was nearly 2 per cent. higher—I calculate about £11 million for that month, on the sort of figures which we have seen in recent months—than in January. Even that— and that accounts for an enormous amount of the improvement—presents a precarious position because if the price index of exports continues to rise, the volume may some day start to fall.
Besides the improvement in the terms of trade, there is another matter which we must take into account. That is the position in relation to stockbuilding. The National Plan states on page 69:
The current account deficit reflected a very rapid rise in domestic demand, which included … abnormally heavy stockbuilding.
In a year in which the Government have had the benefit of the abnormally heavy stockpiling of the previous year and the benefit of a considerable improvement in the terms of trade, we must see the general improvement in our balance of payments in a realistic light. This worries the Chancellor and all hon. Members who are concerned with the future of the economy, wherever they may sit in the House.
I therefore put this point to the Chancellor. One of the keys to this matter is, of course, the question of exports. At the meeting of the Institute of Directors the other day the Chancellor said that if people had ideas for improvement in this sphere they should put them forward. I appreciate that because, from my fairly short experience, I know that there is nothing more difficult than the task of finding ideas which one can use for export promotion.
Sir Donald Stokes, who has a wonderful record in this sphere, paid high tribute to the Government's export: rebate. I am sure that many firms have found that very welcome indeed, but I question whether it has led to additional export orders. This, of course, should be the objective of any money spent. I wonder if it would not be right for us to turn from the impersonal to the personal in this matter and see if we cannot find a more direct incentive which will encourage the sale of our exports abroad.
My hon. Friend the Member for Worcester (Mr. Peter Walker), in his speech at our Brighton conference, referred to this and it was also mentioned in a leading article in The Timestwo or three days ago. We have been studying whether it is possible for an Income Tax rebate to be given to export directors and salesmen for the period for which they are abroad. I am a great admirer of Harold Macmillan, but I do not think that the phrase "Exporting is fun "was the best of his slogans. Exporting is hard work and presents great inconvenience to many of the men, and their families, who are involved in these activities. If often means living out of a suitcase, going from 'plane to 'plane and hotel to hotel. An immense amount of personal inconvenience is attached to it.
I say frankly to the Chancellor and the First Secretary of State that we are not yet satisfied—and we have been studying this matter carefully—that such a scheme could be made watertight. The opportunities for abuse are obvious; one might consider the possibility of someone obtaining a rebate when he had not genuinely been seeking exports. However, the scheme sounds an attractive idea, for it would involve the giving of a very personal tax incentive to the men who really are spearheading our export drive. I hope that the Chancellor will consider this matter and will, in due course, give us his views. All I ask is that he should not rule it out at this stage simply because of the possibilities of abuse—which are, as I say, obvious to all hon. Members who are interested in this subject.
We refer particularly in the Amendment to the failure of the policy on productivity, prices and incomes. So far I have been dealing with the Chancellor of the Exchequer. I now turn to the First Secretary because while all this was going on—while this Socialist year was under way—there, down on the ranch, as they say, the First Secretary was hard at it putting forward his policy on productivity, prices and incomes.
That is true. The right hon. Gentleman has been to meeting after meeting and has come away from nearly every one triumphant; in each case with a scrap of paper. [Interruption.] We have seen how effective this policy has been in fact.
Let us start by looking at the figures. In the first quarter of 1965 the average percentage increase represented by wage settlements—and remember, this is since the Declaration of Intent—was 5·9. In the second quarter it was 6·2 per cent., and in the third quarter 6.7 per cent. I am sure that the Chancellor of the Exchequer must sometimes feel like saying, with Pyrrhus, "One more victory like this and we are undone."
While the Chancellor has been working hard during this time, Little Boy Brown has been blowing his horn up and down the country. We have had this long series of agreements which has led, in the end, to an utterly disastrous situation. [Interruption.] It is nice to see the Minister of Technology coming into the Chamber. On 13th December last the First Secretary said:
We are on the brink of a break-through
Seven months later, on 12th July, he right hon. Gentleman said:
‖ I am convinced that we are on the verge of a major break-through …
Was that the same break-through or were there two different break-throughs? And when he said on 16th December, at the signing ceremony of the Declaration of Intent,
History is being made here today.
—it certainly was.
I agree with the hon. Gentleman. It was. We now have the biggest gap between productivity and earnings of any time in modern economic history. Certainly history was being made. The index figure of industrial production at 133 for January—revised on the latest figures to, I think, 134; and for December it is down to 131—is certainly history. I can find no period—and I have checked this all the way back, with the possible exception of 1952—when in 13 years there was a year when the gap was so wide between what we should be doing and we were in fact doing.
We now have the worst of both worlds —not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of "stagflation" situation and history in modern terms is indeed being made. There is another point behind the figures. As I say, production has fallen by 1 per cent. or ½per cent. while incomes have gone up, perhaps, by 8 per cent. This can result only in two things happening in the months ahead; either a considerable increase in our import bill to meet the increased consumer expenditure or a very real rise in our prices. But what the First Secretary is trying to do is to conceal the rises that are likely to take place.
London bus and train fares were to rise, so the Government provided a £51½million subsidy, which runs out at the end of the year—but what then? Coal prices were to rise, so the Government gave a £15 million subsidy, which runs out in April—but what then? I ask, because all that is happening is that one is building a dam that is bound to burst in an economy where incomes are swiftly rising while production is completely stagnant.
It was this that led to the Chancellor's famous speech in Scotland at the end of last month. Let me first read to the House what he said, and then what he meant to say. He said:
In spite of injunctions and signatures on the Declaration of Intent, earnings are still going up much faster than productivity. In the first eight months of this year they went up by 8 per cent. and this is bound, unless it is controlled, to result in increases in prices.
Everyone had great difficulty in understanding this particular figure.
I talked to my right hon. and hon. Friends, and we assumed the Chancellor must have some figures of his own and must have known what he was talking about. It turns out that he did not. The most charming account of how this was finally resolved is given in the Financial Timesof 5th November:
It was discreetly admitted in Whitehall last night that Mr. Callaghan's notes for his weekend speech had referred correctly to wage rates and not earnings, and to an annual rate of increase ' rather than an actual increase … Mr. Callaghan, it seems, is not challenging the Press reports of what he said, but it is stressed that he had intended to say something quite different.
I will hand this cutting to the Chancellor in a minute—but I want it back. The
right hon. Gentleman should look into this, because what, in fact, was "discreetly admitted in Whitehall last night" was that "we gave him the right figures —but, of course, the fellow cannot read ". If the Chancellor would now like the quotation, I hand it to him—on the strict understanding that I have it back.
We are told that although there is some conflict between the two right hon. Gentlemen, there is no personal animus. I read this in five newspapers, so it must be right[Interruption.] Well, that is nice, is it not? I will go further and say that I have no personal animus against either right hon. Gentlemen, but what I want to know is which of them is steering this boat, and in which direction is it supposed to be going?
The standard of living is mentioned specifically in our Amendment, and the record over the last 13 years is this. The standard of living—just one figure only—went up—we want to be precise —by 48·74 per cent. in the 13 years of Tory Government. That is defining the standard of living as the rise in personal incomes per head as reduced by the fall in the value of money. That rise is almost identical with the rise in the whole of the previous 50 years under many different Administrations and all three political parties.
We say that this is being imperilled, and I want to start with one particular example. We all talked a great deal at the last election about the "brain drain" about the need of the younger executive, and I am quite certain that all three parties were sincere when we said that this was the sort of man to be encouraged. Let us see what has happened to this man's bills as a result of the year of Socialism we are considering. The figures are given in an excellent article in the Financial Times of 7th May, as the outgoings of a successful executive in his mid-thirties, with a salary of £3,500 a year, a wife and two children.
The ordinary plain calculation alone is that his bills have gone up by £206 in the year. But, of course, that £206 is only part of the amount he has had to pay, because his tax bill has gone up by no less than £52 in the year, coming to a total of £258. Even if he had a rise of £258, he still would not be back where he was a year ago because of the tax element at 6s. 5d. in the £—that is, standard rate less earned-income relief. This one man, in order to cancel a year of Socialism, would need an increase of no less than £380. That shows what has happened to these people. It shows what has happened in absolute defiance of everything the Socialist Party said to these men at the time of the election.
Let me turn from the particular example I have given, to the general example. What one has to say really needs no embellishment, because the cold list alone is indictment enough. In one year we have increased taxation by £623 million. We have moved into a period of what I call "stagflation". The cost of living has gone up by 5 points in 10 months. We have lost one-third more days in industrial disputes. We have cut the road programme and many other vital investment programmes in the social services. For most of that period, we have seen all forms of national savings doing less well than a year ago. The value of the £ in that period has dropped by a shilling. We have suffered an intense and prolonged credit squeeze. We have a formidable load of debt.
It would be easy to extend the list, but each and every item on it is in direct contradiction to the promises of the Government as a whole, and to the pledges which the Socialist Members gave to their constituents. Such a record demands the censure of the House today and of the country at the General Election.
The kindest thing that one can say of the speech just made by the right hon. Member for Enfield, West (Mr. Iain Macleod) is that it was a bit better than last time. As far as I could discover, where it was not inaccurate it was exaggerated, and where it was neither it was just a tatty going over of the fill-ins we read every week in "Quoodle".
I must say one word of appreciation and kind thanks to the right hon. Gentleman. It is becoming really helpful to us that we can always rely on Opposition spokesmen to bring up the question of the economic and financial inheritance that was ours, and digging out all the figures again. It saves us doing the work of making sure that that fact stays before the country. I am quite sure that his hon. Friends will agree that the more often they bring that up, the more firmly they plant it, and the less likely they are to explain it away.
The right hon. Gentleman had a little fun about steel. I was not clear whether he was deploring the absence of it from the Queen's Speech, applauding the absence of it, or what the purpose of his comments was. As my right hon. Friend the Prime Minister told the Opposition the other day, if the right interpretation to put upon their solicitous care for steel nationalisation is that they think it wrong that we should not now be doing this, the usual channels can have their conversations about the facilities the Opposition would provide us with to get it through.
I shall be saying a few words in the ordinary course of my speech on the question of investments and incentives. In the same way, I shall deal with the index of production as I come to it in my speech. The old fill-in about the relationships between the D.E.A. and the Treasury and the other economic production departments we have heard so often, but it gets no better and no nearer to the truth.
On the question of the surcharge which the right hon. Gentleman mentioned, may I put this thought to him? If imports had continued to rise at the rate at which they were rising under our predecessors, the gap this year would not be £800 million. It would be £450 million more. Something had to be done about it, as the right hon. Member for Barnet (Mr. Maudling) said in his Budget speech in April of last year, but he then proceeded to waste the next six months doing absolutely nothing about it.
I, like the right hon. Gentleman, will not go again over the whole of the field which we traversed only a fortnight ago. I will start by trying to restate the major objectives of the Government's economic policies. The first one is to get rid of the balance of payments deficit with which the Tories left us. The second one is to achieve a faster annual rate of increase in output as soon as we can, leading to a 25 per cent. increase by 1970 over 1964. The third is to encourage and to bring about a substantial improvement in industrial and commercial techniques and equipment. The fourth is, by an agreed policy for productivity, prices and incomes—agreed, that is, with industry and those who care about affairs, not agreed with the party opposite—to bring about an early and substantial improvement in Britain's competitive position. The fifth is to correct the gross imbalance which existed when we took over between the regions of the country, both in industrial terms and in social terms. The final one is to change the priorities governing our social expenditure so that the rewards from increased output and earnings are more justly and fairly distributed and used.
Just as we saw in the debate on the National Plan two weeks ago, which hon. and right hon. Members opposite had condemned before they read it but thereafter had, rather humiliatingly, to acquiesce in a Motion welcoming what they condemned, so, it was clear from the right hon. Gentleman's speech today, will the position be on our economic policy in general. They have been too busy, too soon, shouting "Failure" even to note; what the objectives of that policy are. When they finally take them on board, they will be in the same position as they were with the Plan. They will then find that what they have been shouting so loudly is failing will, in fact, be succeeding, and they will again have to welcome what is happening.
It was absolutely fascinating to watch hon. Members opposite today. The only time they cheered up was when they thought that the right hon. Gentleman was applauding some decline in the country's position. At every stage when he was talking about something which might go well they looked as miserable as sin.
I will make a present of this point to the right hon. Gentleman for use, with suitable acknowledgements, in the Spectatorthis week. [HON. MEMBERS: "Oh late."] He can have it for next week. Of course it is not our claim that all our objectives have been successfully completed in the first year. For what it is worth, that point can be had. But they will not all be total failures at the end of 13 years. By its very nature, a programme of that size, apart from having to clear up so much mess at the beginning— (HON. MEMBERS:" Oh."] The right hon. Gentleman took 35 minutes explaining all this. I have made only one reference to it. Apart from that, such an exercise is a long-term and continuing one. Some of the objectives will be harder to achieve than others.
I will come to the one which the right hon. Gentleman thinks is so difficult. He is quite right. It is difficult and is not made any easier by the challenges made by hon. Members opposite to managements and to workpeople not to cooperate. Some of the objectives will be harder to achieve than others. Action which is required to achieve some of them will have a deleterious effect on some of the others. It is true that having to take action on the balance of payments has a consequential effect on the objective of getting faster and larger growth.
Quite apart from that and quite apart from the inherited difficulties, the need to lay the plans to achieve these objectives, to forge the new policies to carry them out, and to create the machinery to carry them out, all in this year was bound to make this a very difficult year indeed. It is always harder to reverse things and to get started in a new direction than it is to maintain momentum once started. Against that background, let us examine the objectives and see how much justification there is for the charge of failure. Let us see which ones we are progressing with more swiftly than the others. Let us see what substance there was in the general political speech made by the right hon. Gentleman. What justification was there for it?
On the question of the balance of payments, we all know—even the right hon. Gentleman could not dispute it—the dramatic change which has been achieved in this year. I thought that one of the most fascinating operations I have ever listened to was when the right hon. Gentleman did not dispute that it had happened, but every reason why we had achieved a reduction in the balance of payments deficit was either a bad reason or one we could not help or one that did not count.
The point is that, unlike the Tories, we have brought about a very substantial reduction in the balance of payments deficit. If hon. Members opposite are not pleased about it, the country outside is, and nobody more than the business community. It is not simply the reduction which we have achieved that is the outstanding thing. I believe that the outstanding thing is that 1965, in relation to the balance of payments, has been a year of steady progress towards getting out of the red, whereas 1964 was a year of rapid deterioration right the way through.
As the right hon. Gentleman quite fairly said, we have had this considerable reduction and improvement, not only in global terms overall. The right hon. Gentleman was kind enough to say that we have had it both on capital and on current account. We are very grateful to the right hon. Gentleman for drawing attention to that. Again, I was not clear whether the right hon. Gentleman thought that it was a good thing or a bad thing that we have achieved a reduction on capital account. It is time that one Front Bench spokesman for the Opposition, at any rate, got it into the others' heads that there are times when the country can afford to do things in terms of overseas expenditure and investment. There are other times when other priorities force the Government to hold their hand on that for a bit. It is very much because the Tories would not face that last year that the position snowballed as much as it did.
After what the right hon. Gentleman said, I am not clear whether they are glad that there has been a reduction or whether they claim that not enough has happened. I think that the right hon. Gentleman who will be winding up the debate tonight, and who was having a little trouble with his facial expressions during that part of his right hon. Friend's speech, might tell us whether he is glad and whether he thinks that we should have done more. If it is the latter, it is very odd when one considers the record of hon. Members opposite when they were in office and how they have criticised everything that we have achieved. They pretended that they could spend more and cut taxes, but references to extravagant pre-election promises came oddly indeed from the right hon. Member for Enfield, West. We did our best, but we never came within streets of them and when I saw the papers which they left behind and I found how they were kidding themselves I was surprised that they were as honest as they were.
Just as in the field of Government expenditure they pretended that they could spend more and still cut taxes—and they go on with this piece of duplicity—so in the field of the balance of payments, to judge from what the right hon. Gentleman said, they consider that in their case they could have cut the deficit quicker while doing less about it. That was no more practical than the other proposals which they made.
Within the various constrictions placed upon us by our international obligations —and when the right hon. Gentleman was telling us about the interesting exercise on which his hon. Friend the Member for Worcester (Mr- Peter Walker) and others are engaged I do not know whether he was keeping in mind what was practical and could be policed—we have adopted measures which have been designed to make the maximum impact on the balance of payments with the least threat of damage to the prospects of growth. In particular, we have taken a number of measures to deal directly with the balance of payments.
First, there is the export rebate. It may be that the right hon. Gentleman was not sure what Donald Stokes said, but I think he will find that he is much more representative of those who have engaged in this business than the rather grudging remarks made by the right hon. Gentleman. The rebate has had a considerable impact both on our competitiveness and our ability to get on with the job, and it is showing a surprising degree of success in a short space of time.
We also had the temporary surcharge on imports. As the right hon. Gentleman well knows, there were other possible ways. The Leader of the Opposition left quite a well-documented exercise behind him. Whichever course we took was going to be very hurtful to those whose imports we were going to keep out and, although if we had used some other method the importers would not have had the surcharge, they would not have thrown their hats in the air with joy if we had used a different and more autocratic form of machinery to achieve a different result.
When the party opposite went out of office we had to do something in this field, and whatever we did was bound to be difficult to accept because it had to reduce imports. The party opposite shied off making a choice every time. We made the choice. It is open for hon. and right hon. Members opposite to say that if they had stayed in office they would have come out of their coma and they would have made a choice and it would have been different from ours. That is a legitimate point of view, but they should now tell us which choice they would have made and how they would have reduced the deficit since they could not have gone on in the way in which they had been going on in the last nine months of office.
We also introduced tighter exchange control. The introduction of the Corporation Tax has had effects on private investment overseas. Restraints on Government expenditure overseas have been considerable. All these have been ways in which we have operated directly to get the maximum effect in the shortest time on the balance of payments situation while having the minimum impact on our need for growth here at home. We went further than hon. Members opposite were ever prepared to go to achieve this result, while they attack us both for taking these measures and for the impact of the measures on our home economy. It is no use right hon. Members opposite muttering about it. There were disagreeable consequences, but we had to take disagreeable measures in part to deal with a highly disagreeable situation which had been brought about by their unwillingness to take action.
It is quite clear that if they had had to tackle this problem this year and had rejected all these measures and had relied on their traditional weapons, the amount of deflation and the consequent loss of output and high unemployment which would have followed would have been far more than anything that the country would have dreamed of during the year when we have been in office. These would have been very substantial, and when the muttering has to stop and more audible comments have to be made from the Front Bench opposite I hope that the right hon. Member for Barnet will give an estimate of what would have been the situation if they had tried to meet it with the old measures of deflation, mass unemployment and general shut-down.
Considerable progress has been made in improving the balance of payments. The trade deficit in the first ten months of this year has averaged £25 million a month, compared with £46 million a month in the corresponding period of the right hon. Gentleman's last year in office. The right hon. Gentleman sought to explain that away. It was apparently all due to a sleight of hand about values. The answer is that it is not. Exports in this period were 6½ per cent. higher in value. The right hon. Gentleman mentioned this but, since it might have spoilt the gloom into which he was determined to sink, he did not say that they were about 4 per cent. higher in volume than they were in the same period of last year. If a right hon. Gentleman opposite thinks that that is good, as well he might, he might notice that both the outriders outflanking him shake their heads and say, "What a pity ".
On the other hand, the value of imports has been less than 1 per cent. higher than for the same period last year, and the volume over 3 per cent. lower. I have already given the right hon. Gentleman my estimate of what that import bill would have been had we carried on with no weapons other than those which the party opposite were using last year. Therefore, with this reduction in imports and increase in exports we have avoided what otherwise would have been a vastly accelerating trend. Hon. Members opposite seek to explain away this increase in exports and decrease in imports, but they show that industry is making a very encouraging response to the various measures which we have taken to enable it to do so and that industry feels very differently about this compared with the attitude adopted by the party opposite.
Mr. John Bitten:
In order that we may fully understand the position, will the right hon. Gentleman give us the figures, based on the latest Board of Trade publication, of net new export orders for the engineering industry, and tell us how these figures for the past five months compare with the corresponding five months of the preceding year?
That is the very same point that the right hon. Gentleman made. I did not interrupt him, and interruptions about it now only lengthen my speech. The figures will be readily available. I did not know that the hon. Gentleman would ask me for them or I should have brought them with me. If he will put down a Question, I will give him the answer.
I turn now to output and the rate of growth at home. Clearly—I make a present of this point to the Opposition, for what it is worth; they can nag about it for as long as they like—the steps we have taken to deal with the balance of payments deficit have affected the rate of growth and have affected output here at home. The two Budgets and the July measures have had their part to play in this. Our justification is that we could not have done the one without incurring the risk, or, if one likes, the actuality, of the other. But let us not exaggerate the situation as the right hon. Gentleman did today.
There are several indicators here. They are all in official publications and I shall not bore the House by going through them. Right hon. Gentlemen opposite can look them up for themselves. One indicator is the continuing level of fixed investment, and another is the clear way in which most of British industry is maintaining its investment programmes ahead. No one would do that if the economy and industry were in the state which the right hon. Gentleman tried to show in his speech.
Second, there is the index of industrial production, to which the right hon. Gentleman referred. As far as he went, he was right: the figure for September, published today, is one point down. But the right hon. Gentleman knows that there always are fluctuations month by month. No one bases decisions or assessments on any particular month's figures. If the right hon. Gentleman had gone a little further in his researches, he would have seen what the comparison was with the period when he and his right hon. Friends left office. In the third quarter of last year, the last one for which they were responsible, the index of industrial production was 128. The graph in "Economic Trends", produced by their own statisticians when they were responsible, shows that not only was it at 128 in the third quarter of last year but it had been practically stagnant during all the nine months before that.
What has been the situation since? In the fourth quarter, which, I suppose, we can nominally claim credit for though it must reflect a good deal that had gone before, production went from 128 to 130. It has gone up steadily this year, with the single exception of the second quarter when, obviously, some of the measures we took were having their effect. But, with the exception of the second quarter, the index has stood at 132. It was 132 in the first quarter and it was 132 again in the third. So that we are, in fact, 2½per cent. up on the last quarter for which right hon. Gentlemen opposite were responsible, and all the so-called stagnation this year for which the Chancellor is supposed to be responsible has meant that we have had no reduction at all. True the expansion was checked in the second quarter, but it has been resumed in the third quarter. There has only been one quarter's check, not a nine months' check such as it had under the previous Government last year.
The right hon. Gentleman said that we had published a corrected figure. I do not know about that. The figure I have for January is 133 and for September 131. In between, it has fluctuated from month to month, but it is the quarterly figures that are significant. The right hon. Member for Barnet can explain to his right hon. Friends how important it is in this connection to look at a period longer than one month by itself. For the first quarter of the year, the index of production was 132. It fell to 131 in the second quarter, but it is back to 132 now and, clearly, as the investment and other indicators show, the expansion has been resumed.
Purely to clarify this point, will the right hon. Gentleman agree that the figures for the first nine months last year started at 126 and climbed to 128, and they have this year dropped from 134 to 131? That is the comparison.
No. These constant interruptions only serve to lengthen the time which one must take. I did not interrupt the right hon. Gentleman on a single point although there was much in his speech that I should like to have clarified. However, I am glad he has clarified this. His figures are totally wrong. In the first quarter of 1964, when they were responsible, the figure was 126·7, for the second quarter it was 127·5, and for the third quarter it was 127·9. That is a rise of 1 per cent. in nine months. Now, after a year in which we are supposed to have done so much to damp down the economy, we are ½per cent. up on the position where they left it. I am very glad to have the point clarified in that way.
There are other indicators. Despite some reports which we hear, the demand for labour in general remains high. The October count was 317,000 unemployed in Great Britain, or 1·4 per cent. of total employees. It is very hard to make that match the canvas which the right hon. Gentleman tried to paint today. It is the lowest figure for October in seven years, and I do not think that there will be a major change in the position during the current month of November. The level of unfilled vacancies was correspondingly higher than for many months past.
It is absurd for right hon. Gentlemen to talk as though the Government's measures are having a catastrophic or even a seriously depressing effect on the economy. Whatever effect they have, they are not doing that. Moreover—this cannot be said too often—not only is the charge of failure unreal in national terms, as any of the indicators will show, but it is plainly unreal when one looks at the country through regional eyes. In order to avoid hurting investment projects or the development of regions with unemployed resources, the Government's measures this year have all been highly selective both in their impact on different parts of the country and as between projects of differing degrees of importance.
The six months' moratorium—I want to make this clear again because the right hon. Gentleman once more got it wrong— on starting new projects in the public sector specifically excluded the programme for housing, for schools and for hospitals, and the need to obtain building licences for private projects costing more than £100,000 will not apply to housing or to industrial building. In addition, neither of these restraints will apply at all to projects in development districts and areas which have experienced high unemployment.
By cutting out some of the less essential demands on the building industry, we are, far from depressing the economy, making it possible for more essential projects to be completed more quickly. The restraints on commercial projects in certain parts of the country, together with the controls on office building in London and Birmingham, will not hinder progress but will help to encourage commercial development of this kind in those areas which at the moment have no worthwhile commercial development at all.
As a result of this policy, the less prosperous regions have not been affected as they used to be by the unselective measures which the Opposition always adopted to deal with a situation similar to the one we inherited. Seasonal movements apart, unemployment has not risen significantly in any of those places. As regards skilled labour, there are substantial shortages now in those regions where there used to be considerable over-supply and migration away by people of this very kind. Even in Scotland and other regions where relatively high unemployment has been the order of the day, the shortages of skilled labour are becoming a matter of very great concern.
Business confidence in the less prosperous regions remains high. This does not fit the pattern which the right hon. Gentleman tried to show. It is reflected in a high level of new orders for industrial construction in those regions and also in the increased level of approvals for industrial development certificates in those regions. The latest figures for industrial development certificates approved show that Scotland, Wales, the North-Western and Northern Regions account for a substantially higher proportion of the total certificates approved than they did before. In the second and third quarters of this year these four regions accounted for 52 per cent. of the total projects approved.
This means that we are beginning to overcome the regional imbalance. It means that even in a period of restriction, expansion can go ahead where the labour and materials are available without affecting those regions which are heavily overstrained. This is what right hon. Gentlemen opposite must try to get into their heads. People outside the House know what is happening. Hon. Members opposite may be able to kid people here but they cannot kid people outside the House who see the effects of this policy in new factories and in jobs. The main burden in postponement of starts resulting from the July measures relating to public expenditure has fallen outside the development districts, and this has no doubt contributed to the maintenance of demand and employment in those districts. Let us consider housing and, again, the same four regions. They have increased their share of starts to 33 per cent. compared with a figure of well under 30 per cent. for the same period in 1961.
Many things remain to be done in industrial and regional development. The Liberal Party in its Amendment refers to the need for more incentives, and the right hon. Gentleman also referred to this need. I am talking about incentives for investment and not incentives for export. I want to repeat what I have said both about industrial investment incentives and about regional development incentives. The existing system of investment allowances was first introduced over 10 years ago by our predecessors; it was suspended for a time in 1956 and the rates of the allowances have been varied from time to time. There have been suggestions from various quarters that for one reason or another this system is not operating as effectively as it should in relation to the considerable sums of money which are involved.
Last Session we carried through sweeping changes in the tax code, and, as the Chancellor explained in his Budget statement, we felt that it was time for a thoroughgoing review of the whole system of investment allowances. We are conducting that review now and are looking at the whole pattern of incentives, both national and regional, to see whether there is a better way of doing things. For obvious reasons I can go no further than that today and until the exercise has been completed and various other consultations and inquiries have taken place. But the exercise is being conducted, and I recognise its importance.
What is clearly essential is to drive on, both with the work which the E.D.C.'s are doing on industrial efficiency and modernisation and with regional development policy so that the country as a whole is fully engaged and the overstrained areas are eased. Here we have—and we did not have them a year ago—the regional economic bodies, which are beginning to make an impact. No one should underrate the impact which they are having. I hope soon to announce the new East Anglian and South-East Councils. To the right hon. Gentleman this is failure or defeat. I repeat, that is not the view held by people outside the House, nor is it the view of The Timesas we saw from the second leader in The Timesyesterday which was headed," What Manchester thinks today …" They show how well this is working and how completely different it looks to informed and rational men outside the House from the way in which it looks to frightened and irrational men inside it.
Let me turn to the other half of the official Opposition Amendment, about which the right hon. Gentleman smacked his lips with such relish today—the question of productivity, prices and incomes policy. First let me put the question, this time to the right hon. Member for Barnet, which I put to the right hon. Member for Enfield, West the other day. I have so far had no answer. Do they believe that we should have a prices and incomes policy and that it should be an agreed and effective policy? Do they believe that or do they not? Do they believe that we can have such a policy or do they not? The Government not only believe that we can have it but are working hard to get it. Indeed, the right hon. Gentleman's complaint was that we were working too hard, not that we were not trying to get it. Do they believe that we should? Do they think that the exercise is possible or do they not?
We ought to know what is the view of the would-be alternative Government. Or do they believe, as frankly I think they do—and here the right hon. Member for Wolverhampton, South-West (Mr. Powell) has been much more open about their thinking than has the right hon. Member for Enfield, West—that this can be achieved only by the old, anarchic and I think cruel and unfair alternative of sporadic mass deflation and unemployment, reinforced every time that it does not work by even more unfair pay pauses operating on people in the public sector and on others who can least well defend themselves?
It is anybody's guess, but I am pretty sure that the nation as a whole is anxious for our policy to succeed. But let us be clear and let the nation be clear: there is a long way to go yet before we have the degree of success which we need. That may make the right hon. Gentleman smile. But in my view it only reinforces the importance of getting on with the job. There are many people outside who want the policy to succeed but who have still to recognise—and I put it frankly to them —that they are themselves the people who are holding it back. There are too many who think that it is a matter for the other chap.
But, having said that, let us get some things into perspective. Again there were exaggerations and inaccuracies written into the right hon. Gentleman's speech. It is less than a year since there was even the first glimmer of an intention, with which we so irritated the right hon. Gentleman by succeeding when all before us had failed. It is less than a year. We did not have an agreement on machinery with which to operate it, or criteria by which the machinery should operate, until April of this year. That is less than seven months back. We did not set up the Board until the very end of April. Clearly it could not start to work until well into May. What was happening before that could not possibly have been affected by what the policy was supposed to be doing. We have had the policy and the machinery to make it effective and the criteria on which to base it only since some period in May, and we are now only at the middle of November.
Right hon. Gentlemen opposite also forget the number of claims which were already in the pipeline when we came into office. What happened in the first six months of this year was very largely the result of what had been happening in the six months before we came into power. That was inevitable. I have the figures. At the beginning of this year the Government knew of agreements for pay increases or hours reductions or both in the course of 1965 for nearly seven million manual workers, or 55 per cent. of the total of all manual workers in sectors employing 10,000 or more, and for well over 1 million non-manual workers. They were covered by agreements made in the Conservative Party's term of office and which came into operation in this year There was nothing that we could do about that.
The alleged high rate of increase for a large part of this year—certainly the first six months—was due to operative dates for agreement on pay rates and on reduction of hours; although the operative dates were agreed in the time of the Conservative Party, the dates themselves were in 1965. If we add those 8 million people covered by agreements to the millions of others—I gave the figure to the House some time ago; I believe it was about 4 million or 5 million—whose claims were already in the pipeline before the policy ever got started, we shall see what an inaccurate and exaggerated picture the right hon. Gentleman is painting.
Not surprisingly, if a movement of that order is already on, other workers feel that they have a right to an increase in any case, even though they support the policy for prices and incomes. They say, "There must be a catching up period, otherwise we shall be behind when the new policy starts." The motive for this was quite natural—it was catching up other people who had benefited under agreements which had already been made. This has had an effect on the periods between settlements and the size of the increase which those settlements reflected in hourly wages.
The Government have made it clear to management and unions that this rate of increase in negotiated settlements is much too high. But it does not mean that the policy failed before it started. It means, now that the policy is going, that these rates of increase are rates which we cannot support under the new policy. It is to the credit of management and unions, both the F.B.I. and the T.U.C., that they are co-operating with us to bring this about.
The right hon. Gentleman had a good deal to say about prices. The position on prices is better than at any time during the year for which we have been responsible and a good deal better than in the years before that. There has been hardly any increase at all in the average level of retail prices for some months. There is evidence that many firms are reluctant to risk the scrutiny of the N.B.P.I. which may follow if they put up their prices, and the early warning system, in which they are co-operating with us—even though the Conservative Party are not—will enhance this deterrent effect and will ensure that we have much more adequate information and can take action about price rises which are proposed.
Despite all that the right hon. Gentleman said about the rise in wage rate settlements and the reductions in hours, I would emphasise that we have held the price level. The Conservative Party did not hold the price level even when the wage level was being held. We have held the price level despite all that they have said about increased earnings. Something must have been absorbed somewhere in higher productivity, reduced profit margins or reduced selling prices to bring that result about.
I hope that right hon. Gentlemen opposite will get into their heads the major reason why they so signally failed in all their attempts—although from what the right hon. Gentleman said today we might imagine that there had been no attempts. The reason why the right hon. Gentleman did not have success with his attempt and why others before him did not succeed is that they kept on doing what he did today—talk about incomes but mean only wages and salaries. They did not accept that this incomes policy must apply to all incomes. This is what brought about their downfall, and it is one of the reasons why I hope to succeed.
If the right hon. Gentleman will be kind enough to read what has been said by Mr. Harold Macmillan and successive Chancellors of the Exchequer he will discover that what he is saying is absolute nonsense.
I have a feeling that if I read anything by any Conservative leader I shall read some nonsense. Let the right hon. Gentleman ask the leaders of the two sides of industry why these policies broke down before. We know. Some of us were there. We are making some progress, even though we have a lot more to do. But we shall not get more done if we keep going round and telling people either that they should not do this, as the right hon. Member for Wolverhampton, South-West tells them, or that they cannot do it. This is why the Conservative Party should make up their minds and come into line with industry so that we may say that we shall try to make the policy succeed. They might try to help it to succeed.
There are many different ways of comparing wages and salaries and of comparing earnings. This is one of the reasons why we have such a multiplicity of different figures which are exceedingly difficult to follow. From the point of view of the prices and incomes policy, it is the rate of increase in earnings per head which matters most.
We have not a single or simple comprehensive up-to-date index of earnings per head. It was not part of the apparatus of information bequeathed to us. This and many other gaps in our apparatus of statistical information will have to be filled soon if we are to do the job properly. But taking all available statistics into account, it seems to us that the weekly earnings per head have been rising on average this year at an annual rate of 7 per cent. as against the rise in productivity.
That is insupportable—there is no question of that. But from the start we all knew that 1965 would be a difficult year. There was already the heavy pressure which built up before we took office. The demand for labour was high and we preferred to keep it high. The movement towards a 40-hour week was well under way. All these factors were bound to make 1965 a difficult year.
But clearly the prices and incomes policy is now having an impact. There is an increasing recognition of the importance of productivity in the whole operation. The word "break-through "does not seem to appeal to the Opposition, but we have nevertheless seen some break-throughs this year in the abandonment of traditional demarcation disputes in shipyards on the Clyde and the Tyne and in the electricity supply industry, the petroleum industry and a number of other industries where collective bargaining has brought agreement on greater flexibility of labour. We are trying to encourage and hasten the process by taking direct action ourselves—following up the Devlin Report, for instance, by the introduction of the liner trains and by our meetings with the car industry. Through the "little Neddies" we are trying to bring it about by gaining the co-operation and understanding of both sides of industry.
I know that many of my hon. Friends are concerned about the question of dividends. In July, I said that the rate of increase of dividends in the first quarter of the year was excessive and that I was keeping a careful watch on the position. The increase in the quarter was 28 per cent. There were, however, some special factors and that is why I decided not to take further action then. In the second quarter there was a very considerable fall-back in the rate of dividends. They were increasing at the rate of only 3 per cent. compared with the situation of a year before.
I put this out so that everyone on both sides of the House and on both sides of industry will recognise that this is not a matter of wages and salaries alone, much less of salaries for teachers and dockers and nurses. It is -a matter for all incomes. I repeat my pledge that we will take fiscal action if the dividend area proves to be unaffected by the general policy.
The National Economic Development Council will be having its general review of trends and movements in prices and incomes soon and that will give us an opportunity in an independent atmosphere to appraise the situation. I think that there should be a smaller growth of income in the year ahead, because of the lower pressure of demand, because the pressure for the 40-hour week is coming to an end, because the "catching up" movement will be losing momentum and because the prices and incomes policy is having a greater impact. We are determined that it shall be applied much more vigorously and with greater urgency. Hence our proposal on 2nd September to put the Prices and Incomes Board on to a statutory basis with power to call witnesses to give evidence and to seek statutory powers to enable us, if we need to or wish to, to introduce—after coming back to this House, of course—a compulsory early warning system for pay and prices.
Against that background we have agreed with both sides of industry on a voluntary early warning system which we are starting to operate. I want to emphasise, so that any fears on this score can be laid at rest—they are unjustified —that the statutory system would only be put into effect with the approval of the House and if the voluntary arrangements should prove ineffective. Even then, it would be done only after the fullest consultation with the T.U.C. and the C.B.I. We want to make it effective and I am convinced that they do. If we can do so there will be no need for statutory backing but there will have to be a very widespread will to make it successful in the time scale we want.
Whatever the Opposition feel about it we, in co-operation with both sides of industry, will do our darnedest to make it work. We are further along the road than anyone with experience—and some of us have had a long experience in these matters and know a great deal about the snags and about the traditions we are disturbing and the delicate mechanisms that have been built up—could reasonably have expected a year ago.
The rate of dividend my right hon. Friend has in mind seems to work out at an average of about 16 per cent. This appears to be about twice any dividend that the United States gets for its overseas investors. Is it intended to hold the figure at that level in view of the 7 per cent. my right hon. Friend quoted for wages and salaries?
I am not sure that I recognise the figure of 16 per cent. as arising from what I have been saying. Perhaps my hon. Friend and I can discuss this later.
It is our intention to make sure that this policy shall have an impact on dividends and every other form of personal income as well as wages and salaries. We believe that this must be pressed on because it is a critical key to the whole drive for productivity, for price competitiveness abroad, for curbing inflation at home, and for getting a real rise in our real standard of living.
So long as the Opposition go round denigrating it, then so long must it be clear that they have not grasped the critical nature of this key to the very things that they say they would want to do. Any fool can show that this is a difficult operation. One does not need to be a Member of Parliament to be as foolish as that. Any idiot can just sit around and giggle at the struggle. But this is work for real people who are willing to have a go—and they are not lacking, despite the carping criticisms from the benches opposite.
Who, a year ago, would have believed that today the T.U.C. would not only be scrutinising pay claims for which its individual units have some responsibility but would also be operating on them? No one a year ago would have believed that this would happen. Who, a year ago, would have thought that the C.B.I. —not even born then—would within a year be co-operating in an early warning system for prices of its thousands of members?
I cannot pay too high a tribute to the vision of the leaders of both sides of industry, men of all political persuasions and none, for their participation in this great tripartite adventure. I can understand those who say that it cannot be done, or that we cannot do it in this way. But I have nothing but contempt for the idiots and gigglers and sneerers in a matter where real men are trying to achieve such an objective.
We would never have been where we are now had industry—including supporters of the party opposite—been confined by the blinkers through which the Opposition squint at this policy. The Opposition's censure move last night was a flop. This one must be rated a fiasco.
If the Censure debate yesterday was a flop, the right hon. Gentleman's speech today makes it certain that he will not go down in history as "Capability Brown". It was a poor speech and the first part was much worse than the last.
I know how very sincere and how determined he is in the views he holds and about the things he is trying to do. I admire him for it. But I wish he would get out of his mind the idea that any criticism is unjustified and unfair. I say this because these are the problems that, quite rightly, the nation should debate both inside and outside Parliament, but the right hon. Gentleman speaks with a "holier than thou" voice as though any word of criticism of anything he says must be wrong.
The hon. Gentleman knows that that is not so. In my closing words I said that I welcomed those who said that our prices and incomes policy could not be done or could not be done in the way we are trying to carry it out but that I have contempt for the idiots, gigglers and sneerers who do not even criticise and do nothing to help.
The right hon. Gentleman must put a brake on himself. He used to have a certain sense of humour. Now it has gone. This is not what the House likes. It does not like being lectured. Even in bitter debate we have some fun across the Floor of the House and I have seen Members of the Government laugh at something cynical said on this side. The right hon. Gentleman should not take it so much to heart.
I want to deal first with the question of stable prices. I would like to know how the right hon. Gentleman reconciles the fact that the cost-of-living index shows a rise of 5 per cent. with his claim that we have stable prices. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) showed from the Financial Times the increased cost of living for a person with £3,500 a year. But do not let us forget that such a person is not the only one affected. It goes right down to every family. It has been estimated that it means something like £1 a week for every family of a couple with one child.
No. I cannot give way now.
I want now to deal with the so called crisis which is said to have bedevilled the Government's actions from the time they took office. It is rather like smashing the teapot and expecting the housewife to praise what one has done. The crisis that the right hon. Gentleman talked about was created by the Government. The more time passes and the more reports we get from O.E.C.D. and other organisations, the more it becomes clear that the policy pursued by my right hon. Friend the Member for Barnet (Mr. Maudling) was right. What did he say all through 1964? He made no bones about the fact that we were going to run into a balance of payments problem. My right hon. Friend said that we should be under severe pressure. He said that our reserves were sufficient to weather the storm and the right hon. Member for Huyton (Mr. Harold Wilson), who is now the Prime Minister, agreed with and supported him.
As time has gone on, most of my right hon. Friend's forecasts have been borne out. Exports this year are up by 5½ per cent. In 1964, my right hon. Friend said that exports in 1965 would rise considerably. Right hon. Gentlemen opposite cannot take all the credit for this export rise because they know, as well as I do, that the great bulk of exports, because of the way industry and commerce work, were booked last year. The bulk of the orders now being exported were booked when the Conservatives were in power.
The right hon. Gentleman was not prepared to give the figures to my hon. Friend the Member for Oswestry (Mr. Biffen). However, my hon. Friend has them and in the last five months engineering export orders have dropped by 7 per cent. compared with last year. The improvement in the figures this year is the result of Conservative policy last year and has nothing to do with what the Government are now doing. If the orders for engineering goods now being booked are down by 7 per cent., next year there will be a drop in engineering exports, unless the Government are very careful.
Every hon. Member knows that in the cut and thrust of party strife, which is so much the democratic process, one gets blamed for what the other party has done and takes the credit for what the other party has done—because of the leads and lags. In the export total of £4,500 million, orders for ships and locomotives and aero engines and aeroplanes, probably worth about £1,000 million, will have been booked not last year or even the year before, but in 1961 and 1962. They take all that time to flow through the pipeline.
When the Conservative Party was in power and various financial crises occurred from time to time, I was never certain when supporting the Government whether, because of the leads and lags, we should not have been reinflating when we were deflating and deflating when we were reinflating. We were often doing things at the wrong time because of the leads and lags, because we were only dealing with what had passed, not realising that the course of events had changed. The situation was sometimes made worse when the economy was squeezed when it should have been boosted.
As a result of our experience, all of us from 1945—and let us include all parties in this—have learned a great deal about running the economy. Let us face the fact that for many years this country's economy will be on a knife edge. However successful we are, we shall never be able not to need to worry about what is going on overseas and what our export performance is. We shall always be balanced on a knife edge.
What I blame the present Government for more than anything else is that deep down right hon. Gentlemen opposite even now have not learned the lesson that confidence is the most delicate flower ever to be grown in any industrial horticultural garden. Anybody who has been in business or commerce knows that a whisper can alter the atmosphere which sweeps across a country. If for some reason people suddenly say, "It is too good ", or a rumour spreads and people do not place orders, contraction sets in.
The Government cannot get away from the fact, whether it was lack of experience—and I will give them credit for that, because right hon. Gentlemen opposite have been out of power for 13 years and there were very few of them left who had experience of administration—
The First Secretary and the Prime Minister had experience and the Chancellor of the Exchequer had a limited amount of experience, but the number of right hon. Gentlemen opposite with that experience could be counted on the fingers of one hand. With that and the crush of the General Election— for during a General Election we say bitter and unwise things about our opponents from time to time and the mood still existed when right hon. Gentlemen opposite formed a Government—two-thirds to three-quarters of the financial problems with which we were faced were created by the Government themselves. They would not have existed without Government action. My right hon. Friend the Member for Barnet forecast what would happen to the economy and in broad outline events have proved him right.
How could he check it? He had to wait for time to make it fact. However, in the following 12 months all the export performance and the reduction in the adverse trade balance which he forecast took place.
Is the hon. Gentleman saying that if his party had won the election, right hon. Gentlemen opposite would not have taken steps to correct the deficit in the balance of payments but would have allowed the situation to continue?
It is all right to talk about taking steps, but what steps did the right hon. Gentleman, take with the exception of the import charge which has had a very small effect on imports because of stockpiling and so on? What single action has he taken which has reduced the balance of payments? Will he tell me?
Certainly. There is the import charge, which is worth at least upwards of £200 million in the balance of payments. There is the capital account reduction, which is certainly worth upwards of £150 million in a full year. There is the export rebate, which has certainly helped exports. There are all the additional credits which have been put at the disposal of exports. If the hon. Gentleman is not careful, this will be not an interruption but a speech, because there is so much to tell him about what we have done.
From what I gather, the House is not particularly keen on my prolonging the hon. Gentleman's speech.
I agree that the measures of our capital investment overseas will bite at some time and reduce our deficit, but is the right hon. Gentleman saying that they have done so now? Of course not. They have been in operation only for three months and these things do not work as quickly as all that. The balance of payments deficit was about to come down before any of these measures were taken. The Government themselves said that the balance of payments deficit would be halved in 1965 and it is working out that way.
When he was Chancellor of the Exchequer and after the election, my right hon. Friend the Member for Barnet said that there was a problem. Of course I am not saying that we would not have taken any action. What I am saying is that the enormous measures which the Chancellor had to take were largely a result of the atmosphere which he and his right hon. Friends created in November and December, followed by hasty action and ill-thought-out measures which made the problem even worse. As a result of that, he has had to go on right through this year. I was delighted in July when he got further support from the banks and I hope and believe that as a result of that further support —and this is where I return to the issue of confidence—our reserves will be increased by between £400 million and £500 million by the end of February or March.
When one gets a return of confidence, an assurance that in the near future there is going to be no devaluation, we will automatically, as the leads and the lags work out, get back nearly half of all that we have lost. I am delighted that this should happen, but I think that we should realise that it is jolly nearly automatic. When there is a fear of devaluation the leads and the lags work very much against the balance of payments, but as soon as the position is stabilised there is an automatic flow back into the country. When my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) was Chancellor of the Exchequer, he paid off all our borrowings in 12 months. Once confidence was re-established, the money flowed back again because it is needed in a great trading community such as ours is.
I do not think that the National Plan ought to be called a plan at all. It is a forecast. I do not blame the First Secretary for producing only a forecast—it is a very difficult thing indeed to produce a plan intended to work for five years ahead. A great deal of the plan is based on entirely false premises. Many of the figures were produced by saying, "If we increase our productivity by 25 per cent. by 1970 what is the output in a certain industry expected to be? "That is a very different thing to saying "What is your forecast for the output of your industry "and finding out whether that forecast adds up to 25 per cent.
Industry is trying to build into its forecast the proposition put to it by the Government as a result of the studies made by the Chancellor this year. Is this figure still the target for 1970, when we have this drop in production which means that we have to increase it to 26½ per cent.? Are we still going to increase by 25 per cent. by 1970? Is this a phased programme like the road programme? Is it going to be stretched, to take longer to achieve this figure, or are we still working on this target? It is an extraordinary plan. I thought that a plan was meant to produce a coherency—a matching of one's resources, manpower, wealth and technology, used to the maximum in order to produce the maximum wealth and benefit for the nation.
After having been examined and worked on by a great number of people the plan emerges with 200,000 men short. I am tempted to say that I am very glad that the First Secretary is producing this plan, and not building the Forth Bridge, because it would look a pretty funny bridge if, at the end of the day he was 200 ft. short of the other side. Surely any plan should result in two and two equalling four. All that this plan works out is that our guesses have turned out wrongly, and that we have to find 200,000 men from somewhere else. The plan talks of the saving in manpower, but with all that saving, we still expect to be 200,000 men short. I hope, for the sake of the right hon. Gentleman and of the country, that we do not find that we are short. I hope that the growth of technology in five years will achieve the 25 per cent. increase without the additional manpower.
There are one or two points I would like to make which I think may help. I would like the Chancellor to have another look at the whole system of P.A.Y.E. I am sure that he must realise that one of the greatest disincentives to increased effort is the amount of money taken out of a person's pay packet, or his monthly or quarterly cheque. If a chap thinks that he is earning £20 a week and he only gets £18, he stops thinking that he is earning £20 and thinks that he is only earning £18. One of the great disadvantages of P.A.Y.E. is that if a person works overtime he is then presumed to be earning what he has earned in overtime for 52 weeks of the year, and he pays a large amount of increased tax. Before the war we paid our tax one year in arrear. Could the Chancellor have a look at the possibility of our paying one year in arrears again and therefore paying exactly the same amount each week throughout the year? If we can get back to that system we would find that it was a greater incentive to increased effort than the present system.
I will not give way at the moment.
The reason that it would be so much of an incentive is that people do not work overtime 52 weeks of the year. The First Secretary has talked about the 40-hour week and we all know that although the official working week has gone down to 40 hours, people are still working to within 1 per cent., 47·6 hours a week, as they were doing 15 or 20 years ago. But they do not do seven hours overtime every week throughout the year. They work a lot of overtime for perhaps three or four months then go down to a standard wage for a while and then up again. The system I propose would be a far greater incentive to people to put in the extra effort for which we are asking.
For many years our arguments have been on the question of increasing exports, to increase the standard of living of the British people. We already export 15½ per cent. of the gross national product. No other nation with the exception of West Germany exports a greater proportion of the gross national product. Japan, America and France are all less. It is going to be pretty hard to increase our exports every year, except as the growth of world trade increases, if we want anything like a slightly bigger slice than we now have, of 15½ per cent.
This is where I part company with a great deal of what the Chancellor has done. I know that for temporary reasons he might have felt justified in hitting at overseas investments. But in the world as it is developing, I am sure that the long-term advantage to this country would be very much greater if we could build up our overseas investment from £11,000 million to £20,000 million. [Interruption.] Exactly, but the attitude which is creeping in with all the developing countries, namely, that they want the assembly factories there otherwise we cannot send the basic parts, will increase more keenly every year. Therefore, it is very important and almost essential, that increased investment flows overseas, otherwise these countries will not allow us to send our goods to their markets. We must encourage overseas investment.
Secondly, if the export position is, inevitably, not to get any easier, would it not be money very well spent if we spent more on encouraging the tourist industry, which is one of the unrequited exports, which costs us very little in overseas currency, except for advertising, and which does not place an additional strain on the resources we have in this country? Perhaps the Chancellor of the Exchequer could get the Minister of Public Building and Works, who is responsible for ancient monuments, to go into this matter.
I was horrified to find last year when I went to see Hadrian's Wall that it was almost impossible to look at it without going for a half-mile tramp. There were about three car parks over the whole length of the wall, and there was nowhere to get a cup of tea. This is one of the biggest draws for Americans. The biggest attraction after the Great Wall of China is Hadrian's Wall. Many Americans would visit it if it were made easier to do so. The tourist industry, which does not involve the transit of goods over frontiers, is one of the things which we have to consider more seriously if we are to achieve the increased standard of living that we want.
We are living in an ever-increasingly competitive world in which more and more nations are industrialising and therefore are demanding that their products should be bought in their country rather than in ours. This means that overseas investment must have priority. Indirect exports are just as valuable, if not more valuable, than sending goods across frontiers. I hope that the Chancellor of the Exchequer will consider these matters because I am sure that they are part of the problem which we in this country have to solve.
I have been in the House long enough to know that the hon. Member for Ormskirk (Sir D. Glover) likes nothing better than a bout of in-fighting in the Chamber. But he has a very generous side to his nature. Therefore, I thought that his description of the speech of my right hon. Friend the First Secretary of State as a poor one was entirely out of character.
I enjoyed listening to the speech of the right hon. Member for Enfield, West (Mr. Iain Macleod). It was a good speech, and certainly a distinct improvement on the speech which he made a fortnight ago in the debate on the National Plan. The right hon. Gentleman was perfectly right to dwell on what I regard as the weaker, more disturbing aspects of the present behaviour of our economy, the changing character of our terms of trade and the widening gap between earnings and productivity. Although he may not have satisfied the hon. Member for Ormskirk, my right hon. Friend the First Secretary of State replied at length. His was altogether a much more substantial speech, and I am taking nothing away from the speech of the right hon. Member for Enfield, West. My right hon. Friend made a very well-structured speech and I am sorry that the hon. Gentleman, although he did not pay tribute to it— we can hardly expect that from him—did not at least do a little more justice to it. I thought that the hon. Gentleman, like the right hon. Member for Enfield, West, was concerned, perhaps more than anything else, to acquit his party of responsibility for the crisis of confidence a year ago.
Yes, indeed. One can hardly say otherwise in view of the great efforts which my right hon. Friend the Chancellor of the Exchequer has had to make this year to try to overcome that crisis of confidence.
It is important that we should briefly review some of the key economic indicators not touched on in the debate so that we can assess the Opposition's performance during the last, say, 10 years. I want primarily to contrast the position of a year ago, on the eve of the election, with the present position so as to bring out the corrective actions demanded by that crisis—a balance of payments crisis as well as a confidence crisis—which the Government inherited or which was certainly in existence, whether or not it was coincidental with our coming to power. I want to consider how far they have been, first, implemented by the Government, and, secondly, related to the Government's long-term objectives.
I want to do that against the background of a remarkable speech by my right hon. Friend the Prime Minister in New York on 14th April to which many Americans referred while I was touring the United States only recently for seven weeks, when I had the fortune and pleasure to meet many American businessmen, economists and journalists. They were almost at one in their admiration of what they had seen of the Prime Minister, not only on 14th May, but subsequently. They have since by Telstar seen him meet the Press. His speech in Wall Street in April stuck in their minds, and I want to refer to it later because it will help me in dealing with the Liberal Party's Amendment to the Gracious Speech and to make some sort of appraisal of the Government's programme, its objectives and its chances of success.
The right hon. Member for Enfield, West was right to emphasise the way in which, while his party was in office, the living standards of the people increased. He said that they had gone up by 49 per cent. over the last 13 years. Even if he had not mentioned that figure, I was ready to say that the gross domestic product per head of population has increased over the last 10 years by about 25 per cent., which was sufficient to double the G.D.P. over a comparatively short period of 30 years, which is a good performance by any standard. Of course, no one can deny that because it is so obviously reflected in the average consumption level in this country.
But what the right hon. Member for Enfield, West did not say in order to give a balanced picture was that the retail price level in the same period went up 36 per cent.
My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) also gave the adjusted figure after taking into account the rise which had taken place in the retail price index. The 49 per cent. figure is a real figure.
Yes, that is so. I was going on to make that point. Nevertheless, the significance of this continued rise in the price level over the period for other reasons, which I need not go into because of what my right hon. Friend is trying to do through the National Board for Prices and Incomes, cannot be overlooked. These increased resources were used by the Opposition when they were in government to raise the rate of fixed capital formation in the economy. The cumulative effect of 10 years of investment is a rise in capital stock by about one-third. Despite this, home costs per unit of output have risen by 37 per cent., which shows that we have not been getting the full benefit of this investment and the right level of productivity during those years which the Opposition properly remind us now we are not achieving.
The volume of exports of goods and services increased faster than the G.D.P. for which the Oppposition can take credit —37 per cent. as against 33 per cent. on the other hand, Britain's share of world's exports of manufactures over this period fell from 20 to 13·7 per cent. The amount of imports which these exports would buy rose by 48 per cent. with the aid of improved terms of trade. It might also have been said, by way of balancing the picture, that the volume of imports has grown faster than the purchasing power of exports—56 per cent. as against 48 per cent. and much faster than the G.D.P., namely, 33 per cent.
I think it is not surprising, in view of this, that the balance of payments on current account at the end of this period, though favourable for most years, gave us only an aggregate of £389 million by way of surplus, and this, as we know, was achieved only at the cost of exchange control, at the cost of "stop" policies, at the cost of a certain amount of growth. Moreover, the reserves of gold and convertible currencies were consistently lower in relation to our short-term liabilities and we had at the end of the period a net deficiency of nearly £600 million.
I am not saying that at the end of this period, about which the right hon. Gentleman was talking with such pride an hour ago, there were not achievements, substantial achievements, to the credit of his party, but the fact that a man has added to his net assets during a period does not mean he had not some difficulty in living within his income during that period, and that pretty well sums up, I think, the record of the Opposition over the last decade.
If we now come to the position at the eve of the election we find that the cumulative current account was just in balance, but it was making no contribution—and this is something of which the hon. Member for Ormskirk needs to be reminded— to the financing of long-term capital exports which were averaging then about £175 million a year, and, indeed, had done for some years. The reason why this current account was only just in balance was that our export performance was not satisfactory. It was not satisfactory when we recall the comparative cost position of this country at the time, and when we recall the difficulties of other countries in Western Europe on account of the scarcity of labour. It was not satisfactory, either, when we remember that the exports of manufactured goods, which make up the bulk of United Kingdom exports, were rising less than those of other industrial countries taken as a whole. It was not satisfactory, also, of course, when we remember that our gold and foreign currency reserves were under £1,000 million for the previous seven years. It certainly was not satisfactory when we also recall that the United Kingdom, the United States apart, was the only industrial country not to increase its reserves during that period.
I wonder, therefore, how the right hon. Member for Enfield, West could possibly have said during his speech And so we came to the election of 1964 without any crisis of confidence." Of course, there was a latent crisis of confidence. We felt it all that year. We all knew that corrective measures were not being taken sooner. No one was in any doubt at all that there was a need for corrective measures and that the delay in taking them, as we all know, was due to the need for careful election timing.
I ought not to give way because I want to sit down within 20 minutes if I can.
My right hon. Friend the Secretary of State for Economic Affairs described 1964 as a year of rapid deterioration throughout, and I do not see how we can possibly get away from that in view of what I have just said. I have been at pains to come up with an objective picture. I have not been selective in my indicators. These are key ones. No doubt following speakers —and as far as I can judge there are Members who are very well qualified to do so—can come up with more significant indicators—if there are any—if they catch the eye of the Chair. But in view of all this, I think my right hon. Friend was perfectly entitled to ask that during the speech of the right hon. Member for Barnet (Mr. Maudling), who will wind up the debate for the Opposition, he will say what he and what his party would have done had they won the election.
Now, to come up to date and compare the position I have just described a year ago with the position today, and we look at the reserves, balance of payments, exports, investment, savings. I shall not go over the ground already covered, but it is important to stress a marked improvement in the reserves this year.
When we look at the balance of payments we note a marked improvement in the second quarter. We have these figures, and I shall not delay the House or take up time by detailing them. As to exports, I am not giving figures which the hon. Member for Ormskirk has rightly given, but I will give figures which have not been given. During the period August to October this year exports were nearly 10 per cent. higher than a year ago, while imports were precisely the same. I am not going to say that we shall keep that up. I hope we shall. Happily, the trend is significantly upwards. But it is nevertheless a most striking improvement.
When we look at investment, and particularly at what the Prime Minister said in his speech on the National Plan a fortnight ago, we see fixed investment by manufacturing industry in the first six months; of this year compared with the second half of 1964 is 7 per cent. up, and he gave us the optimistic picture for 1965 as well as 1966 so far as one can determine the intentions of manufacturers according to Board of Trade returns.
That again is most heartening, and yet the Opposition Amendment, as my right hon. Friend reminded us, refers to the failure of the Government's economic policies. I do not see how Members opposite can possibly sustain that indictment during the rest of this debate.
I was worried, I must confess, in recent weeks, about local savings, not merely for the short-term position but also the long-term position. I was worried about the implications of the National Plan for savings and investments and how it would be possible to get the requisite levels of both to give us our targets by 1970. However, I was considerably heartened at the weekend by a reply to a Written Question to my right hon. Friend the Chancellor of the Exchequer, on the basis of the seasonally adjusted figures, that personal savings are estimated in the second quarter of this year to have been 9 per cent. of personal disposable income, which compares with 7–6 per cent. in the first quarter of 1965, and the level so far in the first half of this year is clearly above that for 1964 and certainly 1963.
This is most heartening. I do not want to be unfair to some Members opposite. I know they are interested in this, and there is certainly one of them wanting to catch your eye, Mr. Speaker, and I know he has been even more pessimistic over this than I have been in recent months. I hope that he and some of his hon. Friends will share the joy which we feel about this striking improvement, because we know that without this we cannot possibly sustain not merely the Plan but the present position.
Yet the right hon. Gentleman the Member for Enfield, West in a sense was right. He is usually right most of the time because he is so careful in what he says, but it very often means that he has not given the whole picture. For example, he said that we had seen last year national savings doing less well than a year ago. That was only part of the picture, and I suspect he knew it.
Now what of the future? I think the Secretary of State for Economic Affairs was quite right to dwell upon the need for balance of payments equilibrium and the defence of sterling, because without either we cannot possibly hope to achieve all the wide programme of social reform which makes up the Queen's Speech. I want to touch briefly upon the balance of payments in order to show, as I have said I would like to, what steps I think will be needed and relate them to the Government's economic objectives.
I do not think there is any doubt whatsoever when we look back on the experience of the past that the balance of payments has always tended to be a major constraint on economic growth. On the other hand, many of the difficulties of the past can be attributed to failures of demand management policy. For example, in 1963 the expansion, like the previous upswing in 1959–60, led to crisis. This was undoubtedly due to excessive expansionary measures. I recall that during the Budget of 1963 Members of this House warned the then Chancellor of this.
I think that this is even more significant when I recall that the recent expansion was shorter than the previous upswing. Demand management is clearly of vital importance. But what is crucial is that the persistence of an unsatisfactory underlying balance of payments position, on an average of fair years and bad, points to more deep-seated factors. There is a need, therefore, for planning, for more skilful management of demand within the economy, and for a tougher competitive climate to help maintain an upward trend of exports.
As for planning, we are going to get this now, as we know from the evidence of recent weeks and which my right hon. Friend repeated only an hour or so ago. It is absolutely imperative to encourage steadier as well as faster growth as part of our long-term strategy.
I think, however, that more skilful demand management is needed to help us pay more attention to the main secondary effects of reflationary policies. If the competitive position of the United Kingdom is to be improved, then a prices and incomes policy is clearly called for. Such a policy is being developed by this Government, though no one can possibly mistake the difficulties in the path of such a policy, especially in a free society.
Productivity is also of importance because, as I have said, and as I think is clear, we have not yet felt the benefits of all the investment already made. Other longer-term reforms of a structural character are highly desirable therefore, and the Government have already some of these in hand. For example, there is a number of measures to improve the quality and flexibility of labour supply, and the little "Neddies" are studying ways of improving the efficiency of firms, and regional development schemes are being brought forward for major areas of the country. In turn, they should facilitate the adoption of a more differentiated approach to the problems of each region than has been the case in the past. In certain basic sectors, particularly rail transport and the docks, the Government have announced rationalisation and modernisation schemes. Legislation on monopolistic and restrictive trading practices is being extended and reinforced.
That does not mean that the Government's goal of reaching a balance of payments equilibrium by the end of 1966 is going to be an easy one. The margin for manoeuvre is limited, and large external obligations have been contracted. Servicing of the debt to the I.M.F. calls for an annual surplus of some £200 million in the years 1967–70. It was really about those external obliga- tions and our ability to meet these new debts that the Prime Minister spoke in New York on 14th April and American businessmen were heartened by what he said. He described simply how this could be done by a tougher competitive climate. In a most impressive speech he brought together the Government's objectives for a new Britain and a comprehensive picture of a dynamic economy in which good incomes could be fairly earned by hard, intelligent work, or constructive enterprise in a tough, competitive environment, and in which the Government will assist in the process of modernisation, largely by securing a cooperative approach based on planning by consent, but by a readiness to penalise or prevent anti-social practices, and also by a readiness to look after the weaker members of society. In this way he believed—I found American businessmen a good deal more convinced than formerly—that the national output would rise much more rapidly, and that its allocation between people and uses could and would follow a more acceptable set of social priorities.
I wonder, in view of this and in view of the Prime Minister's assurances as well as the content of the Gracious Speech, how the Liberals can possibly have put down their Amendment. I do not doubt that the hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) will try to catch your eye, Mr. Deputy Speaker, but I should like to remind him that I probably represent more Liberals than he does. I know what some of them are thinking about the Queen's Speech. I know from my experience that a surprisingly large number over the past ten days have been heartened by our announced policies. They welcome and accept the contents of the Queen's Speech; like the Liberal candidate for Harrogate who, according to today's Yorkshire Post, has resigned from the Liberal Party and taken steps to join the Labour Party. That was for the reasons I have just given, because he accepts the Queen's Speech.
The fruits of this new Government's conduct of our economy are already evident in the balance of payments position and in the recovered strength of sterling. It is also to the credit of this Government that they have been able to keep the boom going for so long without having recourse to large-scale unemployment. I do not know that we have managed the trick this time, I do not know that we have established the right Keynesian balance—only time will tell— but I do know that in his management of the economy the Chancellor of the Exchequer has been more successful so far than any of his predecessors. The proof of this can be seen in the prolongation of the present boom.
My right hon. Friend the First Secretary of State and Secretary of State for Economic Affairs was perfectly right to claim credit in his remarks for the way in which his selective policies, notably in the regions, have also helped to keep the boom going. I want to be fair about this. On the evidence and the face of things there is a much more skilful conduct of the economy by the Chancellor and by the First Secretary. I do not see, therefore, how the House can possibly accept these two Amendments.
Mr. John Bitten:
Although the debate has ranged over pretty well the full spectrum of economic policy, I wish to try to confine my remarks mainly to one aspect, the incomes policy, not least because it is specifically mentioned in the Amendment moved by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod).
I invite the House to recall with me 11th February when the First Secretary of State and Secretary of State for Economic Affairs told us that he now had machinery established on which the prices and incomes policy could work. This, in a sense, was an historic occasion. The right hon. Gentleman on that occasion was feeling in a fairly fraternal mood, I think, because I was rash enough to comment that very many people would regard the quest for an incomes policy as illusory and, indeed, undesirable. I also asked about statistical machinery, and I shall come back to that later. On that occasion, we did not have comments about idiots, gigglers or sneerers, but the right hon. Gentleman in a great state of fraternal feeling accused me of courage. Whether it was the courage of the Minister of Technology's convictions, I do not know. I did not claim that at all. Perhaps I was entitled to say that I was sceptical, and I hope to show that my scepticism has been more than justified.
I ask the House to consider three points which now seem worth considering on the development of the incomes policy. I put them under the headings of confusion, danger, and yet again a concern with the statistical machinery which must touch upon the very practicability of such a policy. I hope to return to the point I made in questions on 11th February, a point which has been made subsequently by a number of my hon. Friends, about the statistical machinery by which we are asked to evaluate whether or not the policy is succeeding and also to determine whether or not the First Secretary and the Chancellor himself can determine whether such a policy is succeeding.
I comment first on the confusion. I think we are seeing a considerable amount of confusion about the incomes policy. As evidence for that, I consider the statement which was issued by the First Secretary's Department on 3rd September. There was then the comment put out by the Department of Economic Affairs that—
There is a general understanding of the need of the situation but it is not being reflected in a satisfactory movement of productivity, prices and incomes. Prices are still rising and pay claims are being settled well above the norm.
Clearly this is a statement which is incontrovertible, but what I find confusing and, I suspect, a great many others find confusing, is that just short of a fortnight later the Department of Economic Affairs with a great flourish produced the National Plan which says, on page 67, on the incomes policy:
An encouraging start has been made." I find it somewhat difficult to reconcile those two statements.
I shall now consider the question of the danger which I believe to be inherent in this policy. I think the danger is that the Government have "gone nap "on an incomes policy. Their whole economic programme to some extent rests on the success of an incomes policy. This is no exaggeration on my part. I think one could find ample quotations to show that the arch stone, as it were, of their economic policy is the success of this venture.
It seems that as the difficulties and, as I believe, the inherent contradictions of such a policy become apparent there will be a growing disposition to cast around to blame others. At the moment the blame to some extent is focused pretty sharply—as it was by the Secretary of State this afternoon—on my hon. and right hon. Friends who are taking a somewhat sceptical attitude towards it, but I think that as time goes by others may find that they are accused of not co-operating in this great venture. I have always distrusted the idea of consensus in politics and consensus in Government. This may be a highly unfashionable thing to say, but I believe that one of the results of this will be increasing concern on the part of the Government that they have been let down by those whom they invited to be their agents, the Confederation of British Industries or the vetting sub-committee of the Trades Union Congress.
If I understood the Secretary of State correctly, he said that these bodies must make the policy effective, when he was referring to the early warning system. That was a clear indication that if they did not make it effective statutory power would be taken. I do not think that an unfair condensation of the remarks he made. I believe there is an inherent slide towards increasing control of prices and incomes. I believe this is a return to the philosophy of the 1945 Labour Government which set great store by these kind of controls. This is no exaggeration; it is there in the Statist article published some months ago when the President of the Board of Trade talked about the Tories dismantling the fine planning machinery left behind by the outgoing Labour Government in 1951. Therefore I do not regard it in any sense as scare politics to talk about the slide towards statutory controls implicit in this incomes policy.
I wish to conform with my intention to be brief, and I will now talk about what seems to be the confidence trick nature of this exercise. I hope that it is understood that I do not use this term in any pejorative sense. There is a degree of nonsense in all our politics. We must acknowledge this to ourselves. There is a degree to which we hope we can sell things to the people without them necessarily understanding the full implications or extent. I do not want to prate on this particular line. [Laughter.]An hon. Member laughs as if this were something like pas devant les enfants. We may adopt these postures, it seems, but not on the Floor of the House. What I am saying this afternoon is not particularly agreeable. It is perhaps a distinctive view, but I am saying it on the Floor of the House because I believe that it is here that it should be said.
Where the nonsense calls for more than the permissible degree of credibility is in the attempt of the Government to establish that an incomes policy can succeed. As I understand—and I shall be happy to be corrected by the Chancellor on this point—the development of an incomes policy is seen as trying to determine the general level of activity by identifying and then selecting individual components and subsequently controlling them rather than relying on what he would call the old crude overall tools for the management of the economy.
As the Chancellor does not intervene to correct me, I think I may take it that he assumes that to be a fair interpretation of the philosophy behind the policy. The Chancellor has not interrupted me and I move on comforted. Therefore, when I question the statistics of an incomes policy, this is not a sort of esoteric touch or a clever dick kind of intervention. It must touch on the whole feasibility of an incomes policy, because if we are unable to identify as the prerequisite of our measure of selectivity the whole exercise to my mind is severely questioned, to put it no higher. This was the point which prompted me to ask my questions of the First Secretary of State. I am sorry that I am gunning for him when he is not present to take account of this, but the Chancellor will be answering the debate and I hope that he will assure me on these points.
When I asked the First Secretary about the machinery which would be employed for measuring the success of the incomes policy, that was a question which he declined to answer. I make no complaint about that, but I hoped that as time went on we would see developed an answer to the question. The answer has come, not from the First Secretary of State but from the Ministry of Labour in its publication,
the September issue of Statistics of Incomes, Prices, Employment and Production That says:
Information is not generally available about the rates of wages actually paid by employers, commonly called ' market rates', nor of the extent to which these may be different from negotiated or statutory rates." If that is conceded by the Ministry of Labour, it throws very considerable doubt on the whole credibility of this exercise.
I go a stage further. We are all too prone to talk about wages as though wages were the overwhelming component of the wages and salaries section of the gross national product, but that is not so. Wages admittedly account for 60 per cent., but salaries account for 40 per cent. A number of my hon. Friends, the hon. Member for Woking (Mr. Onslow), the hon. Member for Worthing (Mr. Higgins), the hon. Member for Portsmouth, Langstone (Mr. Ian Lloyd) and myself, asked some questions relating to salaries because we felt that salaries must be vital to the credibility of the whole exercise. The Secretary of State on that day was feeling rather less fraternal. It was called a venomous intervention. What did we have against salary earners? This was touchiness against any kind of examination of his policy which augurs ill for those who are the voluntary participants in this exercise. If it goes ill they may get the same rough handling as was meted out to me on one or two occasions, but maybe they are better able to look after themselves.
No Government Department has been able to offer very much in the way of a trend in salaries, and there is no such thing as drift in salaries as in wages. We have only to look at the heavyweight weekend Press to realise that there is a fantastic movement around of young salary workers throughout industry. Therefore, the measure of the drift in salaries is really what is paid to refill a job which has become vacant because someone has moved on to better himself elsewhere.
Though entirely reliant on outside sources for information, it is worth quoting from the Hay-M.S.L. report which appears in the November edition of The Director. From the sampling carried out, of salaries in the range £1,250-£2,000 a year, it was found that the increase had amounted to between 8 per cent. and 9 per cent. over this time last year. This may be so, and I think that it probably is. But, as far as I can judge from speaking with people in industry, this may not be the whole picture. Are the Government able to confirm this rate of increase? Can they deny it, or is their answer simply, "We do not know "? If it is the latter, then, to put it mildly, this casts considerable doubt on the credibility of this kind of exercise.
In the attitude which I have struck, particularly about the statistics of an incomes policy, it must be made clear that what I have said is not pedantry at all. Indeed, it runs to the very heart of the problem, for a great deal of nonsense is talked these days about this subject—not least by the New Statesman, in which John Morgan wrote on 5th November:
… at the Economic Ministry … the understanding of the movement of wages and prices reaches unparalleled heights of sophistication.
What sophistication? I wrote to the New Statesman, but my letter was not published, and I have heard not a word from Mr. Morgan. Perhaps the Chancellor will tonight tell us whether he agrees that unparalleled heights of sophistication have been reached. If they have, perhaps he will let us know what they are.
Let us return to the significant day in February when the First Secretary made his statement. I admit at once that there has been a lot of history reviewing, which, I have tried not to do. There may be another occasion when I can go into that in greater detail. Suppose that at that stage, in February, we had known that during the following few months retail prices would be rising at an annual rate of 5 per cent. I take that figure from the Government's own statistics. Suppose, too, that we had known that the rate of productivity—such as it may be calculated from the index in the Economist— was rising at a mere 1½ per cent. annual rate, and that the index of industrial production would be lower than it was in February. I suspect that we would all have felt that the incomes policy was not living up to the fairly rich reputation which was being accorded to it.
It is no good the First Secretary saying, "It did not start until May ", because I believe that the whole idea was that the climate should be set for it to come into being. Certainly that applied to the Budget in April. I recall that a great deal of argument centred around the fact that that Budget was designed to create such a social climate. If we had known or could have been told that in the months to follow—and such figures were available from the Board of Trade—that the volume of net new engineering orders would fall by as much as 7 per cent. over the corresponding period of 1964, we would indeed have been shaken.
When I raise these questions, it is no good the First Secretary trying to fob me off as if I were impertinent to be asking them. It is a reflection on his ineptitude that he did not talk about our balance of payments position and our prospects for next year in terms of the current balance without these figures, particularly since they are available in the Board of Trade Journal.
I do not want to be accused of knocking Britain because I am drawing attention to this volume of figures. Indeed, the value of orders may come out somewhat better. None the less, I imagine that the engineering sphere accounts for about 25 per cent. of our total exports. I do not imagine that this sort of thing is susceptible to a precise definition, although the Chancellor may wish to correct me. Nevertheless, this must have implications on our current trade balance for next year.
What I now have to say may be considered controversial, although I make no apology for saying it. When one looks at the economic indicators it must be through a glass darkly—and I speak as an economist. There is far too great a disposition these days to give to economic forecasters or preachers a kind of astrological importance. Let us, therefore, be modest in our forecasting.
On the existing evidence, I think the economy is still over-heated. I say this in view of the continuing shortage of skilled labour and evidence that the wage drift is continuing. I believe, therefore, that we are confronted with the quite serious possibility of renewed balance of payments difficulties next year on the current trade balance. We must, at the same time, remember that it is on the current trade balance that most overseas attention will be focused. Having said that, I again reiterate that I hope I will not be accused of knocking Britain in making these comments. The First Secretary appears to be in a fairly robust mood today, so I must make my position clear.
I make these remarks on this occasion in view of four items which appear in the Gracious Speech; legislation on Exchequer subsidies for local authority housing, legislation to lessen injustices in the rating system, measures to provide supplementary National Insurance benefits relating to earnings, and measures concerning the pensions of retired members of the public services. We know that in the latter case there will be a cost of about £25 million a year. I do not wish to argue the merits of these items. There will be other occasions to do that.
Suffice to say at this stage that in every case there will be an addition to consumption, because I think I am correct ing saying that the whole purpose of those four items will be conceived in terms of social legislation to aid those who are more likely to spend the money they get than to put it in the bank. That being so, we are moving to a situation which must result in increased consumption, the full measure of which I do not know, although I would be grateful if the Chancellor would tell me.
I suspect that we need deflationary policies in addition to those announced by the Government. This may sound like harsh reality, but it must be said in a debate of this sort and in the kind of speech I am making. The cost of these pieces of legislation must, I suggest, be matched by increased taxation designed to fall on consumption; and it could well be that additional measures should be under consideration. These things must be said, and it is no good saying them in the smoking room. Perhaps the Chancellor may even get some vicarious benefit from my saying them. I would rather these points were made here than elsewhere. Government measures must measure up to the reality of the situation, and while, as I say, it may sound like harsh reality, I prefer it to the fiction of an incomes policy and the fiction of a National Plan.
Would the hon. Gentleman conclude what I think is a realistic and logical analysis of the situation by telling us whether he thinks we should pursue the incomes policy? If so, how does he consider that we should strengthen it? If he thinks that we should abandon it because it will not work, what does he suggest we put in its place?
I think that it should be abandoned, and I have never tried to disguise that belief. I believe that the alternative is much stricter overall control—if one likes, a reversion to the system operated, or the system that was sought to be operated, by my right hon. Friend the Member for Monmouth (Mr. Thorneycroft) before he resigned. I have never hidden my identification with that view.
If it will give the Chancellor any encouragement, when my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), speaking of the incomes policy, said that it was a nonsense, a transparent nonsense and a dangerous nonsense, I would only conclude that, on the evidence so far available, the magnitude of that nonsense, its transparency and its danger have become apparent even sooner than someone as sceptical as myself had imagined.
I have always said that I embark on economic seas without much confidence, but I am grateful to the Opposition Front Bench for the framing of this Amendment because they have given me the chance to become more politically conformist by defending the Government on those particular heads on which they are most deserving of support. I have read the Amendment. There is some reference to savings in it, and I can well understand why that subject has now been avoided. One of the other problems of being a Member for a highly sophisticated constituency like Oldham—indeed, the only problem for me—is that a great many of my constituents are much better educated and informed than I am. I should, therefore, like to thank the right hon. Member for Enfield, West (Mr. Iain MacLeod), whose knowledge and experience I usually respect, for ending the debate on a slightly juvenile note, a slightly slap-happy note, because that is more suited to my own particular style and limitations.
When the hon. Member for Oswestry (Mr. Biffen) was speaking I reached the point where I turned and used the one flattering phrase used in this House, saying, "This chap is talking good sense." I agree with what he said about the economists. I was happy that the right hon. Gentleman mentioned the introduction of economic advisers, on which there is the old precedent of Montagu Norman, not now generally regarded as a very happy one. I was pleased that there were two of them. I should not like to turn to the hackneyed attack on a former Leader of the Opposition and his use of matches to help him on this subject. Why they got rid of him, I do not know —I think he was nobbled in the stable.
I was impressed as anyone who, like myself, can get understanding from a little manual process such as that which I used over geography. I could never remember which side Omsk was from Tomsk. I used to say, "Skegness to the right and Pembroke to the left", and when I looked again it did not seem to be on the left at all. When we had two new economists, I tried to find out which was the rive droiteor gauche of the Danube, and which was Buda and which Pest. My constitutents assured me that the Danube had not had a rive droite for a very long time, just as Threadneedle Street does not have a Left Bank.
I made the suggestion at the time, before the business had developed, that if these two very distinguished gentlemen were to act as economic navigational buoys, they should be lit up, and labelled "larboard "and "starboard", so that one could safely drive an economic course right through the middle without obvious danger. I rather think that my right hon. Friend did that in the end, and he should be congratulated on it.
Some of the arguments put forward today would not do for Oldham, and are rather juvenile for the House of Commons. We have had, in substance, the famous old defence in the divorce case in which counsel said: "The respondent pleads that he has not committed adultery on this or any other occasion. Secondly, if he has committed adultery, which is denied, the respondent committed contributory negligence." I do not want to bring a blush to the cheek of Miss Mary McCarthy—I have to be careful in these censorious days. "Thirdly, if he has committed adultery, which is again denied, the husband condoned it by his absence at the material time."This has been the case that has been put today, and previously.
I must say that the right hon. Member for Barnet (Mr. Maudling) is a little more honest about it. He said:"The Chancellor has done what I would have done myself." Today we have heard, first, that there never was a crisis. Secondly, we have been told that if there was one, it was not caused by the defendants in the course of their previous government but by what happened in the course of the first week of the Labour Government, by means not specified at all. We have heard, thirdly, that if there was a crisis, which is denied, we pinched our ideas off the right hon. Gentleman, and used precisely the same measures that he would have used. Fourthly, the measures which in his hands would have worked, did not work in the hands of my right hon. Friend. That has been substantially the case put forward in the course of the day.
I did not quite hear something said by the hon. Member for Oswestry but I think that he said something with which I am in complete agreement, though perhaps I misunderstood him. I think that one should say things frankly to the public. I have a great respect for British public opinion. I do not expect all of my constituents to be passionate about the problems of Rhodesia, but I believe in the ultimate judgment of the people, and I believe that in every constituency the political workers have a great wealth of information and talent which could well be appreciated to the advantage of this House. I say that the Chancellor used socially undesirable methods to deal with a terribly dangerous situation; and that he had to use socially undesirable methods because, in the time limit imposed on him, no other methods were available.
One is always tempted to look back to 1931, but that is a long time ago. That was a world in which there was no G.A.T.T., and in which one reads the economic advice given by the Treasury with appreciation of something so extraordinary in the Keynesian era, that one regards it almost as a curiosity. The Chancellor had to take those measures. Nobody who casts his mind back can fairly say that in the then situation there was any other course to be taken. I fail to see that he could have taken any other steps, although, obviously, the use of Bank Rate is one that one would not have wished.
It is the object of the Labour Party to try to return to a low-interest policy. When the Labour Government in 1951 left an unhappy balance-of-payments situation, the present noble Lord, the Master of Trinity, then Chancellor of the Exchequer, doubled Bank Rate in two short operations in a period of about six months, although he was left with stocks high enough to enable him to take economic measures not available to my right hon. Friend. There is no question that these measures had to be taken in 1965.
The hon. Member for Oswestry again comes up for favourable selection, because he expressed a perfectly fair criticism when he asked: are the Government placing too much hope on the economic plan? Is this really their sole immediate objective of planning? Have they no alternatives possible? If this fails, will there not be a very serious situation? Frankly, I remember many of us talking —and much more distinguished people than I working—on the possibility of a wages and incomes policy, or of a prices and productivity policy, which I think this really is, as I shall explain a little later, and most of us came to the conclusion that, however desirable, it was hopelessly impracticable.
Therefore, when my right hon. Friend embarked upon this policy I viewed it with a certain amount of scepticism. It seemed to me that he was pursuing the unattainable. Although I regard it as a highly reputable political occupation for a Minister to risk his career in the pursuit of what may appear to be unattainable but is obviously desirable, I really cannot think of anyone in the House who would get up now and say, "If this is practicable, if it can be made to work, it is not obviously desirable". Clearly it is in everybody's interests.
I will not make a lengthy intervention. Perhaps the hon. Gentleman and I can discuss this afterwards. There is a perfectly legitimate argument to the effect that this kind of policy is undesirable, that the central allocation which affects to superimpose the working of market forces is undesirable. However, we can argue this on another occasion."
I do not know that I want to argue it on another occasion. I have shown that I listened to the hon. Gentleman with attention. I can understand the argument that the means which may be necessary to enforce such a policy may have some unattractive, and indeed undesirable, features. This is a legitimate argument, but I would have thought it absolute nonsense not to concede at once that, if such a policy can be attained, it is of the utmost value to the community, and probably to this community more than any other in the world because of our dependence upon exports and the desirability of trying to perfect our export position.
I am inclined to agree with my hon. Friend in what he is saying now. Like myself, he was a Member of the House when after the war the Economic Survey used to be published, which most hon. Members awaited with bated breath. It was published showing the out-turn for the past year and forecasts for the forthcoming year, illustrated by little men holding cubes. For. most of us, all our political actions were determined by that Treasury publication. It took many of us some years to realise that each year it was wildly inaccurate and wrong. Therefore, although I agree with my hon. Friend in—
I am obliged to my hon. Friend for telling me that he agrees with what I say and for taking up some of my time to tell me so. We dealt with the problem of the inaccuracy of economists some time ago. Perhaps I could say that we are more or less agreed that quot economines tot sententiae and that they are at their best in expounding the ignorance of other economists. No one has failed to say that. We are expressing just a little doubt that the means to secure this policy may have a certain amount of political dynamite in it.
I have watched my right hon. Friend the First Secretary of State pursuing this policy. The right hon. Member for Enfield, West spoke very good naturedly on this matter and talked about running here and there—it is not a bad thing to run here and there when one can; I could not do it now—and working very hard and toiling very faithfully in pursuit of this policy, as indeed my right hon. Friend is. I do not believe that there is anyone in the House who does not believe that my right hon. Friend has achieved much more in a limited time than was expected. My right hon. Friend had a wonderful demonstration of support from the trade union movement. He scored an astonishing success against the predictions of all the Press in his handling of the trade union movement. He has got a substantial measure of support.
Let us adopt the method of trying to be honest about this. My right hon. Friend, for obvious reasons, calls this a prices and incomes policy. I call it a prices and productivity policy at the moment. It cannot yet be an incomes policy. Everybody knows that my right hon. Friend cannot persuade doctors to postpone claims for increased salaries merely because he says that he has a policy that he hopes he will be able to put over a little better after a couple of years' hard work. Nobody will postpone their social claims for the moment. The proposition that wages may have risen or that incomes may have risen out of proportion to the figures suggested is not a relevant statement.
The real attack upon right hon. Members opposite, which has been made already, is not only that they did not take steps to remedy the crisis, not only that they postponed dealing with the crisis for electoral reasons, but that for six solid months the country was kept in an electoral uncertainty. I was assured that the election must be in May. I said, "You do not know the Tories. It will not be until the last moment. They will be defeated anyhow and they will hang on in the hope that something will turn up "—the political policy of Mr. Micawber, which has a good deal to be said for it in economics.
Therefore, my right hon. friend has got increased confidence in the country. I do not yet want to see legislation to enforce this. I do not believe that my right hon. Friend does. There may come a point when, if he can develop confidence, he does command so much support from so many sections of the community that it may be necessary to take some steps to deal with those who have not come in and who have made it clear that they are unwilling to do so, provided that that is a reasonably small portion of the community. This is how I see it. I sincerely congratulate my right hon. Friend on the courage and initiative he has shown.
Both my right hon. Friend the First Secretary and my right hon. Friend the Chancellor of the Exchequer have sufficient perspicacity to know that I would not stop at that and that the encomiums may be followed by a few criticisms in detail. Indeed, had there not been the statement today by my right hon. Friend the Minister of Aviation dealing with this morning's article in The Times, one might have had a good deal more to say. I am in the hands of these very able constituents of mine. They ask me a lot of awkward questions. They ask me, "How do you balance your payments by buying foreign aeroplanes? "I have never been able to find the answer. Indeed, I felt that that particular item of policy was the most regrettable of all, from every point of view.
Let me return for a moment to a single general classification. I had intended to say that there are items in the First Secretary's economic plan—clearly it cannot be an economic plan at this stage in detail—which worries many of us on this side. There is the failure to mention any possibility in regard to steel's political future. There is the rather sad general omission of any reference to women. What is to happen about equal pay for equal work? When my lady constituents mention this, I say, with complete sincerity, that in my view my right hon. Friend has got to achieve his prices and productivity policy before it is possible to adumbrate a reasonable hope of a successful incomes policy.
I quote one of my right hon. Friends in his absence who is constantly talking about our aspirations for a more egalitarian society. There is not much about an approach to an egalitarian society in the plan as adumbrated at the moment. I do not attack it for that, because I say that I do not believe it can be done at the moment. I believe that we must establish the prices and productivity policy first. We must get a maintained financial equilibrium.
I return for a moment to my right hon. Friend the Chancellor of the Exchequer. I have said with complete sincerity that I think that he took the means at his disposal and I think that he saved the £ in the process. It is rather sad to hear hon. Members opposite point out that there was much help from the Bank of England, since I can remember what they said about the nationalisation of the Bank of England and about Labour's policy of placing the Bank at the service of the community. Some of their comments are a little out of place in this regard. Perhaps their memories are shorter than mine.
Having said that, my right hon. Friend must some time face the fact that we cannot go on like this. The Prime Minister, in the course of the election, made rather a lot of play with the "stop and go" joke, which on the whole is one of those things which at the moment does not seem quite so funny as it was. If we are to have a future plan we must deal with the balance of payments problem, as it effects this country probably more than any other nation.
We must try to take measures to isolate ourselves from the sort of operations, whether by the wicked bankers of 1931 or by the intelligent gnomes of Zurich of 1965, which are in essence the buying of currency by those who have most to profit by the devaluation of currency in any part of the world, if they see it coming in time, rather than the normal operations of finance. They may be good business men and good ratepayers but they are a danger to our arrangements and our security.
Their operations, perfectly properly, are conducted in the hope of prosperity and profit, and we are in a situation in which, when virtually there are only two world currencies, the £ and the dollar, their operations must be against either the dollar or the £ at any given moment. When the Reichsmark was revalued, largely because defence in Germany was being wholly financed by the Tories out of British finances, it was said that dealings in the Reichsmark were beginning to imperil the £, and, even more, there was a rumour that the lira was likely to be revalued, involving even a larger operation which would remove large sums of investment and support from sterling.
I always remember Herbert Morrison saying that the political indicators never pointed in the same direction at one and the same time and that if they ever did we would have reached a position in which we could claim a little certitude. The political indicators have been pointing for a long time in the direction of the need for an international trading currency. I remember saying many years ago that countries should pay for their exports and not their imports, which really is the financial situation which for a long time has been forced over the large surplus trading nations by implication.
The economic plan contains one paragraph with which I do not disagree and it is a serious one for the Prime Minister himself. I worked with him very intimately and closely for some years on the question of war on want and economic aid for the unprosperous countries. We have set up a Ministry of Overseas Development and populate it with economists. Now the economic plan comes out and says that we shall have to consider the whole question of economic aid in view of the balance of payments situation and that we cannot go on like this.
I have always said this. I have always been treated by friends of high ideals and great ethics as something of a reactionary because I have said that we cannot go on without some sort of control. We cannot be issuing surplus money to Angola for aid to be spent in Portugal and unless there is a real hope of international trading which will balance it in the end. There are serious objections to blocked sterling. There are serious objections to political discrimination in handling a policy which should be motivated more by a sense of Christian duty and our belief in the ultimate welfare of man.
There are all these difficulties and I do not believe that some of them can be avoided. There is, for instance, the making of provision for Ethiopia where poverty is great when personally, on political grounds, I should like to see more given to Tunisia where poverty is also great but where a brilliant and dynamic political ruler has tried to keep himself independent and to keep out of controversies and have the rule of order and decency in North Africa which, God knows, needs preserving and making more effective.
As Andrew Schonfield has been pointing out, the amount of aid in terms of world aid, not in terms of England, is rather less per head for the poorest countries, a little more for the not quite so poor, and still more for the better developed. The poverty of some of the tragically poor countries is imposed by irresponsible dictatorships or rulers who cannot be relied upon to see that the aid ever gets to their people. Nevertheless we must consider this. I hope that there will be no question of diminishing the aid which we give to the peoples of the world. Here again my constituents say, "Look here, Leslie. It is all very well to lecture us pompously about this, but why can you buy military aircraft abroad and you cannot give money for food?" That is a question which I cannot answer. On the face of it, it seems to be a difficult question to answer.
As I have said, the incomes policy is to come. I hope that the First Secretary will continue as he has done. I think that he has done extremely well. I think that he has come measurably nearer the objective, which I did not think that he would reach. If we refrain from factious criticism and offer only helpful comments. I think that he may pull it off, and in the process we shall have done much for savings.
I used frequently to be a trustee for savings. I used to rely upon the bank to advise me and they said, "Put the money in 3½ per cent. War Loan". This was the thing in accordance with the trustee regulations. But what happened to savings in the last 13 years? I never like referring to the last 13 years. It is rather like being a brute to a prisoner after he has served his sentence and come out. Consols ended by standing at 37 instead of 100. They were near to 100 under a Labour Government. I think that they reached 100, and certainly they were over the 90 mark. What we have been doing economically over the years is swindling people out of their savings. The one reason why we cannot get savings now is that people cannot go on paying for a War Loan Certificate which when they get their money back is of less purchasing power than when they put it in.
British insurance companies have a high international reputation for honesty. It is the politicians who let them down. I started paying an insurance policy in 1926. I used to boast that I had made provision for my old age and I would be able to walk out of here, triumphant and independent without worrying too much whether a Member had a pension. I have been drawing it now in my advanced years. There is no longer adequate provision for old age. It has gone. The rentiers have been swindled by inflation. There may have been a reason to swindle then after the war and say to them, "You cannot retain the value of your assets when people come out of the war disabled for life." There has been no protection for savings, but I believe that my right hon. Friend's policy gives the best hope of all of securing savings.
I recall a conversation with the late Nye Bevan in which he propounded the view that a Labour Government ought, first of all, to protect poor people's savings, to start by saying, for instance, that Post Office Savings would pay interest in the real value of money. He said that if we did that the Chancellor might himself be compelled to produce a policy to preserve the value of money because he would otherwise have to pay out so much.
I have spent all my time in encomiums. I feel that the Chancellor has done well and the First Secretary of State has done well. In my constituency, I constantly hear immense approval of the Prime Minister's labours, largely from people who have never voted Labour. Recently, when I was told by a constituent that the Prime Minister had scarcely put a foot wrong, I replied, rather tartly, that that was probably true but that although he seldom put a foot wrong, whenever he did he trod on me. However, I should add that, whatever may be the economic and political consequences of the Rhodesian situation, I very much doubt that they will redound to the advantage of the British economy.
I believe that the Prime Minister has ceased to give the appearance of being just an astute politician and has become a statesman. I support everything he has done. He has done magnificently and has given a great lesson to the world in being prepared to accept sacrifice of face in a way that few politicians have ever done. He has said," I shall make every effort I can. I shall satisfy the world that we have made every effort, and then I shall take whatever disagreeable measures are necessary, but no more, and I shall try to deal with the situation with magnanimity ".
I have reservations about what the Government are doing in other spheres, and it would be wrong of me not to say so. One of the Amendments down on the Order Paper today is signed by me. I do not know what happened on the bloody field of Bosworth, but some future historian may tell us that the voice which was heard to call "A helicopter, a helicopter, my Queen's Speech for a helicopter ", was not that of Richard III. Recalling, as I do, the politics and history of the past. I am worried. I do not know why 80 or 90 of my colleagues should gather in the corridor to sign approval of the Prime Minister for saying something in qualified terms that he said in most definite terms a year ago, and, apparently, decide that they would put it down every St. Valentine's Day until he carried it out.
I am reminded of what happened to a friend of mine, an American by birth and the son of one of the most unsuccessful prospectors in the State of Texas. He found himself having to consult a distinguished solicitor who was known as a "wise old bird" in matrimonial cases. His father, as I say, had been unsuccessful. The son was rather a withdrawn person, and, in his youth, he looked rather as though he might end as a member of the C.I.A. Then, on his father's premature death, they struck oil in sinking the grave, and from that time on he never looked back. He qualified as a mortician's cosmetician in the University of Omaha, Pa, and became famous for his introduction of pastel shades. Then he fell in love with an English girl, married and settled down here, acquiring English domicile for matrimonial purposes, though not for Estate Duty. He found himself in this unhappy plight, which is very similar to my own in politics.
When he broached the word "divorce ", the solicitor was a little taken aback and said, "I thought you were happily married ", to which he replied, "1 am, but it is the ' missus'. She has changed sex ". The wise old bird said that this was most distressing but he had to tell him that he saw therein no cause whatever for divorce. My friend said, "You don't say?—that's a fine thing ", to which the old solicitor replied, "I hardly think so. There must be a matrimonial offence committed by him or her, as the case may be, and I see here no such matrimonial offence ", and he added that it might be a question for moral advice.
As I have said, my friend had acquired English domicile, and he was living here. He had got his grouse moor in Yorkshire, his penthouse in Park Lane, his mistress in Brighton, his yacht at Cowes, a beach in the Bahamas, a villa on the Costa Brava, and, of course, a registered office in Jersey, and settled to the humdrum life of the haute bourgeoisie.The solicitor asked "That is your archiepiscopate?" He replied "Both."The solicitor replied, "Try York," and then as a final word of advice, "Try to be adaptable yourself. Try to be conciliatory. The best thing you can do is to change sex yourself and show yourself adaptable."
I am anxious to be adaptable, and there are certain matters on which I am prepared to be. But on byssinosis, the White Paper on immigration, and the statement on steel, I might have difficulty in falling completely into conformity with the advice which is constantly offered to me.
It is always a handicap to follow the hon. Member for Oldham, West (Mr. Hale), the most entertaining speaker in the House, and I hope that he will forgive me if I do not follow him in arbitrage, adultery or changes of various kinds. I hope also that the House will forgive me if I do not continue to follow the pure and, I think, in some speeches today, flashing stream of economic affairs but turn to the related subject of industrial affairs.
We are today discussing plans and policies to give this country greater economic efficiency and stability. In his speech last Wednesday—I hope that we shall examine it a little more closely today as it was a winding-up speech and this is the first opportunity to do so in the House—the Minister of Labour said that it is
… the problems which arise from restrictive practices and unofficial action that impede the greater productivity that we want."— [OFFICIAL REPORT, 10th November, 1965; Vol. 720, c. 302.]
The Gracious Speech tells us very little about the steps which the Government propose to take to create greater industrial productivity. I welcome their actions in connection with the docks and the new emergency "fire brigade "for the motor industry, but, despite the Prime Minister's assertion that there is an all-out attack on restrictive practices, all the Government seem to have done is set up a couple more committees for the shipbuilding and printing industries.
The Minister of Labour's speech was in marked contrast to that of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), who spelt out the Conservative Party's policies on industrial relations and its general policy for industry as a whole, industry which, as the hon. Member for Oldham, West said, provides the means whereby we can give people in this country and in other countries a better way of life.
The Minister of Labour took up his usual attitude in debate, which we on this side of the House always regard with affection, of laughing whenever anyone does not agree with him and saying, like a jovial uncle, "They do not know what they are talking about". This is his constant technique, but I think that his devoted nieces and nephews are inclined to think that the old boy is only saying it because he does not know what he ought to do himself.
Much of the right hon. Gentleman's speech last Wednesday was devoted to pouring cold water on one aspect of industrial policy which had been mentioned by my right hon. Friend, that is, our proposal, which we are rather disappointed not to see reproduced in the Gracious Speech, that some legal enforceability should be given to agreements in industry come to under the negotiating procedure. I was happier earlier this afternoon when there was no lawyer sitting on the Government Front Bench. Now we have a distinguished lawyer present, and I am fishing in deep waters. If he cares to interrupt me I doubt whether I shall be able to give a lawyer's answer to many of the problems which are aroused by enforceability. But as one who has been engaged in manufacturing industries for 20 years, I have some practical knowledge of the subject.
The Minister of Labour considered this single aspect of making procedure agreements legal without considering it in a wider context, but when the Conservative Government are returned to power again a policy will be introduced. First, there will be a new code of industrial behaviour, increased power for a new register of trade unions and a range of industrial courts, which can spring easily from the tribunals which will be or have been set up under the Redundancy Payments Act.
Hon. Members opposite may be inclined to laugh off these policies, but they will find it difficult to do so, particularly the Minister, when they examine the evidence which has been presented to the Royal Commission on Trade Unions by the right hon. Gentleman's own Ministry. That evidence accepts that there is much to be said both for industrial courts and for unions becoming responsible for unofficial action by their members.
Today we have had a new statement on the whole problem by the C.B.I. I will quote one part in which it recommends the setting up of a registrar of trade unions, and presumably of employers' associations, too.It says:
The registrar is not to be an anonymous legal official administering a limited set of regulations but a public figure counselling and prodding unions or employers' organisations into action, including action against breaches of agreement and unofficial strikes, which have turned public opinion against much of the industrial relations system.
I am not with the C.B.I, on this. I see the new registrar as someone with a quasi-judicial position. Although I am a great admirer of Lord Robens, who seems to be the best advocate for the benefits of private enterprise among ex-Labour Cabinet Ministers since Lord Shawcross, I do not agree with the sug-
gestion that he would be the type of man to take on this new job and to become very active in promoting ideas of industrial relations, himself going round to deal with unofficial strikes. The registrar must stand withdrawn from the immediate field of industrial activity.
The second point made by the Minister of Labour was that if negotiating pro cedure were to be made legally enforceable, this would lead automatically to a closed shop throughout industry.I speak personally, but my right hon. Friend the Member for Grantham (Mr. Godber), a former Minister of Labour, and Lord Blakenham have said that they and the Conservative Party have always supported full voluntary trade union membership. If our new policies lead to increased membership of trade unions, provided that it is voluntary, I see no harm in that at all. Part of the object of our industrial policies should be to have strong and responsible trade unions dealing with strong and responsible employers, but always seeing that the individual employee has the protection which our suggested industrial courts would provide for him in any difficulties which he might have either with his trade union of with his employer.
In using the expression "closed shop "the Minister was trying to scare hon. Members and the public away from any legislation about trade unions. I do not believe that he has a case to make in saying that legal enforceability of negotiating procedures would lead to a closed shop. We are not blazing any new trails. Such agreements are legally enforceable in virtually every industrial country in the world, and this has not led to closed shops there. I understand that 16 per cent. of our working population or 3½ million people already work in conditions of a closed shop. I doubt whether that is a larger proportion than in other industrial countries such as the United States, Germany or France.
The right hon. Gentleman's final argument was that legal enforceability of negotiating procedures would not work unless all individuals concerned were union members. I see no logic in this argument, which he put very forcibly. Let us say that there is a shop with 50 per cent. union members and 50 per cent. non-union members. In the event of a breach of negotiating procedure or an unofficial strike by trade unionists, the union would be legally and financially responsible to a known extent, but it would have no responsibility for the non-unionists employed in that shop. Let us assume that because of good leadership by their trade union representatives, the unionists refuse to go on an unofficial strike, but that the 50 per cent. nonunion members go on strike. The union would have no responsibility, financially or otherwise, for the position of the nonunion members. In the same way, even if the whole shop went on unofficial strike, there would be nothing to state that a union would be responsible in any way for the activities of non-union members who went on unofficial strike.
I do not wish to speak for long. I hope that the bogy raised by the Minister of Labour about a closed shop can now be set aside. There is no foundation for his fears, and the public should not be frightened by them. I believe that the public are longing for legislation and firm action about industrial relations, and particularly about unofficial strikes. Right hon. Gentlemen opposite are unwilling and incapable of producing the answer in this respect, and they will shuffle it off as long as they can. That will be one of the main reasons why after the next election, which I hope will come soon, we shall have another strong Conservative Government dedicated to the kind of reforms which I have mentioned.
The speech of the hon. Member for Harrow, West (Mr. John Page) had one thing in common with all other speeches by hon. Members opposite— they all lacked constructive comment. We had an odd speech from the hon. Member for Ormskirk (Sir D. Glover) in which he seemed to suggest that as a solution to all our problems we should have cups of tea on Hadrian's Wall—apart from another odd suggestion about P.A.Y.E. being paid in respect of the previous year. Equally the right hon. Member for Enfield, West (Mr. Iain Macleod) was wholly lacking in constructive comment, except for one proposal that there should be some personal tax incentives for exporters. He said that this view had been expressed by the hon. Member for Worcester (Mr. Peter Walker) recently, but I hope he will not mind my saying that I had made similar suggestions in this House, early in the last Session.
There is much in the Gracious Speech which one can welcome, but to achieve what is in it we shall need a sound economy, and therefore we need the National Plan to succeed, although, even if we succeed, the National Plan shows one thing above all else—how little we achieve even if we meet all the targets set out. Then it would be foolish not to be aware that the plan has in it many assumptions. One has only to look at some of them to realise the difficulties.
In the Plan we require exports to grow by 5½ per cent. a year, imports to grow by no more than an average of 5 per cent. a year and a productivity growth rate of 3–8 per cent. We need to redeploy manpower and to increase investment in plant by 7 per cent. a year. We need the success of an incomes policy, to limit the growth of public expenditure to 4¼ per cent. per year and to increase savings. We need more mergers to improve efficiency, and to deal with restrictive practices, and we need more women to be employed in industry and so on. It is very easy to pick holes in all or any of these assumptions. Right hon. Gentlemen opposite have been doing so but with hardly a constructive alternative. The Plan is quite right to set targets and to show the difficulties in the way of reaching those targets. It is easy to be critical, but it is not so easy to find the answer. Unlike most critics I am prepared to confess that I do not know all the answers to the economic problems facing the country.
We have only to listen to some of the criticism which we have heard in the House and elsewhere to know that others do not know all the answers either. We have had criticism of the imports surcharge, but what alternative would the critics suggest? Personally, I should have preferred then, and I would prefer now, the certainty of selective quotas, but would the critics prefer this? We had criticism today of an incomes policy, delivered very effectively, consistently and honestly by the hon. Member for Oswestry (Mr. Biffen). He is always honest with the House, and today he was equally honest and consistent, as is his right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell). But he had only one alternative to offer to the House and that was to revert to the 1957 policy of his right hon. Friend the Member for Monmouth (Mr. Thorneycroft). This he has told us clearly today and on other occasions.
I ask those who are worried about the effects of the incomes policy what alternative they want? Do they want the old-fashioned deflation of Conservative Chancellors? Or do they want the type of economy which we had even earlier? We have also had Opposition criticism of the Corporation Tax, in particular its effect on overseas investment. But if we do not take this sort of action at a time when we are, as it were, investing overseas on hire purchase, what should we do? The right hon. Member for Enfield, West, at the Conservative Party conference said that a Conservative Government would change this aspect of the tax. In other words, they would delete the help we are getting in our balance of payments by this tax. There is criticism also of export incentives but the critics must be aware of the difficulties before any Government in this matter because of international obligations.
But perhaps the most irresponsible criticism of all is by those who bemoan the insufficiency of expenditure on the social services. The hon. Member for Oswestry was at least honest. He suggested four items of the Queen's Speech that he would not have included. He did suggest ways in which to reduce Government expenditure, although I would not agree with him.
The most peculiar criticism is that made by the right hon. Member for Enfield, West. On the one hand he said, rightly, that industrialists were told to assume a growth rate of 25 per cent. but he doubted whether they themselves would have forecast such a rate. Then he ridiculed the figure as being worse than stagnation when compared with the 25–3 per cent. in what he described as a comparable period. Such cynicism is no substitute for constructive criticism, and that is all we have had from him and other right hon. and hon. Gentlemen opposite. How would he deal with this aspect of our economic problems? Would he leave the targets at the levels that industrialists feel they can achieve?
Perhaps even worse than the irresponsibility of the Front Bench opposite is that of back benchers opposite. I have been particularly disappointed by some of them in their speeches on the National Plan. They should know better than to follow their leaders in destructive criticism of that sort. I think in this connection of the hon. Member for Horsham (Mr. Hordern) in particular. He said we were experiencing the most stringent credit squeeze in living memory. Perhaps some people have longer living memories but I cannot accept his statement.
Of course it is true that we have a credit squeeze and I accept that it has not worked, at least in the sense that there is still great pressure on resources. But I do not go along with the disappointment he expressed at the low level of unemployment. He went on to say—and I am not prepared now to argue the rights or wrongs of it—that production is static. The point was argued earlier today. I accept that it is static this year. No one would dispute it. But I was sorry to see the happy, smiling faces of hon. Members opposite when told today that production was static.
A most disturbing fact is that, despite all we are doing, productivity is static this year. I have never accepted the logic of the need for a pool of unemployment to deal with that situation. It is an odd way to increase production and bridge a manpower gap. In effect, we are told we should bridge the manpower gap by having less people employed. The hon. Member for Horsham had only one practical suggestion. He said that we should reduce the growth rate to match the number of workers available. But surely it is right to set a target and then strive to achieve it, difficult though it may be.
In fairness to the Opposition, one must admit that they have put forward one positive solution. They talk of personal incentives, and talk of it as though this would be a magical solution. The Liberal Party, in its own Amendment, uses the word "incentives ". Never have I heard, in this House or anywhere else, a serious analysis of whether personal tax incentives really can do the job. Because I believe we should try to give some direct incentives by way of direct taxation, I think such an analysis to be worthy of careful consideration. But I do not believe that we should exaggerate the value of incentives, nor should we shirk the fact that we must decide how to balance the books if we are prepared to give these incentives.
There are only two ways of doing it at present. The first is by cutting Government expenditure and the other is by increasing some other forms of taxation. Nigel Lawson, who will shortly succeed the right hon. Member for Enfield, West at The Spectator, wrote an interesting article in the Financial Times recently in which lie discussed this aspect of Conservative policy and considered whether it could be done by cuts in Government expenditure or by increasing other forms of taxation.
Personally, I would opt for cuts in Government expenditure but not in the social services. I would save about £500 million a year by cutting defence expenditure and commitments in the area east of Suez. But I must admit that I have my own difficulties in my party in achieving this, policy just as the right hon. Member for Wolverhampton, South-West has in the Conservative Party. For my part, I shall go on trying to persuade my party that what I and some of my colleagues are saying is right, and I hope that the right hon. Gentleman will do likewise—although I am becoming a little disillusioned about that.
In the short term, the only way of making these cuts in direct taxation is by an increase in some other forms of taxation. One must accept the logic of that and be prepared to make such a redistribution. I am prepared for it but one must ask to whom these personal tax incentives should be given.
We could give them to those earning £10,000-plus a year, as was suggested in an article by Mr. Vince in the Sunday Times in August. Or they could be given to what have been called the "pacemakers" —presumably those on £2,000 to £10,000 a year. Or we could give these incentives to all taxpayers.
Of course, it would cost little to give this to the £10,000-plus taxpayers but it would antagonise all those who would not be getting such an incentive. People I speak to, earning £10,000-plus, of course complain bitterly about their tax liabilities, but it would be a gross slander to suggest that they would work harder or longer if we gave them an extra few hundreds a year in tax relief. Some might play a little less golf, but I doubt it. A really successful man or a man of real worth has never been stopped in his tracks by the level of taxation. What applies to the £10,000-plus a year man applies even more so to the "pacemakers ", although they too complain about the level of taxation.
Does not the hon. Gentleman think that the man with £10,000-plus a year might be pushed a little harder by the man coming from below if such incentives were offered?
I do not quite follow the hon. Gentleman. I did not suggest that the £10,000-plus a year man might not be pushed by people below. I am considering whether tax incentives would push him. I gather that the Liberal Party considers that a direct tax incentive will push such a man. Perhaps the hon. Gentleman would do me the courtesy of following my argument.
I have not met many young men and women of worth in the "pacemaker" section who would work harder or longer for the sake of an extra few pounds or even a larger amount by way of tax incentive. I think that to suggest that they would is getting close to an insult to our young executives.
Then there is the suggestion that we should give the incentives to all. Anyone with experience of industry knows that there are men and women, particularly women, who work perhaps from 10 a.m. to 3 p.m. or only three or four days a week, saying that they do so because of the high levels of taxation. Old-age pensioners tell us that one of their reasons for not working longer is high taxation. Yet in the latter case I elicited recently, by a question to the Chancellor of the Exchequer, the information that it would cost only £7 million if we were to exempt from taxation National Insurance retirement pensioners earning up to £10 a week inclusive of pension.
The National Plan talks about activity rates as a method of bridging the manpower gap. We could make a contribution if not to making people work harder then at least to encouraging a certain number to put in extra hours, which would go a certain way towards bridging the gap. One must recognise that cuts in direct taxation, however, can only be comparatively modest and such an incentive would not be an incentive in the real sense of the word as one understands it because a man would not be paying less as he earned more. Because of the system of reduced rates of personal taxation less is paid lower down the scale and higher rates the more one earns. I am not sure that one would wish to change that system even if one could.
It would be dishonest to suggest that cuts in taxation could be substantial and I hope that hon. Members opposite will not try to suggest to the public that such cuts could be substantial in the immediate future. It is vital to understand that the importance may lie not so much in the amount—for example, a married pensioner earning £10 a week at present has only 5s. deducted under P.A.Y.E., although this is not, of course, insignificant to a pensioner—but in the psychological effect, which might be great. While direct cuts in taxation cannot be other than small, they might help to solve some of our problems. Of course, it cannot be the answer to all our problems. These can be solved only by Government action to turn the assumptions of the National Plan into reality.
I therefore welcome the National Plan in the sense that it shows that the Government are aware of the difficulties and are trying to do something about them. While tax incentives are not themselves the whole answer, they can make an important psychological contribution, and I hope that the Government will consider carefully selective cuts in direct taxation as one method of helping to bridge the manpower gap.
The hon. Member for Heywood and Royton (Mr. Barnett) brings to the House an expert knowledge through his occupation as a professional accountant. I must say that it is rather more pleasant to listen to him at a reasonable hour after memories of his speaking in the early hours during the Committee debates on the Finance Bill. Later, I shall have something to say about accountancy and I hope that if he disagrees with me then, he will take an opportunity to raise the matter.
I note that the Government's first aim mentioned in the Gracious Speech is that we should develop a soundly-based economy. That is a sentiment with which most of us would agree. I cannot help feeling that had we had a Conservative Administration in this past 12 months or so we might have written "maintain and develop a sound economy ", for as time goes on it becomes more and more evident that the economy was basically sound when it was handed over to right hon. and hon. Gentlemen opposite.
In support of this I remind hon. Members of the speech of the hon. Member for Colne Valley (Mr. Duffy), who told us at great length how pleased he was with the reception which the Prime Minister received when making his speech to the Wall Street bankers on 14th April. Hon. Members opposite cannot have it both ways. The Prime Minister boasted on that occasion of the strength of sterling in April and, of course, that strength existed last autumn as well.
There is no need for me to repeat the wearisome details of how half the £750 million deficit on capital and current account was largely accounted for by the fact that we were helping under-developed countries and placing investment abroad which in due course would yield handsome returns by way of dividends. The position was further aggravated, of course, by stockpiling by industrialists in this country in anticipation of the return of a Labour Government and, in consequence, a return of control.
But today even the most gullible of the electorate—and I am referring to that section of the electorate which votes Labour, nationally or locally—despite the protestations of their leaders, are beginning to understand that the basic position was sound. Possibly in support of that they are recalling the fact that in a White Paper on 26th October last year the Government made the forecast that even if there were no basic change in policy, there would be a considerable improvement during 1965. Despite this, some right hon. and hon. Gentlemen opposite will persist in spreading false accusations about this deficit. They do so on the basis that if enough mud is thrown, some of it will stick. They must remember if they are to pursue this sort of policy that they are bound to aggravate both their own and their country's difficulties.
It is obvious from this sort of behaviour that there is very little business experience incorporated on the Government Front Bench. If they had had business experience, right hon. Gentlemen opposite would have learned long ago that in business it is not good policy to exaggerate one's difficulties. It is certainly not good policy to exaggerate those difficulties when they are financial and it is even more important not to exaggerate them if they can reasonably be expected to be temporary financial difficulties. Such exaggeration encourages doubt, arouses unnecessary suspicions about the financial integrity of the business or country, and reduces good will. This in turn makes borrowing both more difficult and more expensive in the long run. I therefore claim that the evidence of the first 10 months of the Labour Government proves that the crisis in confidence of last autumn and early spring was a self-inflicted wound which at times was crippling and at other times very nearly fatal.
It is obvious that by adopting and very correctly following the policies dictated by the Governor of the Bank of England—and I use the word "dictated" advisely, for surely no hon. Member opposite would claim that a self-respecting Labour Government would willingly introduce unpopular measures like high Bank Rate and a surcharge, however temporary, and a widespread credit squeeze, unless they were under extreme pressure to do so—there has been some improvement in the situation.
History will reveal exactly what role the Governor of the Bank of England has played in the financial affairs of the country in recent months and how his influence and his personalty persuaded the bankers of the world to come to the rescue of this country and, incidentally, to the rescue of the Government on two occasions in 12 months. A more generous Government would acknowledge the great part played by the Governor of the Bank of England in this respect and might in future prescribe for their patients that a little more "Cromer" and a little less "Kaldor "would act as a tonic for the nation.
It is obvious that the strength of sterling has shown some improvement in recent months, but the question we have to ask is whether this improvement is temporary or permanent. I am afraid that it appears to be temporary. I think that I am supported in this conclusion by the fact that although large amounts of foreign money are now flooding into the country, the Chancellor of the Exchequer consistently refuses to reduce Bank Rate until he is absolutely certain that the position is secure. This, of course, is an action with which I am in absolute agreement.
It must also be remembered that much of the restored confidence, the feeling that things are a little better, stems from the inevitable relief, a breathing space, obtained from borrowing large amounts of money from overseas. But borrowed money has to be repaid and I am afraid that this borrowed money will probably have to be repaid and taken into account by a Conservative Government. This is something which will not have escaped the notice of my right hon. and hon. Friends.
In order to maintain the improvement in the balance of payments and the terms of trade, we are also told that more incentives to encourage industrial investment are to be introduced before long. I hope that this means the restoration of the investment allowances in one form or another. If I am right in that supposition, this can be claimed as something of a triumph for those hon. Members of the Opposition who, in a spirited debate which lasted five hours in the Committee stage of the Finance Bill last June, put their case very forcefully. In his devious and particular way, the Chief Secretary did his best at that time to justify the devaluation of the investment allowances which had resulted from the introduction of Corporation Tax. He gave the rather lame excuse that a full list of alternative methods was under examination, but he had no alternative to offer when he was discussing the matter.
During that speech he speculated whether methods used for investment incentives should be more direct, whether they should be like a grant or subsidy, or for a more specific purpose, or whether they should be varied by rate or by region. We can all claim to be a little disappointed that the First Secretary today was not more encouraging and did not give us more information about how these investment allowances were likely to be introduced. Presumably we will now have to wait until the Government publish a White Paper on the subject. Before they prepare that, the Government would be well advised to give due attention to the words of my right hon. Friend the Leader of the Opposition, who, during the Committee stage on investment allowances, related his experience, when he was at the Board of Trade, stressing the need for more general modernisation of mechanical equipment generally. He warned that the case for discrimination as to types of machinery has not been proved so far. I hope that any allowances which are proposed will be as broadly-based as possible throughout the manufacturing industries, and that a great deal of discretion will be given to individual industrialists to decide just how those allowances should best be used.
It would be absolutely disastrous if the Inland Revenue, the Treasury, or in other words, the men from Whitehall, were to attempt to dictate how, when and where investment allowances were to be used. If it was decided that some manufactured articles were unsuitable for allowances—and I have one-armed bandits in mind, as they were raised on Committee stage—it should be possible to induce some scheme on disallowed manufactured articles. The right hon. Gentleman the Chief Secretary indicated during his speech on the Committee stage that there might be scope for regional variations in the investment allowances, with the object of helping selected areas, particularly those which had high rate of unemployment. To some extent this is already being done. We see it in the shipping industries and the developing areas. This is presumably what he had in mind.
The more recent Government decision to speed up the closure of the uneconomic coal mines makes the matter one of great urgency now. What we need is some sort of dramatic gesture which will attract the attention of industrialists and encour- age them to bring industries to these areas of prospective high unemployment. We know that the Government have designated a number of development areas— many of them in South Wales—and that they have authorised the building of advance factories. One cannot escape the feeling, in many cases, that something extra special will be required to get industrialists to take the risk of bringing new industries to these areas, especially in a period when there is a fairly tough credit squeeze in operation.
One scandalous omission of the right hon. Gentleman the Chancellor—although I am not sure that it would have been appropriate to include it in the Queen's Speech—is any reference to the rate of Corporation Tax to be charged next year. Boards of directors, firms of accountants and members of the Inland Revenue have been thrown in a state of complete indecision and confusion as to the future rate. This is a state of indecision which is quite unnecessary. We must remember that this tax was foreshadowed by the right hon. Gentleman nearly a year ago and yet the rate is not even known today. We know it is not likely to be known until next April, when the Budget is announced, so that a period of some 18 months will have elapsed since the time it was announced and the time we know the actual rate to be made. I maintain that this delay is quite unjustified.
Another result of the Government's disastrous taxation policy has been brought to our attention by the renewed activity of Mr. Charles Clore in the takeover field recently. I am not suggesting that the particular company which he has under observation at the present time has been materially affected by this Government's financial policies in recent months, but it serves to spotlight the Government's mistaken idea, that by relieving tax on retained profits managements will automatically spend more on modernisation. This is something of a fallacy. The go-ahead managements will modernise whatever the cost, whatever the risks, and however difficult it may be. It is the undecided managements which we need to reach, to give them the incentives of investment allowances, to urge them to modernise more. It is the indolent and lazy managements—and I regret to say there are still some—who perhaps earn their money rather too easily, and are more likely to use the new taxation regulations as an excuse to accumulate funds. Sooner or later they are going to become sitting ducks for the take-over kings like Charles Clore. I am quite certain that the Chancellor will agree that there is some limit to the amount of modernisation which one can carry out in certain industries. When that limit is reached it is surely more sensible to encourage firms and industries to pay out the money, to their shareholders if one likes, so that the money is available for other capital requirements by industry, which need extra capital in order to carry out modernisation programmes.
We might also have reasonably expected a more enlightened policy on money circulation as a whole. Money circulation remains a vital element in the bloodstream of industry. We require a good circulation of the bloodstream; it is essential if we are to have a lively and effective economy. Equally, if the Chancellor wants a lively and effective economy it is not sufficient for him to go billing and cooing to the Institute of Directors, to industry, or to the City, unless he gives a clear indication that his intentions are entirely honourable. By this I mean that if, by some mischance, a Labour Government were ever to get back into office with an increased majority, he would still be as amenable as he now appears to be. I am afraid that there are many people in the City and financial circles, who suspect that the right hon. Gentleman is only "all sweet reasonableness" because of the very narrow majority of the Government. It is feared that if he had a bigger majority he would be far more dictatorial.
If he is really sincere, and wants to co-operate with financial circles, I am hoping that he will consider very carefully indeed the suggestion which I understand is to be submitted to him within the next few days by the Council of the London Stock Exchange, that there should be an exemption of the first £500 Capital Gains Tax in any one tax year. While I freely admit that no Chancellor likes to part with any revenue that he can get his hands on, if he does not introduce something of this sort I fear that he is running a grave risk of bringing the taxation system of this country into ridicule and making a large section of the community into a section of tax dodgers. As he knows, I have seen Capital Gains Tax working at first hand, and in recent months it has resulted in a tremendous fall in turnover on the Stock Exchange with the resultant scarcity of shares and the difficulties of raising fresh capital for new issues. However much this may attract hon. Members opposite, they must remember that this is an essential part of the fabric of the best-known capital-raising city in the world, which is the envy of many other capitals in the free world.
If investors forget—and I use the term in the widest possible sense—to return their capital gains, especially if those capital gains are small, then the chances of the Revenue recovering those amounts are very remote indeed. The Revenue has neither the time nor the staff to do it, and it possibly does not have the inclination. Certainly the tax they might get would not be worth the effort. To give one example, a few weeks ago there was a very successful issue of £50 million of convertible loan stock by I.C.I. There must be thousands of people up and down the country who had a capital gain of about £5 or under. Can the Chancellor honestly tell me that it is going to be worth the Inland Revenue's while to try and trace these small amounts?
It is a typical example, at the present time, of the difficulties of the Inland Revenue in tracing small amounts. It is beyond the Revenue's capacity. Already the Inland Revenue is under very severe strain. I am receiving an increasing number of tax queries from people locally—it started as a trickle, but the number is increasing all the time —which I think indicates the difficulties under which the Inland Revenue staff are working. We must remember that the real impact of the last Finance Act has yet to be felt by this Government Department. If the Chancellor of the Exchequer is not very careful, I fear that there is a real danger of a breakdown of the Inland Revenue system. Certainly we are faced with very serious delays which can be damaging, costly and harmful to relations between industry and individuals and the tax inspectors.
I turn briefly to the Government's prices and incomes policy. It seems to me that, however worthy and well in-tentioned this policy is, it is surely the classic example of shutting the gate after half the horses have left. We heard this afternoon that the policy of some unions has been apparently, "The Labour Government are not likely to last long and, therefore, let us jump on the band wagon, get as big an increase as we can and we will be all right for a year or two". I think that the concern which the Chancellor of the Exchequer expressed recently is hardly surprising in these circumstances.
While we can commend the Government for making the nationalised industries subject to the National Board for Prices and Incomes, they might treat that as rather a left-handed compliment because there would have been a tremendous storm if they had been excluded from examination. We know that an increase is forecast in the price of coal, and presumably that will be placed before the Board. The electricity price has been reviewed from time to time, and the gas industry is already subject to examination.
I would, however, remind the Government that they have not yet explained the very mysterious circumstances leading to the reference to the Board of a recent price increase application by the Wales Gas Board. The Wales Gas Board asked for an increase of l½d. per therm but was told by somebody in authority— presumably the Minister of Power—to put in for an increase of 2d. a therm so that the target performance of the Gas Board as a whole might be improved. This delay has already cost the Wales Gas Board about £250,000, and the cost is going up all the time.
Finally, having examined the White Paper on "Prices and Incomes Policy, An ' Early Warning ' System ", and having examined Parts A, B and C of the Appendix, there is, I think, only one obvious omission and that refers to the Post Office. We all know that the Post Office increased its charges by the unprecedented amount of 33⅓ per cent. in May this year. This is one of the largest increases we have suffered for a very long time. Who can say whether a further rise is contemplated? I hope that the Chancel- lor of the Exchequer will give us an assurance that any further increases in postal charges which may be contemplated will be referred to the National Board for Prices and Incomes for thorough examination.
We have just listened to a remarkable speech, in some ways, from the hon. Member for Cardiff, North (Mr. Box). As far as I could make out, it was nothing more nor less than bare-faced special pleading on investment allowances, Corporation Tax, ploughed back dividends in industry, and so on.
I want to deal first, without knowing what is in the mind of my right hon. Friend the Chancellor of the Exchequer, with the proposed new investment allowances. I do not know, and nobody can know, what the Chancellor will do about this matter. In our present economic situation, unless these allowances go, and are seen to go, to those industries with an untapped export potential, then to spread them across the range of British consumer industries which are already over-capitalised is asking for more trouble than we have. I hope that the Chancellor will resist any such proposals and will concentrate on those growth capital industries which reflect in exports overseas earning capacity which will come back to the Treasury. To do anything else would be asking for trouble in the long run.
I come to the main point of this debate. Some politicians take a flight from reality at some time in their political lives. The flight from reality of the Conservative Party has lasted a long time. It has seen during its 13 years' life at least four successive crises on which no positive action was taken, on which no economic philosophy was seen to be apparent to the electorate and in respect of which no forceful plan was presented to the nation for it to judge its capacity to climb out of the dilemma of deficit finance. This has gone on constantly year after year.
It does not do any politician any good to hide his own conscience from the facts of life, no matter to which party he belongs. The crisis of 1931 was seen to be a crisis and was known to be a crisis by the people of this country. Unemployment was rife and widespread. Investment was down and industry was at a standstill. These factors are not apparent today. But the crisis is just as real. The population in general is apt to think that things are all right, or that they are not quite so bad, or that it is newspaper talk, or that most of it is above their heads. This is not so. This is why the Plan advocated by the Government through the First Secretary of State is a very courageous plan indeed. It has taken us down avenues of industrial and political philosophy which have never been trodden before. For any Minister, while not openly advocating statutory control of prices and incomes, to ask the nation to give the matter serious consideration if the voluntary early warning system does not work is an act of great political courage.
The Government deserve the greatest credit for thinking out these policies and for advocating them. This should have been done before. If we fail to get any cohereni: planning in our economic system, then as a nation we shall quite quickly get into difficulties from which we cannot recover. This has been said many times before, but year by year the difficulties become greater. The two big trading blocs with which we are competing—the United States and the Common Market—are, with reducing tariffs in Europe and a surfeit of capital in the United States, much too heavy and specialised for us to match, and the Common Market, with its policy of reducing tariff barriers between member nations, has a bigger market for internal consumption. We have our own Commonwealth export markets.
But the facts of this situation are changing, and changing quickly, and the facts are beginning to speak for themselves, such as the drop in our share of Commonwealth trade. They tell us of the need for forward, purposeful planning to find other markets and other industries, and what we have to decide is where the markets are and what the industries and the products are to be. That is why I said at the outset that investment allowances must be seen to operate where they will make the greatest impact.
Great Britain's position is unique in that we were a capitalised and industrialised country before any other nation in the world, and we had an established pattern of capital formation, an established production of established industries which did not change for many years although there were new methods, new materials, new techniques. But our ways have not changed as quickly as they should have done. We had also an established pattern of trade unions built on a political philosophy at the turn of the century. It had become established, and it was jealously guarded.
These attitudes are not changed very easily, and, of course, the people to whom we are making an appeal to go along with this Plan are those broad sections of the employed as a whole who are, in the main, very conscious of their hard-earned rewards and the standards they have obtained and maintained.
Reading carefully through the Plan one finds no direct reference to the distribution of national income in salaries or wages. It is in abeyance. Of course, it has got to be till we see the lines on which the Plan works. Let us assume that the Plan gets off the ground; let us assume that it is successful. Let us assume we get a gross national product in this country increased by £4,800 million, which is some 25 per cent. At this stage the Government of the day, of whichever party it is, have got to decide—and there are at least some Members on the Front Bench opposite who are becoming more convinced of the necessity for long-term, year-by-year, national, Government planning. Let us assume we can get it, and let us assume that the British industrial position, with the special allowances, ploughed back dividends, and so on, is changed. What do we do? We can make our decisions only on the basis of what our competitors do.
We must look, for instance, at United States industry. The United States are great competitors of ours, and very efficient competitors. Their net return per employee on capital investment is 3½ times that of Great Britain. Remember also that Great Britain's social insurance schemes are one of the first charges on the Treasury and a charge on exports. When one considers this, one gets some idea of the kind of path we have to tread and the dedicated purposes which will be necessary for our workpeople and management all the way through, with the Government, to achieve the kind of system which will make our balance of payments in future of manageable proportions.
I do not think that the figure of £400 million is manageable. I think this country has to have a £400 million surplus in our position as a fully exporting nation and a high food importing country, which places us at a disadvantage compared with the Common Market countries or the United States or, indeed, the newly developing countries.
When one considers that the economic growth was only 2–4 per cent. in 1960–64 we see that that is where the stagnation took place. That was known on those benches opposite and nothing was done about it. The position was allowed to grow until the moment this party took office, and we found the debt of the size we did—and it was a debt around the nation's neck, and not just the Government's.
It has got to be dealt with. It cannot just be left, and there is no point in hon. Members saying here or elsewhere that there was a loss of confidence. Confidence is hard to maintain in the kind of world in which we have to live. It is in the interests of all of us to see that it is maintained.
But the act of the Government was an act of high courage. If we consider what kind of capital investment we have to get in industry, it has got to be of the order of a 55 per cent. increase by 1970, a net increase of 7 per cent. per annum. It is not going to be very easy to achieve, because alongside existing capital investment provision must be made for all the types of markets we are going to need.
This brings me straight on to the organisation of British industry. I have been looking at a survey recently made of the firms in this country. Only one firm is absolutely economical in its organisation and efficiency to take full advantage of those markets, and that firm is I.C.I. When one considers the fragmentation of the British exporting industries into small sectors throughout the nation one realises what a tremendous job there is of association and re-formation which has got to be undertaken under Government guidance before every one of those industries can be proved to be organised to top efficiency in producing good dividends for the nation as it should. There is such a complexity of firms in industry. The Radcliffe Report on Monetary Reform came out a few years ago when even the Treasury did not know the full mechanisation of many markets. I did not fully understand it and I do not fully understand it even now, but at least it gave me an understanding of the industrial complex and the financial system.
Luckily, European countries in the Common Market have not been associating in monopoly structure across the market. This is to our advantage. We should be in great trouble if it were otherwise. They have set up subsidiary industries in the different countries. It may seem to be an argument for a greater association of firms, and this is something industrialists and trade unionists have to look at.
I should like to see a concentration of unions, with smaller numbers of them, and of managements, too. On the other hand, I should like to see more units of capital formation in this country as industrial export leaders. This is the only way to become more intense in export markets against the size of the competition we are encountering.
It is instructive to look at the premier industries of the United States, chemicals, aircraft, electronics and computers. Compare that with the output of the United Kingdom firms and the prospects of United Kingdom firms, and realise that it is in these industries in the future in which most of the pure and applied research will be done and from which new methods and new materials will be derived, and one sees quite quickly the enormous lead which the United States have got. The European countries are now fast catching up on this basis.
Take the chemical industry of the United States alone. It has a gigantic turnover of over 33·5 million dollars a year. This is 50 per cent. higher than that of the whole of Europe itself, and it is the leader scientific industry. The employees in the industry total 55,000, and the total employable force is only half of the chemical organisation and firms of Europe, including the United Kingdom.
If one looks at productivity per worker —and here is where the startling figure arises—one sees it is 55,000 dollars per annum, which is twice as high as that of any comparable performance in Europe or the United Kingdom.
These nations are competitors in the capital field. This is why this Plan which we have today is a plan of great courage and foresight by my right hon. Friend the First Secretary, a plan to which he has devoted tremendous energy, and which he and which the nation want to see established, and adopted by the insured population of this country, as the greatest single act of faith since the formation of the trade unions for organised labour. What we are asking for is an early warning system to keep the economy in line, in tempo, with the nation's capacity. Indeed, we are asking people to forgo certain wages, which industry can afford, on behalf of the nation. This in itself is a tremendous act of faith and courage, if the country is prepared to adopt this Plan and to give the First Secretary the backing he wants.
Certainly something of this character is needed. The control of prime costs is important if any industry is to know where it is going year by year. Only by this method, by conscious planning over a period of years, can be shown what our position is to be and whether it can be held vis-a-vis that of other countries. This is being done by the Government with a very slender majority indeed. I do not want anyone on the benches opposite to be under a misapprehension that what we are asking for, and which we ask them to support, is not specious speeches here or anywhere else on the concept of the Plan, because they know that something of this order is needed. We ask for their support just because something of this order is needed if this country is once again to be what it was at the turn of the century—one of the prime manufacturing and exporting countries of the world.
I shall be brief as by this time of night hon. Members called upon to speak have a great fellow feeling for those hon. Members who are still left. I do not at this time have a great deal to say.
I have been gratified by the attacks on the Liberal Party made by the right hon. Member for Enfield, West (Mr. Iain Macleod). I was very pleased that the attack was in this House because outside the House he has been threatening homicide to the Liberals and encouraging his troops into battle to that effect. I cannot quite see why he is getting so angry. It is not as though he were like the hon. Member for Colne Valley (Mr. Duffy) who has a Liberal opponent with only 200 votes behind him. Admittedly in Enfield, West the Liberal candidate jumped to second place. This may make the right hon. Gentleman very apprehensive indeed of the Liberal Party.
I could not quite get the right hon. Member's reference to the Liberal Party selling itself into bondage. What appeared to hurt the right hon. Member was the fact that we had not extracted a price. This he could not understand. I can assure him that the Liberal Party has looked at the programme and does not specifically need a price to approve the sort of policies which it has been preaching for some time. My right hon. Friend the Leader of the Liberal Party has said quite clearly that the Queen's Speech has many Liberal policies in it. Of large parts of it we approve. Of course, we shall examine it and vote on the virtues of the measures as they come forward in this House. We shall vote on whether they are right or wrong without the fear that we may bring the Government down, which appears to influence the poll figures of members of the Tory Party voting in the Divisions we have so far had.
The Amendment we are discussing appears to be a most curious one in that it humbly regrets that the Gracious Speech contains no measures likely to redeem the failure of the Government's economic policy. We cannot accept this. There are many measures in the Speech which are bound to be and have been accepted by the Conservative Party— special attention to regions, efficient working of the Boards of little N.E.D.C.s, improved export facilities, agricultural expansion. All these are obviously measures which must improve the economy.
The reference to the policy on prices and incomes is curious because I had understood that Conservative Chancellors have themselves endeavoured to work out an incomes policy. Why they should disapprove of such a policy I do not know. It is obvious that one could criticise, and criticise very hard, a number of the first results of the incomes policy. It is, of course, disturbing that wages have risen by such a large percentage. People are disturbed about this, but it does not invalidate the policy on prices and incomes.
I want to put our position in regard to this Amendment. The Amendment itself we regard as a silly one, not relevant to the occasion, and we see no reason why we should vote for or against it. We do not regard it as relevant and there-we propose to ignore it. We have on the Order Paper what we consider to be a constructive Amendment to the Address. There are certain things which, of course, we in the Liberal Party have criticised. We criticise, and have done before, the lack of any intention on the part of the Government to produce competition in this country. In a few days we shall be debating an Order to retain the 10 per cent. charge on imports. That is a temporary charge which has now been on for a year. This is an extremely disturbing position.
For the Government to talk about competitive efficiency in exports and then to admit that industry cannot compete at home, appears to be quite wrong. I cannot see that investment allowances inside this country will make industries efficient. The industries which require capital should be willing to spend in order to make larger profits. If they can make profits and have to be driven to spend money on equipment which will raise their profits, there is something wrong with competition in this country. This the Government must recognise.
Another matter on which we have constantly criticised the Government is the lack of any reference to a commitment to go into Europe in a proper way. The Gracious Speech says that we should continue our efforts, but the efforts have not been good enough. If we are to be competitive it is absolutely necessary for this Government to declare their intention of joining the European Community, and doing that as soon as conditions are right. If they did this they would create a new climate in industry and would do a great deal to persuade industry to pull up its socks and prepare to tackle the new challenge which would come along.
We in the Liberal Party have also said —and have been criticised for saying it— that more incentives are necessary. This is true today and many hon. Members have spoken of the taxation position in other countries to show how our competitors operate, many of them in an extremely successful way. We feel certain that the answer is to make profits harder to earn but a great deal easier to keep in a competitive economy. This is sound common sense and has been proved to be correct in other countries.
The Government must, first of all, see that we get into Europe and so obtain the advantages of scale and so on which membership of the Common Market would bring about. Is this not a more suitable subject for hon. Members of the Conservative Party to consider for amendment to the Gracious Speech? It has been at the centre of their policy and the Leader of the Opposition has been closely associated with efforts to get into the Common Market. I should have thought that that was the most glaring omission from the Gracious Speech to which they should have drawn attention.
In short, we will vote for or against the Government on specific measures according to their virtues when they are brought before Parliament. We will not vote at the behest of the Government or the Opposition. We see no necessity to vote on this entirely irrelevant Amendment.
The hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) said that he was putting the Liberal Party's view before the House. I am still not clear just was that view is on this matter, although I assume that he and his hon. Friends intend to vote with the Government tonight.
If that is not his intention, then he put his case extremely badly. That was the impression I got and I am sure that other hon. Members had the same impression.
I wish to concentrate on certain aspects of the National Plan and some of the economic consequences which flow from it. In doing so, I will look a little beyond the Plan itself and into a few Socialist concepts as I see them. As has been stated many times, our economy is balanced on a knife edge. The Opposition left us a deficit and the more hon. Gentlemen opposite protest when we say that, the more people in the country believe we are right.
Unless we obtain increased productivity and export more we will not gain economic salvation. The trouble is that while we are attempting to do these things we are spending more than £2,000 million a year on arms. This has not been mentioned in the debate today. Nor is it mentioned in the National Plan— although it is relevant to the problems which my right hon. Friend the Chancellor faces today.
We must tackle these problems in what I would describe as a mixed economy, 80 per cent. of which is privately owned and 20 per cent. publicly owned. It is on the public sector that I particularly wish to comment.
Certain recommendations were made by the Devlin Committee for the improvement of the dock system and, particularly, for facilitating exports. It is one of those anomalies that the Manchester Docks are in Salford, but they came in for very little criticism by the Devlin Committee, primarily, of course, because they are run by one employer, and not by a multifarious conglomeration of employers as exists at the Liverpool and the London Docks. The Manchester Docks are not perfect, and much remains to be done for the dockers there, but the Manchester Docks represent one of the most important and highly efficient inland dock systems in the world. I hope that the reference in the Queen's Speech to the docks means that, if necessary, the Government will not hesitate to take them under public control. If there is one industry that cries out for some form of public control it is the docks industry, and I would advocate such a step.
The Plowden Committee is at present considering the aircraft industry. My union—the A.E.U.—along with the T.U.C. has submitted evidence to that Committee calling for public ownership of the airframe section of the industry. We are expecting the Report within the next two or three weeks, and it is quite possible that it will recommend the public ownership, not only of the airframe section but of the aero-engine section as well. I have heard a lot in this House about the shortcomings of the industry, and the problems created by Government orders being cancelled, and so on, but as the Government, along with the nationalised industries, are among the largest purchasers, I can see no logical reason for this industry not being brought under public control.
Public ownership of the steel industry is not mentioned in the Queen's Speech. I and a number of my hon. Friends tabled an Amendment drawing attention to this and calling for early or immediate implementation of public ownership, because we feel that this step is relevant to our economy. We believe that if it is necessary for the First Secretary, the Chancellor and the Government as a whole to be in a position to plan our economy, they must have control of industries that are at present basic to the economy.
Many of my constituents work in the steel industry. There is no plant in the constituency itself, but there are plants very close to its border. The Guardian today reports that 300 men are to be laid off at the State-owned firm of Richard Thomas and Baldwins at Ebbw Vale, and I have been told by workers at the Lancashire Steel Corporation, which is privately-owned, that redundancy could result from difficulties and problems existing there. If that is the sort of thing that can happen in the steel industry, it calls for an overall plan. It is possible that in the foreseeable future the steel industry will consist of only five or six units. Possibly by the late 1970s or 1980s those units will be virtually computer-controlled. This will mean complete reorganisation.
The coal industry is being reorganised. My right hon. Friend the Minister of Power has to employ public money to ensure that redundancies are not created. He is ensuring that other industries are created so that people can be moved to suitable employment. This must happen in relation to the steel industry, too. It is therefore essential that the industry be publicly owned.
Having tabled the Amendment, which I support as drafted, and having taken part in discussions with my hon. Friends, I am confident that the steel industry will be publicly-owned at the earliest possible moment. [Laughter.] The Opposition can laugh. They should draw no comfort from this, least of all the Liberals. It was not the Liberal Party that prevented public ownership. It will be the Labour Government who eventually bring the industry into public ownership. The industry will be brought into public ownership. The right hon. Member for Enfield, West (Mr. Iain Macleod) may smile, but in a Parliament of the not too distant future, with a far larger Labour majority, he will be fighting to stop steel nationalisation.
I have referred to our mixed economy and to the difficulties involved in trying to implement the necessary policies within it. I am very pleased that my right hon. Friend the First Secretary has seen fit not to introduce legislation to force trade unions to do anything at present. Such action would be disastrous. I think my right hon. Friend has seen the wisdom, and he will continue to see the wisdom, of trying to persuade people, not to compel them.
My reading of the situation inside the Parliamentary Labour Party and inside the Labour movement as a whole is that it is coming out firmly and clearly, not only for the public ownership of steel but for a further extension of public ownership to industries which have been neglected by the party opposite and by the country as a whole and which will have to be taken into public ownership if we are to have the steady economy we need. Hon. Members opposite can draw little comfort from that.
Much criticism can be made of the National Plan, particularly the fact that the targets appear to be too low. It is not satisfactory for the Labour Government to be expected to do in six years what the Tories did not do in 13 years. But a start has been made. It will be possible to make an assessment from that and to take action which can transform our society. The battle must be fought on whether a mixed economy and capitalism can succeed here.
The answer of the Liberals and of the Tories is to run to the Common Market. I believe that there is another answer. I believe that the wealth of our industrial experience and skill can provide the goods that the world needs in return for the raw materials which we purchase to make those goods. We can redress our balance of payments situation. What we can produce the world wants and will continue to want. I therefore hope that after today's debate, and following actions to be taken by the Government in the future, we can set our sights on that course.
After waiting six hours to make a speech I have had to listen to the hon. Member for Salford, West (Mr. Orme) who blames all our troubles upon a mixed economy, advocates the nationalisation of steel and then goes on to advocate the nationalisation of the docks and finally of the aircraft industry. If I understood his concluding sentences, he was advocating the nationalisation of everything and I have three minutes in which to answer him. I think that even hon. Members opposite might think it preferable if I left that task to the Chancellor of the Exchequer.
Today has been an economists' debate. That is inevitable in the terms of the Amendment. One of the troubles of such a debate is that the atmosphere becomes a little rarefied. The terms used become esoteric and statistics become larded in the paragraphs to such an extent that in the end I feel that I want to go back and ask what is the object of the exercise.
I hope to say quite briefly what I believe should be the target to which the whole debate should be directed. I have the good fortune to represent South Dorset, and the target is particularly appropriate to that county where there are 50,000 people, or 15 per cent, of the population who are over the age of 65. We have heard from both sides of the House—and there was some discrepancy in what we heard—about rising wages. According to the Chancellor earnings had risen 8 per cent, in eight months. According to the First Secretary they had risen 7 per cent, in 12 months. In parenthesis I should have thought that it was a reasonable request that the Government spokesman in reply might clear up the figures and tell us which are correct. Right hon. Gentlemen should not contradict each other.
But if there has been a wage increase of either of these percentages it is very little use to constituents so huge a proportion of whom draw no wages at all. This is where the real hardship comes, and this is the simple point which no Front Bencher opposite and, to be fair, few on this side of the House, have attempted to deal with. However wages may have gone up, prices have gone up by 4·7 per cent. One thinks of a retired farmworker or seaman or petty officer, of an army of retired persons in villages in Dorset and indeed all over England who have been living in a cottage on £5 a week. In the last 12 months that sum has been reduced to £4 15s. That is not an uncommon example.
In the few minutes at my disposal that is the only point that I seek to make. Whatever may be the relation between earnings and income, I urge right hon. Members opposite not to forget those who have had no rise in income, for the retired earn no wage. If I went back to my constituency and asked my constituents what they most wished to see, the first priority would not be extra money on education, housing, roads or hospitals. They would say to me, "Make £1 equal £1."
The debate has closed, I think all will agree, on a very good note with the remarks of my hon. Friend the Member for Dorset, South (Mr. Evelyn King), which were so well worth listening to and brought our minds back to a problem which we have tended to overlook in the arguments which we have had.
The debate has, of course, been overshadowed by the problem of Rhodesia. It led to an interruption of our normal procedure and, for many of us, it has distracted our thoughts from other problems. This is bound to have had its effect on the whole discussion of the Gracious Speach. This evening, I do not intend to refer at all to the Rhodesian situation. References in passing are unwise and add nothing helpful. I shall refer to a number of the problems and questions which have been raised in the debate but which, on the whole, have been left unanswered by the Government's spokesmen. No doubt, the Chancellor of the Exchequer, who casts his eye over the whole field of Government activity, will be able to answer all the points and questions which have been put.
The first feature of note in this Gracious Speech is the tactical exercise which it contains. Its object is to ensure the support of the Liberal Party—all of them—in the Division Lobby whenever necessary. I do not know why the Prime Minister thought it so important to do this. There is very little danger of the Liberal Party voting in such a way as to endanger the Government at the present moment. Considering the results at the recent by-elections, they would be very bold men—-I do not say brave—if they courted an election now. The Leader of the Liberal Party is rather fond of saying that he leads his troops towards the sound of gunfire. I have no doubt that he makes sure, before he leads them, that their weapons are loaded only with blank cartridges.
The hon. Gentleman's intervention exactly confirms what I said about blank cartridges. A blanker cartridge I have never heard.
The omission of steel nationalisation from the Queen's Speech is the most significant part of the whole tactical exercise by the Government. The Prime Minister has made a good deal of reference to it. He tried to explain away why he had not put steel into the programme on this occasion. If I may say so in his absence, I thought that I had never seen him more uneasy, like a mouse on hot bricks, jumping about all over the place and not knowing what to do or say next. This was before he had to answer the questions from the hon. Member for Ebbw Vale (Mr. Michael Foot), of course, and now we want to know the answers to those questions. Although the debate on the Queen's Speech has gone on for several days, there has been no response from the Government Front Bench, as far as I know, to the questions which the hon. Gentleman asked about steel.
His questions were simple and clear. First, was the account of the reason for the omission of steel nationalisation given by the correspondent of The Times accurate? Second, could the hon. Gentleman take it for certain that steel nationalisation would be included in the next Labour Party election manifesto if his Government had not succeeded in nationalising it before then? Those were his direct and simple questions, but he received no answer.
It is important that an answer should be given because upon it depends whether the Government will get away with their attempt to bamboozle the Liberal Party and the country as a whole into thinking that they are, as a Labour Government, adopting a moderate programme. The omission of steel is designed to persuade people that they are now a middle-of-the-road, moderate Left-wing, radical Government. Yet the true answer to the question put by the hon. Member for Ebbw Vale must be that the only reason for the postponement of the nationalisation of steel is simply that they have not at present got an adequate Parliamentary majority to carry it through. If ever they had an adequate majority for that purpose I presume that this would be one of their first measures.
There are other examples in the Gracious Speech, under a certain amount of obscure language, of their tendency to nationalisation, if I may use that word. We read,
Legislation will be introduced to remove statutory limitations impeding the proper use of the manufacturing resources of the nationalised industries
A Bill will be introduced to regulate priorities in privately sponsored construction ".
What these two rather obscure phrases mean, in effect, is giving power to the nationalised industries to indulge in a form of creeping nationalisation over an unlimited field and also to impose upon a large section of an important industry licensing controls and rationing once again on a permanent basis.
The point is made about the limitation on the powers of the nationalised industries. The simple fact is that there is no limitation whatever on the ability of the nationalised industries to carry out their proper duty in accordance with the statutes and duties laid upon them by Parliament. What the limitations are entirely designed to do is to ensure that they do not use their privileged position of a monopoly in their own field and access to Government finance to compete on an unfair basis with private enterprise. The purpose of these Government proposals must be to ensure that nationalised industries can extend their activities without any regard to an abuse of proper competition with private enterprise which, after all, provides by far the overwhelming part of the export trade of this country.
The Gracious Speech is designed to obscure in every possible way the consequences of the policies pursued by the Government in the last 12 months. Nowhere do we read in the Speech of these consequences in the form of higher taxes, higher interest rates, a credit squeeze of a character and duration never seen before and cuts in public expenditure of a savage nature.
I should like to ask the Chancellor of the Exchequer some definite questions about the levels of public expenditure and the proposals which the Government have in mind. What about the hospitals? My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) put forward some cogent points on this matter. The hospitals were told in August that the Chancellor's July measures would have no effect whatever upon the hospitals, either in maintenance or in new construction. The Prime Minister said the same thing a few days ago. He said that he had excepted hospitals, schools and houses from the measures of restriction.
But what are the facts which are slowly beginning to emerge? We have heard already that the hospital at Exeter, a very large proposal, is to be shelved indefinitely. We have heard about St. Thomas's Hospital extension scheme, which has been put back, if necessary, indefinitely. What are the facts? Is there a cut back in the hospital programme? Are these important projects being cut back or is it true, as the Government have said, that all hospital building has been exempted from the cuts imposed by the Government? I hope that the Chancellor will explain this in his reply, because it is an important matter to which he must know the answer.
The next questions are about education. My right hon. Friend the Member for Altrincham and Sale gave an example
of a school which had been held back by lack of finance. We have been told in the Gracious Speech that the Government
will continue to develop higher education ".
How much development of higher education have we seen? In the measures of July we saw a severe cut back in the development of higher education in this country. The Minister of Education has announced that the reduction in the size of classes to 30 pupils, which has been talked about so much in Labour Party propaganda, will be deferred until 1983. All these are examples of the cut back in public expenditure which has occurred as a result of the Government's policy. They have been announced but they have been glossed over in the Gracious Speech.
I would accept that with pleasure. It seems to me one more example of what we have always said— that the process of development under Conservative Governments has proved to be immensely rapid.
I turn to the road programme. In March the Minister of Transport told us, "We are determined not to cut the road programme ". We should have been warned. In July £30 million of the road programme was postponed. In December £25 million of the classified road schemes were deferred. The Prime Minister argued that cutting back on all these things was cutting back on luxury building. He said," We are cutting back on luxury building in order to promote the building of houses in this country ". Hospitals have been cut back, and schools. I gather that the Chancellor now says that hospital building has been increased. If the building of St. Thomas's and Exeter has been increased, we should like to hear. Was expenditure on roads increased or cut back? Was expenditure on higher education increased or cut back? If the Prime Minister says that all these were increased, let him explain how. I do not think that the message which the Chancellor gave the House in July was a message of increasing; it was a message of cutting back. The Prime Minister said it was necessary to cut back on luxuries in order to build more houses. This is the Prime Minister's own argument—the "candy floss "argument that he talked so much about as Leader of the Opposition. It is nonsense now, as it was then.
The Prime Minister knows that the amount of so-called luxury building is tiny. [HON. MEMBERS: "Oh."] Offices account possibly for 3 to 4 per cent. of the total building effort; shops a good deal less than that. In any case, investment in new shops is probably a better way of saving labour in this economy than anything else one can think of. The truth is that the Government are having to cut back on hospitals, education and roads in order to achieve a house-building programme of less than 400,000 a year.
If the Prime Minister thinks I am wrong, perhaps he will get up and say so. If he thinks that the Government have increased these things, he should say so. But he is not very forthcoming this evening and I can well imagine why. It is because the answer is the opposite to what he is muttering.
Let us consider the proposals of the Labour Party about social welfare. What has happened to the income guarantee and the half pay on retirement proposals? There is no sign of them in the Gracious Speech nor in the National Plan. The Plan clearly lays out that neither the income guarantee nor the half pay on retirement are expected by the Government to have any effect upon the level of consumption between now and 1970.
We have not heard much about mortgage rates today but we heard a lot about them from the First Secretary of State during the election campaign.
We still have not heard anything about this fairly clear undertaking that, under a Labour Government, the rate or interest charged upon mortgages to house-owners would be reduced. In fact, it has been increased and maintained at record levels and solely because of the policy of the Government. That is the point we make, but we have received no answer. We have received only vague promises about something in the future. The Prime Minister himself has made such a vague promise. But nothing has ben done and nothing emerges in the Gracious Speech to meet one of the most concrete promises ever given to the electorate.
Then there is the Ministry of Technology—another of the great promises of the party opposite. Under the dispensation of right hon. Gentlemen opposite we were to have great advantages, a great movement forward and great progress in technology. What has happened? Lord Beeching has been sacked, so we were told last night, although I gather that there is a certain amount of doubt as to whether or not he was sacked. However, the Minister of Technology said last night that Lord Beeching had been sacked. In Lord Beeching's place we have the Minister of Technology, whose contribution to the subject is not of the most outstanding. Finally, we have the level of increased taxation. It has increased by over £600 million a year in less than a year.
All these factors are the consequence of 12 months of Labour Government and they did not appear in the Gracious Speech. They constitute the reason for our Amendment.
At the moment the Government can rightly claim that the level of employment is high and that the balance of payments position has been improved. This is precisely as we expected. [HON. MEMBERS: "Oh."] If hon. Members opposite want a justification for that statement, they should look at the Government White Paper of 26th October, which said precisely what I have just said. But what we have with the improved balance of payments and the high level of employment is the highest level of taxation, the highest level of interest rates, a strict credit squeeze and pressure on prices.
Either the measures which the Chancellor has introduced to deflate the economy will result in higher unemployment, which is what may happen, or, if that does not happen, the level of imports will remain far too high. I agree that exports have done well. The right hon. Gentleman himself referred to that today. But does he really think that the increase in exports in the first few months of this year had anything to do with the Government? He claimed that the first part of the year showed an improvement in our export trade and so it did. But no one who knows anything about trade or industry would imagine that the level of exports in the first months of the year had anything to do with the policy of the present Government.
The truth, as we have said on more than one occasion, is that the Labour Party inherited a situation in which the level of exports was already beginning to increase and to increase substantially, precisely as we said. The gap between the delivery of exports and their ordering is one of several months and, when we said during 1964 that the winter of 1964–65 would show a substantial increase in the level of our export trade, that is precisely what happened.
We have heard so often now the excuse by Labour Members about the gap of £800 million with which they were supposed to have been faced. They faced a gap of £800 million only if they were looking backwards. The simple fact is that by the time they came into power the problem of 1964 had been handled and, as the Prime Minister himself said, handled without any loss of confidence in sterling whatever. It was only in November, 1964, only after a month of Labour Government and only after the weeks of the muddle about the surcharge and muddle about the Bank Rate and the inflationary Budget in November, 1964, that confidence in sterling collapsed at a time when the Prime Minister himself admitted that a new development had arisen from confidence factors in the middle of November, 1964.
Was not the Government policy which the right hon. Gentleman has just said was the cause of the loss of confidence in November last year the policy which at that very time the right hon. Gentleman was saying he would have followed if his party had been returned to power?
When I said that the Government inherited both our problems and our solutions, I did not realise what a hash they would make of them.
The handling of the surcharge was inept beyond belief. The handling of the Bank Rate, the announcement of Capital Gains and Corporation Taxes, which did great harm to the movement of money across the exchanges and great harm to the capital side of our balance of payments, and the inflationary November Budget were clearly, as admitted by the Prime Minister in his speech of 23rd November, last year, the cause of the confidence crisis from which the Government have been trying to extricate themselves from then onwards.
The problem now obviously is to maintain the level of prices as competitively as possible and the main danger which has arisen in the last year of Labour Government has been the immense pressure on prices. We have seen a rise in the level of prices far higher than the economy can sustain if we intend to maintain our export trade. The source of this rise in prices is fairly clear to see. First, there is the increase in the level of taxation. Secondly, there is the increase in the level of incomes. In both cases it is clear that the policy of Ministers has made a major contribution to the increasing level of costs and, therefore, the increase in level of prices.
About 70 per cent. of the constituents of prices is added in this country. If the First Secretary wants to see why his own incomes policy has been driven through on so many occasions, he need look no further than his own colleagues. The level of prices has risen by about 5 per cent. over the last 12 months and the main contributor has been the Chancellor of the Exchequer himself with the taxes which he has imposed, taxes falling on the level of prices of things consumed in this country. The other main problem has been the level of incomes. We were asked about an incomes policy.
All incomes. As I said to the First Secretary earlier this afternoon, any policy on incomes must be a policy to deal with all incomes, from whatever source. What is absolutely clear is that one cannot sustain an incomes policy on the basis of suppressing prices alone. This is where the First Secretary is making one of his great mistakes. His other mistake is to assume that, when one has a document signed in principle, one has a policy. A document and a policy are entirely different things. One can only sustain a policy of incomes if one sustains it with action and determination. It is no good taking action to consider at a Government level, the price of instant coffee, meat pies or, pickles, or whatever appears in this White Paper. If one tries to maintain a level of prices on a statutory or compulsory basis one erodes the level of profits and makes it absolutely impossible to sustain the level of investment, the level that is necessary, all that one does is to achieve a level of prices in which competition becomes ineffective.
One cannot maintain a prices policy by concentrating on prices and ignoring costs. By far the most important element in costs is the element of personal income. This is where the First Secretary's policy is going overboard, because while he is concentrating on prices the level of incomes is moving up and moving up faster than the level of productivity. The other day the Chancellor said that the level of earnings had risen by 8 per cent, in the last year. The level of production has risen not one single bit in a year. I hope that the Chancellor will comment on this when he replies. It is an extraordinary thing that the level of production for the last recorded month is two points below what it was in January of this year. Not only has production been stagnant, it has, if anything, been falling, and with the level of employment recorded, productivity has also been falling.
We therefore have a situation in which productivity has been falling and in which incomes have been rising something like 8 per cent. from the Chancellor's own figures. Has there ever been a greater threat to price stability in this country? It may be said that last year also the production index showed very little advance between the early part of the year and the later part of the year. But last year we were seeing a very large build-up of work in progress in industry, particularly in engineering. This year work in progress for the first time for several years, has been falling. The fact is that output, effort and production in this country have been falling over the months since January, 1965.
Production has been falling and incomes have been rising at a very rapid rate indeed. The result of this can only be a rapid increase in prices and a rapid increase in prices can only result in our competitive position being impeded and our balance of payment situation being undermined. [Interruption.] This is the sort of silly remark that the First Secretary often makes. I have tried very hard, as did my predecessor, to establish an incomes policy in this country. We know that an incomes policy is not a matter of talk and waving papers and declaring that a new dawn has appeared. An incomes policy is a matter of persuasion, effort and political courage. That is what we do not see at the present moment. We have heard much talk about an incomes policy, but we have seen very little action. We have seen the results working out as badly for the economy and for the level of costs and prices as ever it has done in the experience of this country. That is why in the Amendment we have laid stress on the failure of the incomes policy. We believe that the level of prices and of costs and the competitive position of British industry are of fundamental importance.
Everything proposed by the Government depends on their ability to maintain a competitive level of prices and on their policy for Government expenditure. I would ask the Chancellor of the Exchequer, by the way, how much new Government expenditure is included in the Gracious Speech. There are many proposals, all of them involving Government expenditure. Will the right hon. Gentleman tell us how much additional expenditure is involved in the proposals laid before the House? Both in their proposals for Government expenditure and in their inability to deal with the problem of income they have shown themselves quite incapable of tackling the main problem of the economy, which must be to maintain the level of prices for the sake of our export achievement and for the value of the savings of the people. It is for that reason that we ask the House to censure the Government this evening.
I listened with very great interest to what the right hon. Member for Barnet (Mr. Maudling) said about prices and incomes. He said much with which I agreed. But there is one simple question to which I heard no answer: does he still adhere to the necessity for a prices and incomes policy?
I am glad to hear that. I will return to it. I am sure that it will have been heard with interest by the hon. Member for Oswestry (Mr. Biffen). The mantle of Enoch has fallen upon Oswestry today.
I agree with the right hon. Gentleman that the shadow of Rhodesia has hung heavily over this debate, and I think that it has been partly the reason why it has been a scrappy and sporadic debate. Some of the attacks which we were promised certainly have not materialised. For example, the merciless attack which we were told would come from the right hon. Member for Taunton (Mr. du Cann) does not seem to have shown over the horizon—and no more has he.
But there is another reason why the debate on the Gracious Speech has been sporadic and the attack has appeared so unco-ordinated, and that is simply the inability of the Opposition to deploy any central theme from which they could attack the Government's policy. We have had a great deal of destructive criticism of what the Government are doing. Until the right hon. Gentleman's intervention at the very last moment just now, we did not know whether there was even one vital aspect of our policies which they supported. But I gather that they support us on a prices and incomes policy. [Interruption.]Do they not?
The official spokesman for the Opposition—I beg his pardon; I do not think that he is the official spokesman for the Opposition on this matter. I had better be careful. The official spokesman for the Opposition was very careful not to say whether he agreed with the prices and incomes policy. The unofficial spokesman for the Opposition, who has a degree of intellectual honesty which makes him say what he really believes on these matters, does believe in an incomes policy. He wants to make it work, and he tried to make it work. I wish that the same were true of the rest of his colleagues.
I am choosing my words very carefully about this, because every Member opposite, including the right hon. Member for Wolverhampton, South-West (Mr. Powell) and the hon. Member for Oswestry, fought the election on the Tory Party manifesto, which said:
An effective and fair incomes policy is crucial to the achievement of sustained growth without inflation.
The hon. Member for Oswestry now thinks that this is transparent nonsense, and I respect him for his opinion.
But right hon. and hon. Members opposite went further. The hon. Member for Oswestry was attacking the fact that he thinks that we shall have to take further action. That is right. My right hon. Friend has announced, and the Gracious Speech makes clear, that we are taking further action. But the hon. Gentleman fought the election on the same principle. His manifesto said:
We shall take a further initiative to secure wider acceptance and effective implementation of such a policy.
Does the party opposite still stand by that. Of course, any party in opposition is entitled to rethink its position, whether it be on the east of Suez policy, or whether it be on incomes and prices, but we are entitled to know, I think, from the Opposition, and from the Leader of the Opposition, who has given no clear lead in this matter, where they stand on this issue of an incomes policy at the present time.
The hon. Member for Oswestry was both courageous and accurate—including the point at which he said that this was the nub of our policy. I readily agree with him, and, indeed, we have all said this, and he said it as clearly as anybody. And when I put the specific question to him he was absolutely frank in his answer. He said he believed it ought to be abandoned; he did not think this was the sort of thing which should be whispered about in the Smoking Room but the sort of thing to be said on the Floor of the House. The hon. Gentleman knows I am being perfectly sincere. He believed that this should be answered and debated in this House.
He said the incomes policy should be abandoned, that it could not succeed, and that he himself would go back to the policies followed by his right hon. Friend the Member for Monmouth (Mr. Thorneycroft) when he was Chancellor of the Exchequer. I think I am interpreting the hon. Gentleman accurately.
I think that that is a perfectly logical and tenable position. It is one perfectly open to the Opposition to take up. It would present a very clear issue of principle for the people of this country to decide. They can decide whether they want to fight through an incomes policy and a prices policy with all the difficulties found in these unexplored and uncharted seas. The Opposition have not been backward in pointing out the difficulties.
Both parties fought the election on it, and therefore it was nationally agreed policy—at least, up to tonight. I do not know where the right hon. Gentleman stands in relation to the rest of the policy. It was agreed policy. We should all try to work this, because we do not want as a nation to go back to those policies under which we had growing unemployment, under which we sacrificed growth in perpetuity, as we seem to have done by the measure of growth which other countries have been able to sustain.
We have been trying to carry the incomes policy one stage further through the accent on productivity. Hence the National Plan. Hence the positive proposals put forward. Again, it is perfectly open to hon. Gentlemen to say, "We dismiss the National Plan as a tissue of the imagination which cannot possibly be fulfilled." They can perfectly well stand up and say this, and it is perfectly open to hon. Gentlemen to argue that the forces of the market should be allowed to determine the way the country should go. I would like a debate on this—and my right hon. Friend was referring to this this afternoon in language which got across to some hon. Gentlemen opposite. I agree with my right hon. Friend. What I think is the most despicable course of all is to damn with faint praise, and that is what the Opposition have done and that is why the Opposition are not presenting a credible picture and not presenting any credible opposition to the Gracious Speech. They are willing to wound but afraid to strike. They do not know. Well, they know, and many of them secretly would like to abandon the struggle for an incomes policy; many of them would secretly like to abandon the idea that we should have a National Plan in order to secure increased productivity; many of them genuinely think it would be far better to let prices rip. I am getting nods of assent from the other side even as I say it. But why should it be left to me to say it? Why do they not stand up and say, "That is what we believe in"? But they are afraid to say it until the right hon. Gentleman got up this afternoon and that is why they are not presenting a credible and coherent policy.
What the Chancellor is saying is that what he and his right hon. Friends propound as an incomes policy is the only incomes policy, and that the way in which they handle it is the only way in which it can be handled. Neither of those things do we accept. What we do remember is that he and his right hon. Friends and their supporters sabotaged every attempt to get an incomes policy. That is what they did. They did it in this House and they did it in "Neddy ".
I do not think we could have done more to sabotage an incomes policy than the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) as Chancellor of the Exchequer, who in one and the same breath, reduced the Surtax and denied nurses another 6d. a week. That is not likely to get assistance with an incomes policy. I think one of the things we can claim that this Government have tried to do—and heaven knows in these things nobody is going to pretend to be perfect, and I would welcome honest and constructive criticism from hon. Gentleman opposite—but one of the things we have tried not to do is to create two classes in this country. We have endeavoured to ensure that justice which is secured through the fiscal system shall apply to all.
Hon. Gentlemen opposite opposed the Capital Gains Tax. To us this was essentially a weapon in trying to secure the climate for an incomes policy. But they opposed it, and so long as they oppose this kind of Measure then I believe, in all honesty, they ought to cast aside this pretence that they believe in it, and they should stand up and be counted. Then we shall know what we are fighting and we shall strip away a lot of the pretence.
There are some measures on which the Opposition are in agreement. They are in agreement with us about the need to balance our payments. They agree with us that there is a formidable and substantial deficit to be overcome. They disagree with us about the nature and cause of it, and whether we could have avoided it, and all the rest, but they do agree that there is a problem here, and I am glad they do. There was a time, way back about June or July, when, if anybody on this side of the House talked about an £800 million deficit, there were jeers and groans from the other side of the House. Now they have returned to their own vomit. The right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod) spent the first 20 minutes of his speech talking about it. I am very grateful to him. I hope he will go on reminding the country of the deficit which existed, which exists now, which is being overcome, which is being halved this year, and will be eliminated next year.
The other interesting thing about the debate we have had over the last few days is that there seems to have been more interest and excitement on the part of the Opposition about what has been left out of the Speech than what is in it. There are certain measures which, if I were to judge from their speeches, they would like to have seen in it; but there has been very little discussion about some of the things which are in it. I wish to rehearse some of them again and to ask whether the Opposition supports us on these measures or not—in principle; I do not ask them to commit themselves to the full legislation.
Do they agree with the proposal to introduce a Bill to assist the financing of the coal industry and to redeploy its manpower? Do they agree with the proposal to take powers to acquire land for the community and to recover a part of the development value realised in land transactions, or are they against it? Do they agree with the proposal to introduce legislation to reform the leasehold system, including provision for leasehold enfranchisement?
The right hon. Member for Bexley (Mr. Heath), when he spoke at the beginning of the debate, said that this was one of the old faces that was reintroduced. I have been listening to 13 Queen's Speeches before the last one and never heard it in any of them. This is the occasion on which legislation is going to be introduced. Can we rely in principle on the support of the right hon. Member? I hope he says yes, because otherwise he will put some of his friends from South Wales in some difficulty.
What about the Bill to regulate priorities in privately-sponsored construction? Do they agree with that or not? If so, why on earth did not some one say so during the debate? I shall not go through the other Measures now. I take it that the Opposition are obviously in agreement with the proposal to increase public service pensions, although, with that usual dichotomy which distinguishes them, while one right hon. Member says he wants to see it introduced, the other starts to count the cost and to say, "Can we be sure that we have included it in the estimates of public expenditure?"
The right hon. Member for Barnet will know from his experience the difficulty that any Chancellor of the Exchequer has in these particular matters. I have said that we are going to try —and this, if we succeed, will be the first time it has been done—to get the increase in public sector expenditure in this country down to 4¼ per cent. a year in real terms from now until 1970. This is our ambition. I say this to the right hon. Member. On every one of the proposals included in this programme, namely the proposal for the rebate on rate relief, the proposal for public service pensions and the other proposals that will not come into effect next year, but will be introduced next year, namely the reform of the rating system and the new system for Exchequer contributions, the proposals on wage-related unemployment benefits—all of these have been included in the public sector expenditure review and they come at the moment within the definition of 4¼ per cent. a year increase in real terms.
The increase in housing subsidies will form part of the reform of local government financial arrangements to which I referred in what I said a moment ago. It is all part of it and included in it.
On a great many of these Measures there is no doubt that the Opposition has no substantial objection to raise. The only objection they have raised so far as I see on the Queen's Speech as a whole is that we have not included steel. They could have included it in their Amendment. It might have been slightly embarrassing if they had done so. It is a demonstration of the phoneyness and falseness of the opposition with which we have been faced over the last few days that this should be so.
I should like to give way—[Interruption.]If the hon. Member wants to wave my election address at me he can do so.
If the hon. Member would only be patient I should say what I was about to say, but now I am not sure whether I will. I should like to give way to an hon. Member for a Cardiff constituency, whom I congratulate on being elected as vice-chairman of the Conservative Party's finance committee, but if he is to interrupt me I hope that he will say something worth while—and if he goes on reading my election address I am sure that it will be worth while.
The right hon. Gentleman has been very anxious to point out what other hon. Members had in their election addresses. Is he aware that he had nationalisation of steel in his? Is he also aware that he warned that one of the most important contributions for steel workers in the constituency was that we should escape from what he described as successive stop-go Conservative policies?
Yes, Sir, and I should not be at all surprised if the hon. Member reads my next election address if he will not see the first part of that there again. I do not know what the right hon. Member for Enfield, West is slapping his knee about. If he really thinks that we do not intend to take the major part of the steel industry into public ownership, he had better think again. [HON. MEMBERS: "When?"] I do not mind very much whether or not the hon. Gentleman believes me. The simple truth about this industry—and this must be faced—is that it is in need of substantial reorganisation and that it will need substantial public money to carry it out. Nobody can dodge this question.
I very much regret that it is not possible at this moment to make the major changes in the steel industry that are necessary for the health of the nation, but—
I have less than 10 minutes in which to complete my speech. Anyone who does not believe that these changes will be made is living in a fool's paradise. Of course, if the Opposition will offer us facilities—[HON. MEMBERS: "No."] If they will not offer us facilities then we shall undertake the necessary reorganisation of this industry when we have got the majority to do it. [Interruption.]
I would very much like to know whether the Conservative Party stands on a number of issues—for example, prices. It is essential to keep prices down, is it not?
Perhaps I could now clear up the question which the right hon. Member for Barnet asked me about hospitals because he put this point to me and I should like to answer him now. The programme was not reduced by the measures brought in in July. Indeed, it is true to say that in the spring of this year we found an extra £5 million of capital—that is, for 1965–66—for hospital building. My right hon. Friend the Minister of Health has had, as have other of my right hon. Friends, to cast a realistic and appraising eye over the programmes which were left behind by the former Administration. It is in this sense that the programmes have been made realistic to the capacity of industry to carry them out.
With respect to hon. Gentlemen opposite, I will not give way any further. Only about six minutes remain for me to complete my speech.
The former Chancellor of the Exchequer knows better than any hon. Gentleman opposite that what happened during the last 18 months of Tory Government was a disgrace to any sensible Administration. Burdens were piled on the Exchequer and on the construction industry, and it was impossible to carry them out. One of the things for which the country can be grateful is that now at last a realistic programme has been put forward and contained in the National Plan which can be maintained and carried out between now and 1970.
The right Gentleman will know, if he read our manifesto, that we specifically warned the country about the burdens which the Conservative Party was placing on it, and we gave first priority in the short run to closing the balance -of-payments gap we said would exist. It is all very well for the party opposite to say, "Rubbish ", but this is true. Let hon. Members opposite read our manifesto. I read theirs; let them read ours. The right hon. Gentleman will find it there.
We have borrowed a very great deal. The total is £900 million—that is from the I.M.F. That is £100 million more than the deficit for last year. Hon. Members will recognise that we are still running a deficit this year. I have never attempted to disguise that fact from the House, but I say that, by contrast with 12 months ago, whereas then the balance-of-payments deficit was getting worse every month, this year it is getting better every month.
If we are to judge the performance, whereas in September and October of 1964, gold and dollars were flowing out of the country, in September and October, 1965 they have been flowing into the country. Whereas at that time the £ was at pretty well its lowest basement level, today it is standing higher than parity. Whereas last year exports were pretty well flat, this year they are running at a level of nearly 6 per cent. higher. And I would remind hon. Gentlemen opposite that the flow of imports has been staunched by some of the measures which hon. Members opposite have condemned right from their inception.
Therefore, because of these measures, because of the improvement on the capital account—which in the full year
is at least £150 million—we are able to say to the House and the country that now we can see our way clear to having a balance-of-payments deficit that will certainly be no more than half of last year's—but still a deficit; there is still a lot to do—towards the end of next year, if we continue with our existing policies —and I emphasise this, whatever fun hon. Members opposite make about them —we can see the deficit being removed. This is a target worth putting in front of the country.
What the Opposition have failed to demonstrate during the last week is any constructive alternative to the Government's policy which is resulting in a broad economic, social and political advance. For the first time in his political life the right hon. Gentleman finds himself out of sympathy and out of tune with a great deal of industrial thinking in this country. There is a salutary lesson for the Conservative Party here. Right hon. and hon. Members opposite have lost the allegiance of a great many industrialists, who are impatient with the kind of unconstructive criticism of the Government—a Government which, whatever their shortcomings, have at least presented a coherent plan for social, economic and political progress.
That is why, in my view and in my judgment, this Government are destined for a long period of office and—especially as long as hon. Members opposite go on quarrelling among themselves—the Tories are destined for a long period of opposition. The hon. Member for The Wrekin probably knows the latest Conservative sticker: "Don't blame me—I voted Maudling". I ask the House to reject the Amendment by an overwhelming majority.
|Division No. 2.]||AYES||[10.0 p.m.|
|Agnew, Commander Sir Peter||Barber, Rt. Hn. Anthony||Birch, Rt. Hn. Nigel|
|Alison, Michael (Barkston Ash)||Barlow, Sir John||Black, Sir Cyril|
|Allan, Robert (Paddington, s.)||Batsford, Brian||Blaker, Peter|
|Allason, James (Hemel Hempstead)||Beamish, Col. Sir Tufton||Bossom, Sir Clive|
|Amery, Rt. Hn. Julian||Bennett, Sir Frederic (Torquay)||Box, Donald|
|Anstruther-Gray, Rt. Hn. Sir W.||Bennett, Dr. Reginald (Gos. & Fhm)||Boyd-Carpenter, Rt. Hn. J.|
|Astor, John||Berkeley, Humphry||Boyle, Rt. Hn. Sir Edward|
|Atkins, Humphrey||Berry, Hn. Anthony||Brewis, John|
|Awdry, Daniel||Biffen, John||Brinton, Sir Tatton|
|Baker, W. H. K.||Biggs-Davison, John||Bromley-Davenport,Lt.-Col.SirWalter|
|Balniel, Lord||Bingham, R. M.||Brooke, Rt. Hn. Henry|
|Brown, Sir Edward (Bath)||Harrison, Col. Sir Harwood (Eye)||Orr, Capt. L. P. s.|
|Bruce-Gardyne, J.||Harvey, Sir Arthur Vere (Macclesf'd)||Orr-Ewing, Sir Ian|
|Buchanan-Smith, Alick||Harvey, John (Walthamstow, E.)||Osborn, John (Hallam)|
|Buck, Antony||Hastings, Stephen||Page, John (Harrow, W.)|
|Bullus, Sir Eric||Hawkins, Paul||Page, R. Graham (Crosby)|
|Burden, F. A.||Hay, John||Percival, Ian|
|Butcher, Sir Herbert||Heald, Rt. Hn. Sir Lionel||Peyton, John|
|Buxton, Ronald||Heath, Rt. Hn. Edward||Pickthorn, Rt. Hn. Sir Kenneth|
|Campbell, Cordon||Hendry, Forbes||Pike, Miss Mervyn|
|Carlisle, Mark||Higgins, Terence L.||Pitt, Dame Edith|
|Carr, Rt. Hn. Robert||Hiley, Joseph||Price, David (Eastleigh)|
|Cary, Sir Robert||Hill, J. E. B. (S. Norfolk)||Prior, J. M. L.|
|Channon, H. P. G.||Hirst, Geoffrey||Quennell, Miss J. M.|
|Chataway, Christopher||Hobson, Rt. Hn. Sir John||Ramsden, Rt. Hn. James|
|Chichester-Clark, R.||Hogg, Rt. Hn. Quintin||Rawlinson, Rt. Hn. Sir Peter|
|Clarke, Brig. Terence (Portsmth, w.)||Hopkins, Alan||Redmayne, Rt. Hn. Sir Martin|
|Cole, Norman||Hordern, Peter||Rees-Davies, W. R.|
|Cooke, Robert||Hornby, Richard||Renton, Rt. Hn. Sir David|
|Cooper, A. E.||Hornsby-Smith, Rt. Hn. Dame P.||Ridsdale, Julian|
|Cooper-Key, Sir Neill||Howard, Hn. G. R. (St. Ives)||Roberts, Sir Peter (Heeley)|
|Cordle, John||Howe, Geoffrey (Bebington)||Rodgers, Sir John (Sevenoaks)|
|Corfleld, F. V.||Hunt, John (Bromley)||Roots, William|
|Costain, A. P.||Hutchison, Michael Clark||Russell, Sir Ronald|
|Courtney, Cdr. Anthony||Iremonger, T. L.||St. John-Stevas, Norman|
|Craddock, Sir Beresford (Spelthorne)||Irvine, Bryant Godman (Rye)||Scott-Hopkins, James|
|Crawley, Aldan||Jenkin, Patrick (Woodford)||Sharpies, Richard|
|Crosthwaite-Eyre, Col. Sir Oliver||Jennings, J. C.||Shepherd, William|
|Crowder, F. P.||Johnson Smith, G. (East Grinstead)||Sinclair, Sir George|
|Cunningham, Sir Knox||Jones, Arthur (Northants, S.)||Smith, Dudley (Br'ntf'd & Chiswick)|
|Curran, Charles||Jopling, Michael||Smith, J. L. E. (London, W'minster)|
|Currie, G. B. H.||Joseph, Rt. Hn. Sir Keith||Smyth, Rt. Hn. Brig. Sir John|
|Dalkeith, Earl of||Kaberry, Sir Donald||Spearman, Sir Alexander|
|Dance, James||Kerby, Capt. Henry||Speir, Sir Rupert|
|Davles, Dr. Wyndham (Perry Barr)||Kerr, Sir Hamilton (Cambridge)||Stainton, Keith|
|d'Avigdor-Goldsmid, Sir Henry||Kllfedder, James A.||Stanley, Hn. Richard|
|Dean, Paul||Kimball, Marcus||Stodart, Anthony|
|Deedes, Rt. Hn. TV. F.||King, Evelyn (Dorset, S.)||Stoddart-Scott, Col. Sir Malcolm|
|Digby, Simon Winglield||Kirk, Peter||Studholme, Sir Henry|
|Doughty, Charles||Kitson, Timothy||Summers, Sir Spencer|
|Douglas-Home, Rt. Hn. Sir Alec||Lagden, Godfrey||Talbot, John E.|
|Drayson, G. B.||Lambton, Viscount||Taylor, Sir Charles (Eastbourne)|
|du Cann, Rt. Hn. Edward||Lancaster, Col. C. G.||Taylor, Edward M. (G'gow.Cathcart)|
|Eden, Sir John||Langford-Holt, Sir John||Taylor, Frank (Moss Side)|
|Elliot, Capt. Walter (Carshalton)||Legge-Bourke, Sir Harry||Teeling, Sir William|
|Elliott, R. W.(N'c'tle-upon-Tyne,N.)||Lewis, Kenneth (Rutland)||Temple, John M.|
|Emery, Peter||Lloyd,Rt.t-ln.Ceoffrey(Sut'nC'dfiela)||Thatcher, Mrs. Margaret|
|Eyre, Reginald||Lloyd, Ian (P'tsm'th, Langstone)||Thomas, Sir Leslie (Canterbury)|
|Farr, John||Lloyd, Rt. Hn. Selwyn (Wirral)||Thomas, Rt. Hn. Peter (Conway)|
|Fell, Anthony||Longbottom, Charles||Thompson, Sir Richard (Croydon, S.)|
|Fisher, Nigel||Longden, Gilbert||Thorneycroft, Rt. Hn. Peter|
|Fletcher-Cooke, Charles (Darwen)||Loveys, W. H.||Tilney, John (Wavertree)|
|Foster, Sir John||Lucas, Sir Jocelyn||Turton, Rt. Hn. R. H.|
|Frascr,Rt.Hn.Hugh(St'fford & Stone)||McAdden, Sir Stephen||Tweedsmuir, Lady|
|Fraser, Ian (Plymouth, Sutton)||MacArthur, Ian||van Straubenzee, W. R.|
|Gammans, Lady||Maclean, Sir Fitzroy||Vaughan-Morgan, Rt. Hn. Sir John|
|Gardner, Edward||Macleod, Rt. Hn. lain||Walder, David (High Peak)|
|Gibson-Watt, David||McMaster, Stanley||Walker, Peter (Worcester)|
|Giles, Rear-Admiral Morgan||McNair-Wilson, Patrick||Walker-Smith, Rt. Hn. Sir Derek|
|Gilmour, Ian (Norfolk, Central)||Maddan, W. F. M.||Wall, Patrick|
|Gilmour, Sir John (East Fife)||Maginnis, John E.||Walters, Dennis|
|Glover, Sir Douglas||Maude, Angus||Weatherill, Bernard|
|Glyn, Sir Richard||Maudling, Rt. Hn. Reginald||Webster, David|
|Godber, Rt. Hn. J. B.||Mawby, Ray||Wells, John (Maidstone)|
|Goodhart, Philip||Maxwell-Hyslop, R. J.||Whitelaw, William|
|Goodhew, Victor||Maydon, Lt.-Cmdr. S. L. C.||Williams, Sir Rolf Dudley (Exeter)|
|Gower, Raymond||Meyer, Sir Anthony||Wills, Sir Gerald (Bridgwater)|
|Grant, Anthony||Mills, Stratton (Belfast, N.)||Wilson, Geoffrey (Truro)|
|Grant-Ferris, R.||Miscampbell, Norman||Wise, A. R.|
|Gresham Cooke, R.||Mitchell, David||Wolrige-Gordon, Patrick|
|Grieve, Percy||Monro, Hector||Wood, Rt. Hn. Richard|
|Griffiths, Eldon (Bury St. Edmunds)||More, Jasper||Woodhouse, Hon. Christopher|
|Griffiths, Peter (Smethwick)||Morgan, W. G.||Woodnutt, Mark|
|Gurden, Harold||Morrison, Charles (Devizes)||Wylie, N. R.|
|Hall, John (Wycombe)||Mott-Radclyffe, Sir Charles||Yates, William (The Wrekin)|
|Hall-Davis, A. G. F.||Munro-Lucas-Tooth, Sir Hugh||Younger, Hn. George|
|Hamilton, Marquess of (Fermanagh)||Murton, Oscar|
|Hamilton, M. (Salisbury)||Neave, Airey||TELLERS FOR THE AYES:|
|Harris, Frederic (Croydon, N.W.)||Nicholls, Sir Harmar||Mr. Martin McLaren and|
|Harris, Reader (Heston)||Nugent, Rt. Hn. Sir Richard||Mr. Francis Pym.|
|Harrison, Brian (Maldon)||Onslow, Cranley|
|Abse, Leo||Greenwood, Rt. Hn. Anthony||Mellish, Robert|
|Albu, Austen||Gregory, Arnold||Mendelson, J. J,|
|Allaun, Frank (Salford, E.)||Grey, Charles||Mikardo, Ian|
|Alldritt, Walter||Griffiths, David (Rother Valley)||Millan, Bruce|
|Allen, Scholefield (Crewe)||Griffiths, Rt. Hn. James (Llanelly)||Miller, Dr. M. S,|
|Armstrong, Ernest||Griffiths, Will (M'chester, Exchange)||Molloy, William|
|Atkinson, Norman||Gunter, Rt. Hn. R. J.||Monslow, Waiter|
|Bacon, Miss Alice||Hale, Leslie||Morris, Alfred (Wythenshawe)|
|Bagier, Gordon A. T.||Hamilton, James (Bothwell)||Morris, Charles (Openshaw)|
|Barnett, Joel||Hamilton, William (West Fife)||Morris, John (Aberavon)|
|Beaney, Alan||Hamling, William (Woolwich, W.)||Mulley,Rt.Hn.Frederick(SheffieldPk)|
|Bence, Cyril||Harper, Joseph||Murray, Albert|
|Benn, Rt. Hn. Anthony Wedgwood||Harrison, Walter (Wakefield)||Neal, Harold|
|Bennett, J. (Glasgow, Bridgeton)||Hart, Mrs. Judith||Newens, Stall|
|Binns, John||Hattersley, Roy||Noel-Baker,Rt.Hn.Philip(Derby,S.)|
|Bishop, E. s.||Hazell, Bert||Norwood, Christopher|
|Blenkinsop, Arthur||Herbison, Rt. Hn. Margaret||Oakes, Gordon|
|Boardman H.||Hobden, Dennis (Brighton, K'town)||Ogden, Eric|
|Boston, Terence||Holman, Percy||O'Malley, Brian|
|Bottomley, Rt. Hn. Arthur||Horner, John||Oram, Albert E. (E. Ham, S.)|
|Bowden, Rt, Hn. H. W. (Lelcs S.W.)||Houghton, Rt. Hn. Douglas||Orbach, Maurice|
|Boyden, James||Howarth, Harry (Wellingborough)||Orme, Stanley|
|Braddock, Mrs. E. M.||Howell, Denis (Small Heath)||Oswald, Thomas|
|Bradley, Tom||Howie, W.||Owen, Will|
|Bray, Dr. Jeremy||Hoy, James||Padley, Walter|
|Broughton, Dr. A. D. D.||Hughes, Cledwyn (Anglesey)||Page, Derek (King's Lynn)|
|Brown, Rt. Hn. George (Belper)||Hughes, Emrys (S. Ayrshire)||Paget, R. T.|
|Brown, Hugh D. (Glasgow, Provan)||Hughes, Hector (Aberdeen, N.)||Palmer, Arthur|
|Buchan, Norman (Renfrewshire, W.)||Hunter, Adam (Dunfermline)||Pannell, Rt. Hn. Charles|
|Butler, Herbert (Hackney, C.)||Hunter, A. E. (Feltham)||Pargiter, G. A.|
|Butler, Mrs. Joyce (Wood Green)||Hynd, H. (Accrington)||Park, Trevor (Derbyshire, S.E.)|
|Callaghan, Rt. Hn. James||Hynd, John (Attercliffe)||Parker, John|
|Carmichael, Neil||Irvine, A. J. (Edge Hill)||Pavitt, Laurence|
|Carter-Jones, Lewis||Jackson, Colin||Pearson, Arthur (Pontypridd)|
|Castle, Rt. Hn. Barbara||Janner, Sir Barnett||Peart, Rt. Hn. Fred|
|Chapman, Donald||Jay, Rt. Hn. Douglas||Pentland, Norman|
|Coleman, Donald||Jeger, George (Goole)||Perry, Ernest G.|
|Conlan, Bernard||Jeger,Mrs.Lena(H'b'n&St.P'cras,S.)||Popplewell, Ernest|
|Corbet, Mrs. Freda||Jenkins, Hugh (Putney)||Prentice, R. E.|
|Cousins, Rt. Hn. Frank||Jenkins, Rt. Hn. Roy (Stechford)||Price, J. T. (Westhoughton)|
|Craddock, George (Bradford, S.)||Johnson, Carol (Lewisham, S.)||Probert, Arthur|
|Crawshaw, Richard||Johnson, James(K'ston-on-Huil,W.)||Pursey, Cmdr. Harry|
|Cronin, John||Jones, Dan (Burnley)||Randall, Harry|
|Crosland, Rt. Hn. Anthony||Jones.Rt.Hn.Sir Elwyn(W.Ham,S.)||Rankin, John|
|Crossman, Rt. Hn. R. H. S.||Jones, J. Idwal (Wrexham)||Redhead, Edward|
|Cullen, Mrs. Alice||Jones, T. W. (Merioneth)||Rees, Merlyn|
|Dalyell, Tam||Kelley, Richard||Reynolds, G. W.|
|Darling, George||Kenyon, Clifford||Rhodes, Geoffrey|
|Davies, C. Elfed (Rhondda, E.)||Kerr, Mrs. Anne (R'ter & Chatham)||Richard, Ivor|
|Davies, Harold (Leek)||Kerr, Dr. David (W'worth, Central)||Roberts, Albert (Normanton)|
|Davies, lfor (Gower)||Leadbitter, Ted||Roberts, Goronwy (Caernarvon)|
|Davies, S. 0. (Merthyr)||Ledger, Ron||Robertson, John (Paisley)|
|Delargy, Hugh||Lee, Rt. Hn. Frederick (Newton)||Robinson, Rt. Hn.K.(St.Pancras, N.)|
|Dell, Edmund||Lee, Miss Jennie (Cannock)||Rodgers, William (Stockton)|
|Dempsey. James||Lever, Harold (Cheetham)||Rose, Paul B.|
|Diamond, Rt. Hn. John||Lever, L. M. (Ardwick)||Ross, Rt. Hn. William|
|Doig, Peter||Lewis, Arthur (West Ham, N.)||Rowland, Christopher|
|Donnelly, Desmond||Lewis, Ron (Carlisle)||Sheldon, Robert|
|Driberg, Tom||Lipton, Marcus||Shore, Peter (Stepney)|
|Duffy, Dr. A. E. P.||Lomas, Kenneth||Short, Rt.Hn.E.(N'c'tle-on-Tyne,C.)|
|Dunn, James A.||Loughlin, Charles||Short, Mrs. Renee (W'hampton.N.E.)|
|Dunnett, Jack||Mabon, Dr. J. Dickson||Silkin, John (Deptford)|
|English, Michael||McCann, J.||Silkin, S. C. (Camberwell, Dulwich)|
|Ennals, David||MacColl, James||Silverman, Sydney (Nelson)|
|Ensor, David||MacDermot, Niall||Skeffington, Arthur|
|Evans, Alhert (Islington, S.W.)||McGuire, Micheel||Slater, Mrs. Harriet (Stoke, N.)|
|Evans, loan (Birmingham, Yardley)||Mclnnes, James||Slater, Joseph (Sedgefield)|
|Finch, Harold (Bedwellty)||McKay, Mrs. Margaret||Small, William|
|Fitch, Alan (Wigan)||Mackenzie, Gregor (Rutherglen)||Smith, Ellis (Stoke, S.)|
|Fletcher, Sir Eric (Islington, E.)||Mackie, John (Enfield, E.)||Soskice, Rt. Hn. Sir Frank|
|Fletcher, Ted (Darlington)||McLeavy, Frank||Sprlggs, Leslie|
|Fletcher, Raymond (Ilkeston)||MacMillan, Malcolm||Stonehouse, John|
|Floud, Bernard||MacPherson, Malcolm||Stones, William|
|Foley, Maurice||Mahon, Peter (Preston, S.)||Strauss, Rt. Hn. G. R. (Vauxhall)|
|Foot, Sir Dingle (Ipswich)||Mahon, Simon (Bootle)||Stross,SlrBarnett(Stoke-on-Trent,C.)|
|Foot, Michael (Ebbw Vale)||Mallalieu, E. L. (Brigg)||Summerskill, Hn. Dr. Shirley|
|Fraser, Rt. Hn. Tom (Hamilton)||Mallalieu,J.P.W.(Huddersfield,E.)||Swain, Thomas|
|Freeson, Reginald||Manuel, Archie||Swingler, Stephen|
|Galpern, Sir Myer||Mapp, Charles||Symonds, J. B.|
|Garrett, W. E.||Marsh, Richard||Taylor, Bernard (Mansfield)|
|Garrow, Alex||Mason, Roy||Thomas, George (Cardiff, W.)|
|Ginsburg, David||Maxwell, Robert||Thomas, lorwerth (Rhondda, W.)|
|Gourlay, Harry||Mayhew, Christopher||Thomson, George (Dundee, E.)|
|Thornton, Ernest||Wellbeloved, J.||Wilson, Rt. Hn. Harold (Huyton)|
|Tinn, James||Wells, William (Walsall, N.)||Wilson, William (Coventry, S.)|
|Tomney, Frank||White, Mrs. Eirene||Winterbottom, R. E.|
|Tuck, Raphael||Whitlock, William||Woodburn, Rt. Hn. A.|
|Urwin, T. W.||Wigg, Rt. Hn. George||Woof, Robert|
|Varley, Eric G.||Wilkins, W. A.||Wyatt, Woodrow|
|Wainwright, Edwin||Willey, Rt. Hn. Frederick||Zilliacus, K.|
|Walker, Harold (Doncaster)||Williams, Alan (Swansea, W.)|
|Wallace, George||Williams, Clifford (Abertillery)||TELLERS FOR THE NOES:|
|Warbey, William||Williams, Mrs. Shirley (Hitchin)||Mr. Sydney Irving and|
|Watkins, Tudor||Williams, W. T. (Warrington)||Mr. George Lawson.|
|Weitzman, David||Willis, George (Edinburgh, E.)|
That an humble Address be presented to Her Majesty, as follows:
Most Gracious Sovereign,
We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.