Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 4th May 1966.

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Photo of Mr George Brown Mr George Brown , Belper 12:00 am, 4th May 1966

It will take much longer if hon. Members interrupt me on points which I clearly have not yet reached. I shall deal with that matter.

The debate is, therefore, about the stated aims of policy—and our aims are different from those of hon. Members opposite. The right hon. Gentleman made that clear in the debate on the Queen's Speech and also when he spoke of what he called the right kind of choice and the right kind of choosers. One cannot debate the policies without taking into account the stated aims of the policies and the relevance of the measures which we are proposing as a means of achieving them.

Our economic strategy and the social aims which we want to achieve were set out in the National Plan which we published some time ago. This remains the blueprint for action and the central core of the Government's economic and financial policies. In the debate on the Queen's Speech, when I was not here, the right hon. Gentleman said that he would like me to explain what I meant by "implementing the National Plan". It means the Government and industry carrying out the action programme laid down at the end of the first section of the Plan in order to achieve the aims. A tremendous amount is now being done by industry, as well as in changing Government policies—and the major proposal in the Budget is one of these—in order to bring about the action which is required to enable the aims to be achieved.

It is clear that the Plan itself, as has always been stated, must be reassessed and revised in detail from time to time in the light of progress or the lack of it and in the light of developing information. This is being done this year. Indeed, it is being done currently with the participation of the National Economic Development Council and on the basis of the work and the inquiries which the Little Neddies are making. This will be discussed with industry, and the House and the nation will be told later in the year what is the assessment of the situation in the light of what we have done.

Next year we hope to roll, as I have explained, the whole five-year programme forward, and that will entail a major new industrial inquiry of the sort on which the first programme was based. The main task this year is to pursue with strength and determination the achievement of the action programme set out in the National Plan, and that is what I want industry as well as the Government Departments concerned to concentrate most on.

The right hon. Gentleman drew attention to the fact that the economy is growing more slowly than the average rate required to achieve the National Plan's objectives. That is true, and I do not dispute it. But it is not a new discovery. The total production last year compared with the previous year rose by about 2½ per cent. overall. It was higher than that for manufacturing industry and higher still for some parts of manufacturing industry, particularly engineering. But the fact that, overall, the average so far attained is less than we need, while worrying—and I do not hide that—and something that must act as a spur and not create complacency, is not new. Nor does it invalidate the aims we have set out for the period up to 1970. The National Plan itself clearly states this, and that is why I say that the right hon. Gentleman has not discovered anything new. The Plan says: The need to protect the balance of payments and the position of sterling … will involve some slowing down in the rate of expansion in the next year or so.The Plan will be kept under regular review in the light of developments …". It was, therefore, very clear that this situation was bound to happen if we were to tackle sensibly in a short space of time the balance of payments problem. What is clear also is that the achievement of the aims of the National Plan—and I make no bones about this and will be ready to answer for it—is absolutely essential if the nation is to have the resources necessary to accomplish the rise in social standards as well as in personal standards of living that are set out in the Plan.

If we fail over these next five years, it will not be merely that the Plan has failed or that those in industry and Government associated with it will have failed. It will mean that resources will not be there for all the things we are seeking to do, whether by way of personal consumption, improvement in social standards or overseas expenditure of any kind.

Therefore, overcoming the limitations imposed by our balance of payments situation has had to be a major immediate prerequisite. Until now, right through the period when right hon. Gentlemen opposite were responsible for Government, the problem has been that we have never been able to take the brakes off and maintain a rising rate of growth without running into an intensified balance of payments problem, thus forcing the Government to put the brakes back on in order to ease imports, which in turn forced growth to a standstill with the result that we were worse off when we started again.

Overcoming that sort of situation, with all its difficulties and consequences, was a major immediate prerequisite for the Government, and it is no use, I suggest to the right hon. Gentleman—not that I think that he was particularly guilty of this today, although the Leader of the Opposition has been guilty of it on occasion—from time to time changing one's stance, sometimes making the balance of payments situation one's whole concentration and at other times making the rate of growth one's whole concentration. These two things impinge upon each other and one must take a balanced view of them.

What is so silly is this continued presentation, which I do not mind very much, for it adds to the gaiety of life, of an alleged conflict between my right hon. Friend the Chancellor of the Exchequer and myself that is supposed to be going on all the time. What in fact goes on is a balanced view of these two requirements and the need to see that one is dealt with without inhibiting the achievements of the other—which is as much my right hon. Friend's concern as it is mine.

The Committee will not need to be reminded of the unprecedented severity of the balance of payments crisis which the nation faced in 1964 at the end of a very long and tedious period. In the past, such crises were dealt with in one of two main ways, either by devaluing the currency, with all that that involves, or by imposing deflation—in other words, by deliberately reducing the country's ability to produce and so creating substantial unemployment.

Although I note the protestations of the right hon. Gentleman—in a television programme in which he and I took part some time ago he said that he thought that I had been unfair to him on this—and having heard the Leader of the Opposition yesterday, I still hold the view that the logic of their case is that they still believe that the second of these two courses is the one that ought to be adopted.

Rightly or wrongly, this time we were determined that we would do it differently. We recognised that we could solve the payments crisis if we wanted to by pushing deflation far enough. We also recognised what the cost would be. We have, therefore, tried for the first time to solve the balance of payments crisis without jeopardising the country's long-term advance.

None of us will deny the complicated nature of the struggle to avoid the short-term being the enemy of essential longer term policies. Nor will anyone deny the conflicts inherent in it. We have lived with the problem too much to be foolish enough to do that. But let the Committee also recognise that we have already gone a long way in managing to balance the two things. As my right hon. Friend said yesterday, we have halved the balance of payments deficit, maintained the rate of investment in industry, improved the social services, strengthened the country's growth potential and maintained full employment. We are proud of this achievement, and I say to the right hon. Gentleman that the picture he has presented is a traversy of what we have achieved, amidst all the difficulties, over the last 18 months or so.

But I do not deny, if it is any value to the right hon. Gentleman, that the battle for a permanent solution of our problems is still on and that we have some way to go before we can claim that we have solved it. The extent of our success so far is not a reason to get gloomy and pessimistic, however, but to be encouraged to believe that it can be maintained.

The further measures on the export of capital which my right hon. Friend announced yesterday are, of course, part of the whole consistent strategy. I noted the reaction opposite yesterday when these were announced, but frankly, I believe that the Opposition get this wrong. Of course, exports of capital building up new assets overseas can be very beneficial to the country in the right circumstances and at the right time. But it is no use borrowing long and lending short—[Interruption.] I beg your pardon—borrowing short and lending long for this purpose. Having made that verbal slip, I have no doubt brought the fact more clearly to the notice of right hon. and hon. Members opposite and I am encouraged by the speed with which they corrected me, which shows how they are following the argument. It is no use borrowing short and lending long. It is no good continuing to invest money that we have not got. One can do this for a time by borrowing from others, and that is exactly what the last Government did. But in the end one is forced to take action.

I say to the right hon. Member for Enfield, West that it seems pointless to argue for keeping our own people and our own assets at home under-employed and under-used in order to create new jobs and new assets overseas. I see the value of overseas capital investment, but in circumstances in which we cannot have both home and overseas investment the choice which the party opposite has made has been the opposite to the one that should have been made. If one does not take the right choice in these circumstances one has to impose restrictions of other kinds. The import surcharge was an example of a restrictive measure forced on us by pre- cisely the consequences of the kind of policy the right hon. Gentleman continues to advocate.

My right hon. Friend the Chancellor of the Exchequer and I, when we had the thankless task of announcing the import surcharge shortly after we took office, never saw the import surcharge as a desirable measure nor as a permanent measure. It simply seemed to us to be the least objectionable measure available to deal with part of a situation which could not be sustained and while longer-term measures had time to take effect. It has played its part in building the strength we have now got and therefore we have been able to decide that, in the interests of our trading relations, the surcharge should be removed at the end of November.

Our ability to do this reflects the strength we have built up since October 1964, but the necessary continued improvement in our position which will be required to sustain the situation without the surcharge is also, of course, partly dependent upon the other actions related to our balance of payments problem described by my right hon. Friend.

I think that the right hon. Gentleman did himself less than justice in his speech, because it is no good saying that one is pleased that the imports surcharge is to come off and then attacking the very policies that created the situation in which that could be done. Unless one pursued such policies, one would either have to retain the surcharge or replace it by something which might be equally or even more harmful to international trade. The ultimate and positive road to success is through an even better export performance.

Restrictions can never be a positive road to success in trade—that is clear. If my right hon. Friend the President of the Board of Trade catches your eye, Sir Eric, he will set out in detail ways and means that the Government have sought to give new assistance to manufacturers and to others to export. A great deal has been done during the last 18 months, as can be discovered from the reports from export promotion bodies and the National Economic Development Council.

I want to make it clear that the Government are actively considering now what further changes we can bring about to stimulate exports. We have to recognise the obligations that rest upon us under the General Agreement on Tariffs and Trade and other international agreements to which we are a party. Even so, we must find new ways, and are continually trying to do so, of giving more positive assistance to exporters. That is relevant to what we are discussing today.

It is clear that the nation is relieved that we are not adopting the old stale remedies. I think that the right hon. Gentleman was ill-advised to look down his nose at the idea that the country has this sense of relief. I think that it has. But I do agree with him that one wants the country clearly to understand that if we are to get our balance of payments right in the long-term and succeed in positive measures, it is no use just having a sense of relief because certain tax increases were not made. There must be a recognition by everyone in the country and in industry that we need urgently a much greater rise in productivity than we are currently getting.