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 John Nott Mr John Nott , St Ives 12:00 am, 4th May 1966

The St. Ives division of Cornwall, covering the Isles of Scilly and the Land's End and Lizard Peninsulas, together with the towns of Penzance, St. Ives, Helston and St. Just, must indeed be one of the most beautiful constituencies in the whole of this country. But, as well as beauty, it has a great and fascinating history, because for centuries the Cornish people were cut off from the mainstream of life in these islands, and they earned a bare living from the land, the sea and the tin which still lies unexploited in the granite rocks today.

Even today West Cornwall is in some strange way another world, because it has a sense of community life and a real feeling for religion which is so absent in some of the great towns of this nation. But I am afraid that men's stomachs cannot be filled with the view, nor can they be filled with history. The fact is that we in West Cornwall have about the lowest incomes of the whole of the country. The average wage, which is difficult to calculate in Cornwall, is somewhere in the region of £12 a week, against a national average of £19. We have a large elderly population whose savings have been eroded by constant inflation. This situation is aggravated by the fact that our distance from the main towns and centres of population means that the cost of living is also much higher than it is in most other parts of the country. There is, therefore, considerable poverty in West Cornwall, and I, of course, would like to see it corrected under the regional policies of the present Government. It is a sad commentary on the state of our communications that I find it quicker to go from my office in London to New York than I do to go from this House to my constituency which is only 300 miles away.

I hope that during the course of our coming debates I shall have an opportunity of raising a whole host of matters which touch upon the prosperity of West Cornwall and my constituency—in particular—communications, roads and railways. I hope to ask the Chancellor of the Exchequer, in due course, how it is possible to reconcile policies of regional development with the abolition of tax allowances for tourism and with the variable employment tax on services which was imposed yesterday. How is it possible to reconcile regional development with the abolition of tax allowances for tin mining, for sinking new mineshafts? Our tin saves about £2 million a year on foreign imports. I should like to ask why it is that our industry, primarily light industry, which was previously in a development district and is now in a development area, should be worse off than it was before. I welcome the Government's regional development policies, but I do not see as yet that we have derived any advantages from these policies during the last two years. However, these are controversial matters, as indeed is the variable employment tax, and, therefore, I will not touch on them today.

We are still a great nation in terms of national wealth, primarily due to the thrift and foresight of our ancestors. But much of our inheritance and, in particular, our investment in plant and machinery is woefully out of date. I also, like the hon. Member for Ashton-under-Lyne (Mr. Sheldon), was dismayed at yesterday's statement that private investment is holding up well. This is not good enough. What we require in this country is a vast increase in industrial investment so that our industry can be modernised and put on a more up-to-date footing.

The basic problem in this country is that although we are an inventive nation and although our businessmen are not as stupid nor our working men as lazy as some people would have us believe, every time industrial investment in this country really gets going, the economy overheats, imports rise and so we have another balance of payments crisis on our hands and a consequent deflationary Budget along the lines of the one presented yesterday.

For the past seven years I have worked in a City merchant bank, and I was delighted to hear the First Secretary say this afternoon that one of my colleagues has been appointed managing director of the proposed Industrial Reorganisation Corporation. Although I do not wish to prejudge or comment upon the idea of a State merchant bank, I nevertheless know that the Government have made an excellent appointment. I believe that the Government are in need of expert financial advice, because one small matter struck my eye in the newspapers of the last two days. It was the announcement that the British Government's holding of Amerada Petroleum shares, sold for approximately £30 million a few days ago by the Government, was bought by an American company called the Hess Oil Company, and yesterday on the New York Stock Exchange the shares of Hess Oil rose by nearly 30 per cent. The new York Stock Exchange went down yesterday by about 10 points, but the shares of the company which bought the British Government's holding of Amerada Petroleum shares rose by nearly 30 per cent. Certainly the American public seemed to think that the British Government conducted rather a poor transaction in this case.

I hope in coming debates to be able to play some part in financial, banking and fiscal matters of which I have some small experience. But today I should like to concentrate on the two basic problems which beset this country. First—I do not want to dwell on this matter—there is the whole problem of export incentives in this country. I do not believe that we yet have proper export incentives. But this is a whole subject in itself, and what I want to mention briefly now is the other side of the balance of payments, namely our imports into this country and the whole question of currency saving which is so vitally important.

This is vital because our imports and currency saving are so much more under our control—perhaps "influence" is a better word—than are the export markets into which we sell our goods. In 1963 we imported £700 million worth of temperate food products, and without much difficulty we could undoubtedly have grown in this country £250 million worth of these temperate food products ourselves. It seems to me that the days have gone when this country was the natural exporter of manufactured goods. If only we were to adopt a positive agricultural policy in this country, rather than a restrictive agricultural policy, there is little doubt that within a period of years we could grow at least £250 million worth of those temperate food products ourselves to the huge benefit of our balance of payments. We must give greater consideration to encouraging, by greater investment, those industries in this country—tourism is another example which would save us foreign currency in future years.

But, even assuming that export incentives and currency savings could really correct the basic disequilibrium in our balance of payments, there is then the second most important matter—the hon. Member for Ashton-under-Lyne referred to it—the whole question of encouraging industrial investment. This can be done only by a huge switch from consumption to investment, and I do not believe that the Budget presented to the House yesterday will achieve this object.

Today, the monopoly power of the unions is such that the wage earner is protected against inflation. I do not imagine that anyone will deny that that has been so, certainly over the past year. But savers in this country have no protection against inflation. When a person who has saved a few pounds out of his taxed income and done his best to invest them in order to protect himself against inflation comes to sell that investment, he has to pay tax again, Capital Gains Tax, on what, very often, is a loss in real terms. This is not generally realised. It is an absolute nonsense to have a situation in which people are paying a tax on losses, losses in terms of the real value of money. No amount of gimmicks with National Savings Certificates or anything else will correct this problem because National Savings Certificates draw savings out of one source into another.

What we must do is persuade the British public to save where it is not saving now. We must increase the propensity to save of the British public. This is the only way by which we can really encourage and expand industrial investment. It was the inability of the middle income groups in other countries—Germany and Austria are two examples—which caused the disintegration of these societies before the Second World War. It was the inability of the middle income groups to protect themselves against inflation which was among the prime causes as, I think, most historians will recognise, of the rise of Fascism in Germany. I do not for a moment suggest that that could happen here, but, if people are unable to save and protect themselves against inflation, it could have serious effects upon our whole society.

I fear that, in attempting to check and catch 300 speculators, we are in process of decimating 3 million small savers, yet it is upon these small savers that the economic survival and prosperity of this country will largely depend.