Orders of the Day — Clause 15. — (Continuation of Powers Under S. 9 of Finance Act 1961.)

Part of the debate – in the House of Commons at 12:00 am on 16th June 1966.

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Photo of Mr David Howell Mr David Howell , Guildford 12:00 am, 16th June 1966

Like my hon. Friend the Member for Oswestry (Mr. Biffen), I am hesitant about being identified as being enthusiastic. The real reason why I am here is that I am a pessimist about the Chancellor's capacity to understand the critical nature of the present economic situation and about his capacity and that of other politicians to understand the real policy and the real approach which is necessary for the economy if we are to jack ourselves up into the high-growth league where alone we will find stability and escape from the recurrent economic crises with which we have been faced in recent years.

The Clause raises two questions which are related to that point and which I would like to put forward. The first, which has to some extent been covered in the discussion, is whether the Chancellor will be forced to use the powers in the Clause in the coming months. The second is whether he ought to use those powers in the coming months. As to whether he will be forced to do so, I have little doubt. I think that he will. He has left himself little choice in the matter.

As has been suggested, the Chancellor or somebody else will have to compensate for the erratic impact of the Selective Employment Tax upon the economy, and there is no doubt that if we are to move towards a more sensitive control of the level of demand, some compensation for this very erratic impact will be needed. That is one reason why the Chancellor has very little choice in using it.

Another reason is that the Chancellor's arm will, I have no doubt, be twisted, if it is not already being twisted, by foreign creditors on the undeniable ground that the prices and incomes policy is not "delivering the goods" and is not working and that something must be done. For these two reasons, I think that we will see the Chancellor forced into the position that he has little choice but to use the economic regulator and the powers contained in the Clause.

The second question is one to which the Committee should give much closer attention, because it goes much closer to the heart of the problem of whether the Chancellor's method and approach in the management of the economy and his use of the powers of the Clause are right and whether he should use the regulator to reduce the level of demand in the coming months.

The National Institute of Economic and Social Research has called the Chancellor's policy a counsel of despair. My belief is that if in the coming months we see more cuts in the level of demand, that charge will be still more deserved. 'The figures which we have heard from he survey of industrial trend by the Confederation of British Industry on the possibilities of a downward turn in investment, in new plant and equipment, which is the key to our economic efficiency and future exports, reinforce that trend and reinforce the view, which is gaining widespread assumption and belief outside the House of Commons, that he golden day when expansion can be resumed, about which we hear so much, is receding further and further into the distance until it seems that it will never come.

In asking about the powers of the Clause, what I am really saying is something which has been said many times before by hon. Members on both sides, particularly by hon. Members opposite in the days when they were campaigning before the return to power of a Labour Government in 1964, that these methods, this power and other methods for cutting back internal demand are only a substitute, and a very poor and self-defeating one, for a concerted economic programme to raise efficiency, inspire confidence and put us back into the high productivity situation in which alone we will achieve price stability and less vulnerability to international crises.

I accept, with my hon. Friends, that we cannot run the modern economy in an overheated stage; that is common sense. The answer, I believe—and I may not have agreement in this from either my own side or the other side of the Committee—is not to go back to the primitive reaction of slashing demand either by this power or by other powers. That never has been, and never will be, the answer. The answer, if we are seeking a higher labour reserve, is to look at the economy and see that far from there being a shortage of manpower, there is a vast surplus of manpower. If we can devise a means of overcoming the problem of over- manning and really shape our manpower resources, we can get away from the old arguments about the shortage of labour. We must try to attack the level of demand to convince people that something really constructive is being done, possibly to control inflation and certainly to please our creditors overseas by demontrating that something is being done.

12.45 a.m.

If we recognise that the problem is over-manning and not just a shortage of manpower, it should be possible to combine a rapid increase in output and growth. This is the secret of price stability, leading to a fall in unemployment, and thus by-passing the whole overheating problem and producing all the labour that is needed.

However, the proviso and crux of the matter is this. To launch this expansionist policy—to get out of the dreary situation in which we see miserable rates of growth and productivity—we need an economic and social policy which is concerted. It is hopeless to attempt to follow an expansionist policy if the Government of the day are not prepared to attack the manpower problem by going to the heart of it, which is restrictive practices. It is equally hopeless to try to follow an expansionist policy if the Government are not prepared to make the tax changes necessary to provide the right incentives to put us into the high productivity league.

As to the Clause and the regulator, as long as the Government refuse to tackle the problems I have described on a concerted basis so long are we condemned as a country to these primitive weapons of cutting back internal demand—not only primitive weapons but self-defeating ones. I say that because in the long run any Government who use only such primitive weapons will merely be leading us from one crisis into another, will discourage investment in the plant and equipment—not forgetting brain power and imagination—which will produce the exports which sell tomorrow and which alone will solve our export problem. Only the sort of expansionist policy I have described will prevent us from being held back and will postpone the day when we can achieve the very high productivity and stability which goes with it and is inseparable from it.