Economic Affairs

Part of the debate – in the House of Commons at 12:00 am on 26th July 1966.

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Photo of Mrs Margaret Thatcher Mrs Margaret Thatcher , Finchley 12:00 am, 26th July 1966

As a whole. Hon. Members on both sides have expressed their different personal opinions, but I think that my right hon. Friend the Member for Flint, West made the point when he said that if we were to devalue we would, of course, have to repay the colossal amount of debt at a very much higher rate than at the moment. There were severe penalties from devaluation on the last occasion. We devalued in 1949, and in 1951 we had the biggest rise in the cost of living that we have ever had. It hit pensioners extremely badly, and it was not until 1958 that we really managed to pull out the effects of devaluation and give real pension increases. I further believe that those who advocate devaluation are often seeking for a kind of "economist's stone" that will turn everything to gold. They want some simple solution to all our problems. I do not believe that there is ever a simple solution to be found, and it is certainly not that one.

I turn now to an analysis of the package presented to us. My right hon. Friend the Leader of the Opposition referred to the Chancellor's statement, reported in the Financial Times today, about his attitude to the wage freeze. There was, of course, another warning, this time by the First Secretary of State, reported in The Times of 4th July. The report said: Referring to a newspaper poll claiming massive support for a wage freeze, Mr. Brown said one course would be to halt all wage increases, but he did not think that was the way to do it.Even if it could be made to work, with all the unfairness involved to the lower paid, the freeze could not go on for ever and the position would be worse when it came off. The Government would still have to find the answer to making the policy work in the longer term.So I am not asking for the freeze. I am not saying that nobody should put up prices, declare increased dividends, and get increased wages and salaries. What I am saying is that they should all be examined '. So we are in the difficulty that it looks as though we are to have a freeze. The Prime Minister said that he would not enforce it by elaborate statutory controls, which presumably means that he is prepared to enforce it by statutory controls. My right hon. Friend the Leader of the Opposition thought that if it came it should be voluntary. The Prime Minister, then, is prepared to have statutory controls, the First Secretary does not believe in it, and the Chancellor of the Exchequer does not rate it very highly when he is talking to our European friends.

This scarcely seems the way to introduce a wage freeze or encourage the trade unions to take part in it. Moreover, on the day when it was announced the position was made extremely difficult, because those who had already had increases granted wanted to know what the position about those increases was and they were given conflicting replies. For example, Gas Council officials were insisting that the 4 per cent. award would be paid and Department of Economic Affairs officials were telling union leaders that they were stalling it. What a way to run a Government! What a way to try to inspire confidence in anyone!

I turn now to the cuts in expenditure for nationalised industries. It is difficult to analyse these, because they were given in detail only yesterday in answer to a Question, but I note that in the Sunday Times this week it was suggested that a reduction for the electricity industry of the size proposed would mean cutting right back on the work of reinforcing the local cable network. Cutting this expenditure would mean that the slightest accident or overload could black out a fair sized suburb, and one doubts whether it is wise to take that risk in these circumstances.

But perhaps the cut is more fictitious than real, as with a number of other proposals, but if there can be a cut of £24 million in the electricity industry without undue difficulty, as the Chancellor seemed to indicate at the beginning of the debate, it would seem to show that the electricity people have been very wasteful if there can suddenly be a cut of £24 million without any effect. At any rate, personally I think that these cuts should be viewed with considerable suspicion.

A year's advance payment for telephone rentals is to be demanded. Are old folk to be exempt from that requirement? Many of them must have telephones and need new telephones where they have not yet been installed.

The private building and office controls will not bite until 1967, which once again means that the Government are continuing the inflation until that period.

As various hon. Members from this side of the House have pointed out, there is a tremendous lack of incentives in the present package, in sharp contrast with Mr. Butler, now Lord Butler, when he had a similar situation to cope with from 1951 to 1953. It was noteworthy that in a poll published on 24th July, the majority of Britain's leading industrialists said that they would emigrate if they were younger men at the start of their careers. They felt that the present economic crisis was but one in a series of crises still to come.

This is perfectly true in the lack of an incentive policy in taxation. I note that there is a 10 per cent. charge on Surtax which will take Surtax levels almost back to where they were for one year in wartime. It puts up the top rate to some 19s. 3d. in the £, which is no encouragement to those extremely able people upon whom we depend. The hire-purchase restrictions and the regulator were expected. I have noted that the effect of the regulator will be reduced because of the action of my right hon. Friend the Member for Barnet (Mr. Maudling) in reducing Purchase Tax. In one of his Budgets he reduced the top Purchase Tax considerably.

Most of us regret the cuts in information services overseas. On hotels, we wish that the Government would make up their mind. They are doing away with investment allowances and have added the Selective Employment Tax to the difficulties of the hotel industry. Then they attempt to give a little bit back in loan assistance. I hope that the President of the Board of Trade or the Chancellor will give some clearer guidance to close companies. As the Chancellor knows, they are told to increase their dividends and they suffer considerable penalties if they do not. Who are they to believe? Are they to believe the latest statement that they must freeze dividends, or are they to believe the inspector of taxes who will tell them that they have to increase dividends at certain times? Ought we not to have a new Chancellor's umbrella? There have been a considerable number of positive proposals put forward on previous occasions. Many of us have said what we feel should be done to produce an efficient economy and to get the economy towards expansion once again and out of its present difficulties.

Many of these measures were taken by Mr. Butler, as he then was, in 1951, towards 1953, when he faced a deficit running at the rate of £800 million a year and faced a loss in the reserves in the second half of the previous year of some £547 million. He, too, announced an emergency Budget in November, followed by a very serious Budget in April. The following year he announced an incentive Budget and introduced cuts in taxation—a completely different approach and attitude from that of the present Government.

I would suggest that if we are to move forward once again we must concentrate on some of the policies of modernisation. This means dropping the new system of incentive grants, because these mean that allowances are given regardless of profitability. We believe that the old system was a good deal better. It means dropping the development levy on industrial development, contained in the Land Commission Bill, whereby an industrialist who develops his land has to pay 40 per cent. levy. This is quite absurd. It also means dropping the present Selective Employment Tax and premiums to industry, which would result in keeping in business those who are inefficient and who ought to go out.

That would mean that we should have a good deal more competitiveness in industry. If the Prime Minister is in earnest, he should instruct the Royal Commission on Trade Unions and Employers' Associations to report within six months, with a view to taking legislative action. I would suggest, too, that he tightens up the Restrictive Trade Practices Act along the lines prepared by the last Conservative Government, and deals with the taxation system which persuades top men and women to stay in Britain. We have had a very considerable deflationary package presented to the House. We have no lack of confidence in the British people, but we have no confidence whatever that this Government has either the will or the ability to put matters right.