Economic Affairs

Part of Bill Presented – in the House of Commons at 12:00 am on 27th July 1966.

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Photo of Mr John Horner Mr John Horner , Oldbury and Halesowen 12:00 am, 27th July 1966

The one service which cannot be paid by results is, we are grateful to know, the Fire Service. I do not wish to dwell on this issue, but I must point out that here is an example of the sort of problem that is facing us in the trade union movement.

I am referring to a union which cannot defend itself in the traditional way. It has wholeheartedly and without demur concurred with the early warning system and accepts that the matter should go to the Prices and Incomes Board. Yet we are obliged to tell the members of this union that, in the foreseeable future, there can be no productive results from the many months of negotiation that have taken place.

I would be prepared to go to my old comrades in the Fire Service and local government and my colleagues in the trade union movement and tell them that the urgency of the situation—the simple, dire necessity of the economic position in which Britain finds itself—obliges them to accept the present wage freeze if I could be satisfied that the total package of the proposals we are considering in this debate will do the job we are told they will do.

If, as the Chancellor of the Exchequer has affirmed, these proposals will ensure that the British people are released for good and all from the perpetual burden of economic crisis, if I could believe that this is the last crisis that Britain will have to face, and if I could accept the words of my right hon. Friend the President of the Board of Trade, that when these measures become operative we shall see "soaring exports", then I would be happy to go to my old colleagues in the trade union movement and local government and tell them that, unfortunately, they must remain clobbered. The hon. Member for Canterbury said that these things must be said in this House. I must, therefore, say that I have the gravest doubts about whether the package unfolded last Wednesday will do this job.

Yesterday, the Chancellor said that the deflationary measures alone would be sufficient to get us out of the "red" and that these measures alone would produce a substantial balance of payments improvement. The wage freeze, he said, was an additional element to get the totality of the measures right, and he added: Generally speaking, it is not true that our goods are over-priced in foreign markets."— [OFFICIAL REPORT, 25th July, 1966; Vol 732, c. 1473.]

In saying that, my right hon. Friend blew sky-high once and for all the oft-repeated piece of economic mythology that high wages have priced our goods out of world markets.

If this totality of the deflationary measures would do the trick, and if unemployment and statutorily imposed wage control which the new Prices and Incomes Bill must contain would guarantee the full development of the progress of social and economic advance enshrined in the Labour Party's manifesto—then I would find it possible strongly to contend that my friends in the trade union movement should accept that the wage freeze is an absolute necessity.

I will make my own position clear. supported the voluntary incomes policy. I believed that the early warning system, based on the co-operation of individual anions with the T.U.C., contained the first beginnings of a co-ordinated wages strategy that might finally develop as a rational alternative to the sectional partisan scramble that has characterised the traditional bargaining processes of wage fixing in British industry for so long.

It is hardly possible to exaggerate the significance of the change in trade union thought as exemplified by the early warning system managed by the T.U.C., I am anxious lest that opportunity for change should now be in danger; I am anxious about strain which will be placed on the structure of our industrial relations and on the loyalty of working people to the Government. I am concerned about the potential damage that can flow from a wage squeeze imposed from the top—injust and inequitable as it must be. It is this anxiety that provokes me to speak as I do.

I would defend these measures if I were convinced that the real nub of the problem facing the country was being tackled, but it seems to me that even in this debate my right hon. Friends are still blurring the issue; that the illusions are still clinging. My right hon. Friend the Chancellor of the Exchequer said that the best estimate of unemployment was that if it were spread evenly round the country it would represent little more than the movement of men between jobs.

I do not want to be unfair to my right hon. Friend the President of the Board of Trade, but last night he seemed to me to give the impression that the cuts in home consumption added up to only £500 million—say, a mere 2 per cent.—which was much less than the present annual increase in public consumption. As a consequence, one would be justified in concluding that the measures that have been put to us yesterday and today could almost be defined as part of Socialist planning. The fact is that they were forced on the Government by the total dependency of Britain on the continued support of foreign banks.

In June, the credits from the Bank for International Settlements were renewed to the tune of 1,000 million dollars. It was hoped that that sum would tide us over the next few months. The credits are to be reviewed every three months; Britain has to appear every three months before the Bank of International Settlements. The Bank's annual report on our economy, read in the light of last Wednesday's statement, can be seen to be no more than a preview of what the Prime Minister said.

It refers to the unduly high level of employment, the high level of public sector expenditure, the ineffectiveness of the incomes policy, the inadequacy of the Chancellor of the Exchequer's fiscal restraints—all these came in for severe strictures from the 12 banks which are now really determining Britain's policy. And I am bound to say that the statutory wage freeze we are being asked to accept is a genuflection made in the direction of the Bank of International Settlements. I ask whether these orthodox schemes now being spelled out in detail will do the job. It is thought that they will give us a breathing space, but every one of us knows that much more than a breathing space is needed. And after the breathing space—what?

I want at this stage to deal with two points that have already been touched on by some of my hon. Friends. The first is the position of sterling as a reserve currency, the problem of freeing ourselves from the historical straitjacket of being banker for nearly half the world's trade and, second, the problem of getting other nations to co-operate in an agreed solution to the problem of international liquidity, about which my right hon. Friend the Prime Minister has talked today.

We all know that this will take time. The Chancellor of the Exchequer has just returned from meeting his colleagues at The Hague, where the Finance Ministers of the 10 richest countries in the world discussed these problems. Almost every one of those other nations is running a credit squeeze designed to reduce its import payments, to control its overseas payments and to cut its investments abroad. All our own main customers are seeking to cut their imports. Deflation, unemployment, sound money—these are the criteria that were being applied at The Hague by the Finance Ministers this week in judging each other's economy. Can we, therefore, assume that the serious measures we are being asked to accept will just give us a breathing-space, after which there will be a surge forward of the nation's economy?

There is a real emergency here. Neither I nor any of my hon. Friends denies the deep-rooted nature of these problems with which we are seeking to grapple. Yesterday, the Chancellor, and today, the Prime Minister, spoke about the control of the export of capital. Yesterday, the Chancellor of the Exchequer said that even in present circumstances that control was adequate, but I put the following point to the Government.

Just before the Labour Government took over in 1964, the Bank of England published an analysis of the overseas holdings of British companies and private individuals. It showed a total of no less than £11,000 million. This had been accumulating over the 10 years prior to 1964 during which period the country was forced to deflate no fewer than three times. Of that total sum, £5,000 million related to subsidiaries of companies in Great Britain. The Bank of England showed a figure of £3,000 million in overseas portfolio investment—well over three times the total amount of our nation's present reserves, every penny of which we accept as being borrowed money.

I ask the Government to consider whether—since this crisis is so grave, and so much is at stake—it is not possible to face the political and economic challenge of nationalising the overseas portfolio investment of individuals. I make no reference to subsidiary companies. I would remind the House that, during the war, measures far more drastic had to be taken. If a cushion three or four times the size of our present reserves can be created, I ask the Chancellor of the Exchequer to consider creating it—