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 David Howell Mr David Howell , Guildford 12:00 am, 27th July 1966

Although I am of Welsh ancestry, I feel that, reluctantly, I must drag the House away from this fascinating quarrel in the Principality and back to the main theme of the discussion. I interpret the main theme as one which has concentrated—and this is very encouraging—on where we go now rather than how we have got here. We have heard much analysis of the past from some hon. Members, but most of the valuable contributions from speaker after speaker have concerned the question: what do we do now in the economic crisis? It is heartening to see how constructive they have all been, and constructive in a direction which is contrary to that taken by the Government Front Bench.

Indeed, it is extraordinary how every one appears to be out of step except the Government Front Bench. The public is out of step, hon. Members on both sides of the House are out of step, commentators in the Press are out of step and the Government, such as they are, are right. I feel that they could be left with a motto from Edmund Burke—that we have a very good Ministry and a very bad people.

It is not surprising that a number of hon. Members have said that there is this almost universal line-up against the proposals which the Government Front Bench have put forward because, in essence, in looking to where we go now, what the Government have put forward is the same as before. We have reached a major turning point, a watershed, in politics and in public debate about economic matters—a time when a great deal of new thinking is coming forward, many valuable contributions to economic debates are being made and many hon. Members on both sides of the House have some genuine, new ideas to contribute to the management of a modern full-employment economy, combining that with other economic aims.

At such a time the Government Front Bench have come forward with two main proposals which are, in essence, along the old lines. The first is for a primitive, overall restriction, an attempt to hit demand on the head. I personally believe—I may not speak for all my hon. Friends—that this is a discredited approach to the management of a full-employment economy. The second idea is a development of the incomes policy carried to its logical next step, a wage freeze. This, too, is a discredited approach. It has no relevance either to the question of short-term economic management and to the longer-term question of trying to bring flexibility and a reformist element into our wage and salary structure. It does not surprise rite that we have had almost all-round opposition to the two main ideas which inspire the latest dose of Government measures.

Nor do I think that it is of any great value for us to suggest that some other instant 10-point package or alternative remedy can solve our problems at present. In a sense we have had enough instant policy and enough superficial 10-point packages. It could be argued that it is precisely this kind of approach, this "off-the-cuff" thinking which has led the country into the present difficulty.

The point which I regarded as particularly interesting and important in the speech of my right hon. Friend the Member for Barnet (Mr. Maudling) was that there was a need for calmer and deeper thought on these very complicated questions, that we must get away from imagining that it could be done by packages and 10-point policies trotted out by any hon. Member or by any expert outside who cares to try to command a platform.

Now may I put before the House two points on which, to my mind, deeper thought is particularly necessary and in which some intellectual break-through must be made if we are to make an effective contribution as politicians to the resolution of our economic problems? The first is that our aims are varied and diverse. Perhaps it is rather obvious to say that we have many economic goals, such as the management of a full-employment economy, the achievement of cost-price stability and the whole question of raising low incomes. But this does mean that we must approach the problem sensibly. It is no good coming before the House or the public with economic policies contained in slogans.

The slogan and the banner which have been waved before us for some months is that the whole issue is one of incomes policy versus widespread unemployment. I always thought that this was very dangerous and silly. Now that we have an incomes policy of a developed kind and prospects of unemployment, it looks sillier still that this choice should ever have been offered to us.

It is even more absurd that the Government have embarked on a policy in which an essential element is unemployment, or an increase in labour reserves. Yet, because they regard this as a "horrific and unthinkable" alternative, they are totally unprepared to operate an economic policy which has this element in it. The retraining facilities required for the kind of policy on which they are embarked do not exist. The attitudes, the facilities, the redirecting and redeploying of labour all require very careful and very detailed planning measures. These do not exist, because until a few days ago the Government had put the whole question of unemployment in the emotive and unthinkable category. Hence they are caught in a very dangerous position.

It is incredible, but I have never seen a set of generals or staff officers proceed on a campaign with so little information, so few statistics, so few maps of where they are going or the terrain which they will cross, or so little knowledge of the kind of enemy they will encounter or the objectives of the campaign. That is what we are now embarking on—a Government policy in which the Government have taken no precautions and have ruled out of their thinking the need for precautions and facilities to assist the implementation of the policy.

What it all amounts to is that the two words "incomes policy", which have so freely been thrown about by many people on both sides of politics, are no substitute for detailed fiscal and monetary management, which is a much more difficult concept to grasp. Everyone has learned Part One economics—the familiar aggregates, incomes policy, wages, unemployment, Budget surpluses, and so on—because these are relatively easy things to grasp. I have no doubt that even right hon. Gentlemen opposite were able to learn those prior to the 1964 election.

When we move on to the Part Two economics, so to speak, things become more difficult because one must learn about sophisticated ideas of controlling demand through time; about such things as the timing and structure of measures to control demand. This is a far more difficult and complex task and the more one listens to members of the Front Bench opposite the more it becomes clear that a good deal is lacking in their absorption of the economic ideas contained in Part Two economics, some of which I gather, was rather hurriedly learned prior to the 1964 election. It seems that they stopped dead at the end of the easy part—about aggregates, wages, unemployment, and so on—without finishing the course and moving on to Part Two.

The hon. Member for Stoke-on-Trent, Central (Mr. Cant) made this point with lucidity. I thought that his speech represented a ray of sense and clarity from the benches opposite as he went over some of the economic policies which the Government should be pursuing if they are to achieve the objectives which we all desire to see.

Now, I have outlined the first fundamental point which it is important for the Government to grasp and I move on to the second. It is that if, as politicians, we want to be effective in contributing to the nation's economic recovery—which must be made, and of which this country is perfectly capable—we must come out of our ideological foxholes.

I will give two examples of what I have in mind. The first concerns the public sector, about which a great deal of debate in the House and outside is now raging. But it is being conducted in sadly primitive terms. One group is saying that public spending is all perfect while the other group is saying that it is all bad, and that is about as far as the argument goes. But it is no good, in a mixed economy, having such dogmatic attitudes about public spending, saying that it is good and that anyone who opposes it is evil and that we must leave the present state of the public sector as it is.

The problem of public spending lies at the heart of both our short and medium-term difficulties. We must inject into the public sector, as well as private, some radically new thinking. After all, the public sector is the one sector of the economy that has been growing during the past year and will, apparently, go on growing in the coming year. By my calculation, it will take up to 1½ per cent. to 2 per cent. more of the gross national product, which itself will be stagnating, if not contracting.

In other words, all the extra resources that we have, after the Government's measures are enforced, will go into this sector of the economy. Yet this is the one area where the rays of managerial enlightenment have hardly penetrated, to judge from what has happened so far. They have hardly penetrated the primitive, dark forests of Whitehall where all sorts of activities go on under the name of "management". It really is essential to look coolly and long at the public sector and apply the techniques to it which are available and which could score colossal savings and increases in national efficiency.

The second place where we need to come out of our present prison of ideas concerns the private sector. Here, too, it is no good looking at the general question in terms of it being either good or bad. Hon. Gentlemen opposite may have views on how big or small a private sector they want. Some say that it should be much smaller than it is, while others say that it should disappear altogether. But once they have decided on the size of private sector they want they must be prepared to pursue policies which will make that part of the economy left in the private sector really work well.

It is no good merely having private sector and unless, at the same time, you introduce policies which will make it efficient. If we are to have a vibrant, efficient and enterprising private sector—and I personally believe that it should be considerably larger than it is at present—it is absolutely essential that the Government pursue policies to make that possible and not policies which can only make it impossible.

It may be said that this is a simple point. However, it is fundamental to our difficulties. Because until we make up our minds about the relative size of the public and private sectors and pursue policies to make both perform with the maximum efficiency, a great deal of muddle will permanently undermine the country's efficiency and condemn us to limp from one crisis to another.

If those two fundamental thoughts are grasped bravely by the Government, it would be possible to combine effective and active Government—remembering that the days of passive Government have gone—with free and highly efficient private enterprise, instead of having rather feeble Government trying desperately to sit on free enterprise and then complaining that it is not doing its job.

It has been said that any revolution of attitudes, which is what we require if we are to get out of our economic difficulties, must be preceded by a revolution in the dictionary. I suggest that our first task, if we are to get on the road which leads to an expansionist economy, is to clear away some of the mumbo-jumbo surrounding what was called "new thinking" when Labour came to power. This is now utterly discredited and is out of line with the kind of thoughts and idea which we should be developing.

Unless the Government realise—although, perhaps, the present Government never will—that slogans are not economic policy and that phrases like "incomes policy" and "purposive planning" repre- sent escape routes from the realities of modern economic management, they will never be in the position in which the real obstacles can be faced and we will never escape from the mists of all this verbiage. We will never achieve the momentum we require.

Perhaps I am being staggeringly obvious in saying that we do not have a labour shortage. We certainly have the problem of overmanning, but this represents a labour surplus. It has been going on for a considerable time. If we solved this problem we could bypass the whole question of the dangers of overheating, with the need continuously to cut back demand. This should appeal to hon. Gentlemen opposite, because if we could solve this problem it would benefit all concerned. Certainly, we should attempt to solve it rather than continuing to argue about unemployment or about being unfair to trade unions.

We should concentrate on the question of overmanning but, with it, we must consider the question of the present low incentives to save and work. Tremendous emotions are roused when this topic is discussed, but we must face the fact that there is a lack of incentives, monetary and others, to high wage earning, high saving and the sort of stimulus we want to see. The third obstacle is the one to which I have referred, efficiency in the public sector. This problem is not insoluble. It is a question of applying the best managerial techniques to public spending.

Above all, however, the real obstacle, which has become sadly apparent in the last few days, is the fact that right hon. Gentlemen opposite have failed to grasp the techniques of demand management, techniques without which the chances of getting out of our present difficulties for more than a few months at a time are very slight indeed.

If ever there was a need for a cool and calm look to be taken at the question of economic policies it is now. We must get away from the cry, "Either this package will do, or there must be alternatives; either it is a 10-point plan, or we must think of something else." Until the Government realise that all the 10-point plans in the world cannot take the place of real policies, we shall continue with a debate which, while interesting and sometimes amusing, in terms of the public interest and of a strong British economy is not particularly valuable.