Of course, that raises a problem.
There have been three crises—the crisis of November, 1964, that of July, 1965, and that of July, 1966. On each occasion the solution has been dictated either by the bankers, or by the attempt to estimate how the bankers would expect us to act, which amounts to the same thing. These were financial crises in which we took measures which cut across the basic economic solutions.
This was again the answer to the crisis of July, this year, and the answer is basically supported by the Tories. The right hon. Member for Enfield, West (Mr. Iain Macleod) tells the Government not to listen to the siren voices calling for reflation, and so the Opposition have no ground from which to criticise our Front Bench. They pull them in the direction in which they would have gone.
The deflation, which we were pleased to hear the Lord President of the Council, two weeks ago, begin to question, has now reached a situation in my country—and if I may say "my country" it follows the speech this afternoon of the hon. Member for Inverness (Mr. Russell Johnston), and today is St. Andrew's Day and also the birthday of John MacLean, the great Scottish Socialist, a very good combination—[Interruption.] If the hon. Member for Peterborough (Sir Harmar Nicholls) wants to interrupt, at least he should not do so beyond the Bar of the House.
In my country there are now 78,000 unemployed and the Scottish Trades Union Congress has predicted that by Christmas the number will be 90,000. The tragedy is that this unemployment has been largely in the areas of growth to which we in Scotland have devoted so much time and effort.
From hon. Members opposite we have heard nothing of the sort of thing which was instanced by the demonstration of working-class solidarity by the people in my constituency who are working short time, three days a week, and by the unemployed men in the same villages who contributed so generously to the people of Aberfan. I would like the Government to display something of that kind of working-class solidarity by taking measures not to suit the foreign bankers, but to meet the requirements of the people.
The deflationary methods cut across the long-term economic solutions, because the long-term economic solutions require increased productivity and increased growth which the deflationary methods have hammered. Secondly, the deflationary methods have too great a social cost. That is shown even by the figures of the previous squeeze, the "Selwyn Lloyd" freeze, when, to cut imports by one or two points, the economy was hammered to the extent that 136,000 people became unemployed and the moment the squeeze was removed, import figures shot up.
In 1961 and 1962, there was a fluctuation of only one or two points in manufacturing imports, but immediately the squeeze was taken off, imports—the pre-election boom—shot up to 141 points, so that we had a long period of intense unemployment in certain areas and basically at no saving to the long-term balance of payments position.
Deflation is an inefficient weapon. It works at an efficiency rate of 1:5 instead of 1:1, as would be the case with the use of import controls, or other types of cuts. The real balance of payments crisis is not a trading problem alone. There is a trading problem and there is a real balance of payments problem, but the balance of payments problem is largely not caused by our trading position, but by external expenditure overseas.
I shall be told that this is an old record, but it is an old record which is well worth playing. One of the biggest reasons for our overseas expenditure is the permanence of the illusion that we remain a military power. It is no use the Government saying, as we so often have been told—and that is an old record—that we cannot look for a solution to cuts in defence expenditure because such cuts take too long to work through the economy. I do not accept that. When military expenditure is planned for years ahead, the expenditure is put into the economy now and decisions taken for years ahead would begin to have an immediate effect if military orders were not placed.
Finally, if we are worried about the credibility of the£—and the bankers do not have an international conspiracy to bring down the Labour Government, as one or two of my hon. Friends sometimes imagine, but are concerned with preserving their profits and therefore the credibility of the £—that credibility would be restored by hard decisions to cut military expenditure overseas. That is one of the alternatives which could be used to deal with this "phoney" aspect of the so-called balance of payments crisis.
There is another matter on which I wish only to touch, because I know that one of my hon. Friends will want to deal with it at greater length. On three occa- sions with these crises—this is certainly true of the measures of July of this year—we have had expanding unemployment with cuts in productivity and in production and in investment, while all the time we have had thousands of millions of pounds' worth of overseas assets which potentially could belong to this country.
No one suggests that we should nationalise all British assets held abroad. No one suggests that we should whip back £9,000 million worth of assets of this kind. What we are asking the Government to do is to explore the position, to look at the nature of the holdings, and to see who owns them, and to see whether, on a £ for £ basis—I am not even asking for bad terms of compensation—some of these assets could be sold to deal with the payments deficit.
We must not maintain the illusion of the great return which comes from these assets when the cost is lower productivity here. We should deal with the overseas portfolio. I shall be told that that cannot be done and that to try to do so would create problems and that we should be accused of nationalisation. The people of my constituency would not be at all worried about being told that they were taking over holdings of this kind and nationalising them.
I am told that the Scottish insurance companies have a great deal of money invested in these holdings so that we could not take them over and that Scotland would be up in arms if we tried. I invite my right hon. Friends to tell that to the workers of Linwood, to tell them that there is the alternative of unemployment and taking over these assets of the Scottish insurance companies. I can tell my right hon. Friends that in such an eventuality they would get a unanimous vote of confidence.
Those are the main points which I wanted to make. The unemployment figure is now becoming intolerable and is far too high a price to pay. Deflation should begin to end.
We are told that the Government do not want to head into a consumer crisis. We are not asking for the kind of experience which hon. Gentlemen opposite showed us in the 1960s. We are asking for an intelligent and substantial inflation of the economy. There should be an investment of Government money in the machine tool industry—a Government holding, and Government contracts. A small expenditure in that direction which would not cause any loss of credibility in the£. Government money saved the whole production of Fairfields. I would like to see such money being invested at this time in key points of industry.
I refer hon. Members to the firm of Kelvin Electronics, in Scotland, a country which has suffered from this long decay of our traditional industries; the failure to begin science-based industries—which I promised my constituents in the 1964 election and also in the 1966 election. This particular firm will be going out of commission in February, 1967. Yet that is the very kind of industry we need in Scotland. The danger is that 500 employees will be shipped elsewhere. Those men, I can assure hon. Members, would be delighted to work in that way. The continual squeeze that is going on must stop. Intelligent inflation must take its place.
Finally, I advise the Government not to listen to the siren voice of the right hon. Member for Enfield, West, calling for further deflation. There is no easy option. All options are fraught with danger. We will not accept unemployment being take further.