The right hon. Gentleman had obviously prepared the polemnical parts of his speech before listening to the debate, because he did not hit the bull's eye once. He also pursued a technique which I have noticed many Ministers opposite use when perfect harmony does not reign on their benches, of so overloading their speeches with detail that they become almost impossible to listen to.
This was a long speech, ranging over very many subjects, but not really getting to grips with the real fundamentals of our position, as I shall endeavour to show. One thing which I thought was a little dangerous was the enthusiasm of the right hon. Gentleman for what he calls planned reflation. After enumerating all of these things, I found it difficult to see what was to happen to the balance of payments.
In many ways this debate is rather a sad one, because most hon. Members, wherever they sit in the House, who follow our economic affairs, must feel that our country is trapped in a position from which it will not be easy to get out. The nature of the trap is that on 20th July the Government, out of necessity, were forced to pull out every stop that they had. The result was quite a fair amount of deflation, but contrary to what the Chancellor said, I do not believe that there has been any real international revival of confidence in the £. It certainly has not happened. That puts us in an awkward position.
Why has not this revival of confidence come about as it has after earlier crises? The reason is the length of the crisis. The first run on sterling started more than two years ago, and it was 20 months before effective action was taken. During that time, inflation roared ahead, prices and costs rose, we lost our reserves and incurred enormous debts. Over this long period the nerves of even our most courageous friends became frayed. I think that their nerves are also frayed by a lack of direction in our economic policy which I believe, after listening to the Chancellor of the Exchequer today, is still lacking.
I would say this of the Chancellor. I believe that if he had been allowed to run his Department as previous Chancellors were allowed to run theirs he would have had a much more cheerful story to tell. He would have acted more quickly. But first he had that public nuisance, the Department of Economic Affairs, thrust on him, and it still stinks on his doorstep. He has also had to suffer from a Prime Minister who likes to be his own Chancellor of the Exchequer as well as his own Foreign Secretary and Secretary of State for Commonwealth Relations.
The Prime Minister is becoming increasingly fond of nautical metaphors. We had another one today. I suppose that the sea water gets into the blood of these tough purposive Scilly Islanders. I have no objections to the right hon. Gentleman using these metaphors as long as they are good ones. He shows some familiarity with the technological jargon of the age of sail.
There is, however, one metaphor which I do not think the Prime Minister can get away with. He said that he had been blown off course. "Blown" was perfectly all right; he is blown one way or another practically every day—look at Rhodesia. But the phrase "blown off course" conveys the idea that one was on a course and that one can navigate. I have no doubt that the Prime Minister can chatter very pleasantly about charts, astrolabes and chronometers, but he cannot navigate. That is the basis of our trouble.
Before considering what will happen next, I should like to make two points on what I think will not happen. I do not think that some of the predictions about mass unemployment will be fulfilled. Here I agree with the Chancellor of the Exchequer. Unemployment may be bad, but I do not think that some of the exaggerated forecasts will turn out to be true.
There is one thing which most people think will happen but which I do not think will happen. As a result of what has occurred in the past, the expectation of the public is that after a period of stop—and in this case, owing to the inflationary excesses, it will, perhaps, be a very long period of stop—we shall return to a period of fairly rapid economic expansion. In fact stop-go will recur, as it did in the golden years of Tory rule. [HON. MEMBERS: "Oh."] It worked very well. We have to have "stops" from time to time, and the Conservative Government always had good "go's."
What I think will happen this time is that we shall have a prolonged grey period when we shall lose not only our place in the world but the confidence of the world. I think that the Prime Minister really agrees with that. At the cost of agonising boredom, I listened to his speech at the Labour Party conference in Brighton. At least 15 times in that speech he said that we had got away from stop-go for good. He knew that we were in the middle of the biggest stop in history, and so did his audience. He knew that the audience knew, and the audience knew that he knew. What he really meant was that we had got away from the go; we are just having the stop. I do not think that there will be very desperate unemployment. Expansion will be long delayed and very slow. But, of course, it is difficult to plot the course of a ship which is drifting before the wind.
I have only two points to make on what can be done to help. First, if we are to get the economy working efficiently we must not keep on changing the rules. This is what is happening the whole time. The National Plan was announced, but then, in a few months, it was dumped. Quite a few people believed that as a result of the National Plan something would happen. For those gullible creatures the Foreign Secretary's jape has been very expensive. Then the Government altered the rules by Corporation Tax, Capital Gains Tax, Selective Employment Tax and investment grants.
The trouble about all these measures is that the people who are supposed to work them—the public first—do not understand them. What is even worse is that the officials who are supposed to work them do not understand them either. The amount of confusion, delay and waste of time as a result is frightful. We are all "had for a mug" occasionally, but the Chancellor of the Exchequer has been "had for a mug" four times running, and by the same man. It is quite something. I hope and pray that in the next Budget we shall not have another hideous abortion.
My last point is on public expenditure. The Chancellor said a few words about trying to get control of public expenditure. I am convinced that this will be by far his greatest difficulty, and by far the greatest difficulty of all parties and hon. Members. Public expenditure as a percentage of the gross national product has been rising steadily over the last few years. Now, as a result of the Plan, this rise will be faster still because the expenditure, as Ministers have said, is going on as planned but growth is either non-existent or negligible.
There was a most illuminating pamphlet published the other day written by Professor Sir John Hicks called "After the Boom". He said that we think and talk too much about an incomes policy and not enough about expenditure. He analyses our economy and says that its health depends upon getting the right percentages in the three components of the gross domestic product—that is, consumption, public expenditure, both national and local, and investment. The Chancellor of the Exchequer indicated that he did not think that consumption would go down very much. It is extraordinarily difficult to depress consumption by fiscal means; it never comes off. We can take it that it is fairly fixed.
The other two components are national and local government expenditure and investment. This comes back to the Chancellor of the Exchequer's point about investment. I am making the same point as my right hon. Friend the Leader of the Opposition. In exporting and import saving the private sector is by far the most important, because it is in the private sector that we find the industries which do the exporting and import saving. It is therefore immensely important that their share should be kept up. But it cannot be kept up if the share of the public sector increases. If the share of the public sector increases and investment increases and consumption stays the same, the only way in which the accounts can be balanced is by another balance of payments crisis which we cannot stand.
The growth in public expenditure has been terrifying. Public expenditure on goods and services of central and local government on both current and capital account has increased 50 per cent. in the period 1960–65. National expenditure has gone up by only one-third, but local government expenditure has gone up by no less than two-thirds over that five-year period. I am not going into how it could be controlled. All I am saying is that we cannot possibly get our balance of payments right unless we get control of Government expenditure. Without doing that, we will get straight back into the crisis again.
It is a mathematical question. The laws of arithmetic are inexorable. The Chancellor said that we must not enthrone mathematics, but two and two have a nasty habit of making four. Even 1·5 and 2·5 add up to four. I am certain that unless the Chancellor can get his expenditure under control, we will be in permanent balance of payments difficulty.
I have got to my peroration. My peroration on economics is always the same. I express the hope that the Government's measures will work, but I express the fear that they are not likely to work because the Government cannot navigate.