Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 12th April 1967.

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Photo of Sir Austen Albu Sir Austen Albu , Edmonton 12:00 am, 12th April 1967

I think more than that, but probably not very much. When this growth begins—and I believe that 3 per cent. is optimistic—the resultant increase in personal consumption that will be possible will be less than 2 per cent. a year. What is more, there will be a very slow revival of private investment. According to the National Institute of Economic and Social Research Review, the rise will be to a level of about 12 per cent. above that of 1964 by 1970—not a very substantial rise over that period.

Of course, apart from the effect which this has on the underlying rate of increase of productive potential, which the Chancellor is counting on as being 3 per cent. this has a very serious effect on innovation and the structural change which is so important to us to maintain our competitive position—the change from one industry to another, the growth of some and the decline of others. This cannot easily take place without a continuing high level of investment.

Moreover, if productive potential does rise, unemployment will rise unless some way of reflation is found. If it does not rise, unemployment will stay at its present level, in which case we must expect an increasing unwillingness by the trade unions to co-operate in increasing productivity. This is a very depressing outlook, which will put us even further behind other industrial nations. The Prime Minister has said that there is no easy way out, through an increase of personal consumption—the candyfloss society—or even through an increase in the social services. This would only lead, I think we all agree, to a further balance of payments crisis.

The Prime Minister has said that the reflation must be led by export and investment. Are there any alternatives to such a policy? I preclude the use, advocated by some of my hon. Friends, of a great extension of controls. Economic theory is not sufficiently precise to allow any detailed control over more than one or two parts of the economy. Anyone who has recently been to Eastern Europe knows how rapidly it is moving away from controls to a market economy. There is nothing frightening about the phrase "market economy". It is merely an explanation of how people behave psychologically in the face of deterrents or incentives to spend or not to spend and to save or not to save. We cannot control the way people behave.

Therefore, the number of physical controls which can be applied is very small. I believe that, for example, it is impossible to control prices—except for one or two—or profits. Certainly, they cannot be controlled in an economy with the freedom necessary for expansion—