When a Question was put to the Prime Minister in the House, and the figure of 2 per cent. was suggested, it caused a certain amount of unpleasantness, to say the least, but I have never heard it said that this would be a permanently acceptable figure. On the basis, however, of the arguments now put before us by the Chancellor of the Exchequer, it is obvious that around 2 per cent. is a permanently acceptable and, as we heard this afternoon from the Front Bench, tolerable level of unemployment.
We have been told that we can have a steady growth rate of 3 per cent. and, at the same time, solve our balance of payment problem. But we cannot have a 4 per cent. rate of growth and a surplus in the balance of payments. To me, this is a very strange idea. Nevertheless, that is the theory that we are given. We can have a 3 per cent. rate of growth, which is 0·8 per cent. less than the figure envisaged in the National Plan, which is now long forgotten, and we can solve the problem of the balance of payments. The obvious point, however, is that this must be done with a level of unemployment of about 1½ or 2 per cent. It is high time we changed our views on the solution to all our economic problems.
My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot), speaking at the Labour Party conference after a speech by my right hon. Friend the Prime Minister—who said that the important thing was to root out conservatism in the country—suggested that we might root our conservatism, beginning with the conservative and orthodox thinking in the Treasury—a very good place to start. I suggest that my right hon. Friends start there, and that Professor Paish's ideas, which are accepted by the Treasury, should be rooted out, and that some Socialist ideas should infiltrate that Department. Let us have some Socialist solutions to our problems, not the idea of unemployment as a permanent feature. As I have said, that idea is not acceptable to me, and I am sure that it is not acceptable to any of my hon. Friends when they really think about it.
I do not need to dwell on the subject of our overseas expenditure. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) dealt with it brilliantly, and one does not need to go over the same ground again and again. It is obvious that there are solutions to our economic problems other than those which the Government have adopted. I have said that my first speech in this House related to directing employment to such areas as Merseyside and the West coast of Scotland. My second speech, made now two and a half years ago, was on the need for the Government to carry out drastic cuts in particular military overseas expenditure. I therefore think that I can claim to be absolutely consistent.
The Chancellor of the Exchequer referred yesterday to the £20 million involved in regard to Germany—excellent, though for one year only—and to the £100 million being taken out in regard to overseas expenditure. That is all fine, but it is not enough. It will not solve our problems. We have to recognise that we cannot continue to believe that we are a great imperial Power. We cannot continue to be a policeman of the world—we just cannot afford it, apart from anything else. If we must either have a 2 per cent. unemployment figure to solve the balance of payments crisis or get rid of our commitments east of Suez or elsewhere, I want us to get rid of our commitments east of Suez.
If that is the choice, the choice is clear. In the meantime, we might consider a solution put up by my hon. Friend the Member for Edmonton (Mr. Albu) and others—devaluation. I shall not argue that aspect at any great length, as it is something that one does not talk about until after one has done it. But the Government must consider it.
A prices and incomes policy is a very serious matter. The White Paper said that the Government were considering extending the powers under Part II of the Prices and Incomes Act. In a document put to a meeting of executives on 4th March, the T.U.C. said that it neither wanted Part IV to continue—which, in any case, was not to continue—but it did not want any of the powers contained in Part IV to be transferred to Part II. It did not want the activation of Part II, either.
That is precisely what the Government suggest in the White Paper, though we do not know the exact details. We are as much in the dark about them as we were when we read the White Paper. My hon. Friend the Member for Ashton-under-Lyne quite clearly pointed out that the results of the incomes and prices policy have been marginal. Yesterday, the Chancellor of the Exchequer talked in terms of compulsory powers to keep wages down but in terms of appealing—appealing to those who control industry not to pay high dividends in the immediate situation. We therefore have com- pulsory powers over the workers' wages, but an appeal to the employers not to be too lavish in the distribution of dividends at the present moment. If any member of the Government believes that the workers in the factories and in the trade unions will swallow that, then, quite honestly, they just do not live in the same world that I do.
Those workers and those trade unions are prepared to accept an incomes policy, but they want it to be a fair incomes policy. They also want it to be a voluntary policy operated by the trade unions themselves. I therefore appeal to my right hon. Friends not to get themselves into an unnecessary conflict with the trade unions, because in the long run that could do far more harm to our economy than leaving it to the Trades Union Congress to work out a long-term policy on incomes.
We are deeply concerned about the philosophy lying behind this Budget discussion. The Times Business News today put its finger right on the spot when it said:
Mr. Callaghan has, in fact, changed his economic philosophy and has now accepted the orthodox view entirely.
That is the charge we make. I accept that it is a very serious charge, but we are in a serious situation. We have to get out of that situation. We must have some Socialism in this Labour Party. I believe that Socialism is the real answer. That is also why I believe that we should see an expansion of public ownership.
My right hon. Friend the Prime Minister wrote an excellent pamphlet in 1957 called "Post-War Economic Policies in Britain". I quote the following passage:
The question, therefore, is whether the disappearance of the devaluation danger will lull Britain into a false sense of security and encourage her to continue her policies of sacrificing economic strength to personal comfort or whether we shall not, now, seize this, our final opportunity, living as we are on borrowed money and borrowed time, to take all the measures necessary to make our economy strong and virile.
We must turn now to examine the specific techniques needed for controlling the economy. I list five of these:
I recommend my right hon. Friends on the Front Bench to reread that pamphlet, to look at the philosophy that underlies it, and to reject that which has been argued by my right hon. Friend the Chancellor of the Exchequer in his Budget speech.