Economic Affairs

Part of the debate – in the House of Commons at 12:00 am on 24th July 1967.

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Photo of Mr Russell Kerr Mr Russell Kerr , Feltham 12:00 am, 24th July 1967

I apologise. The hon. Gentleman's eloquent pleadings on behalf of that industry must have misled me.

However, tonight we are discussing more important things, and as one of the Government's occasional critics, especially of their economic policy, it gives me no pleasure to have to take such a strongly critical line as I feel bound to take this evening. Of course, I recognise that a sizeable part of the difficulties which my right hon. Friends have encountered has been bequeathed to them by right hon. Gentlemen opposite, and it therefore hardly lies in the mouths of the Opposition to criticise the Government.

Their own prodigies of mismanagement, particularly during the period when all considerations of national welfare were being subordinated to a desperate attempt to hang on to power at all costs, was equalled only by the "brass" with which they have sought to deny it ever since. The truth is that, whether or not hon. Gentlemen opposite have confidence in the Government's economic policies is of very little consequence—of no more importance than whether the teen-agers are these days screaming for John or Paul or Ringo, or for that matter my hon. Friend the Member for Smethwick (Mr. Faulds).

As the right hon. Member for Enfield, West (Mr. Iain Macleod) was kind enough to imply, although he did not specifically say it, the real argument in this debate is between the Government and the 70 or so of my hon. Friends who signed the much-mentioned Tribune manifesto, some of whom, including myself, are the sponsors of the Amendment to the Motion before us, which Mr. Speaker, in his wisdom, though no doubt impressed by the cogency of the argument and the percipience of its analysis, felt unable to call.

May I take as my starting point the draconic measures announced by the Prime Minister just over 12 months ago, and which descended on this country like a bolt from the blue. Despite denials at the time, there is now little doubt that the savage deflationary measures announced were owed almost wholly to a panic desire to placate international banking opinion in general and the United States Treasury in particular, to ensure that loans would be forthcoming from international sources to shore up a badly threatened £-sterling.

Some little while afterwards the line changed and Government spokesmen suddenly discovered that these measures, far from being a hypersensitive reaction to admittedly difficult circumstances, were designed as part of a plan to lay the groundwork for more rapid growth—or something like that. This claim has been repeated many times since in one form or another.

Coupled with this claim, particularly in recent months, has been the confident assertion by a number of Treasury and economic Minister, to the effect that happy days are here again, and that the economy is again back on course. The basic balance of payments problem has now been solved, and according to the Chancellor at least, we are moving steadily ahead, on and on and up and up, as a former distinguished Member of this House would, I am sure, have put it.

This view is, to put it mildly, out of accord with the facts. Even if it were true that the deficit on our current account was being steadily reduced, which is not the case as I see it, such a development would have been achieved only at the quite unacceptable cost of sacrificing economic growth, of deliberately creating unemployment, and of cutting overseas aid—in short, by embracing all of the dreary, fly-blown, discredited policies of Professor Paish, whose resurrection from a Tory grave by a Labour Government has had no parallel for nearly 2,000 years.

Certainly, the economic philosophy of this vastly over-rated economist ought to have had no part in the plans of a Labour Government, except perhaps by way of illustrating where our predecessors in office went wrong. Presumably, as a result of pressures from the Bourbons of the Treasury, yesterday's bad joke seems to have become today's considered wisdom, so that the worthy Professor Paish, from being a name to avoid mentioning in polite Socialist society, is today apparently being given the Hallelujah treatment across the way at the Treasury.

As my right hon. Friend the hon. Member for Belper (Mr. George Brown) would put it "Brothers, we have come a long way." I bear no personal animosity to either the Chancellor or the worthy Professor Paish in saying this, but the fact is that the economic policies associated with this gentleman's name are likely to prove no less than disastrous for this country, and no amount of sunshine talk by our Chancellor will alter that fact. In our present situation there is no solution along this road. The fact is that we can have a supposedly "healthy" balance of payments surplus of this kind only by having a basically unhealthy economy.

In the words of the Tribune manifesto, signed by over 70 of my hon. Friends: Only when we can maintain a payment surplus, full employment and economic growth, all at the same time, will our economic problem be solved. I heartily agree with those sentiments.

Looking again at the ill-conceived July measures of a year ago, it is obvious that they won us no more than a temporary respite, by holding back imports as production levelled off and unemployment rose. Certainly, if the Chancellor were to change his mind and to begin to reflate the economy to any serious extent, as the hon. Member for Macclesfield has just been recommending, and I agree with him on that one point, there is no doubt that another payments crisis would be the almost immediate result.

The fact that our economy now has built-in into it the assumption that a permanent level of over half a million unemployed, in other words, about 2 per cent. plus of the total labour force of the country, is quite acceptable, is a further indication of the Government's retreat from the pledges made to the people prior to our election, and the abandonment of our commitment to a policy of full employment.

Perhaps the most serious criticism of the July measures is that far from improving our overall economic situation, they have actually made it much worse. As the party opposite demonstrated on many occasions during their period of office, every time that they have resorted to these deflationary bouts, the inevitable result has been the raising of unit costs and an increase in unemployment, coupled with a step up in our export prices, which is what has happened as a result of these July measures.

Perhaps the most important casualty of Paishism has been its effect on industrial investment, which has dipped quite alarmingly during the past year, with the result that the modernisation of our industrial structure, on which so much of our economic future depends, has been still further retarded. At a time when investment in our future screams out for priority, the Government seem to have turned common sense on its head by giving priority not to the things that matter, in other words investment in things like technical education and scientific research as well as in modernisation, but to the sacred cow of maintaining an exchange rate of 2 dollars 80 cents to the £ sterling.

The present economic policies of the Government provide no kind of a permanent policy for getting the economy of the country out of its present stagnation. We are deluding ourselves if we imagine that our commitments to the people who put us in Government is adequately discharged by our obtaining a so-called balance of our international payments.

Surely for a Labour Government, as opposed to the party opposite, which inevitably talks through its pocket on economic matters, this matter of sterling and the balance of payments ought to be a problem which we take vigorous steps to solve in the shortest possible time, using such methods as are judged necessary to effect a permanent solution to our difficulties.

There are some Jeremiahs on both sides of the House who say that the situation is now beyond recall and that Britain is now so heavily in pawn to the United States and the international banking community that we no longer have sufficient elbow-room to work our way free of our present difficulties, and so achieve the economic autonomy which is the necessary pre-condition of our political independence.

I imagine that the logic of their position is that we should pack the game in internationally and make early application to become the 51st State of the American Union. I regard this kind of talk as a counsel of despair. Though our present economic and financial difficulties are by no means under-estimated, I believe that they are perfectly capable of solution, provided that they are tackled with the courage and resolution that the people expect of a Labour Government, and provided that we are prepared to throw out of the window some of the imaginative, discredited advice which Professor Paish and his friends at the Treasury have been selling to the Treasury during the past year and to his predecessors during the years before.

I will not weary the House with a detailed recitation of the steps which I believe to be necessary to escape from the present dilemma in which we find ourselves. They have been outlined both in the Amendment standing in the name of my hon. Friends and myself and at somewhat greater length in the excellent Tribune manifesto signed by more than 70 of my hon. Friends last week and which has become "required reading" for Members on both sides of the House who aspire to an understanding of the present situation.

I should like briefly to draw attention to only two of the suggestions which we make in that publication. First, we advocate measures, to use an expression beloved of my hon. Friend the Member for Lewisham, West (Mr. Dickens), to "get the bankers off our backs", and to that end we ask that the nation should immediately acquire, with fair compensation to those affected, a suitable selection of our overseas portfolio investments so that a large proportion of the present international debts can be quickly repaid. Although this proposal is unlikely to cause the City of London to hang out the flags in unrestrained joy, none the less it would go a long way towards giving us the financial elbow room which we so conspicuously lack.

The second proposal to which I should like particularly to draw attention is our suggestion that selective import controls —I say this despite what the Chancellor of the Exchequer said today—should be one of the economic weapons to which the Government resort during the difficult months ahead. I am well aware that this is an idea which finds, or at least used to find, little favour in Treasury circles, but the objections raised by the Paishites have already, and very effectively, been answered by a person who is now, most happily, "one of their own".

I refer to a very brilliant economist of the younger school, Mr. Michael Posner, who has recently been appointed economic adviser to the Chancellor of the Exchequer and who, more importantly, set out in an article in the New Statesman, just two years ago, the means whereby, with the very minimum of economic retaliation, it is possible for this country to save well above £300 million on the balance of payments by the institution of selective import controls. Any hon. Member who doubts the wisdom of Mr. Posner—and on this point that may, on this one point, even include the Chancellor of the Exchequer—should acquaint himself with this article which, like the Tribune manifesto of last week, should be required reading for those of us interested in economic matters.

What I am pleading for is a new national plan based on national economic priorities and not on the often misleading forecasts of the business community. Surely the main problem afflicting British industry is that our national supply of capital is being channelled to the wrong places, into the wrong areas of the country and into providing things of low rather than high economic and social priority—in other words, into making luxury goods instead of into building schools and hospitals.

Surely we now need a frontal attack, using the weapons of Socialist planning, to eliminate from our midst, with all speed, the gross inequalities of wealth and income which still distort and disfigure our society. Surely the ordinary people of this country have a right to expect their own Labour Government, to which they gave a massive mandate for change 15 months ago, to show them the way and to lead them from the present valley of despair into the better and fairer society which was not the least of the reasons for which people placed their trust in this Government a year or so ago.