Orders of the Day — Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 22nd November 1967.

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Photo of Mr Ian MacArthur Mr Ian MacArthur , Perth and East Perthshire 12:00 am, 22nd November 1967

I agree. I shall come to that point. But in view of the critical state of the shipbuilding industry, the export rebate has a particular significance. Perhaps the Minister, in his reply, will tell us what will be the future of the shipbuilders' relief scheme, which is very important also. Perhaps he will also tell us something about the credit position which plays such a large part in the shipbuilding industry.

I come to whisky. Here, too, there has been some excitement about the new prospects facing the whisky industry abroad. The whisky industry also is not slow to seize export opportunities. Its export record is second to none. But there has been loose talk about devaluation meaning a reduction of 14·3 per cent. in the selling price. Of course, the reduction will be nothing of that sort. The export price for a bottle of whisky is not 50s., or the equivalent price at which it is sold abroad, but about 7s. 6d. The rest is duty imposed by foreign Governments, just as the Government in this country always impose heavy duties on whisky.

The return to Britain from the sale of a bottle of whisky is about 7s. 6d. Devaluation means that it will fall by about 1s. Therefore, the margin of advantage given to the whisky industry is about 1s. a bottle—that is all. We have no idea whether the benefit of that 1s. will be passed on to the consumer who buys the whisky. How much of the 1s. will importers of whisky abroad keep themselves? We cannot control that from this country, and the Scottish whisky trade cannot control it. What will be the effect on the price of a nip of whisky in a New York bar? I should have thought that it would be negligible.

We should not make too optimistic noises about the prospects facing these three great Scottish exporting industries. I agree that they will have opportunities, but they will also face a host of problems as a result of the associated measures announced by the Government.

As my hon. Friend the Member for Liverpool, Wavertree (Mr. Tilney) said just now, many of these considerations apply to all exporting industries which will lose the export rebate, which face the problem of the extra Corporation Tax, which have to cope with the highest Bank Rate for half a century and which face the prospect of wage claims which will be promoted by the provocative increases following the Government's action in raising everyone's cost of living.

The Government have made far too little of the effect of devaluation on the cost of living. I doubt whether the increase will be contained within the 2½ or 3 per cent, which has been quoted. The Government always under-estimate the impact of their economic measures on the cost of living.

What will be done about wages? When winding up the debate last night, the Secretary of State for Economic Affairs—and it would be charitable not to comment on his speech—said: …we cannot allow money incomes to increase simply to compensate for the rise in the cost of living."—[OFFICIAL REPORT, 21st November, 1967; Vol. 754, c. 1268.] My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) intervened to ask what he meant by "we cannot allow…"The right hon. Gentleman said that that would become perfectly clear as his speech continued. It did not become perfectly clear.

That is a question which must be answered. It must be answered tonight before the Division so that all hon. Members know where they stand on what will be one of the central problems confronting the economy over the next few months as the full impact of devaluation and deflation is felt in the country. The right hon. Gentleman's speech yesterday answered no questions apart from one at the beginning. All it did was to make the murky waters of Government policy even muddier.

I also want to know something about the effect on Scotland of the other measures announced by the Government, because we are also debating them. Where will the cuts fall and what is their extent? Is it £400 million or £1,000 million? If one adds on the £600 million we have already been promised, what is the total? Where are they to fall? Where will the axe be?

The Prime Minister said today that houses, schools and hospitals would not be affected. But, of course, they will be. The cost of every house, hospital and school will go up as a result of devaluation. What does "no effect" mean? Shall we have the same number of schools, houses and hospitals as planned, or will the numbers fall? Will the total costs rise? If so, how will the increased costs be financed? Where else will the axe fall?

There was talk today from the Prime Minister of cuts in local authority expenditure. We want to know where they will be. When the Government were asked about this yesterday the Secretary of State for Economic Affairs said that this was not the time to give the answer. It is the time. We want to know before the Division tonight.

We also want to know what form the shelter for the hardest-hit will take. Asked about this today, the Prime Minister said, "Yes. I will answer." He read out—word for word, I think—that part of the Government statement last Saturday circulated in the OFFICIAL. REPORT on Monday. There was not a word of explanation, but just a passing reference to the retention of the major part of the social services. What does that mean? What about the minor part? Is there to be selectivity? Are there to be cuts? We must know in the reply tonight. What are the "steps that may be necessary"? The Prime Minister said that it would be irresponsible to say anything about this. But it is the height of irresponsibility to say nothing about it in this critical debate.

The Prime Minister said that he could not say anything because the impact of devaluation on living costs had not been worked out. Yet he has been telling us that he knows precisely that it will be only between 2½ and 3 per cent. A major claim of the Government throughout the argument has been the meticulous care with which they planned every stage of the operation day by day over a matter of weeks. Have they not considered this point yet? Do they not know what the impact on the cost of living will be? Have they not given thought to what they will do to protect the worst-off people, for whom they pretend to have such concern? Why do we not hear about these things in the debate? Are we to hear from the Chancellor? If not, we shall have to believe that the Government have no answer to the questions about where the cuts are to fall, where and how the shelter is to be provided, for fear of frightening away even more of their supporters on the benches behind them.

What shelter can we expect for the development areas? We have heard this word from the Prime Minister before. He promised Scotland shelter in July last year, and the shelter he provided was a 48 per cent. increase in the number of unemployed. He claims that as a victory since in London and elsewhere the unemployment rate went up by even more. The Scots did not regard that as the sort of shelter they expect. We know that the regional employment premium is to be retained, but there are wiser ways of using that money than through a wages subsidy.

What else is being done? Are the Government aware of the full impact on Scottish life of the increase in Bank Rate and the cost of living in a country where it is already higher than it is in England? Has the Prime Minister considered what the effect of holding down wages will be in a country faced with a rise in the cost of living when the level of wages is already lower than it is in England? What will the Government do to bridge the wages gap? What will they do to meet the problems in Scotland of the increase in the cost of petrol and transport that will follow devaluation? Will they introduce the regulator, as they could, to reduce petrol duty in Scotland, and provide some easement? How can they justify the introduction of the crazy Transport Bill, which will add so many millions of pounds to the cost of transport in Scotland?

The Prime Minister likes using colourful phrases to try to hide the drabness of the future which faces the people. His latest pet word is "straitjacket"—language of the asylum which fits the economic bedlam in which we have been living for the past three years.