Orders of the Day — Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 5th November 1968.

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Photo of Mr Iain Macleod Mr Iain Macleod , Enfield West 12:00 am, 5th November 1968

Had the hon. Gentleman listened to my remarks, he would be aware of my view on deflation. I said in categorical terms that there is no case for general reflation. I do not urge that. [HON. MEMBERS: "Answer."] I do not believe that there is a case for general reflation. I said—and this is within the recollection of the House—that in some regions, and I identified the Northern Region, there may be a case for selective regional reflation. That is fair, and I stick by it.

I come to the announcement on hire purchase, which is the latest—it is not really the latest, because school meals takes that position—or the penultimate of 40 deflationary statements made in this Parliament. I have an indirect interest in this matter, which, in accordance with the tradition of the House, I declare once more.

The Chancellor will recall that in his Budget speech he considered, and rejected, altering the position in relation to what is called terms control in this sphere. He said that the Budget was concerned with an 18-month to two-year strategy and that to alter terms control would not be compatible with his objectives. Clearly, particularly if we have slipped six months, which is now admitted, we are still in the same time-scale.

It is equally clear that the Chancellor's arguments, which I accepted as valid at the time of the Budget, must be valid today. Thus, would the right hon. Gentleman tell us why, if the main objective is to push production towards exports, he has included furniture in these proposals? Hon. Gentlemen opposite will recall the howl of fury that used to go up from them, and their cries about the young marrieds and the others. They will be aware that there is little export content in this sphere.

As for the motor car industry, I had hoped that it was common ground between the parties that this industry needed a strong home base from which to operate and from which to continue its brilliant exporting achievements. It is ironic in the extreme that the Government picked to move the Address the hon. Member for Birmingham, North-field (Mr. Chapman), who made a plea on behalf of his constituents which, if he had only known, had already been answered against him.

The question of the restrictions up to £100 million calls into question a large part of the Chancellor's Budget judgment. We have said consistently that he has quite under-estimated the strength of the spending spree in this country. From this Box in January, I urged upon him at the time of the cuts the use of the regulator. Other commentators rightly urged that this should have been used last November at the time of devaluation itself. To take a typical commentator's argument, Mr. Michael Shanks, in The Times of 18th March, argued that the Chancellor had lost about £200 million by not acting earlier. I agree. In the regulator debate, perhaps our best on the Finance Bill, at least a dozen hon. Members from this side urged the same action upon the right hon. Gentleman.

There were many forecasts. I remember particularly the excellent ones done by the Sunday Telegraph at the time which openly challenged the figures upon which the Treasury were relying. Even three weeks ago my hon. Friend the Member for Lewes (Sir T. Beamish) asked the Chancellor, in a supplementary question: What is the right hon. Gentleman's answer to the charge that the main reason for the disastrous gap which has appeared between the forecast and the reality was his own blind refusal to face the facts of devaluation during the wild spending spree which followed? "—[OFFICIAL REPORT, 15th October, 1968; Vol. 770, c. 178.] That was exactly right. That was three weeks ago. The Chancellor, in the Budget, in the regulator debate, on Third Reading of the Finance Bill and in answer to my hon. Friend, still said that consumption was moving as the Government had expected and forecast at the time of the Budget.

There is now a serious situation in front of us. There is something like a flight from money going on in this country. If saving is a habit—it is on this that we have based our savings proposals—then be very sure that spending is equally a habit. We can see clearly the disastrous results of the actions of the Chancellor and his predecessor simply by looking at the savings ratio, what is called the residual calculation. During the last Tory year, it was 8·5 per cent.; in 1965, 81 per cent.; in 1966, 7·8 per cent.; in 1967, 7·6 per cent.; and in the first two quarters of 1968, 7·4 per cent. We have not got—unless the Chancellor has them; presumably he has not yet—later figures, but, clearly, what he has done is cause an alteration in the spending and, therefore, in the saving habits of the people. Very much of this lies at his door because of the lack of judgment in not acting immediately upon devaluation.

I do not wish to pass even briefly from this side of the argument without saying a word on what one might call the brighter side, in particular exports. They were sluggish for some months. Now, they are moving above the main forecast and probably above the higher forecast, and that is excellent news. I welcome every single export order that I see.

On the other hand, the import propensity remains very high, worryingly high, and everybody may have underestimated the natural propensity to import. If so, we have a more serious task before us than we thought. I put to the Chancellor one point which I do not necessarily expect to be answered. I understand that he has—touch wood—closed his mind to import controls, and I agree with him. But is his mind equally closed to any restrictions upon import credits, perhaps on the pattern of the Italian system? I do not know whether he would like to comment on that point.

The facts which I have illustrated showing a continuing attack on the Chancellor's judgment of the spending spree, certainly for the whole of this year, and, for those who were wise enough to see, even from devaluation and November, show clearly that the Chancellor's judgment has failed him in this matter. That is one of our charges. My right hon. Friend the Member for Barnet (Mr. Maudling), commenting on the President of the Board of Trade's statement last Friday, said that it called into question the Budget judgment—I have dealt with the spending spree side of that—and also the position of Ministers. I should like to comment on the second point.

The Times leader yesterday took the view, with which I agree, that the true issue in this matter is not a question of timing. I have made no comment or complaint about that; it is not the business of a Government to time their announcements to suit the Opposition, and it never has been. Nor do I believe that Bassetlaw is the main point at issue. We think that Bassetlaw, which we last won in 1924, was a brilliant result, and we are more than content with the majority of 250 in the next Parliament which it indicated. The real issue is not the by-election or timing. The real issue is whether Ministers told the truth.

I have been to some trouble to find out the precise context of the question which was asked of the First Secretary of State. This was: Mr. Chairman, in one of today's papers, it is reported that an economic freeze is on the way. A yes or no answer, please. Is it true?". I quote from the Sheffield Telegraph of the next day: …Mrs. Castle, speaking at Retford town hall, said briefly and bluntly: ' There is no economic freeze on the way.'The Times verdict on that is as follows: It cannot be justified by sematic distinctions between an economic crisis and a touch on the tiller. It was liable to mislead. It has left many people with the impression that it was intended to mislead. That is one comment, but the First Secretary knows very well that there were others, in much blunter terms, read by about 10 million people in the country. I have them here, but will not read them. I could, by reading them, get on record in HANSARD, in particular, a word which we are not permitted, as hon. Members, to use in debate, but the First Secretary must be clear that if there is nothing to add to her flurry of jejune statements, then judgment must be given by default.

For some, the verdict will be that what she said was misleading, but for many—I am one—the harsher judgment must be the true judgment. We must be clear about the distinction between the two charges. It is the Chancellor's economic judgment which I have challenged. But I believe that the Prime Minister and the First Secretary of State have fallen below the standards of this honourable House. We know—we have always known—that there are incompetent Ministers in this Administration, but I put it flatly on record that the Prime Minister and the First Secretary have shown by their conduct last week that they are quite unfit to hold Ministerial office.