Orders of the Day — Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 25th November 1968.

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Photo of Mr Iain Macleod Mr Iain Macleod , Enfield West 12:00 am, 25th November 1968

That is not worth going into. The hon. Member's real point was that he thought that a new discovery had been made this afternoon.

Secondly, I congratulate my hon. Friend the Member for the New Forest (Mr. McNair-Wilson). We welcome him back. I cannot congratulate him on a maiden speech and it would be wrong to call it a half-maiden. At any rate, he is very welcome back in our midst.

In winding up a debate that has ranged so widely over economic affairs I could start almost anywhere, but as good a place as any is the very first sentence in the White Paper, The Basle Facility and the Sterling Area, issued in October 1968. This is its description: The $2,000 million facility to offset fluctuations … and the related agreements which have been negotiated with sterling area countries, are a milestone in the evolution of the sterling area and a major contribution to world monetary stability. Some contribution! Some stability!

This is one more example of what, in the debate on the Queen's Speech, I called the lunatic optimism of the Government. They only have to glimpse a patch of blue sky and the heavens fall in upon them. They only have to murmur the words "economic miracle" and the next trade figures go for a Burton—every single time! Either they are unlucky beyond mortal understanding or they are just plain incompetent. I wish to make it clear that my case is the second.

I return to the Basle Agreement because in my opinion we have talked about it too little today. I repeat the question posed by my hon. Friend the Member for Macclesfield (Sir A. V. Harvey). How much has been drawn? When I first put this question we were told that $600 million has been made available. Subsequently, at Question Time the Chancellor seemed to indicate that rather less than that had been taken up. But he said not a word in his speech today. So I ask: did any Commonwealth countries switch or try to switch part of their holdings during this crisis and, in particular, what figure has been drawn now?

It is no good saying that this information is not normally given. The facts are that this information was invariably given in the years of Conservative rule, on the rare occasions when we had recourse to special help. I take the view that on the whole Basle was a bad bargain for Britain, and that there is only one case one can make for it. Under it we agreed to stop part of the sterling balances for heavier repayment obligations. But we draw during the first three years, and we repay between the six and tenth. It follows that the drawings may well be made largely, if not entirely, in the time of this Government, but, as so often, their debts will be left to be settled by those who succeed them.

The only excuse—and it is an important one—is that they may have been forced into this by the run-down of sterling balances. This has been the story ever since they first came into office. The Chancellor has said that I usually devote a portion of my speech to unemployment. I do not do so today because I regard the case as now proved. Professor Paish has won. It is no good hon. Members opposite deluding themselves that there is any difference at all between what the Governor of the Bank of England may say and what this Administration are planning.

It is incredible that some of these measures should be brought foward when, whatever explanations one may offer, unemployment in November is at 560,000. It is not only hon. Members opposite who think that they are dreaming when they see a Socialist Chancellor dashing into action to make certain that the rate of unemployment does not drop between 2¼ per cent. and 2½ per cent. We have been in a situation of crisis ever since November, not October, of 1964.

There is one important lesson to be learned from the crisis of confidence in which France has found herself. She had strong reserves, although we had not, but that did not save her. She is self-supporting, or very largely so, whereas we are not, but that did not save her. She had virtually no debts, and if one counts the sterling balance in this capital, we have very large short-term debts indeed, but that did not save her. The franc was a strong currency. What happened was that there was a lack of confidence in the Government, and there were inflationary wage settlements.

Such settlements—and I thought that we had learned this lesson by now—are usually far worse than a strike, and it is to this point that I wish to return. Our charge first about the Chancellor is that he has heedlessly misread the economic situation throughout this very difficult year. Let me repeat that we do not expect long-term forecasts to be accurate. In the very nature of things we know perfectly well that they cannot be so. We do not expect them to be much more accurate than long-term meteorological forecasts.

But we do expect him, if he looks out of the window and sees that it is raining, to know what the weather is. All through this year he has suffered from delusions, to which we have tried to draw his attention, about the level of consumer spending. Secondly, we believe that he has been neglecting the twin pillars, as we see them, of controlling public expenditure and boosting savings. Public expenditure is up by 60 per cent. since October, 1964.

It is no good simply saying that public expenditure in many—and, I would agree, most—fields is on thoroughly desirable objects which we all want to see go ahead. Of course it is. But in this, a nation is no different from a family, and basically the old phrase of Mr. Micawber is right— Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. There is waste, yes, but it is relatively small. Naturally one concentrates on it to some extent in speeches. But I acknowledge that if is relatively small. I have always acknowledged that if we want to make savings, we must make policy changes.

My right hon. Friend referred today to a number of changes. He said, for example, that we should renegotiate the housing subsidies. Hon. Members opposite cheered their heads off because they thought that they saw in that political profit for themselves. Let me tell them that they are wrong. It is the weight of taxation in this country which is intolerable. It is the sheer weight of government which is intolerable, because, quite apart from having inefficient government, we have too much government in this country, and there are far too many people minding other people's business. I advocate reductions, including the sort of policy reductions mentioned this afternoon, even in the most marginal seats.

The Chief Secretary has been the prophet on this, and no doubt he will say something about it when he replies to the debate. He has said that we are on target. When he says that over the year we are on target, does he mean the National Plan target? That is what I understood it to mean. If that is so, then of course it is one of the direct causes of extra taxation, because although the plan has gone, although the growth which the plan dreamed of has not been achieved, yet public expenditure rolls on at the rate which was envisaged in the National Plan.

I come to the question of savings. I cannot understand why the Chancellor is so little interested in this subject. Over and over again on the Finance Bill we had debates on savings, and ideas were put forward from this side of the House, from the Front Bench and other benches, from the Liberal Party and from the Labour Party. Now the right hon. Gentleman is studying some scheme because he has been forced to do so. But he said not a single word today about savings, and yet he had the impertinence to claim that my right hon. Friend, who concentrated on this point, had not a single constructive thought. Savings are the key to everything.

The savings ratio at present is disastrous. My right hon. Friend said something which echoed a phrase of Adlai Stevenson which we all remember— This is the century of rising expectation. I believe that it was Adlai Stevenson who said it, although I have not checked it.

The performance of the relative Governments is that in six years of post-war Labour Government there was no improvement in the standard of living. Prices rose faster than wages and faster than pensions. In the 13 Conservative years the standard of living rose by about 3 per cent. a year. The increase is about 1 per cent. a year under this Government—and that is why people are trying to maintain the standards to which they got used in earlier years.

I will say just a word about the prior deposits scheme. It is quite true that my right hon. Friend the Member for Barnet (Mr. Maudling) and I on more than one occasion have expressed some interest in this scheme.