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 Roy Jenkins Mr Roy Jenkins , Birmingham Stechford 12:00 am, 25th November 1968

I thought that during the past five minutes I had been dealing with the question of public expenditure and with the totally self-contradictory attitude which the right hon. Gentleman has constantly adopted.

During the past few days we have seen the continuing fragile nature of the world monetary system. In one sense we should not be too critical of its record. Over 25 years it has facilitated a remarkable growth of world trade and prosperity, at least for the richer countries. The structure founded upon Bretton Woods has probably served us better than anything previously known, but it is now wearing a little thin in places. We have had three major monetary crises in one year. The first of them arose out of our troubles, but the last two—the gold crisis and the present crisis—most emphatically did not, and I very much regret the right hon. Gentleman's attempt to suggest that they did.

But we have suffered from all three. I am sure that as soon as possible we should consider both the objectives of international monetary arrangements and the institutions for implementing them. A major reform has been agreed—the scheme for special drawing rights—and we are doing everything possible to accelerate the ratification and implementation of that scheme. But that is not necessarily enough. The Bonn conference, in the febrile atmosphere of last week, could not initiate any such discussions. But we must move as soon as we can. In the meantime, we have to make the best of the present arrangements, and that can be achieved only by means of international co-operation.

What has also emerged clearly this week has been the problem presented by persistent surplus as well as by deficit countries. There is nothing wrong in earning a balance of payments surplus. It is a considerable achievement, and one which I want this country to emulate. But a surplus can only mirror the deficits of others. Among advanced countries the sensible arrangement is that those with big debts should go for surpluses and those with big reserves should be willing to accept temporary deficits.

The fact that West Germany's recent surplus is too big for the health of the rest of the world does not mean that our own surplus objective is wrong. We need it to reduce our debts. But the Germans do not, and a generally recognised problem is to reduce the size of their surplus. I believe that the measures they have announced, relating both to trade and capital, should go a substantial way in that direction. They give us a further opportunity for stepping up our exports and we must seize it vigorously.

Their trading changes could be worth over £50 million on our current account in 1965. The measures that I have announced, especially the import deposit scheme, should also give us a much bigger further improvement, about what we would otherwise have achieved in 1969, especially in the early part of the year. when we need it most.

I hope that the clear statements which have emerged from Bonn and Paris during the past week will give us a period of great calm in which to tackle more fundamental international monetary problems. Our ability to play a constructive role will be increased by one thing, and one thing only—a rapidly strengthened balance of payments position.

This is a national interest, just as surmounting the acute crisis of the past week has been a national problem. I have been surprised by the fact that Opposition spokesmen, with the possible exception of the right hon. Member for Barnet. have played it in a very narrow party sense. I agree with my right hon. Friend the Secretary of State for Defence that not a single constructive suggestion has emerged from any of their speeches.

But it is not merely an absence of constructive thought; it is destruction and party advantage at any price upon which they are intent. I tell the right hon. Gentleman that if he tries to use an international monetary crisis to climb to power he will not succeed. Even if, by a remote chance, he did, he would long regret the irresponsibility of his action.

There is one other point on which I disagree with the right hon. Gentleman. He said that in his view our people would not accept the burdens which are necessary to cure our economic difficulties— [Hon. Members: "No."] I do not know what else his remarks about the consumers' revolt amounted to. Whatever he did about public expenditure, he could not allow consumer expenditure to run without limit and get our balance of payments right in the time that we have to do it. I believe that he is wrong in the judgment of our people. I believe that they want to cure this problem, which has bedevilled us for a long time. We intend to carry through the policies which will enable them to do it.