Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 20th April 1970.

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Photo of Mr John Biffen Mr John Biffen , Oswestry 12:00 am, 20th April 1970

I was touched, as I am sure the House was, to learn that there are circumstances in which the hon. Member for Salford, West (Mr. Orme) would support an incomes policy. But as I heard him elaborate those circumstances, I felt that, like St. Augustine, he was appealing to the Deity to make him perfect but not yet awhile.

What is fascinating about this debate is the extent to which the shadow of the Chicago School of Economics has cast an almost enveloping darkness on nearly all the arguments. At the beginning, my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) talked about dealing with family poverty by use of a negative tax system. It could have been lifted straight from the writings of Dr. Milton Friedman. This afternoon the hon. Member for Ashton-under-Lyne (Mr. Sheldon) talked about the possible desirability in current circumstances—and I agree with him—of moving towards a system of more flexible exchange rates. The term which he used was "a floating exchange rate". This, too, was a doctrine which could have come straight from Dr. Milton Friedman.

Central to the argument has been the concern over the concepts of money supply and domestic credit expansion. It is as though in these days our gnomes wear Stetsons.

The House will certainly wish to reflect at considerable length upon the arguments that were employed by my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) in what seemed to me to be a penetrating critique of the extent to which the Government are continuing their reliance on money supply long after at least certain of the statistical evidence seems to have outlived some of its usefulness.

Perhaps, therefore, it is easy to understand why, in the Press at least, it was reported that my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) should have referred to this as a bankers' Budget. I thought that the Chief Secretary was doing his best at least to strike a good-natured consensus for appealing for support for his Budget from no less a person than Pierre-Paul Schweitzer. Not least in the light of the speech of my right hon. Friend the Member for Wolverhampton, South-West, I should prefer the slightly adapted description that this is the Budget of a banker's apprentice who is still learning the trade. I fear that he still may be capable of making considerable mistakes. I suspect that part of the confusion derives from the acceleration of money as well as in the context of the actual supply.

In the last few moments that remain to me, I do not want to get drawn off into an esoteric argument about money supply and the velocity of circulation. The hon. Member for Penistone (Mr. John Mendelson) said that the current wage claims are the result of pent-up demand arising from past Government policy. It is, therefore, feasible that the argument about money supply, inasmuch as it is now being confounded by temporary incidences of velocity, derives directly from the ineptitude of past Government action.

What worries me is that we do not properly apprehend the true time lags between fiscal and money de-decision authorised by this House and their being brought into effect and being revealed in the economy at large. If we are collecting the poisoned fruit, to use my right hon. Friend's words, from the policies of the Home Secretary when he was at the Exchequer, what poisoned fruit will be for the harvesting of successor Governments as a result of the present Government's over-reliance on money supply?

I believe that the poisoned fruit could well be a substantial increase in unemployment and a substantial turn-down in manufacturing investment. These seem to me to be at least reasonable assumptions, which I make very tentatively because I am not a great advocate of fine tuning. It is, however, a reasonable assumption that if the Government, in desperation, are over-relying on money supply, those are the kind of consequences that will reveal themselves in—who knows-12 months', 18 months' or two years' time. Therefore, there is much with which I would quarrel in the overall Budget judgment.

I am grateful to my right hon. Friend the Member for Birmingham, Hands-worth (Sir E. Boyle) for—I think quite wrongly—giving me precedence to make these few remarks. I should have liked to have elaborated them at greater length, but, none the less, the argument will probably be as sweet by virtue of its brevity. I leave it at that.