I am extremely grateful to my hon. Friend the Member for Oswestry (Mr. Biffen) for having cut short his remarks, and I will follow his example. I am all the more pleased because I wanted to start with exactly the point to which my hon. Friend has addressed himself, which is the part of the Budget judgment that relates to monetary policy and to the money supply.
As many commentators have done, I found this part of the Budget speech profoundly unsatisfactory. On the one hand, the Chancellor of the Exchequer made it clear that money supply was to be limited. He said that in the next financial year, the addition in the money supply was to be limited to 4 per cent. At the same time, we have been told clearly by the Chancellor that he anticipates a rate of growth of the economy of 3½ per cent. He is looking forward to a considerable increase in industrial investment, and we all know that it is very likely that the wages increase this year will be about 10 per cent.
When one sees the figures which the Chancellor has given us for the projected increase in the money supply, and also the likelihood both of the rate of growth which the Government have forecast and of a considerable increase in wages, it seems clear that there is some conflict of testimony here, and that we are likely to see a very great squeeze indeed in company liquidity. I agree very much with my hon. Friend the Member for Oswestry: it is my belief that it may well be that manufacturing investment will be the sufferer.
That strikes me as a particularly serious matter when one compares what has happened to manufacturing investment since the publication of the National Plan in 1965. One of the most important targets in that plan was that manufacturing investment should rise by 7 per cent. a year. In fact, as we know, the figure has been only 4 per cent. a year. I thought myself that one of the sharpest and most pertinent criticisms of the Budget, certainly of those which I have seen, was made in theEconomistlast weekend when it said:
The Budget will leave investment-deprived Britain heading for a wages-fed consumer boom.
That is one very sharp criticism which can be made of the Budget judgment.
Another point I should like to raise on monetary policy is that I believe myself that we may see, following the Budget, a considerable flow of debenture issues and I also very much wonder what is the immediate outlook for the gilt-edged market. It seems to me that Government policy could only work out on the condition that we have tough action on the gilt-edged market, and I must say that one cannot help noticing how War Loan has already taken a plunge since the Budget, even in advance of the fact that, shortly, it goes ex-dividend. That is the first point I wish to make, to question very much the part of the Budget speech which related to monetary policy.
Secondly, I would just comment on what, I believe, is one of the greatest defects in the Budget. It gives no incentive to industry. It is also, as many hon. Members have pointed out, a Budget which does remarkably little for the poorest in the country. I share the view of the hon. Member for Lewisham, West (Mr. Dickens). I could not agree with all of his speech, but I thought that he made a strong case last Wednesday when saying that as we enter the 'seventies the abolition of poverty in this country ought to be one of the prime objectives, and I dare say that he may agree with me that this should apply not only to Britain, but also to our making a contribution to the abolition of poverty in all parts of the world as well, a point which my hon. Friend the Member for Louth (Mr. Jeffrey Archer) made in his excellent maiden speech.
Here, I want to make one suggestion to the Government. Like my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), I believe that it would have been right in this Budget to have increased family allowances. I also believe that if, as we are told, there is today spare capacity in the construction industry, one simple way in which the Government could at short notice help those less well off would be to allow local education authorities some increase in their allocation for minor capital works. I have never been in favour of using the major school-building programme as an economic regulator, but I have never seen why we should not use the minor capital works programme in a more flexible manner, increasing or decreasing the programme in accordance with the economic situation.
This is something which puts remarkably little strain on the Budget; at the same time, it considerably helps children in the poorest parts of our big cities. It is also a great help to local education authorities such as, for example, Kent, where the population is rising very rapidly and where there is always a risk of the older schools falling further and further behind in the queue.
My last point is on what has been said in today's interesting debate on the subject of inflation. I was interested to hear my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) make the point, which I believe has much truth, that we still do not know as much as we should like about the causes and the course of inflation. Many economists have said that, even today, we are not as fully informed as we should like to be about how inflation happens, and how excess monetary demands works its way into the real sectors of our economy.
I would say to the hon. Member for Ashton-under-Lyne (Mr. Sheldon) that, of course, this is a problem which affects all industrial countries today in the Western world. But it is a problem of particular seriousness in this country, because of our balance of payments position, and because we are so much caught up in world trade. Surely a projected increase in costs of 7 per cent. in a year must be a matter of special concern to Britain, which is so dependent on putting up a competitive performance in world markets.
I understand completely all the doubts that hon. Members on both sides have on the subject of incomes policy. I want to see the measure of trade union reform to which my party is committed. I want to see a most competitive economy. But I do not believe that it will be possible for any Government altogether to dispense with incomes policy, and I thought the hon. Member for Ashton-under-Lyne put it fairly when he said that, as one aspect of policy, Governments will have to learn how to exert some influence in the right way.
My right hon. Friend the Member for Barnet (Mr. Maudling), some years ago, in a very perceptive speech delivered at Aylesbury, said that one could well imagine a situation in which there was rising unemployment and, at the same time, sharp wage pressure in other parts of the economy. That is just the position we have recently had. Under the present Government, there has been an increase o¾ per cent. in the labour force unemployed, and an annual rate of wage inflation 4½ per cent. a year.
I do not want to see the public sector "clobbered", as hon. Members opposite have put it, but the Government have a direct responsibility for pay in the public sector. The Government are the largest employer, and cannot possibly abrogate their responsibilities for the public sector.
More generally, I agree with those who say that we want sustained policies that will result in the wage round each year advancing rather less rapidly than would otherwise be the case. Even an increase in the wage round year by year that is 1 per cent., 1½ per cent. or 2 per cent. less than would otherwise be the case would be worth having. It is a great mistake to suppose that a policy can be worth while only if it is 100 per cent. successful. It may well be that the most difficult aspects of policy, where our success can never be more than partial, may nevertheless be vital to the interests of the country.
I agree with hon. Members who say that we need faster growth. Under the present Government we have had a slow growth. We have had disagreeable cuts in public expenditure, yet a notable increase in the burden of taxation. I look to see a Government who give faster growth, proper priorities in public expenditure and a reduced burden of tax. On this point, I have little hope for future policy under the present Government, and that is why I very much hope that my right hon. Friends will be able, in the next Parliament, to produce a policy along the lines which I have indicated.