Not just in May but in every single month since his right hon. Friend said to the House what I have mentioned, the cost of living rose. In his speech the right hon. Gentleman referred again to some remarks which I made during the General Election campaign about doctors' pay. He used the words which he has used before and said that I endorsed the 30 per cent. for the doctors.
I took no notice of that when he raised this on the first occasion, because I assumed that he would take the trouble to check. I will now tell the right hon. Gentleman, and I am sure that he will accept it from me, that what I said in the course of my speech was this:
Of course any Government, Conservative or Labour, must have the last word, and a deteriorating economic situation is a relevant factor. Having been concerned with doctors' and dentists' pay both as a Treasury Minister and as Minister of Health, it is crystal clear to me that in the context of the present awards the only reason for turning them down can be the threat of an economic crisis.
I then went on to add this:
There can be no possible reason for rejecting these recommendations of an independent body other than that the Government is gravely alarmed at the inflation which is now gathering force.
We are determined not to allow the present rate of cost inflation to continue.
There can be no dispute that the continuation of cost inflation at the present rate would have the most serious consequences both domestically and externally. At home it would lead to an arbitrary and haphazard redistribution of income with the main sufferers, as always with inflation, being the poor, pensioners and those living on fixed incomes. [Interruption.] Hon. Gentlemen opposite are destined to sit on those benches for a minimum of four to five years and if they go on shouting like this they will sit there for a lot longer.
Externally the affect of a continuation of the present rate of inflation would be to weaken our competitive position. There are already signs that this country's costs are rising faster than the costs of some of our main competitors. By the third quarter of 1970 wage costs per unit of output in manufacturing were already 9 per cent. higher than in the last quarter of 1969. It is true that Germany experienced a similar rise over the same period, but in Italy, Japan, France and Canada the rise was probably of the order of 5½ to 7½ per cent. and in the United States it was considerably less. There are also indications that there was a deterioration in the profitability of United Kingdom exports between the third quarter of 1968 and the third quarter of 1970, and nobody would pretend that the present Government were responsible for that period. Wages and material costs per unit of out-put in manufacturing rose in that period by about 14 per cent. while export prices of manufacturers rose by only about 8½ per cent.
The right hon. Member for Stechford, who had the audacity this afternoon to criticise this Government, knows full well that all this was building up while he was Chancellor of the Exchequer. What did the right hon. Gentleman do? The General Election was approaching and so he let inflation rip; that is the truth of the matter. The right hon. Gentleman, quite rightly, referred to the very high level of unemployment which was announced in the figures today, but I hope that the House will be under no illusion as to what a continuation of the present rate of cost inflation would mean for employment. It would lead without doubt to a direct loss of jobs in export industries and also in industries competing with imports. In turn, this would be bound to have a cumulative effect on those employed in other industries and services.
The present level of unemployment is, as the right hon. Gentleman indicated, as wasteful in economic terms as it is in human terms, but there can be no doubt that one of the principal causes of the increases in unemployment has been the excessive increases in pay settlements. It is, I believe—[Interruption.] If hon. Members opposite will give me a chance I will let them have the facts and figures.
It is a sad spectacle to see some trade union militant leaders almost forcing their members to price themselves out of work, but that is what is happening. It is time that those who are directly involved in the negotiation of wages realised that the more excessive the claim the more likely it is that it will lead to redundancy and unemployment.
The right hon. Member for Stechford referred quite rightly to the question of investment. The same considerations apply. The right hon. Gentleman was right to look to the future and to talk about investment intentions, but I am sure that he would be the first to agree—because he as good as said this when he was Chancellor of the Exchequer—that the prospect for investment is directly related to the current level of inflation. However attractive particular investment incentives may be—and we have discussed at length whether we should have retained investment grants—the overriding consideration which governs investment intentions is whether management believes that the company concerned can sell its goods at a profit.
There can be no doubt that the poor investment record of industry in the past few years has been both a cause and a consequence of our poor rate of growth, and we shall not achieve a significant improvement in investment intentions—let alone achievements—as long as we are cursed with the present rate of cost inflation.
When a company takes its investment decisions it has regard, first, to prospects and, secondly, to profitability. On both sides of this balance sheet, getting down the present rate of cost inflation is crucial.