Economic and Industrial Policy

Part of the debate – in the House of Commons at 12:00 am on 18th February 1971.

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Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland 12:00 am, 18th February 1971

It is always a pleasure to listen to the right hon. Gentleman the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), and we must be thankful that he was not elevated into silence. He began by saying that he would help out the Chancellor of the Exchequer on economic policy, but, although he made some excellent points against the Opposition, I did not notice that he added much to the almost nil start which we had from the Chancellor himself.

I shall return to some of the points which the right hon. Gentleman the Member for Kingston-upon-Thames made—his main point lies at the crux of the debate—but, before doing that, I wish to welcome what the Chancellor said about special development areas. If I tell him that I shall need a little time to find out exactly what it means, he will sympathise, I am sure, because, plainly, he was not quite sure what it meant, either. I draw attention to one point, however, at this stage.

There is always the danger that if we concentrate help on, say, the West Central belt of Scotland, we shall induce some diversion of investment away from other areas of importance, from the far North and the area which I represent, from the Highlands, the Borders, the medium-size towns and the North-East. I should like the Chancellor to consider whether he could limit the extra assistance to, say, companies over a certain size. encouraging smaller companies to go into what are still development areas but which, as I understand it, are not to benefit from the new measure which he has announced.

I wholly agree with the right hon. Member for Kingston-upon-Thames that the most serious danger facing us is inflation, and we cannot tackle the serious problem of unemployment until we put that right. To my mind, it is the crucial danger for the Western world. Unless it is curtailed and curbed, raging inflation is the classic prelude to an attack upon liberty in general and can easily lead to anti-libertarian measures.

I do not believe that any Government of any party can meet this danger alone. One of the lessons to be learned from today's debate is that it is becoming common form in the House that economic debates are largely taken up either by saying how badly the Labour Government did in past years or by saying how badly the Tory Government are doing now or did in even more remote times. In fact, inflation went on at a fairly steady pace whatever Government were in power. The alarming feature now is that it is accelerating.

We must realise that a concerted effort is needed. I greatly sympathise with those who have stressed that it needs a united national effort, too. I do not believe that any Government of any party, facing perpetual opposition and a divided nation, can deal with this most serious matter.

At present, in my view, we are on a suicidal course. The rate of inflation has risen from 6 per cent. a year to 8 per cent., and it is all too likely this summer to reach 10 per cent. It is a disease which feeds on itself. The higher and the faster it goes, the more strength it gathers.

It is inconceivable to me that a 10 per cent. increase in wages could be considered a welcome minimum. I was astonished at the exchanges in the House over the award to the electricity workers. We heard the Opposition trying to prove that it was actually better than 15 per cent., and the Government saying, "No, it is only 10·9 per cent.". In fact, the increase in productivity is only about 1 per cent.

If that sort of thing is to be repeated across the board, and if it is to be annual—this matters a great deal, because no sooner is one claim dealt with than another is put in—one can foresee, with only the most elementary arithmetic, where we shall end up. In fact, 10 per cent. is double and more the rate which was said to be tolerable by the last Government. We are seeing that now as a minimum, and with serious attendant industrial friction at the same time.

I shall not repeat all that has been said about the dangers of inflation, but I must add a few words because those dangers cannot be too often stressed. First, inflation creates social injustices of a peculiarly harmful sort. There are women and girls in the North of Scotland and in my constituency who are still earning only £7 to £15 a week. Yet that is the extra demand being put in by many trade unions today on top of a basic rate which itself is far above that. The people who are really suffering—it is a disgrace that we do not make more fuss about them—are the low-paid workers and others similarly hit. They are the ones who ought to be demonstrating, demonstrating not only against the Government for their lack of policy but against other sections, too, and some of the trade unions for exploiting their monopoly position.

Second, inflation not only divides but debauches the nation. It rewards the "spiv". It does away completely with the general rule that one should impose upon others only what one is willing to accept oneself. It puts a premium on payments in kind, things under the counter, expense accounts, and so on.

Third—this is closely relevant to what the right hon. Gentleman said—inflation will simply dry up investment. At present. one would have to earn 15 to 20 per cent. on one's investment to make it worth while. There will be little more voluntary investment soon if that sort of thing continues. There could be forced investment, but that would be part of the movement away from a libertarian society. Those of us who have been supporting the savings movement should consider carefully whether we are, in fact. supporting a long-term fraud.

All these results will follow for this country whatever happens in the rest of the world. It is sometimes said, "What does it matter if we inflate if other countries inflate equally fast?". But all these injustices will arise in Britain whatever happens in the rest of the world, and, what is more, if we inflate faster than the rest of the world, as is happening now, we shall soon be in a balance of payments crisis.

The trade unions today are in a very different situation from their situation at the time of the Tolpuddle Martyrs. Some of them represent favoured groups who arc by no means the poorest or most helpless people in society. It is the unorganised who are being so hopelessly left behind in the inflationary race.

On the other hand, so expensive is modern machinery that the owners of it, whether the State, nationalised industry or private enterprise, cannot afford to see it standing idle for long. So the bargaining position of the unions—certainly of the strong unions in certain industries—is immensely strong.

Further, it seems to me that certain conditions of a modern industrial State are in themselves inflationary. There has been a dominant bureaucratic trend in both Government and business to worship size and to worship sophisticated technology. This has been largely nourished by arguments about prestige and the pressure of those employed in such industries; for instance, the production of aeroplanes which will never pay their way. The result has been a great diversion of effort to create products for which no one really wants to pay. That is just as inflationary as making weapons in time of war for which wages are paid but which do not add at all to the number of saleable commodities in the market.

There also seems to me to be a difficulty in the lengthening time of production of many sophisticated products. Wages are being paid out all the time, but even if the product is wanted on the market it does not reach it until considerable sums have gone into circulation.

We know the situation. The Government, caught by inflation, cannot expand. Perhaps they have missed their chance. Probably after the election they could have risked some expansion, but now it is much more difficult. So we are in an exceptionally dangerous situation of inflation plus stagnation plus high unemployment. It used to be thought that it was an almost impossible achievement to reach a very high rate of unemployment at a time of raging inflation, but we have done it. I doubt whether the real standard of living of many people in this country has risen at all over the past five years.

It seems to me that we must get rid of certain facile assumptions. First, there are the inquiries which are set up ad hoc in one form or another, and which always find something above the minimum demand. They are not a very satisfactory way of dealing with incomes. Second, there are the arguments on comparability. We in the Chamber might compare ourselves with American Congressmen, and if we did we should be entitled to £20,000 a year plus £50,000 expenses. Comparability must take account of the circumstances of the society in which we live.

Further, even if prices go up, which gives people a very valid excuse for a wage increase in many ways, obviously if everyone chases present and future rises in the cost of living we are in exactly the position of the donkey chasing a carrot tied to its own bridle.

But, while the difficulties that we face are great, we have certain assets. We might, even in a debate on a Motion of censure, count our blessings. First, as the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) said, we have a strong balance of payments position.

Second, we have in the unions many sensible men who know the situation all too well. Here I come to a rather controversial note in my speech. I happen to hold the view that the Minister in charge of labour is quite a sensible man, and I do not believe that it is beyond the bounds of possibility—I put it no higher than that—that he should get together with the unions privately and see whether the growing friction can be stopped. I know that there is a National Economic Development Council, but that is the sort of body I want to get away from. The growing friction which is doing nothing to check inflation and could do the economy great harm can only be reduced in less public circumstances.

If we are to restore a better atmosphere, there must be concessions on both sides. I do not know Professor Hugh Clegg. I have listened to the explanations of why he has not been reappointed Chairman of the Civil Service Arbitration Tribunal. Of course, the Prime Minister has a case. The question is whether there are not many wider considerations than whether Professor Hugh Clegg took on an appointment by the unions for the Scamp Inquiry. This is the sort of area in which the Government should have shown more generous statesmanship. If they have no other objections to Professor Hugh Clegg, let him go on. Someone must make a few concessions and not appear to be driving through everything on the exact letter of some law or because of arguments which have a certain amount of logic.

I fail to understand some of the talk about hiving off profitable parts of nationalised industry. I am not a very keen nationaliser, but the Government always tell us that nationalised industries must show a profit. When those industries have some part that does, they are told to sell it. I cannot see that that is a very suitable policy.

We must also get away from the question of prestige. I should like the newspapers and other mass media to get away from all the language of battle they constantly use in industrial relations. When a sensible and moderate trade unionist is put on the televisison, someone asks, "Don't you take this finding as a defeat?", when the man has, possibly very reasonably taken rather less in a major award than he originally claimed. We must get away from that atmosphere of battle, for which the papers and television are very much to blame.

Several things are essential to any economic policy that can deal with inflation. First, we must have a lead from the top. It is impossible to forgo wage rises when the top people, the managing directors, the leaders of professions and everyone else at the top increase their emoluments and payments in kind every year. It is almost inconceivable that the managing director of Rolls-Royce had an increase of £9,000 last year. Where is the productivity? I can understand such people having increases when their businesses do well, but they get more cars, more secretaries and more money whatever their businesses do. I do not think that it can be argued that this does not affect the economy. No one suggests. that chairmen of companies should be allowed to murder people simply because they do not murder very many, that it does not matter very much if they murder one or two. There is a general rule that the top people show an example.

Second, we should look at some of the top institutions. There is a lot of talk about people putting up prices, but some of the banks have increased their dividends and their charges. They are in a monopoly position; they operate restrictive practices. They even refuse to take the decimal halfpenny. There are members of the Government who have great influence with the banks. Let them induce a little economic sense in them.

Third, we must have a prices and incomes policy. It may not be the same as the Labour Party's policy, but it is insufficient for the Chancellor virtually to say, "I have no policy. We all hope for the best." Does he think that 10 per cent. is the right level of increases in wages? Is that to be the norm? If he does not like the P.I.B., has he any means of establishing a principle for wage increases and fixing salaries and so on in the public sector? Obviously, productivity is not applicable. We cannot judge judges by productivity. A very good point was put to Lord Wilberforce when he was asked, "Has your productivity gone up?" It is absurd to apply productivity everywhere. But there must be some criteria. We cannot leave the matter to a whole series of ad hoc inquiries.

I should also like to see a policy which encourages plant bargaining instead of across-the-board wage increases, and I should like to see increases when they occur in monopoly conditions referred to something like the Monopolies Commission. It has often been suggested that there is no reason why unjustifiable increases arising from a monopoly position should not be subjected to scrutiny by a body like the Commission, and so should rises in prices.

I am not asking the Government to go back to the time when they tried to fix wage rates all across the board, but I am asking them to establish principles and to take action against what they consider to be unjustifiable wage increases. They should also consider the possibility of taxing such increases which are clearly beyond the public interest.

Next, instead of cutting down the social services the Government should increase them. I am trying to stop the causes of distress in this country. If we increased the Community services in particular we should make it a good deal easier to restrain wage demands. I do not for one moment share the Government's view that the social services are intended only for lame ducks. I regard them as part of the fabric of this country. They need altering and extending in some ways. They should become community services to a great extent. I want them to be used as instruments for greater equality and binding us more closely together.

The question of Government expenditure has not been much raised in the debate. It is pretty clear that in spite of all the promises there will be no reductions, or very little. What is rather significant is that such reductions as there will be will be in the Government's involvement over investment. There are arguments on both sides as to whether allowances are better than grants. Certainly, in my part of the world grants are generally more useful because they provide some cash. According to the Government there will be less money for investment, whatever system is used. Yet we are running a very large Budget surplus with no effect on inflation and have a strong balance of payments position. In this situation we should begin to make credit rather more readily available and try to reduce some interest rates.

I agree with the right hon. Member for Kingston-upon-Thames that ultimately it is the confidence of investors in the future that will decide whether or not they invest, but certainly lower interest rates and a less restrictive policy will encourage them to take a rather rosier view of the future. This is very true. It is very serious indeed that Scotland has 118,000 people unemployed. Although the Government may consider that it is impossible to do anything more than they suggest, I do not think that their present measures will impinge on that situation unless they take more general measures to encourage again investment and the taking up of the slack.

For my part, I believe that the running of the economy is a matter not simply of economics but of politics as well—politics in its widest sense. As has clearly been demonstrated over the years, a great deal of the party battle in this House is totally irrelevant. In fact, the economy is not going to be put right by total nationalisation nor by an attempt to go back to a completely competitive society—an attempt which has been knocked on the head as soon as it started. The only major measure the Government have taken is to nationalise Rolls-Royce. That is their great triumph in the first year of office. That is their battle honour. Their battle has not been very successful so far.

If we are to remain a free society, a joint effort must be made both to protect people from the causes and effects of inflation and to deal with the serious cases of hardship caused by rising prices. It must be done by establishing general principles, particularly in the public sector, and by trying by reasonable concessions to build up again some unity of purpose between us with which to run the economy and the labour relations of trade unions and employers and to do all those other things which ultimately go to make the wealth on which we depend.