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Part of the debate – in the House of Commons at 12:00 am on 13th December 1971.

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Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone 12:00 am, 13th December 1971

I, too, congratulate my hon. Friend the Member for Exeter (Mr. John Hannam) on raising these wide issues in his excellent speech. I also thank my hon. Friend the Member for Cheadle (Mr. Norman-ton) whose expertise, added to that of my hon. Friend the Member for Exeter, in addition to the knowledge of the right hon. Member for Birkenhead (Mr. Dell), have been of great value to our deliberations.

I wish to turn to a matter which is mentioned in the second Motion on the Order Paper, namely the burning question of investing in this country. My hon. Friend the Member for Exeter referred to this point. I think that this is no new phenomenon but it has undoubtedly become more serious since 1965. Whichever party has been in office, there is no question but that the rate and the level of investment is now in a serious state.

According to the figures of the N.I.E.S.R., talking of industrial investment, and not of the total—that 10 per cent. of the G.D.P. or 5 per cent. in the case of industrial investment—there has been a grievous fall. In 1970–71 the fall in investment is about 8 per cent. according to the N.I.E.S.R., and in 1971–72 we shall suffer a fall of about 6·5 per cent. These are extremely serious figures and it matters not to me whether it be a Conservative or a Labour Government in office. These are figures which are, or should be, of great alarm to the country.

The situation is reflected in the unemployment figures. In spite of previous Treasury optimism, it is clear that 500,000 people have left their jobs in manufacturing industry this year. The situation is reflected in the longer term, in the number of machine tools which have been purchased by this country, by West Germany and Japan in the last five years. We have purchased or installed about 200,000 machine tools, West Germany 480,000 and Japan well over 800,000. These are some of the indications of the gravity of the situation.

I am sure that everyone with constituents involved in heavy industry, as I have in Stafford, will be aware of the problems which affect heavy electricals, chemical engineering, machine tools and commercial vehicles, and factories are now working four, and even three days a week. These are the immediate impacts if the heavy industry programmes go into decline.

Far more seriously, as my hon. Friend the Member for Exeter said, within a decade unless these trends are altered, our physical finished exports will cease to be competitive in many parts of the world. Secondly, unless investment is now undertaken it is inevitable that our competitive position in the world can be maintained only by reducing the real purchasing power of the workers in this country, as happened between 1968 and 1970, by a series of devaluations.

May I put it in another way? Mr. Wynne Godley, in an article which has been referred to frequently said that a 9 per cent. growth rate in actual investment is needed between now and 1975 if we are to achieve anything like a 2½ per cent. level of unemployment. This is the weight of the problems which face the country. I think they are difficult to compute except in terms of the really great dangers which face us.

It is possible that the adverse trends will be reversed, but what is surely needed now is an acceleration even if the trends start moving in our direction. What is needed now is action by the Government to accelerate those trends so that we get the necessary investment to bring down unemployment and keep ourselves competitive. Even if the trends are in the direction of better profit, a higher rate of investment must be made possible.

I have my doubts that the trends are as good as all that. First, the resolution of the American imposed financial crisis is by no means certain before the next Presidential election. Secondly, far from being good, investment prospects in Europe at the moment are very bad. Clearly from the company reports there is a general down-turn in industry there. Thirdly, as has been pointed out by the right hon. Member for Birkenhead, even if there is a settlement of the currency impasse it will be around the United States demand for a 5 per cent. greater share in world trade, and this is bound to hurt others engaged in world trade. Therefore, the signs are not as good as all that.

Even if they were better than I suppose them to be, I believe that the time has come for the Government to start taking action. Indeed, my hon. Friend the Minister of State, Treasury only a few days ago said: It is indeed remarkable, given the weight of our overall fiscal policies and our public expenditure programmes, that business confidence and investment have not responded more rapidly.…" —[OFFICIAL REPORT, 9th December, 1971; Vol. 827, c. 1545–6.] In the public sector the Government have advanced investment by £300 million net into this year. I believe that we have now got to start moving along those lines for private industry. We need a spark to turn up the economy and get the wheels turning faster.

Even if one looks at the consumer boom, the money is there. Real incomes have increased in the last year or so, but the boom is not booming because people are not spending. They are saving. It is an international phenomenon. Too much money is failing to fructify in the pockets of too many people. Even the phenomenon of a housing boom both here and in the United States is having only a marginal effect on the reinvigoration of the general economy. Fashions change quickly, but the cry issued by the Treasury should be, "Spend now and save later". That would be of some assistance in getting the wheels turning a bit faster.

Rightly or wrongly, I believe that the key is to try to get investment moving in the same way as it has moved in the public sector. It is not easy to inspire confidence. It is not easy to make clear to industry that profits are ahead. But I believe that they are. What we want now is not speeches at the Mansion House or off-the-record chats to leading industrialists; we need action by the Government to bring investment in the private sector forward.

In my view, it would be perfectly possible and proper to set up and make use of an organisation based on the N.E.D.O., where we have an extremely competent director-general in the person of Sir Frank Figgures, bringing in the unions, the Government and management to consider the broad field of investment for the future. These will be difficult subjects, but, much in the same way as my right hon. Friend the Member for Wallasey (Mr. Marples) spoke of the need to consider employment in relation to the avalanche of change, I believe that there is much to be said for using this excellent machinery, giving it a bit more power, and turning our attention to what the French used to call indicative planning such as was very successful in France in the 1950s and 1960s. That is for the long term.

The immediate need is for pump priming and an endeavour to catch up the 18 months which we seem likely to waste. This is what the figures from the N.E.D.C. seem to indicate, that there will be virtually no heavy reinvestment or investment in this country not just in this year but until the end of 1972. If this comes about, it will mean that, when 1975 comes, we shall have a grossly overloaded and overheated economy, and that, I am sure, Treasury Ministers would regard as the one thing which they want to avoid. I hope, therefore, that they will bear with me if I now put forward some concepts, not totally Conservative and not always Socialist, for what I believe we should do. We must approach these questions in a completely undoctrinaire fashion to see what can be achieved in the way of pushing investment forward now into the economy.

My hon. Friend the Member for Cheadle referred to company taxation. In spite of what the right hon. Member the Member for Birkenhead said, I regard this as an important matter. Taken on an actuarial basis, that is, on the basis of actual replacement rather than historic cost, the figures for replacement of assets in this country reveal that many companies in this country are actuarially bankrupt. There must, therefore, be further assistance to the companies concerned. A cut in Bank Rate is long overdue, and I hope that it will come.

Next, I beg Ministers to reconsider the whole question of investment allowances, free depreciation and investment grants. We can no longer afford to be doctrinaire about it. It is not a question of what we said in the manifesto or in our speeches. It is a question of what needs to be done now. I am all the more convinced today that the investment grant, especially if arranged in a more refined fashion, with precise emphasis on new, British, and preferably manufactured equipment, is an instrument which we should use once more.