Inflation

Part of the debate – in the House of Commons at 12:00 am on 24th January 1973.

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Photo of Mr Denis Healey Mr Denis Healey , Leeds East 12:00 am, 24th January 1973

We can all agree on one thing about the speech which was made this afternoon by the Prime Minister, and that is that it was a speech of historic importance. The whole 45-minute speech was a carefully drafted treaty of surrender of the philosophy which has guided Conservative policy for most of its existence—although, as the Prime Minister will recall, the philosophy was drastically revised under Lord Butler for some years after the Second World War. It was the Prime Minister who, when Leader of the Opposition, revived the old Tory doctrine in its pristine simplicity, and it was a doctrine that was adopted by the Conservative Party at the Selsdon Park meeting.

Nobody who has watched the Prime Minister over the last 10 years can doubt that the right hon. Gentleman believed in that doctrine. We recall his responsibility for the document "Make Life Better", published in 1968 in which he said: Policies of restriction and control work not with the people but against them. They stifle the forces which our economy most needs. Reward and competition are still the greatest incentives to effort Many of the Prime Minister's hon. Friends who spoke during the debate, notably the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and the hon. Member for Basingstoke (Mr. David Mitchell), recognised that every sentence which the Prime Minister uttered today was a direct contradiction of the philosophy to which he converted his party during its years in opposition and on which he fought and won the last General Election. Yet in the whole of his speech we had not one word of apology or even of explanation for this astonishing change of front.

The Prime Minister has carried out one of the most dramatic U-turns in political history, and he is now driving at full speed in the opposite direction with just the same stony rectitude as that with which he started and with the same petulant arrogance towards anyone who dares to suggest that he has changed course and might be just as wrong in his new posture as he was in the old one.

The Prime Minister has changed a great deal in the last few months. I suggest that he takes down from the hoardings those impressive images with which he plastered them not so long ago presenting him as a man of principle—unless, of course, when he put those posters up he meant people to understand that he would change those principles once a week.

My right hon. Friend the Leader of the Opposition quoted at length the promises which the Prime Minister made and the solemn pledges contained in his election manifesto, repeated in broadcast after broadcast and speech after speech in the 2½ years since then. After the Prime Minister's speech today, I see no reason why anyone in the world should ever again believe a word he says.

The nearest to an explanation that we have had from the Prime Minister for this unprecedented change, not just of front but of philosophy, is that the national interest requires it. The country now faces an economic crisis of unprecedented magnitude, we are told, which requires him, his party and all those who voted for him to claim that what was wrong is now right and that what was black is now white.

Why is the country facing this crisis? It is because the Prime Minister's attempts to apply the philosophy on which he was elected to office have led the country into the most frightening conjunction of catastrophes since 1931, with mass unemployment on a scale we have not known since before the war, with industrial stagnation, with soaring prices and, what is more, with a balance of payments crisis. It is not surprising that the trade unions and ordinary people have turned against him. After the way in which the right hon. Gentleman treated them in pursuit of his old philosophy which he has now changed, it is not surprising that we lost 25 million days in strikes last year, more than at any time since 1936.

What is important and significant is that the Prime Minister has had a vote of no confidence from the very people he purports to represent. He has given tax reliefs to the rich on an unprecedented scale in the last 2½ years. He has got British industry into the Common Market as it almost unanimously demanded. His reward has been a collapse of investment by the business community. Last year 1972, there was a fall in investment of 10 per cent. That followed a fall of 8 per cent. in 1971. I might remind the House that business profits last year were higher than at any time since 1964. The reward the Prime Minister got for his incentives was a further fall of 10 per cent. in business investment.

The right hon. Gentleman got another vote of no confidence in his new policy from those he purports to represent in the Stock Exchange only last week. I put it to right hon. and hon. Members on both sides of the House that the failure of Britain's business community to respond to the incentives which the Prime Minister and the Chancellor of the Exchequer have showered upon it in such abundance over the last 2½ years represents not just a crisis for the Conservative Party but means a crisis for the whole system of free enterprise under private ownership as we have it in Britain at present.

The Tories believe in free enterprise. They came to office to set it free. Now that we see business free, it has proved that it is not enterprising. This is the root cause of all the problems with which the Bill referred to in the White Paper is supposed to deal.

I stress that because, although for ordinary men and women rising prices and unemployment are what hurt most, the real failure of the present Government has been their failure to get the economy growing and the collapse of investment which has accompanied the Government's attempt to apply their own philosophies.

Many other countries have seen their earnings rise as fast as earnings have risen in Britain. But nowhere else in the world have we seen so great a rise in prices. The reason is that in almost every country with which we compete in trade, productivity and production have risen with rises in earnings. In this country they have failed to rise. The responsibility for productivity and production is one which rests with management and above all with those whose duty it is to invest their profits in improving productivity.

Even within the parameters of the system that the Chancellor of the Exchequer supports, his management of the economy has been so appalling that he has got himself into a box from which I doubt whether he can ever escape. He has got himself into a position where it will be almost impossible to combine continued growth at 5 per cent. for the two years during which the Prime Minister undertook to continue a 5 per cent. growth and to maintain stable prices and a healthy balance of payments. What the Chancellor has contrived is that worst of all forms of growth, the import-led boom. His management of the economy last year has enabled Japan, Germany and many of our other competitors in the world to establish a firm base for the expansion of their exports to Britain. Let us consider the motorcar industry. Imports of cars were up by £150 million last year and exports were down by £50 million. The same is true of colour television and of many other consumer durables on which the Chancellor concentrated so many of his tax reliefs in seeking to get the economy moving over the last 18 months.

Now let us look at the position as the Government propose it shall develop under the Bill during this year. In replying to the debate, I hope that the Chancellor will give us the Government estimates of the increase in consumption under the Bill and how that will relate to the increase in production to which he and the Prime Minister have pledged themselves. But in any calculation which I or any other observer have been able to make, it is difficult to see consumption in Britain rising by more than 2 per cent. in the next 12 months, although the Government are aiming at a 5 per cent. increase in production.

What the House and the country and. indeed, the world will want to know, and one of the reasons for the slump on the Stock Exchange—this new vote by the business community of no confidence in the Prime Minister—is the answer to this question. They want to know it as much as any hon. Member on this side of the House wants to know it. The central problem, which the Chancellor knows very well and which has been pointed out to him by the Oxford and Cambridge Review, by the National Institute for Economic and Social Research