I shall be dealing with some of the points to which my hon. Friend the Member for Ashfield (Mr. Marquand) was referring a few moments ago but first it is right that I should congratulate my hon. Friend the Member for Chester-le-Street (Mr. Radice) on an excellent speech. I am sure that we were all very pleased to hear his kind remarks about his predecessor Norman Pentland, whom we all respected and admired. Judging by his speech, my hon. Friend will clearly be a first-class representative of his constituency and an excellent Member of the House. I hope that we shall hear him often.
I begin by congratulating the Chancellor on his policy of continuing to go for growth. It will be known that it has been a policy I have personally advocated for a long time, and not only from this Dispatch Box. I noted that he committed himself only until the interesting year of 1974. However, I would not wish to detract from my congratulations but that is where they end.
I am not a natural pessimist but I fear that the Chancellor's growth policy is doomed to failure out of his own mouth when he says that it depends upon the success of his counter-inflation policy. I do not say that with any particular relish because someone must sometime win the battle for growth if we are not to become the poorest nation in Europe, as was mentioned in the report referred to by the hon. Member for Enfield, West (Mr. Parkinson).
That is why I believe that this year's Budget is one of wasted opportunity. The Chancellor had a chance to create a climate to enable the nation to move away from industrial strife, caused to a considerable extent by his own policies and not least by his policy of compulsory wages control. The Government could have moved to a policy of industrial peace based on a voluntary incomes policy against a background of fairness in tax and social policies. That would have meant not a neutral Budget but one that neutralised all the previous Budgets of the Chancellor. We are told that the voluntary policy has failed. I wonder whether that means that the Chancellor intends to have a permanent compulsory policy or even one for the foreseeable future, as the hon. Member for Leek (Mr. Knox) said the other day. I would assume not. If, however, he is to return to a permanent voluntary policy, what grounds does the Chancellor have for believing that it is likely to be any more successful under him in the future? The answer is that he has no such grounds. Yet we must make a voluntary policy work. Indeed, the Chancellor's own sustained growth policy depends upon it.
I should like to examine the Chancellor's proposals to see whether they are likely to achieve that kind of policy. His own analysis shows how foolish it is to boast of having achieved a 5 per cent. level of growth on its own. It is like a juggler boasting about having one ball in the air when he has dropped the other three, because the Chancellor knows more than anyone that he must get them all in the air at the same time. If he is to sustain long-term growth he must have increasing industrial investment, a good balance of payments position and a successful counter-inflation policy. I doubt whether even he would claim that he has even remotely achieved any of those, although to judge from the remarkably complacent speech by the Secretary of State for Trade and Industry one would think that all his troubles were over; but I am not too sure whether the Chancellor would entirely agree with his right hon. Friend.
I should like to examine the prospects for each of the items in which the Chancellor needs so desperately to succeed to achieve his policy. There is nothing new for investment in the Budget except, as the Secretary of State for Trade and Industry told us, the constant catalogue of all the wonderful things that the Government have done more than ever before. The trouble is that vital manufacturing investment, despite all those things, has declined. Now it is forecast to rise this year. I do not wish to be too unkind to the Chancellor, but last year a 10 per cent. fall in manufacturing investment was preceded by a statement from him that he expected a recovery of private investment including manufacturing investment.
I agree that in a mixed economy companies will not invest unless they see a profit. Incentives are therefore only of marginal value. If anything they are probably too high. We now have lavish incentives coupled with massive disincentives of high interest rates, a prices code and industrial chaos.
The Chancellor misled industrialists when he said in his Budget statement:
There is no bar whatever to increased earnings"—
in the case of companies with
a bigger turnover on the home market"—[OFFICIAL REPORT, 6th March 1973; Vol. 852. c. 239]
Strictly, that is true, and the Chief Secretary today tried his best with it. But the code, in paragraphs 38 and 39, makes nonsense of it. There is a definite bar, because it talks about the "net profit margin" being kept the same as it was previously.
If prices and everything else remain the same on a higher turnover, there will be the same gross profit. Even that is not altogether certain, because with new plant and longer runs a higher gross profit margin would be expected. The net profit could be, and certain should be, much higher.
The Chancellor expects companies to reduce prices, and the Chief Secretary used as his defence paragraph 40 of the code. The words of the code are quite clear. Companies will be expected to reduce prices of goods already sold under long-term contract and, in some cases, actually delivered. In the present form of society it is not really surprising that companies do not increase investment. Indeed, it would be surprising if they invested at all.