I was rather hoping that some people would get paid for taking the day off.
There are two fatal flaws in the economic policy of the last decade. They cropped up again and again in our last debate and will continue to crop up in all economic debates. First, there was the failure to carry out the planned devaluation in 1964 and, secondly, there was the Government's failure to introduce a statutory prices and incomes policy in 1970.
To make just one political point, if the Liberal Party had held the balance of power, as it will after the next election, both those fatal flaws would not have occurred because we would have forced devaluation on the Labour Government in 1964 and we would have forced a statutory incomes policy on the Conservative Government in 1970.
The country, the Government and to a certain extent the Opposition are all suffering from these basic flaws. The Chancellor of the Exchequer has given us figures of the CBI survey which show that business confidence is only just recovering from the consequence of the failure to carry out the planned devaluation in 1964. It was the tremendous squeeze and freeze which came as a consequence of delaying that devaluation for far too long that created the havoc in business confidence which caused the collapse of investment.
Industrial relations may now just be recovering from this failure to carry out the planned devaluation in 1964. Industrial relations suffered for a long time, and are still suffering, from the aspirations of working people going ahead much faster than the economy was allowed to go ahead. That is the best possible recipe for national gloom and bad industrial relations. We are, unfortunately, not yet recovering from the failure to introduce a statutory prices and incomes policy in 1970. The present inflation rates show that that is so.
I am concerned not only about those two fatal flaws. They are history, water under the bridge. One can say that they happened and that it is unfortunate. I am concerned that the attitudes which led to those two fatal flaws are still with us. In the hearts and minds of most hon. and right hon. Gentlemen on both sides of the House there is a desire to get back to the good old days of fixed exchange rates and a free-for-all on the wages and prices front. There is a need for a permanent float—if with the crawling peg—which creates a certain stability in place of what might turn out to be anarchy if allowed to go on. There is also a need for a permanent prices and incomes policy.
There are certain questions that I wish to direct to the Government, and they are questions which the Chancellor of the Exchequer has touched on this afternoon and in previous economic debates. He certainly touched on the question of the Government's attitude to what happens when the balance of payments position gets out of hand which was fired at him by the right hon. Member for Leeds, East (Mr. Healey). The Chancellor is a good European, and so am I, but we do not have to go in a headlong rush for monetary union in Europe and acceptance of the French attitude to fixed exchange rates. It would be much better to say that we do not accept the need for a return to fixed exchange rates. We certainly do not want to go back into the tunnel or to have anything to do with the snake. We do not want to have anything to do with the French monetary union until such time as much greater progress has been made towards a federal Europe and a genuine democratic structure.
The Chancellor of the Exchequer did not answer the question about what happens next time the balance of payments position gets out of hand—if it is not already out of hand, which is a moot point. Business confidence requires a categorical answer to that question. The great majority of business men, whose confidence is just returning, need to know that the Government will not answer the next balance of payments crisis with the old squeeze-and-freeze measures.
The Government seem to want to get out of the ring on the prices and incomes policy. I cannot understand why. I am delighted that they have got into it. I have always wanted Governments in the ring on both prices and incomes. We cannot have full employment, a favourable balance of payments position, growth and stable prices without Government intervention in prices and incomes. So what should phase 3—and I believe it should be a permanent phase 3—be?
First, there is an essential need to insure people against rising food prices— not against all rising prices. It is unnecessary to insure anyone against a rise in the price of colour television sets. But the national psychology is such that it is essential to insure people against rising food prices.
The right hon. Member for Leeds, East made great play of the Opposition's answer on food prices, which is food subsidies. I am not intellectually against subsidies—I doubt whether many hon. Members on either side of the House are —but this question is very much more difficult than the Chancellor made out. It may be easy to talk about food subsidies as gesture politics, but one has to ask, how much would they cost? It is not enough to ask how much this year to stave off the crisis, but how much next year and the year after and for ever, because one thing which is certain about food subsidies is that they are the devil's own job to get rid of. Once they are imposed, they tend to stick.
In Committee on the Counter Inflation Bill we heard the hon. Member for Birmingham, All Saints (Mr. Brian Walden) rather favour open-ended subsidies for food. It may well be that they should be open-ended, but if the Opposition are to advocate food subsidies they have to be honest and to state clearly how much they are prepared for them to cost. The right hon. Member for Leeds, East did not recognise that when his Government were in power the actual Budget cost of food subsidies was brought down. Therefore there were pressures on the Chancellor of the Exchequer of that day, on the Minister of Agriculture and the whole Labour Cabinet, to get the cost of subsidising food down. There will be pressure on any future Government to do that once food subsidies are introduced.
I agree entirely with the right hon. Gentleman in his remarks about £110 million for sweets. I considered that an entirely foolish idea. But the suggestion made by the right hon. Gentleman would go precious little way towards solving the crisis generally. To do that would probably cost three times as much if it were to have a major impact on the price of food and, in consequence, on wages.
Having said that I do not accept that food subsidies would be the best way to deal with this problem, I think it essential to build into a prices and incomes policy a permanent insurance against rising food prices. I hope that the Government will accept the idea that this is a part of a prices and incomes policy and that before negotiations start on productivity deals and raising living standards everyone will be assured that their income will go up at least by what is necessary to compensate the man with average industrial earnings for the effect which the rise has had on his earnings over the last six months. Even if we had to adjust every six months, it would not be catastrophic. A simple straightforward flat-rate benefit calculation of the effect of the cost of food for the average worker would be easy. Of course it would be paid for not by the Government but by the employer. Food is crucial and once one removed the aspect of food prices from the negotiation one could get down to reasonable bargaining for the future.
Next we have to answer the question, what kind of penalties would one have in a permanent statutory prices and incomes policy? As I have said on several occasions in debates on prices and incomes policy, it is much preferable to use the fiscal means, to use a tax on inflation and to tax selectively the people who cause inflation whether by outrageous wage demands or by excessive price increases. Such a selective tax by national insurance contributions in the case of wage increases and corporation tax on company price increases would be administratively easy.
The Chancellor said that he believes that growth is possible and that we have the resources for growth for next year and the next two years or so. I should like to know from him or from some other Minister exactly what the words "or so" mean. It is clear from official forecasts that the growth rate in GDP will be much lower than the present level. The Chancellor is right to say that it is going on target now, but we shall be down to something less than a 3 per cent. growth rate within 18 months or two years' time on annual rates.
I believe that we have the resources to continue a growth rate of at least 3 per cent. for about five years ahead— and no one can see further than that. It would be helpful for business confidence if the Government could say that this five-year period is what they are aiming at and that they will aim for it to be certainly over 3 per cent. in the five-year period and over 4 per cent. in the first three years. They should also say that they will never sacrifice that growth target to a balance of payments crisis should it ever arise.
With those few comments on demands to the Government for categorical assurances for business confidence to go forward, I can see no case at all for doing what the amendment asks. If one believes in a planned economy, one believes in giving the Government of the day all the fine tuning they can get their hands on. I should like Governments to have more regulators than those we have at present. I will not vote with any degree of confidence in the Government's economic policies, but I shall not support the amedment.