If the hon. Member for Birmingham, Northfleld (Mr. Carter) had confined himself to the last point he made, on investment, his contribution would have been entirely relevant and of a better length. I feel this is not the time to discuss insurance premiums. I shall confine myself to the management of the economy and will touch at some length on the hon. Member's point about investment towards the end of what I have to say.
It now seems to be fashionable to talk not so much about money supply as about overheating. The two are not the same, because it is quite possible to have too great a money supply without overheating. It simply means one has jacked up one more on the ratchet to the point where there is a higher level of inflation but not the excess demand. I am afraid it is equally possible to have at the same time a high rate of money supply growth and overheating, and I fear that that may be what is happening here.
My hon. Friend the Member for Leek (Mr. Knox) almost overheated himself in denying that there were any signs of overheating. If I pour a little cold water on him I hope he will not sizzle. There are obvious signs that the economy is moving to an overheated state. We can leave out of account the overseas account. It is true that a surge of high import prices will be coming through from the food and raw material commodity increases of which we have heard. But the Chancellor was right when he said he expected exports to turn up as a result of our devaluation—and the net effect of the overseas account must be neutral so long as the Government continue to let the pound float.
Here, I underline the words of the hon. Member for Cornwall, North (Mr. Pardoe). I do not believe we have realised what a transformation of the economic situation has come about since all the major currencies started to float. It means that unfair trading cannot continue. The effect to which it has smoked out the Japanese is not yet generally realised, because their game was to rely on an under-valued currency to force their exports into every country in the world. They did this by insisting, through the banking system, on channelling into the export industry funds which would not otherwise have gone there, and as a result they denuded the standard of living of their people by their failure to invest in social and domestic matters which would have increased that standard of living.
This is no longer possible, because the yen has been up-valued by 30 per cent. against the dollar and the Japanese standard of living has actually gone down as a result of this, despite the peoples' hard work of 20 years. Political pressures will only add to economic pressures to make the Japanese desist from what they were doing. I would only say in passing—it is relevant to this debate— that if we choose this moment to try to emulate the Japanese performance we are doing so at the worst possible moment and at a time when such action could not possibly succeed so long as we continue to float our currency.
I mention that only to dismiss any connection there could be between the overseas account and the domestic economy, at any rate in the long run. My right hon. Friend believes investment is going to rise. I very much hope he is right. I am not quite so optimistic, though there are signs that there is an increase coming. But this in itself will add to the pressure of demand if we are talking of overheating, and already there are very strong signs of a labour shortage, particularly in some areas, and also a shortage in some skills. In my own constituency several industrialists have told me they are short of labour. It must be said that one is hearing more and more of wage settlements which have been arrived at to secure, or to hold, labour—settlements which are well above phase 2, and which, but for the fact that they might be stopped, I would be prepared to spell out by name here and now.
I am certain that in areas where it does not come into the full light of the day the norm is already being exceeded. I am fairly dubious about the norm being exceeded in some of the recent major public sector settlements. I agree with the hon. Member for Birmingham, North-field that it is extraordinarily difficult to obtain detailed knowledge of the exact terms of offered and accepted pay increases in the public sector, because Ministers seem very reluctant to give the full details. I hope we may be given them in the future. I have no doubt that demand is very strong and will become stronger, and that as the year passes the signs of overheating will become more and more apparent.