Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 5th November 1973.

Alert me about debates like this

Photo of Mr Denis Healey Mr Denis Healey , Leeds East 12:00 am, 5th November 1973

The Prime Minister is leaving because he knows that it is impossible to defend the fact that the 20 top property companies in this country, which own over £3,200 million worth of assets, pay on average only £1 million in tax a year. Neither the Chancellor nor the Government as a whole have tried to do anything about this all the time that they have been in power.

But the worst of all areas in which the Government have discriminated in favour of the rich against the poor is in the maintenance of a policy which depends on inflation. The Chancellor knows that his whole economic strategy now depends on inflation continuing in order to cut excessive demand in the economy. The point was well expressed in an article by the London Business School in the Sunday Telegraph yesterday saying that the effect of inflation will be to mop up surplus funds in the economy. The Permanent Under-Secretary at the Treasury, Sir Douglas Allen, put it rather more delicately last summer, when he said that the Government were relying on what he called …the spontaneous effect of the changing wage-price relationship. The Government now depend for bridging their deficit on tax increases imposed by fiscal drag on those who have seen no increase in their real standard of life.

Meanwhile, of course, we are getting deeper and deeper into debt abroad. The Chancellor has pushed the public authorities into borrowing nearly £1,000 million abroad since last March at rates of interest far above those at which the Labour Government ever borrowed money when they were required to do so, and in many cases at rates of interest far above those paid by anyone else in the world, even at the present time.

Of course, the Government cannot go on like this. Many of us suspect that they are only waiting for the energy crisis to make yet another U-turn. I suspect that my hon. Friends are unfair in suggesting that Thursday's by-elections are the only reason that the Government are doing nothing about the increase in oil prices and the cut in oil production. I suspect that the real reason is that they are waiting for a major oil crisis—promoted in part by their own refusal to act now—to produce a smoke screen under which they can make yet another reversal in their whole style of economic management.

We have learned again and again since the war that there is no chance of solving this problem of inflation unless the people of this country feel that the Government's policy is fair, unless the Government act on prices which can be controlled and unless the Government show honesty in their general management of the economy. That is why we have pressed consistently in the last 12 months for direct action on food and housing costs. We shall be discussing housing in more detail tomorrow. All that I would say now is that there is no way in which we can hope to reduce the price of housing without taking building land in the urban areas into public ownership.

If the Government want any hints or suggestions here, I might quote One extremely sober and emphatically non-socialist director of a leading property company who was quoted the other day in the Daily Telegraph as saying that he was now utterly convinced that the only possible social solution to rising property values was nationalisation of the property industry. As this would require to make it work the conversion of every estate agent and chartered surveyor, to say nothing of property developers themselves, into civil servants or at least State employees. this sober and non-socialist director said. it may safely be ruled out during the life of the present Government. We shall be debating the general management of the economy on another occasion—[Interruption.] I dealt at some length during a debate a fortnight ago, at which I think the hon. Member was present, with the ways in which I would propose to increase taxation and reduce Government expenditure.

The simple problem facing the nation—I think that the Prime Minister would agree with this—is the failure of British industry, in spite of all the incentives that it has had in the form of tax relief, in spite of the substantial increase that it has seen in its profits, to invest its profits in new capacity in time and to carry out the intentions that its members declare from time to time to the DTI or to the Financial Times inquiries.

But behind this central failure lies another question to which the Prime Minister referred in his recent conversation with the Institute of Directors. According to the record of his conversation which was published in The Director, the right hon. Gentleman said: The whole social structure of this country suffers from divisions which are far greater than those to be found in other free enterprise economies like the United States or Germany. I believe that this is profoundly true and that it is at the root of all our economic as well as social problems. The recent publication of the pervasiveness of the public schools in the higher ranks of the establishment bears that out. A great deal of this can be put right only by changes in our education system which we shall be discussing on another occasion, but tax policy has a major part to play.

The fact is that this Government—they took credit for it in earlier years—have used their tax policy to widen the gulf between the classes rather than to narrow it. It was possible for the Director of Economic Affairs in the Brookings Institute in the United States to point out last week, without contradiction, that the British tax system is more regressive than even those of the United States and Japan.

I believe that the Prime Minister at least recognises the existence of this problem, although so far he has given us no hint that he has any policy for solving it. But the Chancellor has consistently rejected even the diagnosis. He persists in widening the gulf between rich and poor, the gulf between the classes—and not only in his fiscal policy. Whenever we have any industrial trouble, he can be relied on to make a speech deliberately intended to inflame the atmosphere and to make the situation worse. Everything that he has done in the three years that he has been in that position is calculated to aggravate the central problem which the Prime Minister said lies at the root of our present economic difficulties.

The right hon. Gentleman shows no sign in this field, any more than in the field of economic management, of learning the lessons of his own repeated failures. He knows now that his policy has worn out. His justification for it has worn thin. His whole attitude belongs to a bygone age and it will be swept away with the other relics of Selsdon Man as soon as the British people have a chance to choose their future.