Orders of the Day — Economic and Energy Situation

Part of the debate – in the House of Commons at 12:00 am on 19th December 1973.

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Photo of Mr David Marquand Mr David Marquand , Ashfield 12:00 am, 19th December 1973

The House has rarely been presented with a more remarkable change of front, in presentation and style, if not in content, than the difference between what we heard yesterday from the Prime Minister and what we have just heard from the Secretary of State for Employment. I hope that the right hon. Gentleman will not think me impertinent if I say that I hope he will bear in mind the advice given to Winston Churchill by Lloyd George in the 1940 debate on the Norwegian disaster, when Winston Churchill stood at the Dispatch Box defending the policies of the Chamberlain Government. Lloyd George warned him not to allow himself to be used as an air raid shelter to protect his right hon. Friend. I would say the same to the right hon. Gentleman. I think that he may become an asset to this country in due course if he does not indulge in too much protection of that kind.

The House agrees that we face perhaps the gravest emergency the country has ever faced in peacetime. In normal circumstances, the whole House would accept what the right hon. Gentleman said at the beginning of his speech, that a Government facing a national emergency of this sort are entitled to ask the whole nation to rally behind them, and to ask for a cessation of partisan squabbling. The trouble is that the approach taken by the Secretary of State is not that taken by the Chancellor of the Exchequer. We are unfortunately debating the proposals put to the House by the Chancellor, which violate what the Secretary of State said at the beginning of his speech.

If a Government expect the nation to rally behind them in facing a national emergency, the Government are under an obligation to approach that emergency with candour, to explain to the people exactly what the emergency is and why it came about, and to put forward policies that are likely to deal with the emergency in a way which will unite the country.

In the Chancellor's statement on Monday there was no approach of that kind. There was a total absence of candour. The Chancellor pretended then that the crisis with which his measures were designed to deal had been caused solely by the industrial action of the miners, the train drivers and the power engineers. The House knows that that cannot be so. The Chancellor said that it was necessary to deflate home demand by the amount in question because of the three-day working that would take place in the new year. That three-day working will last either for a long time or for a short time. If it lasts for a long time, the amount of deflation caused in the economy by the three-day working itself will be so much in excess of anything this country has ever experienced before that to say that it is necessary to deflate demand by an additional £1,200 million is like trying to apply leeches to a corpse. If the three-day working lasts for only a short time, as the Government presumably hope, the public expenditure cuts will not start to come into effect until the three-day working is already over.

We all know the truth. The right hon. Member for Taunton (Mr. du Cann) let the cat out of the bag yesterday, as he often does in our debates, when he said that the country was already facing a severe and deteriorating balance of payments situation, and that the measures announced by the Chancellor on Monday would have had to be announced in any event, whether or not there had been a war in the Middle East and whether or not there had been any overtime ban by the miners. We all know that that is true.

If the Government expect the nation to rally behind them in the present emergency, the least they can do is to tell the people that truth. The fact is that the Chancellor's policies were in ruins long before the war in the Middle East started, and he has found a way out by being able to blame industrial action for his troubles. No doubt he is thanking his lucky stars he was able to do so.

Why was the balance-of-payments situation deteriorating? Part of the reason was the explosion in world commodity prices. I entirely accept, and no one on this side of the House has ever challenged, that that is not a matter in the control of any British Government. But that was not the entire reason for the balance of payments deterioration. In addition, there was the dogmatic, obstinate refusal of the Chancellor to jeopardise his personal popularity in the Tory Party by increasing taxation when the downward float of the pound made it necessary to divert resources into exports.

The Chancellor won great applause from the Conservative benches by his tax cuts in 1971 and 1972. As a result of those tax cuts, he produced a consumption-led boom of unpredecented proportions. Then he was forced to allow the pound to float downward. It floated downward so far that we also had a devaluation of unprecedented proportions. In other words, on top of the consumption-led boom which the Chancellor had created through his tax cuts we had an export-led boom struggling to be born as a result of the devaluation of the pound. The two together were more than we could cope with.

Therefore, the balance of payments was bound to deteriorate, and sooner or later some measures would have been necessary to disinflate the home economy. We all know that that is true, and it is about time the Chancellor faced up to it and admitted it.

But my accusation against the Chancellor goes deeper than that. Having now, at last, admitted—if not explicitly, at least implicitly—that there is a balance of payments crisis and a need to disinflate home demand, what does he do? He still obstinately refuses to jeopardise his personal popularity in the Tory Party, and instead deals with the domestic situation in the most wasteful, regressive, inefficient and divisive manner that he could have chosen by putting the brunt of the cuts on the public services of our people.

I am not saying that every item in the public expenditure programmes is sacrosanct. I do not say that there should be no cuts whatever in public expenditure. On the contrary, it could be argued that, in present circumstances, the right hon. Gentleman should have cut more than he has cut from the road programme. It is ludicrous to be spending as much as we are at present on road building when no one can tell what the relative economics of road and rail transport will be in five years' time.

But the right hon. Gentleman did not make any attempt at selectivity in his cuts. He has applied a crude cut across the board on every programme in the public sector. He pretended that it was necessary to impose cuts on the public sector because the private individual would already be hit hard as a result of the economic situation in general—as though, in some extraordinary way, cuts in the public sector do not affect private individuals whereas tax increases do. This is nonsense. Cuts in public expenditure affect private individuals as much at tax increases do. The only difference is that cuts in public expenditure will affect my constituents, whereas increases in tax will affect the constituents of the hon. Member for Cities of London and Westminster (Mr. Tugendhat) more than mine.