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 Denzil Davies Mr Denzil Davies , Llanelli 12:00 am, 19th December 1973

Having listened to the debate for the last two days one thing upon which we can all agree is that we are facing a difficult and severe national crisis. It would have been reassuring if the crisis had been due entirely to external factors. Then it would have been simple to rally around the Government in fighting for economic survival. Unfortunately, the main reason for the crisis is the financial mismanagement of the country's affairs which the Prime Minister and especially the Chancellor of the Exchequer have shown over the last few years.

We have known for a long time that the Government are unable to communicate with ordinary people, as witness their appalling record in industrial relations. What is becoming more and more clear is that the Government are not very good at managing the economy either, although we are constantly being told that that is something that a Tory Government—a Government of businessmen—happens to be good at. We all agree that the country is facing today's situation partly because of external differences, but at that Dispatch Box on Thursday the Prime Minister tried to tell us that the balance of payments position next year would have improved had it not been for the difficulties of petroleum supplies and their increased costs.

To imply that at this time of grave crisis seems irresponsible. Most people know that, quite apart from the increases in petroleum prices, our balance of payments next year would have been considerably worse than this year. On the evidence of the last two months, the balance of payments next year will be in excess of £2,000 million, ignoring the effect of increased prices of oil.

With a potential balance-of-payments deficit of £2,000 million or more, and with foreign and convertible reserves of only £2,800 million the time was bound to come when the Government would have to take action to remedy the situation. The country could not proceed to cover this balance-of-payments deficit on that basis.

The oil and industrial crises have provided the Government with a thin veil to cover their appalling financial mismanagement. The indictment against the Government is not that they embarked on a policy of growth. We all want and must have growth. What is important is that the fruits and benefits of growth should be evenly and fairly distributed throughout society.

We have often seen other countries where there has been considerable growth but where its effects have not permeated justly throughout society. We must have growth, but the indictment against the Government is that they embarked on an import-led growth without adequate financial reserves on which to fall back should external storms blow up from time to time, as they are bound to.

No one expects the Government to foresee the vicissitudes of fortune outside their control, but I suggest that a prudent Government—and prudence is the last quality that this Government seem to possess—before embarking on such a course would have put their own financial house in order. The Government neglected to do that when they embarked on their policy of growth. To base that policy on the hope that world commodity prices might fall or stabilise, when those prices are entirely outside their control, seems to be financial profligacy of the highest order.

It has become fashionable over the years—and we heard it during the debate yesterday from the Leader of the Liberal Party—to suggest that the restraints imposed upon a country's reserves and its balance of trade should not be allowed to impede growth. Apparently all that we have to do is to free ourselves from the shackles of the exchange rates and the promised land will soon appear before our eyes.

That may be the case for some countries. That may apply to France, which grows most of its own food and is not as dependent as we are on imports. It may apply to West Germany, which has massive reserves to protect it in times of external financial difficulties. But for a country such as ours to embark upon this kind of policy without the financial reserves to support it is a rake's progress which, if it is not arrested, could lead us to the brink of bankruptcy.

One of the Government's troubles is that they believe their own propaganda. The Chancellor and his lieutenants never tire of telling us how high our reserves are. They have been telling us that for the last three years. They have become the victims of phoney financial statements and balance sheets which the Bank of England and the Treasury have been peddling out over the years.

The truth is that our reserves are wholly inadequate to meet a situation such as that which we are facing. It is also true that we do not have any reserves in the true sense of the word. What we do have are debt obligations, of a short-term volatile nature, of more than £4,000 million, and these are covered by reserves of £2,800 million. These are debts that we have incurred to Arab and other countries by paying them cripplingly high rates of interest.

It is a measure of the depths to which the Tory Government have brought this country that when an organisation of Arab States merely suggests that they may wish to withdraw part of their sterling balances that causes panic in the City and confusion in financial circles. How humiliating it is for a great nation such as ours that the Governor of the Bank of England had to be sent hot-foot to the deserts of Arabia to persuade a Bedouin King not to foreclose upon Great Britain.

The lessons to be learned from this crisis are clear, but the Government have not learned them. Like the Bourbons, they have learned nothing and forgotten nothing. When we again embark upon a policy of growth, we must not deceive ourselves into believing that we can achieve that growth with meagre resources and without making the necessary sacrifices at home—and by those who can well afford to make them—in order to shift resources from home demand to the export market. If we want Japanese colour television sets and high-powered foreign motor cars, so be it, but we have to pay for them with our own money that we have earned from exporting our own goods and not as a result of borrowing at 15 per cent. over the short term from Middle Eastern oil sheikhs.

The other lesson to be learned is that if the Government want to solve the problems facing this country they must create a climate of social justice. They will not do that if the Chancellor comes to the Dispatch Box and announces that he is to take £1,200 million from the people who build hospitals and schools, but only £85 million from those who build offices and well-furnished luxury hotels in the West End of London.

We should start committing vast sums of public money to making ourselves self-sufficient in energy. As a start, we should pay the miner sums in excess of the limits laid down by phase 3, and we should cancel Maplin, the Channel Tunnel and Concorde. The savings, and more, should be spent on developing our own indigenous fuel resources. That is the only way in which we can exist in the modern world. We must cancel the prestige projects to which I have referred. Finally, we must not enter into any arrangement with Common Market countries whereby we lose ownership, control and the benefits of our North Sea and, hopefully, Celtic Sea oil.

Having been a Member of the House for three years, it seems to me that what the country expects from the Conservative Party is leadership that is capable of governing the country. The present leadership has failed to do that. It is incapable of governing the country, and it is the duty of the Conservative Party to change that so that the country may be provided with the right kind of leadership. Before Field-Marshal Haig takes us once more into the mud of an industrial Passchendaele, the Conservative Party should get rid of him and put someone else in his place. If the Conservative Party cannot do it, then the British people will.