No doubt we shall learn as time goes by.
The right hon. Gentleman the Chancellor of the Duchy of Lancaster did not allow the prospect of a wealth tax to mar the even tenor of his paean of praise for the capitalist system and the mixed economy, but we have it on high authority from the Labour Party—a view endorsed in his' speech today by the right hon. Member for Battersea, North (Mr. Jay)—that the question of a wealth tax is not a question of whether but a question of how it will be introduced. I am not sure whether the difference between "whether" and "how" is as great as one might assume.
Mrs. Beeton, in her cookery book, in her recipe for jugged hare, said "first catch your hare". I think that sometimes there is a tendency to think that wealth should be measured as a tangible asset. In fact wealth is not wholly, or even mainly, a tangible asset. The value of ICI is to be measured not by its laboratories or premises but by its scientific formulae, its management skill, its experience, its goodwill and the confidence its commands. When we look at the equity market today we see that wealth, even when not yet subject to a wealth tax, can disappear almost overnight. I am not sure that the pursuit of a wealth tax may not be a little like the "Hunting of the Snark"—somewhat illusory—and that the wealth will be found, just like the Cheshire Cat in "Alice", to have disappeared.
I want to consider the problem of the balance of payments. I agree entirely with the Chancellor of the Duchy that it is false theology to separate the oil deficit from the non-oil deficit; although in so doing there is some convenience from the point of view of discussing the matter. However, the general considerations applying to the non-oil deficit apply equally to the oil deficit.
It is fair to say that although last summer we knew that there would be a large deficit in 1974, there was good reason to think that it could correct itself by the end of 1974 or the early part of 1975. But the consequences of the October war, the miners' strike and the three-day week have made a shipwreck of our balance of payments. The problem is how to bridge the gap of £3,000 million to £4,000 million that will confront us at the end of the coming year. It can be done partly by exports and partly by loans from institutions like the IMF, or through the banks; it can be done in part by encouraging private deposits and investment in this country.
On the subject of exports, I appreciate that the Government believe that the Budget, by some of the deflationary measures undertaken at home, should encourage exports or, rather, force industry to send more goods abroad. Industry takes a different view and regards itself as not being encouraged to expand but, indeed, as being "clobbered". It seems just possible that in the short term there might be an increase in exports, but I do not see how there can be a sustained increase in exports following a Budget that limits and discourages expansion in industry.
On the subject of loans, whoever has the key to No. 11 Downing Street is in a position to borrow a lot of money, but I regard our financial position in terms of borrowing as dangerous. The official sterling balances are subject to dollar guarantee. The new loan is a dollar loan. Further institutional loans are likely to be subject to dollar guarantees as well. We are getting pretty deeply into debt, and this with no great prospect of any substantial improvement in the position of sterling.
Interest rates play a great part in encouraging private deposits, but we know —as the Chancellor of the Duchy pointed out—the great disadvantages that flow from high interest rates, although I did not think that the right hon. Gentleman was very convincing in explaining how he would reverse this situation. Encouragement of foreign investment as distinct from deposits, depends on confidence in the projects in which foreign money would be invested. If home industry regards itself as clobbered, the prospect of foreign investment seems to be discouraging.
These general observations apply to the oil deficit just as much as they do to the non-oil deficit, but the significant thing about the oil deficit is that it is different in kind and in size. It is different in kind because a large number of oil producers, if not all, are unable to spend on buying goods and services from the United Kingdom all the money which they have accumulated through selling their oil. It is different in size, because if the oil producers switched their holdings of sterling overnight, for either specula- tive or political reasons, they could wreck our currency and almost any other, except perhaps the dollar.
I see little prospect of achieving a solution of this problem on a purely national basis. Like the Chancellor of the Duchy, I recognise the importance of Dr. Kissinger's initiative to bring together the principal industrial countries to try to consider how they should organise and regulate their consumption of oil. Certainly broad co-operation with the United States and Japan will be of great importance. But we have to remember that there is a considerable element of competition between the European countries, on the one hand, and the Americans and Japanese, on the other. The American time scale in approaching the oil crisis is very different from our own. For us, the oil crisis is an immediate problem. The oil embargo was a mortal threat while it lasted. The increase in the price of oil to countries whose economic stability is as much in danger as our own is also an immediate problem. For the Americans, it is not a matter of such urgency.
In these problems the best can sometimes be the enemy of the good. That is why, when the Conservative Party was in office, it was argued that we should obtain, if we could, a European agreement in advance on how Europe should regulate its relations with the oil producers. That is why we attached great importance to the European statement on Middle Eastern policy at the Summit meeting in Copenhagen. It is why we believed that it was important to go ahead with the French proposal for a Europe-Arab conference, and it is why I believe that it is essential to work for the creation of a European payments unit—a monetary union.
No single European currency—not even the deutschemark—is strong enough to give sufficient confidence to the oil producers to leave their money for any length of time in that currency. A European unit would be very different. It would be backed by the reserves of Germany and Holland. It would be backed by the gold of France—that held by the Bank of France and the very much larger amount of gold in private hands in France. It would also be backed by the massive prospects of this country in oil and nuclear energy.
If we could bring about a European monetary union of this kind, we should find a completely different situation. In the early stages it could be limited to external transactions, not to trade between members of the European Community or investment between them, but to trade between them and the outside world and investment from them outside Europe, or from outside into Europe. To begin with, it might be a floating currency. Alternatively, it could pool its reserves with perhaps a revaluation of gold.
A little more than a year ago, it seemed that my right hon. Friend the Leader of the Opposition and the Chancellor were on the brink of achieving something of this kind. The experts got at it, and it did not go ahead. But that was before the October war. It was also before the full extent of British oil resources had been recognised—pace Lord Rothschild—and before the full extent of the energy crisis facing Europe had been recognised.
It is my belief that this Government—indeed, any British Government—could make a great contribution to solving the world oil crisis if they could take the initiative in setting up a European payments union not hostile or antagonistic to the United States or Japan but strong enough to do business with them as a valid and viable partner. In the process, we might even extract concessions of the kind that the Government have been seeking from our partners in the European Community.
I do not know as yet what the Foreign Secretary has said in Brussels. Before I rose to speak. I inquired whether copies of the right hon. Gentleman's speech were available. They had not come through from Brussels. However, I see great dangers to our ability to solve the oil deficit if we deliberately turn our backs on the goals of monetary and political union. If the fears which are held in Bonn and Brussels today about the Foreign Secretary's real intentions prove true, that is the direction in which we are heading. I beg the Government, before they turn their backs on an historic opportunity, to think again on that vital subject.
In most respects I share the rather pessimistic assessment of the Budget which the hon. Member for Rochdale gave us just now. Like him, I doubt whether "the social contract" will be ratified. But I think that the Government recognise that unless it is ratified and unless it is supported by the bulk of the trade unions, the whole Budget strategy to which they are committed will fall apart.
At the General Election, my right hon. Friend the Leader of the Opposition asked who was to govern the country—Parliament or the trade unions? On an analysis of the vote it could be argued that 18 million people who supported the Conservative and Liberal Parties voted by implication for a statutory incomes policy. But the result that we have is a minority Government who appear already to be controlled by the Trades Union Congress.
The Chancellor of the Exchequer has left himself very little room for manoeuvre and to negotiate. During the coal dispute before the election, Labour Party supporters were frequently telling the then Government that they must negotiate. It was often implied that we had made a mistake in putting our cards on the table too soon in the National Coal Board's negotiations with the National Union of Mineworkers. But I am not sure that this Government have not done exactly the same. They have put all their cards on the table. They have no room to negotiate with the TUC or with individual unions.
This Government were elected in February. Many people think that the administration may come to an end in October. February to October: there is a rather ominous comparison which may have occurred to Labour Party supporters. In 1917, the Duma was called into existence in February. The conservative Prince Lvov and the liberal Mr. Miliukov failed to pull off their coalition. Mr. Kerensky took over. The Duma postured and debated, but all power had really passed to the Soviets.
The basic weakness of the Government is that the Chancellor of the Exchequer and his colleagues have put their heads into a noose. But the other end of the rope is in the hands of Mr. Scanlon and his friends. The parallel is one that politicians of all parties, including the Labour Party, might well ponder.