Orders of the Day — The Economy

Part of the debate – in the House of Commons at 12:00 am on 22nd May 1975.

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Photo of Mr Denis Healey Mr Denis Healey , Leeds East 12:00 am, 22nd May 1975

After five and a half hours of debate and two speeches from the Opposition Front Bench, I confess that I still do not understand why they forced this debate. But I understand very well why the right hon. Member for Finchley (Mrs. Thatcher) decided last week not to speak in the debate. I dare say that she is now bitterly regretting that she changed that decision.

When the Opposition first announced their intention to force yet another general debate on the economy—we have already had three in the past month—two questions were difficult to understand. The first was why do it at all when they were hopelessly divided on every major economic issue. The second was why the Leader of the Opposition announced that she had more important things to do than to speak in the debate.

The first question is more difficult to understand now than it was even last week. It could have been that the Opposition wanted the opportunity to make a serious contribution to a discussion of the nation's problems and to put forward specific proposals for dealing with them, perhaps on the basis of some defined area of agreement with the Government as they saw it.

All that we have had from the Opposition Front Bench is stale party rhetoric. Every real issue has been dodged. Every point made today had been made and rebutted at least three times in the past month. That was particularly true of the speech that we have just heard from the right hon. and learned Member for Surrey, East (Sir G. Howe), although I am bound to say that he made a better speech than the Leader of the Opposition—but he had already made it twice before.

At least it is some comfort to have the other mystery cleared up. We know now why the Leader of the Opposition told the world last week that she did not intend to speak in the debate. It was because we did not get from her this afternoon either a clarion call to the nation or a battle cry to her own divided and demoralised supporters. All we had was a monotonous recitation of disconnected little homilies on each of the major economic abstractions studded with indigestible quotations from the whole gamut of Tory house journals from the Sunday Telegraph to the Economist and charged with all the moral passion and intellectual distinction of a railway timetable.

One characteristic ran through the whole of the right hon. Lady's speech giving it a particularly disagreeable flavour—a steadfast determination to ignore and play down any aspect of the nation's performance which does credit to Britain. As the Prime Minister suggested this afternoon, the patriotism of the Tory Party, like its loyalty to its leadership, is strictly a cyclical phenomenon.

The right hon. Lady and the right hon. and learned Gentleman know as well as anyone in this country that there are three major criteria of economic success in which Britain has done well in recent months by comparison with almost any of her competitors, all of whom faced the same problems created by the oil crisis and the world recession but none of whom entered the oil crisis with the handicaps that we inherited.

Our output has fallen less than that of most other countries—by only 4 per cent. in the last three months compared with 24 per cent. in Japan and between 10 per cent. and 15 per cent. in America, Germany, France and Italy. Our employment has fallen less than that in many other countries, and our balance of payments position has improved more when we consider that, as the Prime Minister told the House, we entered 1974 with a deficit already running at about £4,000 million, before the oil crisis had exerted more than a minor effect, as the Governor of the Bank of England pointed out to the nation in January last year.

There is, however, one very black spot on which the debate rightly concentrated, and that is inflation. Last year Britain was one among a fairly large group at the higher end of the world inflation table. This year we are almost alone among the industrial countries with a rate of inflation which could be double that of most others unless we do something about it.

The most interesting speech on this matter—indeed, the only one from the Opposition—came from a member of the Government in exile rather than from a member of the Shadow Cabinet. I refer to the right hon. Member for Farnham (Mr. Macmillan). He rightly pointed out—and this is the core of the nation's problem—that the level of wage settlements is only half the problem of inflation. The most important element is the level of productivity. We in this country since the war, by and large, have not had wage settlements higher than those in most other industrial countries. We have had a far lower rate of productivity because we have had too little investment, too much investment in the wrong places, and, when investment has gone into the right places, it has not been fully exploited.

We cannot put that problem right in a matter of months. I have made money available for investment, and the CBI agrees with me that there is now no problem for business in obtaining money if it wishes to invest. I made £100 million available in the Budget to stimulate investment in those areas in which we know it to be possible immediately and in which we know it to be desperately urgent, such as the ferrous foundry industry, on which the engineering industry depends.

The fact is—a point made from the Opposition benches but not seriously discussed—that as long as we have a level of inflation as high as it is at the moment, and no certainty as to where it will move during the coming year, there will be a great disincentive to business to use money which is available for investment. That, I hope, is common ground between the two sides of the House.

We had every right to expect, and indeed to insist, as the Opposition had put this motion on the Order Paper, that the Leader of the Opposition or another Front Bench spokesman would tell us tonight how the Conservative Party proposed to get the rate of inflation down. For one moment only in the right hon. Lady's speech did hope flicker. That was at the beginning of her speech when she said, very rightly, that inflation is a political and social problem rather than an economic problem. I entirely agree with her about that.

However, nothing followed from that flash of insight. All that we had beyond that was the familiar and dreary chanting of abstract slogans about public expenditure and the public sector borrowing requirement, and the ritual denigration of the social contract, without which no speech from the Opposition has been complete for many months. There was no suggestion either from the right hon. Lady or from her right hon. and learned Friend the Member for Surrey, East as to what they would put in place of the social contract. Indeed, at the end of the right hon. Lady's speech she appeared to suggest that she supported it. She said that one of the three pedestals on which her policy stood was the renegotiation of the guidelines which are the TUC's contribution to a social contract in which, of course, the Government are also involved.

The right hon. Lady then had the effrontery—if I could have her attention and that of her right hon. Friend—to talk to us of the need to keep the money supply under control. The right hon. Lady, along with the right hon. Member for Yeovil (Mr. Peyton) and the right hon. and learned Member for Surrey, East, is representative of a Government who allowed the money supply to rise to 34 per cent. in 1973, three times higher than the increase in GDP in money terms. The right hon. Lady has the effrontery to talk about controlling the money supply which on no definition has come close to the increase in GDP in money terms since we have been in power.

We had the usual monetarist lecture from the right hon. and learned Member for Surrey, East. I suggest that he looks at what the high priest of his church, Professor Laidler of Manchester, wrote last week—namely, that inflation this year in Britain is the direct consequence of the monetary profligacy of his Government in 1973. That is a view to which the right hon. Member for Leeds, North-East (Sir K. Joseph), the Mephistopheles to that shabby Faust, would subscribe.

The plain fact is that our public sector borrowing requirement is too high for comfort, but it is the consequence and not the cause of inflation. I cut it by £1,000 million in my Budget a month ago by increases in taxation, many of which the Opposition opposed and are continuing to oppose in Committee. Moreover, the right hon. and learned Gentleman went further. He was reported in yesterday's Evening Standard as saying that he pledges the next Tory Government to lighten the tax on incomes and savings, to aim for a single rate of VAT, to abolish the capital transfer tax and to ease the burden of the self-employed. I am glad to say that on those matters at least it is taking him more than 24 hours to change his mind.

The right hon. and learned Gentleman made clear today that he would solve the whole problem by cutting public expenditure. However, he has given us no indication of how he plans to cut public expenditure. When the right hon. Member for Down, South (Mr. Powell) asked the Leader of the Opposition by how much she would cut it, she was, and not for the first time, completely at a loss for words. She gave no indication—