Employment

Part of the debate – in the House of Commons at 12:00 am on 29 January 1976.

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Photo of Mr Maurice Macmillan Mr Maurice Macmillan , Farnham 12:00, 29 January 1976

Some time ago I made a slip of the tongue and referred to the hon. Member for Birmingham, Ladywood (Mr. Walden), who used to represent Birmingham, All Saints, as the hon. Member for All Souls. Hon. Members who heard his speech tonight will feel that that slip was pardonable.

The hon Member got me very depressed at one moment. He said that monetary policy was no help in dealing with unemployment, that incomes policy did not really work, that we could gain nothing by inflation and that no general reflation was possible. I began to feel like a passenger on a ship with one of the crew saying that the wireless was broken, the radar did not work, the compass was inaccurate and the navigator did not know his job. It turned out not to be quite as bad as that. The hon. Member was merely warning us that these matters require practical, rather than theoretical, solutions.

We are charged not only with the duty of discussing these problems in economic terms, but also, and far more important, bearing in mind, at all times, their impact on people. In his speech the Chancellor made it quite clear that he had no intention of embarking upon a general reflation. The right hon. Member for Battersea, North (Mr. Jay) agreed that this was correct and said that reflation should not happen until there was an effective incomes policy and the increase in the Retail Price Index had been reduced to single figures.

There is a further criterion to be added: financing the deficit. The Secretary of State for Employment, who, I believe is to reply to the debate, could allay this one of our fears, a fear which was voiced by the hon. Member for Lady-wood. He might say something about the problem which will face the Chancellor in financing his public sector borrowing requirement when the industrial upsurge which the right hon. Gentleman forecast diverts funds from the Government to industrial investment. If there is to be upturn in industrial investment, it is bound to be to some extent at the expense of the money that is now financing the public sector borrowing requirement. Any Chancellor in these circumstances must face that problem.

The main tenor of most of the speeches this afternoon was admirably captured by an article published last week in the Daily Mirror which said: With unemployment at the appalling level of 1,430,369, the temptation is strong to increase public spending and to start creating jobs for the sake of creating jobs. If this is done—and done for the best and most humane of reasons—inflation will be unleashed yet again. Result: more people will be out of work. That states the dilemma which all hon. Members have been seeking to resolve.

I wish to be brief and I shall therefore raise only two of the many points which arise in this debate. They are, first, investment, particularly in relation to overmanning, and, second, the question of how Government spending and investment should be directed.

On investment, the Chancellor has reassured many of us in business who were concerned about the cash flow problems which might arise if he were suddenly to rescind his deferment of corporation tax. He has given indications of further financial assistance to industrial investment. Particularly welcome will be the extension of such incentives to individual projects costing below £500,000. All these inducements are effectively methods of reducing the rate of interest on capital investment in new projects. But the obstacles which exist to the creation of new wealth by new investment are not wholly or even mainly financial. I do not believe that a high rate of interest is necessarily a deterrent to an investor in a profitable and reasonable enterprise. The certainty of his being allowed to maintain profits to provide a large enough surplus to reinvest and finance the continuation of his growth is far more important.

The smaller businesses, particularly the unquoted companies and unincorporated businesses, will need different incentives if they are to find it worth while making the type of investment which the Chancellor is suggesting. By definition they are not likely to qualify for the sort of help he has in mind. The hon. Member for Penistone (Mr. Mendelson) made an extremely interesting speech, part of which, he will be surprised to hear, I did not quarrel with. In it he quoted Keynes, referring to the "neurosis of business men" through which they did too much when things were good and not enough when things were bad. I do not believe that Keynes was at his best on this point. I believe that this is the neurosis of financiers. Keynes was much better at making money as a financier than as a business man.

The non-financial disincentive to investment for ordinary business men particularly in the private company part of the private sector, is far greater than many people realise. What is the point of borrowing money to put in new equipment if it will not lead to increased productivity because it is impossible to negotiate the manning agreements required to justify its expense?

We all know that one of the more serious problems facing the country in this highly competitive world is that we are not getting out of the same equipment the same output per man hour which is achieved in other countries. It is no use trying to excuse our poor performance as a country by saying that managers have not put in good enough machinery and that the labour force cannot give of its best on inadequate capital equipment. The reality is that, comparing capital equipment like with like, the output in this country is lower than in almost any other country in the world.