Oral Answers to Questions — Economic Affairs (Chancellor's Speech)

– in the House of Commons at 12:00 am on 25th May 1976.

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Photo of Mr George Gardiner Mr George Gardiner , Reigate and Banstead 12:00 am, 25th May 1976

asked the Prime Minister whether the public speech by the Chancellor of the Exchequer on economic prospects at Scarborough on 10th May represents Government policy.

Photo of Mr Giles Radice Mr Giles Radice , Chester-le-Street

asked the Prime Minister whether the public speech on the economy at Scarborough made by the Chancellor of the Exchequer to the Association of Professional, Executive and Clerical Staff on 10th May represents Government policy.

Photo of Mr Timothy Renton Mr Timothy Renton , Mid Sussex

asked the Prime Minister whether the public speech on economic policy by the Chancellor of the Exchequer at Scarborough on 10th May represents Government policy.

Photo of Mr Ian Gow Mr Ian Gow , Eastbourne

asked the Prime Minister whether the public speech of the Chancellor of the Exchequer at Scarborough on economic affairs on 10th May 1976 represents Government policy.

Photo of Mr James Callaghan Mr James Callaghan The Prime Minister, Leader of the Labour Party, Member, Labour Party National Executive Committee

Yes. My right hon. Friend's speech at Scarborough, has my full support, especially in stressing the importance to this country of the TUC General Council's agreement to recommend a further voluntary extension of incomes policy to a special TUC conference next month. As my right hon. Friend pointed out in his speech, if this recommendation is accepted and endorsed by the conference—as I believe it will be—it will greatly strengthen our competitive position in world markets; and it will generate fresh confidence leading to much needed new investment and to more jobs. It is for these reasons that my right hon. Friend's speech has my full support.

Photo of Mr George Gardiner Mr George Gardiner , Reigate and Banstead

The right hon. Gentleman will have also notice that in his speech the Chancellor hoped for an economical miracle. As miracles do not happen very often, what are the Government going to do to restore some overseas confidence in the pound before action is dictated to them as a condition for a further IMF loan?

Photo of Mr James Callaghan Mr James Callaghan The Prime Minister, Leader of the Labour Party, Member, Labour Party National Executive Committee

My right hon. Friend pointed out that miracle have happened in other countries and that one could certainly happen here. [Interruption.] But that will not happen as long as the Opposition remain so totally divided on the remedies that they would put before the country if they were to have the opportunity of returning to power. I must agree that they have not done much to impress themselves upon the country so far. As long as these divisions continue between them on their economic and financial policies, they are not likely to get much satisfaction—[Interruption.] If I am asked a very important question about the speech at Scarborough, I must give it the attention that it obviously deserves, and I intend to do so. As regards sterling—[Interruption.] I cannot make myself heard, Mr. Speaker.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. The Prime Minister is coming to the end of this Answer.

Photo of Mr James Callaghan Mr James Callaghan The Prime Minister, Leader of the Labour Party, Member, Labour Party National Executive Committee

Yes, Sir. I was saying that sterling is a great national asset and should not be made—I hope that the hon. Gentleman does not intend to make it so—a party football. It is our judgment—I believe it is the judgment of central bankers generally—that sterling at present is under-valued. There would be no point therefore, in indulging in punitive measures that could have no possible impact upon the level of competitiveness of our exports.

Photo of Mr Giles Radice Mr Giles Radice , Chester-le-Street

Doos my right hon. Friend agree that it would be better if the Opposition acknowledged that our share of world trade has increased for only the second time in 20 years, and that we now have a real prospect of export-led growth? Does he further agree that a contribution from them on those lines would be fare more constructive than the discordant carpings of recent weeks, which have undoubtedly played a part in the weakening of sterling?

Photo of Mr James Callaghan Mr James Callaghan The Prime Minister, Leader of the Labour Party, Member, Labour Party National Executive Committee

Yes, but I do not expect to hear any words of commendation from the Conservative Party about the fact that our share in the level of world trade increased last year for only the second time in 20 years. In fact, exports are doing well again this year. I hope that the Opposition will soon be able to resolve their economic difficulties and tell us whether they believe in exports.

Photo of Mr Timothy Renton Mr Timothy Renton , Mid Sussex

Is the Prime Minister just going to give us a repeat performance of 1964 and 1965 on sterling, is he just going to shake at the knees while the rate falls, or will he have the guts to impose some public expenditure cuts?

Photo of Mr James Callaghan Mr James Callaghan The Prime Minister, Leader of the Labour Party, Member, Labour Party National Executive Committee

Further public expenditure cuts now would mean more unemployment. They would not improve our industrial base; they would lead to immediate unemployment. It is the general view of most people, except for the unpatriotic members of the Opposition—[Interruption.] There is no reason to talk sterling down when it is the general view that at present it is competitive with currencies of other countries.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

Given that the TUC Liaison Committee's statement yesterday indicated that the TUC is anxious for a wealth tax to be brought in at the earliest possible moment. and calls for selective import controls plus a series of other demands, will my right hon. Friend indicate whether this will be the Government's policy in the near future? Will they carry out those demands as the other side of the acceptance of the wages policy by the trade unions?

Photo of Mr James Callaghan Mr James Callaghan The Prime Minister, Leader of the Labour Party, Member, Labour Party National Executive Committee

As my hon Friend knows, the manifesto has been carried out to a remarkable degree, as is acknowledged by the Trades Union Congress and, indeed, by all fair-minded people in this country. A number of issues are still under discussion and will continue to be under discussion with the TUC. The question of selective import controls is one with which we have dealt on a number of occasions, and the Government's approach to it has been made clear by me. The Chancellor of the Exchequer has already announced in the House that he is considering a wealth tax, and he will, of course, announce his conclusions.

Photo of Mr Ian Gow Mr Ian Gow , Eastbourne

Will the Prime Minister explain to the Chancellor of the Exchequer that real reason for the underlying fall in the external value of the pound is the Government's borrowing requirement and that, as long as he goes on borrowing £23,000 a minute, the decline in sterling will go on?

Photo of Mr James Callaghan Mr James Callaghan The Prime Minister, Leader of the Labour Party, Member, Labour Party National Executive Committee

No, Sir; that is too simplistic a view. There is no one factor here. Indeed, the markets that have dictated the movements of the rate in either direction have been extremely thin. There is little doubt but that this year the Chancellor will be able to finance the borrowing requirement, although I think that we have all indicated that a level of this kind will come into collision with the demands of industry for investment during the course of 1977. That is the time for which we must prepare.

Photo of Mr William Whitelaw Mr William Whitelaw , Penrith and The Border

Is the Prime Minister aware that the Opposition deeply resent his accusations of unpatriotic conduct—[Interruption.]—particularly when they come from a party which behaved in the way that the right hon. Gentleman and many of his right hon. and hon. Friends behaved when they were in Opposition?

Secondly, would the Prime Minister regard it as an economic miracle if, by the end of 1977, the rate of inflation were brought back to what the Chancellor said it was at the time of the October 1974 election—namely, 8·4 per cent.?

Hon. Members:

Answer.

Photo of Mr James Callaghan Mr James Callaghan The Prime Minister, Leader of the Labour Party, Member, Labour Party National Executive Committee

I have not been able to get a word in yet. I thought that the right hon. Gentleman was getting up to tell me that he shared the view that sterling was not over-valued. [HON. MEMBERS: "Answer."] That would have been the best answer to accusations of lack of patriotism.

I think that there is little doubt that, if the TUC's recommendation goes through and is accepted by the unions, by the end of 1977 the rate of inflation will put us in line with our major competitors, such as the United States, Germany and France. [HON. MEMBERS: "8·4 per cent."] It may be round about that. Considering the way in which the hon. Member for Henley (Mr. Heseltine) is now encouraging and inciting trade unionists to break the Pay Code, that would indeed be remarkable.

Later

Photo of Mr David Renton Mr David Renton , Huntingdonshire

On a point of order, Mr. Speaker. I rise to ask for your ruling on the question whether it is in order for the Prime Minister to accuse other Members of this House of being unpatriotic. We have various well and long established rules which maintain the dignity of the House, the principle of which is that we treat each other as being honourable or right hon. Members. Is it not a breach of that tradition and of those rules for the Prime Minister to accuse other Members of being unpatriotic? As the accusation was aimed at Members of the Conservative Party, would it not be right for me to add that Members of this party have at least as good a record of patriotic service to their country as the Members of any other party?

Photo of Mr George Thomas Mr George Thomas , Cardiff West

First, I always strongly deprecate terms of abuse about Members on either side of the House. Secondly, a term of abuse, whilst deprecated, if not directed at an individual Member—[Interruption.] I did not understand it to be directed at any one individual. It was a group statement. I cannot rule it out of order, but I do not like it.

Photo of Mr James Callaghan Mr James Callaghan The Prime Minister, Leader of the Labour Party, Member, Labour Party National Executive Committee

I accept what you, Mr. Speaker, have said about the undesirability of accusing individual Members of lack of patriotism, or, indeed, of individual Members calling individual citizens scroungers. Nevertheless, I think that it is time that the Conservative Party stopped talking sterling down at every Question Time when I answer Questions.

Photo of Mr William Whitelaw Mr William Whitelaw , Penrith and The Border

Further to that point of order, Mr. Speaker. Surely the Prime Minister will accept that all Members of this House should have the best interests of this country at heart. I believe that over a long period of time many of us have shown that to be the case. Whatever happens to be for the good of this country, I shall always applaud. I hope that the right hon. Gentleman will recognise that is said on behalf of the whole of the Conservative Party.

Photo of Mr James Callaghan Mr James Callaghan The Prime Minister, Leader of the Labour Party, Member, Labour Party National Executive Committee

Further to that point of order, Mr. Speaker. I recognise that, but I think that the right hon. Gentleman could put the seal on it by telling us that he shares our general view that sterling is not at the moment over-valued.