Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 11th October 1976.

Alert me about debates like this

Photo of Mr Maurice Macmillan Mr Maurice Macmillan , Farnham 12:00 am, 11th October 1976

The Chancellor of the Exchequer pretended in his speech that we were going through a financial and monetary problem rather than an economic crisis. For example, he said that the pound was undervalued. I dare say that that is true, if we look at the purchasing power of the pound in some markets and the selling value of our goods in some markets, looking at the pound as a medium of exchange. But it is certainly not true that the pound is undervalued if considered as a store of savings or value, because people do not want to keep their money here. They do not want to hold sterling.

The right hon. Member for Battersea, North (Mr. Jay) suggested that this was a relatively short-term problem, caused largely by the failure to announce now an incomes policy for the future. But I think that the lack of confidence goes far deeper and is far more important to our country than the right hon. Gentleman's diagnosis suggests, much though I respect his judgment. I think that it comes about because we cannot yet sell our goods successfully abroad, despite the price advantage that a depreciated pound gives us, despite the fact that we have idle manpower resources and, until very recently, idle money available for investment.

We are still late on delivery dates. Our quality is not good and our reliability as producers and salesmen is questioned throughout the world. To deal with that takes a little more than jiggling with the figures or pretending that we face purely a financial and monetary problem, however serious.

What is wrong is that for a long time we have been putting too much of the total effort of our manpower, skilled and unskilled, management and professional people, and too much of our money and investment, in the wrong place. We have concentrated too much on producing non-marketable goods and services. I do not think that it is, as the Chancellor suggested, simply a matter of changing the balance in favour of manufacturing industry. After all, many of our services, particularly financial services provided by the City and others, are very marketable overseas and bring us great foreign currency earnings. Besides, most developed countries have a long-term trend to increase the ratio of non-industrial to industrial effort.

I shall take the period 1961 to 1974 to show, I hope, a lack of political bias and a sense of the national problems that we face. During that period in Italy there was an increase of 10·3 per cent. in non-industrial output compared with industrial output. In West Germany the increase was more than 14 per cent. In the United States it was 15·4 per cent., and in France it was 18·6 per cent. But in the United Kingdom it was 33·9 per cent., a vastly greater increase in the ratio of non-industrial to industrial production than in any of the other countries.

That did not happen because of a switch from goods to marketable services, as is shown by the figures for people employed in services generally. The increase in the number of civilian employees of central Government in that period from 1961 to 1974 was 35 per cent. The number of local government employees went up by 54 per cent. But the employees producing marketable services increased by only 13 per cent. As a result of the change from industrial to non-industrial production and the great increase in non-marketable services, the Government's pre-tax claims on marketed output—nothing to do with transfer payments and nothing to do with taxation—rose from under 40 per cent. in 1961 to over 60 per cent. in 1974.