If the hon. Gentleman knows of a more incompetent industrial nation, no doubt he will mention it. I cannot think of one that is more incompetent. If we consider the figures we might well pass such a judgment. The hon. Gentleman said very much the same thing in his speech.
Our industry is inefficient in a way that could not possibly have been caused by anything that has happened in the past two years, let along the past 20 years. Let us consider the fall in the pound. That is not something that can be blamed on any one party or on any one Government. It is something that has happened over years. I have spoken to international bankers and I find that they take the same view. They expect the pound to be at about parity with the dollar in the early 1980s. The same conclusion springs from the fall in our share of world trade that we have suffered ever since the war. They are both symptoms of a failing economy with which no Government have come to terms since the war.
Although it is now fashionable to discount the views of the greatest economist of our age, I remind the House of the views that were stated by Keynes when he considered the post-war outlook for the British economy. It was a deeply gloomy outlook. Keynes was someone who revolted against over-regulation, but he came to take so gloomy a view about our post-war economic prospects that he warned that Britain could well be forced to employ all the weapons of Dr. Schacht to square the circle. If we consider the present state of our economy and the situation that Keynes was considering in 1943–44, I do not think we have moved on very far.
Keynes saw Britain's post-war balance of payments deficit as of a size and kind that no one else had appreciated. We had never balanced our trade account with the rest of the world. Since the Industrial Revolution we had not had to do it. We had relied on overseas investment. In two world wars we had not only sold most of those investments but had borrowed considerably. We had run up enormous debts to pay for those wars. Presumably it has been the policy of all succeeding Governments since the war to repay those debts, but some of them are still unpaid. They have been added to massively over the years. That has happened not only recently but over a long period.
What are the remedies that we are offered 30 years on? The Government offer us industrial regeneration and we certainly need it. But the Labour Party correctly defined and analysed that problem in the period leading up to the 1964 General Election. I well remember the right hon. Member for Huyton (Sir H. Wilson). who was then Leader of the Opposition, talking about the need for industrial regeneration in speech after speech. We are still as far from achieving it as we ever were.
The Government's strategy cannot work. First, the Government believe in export-led growth. Do not we all? But there is no hope of getting out of our problems by that course. Even if the boom in other countries takes off—it is very slow about it this time round—our industry is not competitive enough to take advantage of it.
That is not because of prices. Of course we are competitive in terms of price. Given the way that the pound has gone, we should be able to sell anything if it depended on price alone. Unfortunately, we cannot do that, for it is quality and dates of delivery that make for one's ability to sell in export markets. We are uncompetitive because there has been chronic under-investment over the years. No one can make up for poor quality by prices lowered by a sinking pound.
The falling pound might do the trick for some economies, but it will not do it for ours. Our added value is so low that the increase in the price of materials that we must import to make our exports outweighs most of the advantages of the increased export sales.
Let us consider this doomwatch formula. A calculation made recently by a Dutch economist—I have not been able to find anyone to fault it—is that for every 1 per cent. by which our GNP grows, our imports grow by 1·7 per cent. For every 1 per cent. by which the GNP of our major trading partners grows our exports to them grow by 0·7 per cent. There is no way out of that problem through an export-led boom. It will not happen. It cannot happen.
Is it possible that we can get the growth we need through investment? I do not believe so. There is a great deal of spare capacity about and even though a lot of the machinery is old, it is still being under-used. There may be some defensive labour-saving investment but there will be no job-creating investment of the size that we need.
Cutting interest rates would certainly make it easier for industry to invest, but how far should we have to cut interest rates from their present levels in order to make investment in British industry really worth while? Would we have to cut them to 10 per cent. or 5 per cent? Even at 5 per cent. they would then only equal the average return on industrial capital. That leaves us with a consumer boom. That is always possible but obviously it would be quite fruitless. I maintain that the Government strategy will not work.
What about the Opposition? The remedies that they have espoused in their new pamphlet are not at all new. And they did not work when they were last tried. It is no good talking about the 'fifties, which were a sort of golden age of Conservative economic policy, because the terms of trade were so different then. We are now faced with an entirely different international situation. If we cut public expenditure to allow industry to invest there is no indication at all that industry would then take up the money which was made available.
There are two fallacies in this Conservative approach. Would industry invest if this was done and do we know how to cut public expenditure by the amount required? In respect of the first question, did industry invest last time? I well remember the right hon. Member for Sidcup having to go down to the City to curse and cuss at the industrialists of this country for not investing in spite of the fact that he had done everything to make that possible. The right hon. Gentleman introduced all sorts of new investment incentives—he cut taxation and did everything he could to make investment possible—but investment went into the property boom instead. When did we last have an investment boom of the size that we now need to square the circle? It has not happened in my memory and I do not believe that it will happen in my lifetime, and certainly not within the next 20 or 30 years.
Having sacked all those public employees by cutting public expenditure, which for other reasons might well be a good thing to do, what would a Conservative Government do if industry then failed to invest? Perhaps the Leader of the Opposition will address some of her remarks tonight to the questions how and what. The hon. Member for Henley (Mr. Heseltine) when interviewed on the radio on Saturday morning by George Ffitch was asked what a Conservative Government would not do that Governments were now doing. That really is the crucial question when we try to see what to cut in public expenditure. The hon. Gentleman listed various Government Acts which should not be passed—shipbuilding and aircraft nationalisation and such things.
I agree that they should not be passed but those Acts have not yet been passed. They represent expenditure in the pipeline. Surely the Opposition are not saying that Government expenditure is too high only in view of the amount which has not yet been spent. They are talking about Government expenditure last year. If they are saying anything at all, it is that Government expenditure last year was too high and that something has to come out of that, not out of what is being planned in the future.
I would repeat the question: what is it that Governments will not do that they now do? It is a problem for all of us. I have asked it at many meetings of my own party in the last year and I have never got an answer. People talk about rolling back the frontiers of government, but they are never able to answer the question. We could cut out a few subsidies here and there. We could do a bit with housing subsidies. If we look at the list of public expenditure items in the central pages of the Government's annual White Paper we see that in order to make the impact that we need to make on public expenditure we cannot cut at the fringes: rather we have to cut right at the centre of things in the major areas of public expenditure. These are education, defence, national insurance and social benefits.
That is where the cuts would have to come if they were really to make the difference. They could not be made unless we were prepared to return whole services now provided by Government to the market. I have not heard that argument by the Conservative Party officially, though it has been argued by one or two individual members of the Conservative Party.
What about the commitment to indexing pensions? That is something which nobody in this House will want to dismiss but unless one cancelled that commitment I do not see how such cuts as the Conservative Party are now calling for could be made.
I do not believe that we shall solve our problems by any of the measures that we have heard of either from the Government or Opposition. The Government are certainly blameworthy for short-term faults. The 8½4 per cent. fiasco is symptomatic of the Chancellor of the Exchequer. One of the first rules of politics is that even if one believes anyone's propaganda, one should not believe one's own. The Chancellor unfortunately not only misled the country but misled himself and the Treasury. I think he actually thought that he had got inflation down to 8½4 per cent.—poor fool. And that meant that he based all his policies on the wrong figures; that is not entirely unknown of British Governments, and he was not the first to do it.
There is a further point for the Opposition to consider. Supposing they come up with the right strategy, how long would that strategy have to be pursued to halt the decline? Ten years, or would it be less? I do not believe that it could be less. It would have to be 10 years. How can we ensure that any strategy is Pursued long enough for it to work?
It is certain, for instance, that any correct strategy would have harsh effects in the early years and be very unpopular. A very wise, if somewhat cynical, elder Tory statesman—indeed he is still very active today and within a stone's throw of the right hon. Lady's confidence—once told me that no Government should ever try to do anything in this country which could not reap electoral reward before the next election. Ten years is beyond the next election and the unpopular effects of the strategy will come before the next election—the first election that a new Conservative Government would have to fight. Therefore, the Conservative Party would not be able to pursue that strategy and would have to go back on it in exactly the same way that they had to go back on it after 1970. That is straight politics and there is no escape from it.
I believe that we are faced with a situation in which what is economically
necessary is politically impossible. Since the Chancellor quoted from the Investor's Chronicle I will now quote from an even more illustrous one—the Economist, which said on 9th October:
The real need for Britain is to find the political institutions and national will to reverse 100 years of continuous decline.
But there will never be a party, Labour or Tory, with the self-confidence and moderation in government to make any of these reforms until the electoral process to what purports to be the mother of parliaments has itself been made representative.
I hope that the right hon. Lady will address herself to that.
It is no use her coming to the Dispatch Box tonight and making a repeat of the kind of speech which she made at the Conservative Conference or the kind of speech which the right hon. Member for Sidcup was making in the Selsdon Park days. Whether or not that is the right strategy, the right hon. Lady should realise that the political system of this country will not allow her to pursue that strategy long enough to have a hope of its working.