Orders of the Day — Economic Affairs

Part of the debate – in the House of Commons at 12:00 am on 30 November 1976.

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Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey 12:00, 30 November 1976

Of course there are responsibilities to be shared across frontiers for the world monetary order. I complain that this Government, who have recklessly disregarded the policies that have been so successful in Germany and the United States, seem to have no policy other than to look to other countries to get them off the rocks.

The country is sick and tired of an endless cliffhanger as the Government struggle to reconcile the national executive committee of the Labour Party on the one hand and the International Monetary Fund on the other. We are asking just how much longer these visitors from other countries are to remain in this country apparently seeking to secure the agreement of the Government to what ought to be done to put our economy right. The opinion was seriously expressed to me last night that if they stayed here much longer, the Government hospitality fund might be consuming too large a share of the loan that is still in prospect.

We want to know when the Chancellor or the Prime Minister will be in a position to disclose to the House the content of the Letter of Intent. I hope that they will not repeat last year's example of publishing it on the eve of the dissolution of Parliament on 17th December. When is the Chancellor to announce whatever package may emerge from these over-prolonged deliberations? Are the package and the terms of the Letter of Intent to be disclosed to the House at the same time so that we may judge them together? May we have an assurance that the House will have—as it certainly ought to have—an opportunity of debating that package and the terms of the Letter of Intent before the Government are committed to them?

As the hon. Member for Berwick and East Lothian (Mr. Mackintosh) said yesterday, our anxiety is that this is the last chance—not just for the Government but for the country—to put together a sensible economic policy for the years ahead. The people of this country rightly will not forgive the Government if they produce yet another package that is inadequate, does not work and condemns us to three months more misery waiting for the next round.

We seek from the Chancellor an assurance, without qualification, that he understands that, that the Prime Minister understands it, and that they will between them require their colleagues to understand it. No one outside this country will believe the Government unless this time their actions speak louder than their words—and soon. We have had enough waiting and enough half measures. This is the time for the action that will begin to put the country right.

I come to the second proposition from the Prime Minister's speech that I commend to the Chancellor and, indeed, to Government supporters below the Gangway. We must make a success of the mixed economy. We must give absolute priority to industrial needs. We must ensure that industry is profitable. That is the second key ingredient in the prescription that we commend.

For that to happen—if we are to make a success of the mixed economy—the Government cannot look for help in that respect to the public sector; nor can their supporters below the Gangway. There is no prospect in the public sector of the creation or establishment of jobs that will survive. There is no prospect in the public sector of any creation of wealth. It is to the private sector that we have to look for the restoration of health. The real threat to the health of the private sector comes from the very size of the public sector. That is where the importance of the size of the public sector borrowing requirement lies.

We have heard so many speculations about that that we cannot possibly, from the Conservative side of the House, predict with any accuracy what that figure is likely to be. I ask the Chancellor today to let us into the secret that he has been sharing with his Cabinet colleagues and with the representatives of the International Monetary Fund. The House is entitled to know today what is the Chancellor's estimate of the likely size of the borrowing requirement for the current year and for the following year.

What is clear—and we are glad to see it recorded in the Gracious Speech—is that the conquest of inflation is of fundamental importance to the restoration of any prospect of employment. If that is clear, we are agreed also that the proper management of the money supply, which means a steady reduction in its rate of growth, is equally essential to the management of the economy. What concerns us is that, exactly as we predicted earlier this year, we have now been landed in the past six weeks with the most savage squeeze in the recollection of anyone in this country as a result of the incompetence of the Chancellor in the management of his monetary policy. He has demonstrated all the skill of a reluctant and unconvinced convert to that argument. What I want to ask him is where he goes next.

Does the Chancellor still stick to his target for the money supply of 12 per cent.? If so, does he anticipate that inflation will be running in the same year at 14 per cent. or 15 per cent., and if so, does it not follow as we can see as we go up and down the country—that the public sector is exerting and will exert tremendous pressure upon the private sector, thereby destroying present and future jobs in the private sector? That was the point made yesterday by the hon. Member for Berwick and East Lothian.

We can see—and I hope that this is common ground throughout the House—that the wealth-creating private sector of the economy is now being throttled by the high interest rates now imposed which are a direct result of the Government's mismanagement of their monetary policy. We can also see that the private wealth-creating sector is also facing further destruction as a result of the payroll tax which we are to debate next week.

There was only one ray of hope in the Prime Minister's speech last week. He pointed with some cheerfulness to the fact that the minimum lending rate had fallen by ¼ per cent., from 15 per cent. to 14¾ per cent. At the same rate of progress, by the end of the next 12 months we shall have come down to the 13 per cent. which the Chancellor introduced as a crisis rate only six weeks ago. That is in no sense good enough for us. The Government must make such changes in their management of the public sector and of public sector debt as will bring down those crippling rates of interest as soon as possible. They ought to be making changes so as to avoid the necessity of imposing a tax of £1,000 million on British industry and destroying still more jobs.

We are not, as the Chancellor so often seeks to misrepresent us, calling for savage and immediate deflation, whatever that may be. We are asking for evidence of firm, determined progress to restore the essential balance of the economy.

We seek three assurances from the Chancellor. First, we ask that he will do what is necessary to reduce the borrowing requirement, however hard that task may be.