The Economy

Part of the debate – in the House of Commons at 12:00 am on 25th July 1978.

Alert me about debates like this

Photo of Mr Denis Healey Mr Denis Healey , Leeds East 12:00 am, 25th July 1978

I should like to start, as did the right hon. and learned Member for Surrey, East (Sir G. Howe), by congratulating my hon. Friend the Member for Penistone (Mr. McKay) on a most moving and sincere maiden speech in which he demonstrated his love of his constituency. I had the privilege of speaking with him during the recent by-election campaign which brought so much comfort, as the right hon. and learned Gentleman said, to so many people. I must say that I was deeply impressed by the direct common sense and the wide industrial experience and experience of local government which my hon. Friend showed, as well as by his deep humanity. These qualities make him a worthy successor to Jack Mendelson, and I know that he will continue to contribute matters of great value to our debates.

It is nice to hear the right hon. and learned Gentleman again. I must say that he has broadened his literary tastes a little since we last met. I was a little surprised at their catholicity, if that is the right word. I was interested to see that his hon. Friend the Member for Blaby (Mr. Lawson) has at least introduced him to numbers, which is about time in view of the responsibilities which he claims he wants to follow.

In the main, the right hon. and learned Gentleman made a very entertaining speech—[HON. MEMBERS: "A very good speech."]—yes, it was a very good speech. I was unfair to him last time. He is not dead, but sleepeth. The right hon. and learned Gentleman wanted to explore common ground, for reasons which I shall come to later. He did, indeed, declare a wide area of common ground, somewhat to my surprise and, I think, that of the Tribune group. With however little hope of success, I shall try to start by carrying both sides of the House with me in describing as objectively as I can the background against which I think any fair-minded person will wish to judge the Government's economic record.

For nearly five years the western world has been living in a crisis of economic uncertainty. When the fourfold increase in oil prices was imposed overnight by the OPEC countries, the industrial economies sustained a blow from which they have still not recovered. The stability that we had come to enjoy in the post-war years was undermined, and the steady expansion of material wealth was brought almost to a standstill. Massive unemployment spread over western Europe and North America and soaring inflation swept across most countries as a result of the sudden immense leap in the price of the raw material on which most of the industrial life of the west depended. We are still suffering from the consequences of the pertks it reached during this period.

Those words, as I know hon. Members opposite will recognise, come from the matrimonial address of the right how Member for Sidcup (Mr. Heath) in Penistone a few weeks ago. He knows what he was talking about because he was Prime Minister when the February 1974 General Election was fought. He plighted his troth to the Leader of the Opposition in the words that I have just quoted, and she leapt to embrace him with a statement issued within a minute of the news coming over the tapes. She said: I welcome the warm terms in which Ted Heath has pledged his support. They will give added strength to the Conservative cause in the battles ahead. I confess that I thought that she was a little ungrateful to her wooer when she spoke this afternoon, because she tried delicately to ignore the whole record of the Government of whom he was the Leader and she was a member. She concentrated on the record of what we on this side of the House call the 13 wasted years before the 1964 General Election. I thought that her slogan in the next election might be "Bring back Harold Macmillan".

Of course the right hon. Member for Sidcup learned a great deal from his experience in office at the head of a Government in which so many of those on the Opposition Front Bench had the privilege—if one can call it that—to serve. Three years ago, almost to the day, he spoke to us in this House with all the authority of a man who had only just left the Prime Minister's office and he told us that the oil crisis faced us with a cut in living standards of 5 per cent. to 10 per cent. He said that the reason was that there was a massive transfer of resources from each country of the western world to the oil-producing countries.

The right hon. Gentleman said: For too long—perhaps over 30 years "— that includes the 13 wasted years under Mr. Macmillan and four years under himself— we have seen that the payments that we make to ourselves are greater than our production of resources to meet them. He said that the reason why we have never been able to run our economy at a reasonable rate in the last 30 years without crises was that fundamentally we had had an unbalanced economy."—[Official Report, 22nd July 1975; Vol. 896, c. 344–8.] That was the economy that we inherited four and a half years ago, as described by the leader of the Government from whom we inherited it. His new alliance —if that is the right word for it—with the Leader of the Opposition will sweep the Tory Party to oblivion.

The fact is that we inherited an economy which was gravely out of balance. It was running a balance of payments deficit of £3·5 billion. Inflation was over 13 per cent. and rising fast, with 11 triggers of the threshold agreement by October 1974. The minimum lending rate was at 12½ per cent. I do not know how the Opposition have the audacity to complain about the minimum lending rate of 10 per cent. against their record. Added to all this, growth collapsed completely in two months of three-day working. This was all before the oil crisis had really hit us. The right hon. Member for Sidcup pointed out in 1975 that, given the impact of the oil crisis and the world recession that accompanied it, unemployment was bound to rise. Indeed, he thought that it would rise faster than it did.

Let us look at the situation today. The balance of payments is in surplus, not because of oil alone, but because we had a 7 per cent. increase in the volume of our manufactured exports last year. For the first year since the war, we increased our share of world trade in manufactures. Inflation is down to 7½4 per cent. and has been cut by more than half in the past 12 months to the lowest level for more than six years—long before the last Conservative Government left power.

The minimum lending rate is down to 10 per cent. and output is rising, in the last three months for which we have figures at over 4 per cent. and the retail sales figures suggest that it will continue rising at the same rate for many months to come. Unemployment is falling slowly, but steadily.