I have always had the greatest respect for the right hon. Member for Battersea, North (Mr. Jay) over all the years that we have sat together in the House, but when he says that the problem of unemployment could be simply solved by good management I must beg to differ with him. There is a structural problem here, about which I shall have something to say later. The right hon. Gentleman advanced some statistics about Austria and Norway, which may have some relevance to the problem, but the statistics for Germany and Switzerland show that their problems are not so very different from ours. Had the Germans not repatriated some 2 million Turks and Yugoslays, their unemployment would be not 2 million but 4 million. The Swiss in proportion have had the same sort of problem that we have, and solved it like the Germans.
In pleading for lower interest rates, the right hon. Gentleman gave support to my right hon. Friend the Member for Sidcup (Mr. Heath) in what he said about Mr. Neville Chamberlain's action. But Mr. Chamberlain was acting against the background of zero inflation. If I were asked to lend my money today, if I had any, I would want 2½ per cent. above the rate of inflation and so, I dare say, would the right hon. Member for Battersea, North, if he has any to lend. We would not have the same factors that Neville Chamberlain had unless inflation had first been brought under control.
I agree with my right hon. Friend the Member for Sidcup that there is no reason why our interest rates should be tied to American interest rates, because interest rates are determined only partly by competition—what is available in the New York market—but also by the rate of inflation at home. German, Swiss, Austrian and Japanese interest rates are considerably lower than ours because their inflation is considerably lower than ours. There is a balance to be struck between the attraction of what one can earn in New York and what one could get here if our inflation rate were lower.
I have had the feeling both in the debate and in the discussions surrounding it that there has been a sort of smell of Sotheby's or a tang of Christies. The economy has been up for auction. My right hon. and learned Friend the Chancellor put in a reserve bid of £1·5 billion. That was not too bad. The SDP and the Liberal Party were a little uncertain. The right hon. Member for Crosby (Mrs. Williams) had said £6 billion in a speech before the Budget. From reading the speech by the right hon. Member for Orkney and Shetland (Mr. Grimond), it looked to be more like £2 billion or £3 billion. The TUC put in a bid for £8·3 billion. The right hon. Member for Stepney and Poplar (Mr. Shore) put in a bid for £9 billion, which was backed up by a powerful article by the Leader of the Opposition in the News of the World yesterday. My hon. Friend the Member for Enfield, North (Mr. Eggar) put in a bid for £10·5 billion to £11 billion. The evening is still young. Any advance on £11 billion? Cannot we have something better?
What we must do is examine the credibility of these proposals. My right hon. and learned Friend the Chancellor has achieved a remarkable acceptance for his Budget among Conservative Members. There is an argument as to whether or not he is still a monetarist. These are theological arguments into which I do not care to enter, and as he has satisfied both my right hon. Friend the Member for Sidcup and my right hon. Friend the Member for Worthing (Mr. Higgins), and orthodoxy and heresy have been reconciled, who am I to quarrel? The essential point is that this is still an anti-inflationary Budget. Defeat of inflation is the key. Unless we bring down inflation, interest rates will not come down, and until interest rates are brought down there will not be enough investment.
I shall not delay the House long by commenting on the views put forward by the Liberal-SDP alliance. They seem, naturally, to want to outbid the Chancellor a little. I can understand that, but, on the other hand, they seem to recognise that even if the Chancellor had gone as far as they wanted him to, there would have to be some sort of incomes policy. I am not against that in principle. I served in the Government of my right hon. Friend the Member for Sidcup, when there was an incomes policy. Until the oil crisis, it worked, up to a point, fairly well, but we have had three goes at a policy such as that and the experience has not been altogether happy. The SDP and the Liberals must be cautious, with a former Chancellor of the Exchequer stomping the hustings in Glasgow. I have a feeling that if Mr. Jenkins were back in 11 Downing Street, the Budget that he would produce would not be so very different from that of my right hon. and learned Friend.
Then there was my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour)—the very word rings like a bell. He wanted to increase the public sector borrowing requirement by two thirds, but he did not tell us how he would do that. Unlike the alliance, he did not have an incomes policy. His policy gave some credence to the criticism made by my hon. Friend the Member for Mid-Bedfordshire (Mr. Hastings), that perhaps he thought that we could get in the votes before the inflationary effect caught up at the election.
The serious alternative policy was suggested by the right hon. Member for Stepney and Poplar. There was some equivocation, as the right hon. Member for Down, South (Mr. Powell) said, between his £9 billion and £5½ billion, but he proposed to increase public expenditure by £9 billion. How did he intend to finance it? By taxation? If so, whether it meant taxation on companies or individuals, presumably it would reduce the amount of money that was available for investment. He would take money out of the potentially wealth-creating sector and spend it on desirable, but not productive, social services.
Would the right hon. Gentleman finance it by borrowing? That would, inevitably, drive up interest rates. It is absurd to pretend that with a limited amount of money available one can go on borrowing without having to pay more to the potential lender than one is paying today.
Would the right hon. Gentleman do it by printing? There was another Duke of Devonshire who said that he would not countenance any tampering with the fiduciary issue. Perhaps we should remind the present Duke of that. Clearly it would have an immediate inflationary effect, and to that extent would therefore discourage investment and encourage the export of money.
Whichever line was adopted, the programme that was advanced by the right hon. Member for Stepney and Poplar was plainly reflationary. The pretext on which he justified it—I shall come to the real reason later—was that unemployment was worse than inflation. That was the implication. We should consider that. Is he right? Clearly 55 million people are hit by inflation, of whom 10 million are retired people with few means of improving their welfare. Then there are 3 million unemployed, of whom fewer than 1 million are unemployed for more than a year.
Inflation is a tax. We all know that. Indeed, those who have been Members of this House for long enough have all been guilty of it. We have allowed wages to go up, knowing very well that if prices rose we would claw back with one hand the money that was given with the other.
Then there is the statement that is clear to me, and it was certainly clear to the last two Labour Prime Ministers, that inflation produced unemployment.