BUDGET PROPOSALS (Hansard, 7 April 1959)

The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory)

The account I have to give to the Committee this afternoon is, I believe, an encouraging one, but the note I want to sound throughout is not one of satisfaction at past achievements but one of challenge to the opportunities that now confront us if we have the enterprise and the vigour to exploit them. Above all, any feelings of complacency that easy times lie ahead, and that we can now sit back and enjoy them, would be an utterly misleading recipe for our future conduct. As one Sunday newspaper put it, rather well I thought, this is a springtime of opportunity, not a harvest of prosperity.

Our debates on the Budget tend to the confined to the record of the year just ended and the prospect for the coming year. This is, to some extent, I suppose, a consequence of the form in which this annual survey of our affairs is presented, and up to a point this is right. But it is a good thing, every now and then, to stand back and try to see, in longer perspective, where we have been and where we are going.

At the cost of some over-simplification, I should say that we have been dealing with three major problems during recent years. The first has been to fit the British economy to stand in the modern world without artificial supports and constrictions. These were necessary under a wartime régime, but subsequently became increasingly irksome, distorting, and, most important, ineffective.

The second has been to promote a great increase in the proportion of our national resources saved and devoted to investment, so that we should be able to hold our own in the world and achieve the economic growth which is our objective.

The third has been to reconcile the maintenance of high and stable levels of employment with a sound balance of payments and price stability. All of these 28 things— high rate of investment, a sound balance of payments, and price stability;—are, I believe, essential conditions for full employment in the long run.

How have we got on? The process of freeing the economy from war-time controls and constraints is now virtually complete. Price control and all the general consumer subsidies have gone. Particular demands are no longer swollen by charging people less for things than they really cost. The market is free to do the job which it alone can do quickly and efficiently of making the finer adjustments between supply and demand. People can spend their money at home as they wish without bureaucratic supervision or direction.

Externally, the £ is standing firmly on its feet, after the removal of most of the controls which had been necessary since the end of the war. Sterling is again in a position to play to the full its immensely important role as a reserve currency for the world. By the progressive removal of trade restrictions we have shown that we in the United Kingdom are ready to pursue the policies which all countries need to follow if we are to have expanding world trade. Hon. Members will agree, I am sure, that expanding world trade is the indispensable condition both for our own economic growth and for that of the free world as a whole.

The share of fixed investment in our national production has been rising steadily ever since 1952. In the year just ended, investment of all kinds took just 20 per cent. of our gross national product compared with 16 per cent. eight years ago. It is interesting to recall that the share taken on average between 1900 and the outbreak of the last war was probably not more than about 12 per cent. This shows how great is the change which has been brought about in the proportion of our resources devoted to investment. Another good thing is that this increased investment has included a massive effort of overseas investment, nearly the whole of which has been in the Commonwealth. Long-term investment overseas last year came to about £240 million. This is nearly double the rate obtaining eight years ago.

The problem of reconciling price stability with expansion still persists, as 29 indeed it does with virtually every other democratic country. I suppose that this is one of the most important and intractable economic problems with which the modern world is faced. There is no simple and single solution which can be introduced overnight by a decision of Government. Nevertheless, a greater degree of price stability exists in the United Kingdom today than at any time since 1945.