HC Deb 23 June 1960 vol 625 cc651-3
7. Mr. Rankin

asked the Chancellor of the Exchequer, in view of the unsatisfactory state of the balance of payments, the small rise in the gold reserves, the recent increase in the West German Bank rate, and the consequent unsettling effect on the value of the £ sterling, what steps he proposes taking to maintain its stability.

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

A healthy external position is closely linked to a sound balance in the internal economy. As I said in my Budget statement, our purpose is to ensure that our policies are adapted to changing circumstances."—[OFFICIAL REPORT, 4th April, 1960; Vol. 621, c. 45.] A number of steps have already been taken to restrain the growth of credit, and the measures announced this morning are intended to reinforce these steps.

At the same time, the Government have been reviewing the level of capital expenditure in the public sector. The increased rate of expenditure in this field is now beginning to diminish, although there will be small increases in the next two quarters of this financial year. But the Government are arranging that the programme of expenditure on investment in the public sector for 1961–62 will be held at the level of the current programme for the present financial year.

Mr. Rankin

I thank the right 'hon. Gentleman for that statement. Is he not aware that the step he has taken this morning in raising the Bank Rate to 6 per cent. reveals his continuing friendly attitude towards the moneylenders? Why does he continue to disregard the excellent proposals of the Opposition about the selective control of imports, which would keep the balance of payments healthy, help and not paralyse local authorities, and also prevent the fluctuations in Bank Rate which upset industry, and particularly those hon. Members who represent industry and who sit behind him?

Mr. Amory

The answer to the first part of the hon. Gentleman's question is that we believe that the Labour Party policies to which he referred would have precisely the opposite effect in practice. The object of all the steps I have taken is to maintain the economy in balance and to keep off inflation. In general the economy today is in a very healthy state, and I mean to do my best to keep it so.

Mr. H. Wilson

How can the Chancellor say that the economy is in a healthy state when the gilt-edged market is at its lowest level almost within recorded memory, When exports are failing to rise as much as imports and when there are long delivery dates for important materials, for instance, to British Railways? After all these years of experience and the Radcliffe Report, is not the right hon. Gentleman yet aware that this over-reliance on the monetary weapon simply means penalising local authorities and people building houses with the help of mortgages, and is also inimical to private and public investment? Will not the right hon. Gentleman move into the modern age and try to produce more up-to-date methods of dealing with the situation?

Mr. Amory

The right hon. Gentleman is speaking in a spirit of extreme envy. He knows perfectly well that he is very envious of the management of the economy which has resulted in high production, a high level of employment and a stable price level for more than two years.

Mr. Ridsdale

Is the Chancellor aware that his statement that the level of public expenditure will be restrained in the coming year will be greatly welcomed by many people, not only in this House but in the country as a whole? Is he aware that many people believe that the rise in the Bank Rate would not have been necessary if he had been able to restrain Government expenditure this year?

Mr. Wilson

Is the Chancellor aware that nobody envies a Chancellor who has got himself into such a mess that he has to have a 6 per cent. Bank Rate so early in the season when perhaps a worsening of the situation gives him little room for manoeuvre in the summer and autumn? Secondly, since he has failed to answer the question put by my hon. Friend, is he aware that our complaint is that in failing to control some excrescences of private expenditure, particularly in regard to private luxuries, speculation in land, and the rest, the Chancellor always takes what is for the Tory the easy way out, and that is jumping on essential public expenditure by local authorities?

Mr. Amory

What I know is that steps are much more effective in avoiding possible risks and dangers if they are taken in good time.