§ 3.36 p.m.
§ Mr. Douglas Jay (Battersea, North)
I beg to move,
That this House, expressing it's deep concern at the present grave balance of payments position facing the country, regrets the Government's failure to secure an adequate expansion of exports and a steadily expanding production, and calls upon Her Majesty's Government' to institute policies designed to strengthen our economic position at home and abroad, and to secure social justice and a greater responsiveness by industry to the needs of the nation.
The Chancellor of the Exchequer has made a number of gloomy speeches in the past few weeks, and the most notable feature of these speeches has been the extraordinary contrast between their tone and that of the propaganda which we were getting from hon. Members opposite at the time of the General Election fifteen months ago. A great many people outside the House not unnaturally feel that they were gravely misled by the election propaganda of the Conservative Party in 1959.
In a special preface to the Tory official election manifesto at the last election, the Prime Minister wrote:I do not remember any period in my life when the economy has been so sound.The manifesto went on to promise not merely that the Tory Government would double the standard of living in 25 years but also to say that their policy would lead to dramatic increases in prosperity and leisure. I do not know whether they meant a three-day week in the motor industry by a "dramatic increase in leisure."
The same manifesto told us,We have shown that Conservative freedom works.The present Minister of State at the Board of Trade was even more eloquent in an official Tory television election broadcast, for he saidThe future is good. The British car industry is doing a wonderful job. They are free to get on with it, too, and are exporting more than ever before.We were all told, in short, that the policy of setting the people free was solving all our economic problems.
Let us, therefore, look at the reality today and see how Conservative freedom 37 works in hard fact. It has always been feared by many moderate people that under this laissez faire ré gime, under which we live, this country would be forced to choose between expansion with a balance of payments deficit, on the one hand, and a surplus at the cost of stagnation, on the other hand. But the remarkable and lamentable fact is that in the past twelve months we have achieved neither surplus nor expansion. At one and the same time, production has stayed still since the spring of last year; we have incurred the biggest balance of payments deficit for nine years; and we have had to borrow about £900 million of short-term funds from abroad in order to avoid gold losses. All this has been at a time when the terms of trade are exceptionally favourable—nearly 25 per cent. more favourable than they were in 1951. It is certainly a picturesque use of language even for the Prime Minister to describe this as a sound economy.
There is no dispute about the facts. Production has stagnated again ever since last Spring, when the hire-purchase restrictions were clapped on, even though in Germany and France it has gone ahead again in these last few months. The balance of payments deficit was, according to the National Institute of Economic Research Review, which appeared last week, at least as high as £150 million in the calendar year 1960. If that is exaggerated, I hope that the Chancellor of the Exchequer will say so today.
In addition, we were attempting to lend abroad several hundred million pounds for investment. The estimate of the National Institute is that had we not managed by extremely high interest rates to attract this large influx of largely short-term funds, we should have suffered last year a fall in our reserves of about £750 million, or very nearly 75 per cent. of the total reserve. We avoided that only by extremely high interest rates, which caused acute difficulties to the United States and much of the rest of the world.
It cannot be denied that this is a rather disturbing situation in which we find ourselves sixteen years after the war. If people had been warned of this, as they were by the right hon.
38 Member for Woodford (Sir W. Churchill) during the war, or by Sir Stafford Cripps in the post-war years, they might not have felt so let down, but exactly the reverse was the case in this last year.
The situation today is extremely disturbing for three main reasons. First, United Kingdom production and national output have now stood virtually still for nearly six years, with an interval of only fifteen months, timed for some reason to coincide with the 1959 General Election. I will not quote the league tables again today. I do not think that it is now denied by anyone on either side of the House that our production record is deplorable, compared with the rest of Western Europe or with Russia, or with Japan, or with a number of other countries.
All of us in this country have suffered enormous losses as as result of this stagnation. Sir Roy Harrod, who periodically supports the Tory Party, estimated in the Financial Times on 2nd January thatowing to misjudged policy some £2,000 million worth of goods and services have been lost to the nation'between 1955 and 1960. Contrast that £2,000 million, which we might have had, with the miserable £50 million, which the Ministry of Health is now raising by putting a tax on the poor and the sick. What a comment it is on the Government that, because they are afraid of expansion, they are striking at the food services offered to the neediest people in the very week when the American Government, because they believe in expansion, are expanding those same services.
We on these benches are not alone in deploring this prolonged stagnation. I hope that the Chancellor has read, not merely Sir Roy Harrod's recent articles, but also Sir Oliver Franks's speech to the Lloyds Bank shareholders. Sir Oliver summed up the situation in these restrained words:We have achieved stability only at the cost of stagnation.That is not a very comfortable situation when one is engaged in a race. I am sure that the Chancellor of the Exchequer and the President of the Board of Trade will agree with me that Sir Oliver Franks is neither a partisan nor an ill-informed critic.
39 The second extremely disturbing fact is that, not merely are British exports still steadily declining as a percentage of world exports, but last year we suffered this huge deficit at a time of European boom and with very favourable terms of trade. If that is the situation after nine years of Tory economic policy and "prosperity", how do the Government think we are ever to achieve an export surplus? What do they intend to do other than sit by and watch the situation?
Thirdly, it is also highly disturbing that our exchanges are now bolstered up by the £800 million or £900 million of largely short-term funds which we borrowed in the course of the last twelve months. According to the National Institute, these funds exceed the whole of our drawing rights at the International Monetary Fund, and most of them can be withdrawn immediately at the will of the holders. Incidentally, while they are there, they place a very large additional interest burden on our current balance of payments.
What has caused the predicament in which we now find ourselves? Basically it is this. The complete decontrol of the economy and the complete abandonment of all planning have landed us in a situation in which we cannot expand without an internal deficit and, with each successive lapse into deficit, we become more and more dependent on very high interest rates and the attraction of international hot money from abroad.
There is no mystery about what has happened. Successive bouts of deflation like that from which the motor industry and other industries are now suffering have checked expansion, and fears of external deficit have driven the Government into these bouts of deflation because they are not willing to take any other action. We on this side have always warned the Government that a totally unplanned United Kingdom economy could not work in the conditions of the world today. We warned them that, if they returned to convertibility and premature decontrol of all manufactured imports, deflation would be the only method left for protecting our reserves.
That is exactly what happened. Premature convertibility has made us again 40 dependent on all this international hot money which is outside our control, just as we were dependent in the 'thirties. Premature and unilateral decontrol of all manufactured luxury imports in 1958 and 1959 was the cause of the plunge into deficit last year.
We should have built up bigger reserves first. The President of the Board of Trade will agree that our manufactured imports rose by just on 40 per cent. last year. Imports of manufactured goods from the United States rose 101 per cent. in 1960.
§ Mr. Jay
The President of the Board of Trade argued last week that only £45 million of the higher imports of finished manufactured goods were consumer goods. But when exchange reserves are being strained anyway to import large amounts of machine tools and such goods—it is not very comforting that we have to do that—it is even more foolish to choose that moment to import £45 million more of cars, motor bicycles, washing machines, gloves, ladies' handbags and all the rest of it at the same time.
I would at least congratulate the President of the Board of Trade on this. He is responsible for starting up one new industry in the United Kingdom, namely, the conversion last year of slots on imported American gambling machines from 10 cents to 6d. I hope that he is proud of it.
§ Mr. Maudling
At a time when we are trying to export very large quantities of inessentials to America—for example, whisky is one of our largest exports—it seems very foolish to stop buying their goods.
§ Mr. Jay
The right hon. Gentleman maintained these controls until 1959. He was under no obligation prematurely to abandon them all in that year. In any case, the final result of all this is not that we help the United States or any other country by importing more. We are naturally forced to check these extravagant imports anyway; but we now have to do it by deflating the whole economy and running down British production and employment.
41 What is the immediate prospect for 1961? The National Institute Review paints it bleakly as another balance of payments deficits, in spite of better exports, if nothing is done immediately to check it. This would be the first time since 1947 that we have suffered a balance of payments deficit in two successive years. The Institute foresees a possibility next year of a 5 per cent. increase in national output if all our capacity is used, but a probability of only a 2½ 1 per cent. increase if the Government's present policies are continued. In fact, another year to be spent falling behind our competitors. The lost 2½ per cent. of output may not sound very much, but it means £500 million of lost national output, or ten times that which the Minister of Health is obtaining by his tax on the sick and the needy.
I believe, therefore, we cannot afford to tolerate any more years of this economic drift and complacency. If we do, it certainly means national decline, politically as well as economically, compared with other nations. Sir Oliver Franks put this point very bluntly when he said:If we are to mark time for three years out of every eight while others go marching ahead, we are bound to fall behind the general progress.What do we need to do to shake ourselves out o,f this inertia? To be perfectly fair to the Chancellor of the Exchequer, he himself has been giving us advice in a number of speeches. He has told us that we must not panic, that there are no grounds for either despondency or complacency, that the situation needs careful handling and that, above all, we must get a clear idea of where the nation is going. If the Chancellor has a clear idea, I hope he will tell us this afternoon what it is.
The Chancellor also now assures us—and I am glad of this as far as it goes—that he believes in growth, and that we ought to achieve a growth of 3 per cent. a year. Then, however, in his last speech about a week ago, he complained that we cannot achieve this growth because exports are not rising fast enough. Apparently, he is not going to do anything further about it. Does not the Chancellor see the implications of this defeatist argument? If he thinks that with his policies we cannot combine an overseas surplus with full employment, and if he is unwilling to control imports, 42 he is simply telling us that our currency is over-valued. The Chancellor cannot blame other people for drawing the logical conclusion from his own arguments if that is what he has told us.
Therefore, as a nation, we ought now to make steady expansion our first economic aim and be prepared to accept the disciplines and the efforts that this may involve. That means, first and foremost, that we must return to some sort of deliberate purposive planning of our whole economic policy. I believe that the country is ready for that. Indeed, when Sir Hugh Beaver, of the F.B.I., and more than one leading banker come out and speak in favour of it, I cannot believe that there are many people left against it. except, of course, the Minister of Health.
The state of our economy today proves that the laissez-faire solution has completely failed. Of course, we do not want—
§ Mr. Cyril Osborne (Louth)
Will the right hon. Gentleman tell the House how planning our internal economy would help our exports?
§ Mr. Jay
The hon. Member may not have noticed that it noticeably did so in the time of Sir Stafford Cripps. [Interruption.] Of course, we do not want any attempt at rigid regulation of all sorts of details of the economy which would be both unworkable and unpleasant. I agree with the hon. Gentleman there.
I will go on to say some of the things that we do want, because we do not want complete chaos either. Let me give an example. We now read that the steel industry is basing its expansion plans on a quite different estimate of the future demand for cars than the motor car industry, and that the coal and electricity industries are not using the same estimate of the future rise in national output as the steel industry. Probably, the Inland Revenue is using yet another basis to predict Budget revenue.
Is it any wonder that we have chaos and muddle in that situation, with heavy imports of steel sheets one year and short time in the strip mills the next year, with coal short at one time and surplus the next year, and with hire-purchase restrictions clapped on at one 43 time and removed six months later? Surely, it would be better if all these great industries at least worked to consistent targets, agreed in consultation with the Government, even if those targets were not always precisely achieved.
Let us also—I will explain this to the hon. Member for Louth (Mr. Osborne)—have some intelligent co-operation in the international field. Surely, it is quite obvious by now that some international planning is urgent in the sphere of interest rates and of International Monetary Fund support for currency reserves. Almost every expert, if not the hon. Member for Louth, now agrees that the world is again threatened with competitive deflation due to shortage of gold and beggar-my-neighbour interest-rate policies.
Why do not the Government approach the United States and Germany in the first instance and propose a joint and simultaneous lowering of interest rates, so that the United States and the United Kingdom could expand again without fear of loss of reserves? Indeed, if the Germans—perhaps they would not—obstinately refused to co-operate in such a venture, the Government should consider whether we should not then be justified in discriminating against imports from Germany. [HON. MEMBERS: "Oh."] Why not, in those circumstances, if the mark were a scarce currency?
Why should not the United Kingdom now propose a plan for, at long last, converting the International Monetary Fund into something more like a real world central bank which could create credit that member countries could treat as their own reserves? I should have thought that the new United States Government would be more favourable to that sort of plan than at any time in the fifteen years since the war. I hope that the Chancellor will have something to say about this today.
Next, the Government plainly must take more vigorous steps than they have done yet to improve the poor performance of British exports and British productivity. British industry has come in for a lot of criticism lately. The language is, indeed, very different from all the propaganda we heard at election 44 time that free enterprise would solve everything. Sir Miles Thomas tells us that British cars are not always up to standard. Mr. Bagrit, of Elliott Automation, tells us that we are seriously lagging behind Germany, the United States and Russia in the introduction of automation into industry. Two main reasons emerge from all this discussion for the poor performance of British exports over the last few years. First, our productivity is not rising as fast as that of our competitors; and secondly, a number of firms, at least, are not exporting simply because they are not trying hard enough.
In turn, the main reason for lagging productivity is lagging investment due to the repeated bouts of credit squeeze over the last seven years. If hon. Members look at the figures over these years, they will see that whenever production has fallen productivity has fallen also. If we want private industry to invest, we simply must give it the assurance of a steadily expanding demand.
Another cause of lagging productivity is the persistent high interest rate policy of the Government. Of course—and this is a point that Sir Oliver Franks made also—if the Government strike at investment in every crisis, they must expect productivity to fall behind. Yet another cause is the evident failure, still continuing, of British industry to spend enough on research. British industry today is still spending as much on advertisement as on research, and, if we deduct the grants that come from the Government, it is probably spending twice as much today on advertisement as it is on research. Is it surprising, in those circumstances, that our productivity falls back compared with other countries? Incidentally, the Government suppressed the Industrial Development Councils which the Labour Party set up to promote co-operative research. If they do this, it is up to them to put something in their place, in view of the conditions that we have today.
If we really mean business about exports and productivity, surely some more positive effort has also got to be made by the Government to bring our shipbuilding and machine-tool industries, in particular, up to date. Leaving it all to private enterprise has failed here also. Both of these industries have been found by expert official committees to be falling seriously behind our competitors 45 abroad. The outlook for shipbuilding is particularly serious. For a few years after the war we were again producing 50 per cent. of the world's ships. That percentage has now fallen to 15; and this decline has now reached a point when it threatens not merely our balance of payments but the jobs of tens of thousands of employees in areas already hit by unemployment.
Since the Government in this case are pumping £18 million of public money, via the Cunard Company, into the shipbuilding industry, I should have thought there was a special obligation on Ministers to act energetically to see that something is done about this industry. All that the industry is getting at present appears to be a few minutes of earnest consideration in the spare time of the Minister of Transport. So I hope that we shall be told before the end of this debate what the Government plan to do about both the shipbuilding and the machine-tool industries.
I should also have thought that one of the first necessities for raising productivity in British industry would be to halt the accelerating rush towards monopoly and near-monopoly which has developed in the last two years. The real motive of all these take-over bids is usually simply to reduce competition, and the real danger of it is that privately-owned British industry is becoming trustified at the moment at a faster rate than ever before. During 1960 no fewer than 90 take-over bids were reported by the Economist. In January, 1961, there were another 60, and that was before the latest bid of Mr. Clore and Mr. Cotton to take over the rest of the City of London.
Do the Government really believe that all the mergers—though some of them may be in the public interest—are going to enhance Britain's power to compete abroad by largely suppressing competition at home? Are hon. Members opposite really happy about this picture of monopoly capitalism, or whatever one likes to call it, which is now being presented to the world by all these operations with their attendant melodrama of rumours, leaks and the wild search for capital gains?
When it comes to the newspaper industry, of course, it is not so much capitalism as cannibalism. I wonder 46 whether hon. Members opposite have realised this consequence of these operations? In the case of the bid for Odhams, one of the reasons that made that company vulnerable was that its shares carried voting rights in accordance with the spirit of the Companies Act and were widely spread over the community. If this raid succeeds, a lot of companies, I should have thought, will draw the inference that one had better not have too many voting shares. I think that is another consideration that we should not forget.
Therefore, I say this to the Government. Is there really no point in this process at which the Government are prepared to call a halt? I do not know what might happen nowadays, but suppose we found that the Ford Motor Company or the Russian Trade Delegation, for instance, were buying up the newly-enfranchised Daily Mirror shares on the Stock Exchange, would the Government then interfere? Or suppose there were a bid by Mr. Clore and Mr. Cotton for the Palace of Westminster. The Government are engaged in selling a lot more public property in steel at the moment, and therefore it is rather hard to know exactly what will happen next. I ask the Chancellor: is there some point in this process at which the Government would be prepared to call a halt?
I suggest that we now need legislation in this country at least to ensure that major mergers and amalgamations in all industries, not just the newspaper industry, should not go ahead until they have been adjudged by some public authority to be in the public interest. That is what the House decided in the case of restrictive practices, and about 1,000 restrictive practices have been found since 1956 to be contrary to the public interest. Is it not rather likely then that some of the mergers would be found to be injurious also, even though no doubt a certain number are defensible? If we impose a test, as we do now, on restrictive agreements, why should we not impose a test on mergers also?
The irony of the situation is that the Restrictive Practices Act itself has actually in some degree incited the rush towards monoply, because big firms now find that they cannot make a price agreement but they can amalgamate. I believe that in the case of Courtaulds 47 and British Celanese—and it is natural from the firms' point of view—that was one of the decisive motives.
Now what do the Tory Party do in the difficult economic situation in which we now find ourselves, with all its implications for our national future? Of course, they go back to the prayers which they learned at their mother's knee and they call out for cuts in Government expenditure, higher taxation on the least well-off and lower taxation on the rich. For weeks past, the one idea coming from the party opposite to help our exports has been a cut in taxation on the highest incomes. We are all particularly well-informed about the Government's Budget intentions this year, because the present Chancellor has set the interesting precedent of conducting his Budget discussions in public. We read all about what the right hon. Members opposite have said to one another at Chequers, and various Ministers, including the President of the Board of Trade, make public speeches advising the Chancellor what he ought to do. I am afraid we cannot help listening in to these interesting discussions.
§ Mr. Gerald Nabarro (Kidderminster)
With regard to the right hon. Gentleman's strictures on my right hon. Friends about conferences at Chequers, how does he reconcile what he is saying with the recommendation, apparently made officially on behalf of the Labour Party, that Surtax should start at £6,000, advocated by the hon. Member for Bosworth (Mr. Wyatt) and subsequently confirmed by the Leader of the Opposition, who said in different terms precisely the same thing?
§ Mr. Jay
I only regret that he has not invited himself to these discussions at Chequers.
As to the idea that everything depends upon a cut in taxation, it always seems to me rather a libel on British industrialists, or a great majority of them, to suppose that they are only held back from launching into the export trade by a sort of unofficial strike against Surtax. I do not believe that is true. Nor did the 48 Radcliffe Commission on the Taxation of Profits and Income believe that it was true. That Commission, after the most thorough and authoritative review of this issue in the last thirty years, came to the conclusion that the whole alleged disincentive effect of direct taxation was grossly exaggerated.
The Radcliffe Committee added:But if we are asked to infer … that the heavy rates"—that is, of taxation—have any special disincentive effect upon the receivers of the higher levels of income, so as to justify a shifting of the existing weight of taxation from these ranges to lower levels of income, we are bound to reply that we see no evidence that the higher income earners are specially affected by disincentive.That was the view of Lord Radcliffe, Lord Cohen and Lord Heyworth, then chairman of Unilever, who probably knows more about it even than the hon. Member for Kidderminster (Mr. Nabarro).
If you are not impressed by expert opinion, Mr. Speaker, let us look at practical experience. This remedy has been tried before. In the spring Budget of 1957, the present Minister of Aviation, declaring to the House, "My theme is expansion", reduced Surtax. After that Budget, national output went down and stagnated for at least two years. The truth is, as the history of the last twenty years on both sides of the Atlantic shows, that there is very little close connection between the levels of direct taxation on the one hand and the progress of production and exports on the other.
Nor is it even true to say that British direct taxation compared with that of other advanced countries is particularly high.
§ Mr. Jay
I agree that it is higher than theirs in Russia, but it is not as high as that of others, as I will show. It is no more true to say that than it is to say that our sooial services are now in the forefront.
The Financial Times gave these facts extremely clearly in a table on 4th January, this year. This showed that the maximum rate of tax on undistributed profits was higher in the United States 49 of America than in this country, and that Germany, France and Canada were coming very close to ourselves on this test. Secondly, the maximum marginal rate of tax on personal income, about which we hear so much, is now actually higher in the United States than it is here, with those of Canada and France not very much below our own.
§ Mr. Jay
As a matter of fact, if one works out the proportion of total personal incomes taken in direct taxation, local and national, in the United States and here, it will be found that it is slightly higher in the United States than it is in the United Kingdom. I will give the hon. Member some figures, for we should at least get the facts right.
It is quite false to suppose that the proportion of national income taken, even in direct taxation and insurance contributions together, is higher in the United Kingdom than it is in the nations with whom we are competing. The latest O.E.E.C, figures, which refer to 1958, show that the share of national income absorbed in taxation and insurance contributions together was higher in Germany, France, Sweden and Norway than it was in the United Kingdom. It was highest of all in West Germany, far higher than here. That in itself almost entirely demolishes the argument that our export failure is due to high taxation or social payments. The truth is that our most successful and dangerous competitor is channelling a larger proportion of the national income through public finance than we are.
Nevertheless, the Opposition certainly do not regard our present direct taxation system as perfect. For one thing, it weighs too heavily on the lowest levels of personal earned income. That is where the first reliefs ought to come. What the Chancellor ought to do this year and in further years during which he may be responsible, if any, is to shift the burden relatively from personal earned incomes to capital gains and distributed company profits.
50 The case for a capital gain tax is overwhelming, on revenue, social and administrative grounds. We all know that far too much time and brains are spent in the City and industry on chasing capital gains which ought to be devoted to modernising British industry. The case for a higher proportionate tax on distributed profits is the plain faat that they are growing faster than any other section of the national income. According to the Government's official Blue Book figures, between 1949 and 1959 the total of dividend and interest payments by all companies after tax rose from £540 million to £1,071 million, while the total taxation from the companies rose only from £764 million to £901 million. That seems to show fairly clearly where the extra revenue ought to come from.
However, instead of doing that, the Government, we are told in all these rather public discussions, intend to increase indirect taxation and insurance contributions, as we now know, and use the money to reduce Surtax. We say that that would be quite indefensible. There is no shred of reason for making such a shift, except a desire to redistribute income in favour of the most wealthy. All this annual talk about a sales tax springs from little motive other than that.
If by a sales tax is meant a tax falling at the retail instead of the wholesale stage, an administrative change, then the previous Chancellor disposed of that argument last year, presumably with the agreement of the present Economic Secretary and Financial Secretary to the Treasury. If what is meant is a Purchase Tax at one flat rate on everything, which is what the hon. Member for Kidderminster campaigns for every spring at Question Time and then votes against in the Divisions on the summer nights afterwards,—
§ Mr. Nabarro
I do not mind having my leg pulled publicly, but the right hon. Gentleman might be a little more truthful in this context. Is it not the fact that in Committee on the Financial Bill last year I was obliged to go into the Lobby against my own party and reluctantly lead a large number of hon. Members opposite, together with many of my hon. Friends, into the Lobby on 51 this very issue? Will not the right hon. Gentleman withdraw his wholly false statement?
§ Mr. Jay
—that he will support our Amendments in the coming summer, I will gladly welcome him.
Nevertheless, if what is proposed is what, I agree, the hon. Member has campaigned for, that is to say, a flat rate of Purchase Tax, then there is no reason whatever for it except the desire for regressive taxation on the poorest taxpayer. About the National Insurance contribution I will say only this, since we are to debate the Minister of Health for the whole of the rest of the week. This contribution is now being used by the party opposite largely as a substitute for Income Tax and a major regressive tax on those least able to pay, a poll tax of the worst type.
If a charge of this kind is neither related actuarially to future benefits, as was the original insurance contribution in 1946, nor is a payment for specific services, then it is quite plainly a tax and nothing else. In the form now proposed by the Government, it is of all forms of tax the most odious. Not merely is it socially odious, but it is economically injurious. So far as we pay for social benefits by taxation raised out of profits, then we do not raise the costs or the prices of the goods. But if a levy on employers is imposed, that is directly added to costs and prices; and the levy imposed on employees almost certainly leads to higher money wages and therefore to higher costs.
That is precisely why our more enlightened system of financing social benefits is far superior from the point of view of economic and industrial costs than the more reactionary system followed in the Common Market countries. A point which many people do not 52 realise is that it follows from this that any shift away from tax revenue, such as is now contemplated, towards the contribution tends to increase all our industrial and export costs.
I wonder whether hon. Members recognise that with the Minister of Health's new impost—I am speaking about the insurance contribution—the employees' and employers' payment together will rise next year to about £1,000 million a year. That is as much as if not more than the total Income Tax yield from P.A.Y.E. on all wages and salaries. With an employee's contribution after next July of 10s. 7d. a week, the adult man or woman earning £7, £8 or £9 a week—there is still quite a number of them—will be paying a higher proportion of income in tax and insurance contribution than people earning much more than they. Is that good for incentive?
At the time of the General Election, the prospect was held out by the party opposite that the contribution would go not up but down to about 9s. a week. I find it almost incredible that in 1961 even the Tory Party can propose to impose a tax of 10s. 7d. a week on a man earning £7 or £8 a week entirely regardless of how many children he has or what his other circumstances are. This is nothing to do with exports, productivity or the balance of payments. It shows a complete disregard for social justice, and, to my mind, it merely emphasises what the whole of the last 30 years have proved, namely, that we can no more expect a sense of social justice or social responsibility, than we can expect an economic plan for the future of this country, from the British Tory Party.
§ 4.24 p.m.
§ The Chancellor of the Exchequer (Mr. Selwyn Lloyd)
I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:noting the improvement in the economic situation of the country since October, 1951, and the present high levels of employment, investment and consumption and recognising that in order to meet our commitments at home and abroad, further expansion, particularly in exports, is necessary, supports Her Majesty's Government in their determination to strengthen the country's economic and financial position.I should like to begin by saying how much I regret the absence of the Leader 53 of the Opposition. I hope that he will be better soon. I understand that he is suffering from laryngitis or lack of voice. Any temptation to describe the speech of the right hon. Member for Battersea, North (Mr. Jay) as vox et praeterea nihil I can resist in view of the large number of topics he has covered.
First, I wish to refer to certain international affairs, to which the right hon. Gentleman referred. Some critics seem to think that we can live in splendid self-contained isolation, but, as everyone knows, this country is vulnerable to world events. From the point of view of tension, that is not good for the expansion of trade, and the Government have done a good deal to promote the easing of East-West tension in 1959. The change for the worse in 1960 is a cause of bitter regret to us, and we must welcome the present slight signs of improvement.
The second international matter to which I wish to refer is the imbalance in payments. I say at once that I think that the present state of affairs is disturbing. Over the past seven years the United States have had a 9 billion dollar deficit, Germany a surplus of 5 billion dollars, Italy 2½ billion dollars, and France and Japan together about 2 billion dollars. We have been almost even over the period. Over the last year we have moved into deficit. The United States and United Kingdom's short-term liabilities have been increasing. If this imbalance is fundamental—in other words, if it is not just a temporary affair—it must be corrected one way or another. But if the whole burden of correction is left to the deficit countries, the danger is that the eventual solution will be sought through competitive deflation with world-wide stagnation and unemployment.
Whatever may be said about the other countries to which I have referred, I am satisfied that the German imbalance is fundamental. We therefore have discussed with the German authorities, on a variety of occasions, the steps which might be taken to put things right. The discussions covered both steps to deal with the immediate situation and longer-term remedies. The German Government have taken some steps. The short-term inflow of capital into Germany was high in 1960. This was in part due to 54 the high interest rates maintained by them in an endeavour to restrain home demand. This had the result of attracting money into Germany from outside and worsened the problem of imbalance.
The German authorities have now reduced their discount rate, the most recent change being the reduction on 20th January from 4 per cent. to 3½ per cent., and the restraint on liquidity has been eased. The German Government have also promised a significant programme of financial aid to the less developed countries and a fund of about 3½ billion deutschmarks has been mentioned. This amounts to about £300 million. We have been told that these funds, when disbursed, will not be linked to German exports. There will be a very considerable problem involved in getting such a fund mobilised and moving at all quickly, but clearly if sums of this magnitude could be achieved and made available and repeated year by year that would be a very important contribution to a solution of the problem.
Various other measures are under consideration by the German Government. I do not want to comment on them now. On all these matters consultation will have to continue, particularly as the problem is, in our judgment, one for which purely short-term palliatives will not suffice.
The next matter concerning the international situation to which the right hon. Gentleman referred is the position of the International Monetary Fund. It is true to say that the Fund's resources are not much used at present. I do not think that that means that the Fund does not fulfil a useful purpose. It rather reflects the fact that countries are not at present seeking to hold more reserves. Many countries are putting higher priority on getting money to spend on development rather than money to hold as reserves.
The Fund has a useful rô le to play in helping countries with temporary balance of payment problems. In the past, there has, perhaps, been the mistake made of regarding that too much as a last resort. Payments into the Fund and drawings from the fund should not be thought of as dramatic, something by way of a crisis measure, but as a normal international financial operation. That is why we made the repayment last year ahead of time and we made the repurchase of 55 sterling just before Christmas. I was pleased to note the form of President Kennedy's statement the other day saying that he did not regard it as otherwise than quite normal for him to state that he regards the United States' drawing rights on the Fund as standing behind the dollar and must be included in the elements supporting the dollar.
I agree with the right hon. Member for Battersea, North that we must have consultations with Germany, in particular, and the United States. O.E.C.D, will play a useful rô le in international consultation. We look forward to working closely with the United States Administration on these problems. The Joint Permanent Secretary to the Treasury, Sir Frank Lee, accompanied by Sir Denis Rickett, of the Treasury and Mr. Maurice Parsons of the Bank of England, will be visiting Washington later this month to make contact with their opposite numbers in the United States Departments and the World Bank and International Monetary Fund for an exchange of views on these matters. I think both sides of the House will agree that that visit will be timely.
Coming to the Opposition Motion, the right hon. Gentleman's speech seemed, if I may say so, to be extremely muddled and dealt with numerous topics, most of which are matters to be debated in the House between now and the next Session. The substance of the attack upon us is that there is stagnation at present. That is what we hear from them on every occasion. What are the facts? The general level of activity in this country is very high. There were 42,000 fewer unemployed in January, 1961, compared with January, 1960. Earnings are up. Real earnings went up by 5 per cent. between October, 1959 and October, 1960. Personal savings are estimated at a rate of 9 per cent. of disposable personal income in the first three-quarters of 1960 compared with 2.2 per cent. in 1951, at the time when the right hon. Gentleman had the responsibility. Consumer expenditure was higher than ever. As for social justice, I do not think anyone can dispute that we are undertaking a vast programme in the field of social service. That is a matter which I will be very willing to debate on Wednesday on another Motion of Censure by the Opposition.
56 To take one example, I do not think enough attention has been paid to the university programme which was announced the other day. We announced new starts of £25 million a year for each of the next four years, which is £100 million over four years. That is only part of the cost. The university buildings will have to be equipped and staffed. That is a vast expansion in the university programme, and is consistent with a total of 170,000 students by the early 1970s.
When we speak of the high level of earnings and consumption no doubt some hon. Members opposite will say that that is part of the indictment against us. I do not think it was mentioned by the right hon. Gentleman and it is one of the few things that he did not mention. However, the idea that there is too much consumption is a part of the indictment against us. The argument is that consumption is increasing at a time when there is stagnation because our production figure has levelled off.
What are the full facts? We have had a reference to the speech of Sir Oliver Franks. I should have thought that one clear thing to be deduced from that was that consumption was too high. [Interruption.] I thought that was part of the case, but I am glad to hear that is not so, and glad to have it on the record. The full facts are that between October, 1958, and April, 1960, the index of industrial production went up from 105 to 121, an increase of 15 per cent. in eighteen months.
That increase was based on a good balance of payments position, upon growing exports, upon price stability at home and spare capacity at the beginning of the period. It is not surprising that, with the check in world expansion, we should have a pause at home also. Even had world conditions been favourable, after such a rapid rate of increase there was bound to have been a pause. In present world conditions it is inconceivable that there should not have been a pause, and the restrictive measures taken by my predecessor were absolutely correct. They were taken to curb inflationary tendencies and excessive pressure of demand at home, and to leave capacity for exports. It would be absolutely wrong in the present circumstances to go in for a programme of general stimulation of home demand. It could 57 not fail, in present circumstances, to harm the export effort and, therefore, worsen our balance of payments.
§ Mr. Roy Jenkins (Birmingham, Stechford)
Does the Chancellor seriously believe the extraordinary mixture of indecision, irrelevance and confusion he has just given is a serious argument for the case about Britain's relative stagnation? Do hon. Members opposite seriously believe that?
§ Mr. Lloyd
When I used to debate with the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) he was not always so offensive.
I will now deal with the point that he was going to make. What will be said is that, even if we have a high level of activity at home we are doing less well than other countries. The example is given of Western Germany.
Some of the statistics for the last seven years—and I think these statistics have to be faced—show that the gross national product in Germany went up by 50 per cent., the United States and the United Kingdom only by about 20 per cent. each. As far as fixed capital formation is concerned, in Germany 23 per cent. of the gross national product was devoted to it; in the United States 16 per cent. and in the United Kingdom just under 16 per cent.
Germany's exports have more than doubled; the United Kingdom's have gone up by about a quarter and the United States by less than one-fifth. It may be said that there have been special circumstances favourable to Western Germany. Their labour force has gone up by 15 per cent., against an increase of 4 per cent. in the United Kingdom and 9 per cent. in the United States. They have had a very low defence expenditure and they have had far less to spend on foreign aid and less internal debt. Germany had the advantage of having had her industries re-equipped after the war starting from scratch.
Nevertheless, I fully accept that these figures must not be burked, but that they must be faced. We must do better than we are now doing. However, these figures do not sustain any of the rest of the Opposition's case. The German performance is not due to centralised planning. They have had high profits and wage increases have lagged behind 58 increases in productivity. They have had lower rates of taxation on initiative and enterprise. They have been a free enterprise economy controlled by monetary and fiscal methods. So, when the German example is trotted out as an argument against the Government's policies, it does not make sense.
§ Mr. Lloyd
I gave some reasons why Germany has been in a better position, but to suggest that we should abandon our present policies because they have not yet done so well as Germany's, starting on a very different basic position, is wrong. The right hon. Gentleman is addicted to planning and he says the solution of all this is to have more Government planning. We plan for the public sector; why do we not plan for the private sector? I think that conveys a completely false impression that planning is a substitute for action. He says that once we have the plan then everything is all right.
There is, in fact, a good deal of planning by the Government—by public expenditure, by investment in the public sector, by defence commitments, and the like. Therefore, it is not a choice between total planning and total laissez-faire. To suggest that the Government are running a laissez-faire economy at present is just plain nonsense—but I think that the right hon. Gentleman really does believe that the gentleman in Whitehall knows best and that once we can get Government planning for each industry—for production, for growth, for consumption, for investment—if only we can get the Government producing national plans for all those things all will be well. I myself do not believe that any such plans have the slightest chance of being carried out unless there is complete direction of labour and of consumption, with the lack of liberty that that involves.
The right hon. Gentleman talks about import restrictions as though the way for us to get out of our present difficulties was to restrict imports. The fact is what we are trying to persuade every other country to let our exports go into those countries, and one of our reasons for liberalising our 59 policy in regard to the United States of America was in order to help to keep the United States system as liberal as possible; and, by and large, the Americans have not taken refuge in protective measures to meet their balance of payments difficulties. I think that for us to clamp on a whole lot of import restrictions would be contrary to the whole trend of the policy which I really did think had had the support of all quarters of the House over the past nine years.
The next thing in the right hon. Gentleman's mind is, of course, building licensing. [HON. MEMBERS: "He never mentioned it."] Do I understand that the right hon. Gentleman has abandoned his desire to have building licensing? I am delighted to hear that it is given up and is no longer part of the Opposition's case, because we think that the more we get into that kind of control the more certain we are to end in price fixing, rationing and controls.
Having said that, I believe that it is necessary to try to improve our techniques of planning in the public sector. [Interruption.] The plans made in the public sector are not always quite right. We have to try to improve our techniques of planning in the public sector, and I would go so far with the right hon. Gentleman as to say that we are considering whether there are ways of improving our knowledge of what is being planned in the private sector. There is a considerable element of knowledge there, but I am not satisfied that it is complete enough. Quite frankly, I disagree with the right hon. Gentleman when he says that we should have one plan, because if we have one single plan it is almost certain to be wrong, and it is probably much better that people should make slightly different estimates of the position—
§ Mr. Lloyd
I am not at all certain that they should make the same assumptions. One knows very well that with a long series of assumptions frequently most of them are wrong. I believe that 60 the right hon. Gentleman knows this quite well, because during his period of office there was never a time when so many plans were so wrong. [Interruption.] There were those Economic Surveys. Hon. Members opposite should read again some of those Economic Surveys and their forecasts.
The right hon. Gentleman tries to make out that we on this side really do not want expansion. We know quite well, of course, that we have to have expansion if there is to be an expanding standard of living. We must have expansion if we are to fulfil our tasks overseas and to carry out world commitments. I said the other day that I believe it to be well within our power to expand at the rate of 3 per cent. per annum over the next five years, but to do this our exports will have to rise at approximately double that rate.
I must say that about the only thing I liked about the Opposition's Motion was that in dealing with these matters they did seem to put them in the right order. The words used are.
… secure an adequate expansion of exports and a steadily expanding production …Those are the words used in the Motion, but I did not quite get the impression from the right hon. Gentleman's speech that those were his priorities. I agree that it is very important indeed to get adequate expansion of exports, and then we get an expansion at home—
§ Mr. Harold Wilson (Huyton)
As the right hon. and learned Gentleman knows, those were our priorities when we were the Government, but they have not been the priorities of the present Government, other than at or about any election time—which is why we are in this mess. However, since the Chancellor has now, after ten years, come to that brilliant idea of a 3 per cent. per annum increase in production—-which is more than we did under the Prime Minister when he was Chancellor—will he tell us whether he means 3 per cent. compound interest or 3 per cent. simple interest? It make rather a difference.
§ Mr. Lloyd
I mean an increase of 3 per cent. per year—an increase of 3 per cent. on the previous year.
I was dealing with the question of exports. There, the Government's rô le 61 is limited. Successful exporting must depend upon the goods being of the right price and quality, upon delivery dates and, not least, upon salesmanship. The Government can help or the Government can hinder—but they cannot decree. We cannot pass Acts of Parliament to say that someone will buy our goods. We cannot decree sales, or decree that part of our production will be exported.
There are, however, certain things that the Government can do. First of all, we have to try to cut down the red tape connected with exporting—the forms to be filled in, and so on. We have done that. We have improved the procedures in that respect in certain particulars since the right hon. Gentleman's day, but if anyone else has any ideas as to what further form-filling can be stopped we are certainly very ready to consider them.
The Government can help over sales promotion overseas; by making a little more money available for trade fairs, and for the assistance given by embassy staffs to sales promotion. We can avoid irritants to exporters over expenses, and I intend to do what I can to meet reasonable complaints on that score. We can help over credit arrangements. The President of the Board of Trade announced on 20th October some new arrangements for credit insurance, and the question of finance for exports is also very much in our minds.
The Bank of England is today announcing arrangements, which have been concluded in the first instance with the London Clearing and Scottish Banks but may in due course be of more general application, designed to facilitate provision of medium-term finance for exports. The banks stand ready to refinance a substantial proportion of medium-term export credits supplied by the banking system, and this will help to maintain the flow of credit for this most important purpose.
I appreciate that this leaves over the question of the availability of longer-term credit for exports. This is not a simple matter. It is not in our interests to give longer credit terms generally so that we stand out of our money for a longer time. Our balance of payments problems can be solved only by our selling more of our goods and services over- 62 seas and receiving prompt payment for them. It is quite contrary to our interests to get caught up in a race to give longer and longer credits, particularly on artificial terms.
There are, however, genuine problems affecting the supply of credit for certain limited classes of exports—such as major installations—in particular markets, and we have under consideration, therefore, both the adequacy of our credit facilities to meet these problems and also the terms and conditions of the services provided by E.C.G.D. In addition to these specific ways in which the Government can help over exports, we can, of course, try to create the right conditions at home—the absence of inflation and the competitiveness of the economy.
The right hon. Gentleman dealt, as the Motion deals, with balance of payments. He spoke about the size of the import bill, and about how wrong we have been to allow in manufactured goods and so on. If he looks at the figures—I will not go into them at length—he will see that a very large proportion of the imports consisted of raw materials and semifinished goods. The increases in food, beverages, tobacco were very small. Even in the field of finished manufactures, consumer goods accounted for only about one-third of what was imported—[HON. MEMBERS: "Quite a lot."]—£55 million being the rate. My point is that we are asking other people to buy our manufactured goods.
The right hon. Gentleman referred to avoiding both despondency and complacency. I agree that we have to steer between the Scylla of despondency and the Charybdis of complacency. The year 1960 was a poor one for the balance of payments, but I say that already the Opposition ship is firmly aground on the rock of despondency, as shown by the use of such words asdeep concern at the present grave balance of payments positionin the Motion. Such words go far beyond what is justified. They give a misleading impression both at home and abroad of the true nature of our position.
Our gold and dollar reserves stand at the relatively respectable figure of £1,150 million. I have already referred to our drawing rights on the International Monetary Fund, which we have substantially reinforced during the last 63 two years. We are still building up, by our overseas investment, the balance of our long-term assets overseas. No mention has been made by the right hon. Gentleman today of the fact that our net investment overseas has been £2,000 million over the last nine years. Sterling has remained strong throughout 1960, which was a year of considerable international difficulty. We have been able to maintain the system of freely moving trade and payments, which is the cornerstone of our policies.
It looks as if 1961 will be a better year than 1960, but I fully agree that we have a long way still to go before the balance of payments is satisfactory. I am dealing with the balance of payments problem.
§ Mr. H. Wilsonrose —
§ Mr. Lloyd
I must finish.
I return to the relative merits of the Motion and Amendment. I think the general view will be that the Government's Amendment is a much fairer statement of the position. It refers to the high level of employment, the high level of consumption, the substantial improvement in the investment position. Our investment is running at a high level. There is the fact, for example, that in private manufacturing industry investment has gone up during 1960 by 24 per cent. It is estimated that in 1961 it will go up by a further 30 per cent. That is described by the Opposition as "stagnation". We have strengthened the position of this country over the last nine years.
The greatest danger facing us at the present time is the possibility that attempts will be made to solve this balance of payments problem through international restrictions and protective measures. We recognise our commitments at home and abroad and the importance of fulfilling them if conditions permit. I have stated the blunt fact—I have stated it over and over again—that we shall not succeed without a greater effort to sell overseas. We shall do everything possible to help, everything possible, appropriate and reasonable to help our exporters in the task which they have to attempt to fulfil. That is the position. We have taken certain practical measures to help our exporters.
64 We have done all we can to try to bring home to them and the House the importance of the situation in which we find ourselves.
§ 4.55 p.m.
§ Mr. Anthony Crosland (Grimsby)
I think it is probably the case that even a large number of Members opposite were extremely disappointed at the speech to which we have just listened. This is the first time that the House has had a major economic debate for some months about a situation which is causing increasing anxiety in the country. I think it is true to say that not only hon. Members on this side of the House but the whole country was looking to the Chancellor this afternoon for some lead and some policy for relieving the situation.
Despite the cliche-ridden tenor of the right hon. and learned Gentleman's recent speeches, there have been rumours that in private he himself was disturbed by the country's recent performance and that he had some definite view about the situation. Nothing of that came through whatsoever this afternoon. If I may say so, it was a debating speech in the worst and not the best sense of the term.
We were told in all seriousness that production and exports and so on were up last year over the year before. So they should be. They should automatically be up over the year before as they are in every other country. If he is going to make comparisons with Germany and other countries he must recognise that our performance is extremely poor. After a brief section of his speech setting out the comparison he instantly went on to make excuses and find scapegoats; but a large number of the excuses were completely inaccurate.
For example, take the case of Germany. He said that Germany has succeeded because it has a dynamic free-enterprise economy and no economic controls. But, in fact, the total of direct and indirect taxation is higher in Germany than in Britain. Wages have gone up faster in Germany than in Britain. Moreover, it is quite untrue to say that in Germany there is no Government intervention or planning. On the contrary, the German Government often intervened much more toughly than our own; for example, there is much more 65 planned co-ordination of road and rail. So much of what the right hon. and learned Gentleman said was inaccurate.
Moreover, it is quite wrong simply to take a comparison with Germany and not to mention other countries. The truth is, as my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) has said, it is not Germany which is the exception; it is Britain which is the exception. In other words, the comparison which is valid is not one between Britain and Germany but one between Britain and all the other countries of the Six, not to mention Japan, not to mention the Communist bloc, not to mention countries elsewhere.
I really must say that a speech of that sort in this pressing situation, which gave no lead of any kind and took no view of the situation, which simply offered a few utterly minor items such as cutting red tape and giving additional export credits to South America and the rest, was thoroughly deplorable and a wholly disappointing performance. If one wants to try to make a serious contribution to this debate one simply cannot follow the Chancellor because he made no serious points of any kind.
I should like to try to consider rather seriously some of the things which we have got to do in this country because there is no getting away from this depressing international comparison. The first thing I should like to comment on is the taxation point, mentioned by my right hon. Friend the Member for Battersea, North (Mr. Jay) in his speech, and indirectly by the Chancellor. A great deal of nonsense is currently being talked—I regret to say, by an hon. Friend of mine on this side of the House as well—about the incidence of Surtax and about the vital effect it has on our export performance. It seems to me quite untrue to suppose that those people who are in the lower ranges of Surtax, that is, junior and middle management, are responsible for the slow rate of economic growth. Of course they are not. It is the people in the top brackets of Surtax who are responsible and not those in the loweT brackets.
What we have to explain if we are considering the impact of taxation is why it is—as many hon. Members know from personal experience, and as we can read 66 in the latest report of the National Institutes—that a high proportion of top managements—not people in the lower Surtax brackets but people in the upper ranges—relative to their competitors abroad are uninterested in introducing new products, belittle market research, are slow to find new markets abroad, will not exhibit at trade fairs, even those organised by the President of the Board of Trade, and generally take a somewhat undynamic attitude towards exports in particular. That is the problem which has to be explained. There is no evidence that that situation is to be attributed to the fact that Surtax starts at £2,000 a year and not at £6,000 a year. Indeed, that scarcely comes into the picture at all.
Moreover, I would say to the Chancellor that if, as many people suspect, he is seriously considering a considerable Surtax reduction in the Budget, coming on top of the increase in National Health Service charges, he must bear in mind that if this process is going on a great number of people in the country will begin to think more and more that the distribution of sacrifices and rewards is becoming exceedingly unjust. If the Chancellor allows this impression to grow and become more widespread, it will not be good for social harmony in the country and in industry, and if it is not good for harmony, it is not in the long run good for efficiency and growth.
§ Mr. E. H. C. Leather (Somerset, North)
Is it not a fact that at the £2,000-£5,000 a year level a German export manager or director who does additional work and earns an additional £2,000-£5,000 a year is left with many times more money in his pocket than his English counterpart is? Is that not a fact, and is the hon. Gentleman really saying that that has no effect whatsoever on incentives?
§ Mr. Crosland
I am simply saying that the people with whom one is concerned when discussing the lower ranges of Surtax are not those whose decisions fundamentally determine whether our growth is slow or rapid. In other words, one is talking about people in the lower and middle, not the top, managerial positions.
§ Mr. Crosland
What the hon. Gentleman suggested is no doubt factually correct. I am simply saying that that cannot possibly be a main explanation, and I am fortified in saying that by a report of good judgment which has previously been praised in this House. It is the P.E.P. Report on Economic Growth in England, which takes the same view as I do of taxation as a whole. It says:There appears to be no good ground for accepting the allegation that public spending financed by a high level of taxation has in itself a built-in tendency to harm production.The Report goes on:If the onus of proof lies on those"—as it certainly does—who call for a reduction in the total of taxation, it must be concluded that their case fails for lack of sufficient evidence of the evils they allege.That sums it up very clearly.
I should like to turn to one or two of the positive things that we ought to consider doing in this country, and a discussion of which should have formed the main part of the Chancellor's speech. First of all, I take it that almost all hon. Members would agree even today, after some improvement in the last few years—not very much—that we still want higher investment in this country. I should very much have liked to have heard the Chancellor's view—whether he agrees with this and how much more investment he thinks we need. Probably most of us do not to the same extent as we did a few years ago treat investment as being the panacea for all problems of slow growth, because we find not only in this country but also in other countries that the link between investment and the rate of growth is not quite as close as many of us thought it was in the past.
We have had a good deal of investment per head of population in this country in the last few years, but without any increase in the rate of growth of productivity. As has been pointed out recently, a striking case is Norway, which has the highest investment ratio in the world and yet only a moderate rate of growth of output. Despite that, almost everybody would agree that we still want some increase in investment in this country. I should have liked to have heard the Chancellor on this subject. Does he agree that we should have more investment? Has he any figure in mind? He 68 gave the present figure of investment in this country as about 16 per cent. of the gross national product. Does he think that the right target to aim at is to push it up to 20 per cent.? This is the kind of objective, which the Government ought to have, about which we wanted to know.
The next matter that I want to discuss briefly is the question of the general technical dynamism of the economy. It is clear that the behaviour of the business community generally in Britain is not as dynamic as it is in some of our competitor countries. The question is what the Government can do about this. Some people think the Government can do nothing. They think it is due—and I think there is a lot in this—to basic social factors and some basic lassitude or lethargy which has overtaken the whole country and is not under the Government's control.
However, there are some things which the Government can do, and I should like to mention one. They can foster an increase—a large increase—-in the extent of competitive pressure to which British businessmen are subjected. There are several ways in which this can be done, most of them falling under the responsibility of the President of the Board of Trade rather than the Chancellor of the Exchequer. By far the most effective way would simply be to go into Europe. The strongest economic argument for going into Europe is the breath of very competitive, cold air, which would blow around a lot of ears in this country.
On the home front there is one action which the President of the Board of Trade can take, and that is the abolition of resale price maintenance. He has a committee sitting on the subject. I am aware that he is being subjected, and will be subjected, to very strong pressure by interests on the other side. I find that a great many of the Questions that he is being asked about housewives' organisations and what they are saying have a rather ominous ring. However, I hope he will be firm against the pressure groups on the other side, and that when the committee has reported he will grasp this nettle, which the Labour Government was going to grasp—my right hon. Friend the Member for Huyton (Mr. H. Wilson) will remember this—the year after they fell from office in 1951.
69 There is another thing which has to be done in this field, and here I very much agree with my right hon. Friend the Member for Battersea, North. We must look again at our monopolies legislation as opposed to our restrictive practices legislation. Looking back over the legislation of this kind—that means looking back thirteen years now—we can probably say that those of us who at the start—there were many on this side of the House—said that this piecemeal way of going about it was wrong and that we should go about it more in the American manner, have been proved incorrect so far as restrictive practices are concerned. That side of the legislation has worked astonishingly well, much better than many people expected. On the other hand, we have been proved right so far as the monopoly, merger or trust side of the legislation is concerned. We are faced with a situation now which is utterly out of the control of the Monopolies Commission. The way in which the Commission now works is simply neither here nor there in relation to the problem with which we are faced. It is not only a problem of growing numbers of mergers.
It is the problem of the type of merger which is now going on, the type of take-over bid which is now going on. When take-over bids began to come along on a very rapid scale some six or seven years ago, as a result of the policy of freeing dividends, or partly in consequence of that policy, they were always defended—and this was a powerful argument—in the following terms. It was said that normally a take-over bid was a bid for assets which were being underemployed but could be more productively employed and that in consequence of the bid the assets would be more productively employed. Even though we objected to the tax-free capital gains associated with take-over bids, nevertheless the result economically was an improvement in efficiency. One had constantly to concede that argument.
But the type of take-over bid seen now is not of that character. More frequently, the object is not to find assets which are being incompetently used and to use them more productively but to find assets which are being productively used and compete heavily with one's own firm and to stop them being used thereafter. This is what we are faced with 70 now in the case of the bid for Odhams Press. This is the irony of the bid for Odhams Press. It is not because the Odhams Press assets are inefficiently employed but because they represent a strong threat to the Daily Mirror magazine assets. That is the logic and motive behind Mr. King's bid for Odhams Press. In this situation I believe that, in the end, we shall probably have to have something at any rate like the American system of having a permanent, quasi-judicial body of some kind, simply given—as my right hon. Friend the Member for Battersea, North suggested—the task of watching mergers and considering whether or not they are in the public interest.
I now want to say something about the balance of payments. The biggest single reason why our economy does not grow properly is because, every time it starts to grow, an alarmed Government stops it because it is nervous about our balance of payments. It grows by fits and starts. It is an extremely difficult problem and nobody has suggested the ideal answer.
There are two aspects to the problem. One is that there may be a run on sterling and a rapid outflow of short-term capital, and so a serious pressure on the reserves. That is what the National Institute fears will happen, though too pessimistically, I believe, in 1961. In the end there are only two alternatives in this situation.
All this difficulty stems from the fact that relative to our liabilities, and while sterling is an international reserve currency, our reserves are still too low. There are two ways out to consider. The first is that we should not go on allowing sterling to be used as an international reserve currency, but I believe that that would be a wrong decision. The other alternative is that if we are to go on with sterling as a world reserve currency then we must have, in the short run and not in the long run, the major reform of the International Monetary Fund which is being increasingly discussed.
It is not simply a question of sterling—luckily for us—but also involves the dollar. One cannot pick two single currencies and use them alone as world reserve currencies, given the present amount of gold. I hope that the Chancellor will go on pressing as hard as he can for some such reform.
71 Even with such a reform, one must still worry that our actual current balance is in deficit, and looks like being in deficit throughout 1961. In the end the only thing the Government will be able to do to solve this problem is to reverse their priorities. At the moment we are in a vicious circle. Because we have a slow rate of growth of productivity, our goods are less competitive than they should be, and therefore the balance of payments is worse than it should be. Then the Government get alarmed, cut home demand and investment, and this slows down the rate of growth still further. So we go round in a vicious circle.
We shall never solve the problem by periodic cuts in home demand and investment at the same time as our economy is growing less rapidly than economies abroad. If we go on doing this—and this is the logic behind the National Institute's suggestion—the Government will be driven to devaluation, whether they like it or not. If our rate of growth of productivity is badly out of alignment compared with our main competitors, in the end the rate of exchange will have to be realigned if our goods are to remain competitive. No one wants that.
The Government must therefore reverse their priorities, and acknowledge that the only guarantee, in the long run, of a strong balance of payments is a rapid rate of growth. All the countries which have grown most rapidly in the 1950s now have the strongest payments positions, and those which have grown slowly now have the weakest payments positions.
§ Mr. C. Osborne
Since the heart of the Motion is the Opposition's claim that the Government have not done enough to expand exports, will the hon. Gentleman say what the Government should do to make the foreigners buy British if they want, instead, to buy goods made in their own countries?
§ Mr. Crosland
By making the right goods, at the right prices and of the right quality, and by trying to sell them.
The last point I want to discuss is this. The Chancellor poured a great deal of scorn on Members on this side of the House. He said that they wanted 72 more planning, did not know what planning was, and so on. I want to consider what we mean when we say that we want more planning. This is not a very original demand these days, and it is not put only from our side. Mr. Lionel Fraser, Sir Hugh Beaver and other respectable figures in the City are asking for the same.
What does Sir Hugh Beaver want? He cannot be knocked down by the Chancellor as a Socialist crank. What he and others are asking for are three things. The first thing is that the Government should define the target for growth over the next five or ten years; secondly, the Government, in the public sector of industry, should plan and co-ordinate investment in a way that fits in with the target; thirdly, the implications of this target and of investment planning in the public sector should be discussed with private industry so that it can plan its own investment programmes more rationally.
That is what Sir Hugh Beaver, Mr. Fraser and others like them want. There is nothing impossible about it. The most difficult part is to get effective planning in the public sector. We have very little planning in that sector-merely constant ups and downs in investment in every nationalised industry. That is due partly to political reasons and partly to the balance of payments crises, but, in general, there is very little rational planning of the public sector as a whole.
There should be a great deal more of it. Part of it would certainly spill into the private sector and make it easier for private industry to make its own investment decisions rationally. But we shall not get this ideal unless the Chancellor strengthens his own planning staff.
I should like to pay tribute to Sir Robert Hall, the retiring Economic Adviser to the Government over ten of the most difficult years anybody could have had. He has shown constant sagacity and good judgment, not to mention good temper and other personal qualities. I am extremely sorry, for the country's sake, that he is going.
However, Professor Cairncross is coming in. I hope that the Chancellor will use this change as an opportunity to look at the size of the Economic Section. I am convinced that, even if it 73 were only a question of the more efficient planning of the public sector, the Economic Section is probably not large enough at the senior level. More senior planners are needed in the Treasury. Large numbers of individual economic decisions are getting by at the moment without ever being checked from the economic planning point of view.
I hope that the Chancellor—indeed, he may have done it already—will look into the whole question of the size of his planning staff, and decide whether or not it is sufficient.
The trouble is, however, that one can propose all these remedies but none of them will be the slightest use unless the Government really wants the country's economy to expand. I sense, particularly after the Chancellor's speech—and after his previous speeches—that at the moment there is no drive for economic growth or expansion but, instead, a kind of complacent looking for scapegoats, finding excuses, passing-the-buck, transferring the blame attitude. It is hard to think that we shall get the kind of dynamic expansion that we need as long as all we have on the Treasury Bench is a row of figures who look so utterly bored and satisfied with the way things are now going.
§ 5.10 p.m.
§ Captain Walter Elliot (Carshalton)
I ask for the indulgence of the House on this my first contribution to debate. If hon. Members are kind enough to grant it, they will certainly assist me during the next ten minutes or so. What is more, the business of the House may be expedited.
I followed the speech of the hon. Member for Grimsby (Mr. Crosland) with the greatest interest. I hope he will not think me discourteous if I leave the many important points he raised to be dealt with by hon. Members much more experienced than I. I want to talk about the human element in our economy, those who with their heads and hands produce the goods. We all know that scientific knowledge, capital, brains and skill are vital, but they are not enough to maintain the prosperity of our country and make it go forward with the speed at which we want it to go. There must be the will and the effort as well. It is at this point that there is so much criticism It is said that we lack 74 aggressive salesmanship, that we do not invest enough, or that we do not invent enough. Delivery dates, for a variety of reasons, may be late, and so on. All this is just a symptom of the disease. The disease itself is the lack of will and effort.
The best example I know of what can be done was the effort made by the people of this country during the early years of the last war. In the words of one who used to be a Member of the House of Commons, "They burned the bloom off their cheeks, but they delivered the goods". In more ordinary language, they raised their output per man-hour by 40 per cent. on pre-war figures and with much the same tools. The problem is how to imbue people with the will to make the effort to achieve that sort of result. In wartime, the common purpose which unites the community is obvious. It is survival. In peacetime, although the common purpose is also survival—the world does not owe these crowded islands a living—it is much more difficult to persuade men and women that this is so.
I believe that we must begin by getting straight the human, day-to-day relations between all those who work together. My short experience in industry has shown me that, although many people are aware of this need, they are indifferent to it. Since I became a Member of the House, I have attended two talks to discuss a document known as the British Charter of Industrial Relations, produced by British manufacturers. The first talk was given by a well-known man, the head of an employers' organisation. He did not like the paper at all Paragraph 8 of it reads:Possible effects on all persons employed should be fully considered before any decision involving them is made.I do not like the wording of that very much myself, but the meaning is crystal-clear. The speaker picked out that paragraph for comment, and his comments were such that he was told from the body of the room that he need not be rude. Many people, including, perhaps, some hon. Members here, might say that that his comments were all one would expect from a wicked employer. The next week, however, a well-known trade union leader gave a talk on the same document, and he said much the same thing.
The main criticism was that the document was far too woolly. But the truth 75 is that, although we can produce blueprints for a machine or a factory, we cannot blueprint our working relations. There are far too many intangibles.
I am struck by the sense of loyalty of trade union members to their unions in industry. If necessary, they will sacrifice much for leaders in whom they have confidence. If the leaders of our industrial organisations could make their leadership understood, they also would command the same loyalty. It is asking a lot, but if that loyalty were given, and given without the certainty of permanent employment at the same firm or in the same place for all workers, which may be impossible because of economic change, then the economy of this country would be based on human relations in keeping with its problems.
In The Times some time ago there was a letter asking that men from the Services when applying for a job should refrain from giving as a qualification that they were "used to dealing with men". The writer added,This is one thing we do not want. The trade unions do all that.How wrong that view is. I am sure that it is the duty of employers to explain to their workers at all levels the problems and relationships between job, firm and society. The task will be bedevilled by many historical issues and it will take time, but. basically, it is not difficult. This is so because the ordinary Briton is reasonable and tolerant.
We tend to forget that human relations in industry cover more than wages and welfare, important though these are. There are many other factors involved. I know that there are many experienced hon. Members here who know much more about these matters than I do, but, if they will bear with me, I will give one or two examples to carry on my argument.
A man working in a firm has several conflicting loyalties—to his family, to his union, if he is a member, and to the firm. The difference between a man on the floor and a man in administration must be appreciated. Sometimes, routines are changed regardless of social effects. A change of machinery may remove from a man the right to exercise his initiative. This alters the relationship 76 between supervisor and worker. Above all, a man needs to be told what is going to be done and why it is going to be done. And if frank, straightforward explanations are given, the response is sometimes astonishing.
We have heard a great deal about take-over bids recently and today. The economic reasons for most of them are very good, and so are the reasons for keeping negotiations secret until the deal is completed. But, from the point of view of the man working in an organisation, we cannot expect him to identify himself fully with it if, after years of good service, he wakes up one morning and reads in the newspaper that his firm belongs to somebody else. This reacts also on many other firms outside the actual take-over. If we can get the human relations right in the economic life of the country—and it can be done—we shall once again have that vital sense of common purpose.
But we still must inspire the effort. This is not only, or even primarily, a matter of working harder. It means also the taking of risks and the need to create. The motives which inspire people to do these things vary. It may be a desire to contribute to national or international welfare, or to achieve eminence in a profession. Probably, most of us are influenced by professional or public interest in the jobs we do. But there are many fields of work which are not particularly attractive and which do not arouse very much, if any, public interest. Also, they may entail hard work, the overcoming of many difficulties and the taking of risks. The result may be nothing but a small contribution to the material welfare of the country.
Although these fields of work are less attractive, it is highly important that they should have their share of talent and effort. Since the glamour is lacking, other forces must be called in to redress the balance. Why not relate the material reward to the contribution made to the material welfare? There is no doubt that most people like to make money. And the reasons for this are by no means always selfish. It may be to give their families a better living, wider activities, and so on, but, whatever it is, the influence of money cannot be ignored, and the duller the work being done the more 77 important it is that this material self-interest should be harnessed. I have not time to deal with all the levels of working people and how they should be inspired to greater efforts, and I will turn to my last point.
There is, I know, some controversy over this. It has been mentioned this afternoon, but I shall try to put it in a non-controversial way. For many years there has been a steady pressure in this country to reduce the extremes of wealth and poverty, and most people will agree that it is very necessary. I think that we would also agree that there is a point beyond which this process should not go. The argument is mainly where this point should be. The difficulty is to arrest the process, because there will always be more poor voters than rich ones, even if the word "poor" can only be used in a relative sense.
At the present 'time the salary brackets are high of those men who are capable of pioneering an industry, who will take risks, and who will innovate, and I am not thinking entirely of the very top people. I am sure that high tax rates blunt their willingness to make that extra effort. What is just as important is that it deters people from moving freely from one job to another, particularly when they have to change their homes.
I have said that the British people are both reasonable and tolerant. I do not believe that they cut off their noses to spite their faces. If they can be brought to realise that the lack of opportunity and reward for great talent is depriving them of the efforts of men who are to a large extent responsible for raising their standards of living, I am sure that they would be glad to see measures taken to reward these people.
If we get our human relations right and so achieve a common purpose, and then, by proper rewards, particularly in humdrum fields, inspire our people to greater efforts, we need no longer look anxiously at our trade balance or our stock of gold. Those things will look after themselves.
§ 5.33 p.m.
§ Mr. J. Grimond (Orkney and Shetland)
It is my pleasant task to congratulate the hon. and gallant Member for Carshalton (Captain W. Elliot) on behalf of the whole House on a most delightful and very interesting maiden 78 speech, and to tell him that on this and other subjects the House will look forward to hearing him again.
There are many grounds for congratulating the hon. and gallant Member. One is that it is always pleasant to hear a new voice in an economic debate. The old gramophones speak all too frequently. It is also rather pleasant to have someone talking from practical experience. I understand that he not only had a distinguished career in the Navy, but that he has been an engineering employer in John Brown's Shipyard and, therefore, knows something of these personal relations about which he spoke.
The hon. and gallant Member is an international Rugger player and a naval boxing champion. In fact, I think we might dispose of the services in one rô le of the hon. and gallant Member for Knutsford (Sir W. Bromley-Davenport), the hon. Member for St. Marylebone (Sir W. Wakefield), the hon. and gallant Member for Croydon, North-East (Vice-Admiral Hughes Hallett), and probably the hon. Lady the Member for Tyne-mouth (Dame Irene Ward). We have someone who no one in this House can rival in the variety of his experience, and I think that the House enjoyed his maiden speech a great deal.
I must give the hon. and gallant Gentleman a brief warning. He should watch carefully what happened to his predecessor. His predecessor was suddenly lifted to another place and we lost him forever. Many of us look back on that with some sorrow, because he was a much respected Member of the House and contributed a great deal of independent thought to our debates. If in future debates the hon. and gallant Gentleman finds that he is more able to be controversial, and becomes controversial about his own Front Bench, he should watch the activities of his Whips with particular care. The Conservative Party is very much more successful in running party affairs than in running the economy of this country.
I share the opinion that the speech of the Chancellor of the Exchequer was a grave disappointment. It seemed to me to confirm all the worst fears expressed not only by the Labour Party, by the Liberal Party, and by some sections of the Conservative Party, but expressed fairly forcibly this morning by The Times, 79 which referred to the terms of the Government Amendment as courageous, I think in inverted commas, and pointed out that the rate of economic expansion in Britain in the last nine or ten years had been less than that in many other countries, including Britain's European neighbours. This is well known. What did we get from the Chancellor of the Exchequer? We got many of the passages to which we have become all too accustomed in economic speeches.
To begin with, the Government have been in office for ten years—they did not start yesterday—yet during those ten years they have taken practically no steps to right the fundamental imbalance of our economy.
§ Mr. Grimond
That is true. We might have expected countries like Germany and Japan to make a great increase in their exports in the years immediately following the war, but fifteen years have gone by and production and the share of world exports of this country is steadily falling while that of Germany and Japan is steadily rising.
We have had today the bromides to which we are accustomed. The strange thing is that bromides from America ceased last week. Bromides in this country are going to be more noticeable in future than they have been over the last four years. We have had no proposals for improving the situation. The right hon. Gentleman said that there was some need for proper planning control in the public sector. I listened carefully to hear what this was, but there was no indication as all. The export position is worsening, and there were indications of a minor sort of what might be done to help the rather serious position.
The right hon. Gentleman then referred to the need for competitiveness at home. He did not say whether he would make changes in the Restrictive Practices Court or the Monopolies Commission. There is a good deal of evidence that the effect of having a rather effective law relating to restrictive practices with no equivalent monopolies law is leading to an increase in monopolies—and not always of a desirable sort.
80 We then had the selected statistics. It is true that up to the Spring of last year there had been an increase in production. We were not told that it had stopped, although it had, and that European countries were continuing to increase their production. Everybody knows that what is wrong is that expansion is too slow. It has stopped almost entirely since last Spring. Productivity is too low, and investment of all kinds is far below what it ought to be.
The Chancellor referred to education. Is he really saying that he is proud of the Government's record over university education? They have produced a scheme after ten years. The right hon. Gentleman ought to go to Canada or Russia, or the United States of America. There are 20,000 students in Toronto University, and, in spite of that it is building a new university. Birmingham has 6,000 students, yet we claim to be one of the richest countries in the world.
We have the worst balance of payments position since 1951, and exports are probably worse than they appear to be because, I understand, the Government include in the exports statistics goods which are sent abroad but which have not been paid for. It would be interesting to hear how they would show these goods if they were never paid for. In some cases, there is doubt whether they ever will be. We have recurrent bouts of deflation which almost completely stop our production.
The final indictment against the Government is that over ten years they have learnt no lessons and given no leadership. What are the lessons to be learnt? The first is that economic health is indivisible. It is very noticeable, from recent reports, that where production as a whole rises productivity per man also rises; we do not get one without the other; exports rise, reserves rise, and, on the whole, investment also goes up. If we look at the situation in the European countries, we see that this is borne out in all the countries in the Common Market. We also find that two of the oldest British economic saws are exploded. The first saw is that a flourishing home market is a handicap to our export trade. On the contrary, an expanding and competitive home market is almost certainly an asset to the export trade. The second saw is that if exports 81 rise it is inevitable that imports will rise further and faster. This has not happened in many countries during the last four or five years.
The second lesson to be learnt is that big units are, generally speaking, essential to modern industry. But if these are not to lead to a monopoly there must be a big market.
These two lessons lead straight to the need to negotiate our entry into the Common market and to continue to reduce our tariffs. The terms of joining the Common Market should be a great deal more favourable now than they will be in a year or two, and unless we do join we will face increased United States investment in Europe. We should bear in mind the fact that although Europe is not our largest export market it is the only one which is expanding.
The third lesson is that if we want an expanding market—and this is a fundamental question which the Government must answer, and we have not yet had a clear answer—we can get it only if we have an expanding labour force, or expanding productivity per man, or both. The latest inquiries show that there is spare capacity in this country, especially in engineering.
§ Sir Harmar Nicholls (Peterborough)
Is the hon. Member suggesting that we should have joined the Common Market on the terms put up at the time we were negotiating?
§ Mr. Grimond
At one time we were the dominant country in Europe. Every country which went into the Common Market negotiated its entry, and we were once in the strongest position of any country to negotiate our entry into the Common Market on terms favourable to ourselves and the Commonwealth. The chance has not completely disappeared, but the position is getting much more difficult.
One survey shows that about 67 per cent. of engineering firms of whom inquiries were made said that they had spare capacity. Incidentally, not only must we aim at higher productivity; those who want severely to curtail or to stop immigration into this country should look at the situation in Western Germany,where one force making for expansion has been immigration from Eastern Germany.
82 In dealing with the question of productivity per man, we must take into account the fact that there is probably spare capacity, under-employment of machines and a great deal of hoarding of labour. It is noticeable that after production began to fall the number of people in employment was still rising in certain industries. The lesson to be learnt from this is that we must adjust our taxation system in order to make this less profitable. We should also reward enterprise. I accept the arguments put forward by the right hon. Member for Battersea, North (Mr. Jay) and the hon. Member for Grimsby (Mr. Crosland). Overall, there is no direct correlation between the height of taxation or the amount of money taken by public authorities and the amount of effort put into the economy. In Western Germany an extremely high proportion of national income is taken by the public authorities, but there is a high rate of production and productivity.
But it is symptomatic of our outlook on expansion that we maintain Surtax at a rate equivalent to £700 or £800 before the war. I share the view that although this does not affect the top managers in industry it slows down mobility. It is important in the case of the man who is deciding whether it is worth going up the ladder and changing his job or whether it is better to stay in his present job, with his built-in pension rights and everything else.
§ Mr. C. Osborne
The hon. Member has said that those who are concerned about immigration into this country should look at the example of Western Germany. Can he tell me whether the West German Government would accept the Commonwealth flow of immigrants now available?
§ Mr. Grimond
I could not tell the hon. Member, but they accept the flow from East Germany, and nearly every economist says that this is one factor making for expansion in their economy. I agree that it is a difficult question, and that the case of the Commonwealth is somewhat different, but to say absolutely that we should try to keep down the flow of immigrants is of doubtful value in the face of the example of Western Germany.
I now turn to the question of industrial relations, which was the theme of the 83 speech of the hon. and gallant Member for Carshalton. In this country we lost 25 million days in industrial disputes last year, as against 8 million in Western Germany. I know that the number of days lost through the common cold is more serious, but it is not a good advertisement for our industrial relations. It is vital to our economy that we should take the question of co-ownership seriously. I was glad to hear the hon. and gallant Gentleman say that we cannot divorce improved industrial relations from material satisfaction.
Tax inducements can easily be devised to encourage co-ownership. Suggestions to this effect have been put forward by the Liberal Party every year in the finance debate. We have suggested the abolition of the stamp duty on transfers, the alteration of company tax, and other steps. We should not only bring in co-ownership but should encourage better consultation in industry at all levels, and endeavour to make it more of a joint enterprise, instead of a dogfight between labour on one side and owners or managers on the other.
Another lesson to be learned is the growing inadequacy of world reserves. The world it still indirectly attached to gold, but there is not a large enough supply of gold to finance the ever-growing volume of world trade. No country has more to gain than we do from taking up various suggestions relating to the use of the International Monetary Fund as a kind of central bank. In this connection. I would draw the Economic Secretary's attention to the Economic Review of the National Institute of Economic and Social Research, which I suspect has been the background to many of the speeches made today. On page 44 it says:If there were no external payments problem, the British Government could safely encourage a considerably faster rate of domestic economic expansion than in fact seems likely during 1961 … Yet, because of the desire to reduce the risks to the international position of sterling, it is probable that the Government will once again consider it impossible to encourage economic growth … Britain has not yet solved the problem of reconciling a sustained growth of the domestic economy with the need to secure a current surplus adequate to match her long-term investment overseas.It is vital for us to get sterling out of its dilemma, either of stagnation at home 84 or a run on the reserves, and there are various proposals for doing this.
It is no good the Government's clucking round the place with the old exhortations, or having another Budget with a few trimmings off here and a few trimmings on there.
§ Mr. Grimond
I am glad to have the noble Lord's agreement. It is true that every year we find the economy is only a little wrong, and that a 3 per cent. difference here or there would cure it, but the margins are mportant. It is the fact that we are so often out of line which makes the matter serious. The Chancellor must mak2 decisions and follow them up, unless, under Tory rule, we are to slide into the position not merely of a second-class but a third-class industrial country.
When are the Government going to make up their minds about the investment target they are aiming at, and the amount of increased production which is necessary? The Chancellor spoke about an increase of 3 per cent. Let us accept that. How are we going to get it? The first thing is to negotiate our entry into the Common Market. Secondly, we must progressively reduce tariffs and recast our taxation system. We must then get the Government to put their plans to the unions, the employers, and the public. Let them explain that with a little bit of candour; let us have a little bit of panache—if we can raise that on the Treasury Bench—calling for a three-year, five-year or ten-year plan to impress on everyone that at last the Government are going to do something; that they have made up their mind and have some concrete proposals for the next five years to enable us to pursue a stable policy of expansion.
If we could do that and show a surplus instead of being in deficit, we could begin to enthuse the public over what we could achieve in the under-developed countries. We could do something to match the new spirit which is apparent in America and also indeed in Russia. The Government should draw up a budget for more than one year, an economic as opposed to a fiscal budget. I am wondering whether budgeting by the Government comes up to the ideas 85 and standards of private industry. I wonder whether their economic unit can match the task which ought to be done.
Let them get the unions and employers together and try to persuade them to give up their restrictive practices in return for a fair share in the product of industry, a steady increase in the real value of wages and an improved status for the worker. Were I asked what I mean by status, I should say a full right to consultation and a contractual basis of employment wherever possible. Surely we need a compact covering the Government, industry and the public, covering the private and nationalised industry, to raise productivity in return for a fair reward.
Finally, the Government must set their own house in order and resolve that they will not continue to lend long until they can borrow long. Until they have the finances of this country in rather better shape they may have to continue with a system of borrowing short and lending long which, in the long run, will prove disastrous. It will mean making serious proposals to the International Monetary Fund, based on some of the suggestions, to be found either in the Survey or among those put forward by Professor Triffin, for converting sterling and dollar claims held by foreign official holders into deposits at the Fund. If that be felt too revolutionary a step, they should try to set up a central bank in Europe.
These are the steps needed as a preliminary to decisions of the very sort which have been so conspicuously lacking over the past five years, and of which we have seen no shadow this afternoon. The Government must match their words about the importance of international trade and high productivity with some action. They must make good their speeches about interdependence. America looks as though she may be going to get this kind of leadership, but what are we offered in Britain? We are offered an Amendment to a Labour Motion which says:… the improvement in the economic situation of the country since October, 1951, and the present high levels of employment, investment and consumption …are something which this House should unquestionably support.
§ Mr. Grimond
The hon. Gentleman says, "Hear, hear". Does he realise that since 1951 we have had one of the most sluggish economies in the world? Does he realise that we are nowhere near earning the surplus which his own Government say is necessary? Does he realise that if the prognostications of the Home Secretary are to come true we have to pick up the slack?
§ Mr. Osborne
Does the hon. Gentleman realise that since 1951 the average industrial wage has gone up from £8 2s. to £14 3s. 5d. a week, and that is something to be proud of? I say "Hear, hear" to that.
§ Mr. Grimond
And so it should, seeing what the rest of the world has done and the position of this country in it.
I believe that the public reaction to the Government Amendment will be that it is an Amendment of breathtaking smugness. I believe that the public are beginning to see that smugness is the hallmark of this Government. In my view, the Amendment should be rejected for the simple reason that the people of this country want a plan of action and they are being offered a feather pillow.
§ 5.54 p.m.
§ Mr. Maurice Macmillan (Halifax)
It is always a pleasure to follow the hon. Member for Orkney and Shetland (Mr. Grimond), especially on an occasion such as this, when I can agree with a great deal of what he has said; and not least with the congratulations which he extended to my hon. and gallant Friend the Member for Carshalton (Captain W. Elliot) on his sincere and, may I say, well thought out speech. I had not realised how distinguished is my hon. and gallant Friend in how many spheres until the hon. Gentleman reminded us, and I am bound to say that because of some of them I am very glad my hon. and gallant Friend is on this side of the House and not opposing us. I am sure that I am speaking for the whole House when I express the hope that we shall hear my hon. and gallant Friend again when he can be more controversial, if not pugnacious.
In the world as it is, perhaps it is natural that we can find many points on which to criticise a Government who have been so long in office, and I think that 87 those of us who are critical are right to be so. It is also natural that the Government should retort that their power to control events in the economic sphere is very limited; and I agree that they must not act in a way which could succeed only if their power to control events was wider than in fact it is. But that does not mean that they should refrain from taking a positive lead in the sphere where they can control events, however limited it may be. That need for leadership is all the greater because of the narrow margin on which we operate; it is likely to be all the more effective because of that narrow margin, however limited the sphere.
I agree that my right hon. and learned Friend the Chancellor of the Exchequer cannot control events, but this does not absolve him from his responsibility, and I regret that I feel bound to say that the Government are at fault here. I consider that their leadership has been most successful—by a curious paradox—where their ability to control events has been least. There they have been not unsuccessful in influencing and advising. Perhaps it is this very success which they have had which has tempted the Government to try to extend this sort of leadership too far and, to my mind, to neglect their responsibility for leadership within this country and within a sphere where they can control. For I feel that the country and industry has looked in vain for economic leadership from the Government.
Perhaps it is not quite fair to blame it all on to the Government. I could have made the same criticism of many preceding Governments, and, indeed, it may be a criticism which could be made of all politicians, and most other people—that we are reluctant to face the unpleasant facts of life, to realise that we cannot have our cake and eat it and that we cannot spend our money and save it. If I may give a concrete example of where successive Governments' leadership has failed most, it would be in Europe. At one time we could have played the lead on this stage. With the comparative strength and power of the other actors in the situation as it originally was, this rô le would have been natural for us. We lost the chance, not because we were unwilling to assume broad responsibilities in general terms on broad issues and so on, but because the Government failed to con- 88 vince our people at home of the changes needed in the structure of our industry and to inform them of the conditions which might have arisen; they failed to convince our people that we could face these changes successfully.
I think the reason for that failure was that the Government had no clear idea themselves of how to meet such changes or of the ultimate direction in which they wanted to go. Their action over the Cotton Act was a great contrast, perhaps because it was dealing with the Commonwealth and not with Europe. There they accepted the need for a change in the structure of the industry. They refused the easy way out of tariff protection against the cheap imports from Hong Kong, and they acted to help the industry face the change and to reconstruct itself.
I think there is a great lesson there for the future of Europe. I do not go quite so far as the hon. Member for Orkney and Shetland in saying that we should do everything we can to get into the Community now. Now the solution must be a political one, a deal if hon. Members like to call it such. But however successful that deal may be, we shall not be able to take full advantage of it without the sort of leadership the Government have so far failed to give us in the economic sphere.
It is the same in the wider economic issue. We all admit that the major problem is in the external sphere and that its solution will probably have to be a political one. We all know that we have to achieve greater international liquidity, that Germany must take up a more cooperative attitude, and so on. We may argue about the Triffin Plan, the revaluation of currencies in terms of gold and ways of improving this use of the International Monetary Fund, but I think we all agree that we cannot force our views on the world in this way. We can only persuade, influence and bargain. Part of our bargaining may have to include matters a long way outside the direct economic field. Those matters, I agree, are outside the control of the Government. I am very anxious because I feel that the Government are becoming so preoccupied that they are neglecting the spheres where they have power to act and would be unprepared alike for the success and the failure of their bargaining.
89 I do not believe that at this moment we are ready or the Government are ready to face the consequences of whatever success they may achieve in international negotiation even in matters where they have complete control. They are not prepared either for administrative action or fiscal policy. They have the ad hoc skill to manoeuvre, but I do not believe they have the positive approach with a definite idea of what their objective should be. We all accept the need for occasionally turning off the main road and, so to speak, making a detour because of necessity and then coming back when we can to the main road, but this Government are wandering about in the highways and byways and lanes without even knowing where the main road is.
I shall give as an example investment policy. We may well be prepared in the political sphere for the success that the Chancellor mentioned in getting the Germans to take a bigger share in defence costs. We may even achieve something about over-valuation of the mark and German hoarding of reserves. We may bring more investment and help to backward countries on a European basis. We have heard something today about European plans for space research. Very well, I think we may do that, but what is happening now in the administrative field?
We are continuing to encourage too much overseas investment, especially in rich countries. How many hundreds of millions of pounds will the diversification of capital due to the split between the Sixes and Sevens cost us? Is it really necessary for industry to make these great investments in Europe? I do not agree that the tariff situation is bad enough to prevent our industrialists succeeding in exporting to Europe. There is all the advantage of large runs and lower unit costs and the question of the larger value of marginal exports to an expanding industry.
The Government, even if they are trying to do a little, are not giving great leadership in this sphere of investment. I do not think it is so much tariffs which are forcing people into Europe, but the whole apparatus of selling and its integration. The integration of the great European community is not just financially real. Although it is not yet a 90 political integration, it is real in terms of commercial and economic unity. Because industry feels that the Government do not know what they are going to do, and that they cannot or will not do enough it is acting by itself, in default of the administrative action which the Government could take to help exports, and in despair at the niggardly help over credits. I do not altogether agree with the Chancellor that it is necessarily a bad thing to finance exports by extended credits. In every exporting business there is a marginal benefit in export sales at a cost which gives an inadequate return on capital if applied to all sales but which is worth while for extra sales. I should like the Government to examine the whole question of tax relief and tax incentives to exporters, and at least to examine what other countries with whom we seek to compete are doing in this sphere.
I have frequently wearied the House with my detailed views on how to encourage saving and investment. I shall doubtless do so on future occasions, but not—I am happy to tell you Mr. Speaker—today, especially as most of them are contained in a little pamphlet which I hope the Chancellor will eventually add to the growing pile in his suggestion box.
Broadly, those views are based on the belief that there is a need for more voluntary savings both to combat inflation and to aid growth through investment, and that there is an unused capacity to save and invest which has not yet been tapped. I believe that on the whole people spend what they do not save rather than save what they do not spend. Therefore, to increase saving and to encourage investment, new incentives are needed: on the lines of making legal company thrift plans, tax relief for income from small savings invested directly in industry on the same lines as now obtains for income from National Savings, and the same concessions for all retained savings as for assurance and deferred annuities.
Social benefits would arise from such a spread of ownership and spread of wealth; although I admit that it would mean involving the administration in the paradox that the more widely held a company's shares are the easier a takeover bid becomes. That is not an 91 argument, however, against encouraging small savings, but for the Government facing the consequence of its actions and working out to the end what it has started on.
I believe this should be part of long-term policy to increase incentive and to increase personal responsibility. We must, of course, maintain the ability of the Welfare State to protect the weak or unfortunate individual, but I do not feel that we should use it or extend it to bolster up the incompetent firm or industry. If the rewards of success should be greater for organisations then also should be the penalties of failure. We can do this if the Welfare State is there to cushion the individual against hardship, but we shall not do it if we use the Welfare State to protect the incompetent organisation.
I should welcome, among other reforms, raising the starting level of Surtax. I do not think we should do this by imposing a capital gains tax to make up for it. This would mean the usual Treasury error of trying to prevent a slippery customer getting away by casting the net wider instead of making the mesh smaller so that the innocent is caught while the slippery customer still gets away. We should rather recast the whole of our direct taxation system and redefine it so that some of the gains which are now classed as capital gains would become judged and taxed as regular income earnings. We could then also begin to deal with the problem of the expense account on the basis of differentiating between company taxation and individual taxation.
It is a great cause for regret that a start was not made on all this and on other reforms in the last Budget. They might have led to wage demands, particularly had there been a movement from direct taxation towards indirect taxation, but I believe that if the Government's policy is right, such wage demands can be met from increased productivity, provided that labour-saving equipment is used and a proper lead to both management and unions is given by the Minister of Labour so that we achieve the full use of our resources and do not operate on half power. If necessary, I should also be ready to see that enforced upon industry by a reduction of tariffs.
92 But there is more that the Government can do now and in the future to improve our industrial position and our rate of expansion than merely use fiscal action. We all know that there are many industries which are sick in themselves, quite apart from any cyclic changes on differences in the terms of trade. There are some which seem to need permanent nursemaiding by the Government, although some, I am happy to say, are beginning to look a little better and have moved as far as to the schoolroom.
There are many out-of-date attitudes on the part of both management and unions with which it is the responsibility of Government leadership to deal. Of course, it is not only the Government's responsibility. In some sense we are all responsible. But the Government cannot escape the main responsibility; for we have quite rightly abandoned the laissez-faire techniques of the past because they are socially undesirable, and that means that the Government must assume the responsibility and set the example. I do not think that exhortation, of which we have had a great deal, is enough.
§ Mr. Emrys Hughes (South Ayrshire)
I have followed the hon. Member's argument with great interest, and I understand that he wants a new leadership. How does he reconcile this with the speech which he made on the Address in reply to the Gracious Speech? When did he see the light on the road to Damascus?
§ Mr. Macmillan
If the hon. Member rereads the speech which I then made, he will find that within the limits of the occasion I did my best to express the very points that I am making now. Indeed, I have been criticised for departing from precedent for so doing.
May I refer for a moment, not to this admirable document which has helped so many of us in the debate but to Mr. Barna, deputy director of the National Institute, who wrote an article published in The Times on 1st February in which he suggested that the sort of measures whicb I am advocating were not in themselves enough. I agree with him. He wanted a detailed study of our industrial problems, industry by industry.
93 In the General Election of 1945, with the somewhat naive optimism of the very young, I assured the electorate that a Conservative Government wouldcreate conditions in which the enterprise and initiative of the individual can develop".
§ Mr. Macmillan
I said that it wouldprevent any restrictive practices of either capital or labour from injuring the efficiency of our industryand added that I wanted to seethe co-operation of trade unions and employers, managements and government, to build a fair and efficient industrial system.After nine years of Conservative Government, want is still my master, and Mr. Barna in The Times must still plead for theclose contact between government departments, financial institutions, and manufacturerswhich so many of us were demanding in 1945. After fifteen years we are still seeking not the sort of Government control which we should get from the Labour Party but real leadership.
§ 6.15 p.m.
§ Mr. A. E. Oram (East Ham, South)
The hon. Member for Halifax (Mr. Maurice Macmillan) began his speech with a powerful plea for leadership from the Government, which makes me think that he must be one of those Government back benchers to whom my hon. Friend the Member for Grimsby (Mr. Crosland) referred as being particularly disappointed at the speech which we heard earlier from the Chancellor of the Exchequer. Although I by no means agree with everything which the hon. Member for Halifax said, at least his speech showed a will to get to grips with the economic problems of the country which was sadly lacking in the Chancellor's speech.
I want to address a few remarks to that phrase in the Motion which refers tothe Government's failure to secure … steadily expanding production—I note that the Government Amendment fails to refer to production—and also to that part of the Government Amendment which claims a high level of investment, among other things. I agree with my hon. Friend the Member 94 for Grimsby that we ought not to overstate the connection between the level of investment and the level of production, but I think that he will agree that, nevertheless, there is an important causal relation between the two; it is important, when the Government boast that they have achieved a high level of investment, to look at that claim a little more carefully. One needs to ask, high compared with what?
It is true that, over the last couple of years or so, investment in industry has been somewhat higher than in earlier years. But a more important comparison I suggest, and one which I shall invite the House to make, is that with other countries. If we do that we find that the level of investment in this country in manufactures has been considerably below that which has been achieved by our rivals on the world scene.
I should like to make comparisons between three groups of countries. In the first place, I take the United Kingdom and the United States, two allies in both the hot war and the cold war and two great countries with basically free enterprise economies, and I put them in the first group. In 'the second group, with which I want to compare our achievements, I put the ex-enemy countries, Western Germany, Italy and Japan, which also have, broadly, free enterprise economies, which were our enemies in the hot war but which are our allies in the cold war. In the third group I put the Soviet Union and its allies.
Let us begin by comparing the first two groups of countries. Let us compare their investment records. In recent years, as the Chancellor said, our investment has been at a rate of 16 per cent. of our gross national product. In Germany, Italy and Japan, the rate of investment has been distinctly above that. The figures are 21 per cent. for Germany, 21 per cent. for Italy and 27 per cent. for Japan. If we look at the production records we see that our modest investment has produced only a modest increase in production. Between 1953 and 1959 our production rose by only about 15 per cent. In the ex-enemy countries during the same period production rose 37 per cent. in Italy, 47 per cent. in West Germany and 36 per cent. in Japan.
95 I accept that this is only one factor in the complex situation, but the correlation between the amount these countries have been prepared to plough back in industrial investment and their achievement in terms of industrial production is too obvious and too serious not to be without an important meaning.
The fact that we, as is evidenced by the debates later this week, find that we have not the resources to maintain our social services, the fact that our balance of payments is in a critical situation, and the fact that we are unable to provide sufficient resources for investment in the under-developed countries have in large measure been brought about because in past years we failed to invest enough in order to produce enough.
Coming to the third group, it is difficult to obtain strictly comparable figures for the Communist bloc. However, taking the figures for Soviet production given in the United Nations Economic Survey for Europe, it would appear that in the Soviet Union there have been annual increases in recent years in the domestic product of 12 per cent., 10 per cent. and 8 per cent.—that is to say, four, five or six times our own rate of increase. There can be no doubt from general observations that the greatly increased rate of production in planned economies is largely based on the large proportion of profits which they plough back into industrial investment.
There is no mystery about how this is achieved. After all, they have a rigorously planned and authoritarian system of government.
§ Mr. Oram
If there is that state of affairs and if consumers can be dragooned into accepting standards less than they would individually wish to have, obviously capital goods can be accumulated at a higher rate. However much we may deplore their ideology and political methods, there is no gainsaying the fact that a planned economy of one kind or another is a means of achieving a high level of reinvestment in industry.
96 If that is the explanation in the case of the Soviet Union, what is explanation in the case of the free-enterprise ex-enemy countries which have also achieved a high degree of industrial investment and a high rate of production? Here there is another important factor for us to look it, namely the defence expenditure of these countries. In 1958 we spent 7.7 per cent. of our gross national product on defence. The United States of America spent 11.1 per cent., Germany spent only 3.2 per cent., Italy only 3.7 per cent. and Japan as little as 1.7 per cent. In other words, making a comparison between the two extremes—our own and Japan—and comparing the amount invested with the amount spent on defence, we invested over twice as much as we spent on defence, whereas Japan invested sixteen times as much as it spent on defence. That is one important reason why we are being outstripped in industrial investment by the Japanese and the Germans.
The historic contrast in these matters was expressed in terms of guns and butter. It was said that a country could not have both guns and butter. I suggest in the world of today that a country cannot have both hydrogen bombs and modern shipyards with which to beat the Japanese shipyards. A country cannot overspend on defence and at the same time have resources with which to re-equip industry.
It is high time that we faced some of the fundamental questions of the division of the national product between the various things we strive to do. At the moment the Government are trying, or say they are trying, to do three things all at once. They want, or say they want, an expanding economy. They want—they conceive it as the national duty to want—a high level of armaments. They want to do these two things with a free-for-all, planless economy. It just will not work. We cannot have all three things at one and the same time. There can be an expanding economy and a high level of armaments if, like the Russians, there is a planned economy. A country can expand and have a free-enterprise economy if it is not over-burdened with armaments. What a country cannot do is to expand, have a high level of armaments and remain without planning.
97 What ought we to do? What ought to be our line of approach? We cannot and should not—we would not wish to—adopt the rigorous Soviet planning methods, because only in wartime have the British people shown any disposition willingly to accept a measure of control over their patterns of expenditure, the nature of their employment, and their personal lives comparable to that intensive planning.
I suggest, however, that we can and should do much more planning than we do. It is possible to do that without impinging upon the essential basic personal freedoms that it is our purpose to preserve. It is ridiculous, especially in the public sector, that we have not yet got a fuel and power policy, co-ordination in the transport industry, ox anything like planning in other sectors of the economy where it would be perfectly feasible without throwing away any essential freedoms.
The Government refuse to have anything to do with planning, despite—as my hon. Friend the Member for Grimsby said—the advice in recent days of many of their business friends that planning is necessary, but, ironically, in one sphere of foreign trade they showed a willingness to plan in the wrong way. When there was an embargo on trade with countries east of the Iron Curtain, the Tory Government very often showed a greater enthusiasm than either the Germans or the Americans in applying that embargo. I agree at once that there has been an improvement in that situation, both in the Government's attitude and in the amount of East-West trade. Indeed, I understand that there was a very welcome increase of about 40 per cent. in that trade during the last year.
I recently noticed a speech by Lord Boyd-Orr in which he said—I have not the first-hand experience myself, but his words are worthy of attention—that there are still discriminatory import quotas on goods coming in from Eastern Europe while, on the other hand, the Export Credits Guarantee Department has imposed unreasonable limits on firms wishing to export to those countries.
I listened with interest to the Chancellor's remarks about new provisions for insurance of credit in overseas trade, and I shall look more closely at what he said. I certainly hope that the new 98 provisions will help to increase East-West trade, because I am sure that there are tremendous possibilities in the next few years of increasing our exports in that direction.
If, as I have suggested, there is one important lesson that we should learn from the world's planned economies it is that even in our own British way of life we should have a great deal more planning. We must also seek relief from the undue burden of armaments that we now carry.
I am far from suggesting that, overnight, we can reduce the proportion of our national product that we spend on armaments from the present 7.7 per cent. to the 3.2 per cent. of Germany or the 1.7 per cent. of Japan. We have to recognise that, ironically enough, in the post-war years victory has brought its burdensome responsibilities to the victors which the losers have escaped. That, however, does not mean that we can avoid the economic consequences of our present heavy burden of armaments.
What can we do in this respect? This is no defence debate, although I sometimes think that in recent years we have tended in our minds to get defence and economics into two water-tight compartments rather than to investigate the connection between the two. I do not want to enter now into the controversy surrounding unilateral nuclear disarmament, which is usually advanced in terms of military strategy and of the moral issues involved. Whatever the rights and wrongs on that issue are—and I think that there are more rights than wrongs in the case for unilateralism—there can be little doubt that if we embarked on that course there would be, or could be, considerable economic relief as a result.
I believe that it was the Prime Minister himself who said, nearly a year ago, that perhaps 10 per cent. of our defence expenditure was spent on nuclear arms. That represents about £170 million, which may seem a small sum by comparison with the total defence bill. Indeed, in these days, it may seem comparatively small when the Minister of Health can, at one fell swoop, get rid of £65 million of the Health Service Estimates. At the same time, whatever comparison one makes, £170 million is well worth saving. It could at least 99 have taken care quite easily of the National Health Service cuts that we shall debate on Wednesday and later, and it could also have been a considerable help in other social spheres such as housing, hospitals and schools.
We have to face the question of what saving is possible, for economic reasons, within the sphere of defence. I was most interested when, before Christmas, we debated the Report of the Public Accounts Committee, to learn how the bill for guided missiles had soared. We learned that that bill had stepped up at a tremendous rate—almost, it seems, without anyone having any control over those things at all. Items that had been estimated to cost, perhaps. £1 million or £2 million, ended by costing £40 million or—as I think occurred in one case—£70 million. Both the House and the country should make, a comparison between that sort of expenditure and the £65 million in cuts of which we were told the other day.
I end by repeating my main theme. Unless this country goes in for a good deal more planning of its economy, unless we are prepared to look at our defence expenditure and make some serious cuts and economies in it, we shall begin to be not the great Power that all of us wish the country to be. Unless we do these things we cannot be economically strong, and we cannot be militarily strong if we are economically weak. The time is long past when the country should cut its military coat according to the size of its economic cloth. Until we do that, we shall not solve our economic dilemma.
§ 6.37 p.m.
§ Sir Alexander Spearman (Scarborough and Whitby)
The hon. Member for East Ham, South (Mr. Oram) made a very fair point when he said that we could not, without cutting consumption to ribbons, put as much to investment as are other countries that are spending far less on defence. I believe that our defence contribution—at any rate, in conventional weapons—is absolutely vital, and I hope that it will be possible on some future occasion for the hon. Gentleman and myself to take part in a defence debate, when we can discuss our views on that question.
The right hon. Gentleman the Member for Battersea, North (Mr. Jay) com- 100 plained, as he has done often before, of the stagnation in our economy, and I thought that my right hon. and learned Friend the Chancellor blew that myth to pieces. From the various interruptions, and from succeeding speeches—including the speech which we have just heard and that of the hon. Member for Grimsby (Mr. Crosland)—I also gathered that the Opposition had rather changed their ground and were now saying, "It is not stagnation, we admit, but we are not getting on as fast as other countries are". That is quite a different matter.
I agree that the figures show that, but we must get the matter into its right perspective. Let us remember that Western Germany, for example, has had an enormous increase of strength through the refugees who have entered that country. There have been millions of them. A P.E.P. book, comparing the growth of different countries, said that this had been a tremendous windfall for Western Germany. Let us remember, too, that France, Germany and other European countries have a far bigger proportion of workers in agriculture who have been drawn into industry, and that has made their industrial expansion easier.
We should also remember the different state of growth. The United Kingdom and America have now reached a state where a great deal more is spent on services than is spent in these other countries and they, of course, are not open to the same expansion by further mechanisation. I suppose that if I wanted to make a debating point with the hon. Member for Grimsby I would say that taxation on the top level in Germany is 57 per cent. and that in this country it is 88 per cent. I would also suggest that if we compare the expansion in industry in this country with the United States of America, which I think is a fair comparison, it stands up quite satisfactorily.
The Opposition Motion criticises the Government for failing to expand exports, but unless the Government employ the methods of Hitler or of Schacht they cannot compel foreign countries to buy our goods. I agree that they can do a lot to help, but in the last resort it depends upon industry, workers and management, producing the goods that people want to buy, at the right price and quality.
101 It is not only from the other side of the House that the Government are continually pressed to increase money incomes. That is easy and agreeable. They reduce taxes, increase pensions, and pay subsidies to people who are in difficulties, sometimes through force of circumstances and sometimes through their own fault. But unless production goes up at least as much as money incomes rise, prices must rise and we shall have a balance of payments crisis. I think that the Leader of the Opposition would agree with that, because he has often said so.
I should like to say how much I regret that he is not here today, not only because of the reason for his absence—it is one which affects even those of us who put far less strain on our voices than does the right hon. Gentleman—but also because any economic debate here loses by his absence particularly because it is very rarely that he descends to making just purely debating speeches. I am sure that the right hon. Gentleman would agree that if money incomes go up and production does not rise as much, then prices must rise because demand outruns supply, or else we have a balance of payments crisis because imports rise and we consume at home goods that ought to be exported.
I believe that some hon. Member, probably the right hon. Member for Battersea, North, would tell me that we could push up production here because there are many reserves of labour, but those reserves are not where they are wanted today. It is no use making things that people do not want to buy. Also, much of this labour is not specialised, and specialised labour is what is wanted. I am sure that, as in the war, industrialists can always squeeze a little more production if they try, but only if they bring in part-time labour and use rather antiquated plants. Industry will only do that if demand rises so much that profit margins are much wider, which means that costs will continue to rise. I can think of no worse way of helping the export trade.
Therefore, I think, there is fairly general agreement that the only safe way of pushing up production is to increase capacity to produce. I am convinced that growth in the economy is larger if 102 there is sufficient excess capacity to ensure competition. I was very glad that the hon. Member for Grimsby referred to the need for competition. Personally, I believe that if every industrialist in the country could sell everything that he made there could not be enough competition to keep down prices or keep up efficiency.
I can quote in support of the need for excess capacity rather surprisingly, from the last chapter of the Economic Review. The writer of this chapter appears to have learned wisdom as he went through the chapter. Having started off, as has already been quoted, by saying that if there were no external payments problem the British Government could safely encourage a faster rate of consumption, then, at the end of the chapter, and after referring to the need of this country for sufficient spare capacity, the writer says:Without sufficient slack, external adjustments would be futile. These considerations would rule out an immediate policy of expanding internal demand.I think hon. Members opposite will have to give up that document in support of their case for speeding up the economy. I do not think that capacity in this country is increasing as quickly as it should; neither do I think there is anything to be complacent about, as I am sure my right hon. Friend the President of the Board of Trade will agree. But the picture is not quite so black as it is painted—perhaps as it suits hon. Members opposite to paint it. In 1948 and 1953, when the Opposition were largely responsible, capacity was growing at the rate of 2½ per cent. In the last five years, it has been going up at the rate of 3¼ per cent., which is rather more than the average in the United States and double what happened in this country before the war.
§ Mr. Bruce Millan (Glasgow, Craigton)
Is there not now a significant difference, in that the new President of the United States has been saying some very scathing things about the United States progress in the last few years, in considerable distinction to the kind of attitude that we have had from the present Government?
§ Sir A. Spearman
That is all in the future, is it not? I am dealing with facts from the past and am trying to get the picture.
103 The hon. Member for Orkney and Shetland (Mr. Grimond) was very indignant at the amount of investment that this country is now achieving. Last year manufacturing investment went up by 24 per cent., and the Board of Trade predicts—I am sure my right hon. Friend will support me—that this year it will go up by 30 per cent. That may not be enough, but it is not such a doleful picture as the hon. Member would have us think.
The point I want to stress is that it is not only a question of how much investment there is; it is also a question of how that investment is used. I am sure that production would go up a great deal if we could get workers throughout the country to do shifts as is done abroad. I know that there are many industries which have a good record for this sort of thing, but it is not generally done.
§ Sir A. Spearman
If we can produce more goods we can put up money incomes and speed up the economy of the country.
§ Mr. Silverman
Does not the hon. Gentleman know that the motor trade at this moment is working below capacity deliberately and designedly, because we cannot find markets for the cars that we produce? It is idle to say that the only remedy is to increase production when we are designedly cutting down production because we have no idea what to do with our products when we make them.
§ Sir A. Spearman
That is due to the motor industry relying so much on selling a particular type of car which has had a very long run. The industry ought to be concentrating on something different. I should like the resources to be used where there is a demand for them. If only we could have more shift work, we could do more. If only we could abolish restrictive practices on the labour side, as the recent Act has done on the management side, we should produce more. I am referring to what are called, I think, craft union demarcations. Again, there are many industries which have set 104 a very fine example in this respect, but it is far from universal. We all know what a tremendous wastage there is in shipbuilding and in the printing trade as a result of restrictive practices.
Thirdly, it we could have more mobility of labour, we could have a very high level of employment far more safely. The Government have done a lot to take work to the workers. There may well be cases where this is a good thing to do, where it means saving in houses and services which otherwise would have to be provided, but I do not think that they have done enough to encourage workers to go to the work. After all, where the work is now is where, for geographical reasons, in all probability, the costs of production are lower.
I wonder whether the Government could consider giving special assistance to local authorities to build more houses in those areas, and only those areas, where labour is very short. Could they do more than they are doing in allowances to enable workers and their families to move? Could they advertise what facilities there are in this respect? I do not believe that there are enough and I do not think that they are doing as much as they could, but I am certain that what there is is not well enough known. I ask my right hon. Friend the President of the Board of Trade to discuss with the Minister of Labour whether more could be done to make our population more mobile. To do so would cost much less, and pay off much more quickly, than subsidies.
We want more investment, of course, though I do mot think that the position is quite so serious as some hon. Members have said. We shall have more investment only if we have more savings. The reoord of right hon. and hon. Members opposite in this is quite deplorable. Personal savings in 1951 were £225 million. In 1959, they were £1,279 million and for the first three quarters of last year they ware running at the rate of £1,600 million.
Hon. Members opposite are always saying that we must have more investment, but they do not say how we are to have the savings. Do they suggest increased taxes? They said not at the last General Election. Do they suggest that we spend less on housing? They have never said so. Do they suggest 105 that we spend less on the nationalised industries or devote less to the underdeveloped countries? I hope that some hon. Member will, during the debate, say how the Opposition propose to get the extra savings without which it is quite impossible to get extra investment.
§ Sir A. Spearman
It is not monetary savings but real resources which matter. At present, there is such confidence in the future that people are, to some extent, postponing their consumption in order to make savings available for investment. That is why we can do as much as we have done.
§ Sir A. Spearman
Clearly, we want more savings. I should think that that is generally accepted everywhere in the House.
§ Sir A. Spearman
I suggest that we might achieve more savings and encourage greater enterprise if the Chancellor could see his way to tax earnings less and spending more. It is rather extraordinary that the proportion of direct taxation to indirect taxation should be greater under a Conservative Government than it was in 1948. In 1948, the proportion raised by direct Income Tax was 35 per cent. Today it is 43 per cent. Today, 10s. 7d. in each £ is raised by direct and 8s. 10d. by indirect taxation.
I realise that, with the present balance of payments position, the Chancellor must hold back any vast tax remissions. Sterling is strong today very largely because foreigners have such confidence in the financial policy of our Government, but if we started as a country to spend more without an equivalent increase in exports, that confidence could very quickly and disastrously go.
Therefore, the only way, in my opinion, that the Chancellor can remit taxes is by switching from one sort to another. I hope that he will not, in 106 spite of the strictures of right hon. and hon. Members opposite—perhaps his interest will in no way be lessened by the strictures of the right hon. Member for Battersea, North—accept too easily the Board of Customs' refusal to accept a sales tax or a turnover retail tax. I know that it would be difficult, and there might be opportunities for fraud, but other countries can do it. Why should not we? It would be a far more powerful and more flexible weapon for regulating the economy. If he cannot do that, I hope he will consider the suggestion made in the 1944 White Paper of the Coalition Government to vary insurance contributions. I hope that my right hon. and learned Friend also will, although it may be impossible to make these huge bureaucracies really efficient, at any rate make the nationalised industries charge an economic price so that the taxpayer does not have to bear the burden.
He must face the fact that, if he is to cut back consumption rather than investment—I think most people in the House want him to do that—he must do unpopular things. He must affect the ordinary man. This is absolutely unavoidable. It is the general population who do most of the spending.
§ Sir A. Spearman
I am not at the moment talking about the justice of the matter. I am concerned with the facts and the question of how the Chancellor can cut down consumption rather than investment, if he wants to do so.
§ Sir A. Spearman
I am not thinking of the man on £10 a week. I have not that figure in my head at the moment.
107 I am thinking of the figures referred to by Sir Oliver Franks in a recent speech when he said that in 1959 more than four-fifths of the spending was done by the people with net incomes of £20 a week and under. If that is the case, it is quite obvious that one cannot restrict consumption without affecting them.
In my humble place in the House, I have taken part in even more budget debates than my right hon. and learned Friend the Chancellor of the Exchequer or my right hon. Friend the President of the Board of Trade. I am sure that they do not need me to assure them that almost any positive action which the Chancellor takes will provoke screams from somewhere. I am equally sure that, if the measures are sound, the screams, however loud, will disappear before long and will be forgotten in a few months.
My hon. Friend the Member for Halifax (Mr. Maurice Macmillan) made a severe attack on the Government today. I shall not go as far as he did. Perhaps I have not inherited such rebellious characteristics. Indeed, I would say that this is perhaps the best Government we have had for a very long time—[Laughter.]—hon. Members may laugh, but I am sure that many of them would agree that they have known many worse Governments. I think that the Government are at fault in one respect. They are too apt to try to placate people who are in some difficulty, perhaps through their own fault; to listen to those who advocate that a particular industry should have a subsidy or some form of protection when it is not in the interest of the economy as a whole.
§ Sir A. Spearman
I was thinking particularly of what is likely to happen in the shipbuilding industry and other industries where subsidies are going forward. We in this country can afford a great deal; and should afford better social services in time. What we cannot afford is inefficiency.
Many years ago I said something in the House which I know was a platitude, but it is a good one and I should like to repeat it. I should like to see the Government take steps to make profits a bit more diffioult to get and the reward a bit more worth having when it is got. To 108 that end there has to be more competition. One of my complaints about the Government is that they do not encourage competition enough. We are a very high tariff country. I should like to see the Government take a lead in an all-round reduction in tariffs. That would give a great opportunity to efficient companies and would be a healthy challenge to the inefficient ones.
I have been struck by the number of industrialists now converted to the idea of freer trade. I agree that we could not suddenly remove all forms of protection, but, if they are given time to put their House in order, it would be for the good of the economy of the country that the inefficient firms should be forced to compete or to release their resources to those who could make better use of them. I have often made these free trade exhortations in the House and I have never been entirely sure whether Ministers entirely approved of what I said. I was, however, much encouraged by what the Prime Minister said last summer:We cannot hope to invade the markets of others whilst retaining a barbed wire fence round our own.I very much hope that my right hon. Friend will press very hard for reducing tariffs, mainly for economic reasons, but also for political reasons. So long as we are faced with the Communist menace it seems to me of enormous importance that we should have the maximum unity with Western Europe.
In conclusion, I believe that my right hon. Friend the Chancellor of the Exchequer on this occasion can most help to raise the standard of living by making his test not whether a tax remission is particularly needed by a certain group of people but simply whether it will promote efficiency and enterprise. Humans being what they are and not what we should like them to be, I think that we come back to the old story about the carrot and the stick. I believe that my right hon. Friend must threaten with the stick and tempt with the carrot—that is, competition and reward.
§ 7.5 p.m.
§ Mr. David Ginsburg (Dewsbury)
I hope that the hon. Member for Scarborough and Whitby (Sir A. Spearman) will forgive me if I do not follow him 109 in his more controversial remarks, although I agreed with some of what he said. On Thursday last the hon. Member for Louth (Mr. C. Osborne), who is not with us at present, suggested that we should all adopt a self-denying ordinance and should speak for only ten minutes. That is cutting it a bit fine for dealing with the economic sins of the Government. However, I will try to be as brief as possible.
The debate seems to be centering around three main themes. First, the failure of the Government to manage the economy; secondly—and this has been illustrated this afternoon—the continuing and appalling complacency of Ministers; and thirdly—this is perhaps a more difficult point—inasmuch as the Government have objectives of policy, they are the wrong objectives. The Government continuously pose the problem as simply one of how we are to have economic growth and, at the same time, a sound balance of payments and stable prices whereas, in fact, they have the emphasis of the problem wrong. Without economic growth, it is impossible to have stable prices and a sound balance of payments.
Much has already been said to illustrate the extent of the Government's economic failure recently. Not least are the facts that our surplus on the balance of payments is the worst since 1951 and that industrial production having remained stable since 1956 and 1957, and although there was a brief upsurge late in 1958–59, it is now stable again, and I believe 'that the latest indications suggest that it may even be going down.
That is not the full story. What is perhaps even more sobering is the realisation—it is a gradual realisation in the nation—that outside the United States, which until recently pursued economic policies akin to our own, our performance is almost unique among the advanced industrial nations. It is not merely a case of an isolated failure here or there. It is failure all along the line. The performances of other European countries concerning production, living standards, imports and exports have far outclassed our own performance. We should be deluding ourselves if we imagined that we have been prudent while other countries have been the spendthrift countries, particularly in 110 allowing greater imports. The contrary is the case. Those countries which have gone all out to foster production and trade have the best balance of payments results.
It is interesting to consider what has happened with regard to our gold reserves since the Leader of the House left the Treasury. Our gold reserves have gone up by about 10 per cent. in six years. In the same period the gold reserves of the O.E.E.C., including this country, which brings down the average, have doubled, those of Germany have trebled, those of France have almost doubled and those of Italy have gone up by over 300 per cent. I suppose that we might be thankful for small mercies and say that at least ours have increased by 10 per cent. We would be thankful if we could be sure that all of that 10 per cent. constituted a genuine increase and reinforcement in this country's reserve position. But, as I am sure the Financial Secretary would confirm, because recently there has been an authoritative estimate, last year there was over £900 million of abnormal capital inflow into this country.
Fears have been expressed that in moments of difficulty much of that £900 million might go out. I hope that in the debate the Financial Secretary will be able to comment on the question of outflow, because there is some evidence that in December there was a rather serious outflow of funds, despite what was stated in official handouts.
On this side we have long expressed doubts on the effectiveness of dear money and whether dear money is a sensible cure for our balance of payments problems. When my right hon. Friend the Leader of the Opposition was at the Treasury, one of the main factors limiting the secure balancing of Britain's foreign trade accounts was the failure of our invisible earnings to recover from the war. The Financial Secretary can check these figures. Before the war, about 30 per cent. of our imports were covered by invisible earnings, and in 1950, when my right hon. Friend the Leader of the Opposition was at the Treasury, some 15 per cent. of our trade was covered by invisible earnings. In the years that followed, it was anticipated that a big improvement would take place, 111 but in fact the contrary is the case. They failed to recover and the position has gone downhill very rapidly.
Our earnings on invisible account are probably 70 per cent. down on 1950. There are many explanations of this, and it could be a very long and complicated subject, but one of the most important factors that I would put to the House is that, through dear money, the cost of servicing funds in London has risen catastrophically. When the Leader of the Opposition was Chancellor of the Exchequer the net earnings of interest, profits and dividends, stood at about £159 million. In 1959, which is the last year for which comprehensive statistics are available, that figure had fallen to £82 million. I understand that for 1960 the figure is bound to be lower because higher interest payments have had to be made.
Is it worth pursuing a dear money policy, the main divdends of which appear to be in the first place, to bring in unwanted funds to this country, and, secondly, at a cost which would otherwise have paid for a substantial volume of imports?
There are other areas of the invisible account on which I will comment and on which action by the Government is called for. Are the Government really satisfied, from the point of view of the national economic interest, with the desirability of some of the overseas investments which leave these shores? There have been very disturbing reports about this lately.
As has already been mentioned by hon. Members, there is the question of overseas defence expenditure. This, I believe, costs about £200 million per annum. Do the Government feel that this is within the economic capacity of this country and, in particular, do they feel that other countries are bearing their fair share?
Reference has been made to the question of Germany. As late as 1959, according to figures given by the Lord Privy Seal in reply to a Question I asked some weeks ago, this country was devoting 7.7 per cent. of the gross national product to defence, whereas Germany was devoting 5.3 per cent. of the gross national product to defence.
112 In other words, the British citizen is carrying a load 50 per cent. higher than the German citizen. I suggest that it is not only the American Government which should now be making energetic representations in Bonn. I hope we shall hear from the Economic Secretary what is happening in that regard.
One other area of the invisible account is the tourist industry. Is there not something seriously the matter with the British tourist industry? We know there is a rising world tourist trade. It is true that our earnings from American tourists are keeping up with that trend. One part of the tourist trade which is causing a very substantial loss on our trading accounts, however, is European tourism. The number of British tourists going to Europe has doubled, if not trebled, over the last ten years. In the same period the increase in the number of European tourists coming to these shores is less than 50 per cent. One is bound to ask what is being done to make the British tourist industry more attractive. If that is not done over the years ahead we must expect a growing drain on our balance of payments from that source.
To return to the visible balance of trade which, however, still is the most important part of the problem. Our exports are lagging and our imports—especially manufactured imports—are much higher than we would like. It is worth remembering that dear money has been a pretty poor brake on manufactured imports, which in 1960 were 45 per cent. higher in value than in 1959.
If one looks at some of the commodities concerned, one gets a pretty startling result. I believe the President of the Board of Trade has said in the House that dear money is necessary to stop these imports coming in, but look what has happened, for example, in the case of refrigerators. A lot of refrigerators came in during 1959 because of the hot summer. In 1959, 11 per cent. of home supplies of refrigerators were imported from abroad, and that figure rose to 16 per cent. in 1960, although there was not a hot summer. The trend is still upwards. In the motor car industry 4 per cent. of home supplies were imported in 1959 and 7 per cent. in 1960. That general trend will continue.
113 The main reason why imports are up and exports are down, as the hon. Member for Grimsby (Mr. Crosland) has said, is that British products are not as competitive as they should be. This, in turn, is related to the fact that our investment in British industry simply is not enough.
I will make one further comment on investment. Many hon. Members have referred to the need for going into the Common Market. If this country were to go into a wider European area without improving its investment effort, we shall head for very serious trouble indeed. There must be many hon. Members, like myself, who represent older industrial areas, areas where industrial diversification is quite inadequate and whose staple industry—in the case of my constituency the wool textile industry—has benefited both from Imperial Preference on the one hand and tariffs on the home market on the other hand. Both of these barriers will fall and we must expect far stiffer competition in overseas and home markets. Whatever happens we shall need to diversify our industries in these localities, and for that purpose one is bound to say very emphatically that the Local Employment Act is far too tightly drawn to be of assistance. If the Government really mean business in Europe, we shall need a much more flexible and dynamic local employment policy.
I have said that the main responsibility for the country's economic failure rests emphatically with Her Majesty's Ministers. They cannot escape this responsibility. Having said that, however, there is one important weakness in our planning machinery also on which I should like to dwell. My hon. Friend the Member for Grimsby has already referred to it.
As we have said, Britain's problem is economic growth. If we sacrifice economic growth in the interests of the balance of payments, we shall be worse off. We simply must have growth. In my opinion, the concentration of economic power and advice in the Treasury is inimical to this process. A well-deserved tribute has been paid to the work of the economic adviser to the Government. Nevertheless, one is bound to say that the Treasury outlook as a whole on economic affairs is extremely cautious. I go further and say that the influence of what is known as its Overseas Finance Division is extremely per- 114 vasive on Treasury thinking. It is probably influencing the Financial Secretary at this moment.
If the Government wish for greater emphasis on growth, they must consider the structure of the Treasury. It is interesting to recall that, in 1938, the Prime Minister advocated a Ministry of Economic Affairs, and for a brief moment when Sir Stafford Cripps took over economic policy and the economic planning staff in 1947 it looked as if this might come about. I hope that the Prime Minister will personally "have a go" at this problem.
There is a strong case for separating the economic from the revenue-raising and establishment functions of the Treasury. If the Government are afraid to take such precipitate action, let us at least have an expert inquiry into this subject. After all, we have had the Radcliffe Committee on Monetary Policy. Surely, we could have an authoritative inquiry on economic planning.
§ The Financial Secretary to the Treasury (Sir Edward Boyle)
Since the hon. Member has raised the point, may I ask him a question? Surely, he would agree that the Budget, which is not simply a matter of raising sufficient revenue to cover the Government's expenditure, is, perhaps, the most important of all the economic regulators. How, therefore, could a Ministry of Economic Affairs and the Exchequer ever become totally distinct? This was a problem which was hardly reached in 1947, because the experiment went on for so short a time. The hon. Member is thinking too much of Supply expenditure and the difficulties of Supply divisions in isolation from the Budget, which is a highly important economic regulator in its own right.
§ Mr. Ginsburg
That intervention gives added point to what I am saying. This is an important subject which should be debated in this House. Certainly, it should be inquired into. I quite agree that the Budget should be a part of the Ministry of Economic Affairs, but the revenue-raising and establishment functions are matters which could be put on one side.
It is no coincidence in this connection that long-term planning outside the Treasury—it works in some countries— 115 happens, for example, in France and has been extremely successful. Indeed, it is even worth advancing the heretical view that in a critical year—1957—the French went all out for economic expansion, even at the expense of the balance of payments at that time. It was a calculated risk and not recklessness, and it paid off. Let the Government learn from experience. Let them have confidence in our people and go all out for expansion. If they will not go all out for expansion, let them make way for a Government who will.
§ 7.24 p.m.
§ Sir Harmar Nicholls (Peterborough)
The hon. Member for Dewsbury (Mr. Ginsburg) made an interesting speech that clearly will be worth reading afterwards. He succeeded in goading my hon. Friend the Financial Secretary to the Dispatch Box. At the same time, he had the representative of his own Front Bench shaking his head energetically. The hon. Member, therefore, accomplished an interesting feat.
The Opposition were quite right to want this debate at this time and I heartily supported hon. Members opposite when they suggested that it should occupy two days. I hope, however, that they will make a little better use of the extra time than we have had signs of their doing so far. I can understand that a debate of this nature, a censure debate extending over two days and focussing attention on one of the most important aspects of the country's life, should take the normal form, that the party in opposition, which wants, if possible, to be the Government, makes a general attack on the Government as a whole and tries to show that its own leaders are the better people to be at the helm. It is right that the Government should give their general defence to prove to the country that the decision it took at the last election was the right one.
It is right and proper that that should take up half the time of the debate. With the election far enough away, however, I should have thought that, in addition to that common form of debate, we would have had some specific suggestions. The party opposite should have used this opportunity to put forward clearly some good ideas of their own and not hide behind all the vague generalities such as we had in the speech of the right hon.
116 Member for Battersea, North (Mr. Jay), who opened the debate. The two things should go together.
All I got from the right hon. Member for Battersea, North was that he is very much against any reduction in direct taxation and very much against anyone in the higher grades getting relief. It is a good thing that the country should know this. The right hon. Gentleman had some support in his views from his hon. Friend the Member for Grimsby (Mr. Crosland).
§ Sir H. Nicholls
The general impression upon my mind—and it may be that when the right hon. Gentleman reads his speech, he will find that I am right—was that any suggestion coming from this side that a reduction of direct taxation would help exports had no basis whatever. If that was not the burden of the right hon. Gentleman's argument, I do not know what was. We know that the right hon. Gentleman wants to help exports and we know that he is not in favour of any suggestion to reduce direct taxation. That was the only message I got from his speech, which was full of generalities.
Then, we had the hon. Member for Orkney and Shetland (Mr. Grimond), the Leader of the Liberal Party. I was interested in what he had to say. His only contribution was that we should negotiate our way into the Common Market, just like that. According to the hon. Member, we must get into it. Had the hon. Member said that we must get into it at any cost, no matter what the other people were saying about it and that it was vital for us to be in the Common Market, I could understand his logic, but to say that we should negotiate our way into it is an admission that there is opposition against which we should have to negotiate. We have a great football club in Peterborough. Last week, the team played a very good game against Aston Villa. I can imagine the manager saying last Wednesday, "Go on to the field and win 3–2. There is another side playing." The question of going into the Common Market depends upon the sort of terms we can get.
117 My main reason for wanting to speak in the debate is to argue with my right hon. Friend the President of the Board of Trade that he is wrong in one specific respect. In popular parlance, I want now to fight, fight and fight again until I have got him to change his mind on a public statement which he has made.
In terms of the general position, the one thing which has come out of this debate is that the Opposition's policy is exactly as it was before the party opposite left office. All I have got out of the debate is that the party opposite again wants low interest rates, import restrictions and licences. The right hon. Member for Battersea, North did not say that, but his right hon. Friend the Member for Huyton (Mr. H. Wilson) looked very coy when he appeared to deny that licences were part of their policy. Whether or not the right hon. Member for Battersea, North said it tonight, however, his right hon. Friend never makes a speech without underlining that point. In addition, there is always the threat of nationalisation, because Clause Four still remains.
Whatever weaknesses they may be thought to have, the Government are far superior to anything that the Opposition can offer in leading the country in the right direction. The Opposition are offering the same medicine as before, which after six years resulted in a deficit of something like £800 million. Whatever is said about the Government—a lot has been said and a lot more, no doubt, will be said—they have so far got us a balance of £1,500 million on the right side after the nine years in which they have been the Government.
Speakers generally have tried to suggest that the Chancellor of the Exchequer was hesitant and did not grasp the opportunity which this debate offered to be more specific and pointed about some of the things he wanted to do. I am not suggesting that it was one of his most brilliant efforts, for I am a great supporter of the Chancellor of the Exchequer, and I think that he is incisive, that he has a mind of his own, and that he has courage. I am sure that his rule at the Treasury will produce results which will give very considerable satisfaction. I believe that, and I am not saying it just because other hon. Members have been critical 118 The thing which my right hon. and learned Friend wanted to emphasise and did emphasise—at least, he left me in no doubt about it—was that the one thing above all we had to do was to improve our export position. That was what he wanted to tell the House. Although he recognised that so far, we have had leadership which has given us a pretty good standard of living up to now, and while now things are not bad—and he gave a list of figures which justified this claim—nevertheless, as most hon. Members in this House are, I think, he was apprehensive as to the future. We are all right thus far; but, looking ahead as far as one can see, it looks as though if we do not do something more positive than has been done so far we may be running into some sort of trouble. Clearly, without equivocation, he said that it was exports which mattered. He did not suggest the thesis that we had to cut down imports generally or have a restrictive policy, but that the export market should be widened to give us further chances of trade. He said that we had to get a higher proportion of world trade, much higher than we have had.
It is on that aspect of the matter that I want to contribute to the debate. My hon. Friend the Member for Halifax (Mr. Maurice Macmillan) referred to this in the article which he wrote in the Daily Mail more than he did in the House today. He made a general speech today. We know what he was after. He made his speech well and he was quite clear, but in his article he was rather more specific on the things he would do. The things he wanted to do were good, but he left out one thing which I want to mention now.
I think that the one message above all which must go out from this debate in this House today is that when we say we want a bigger export trade now we do not mean only for a while as a passing need. We remember how we have had Savings Weeks or "Buy British" campaigns. They would go on for a week or a month or so and then they W'ould be left. This business of increasing our exports and obtaining a bigger share of the world market must be a permanent one. It will be a permanent feature for ever more, because it is quite clear that we are entering a completely new phase.
119 We had pre-eminence through having raw material, and it meant that we had a big share of the world's trade. If some years ago people wanted coal they could only get it from us, for we were the oountry which produced coal, so we were certain of getting a market. Today, we are having new forms of manufactured goods which will make up the export trade of this country. We see today that the engineering industries have become much more important in the export trade. Today more than two-fifths of our exports consist of engineering goods, when as recently as 1913 only one-eighth of our exports was made up of engineering goods. We see today the growing importance of such things as plastic materials and antibiotic drugs, nuclear products, nylon, terylene. All these things can be produced by other countries, by our competitors—so that we have not now the great advantage that we had when we were the country with all the coal and all the pre-eminence of being first in the industrial era.
This is the message I got so clearly from the Chancellor today, that what we have to do is to concentrate on this permanent feature of getting a bigger share of the export market. He gave a list of the things which the Government have already done and are doing to try to achieve that. He made a constructive suggestion on that. He said that we are going to cut the red tape and the form-filling which go with exports; we are going to improve sales promotion by encouraging trade fairs and such like; we are going to cut out irritants with expense accounts and that sort of thing which, we know, do affect the chap who has to go out into the export market.
I was talking to one of our exporters the other day. He said, "I did not find much joy in my recent export group tour I had in India. There I was sleeping in a little basha in the heat, with betel-nut spit all over the wall. I had all that sort of thing for several weeks, and when I came back I had to explain to the Income Tax inspector whether or not the lunches which I had eaten out there were the sort of lunches I would have eaten here." That sort of thing is an irritant, and anything but pleasant, and I was delighted that the Chancellor 120 said that we were going now to look at that sort of thing.
One thing he did not say, however—and this is really what I have come to this debate to talk about. I believe that we have really got to make up our minds that in taxation we have got to give a concession for exports. We have got to have tax discrimination on exports. That is the argument which I want to put to my right hon. and learned Friend and to the Government. I know that there are many of my hon. Friends in the House who do not agree with me, and I know that leaders of the F.B.I. have said—they said it in 1955—that it was not much good and would not work out, and that there were many problems. I believe that if the F.B.I. and others and the Government do not accept this, they are wrong. I am quite certain that we have to find some way—not merely of exhorting people to export, not merely of having hire-purchase restrictions and financial restrictions put on or taken off—some permanent way within our tax system to encourage the development of the export trade.
My father, to whom I paid a lot of attention, used to say in terms of business, "There is no taste in nothing." We know it is more expensive and more difficult and a greater risk to go into the export market than to sell just round the corner in one's own country. I believe that it is within the power of the Government to provide something which will make exporting well worth while by putting some taste into exporting. I believe that it could be done without all of the insuperable administrative difficulties which, we have been told, would pursue us if this policy were accepted.
The principle has been accepted for some time. We have had derating of industry, which is a sort of discrimination, because we accepted the importance of having flourishing industry. Today we are making financial grants to give inducement to industries to go from the places where they are and where they would like to be to areas of underemployment to which they would not otherwise go. The point I am making is not that that is a wrong thing to do. I am saying that financial inducement to persuade industry to do things which it would not otherwise do is the sort of inducement we need for exporters.
§ Mr. Millan
Surely the sort of discrimination which the hon. Gentleman says he would like to have with reference to the export trade would affect industry as a whole? The point about exports today is that other countries would possibly discriminate. That is the great difficulty.
§ Sir H. Nicholls
The hon. Member is a great supporter of the F.B.I., and a greater supporter of the F.B.I. than I am, but I agree with that. I was merely saying that the general principle of financial inducements which the Government are using to get some sections of the community to do something they would otherwise not do, could be extended. I cited that as an example. 1 agree that that was not the export trade, but they are financial inducements for persuading people to put their factories in parts of the country where they otherwise would not. I am saying that we could and should go a little bit further and use the same financial inducement to get people to become really keen on exporting.
I do not know how many hon. Gentlemen have read the articles in the Sunday Times on exports. I thought that the opening paragraph of the first of those articles really put the finger on the whole thing. It said that we have got to accept the fact that industries by and large on the Continent have rather grown up with exports so that with them they were a natural and normal thing, whereas in this country our industries have tended to think first of the home market, and to think of exporting only when they have had a bit of over-production, a surplus, which they could send as exports. I think that article was right.
It means that we have to do something a little out of the ordinary to induce a change in that old pattern from now on, because we have got to make our producers in this country much more conscious of the export market.
§ Sir H. Nicholls
The right hon. Gemtleman has been in charge of an important part of the Treasury and he knows that the officials can work out details. However, I will certainly give a suggestion of the sort of thing that I had 122 in mind, but it is open to variation and correction. There are auditors going to firms, and the tax that one pays is on the basis of their report. I suggest that the auditors could at the same time give a certificate to say that, for instance, 25 per cent. of the business was export, and if so, I would suggest that on a quarter of the taxable amount there should be a concession of 1s. or 2s. in the £ to the exporter. I suggest that in a general way. Naturally, that is open to amendment, but it shows what I have in mind. It is a general suggestion which I hope someone will knock into much better shape.
I was a junior member of the Government until recently, and I joined in the export exhortations. I was one of the team which followed up the Prime Minister's speech. This tax concession was one part of it which I queried, and I was not altogether happy about it. However, it is well known that the brief at the moment is that the administrative problems involved in putting such a thing into practice would make the scheme so intricate that it could not work I remember the Prime Minister in a broadcast saying that in things of this sort it is for the Government to decide policy. Having decided the policy, it is for them to ask the civil servants to make a machine which will make the proposal work. If one first of all asks whether the machine will work, one will be told that there are all sorts of obstacles which cannot be overcome. But if one decides on grounds of policy that a certain thing ought to be done, the civil servants will, I am certain, succeed in providing a machine to carry out the purpose. I should, in any case, be very surprised indeed if this sort of scheme does not already exist in one of the pigeon-holes of the Treasury.
What does the President of the Board of Trade say about this? He has gone flatly against what I am arguing. That is why I want my proposal to be known, and I hope that sufficient of my hon. Friends will think that there is enough in my argument to start asking the President to change his mind. He has so far said that it may well be that we could give some discrimination, but he does not think it would be right to make a special tax concession on profits earned from the export trade. He has said that 123 such a concession would break international agreements, and that our competitors would do the same and in the end none of us would be any better off.
I want to make my position clear. I am not suggesting that we should do this in a hole-and-corner way. I am not suggesting that we should give a hidden subsidy, which we know that Germany, France and other countries have been doing for long enough. If it means that we have to vary some international agreement to do this, let us get on with it and have an international conference in order to get the matter sorted out. If we give tax discrimination, it is true that it may well be that our competitors will do the same. I do not object to that. My argument here is not that tax discrimination will get us export trade. What I am arguing is that such a tax concession will get more of our industrialists, factories and workers into the export ring if they once set about doing it. I have confidence that once we get some of the medium and small-sized firms going in for exports, we shall get good results even though their competitors have the same concession.
I was interested in the research report which stated that about 30 per cent. of out total export trade is carried out by a mere forty firms and that half of the 30 per cent. is done by ten firms. I come from the Midlands, the heart of this industrial potential, and I know that there are thousands of firms which are big enough to think of getting into the export market, and I am convinced that if they could be injected with the enthusiasm to make a start, their natural skills and "know-how" would ensure that they had as good a share as any of our competitors.
That is why I am arguing that we ought now to be prepared, in an open and above-board way, to alter international agreements if we have to do so, and to face the fact that our competitors would do it. We know that at this moment France and Germany have some concessions of this nature. The German exports incentive scheme works in two parts: first, there is a return to the exporters of the turnover tax of 4 per cent.; in addition, a small export incentive payment, ranging from 1 per cent. to 3 per cent., is made by the German Government to exporters. If they can 124 do it, why cannot we? A similar thing is going on in France.
The main argument that I want to convey to my right hon. Friend the President of the Board of Trade is a little article which appeared in a newspaper the other day:The Australian Government is to grant extensive tax concessions to exporters as a major incentive to encourage exports. Mr. Menzies, the Prime Minister, is likely to give the full details of the scheme's operation before his departure overseas later this month. It is believed that tax concessions will bring new producers into the export drive. The concessions are part of a wide range of plans to increase trade".That is precisely what I should ask my right hon. Friends to do. Even if they have been unimpressed by the German and French model, will they promise to look with sympathy at the scheme which is to be announced in Australia, and, whether or not they are terribly impressed with it, will they give some thought to recognising that we have tried and failed in merely trying to talk ordinary industrialists into the export market? If we can do this, I am certain that the results which will flow will be more than well worth while.
If on this occasion we do not get a sympathetic response from the Government, I hope that there will be enough of my hon. Friends who will think it worth their while to keep prodding the Government until they come to the same decision as Mr. Menzies has apparently come to.
§ 7.47 p.m.
§ Mr. John Morris (Aberavon)
I listened with great respect to the strong plea made by the hon.Member for Peterborough (Sir Harmar Nicholls) for financial aid to exporters. He said a great deal which was worthy of consideration, and if action were taken along the lines he suggested, a positive lead would be given to exporters, something which is needed at the moment.
However, the hon. Member said at the beginning of his speech how much he valued the message which he had heard from the Chancellor of the Exchequer this afternoon, and how incisive the Chancellor was. I think that the last thing one could do would be to describe the speech of the Chancellor as incisive. It was muddled. He put up a whole series of Aunt Sallys one after the other, and then attempted to knock them down.
125 The hon. Member for Peterborough suggested that he had had a very clear message from the Chancellor. I feel that the last thing we had from the Chancellor was a clear message.
Every hon. Member in the House must be concerned at the present financial state of the country. Although hon. Members opposite may not go with us with our Motion of censure, everyone agrees that there is cause for anxiety—with the possible exception of the Prime Minister, who has been so long in pursuit of the settlement of the world's problems that he has forgotten the problems facing his own country. He is now, we understand, temporarily grounded in an attempt to solve the problems of the situation in which we now find ourselves ten years after the return of a Tory Administration.
Many chickens have come home to roost today, one being a statement made by the Prime Minister at the last General Election, when he said:I do not remember any time in my life when the economy has been so sound and the prosperity of our people at home so widely spread.I wonder whether the Prime Minister would endorse that today as a summary of the state of the country. When the historians of the future turn back the pages of history and look at the 1960s, they will be amazed at the hollowness of the so-called prosperity of the never-never land in which we live. Not only will they be amazed at the brinkmanship of the late John Foster Dulles and his foreign affairs policies in the last few years, but also at the brinkmanship of the financial policies of this Government.
It has been described as a brake and throttle policy. The policies of the Government deserve the attention of the Minister of Transport. Does anybody think that these ramshackle financial policies of the Government could ever hope to pass the ten-year test of safety; that they could ever hope to have a road worthiness certificate as being a safe vehicle in which to travel? If I might change my metaphor, if it were a horse, it would hardly qualify for a certificate of being sound in wind even though the jockeys are not lacking in this commodity.
The electors at the last election mounted 'this vehicle at their peril, and 126 now they are benefiting from the return to the father-figure's bosom of the unprodigal son in the person of the Minister of Health. They are reaping the benefit of increasing the stamp rate, doubling the prescription charge, and even robbing 'the babies of their orange juice and cod liver oil. I do not know whether the unloved Surtax payer is waiting for whatever succulent pods the Chancellor of the Exchequer is eager to hand to him. There is not even a fatted calf to celebrate the return of the unprodigal son to his inheritance. He is attempting to save a total of £50 million this year and £60 million in a full year. It would be no accident if the level of Surtax rates were raised from £2,000 to £6,000 a year that that figure would amount to £60 million in a full year. It is the same figure as will be saved by the Minister of Health by his revised Estimate.
The Financial Times which, as Shakespeare would have said, is full of wise saws on these matters, says:A concession of this order may frighten the timid,"—and well it might—"but it can safely be made in the next Budget, whatever the state of the Exchequer accounts or of the national economy.This is a blank cheque which one of our leading newspapers is able to give to the Chancellor for his next Budget. It goes on:one suspects that the sound and fury with which the Opposition would greet any really worthwhile Surtax concession would bear no relation to the actual feelings of the electorate.I can well imagine the bonfires being lit in South Wales when the Surtax rates are raised; when the electors throughout the industrial constituencies hear the glad tidings of the Chancellor of the Exchequer raising the Surtax rates and at the same time the Minister of Health robbing the Health Estimates of £60 million in a full year. If there is a connection between these two matters, I assure the Government that there will be an outcry throughout the length and breadth of the land.
In the short time at my disposal, I should like to deal with one or two aspects of the present day policies in the motor car industry and its effect on the steel industry, in particular, its effect on the sheet-steel industry, and the effect 127 that it has had on our balance of payments in the last year or so. There are other hon. Members far better qualified than I am to discuss the situation in the motor car industry. Short time working is one significant feature. One must not be too pessimistic, because most of the men in the motor car industry have hung on to their jobs. That is a mark of the confidence of the men themselves. If one looks at the Stock Exchange shares, the shares have remained comparatively buoyant despite the present crisis in the industry. One sees this if one compares the price of B.M.C. shares now and back in 1957. That is a mark of confidence of the Stock Exchange in the recession, and we should like to know whether there is a real crisis and how long it will last. What is the prognosis of the Government as regards the motor car industry?
The recession has at last begun to hit us in South Wales. Further west than my division, at Trostre and at Velindre, they are already working short time, 16 shifts instead of 20. The Steel Company of Wales in my division has introduced short-time working involving a large number of men.
Last Saturday there was a statement by the chairman of John Summers, a firm employing 10,000 men. The firm is now cutting its working hours because of the continuing fall in the orders for sheet steel, and the extent of that cut is being discussed today. The chairman, Mr. Richard Summers, states:We cannot say how long this reduction will be necessary.That really is the sting of the issue. No one knows how long the present recession is going to last. There is a cautionary note by Sir Andrew McCance in his annual report published last Friday. If one looks at the report of the chairman of Richard Thomas & Baldwins of 25th January, it refers to the general easing on the demand for sheet steel in the first few months of the financial year.
The cuts we have had in South Wales in the sheet-steel industry are chicken feed compared with the cuts which the motor industry has suffered already. The fear of the workers in my division is about the extent of the recession; not what has happened, but what might happen. We would like an assurance 128 from the Government about what is going to happen. All our eggs are in one basket. We produce sheet steel and very little else. If there was a major or long recession the result would be deplorable and disastrous. At the moment there is only a small cloud in the sky, but if that grows into a big storm the extent of it would be catastrophic.
I will not go into the basic problem of boosting exports and the need to lower imports, but it is interesting to note that all the major areas, with the exception of the United States of America, took more British goods in 1960 than in 1959. If one looks at it from the angle of steel and sheet steel, the North American exports of steel to the United Kingdom jumped from £3½ million to £38 million last year. Sheet steel was scarce, and there were vast imports at the beginning of the year.
It is interesting to note the fantastic growth in imports of sheet steel from 1958 to 1960. All these matters have added to our balance of payments situation. In 1958 less than £13 million of sheet steel was being imported. It went to £16 million in 1949, and in 1960 over £40 million worth of sheet steel was being imported. More sheet steel was imported in June and July, 1960, than in the whole of 1958.
After all this, because of the crisis in the motor car industry, there was a spectacular drop, and the merchants were cutting their contracts as rapidly as they could, and by December a mere £750,000 was being imported. There are heavy stocks at the moment, and that is another matter which is causing concern to the sheet steel producers.
What is the reason for these huge imports? The reason is obvious and apparent to everyone. At the beginning of the year there was a lack of capacity in the steel industry. We had the highest imports since 1955, and that was a year of crisis. The balance of payments situation in that year was to a large extent caused by the import of sheet steel. There is a balance of payments crisis now. How far is it due to the increased imports of sheet steel? Indeed, if the motor car boom had lasted past August into the latter months of the year, what would have been the effect 129 then on our balance of payments situation had the same rate of imports of sheet steel continued at about £6 million worth a month instead of falling as they did after August?
On 24th March, 1960, the Financial Times was able to say:The shortage of home produced steel is not confined to sheet and includes among other types, light rolled products and structural steel.It went on to say that steel was being diverted from exports to the home market, imports were mounting, and delivery dates were lengthening. These were three matters of embarrassment to this country because of the lack of capacity in the steel industry.
The lack of capacity in the earlier part of the year was predictable. It was predicted by the Iron and Steel Board that because of the clash of interest between the Board and the Federation there was a delay in the building of plant, and that it would be some years before that plant was available. The Government are responsible for this situation, but they are happy with the present system of dichotomy of control between the Steel Board and themselves, and the Federation. The steel producers, through the Federation, are able to ride their own hobby horses regardless of the nation's interest. If the capacity had been there, as the Board said, there would have been no need to import such a great amount of sheet steel last year. I am sure that our balance of payments situation would then have been much better.
The Government were saved from a worse catastrophe by the recession in the motor car industry and the consequent end of the need to import further stocks of sheet steel in the latter part of the year. There is a complete lack of planning in relation to this aspect of the steel industry. It may be that we are leaving a period of under-capacity for one of over-capacity. We are continuing with the building of two new plants at Colvilles and Richard Thomas and Baldwin at Llanwern. No one knows how much steel is really needed. The Government give no indication of when the industry's capacity will be used, and the last statement of Colville's chairman is a worrying one. He says:It is significant that both in the United States and Canada there is a growing uneasi- 130 ness that the expansion of capacity has overtaken rather too rapidly the expansion in demand…. This fear may or may not be soundly based, but it is a warning that must be most carefully considered.My indictment against the Government is that they have no cohesive plan to match the capacity of the industry to the demand. It will be amazing for the historians to look back and think of our economy as being perched on a knife edge, so that the slightest recession in the motor car industry is sufficient not only to drive a crisis through the whole industry but also to upset the steel industry and our balance of payments. We are dependent on that one product, and the figures from America are rather disturbing in relation to our future prospects for exports to that country. They are now producing their own compact cars, and they are also choosing the Volkswagen in preference to our cars. That is the crux of the problem.
Let us look at the figures with regard to the export of some of our motor cars to America last year. The exports of B.M.C. were down by 14 per cent.; Fords of the United Kingdom were down by 41 per cent. over eleven months; Rootes were down by 40 per cent., and Triumph by 22 per cent. Volkswagen were up by 38 per cent.
That is the situation we have to face. It is said that one of the difficulties Americans find in regard to British cars is the lack of proper servicing facilities. American importers and our own exporters have spent a great deal of money on these servicing facilities, but I am told they are not enough. The Government should pay attention to this point and see whether they can give direct assistance to our car exporters for the building up of proper maintenance and servicing facilities in the United States and other countries to which we export cars.
Another disturbing article in the Financial Times was to the effect that the United Kingdom was also suffering from the fact that the sales of the key importers—Ford and Vauxhall—which dropped by half last year, are handled by United States dealers under American parent companies. It was said that this had been working out most unhappily since United States dealers had received their compact cars. There has been a clash of interests, and the figures 131 in respect of Fords and Vauxhalls are a crushing indictment of the present marketing system in these cars.
I do not want to adopt a Luddite attitude towards the integration of British and American capital, but the Government should pay serious attention to the problem and be on guard whenever American firms ask permission to take over shares in large British companies in circumstances where there is a clash of interests, as there is in the case of Fords and Vauxhalls, whose figures are worse than for any other cars. The Minister will be aware of the connection between the rival American and British parts of these companies.
In an interesting article in the Sunday Times, Sir Miles Thomas says that he finds the reports of the performance of British cars disturbing; that there were serious shortcomings in the assembly of cars, and that they lacked detailed finish. I do not wish to canvass this issue further, it would only do harm, but I hope that motor car manufacturers will investigate the matter and see whether there is any truth in what Sir Miles says. He has had twenty-seven years' experience in the car industry, and if what he says is true the matter should be attended to. This is a matter upon which we should not bury our heads in the sand.
I would ask the Government whether their present plan to resell the steel industry is necessary. In view of the present state of the market there will be a loss to the public if the huge firms in which public money is invested, such as Richard Thomas & Baldwin, are sold. I was proud of the vast profit which that firm announced the other day, and that this great publicly-owned industry was able to put another nail in the coffin of those who say that public ownership can never pay.
I now turn to the activities of the Iron & Steel Holding & Realisation Agency. Llanelly Steel was sold for £1¾ million and Staveley Iron & Chemicals for £6 million. Both sales were announced in the Summer Recess; on 5th August in respect of Llanelly Steel and on 13th September in respect of Staveley Iron & Chemicals. There seems to be a "close-season" for the selling of publicly-owned companies. If the House is sitting they 132 are either not sold or the sale is not announced. The sale of S. G. Brown was announced during the Whitsun Recess. Will Richard Thomas & Baldwin also be sold during the Easter or Whitsun Recess, or shall we have to wait until the Summer Recess? There is a deliberate pattern of holding back the announcement of these sales until the House has gone into recess.
Yesterday's Sunday Express refers to a trade row which may develop because of the "on the quiet" export of thousands of tractors to China by Massey Ferguson. There is a clash between that firm and the American holders of patents in relation to these tractors. Is any American pressure likely to be brought to bear to stop our export of these tractors to China? There is a great market for them in China and Africa. It is amazing that in a largely hungry world, where vehicles are wanted nearly everywhere, workers in Coventry should be working on short time. It is amazing that the Government have no policy for making our vehicles more adaptable to the needs of the world today. That is one of the things to which we shall have to attend in future.
The Government have no order of priorities. We have gone through periods of industrial stagnation at the same time as we have had luxury building and fortunes made in take-over bids, and a poll tax on health. The policies of the Government are rotten to the core, and this country can never hope to look for leadership from the present Administration, headed by the rather pathetic figure of the Prime Minister who, like Mr. Micawber, seems to be hoping for something to turn up, although nothing ever does.
§ 8.10 p.m.
§ Mr. Stanley R. McMaster (Belfast, East)
In supporting the Government Amendment I wish for a moment to consider both the Motion and the Amendment. It would seem that theTe is little between them. In their Motion the Opposition admit the gravity of the balance of payments situation which faces the country. The substantive part of the Motion… calls upon Her Majesty's Government to institute policies designed to strengthen our economic position at home and abroad, and to secure social justice and a greater responsiveness by industry to the needs of the nation.133 The reference tothe responsiveness by industry to the needs of the nationis the most important part of the Motion, and about that hon. Members opposite have said nothing. Nor have they made any suggestions about how to further that most desirable end. In fact, far from encouraging it, the right hon. Member for Battersea, North (Mr. Jay) could suggest only that we give no further incentive to our industry to encourage it to be more responsive to the needs of the nation. On the other hand, the Government Amendment mentions the present high level of employment, investment and consumption—
§ Mr. McMaster
I wish to refer to the position in my own constituency. In Northern Ireland we do not enjoy that high level of employment mentioned in the Government Amendment. During the past two or three months the unemployment figure has been increasing. In my own constituency there is a serious threat to the shipbuilding industry and to the welfare of many of my constituents and to those in other Ulster constituencies. In Belfast we have been building ships for over a hundred years. We have the largest shipbuilding yard in the country and we have built such famous vessels as the ill-fated "Titanic" and, more recently, the "Canberra", the biggest liner built in this country since the end of the war. But this industry faces a difficult future. There is a threat to the employment of more than 7,000 men, and there exists little hope of alternative employment for them in Northern Ireland if they are declared redundant in the next six or nine months. Many of these men are married and their families are in Northern Ireland. It is not easy for them to move to other parts of the United Kingdom to find alternative employment.
Mention has been made of the desirability of making labour more mobile, but there are certain parts of the United Kingdom where this would not be simple or easy to do. I strongly urge the Government, therefore, to take steps to bring relief to the shipbuilding industry. In my constituency one remedy would be the provision of finance on easy terms 134 for the building of a new large dry dock. It is recognised that such a dry dock is required if the shipbuilding yards of Belfast are to retain their position in world trade and compete successfully against the modern yards of Germany, Sweden and Japan, many with assistance from the United States.
The Government must think of some way to assist our shipping industry. It is on that industry that the trading position of this country has depended. Our independence and position as a creditworthy country has been built on the shipping and shipbuilding industries. I suggest that the Government should support a scrap and build programme. It has been announced that the Government are prepared to spend £18 million of the taxpayers' money on replacing the Queen liners. This money is to be lent to the Cunard Company on most favourable terms. I suggest that the Government should consider spending a similar sum to assist other shipping companies to face competition from shipowners abroad.
Many of these foreign shipowners owe allegiance to no country and they fly flags of convenience on their vessels. Some are assisted by American capital. In time of war or international insecurity they owe no responsibility to any of the free nations of the Western world. Is this compatible with British interests? I strongly urge my right hon. Friend the Prime Minister, in his talks with the new President of the United States, to bring up this question of flags of convenience yet again, and the question of American support for ships flying such flags.
I urge the Prime Minister—perhaps my hon. Friend the Financial Secretary to the Treasury will convey these suggestions to him—that he should take up the question of flag discrimination on which there has been discussion already, by the Ministry of Transport. I read with concern a suggestion that the American policy regarding flag discrimination should be continued, and I suggest that such a policy is not in the best interests of the United States or of this country.
We must remember that in the years after the war, when there was an acute; shortage of world tonnage and when it was possible for shipowners to make reasonable profits, our industry was 135 extremely heavily taxed compared with those shipowners flying other flags, and therefore it is perhaps too late now to grant them tax concessions. Now, in the time of low cargo rates, it is impossible, simply by lowering taxes, to provide the money needed by our shipowners so that they may scrap their vessels and build new boats. I suggest a more positive policy which I am sure would pay great dividends in the future. It would allow British shipowners to recover their proud position on the oceans of the world and to compete with foreign-owned boats.
§ Mr. Richard Marsh (Greenwich)
One can sympathise with the suggestion of the hon. Gentleman that public capital should be provided for the shipbuilding industry, because of the inability of the industry to run its own affairs. But is the hon. Gentleman prepared to accept a degree of public control in return for the provision of public capital?
§ Mr. McMaster
I regret that the hon. Member for Greenwich (Mr. Marsh) does not appear to have followed my arguments very closely. I developed at some length the reasons why our industry is in difficulty, and because of that I suggested that the Government should be bound in honour to make some concessions to it in order to repay some of the taxes which they have taken from the industry at a time when it was making substantial profits.
§ Mr. McMaster
That, I suggest, is a policy which would be in the best interests of our country, and I am not advocating that there should be any restrictions upon our shipowners. Between the wars, and throughout the long history of this country, the shipowners have proved that, with proper Government support, and given freedom and equality with foreign competitors, they can hold their own and do not need any Government direction or control.
§ Mr. McMaster
The main burden of the debate this evening has been that we must improve our export position; we must improve our balance of payments. One of the big factors in our 136 balance of payments before the war was the invisible earnings which this country made out of the services which our ships rendered, not only to our country but to others, in carrying goods all over the world. I repeat that by assisting that industry to retain its position and not merely to cover a shrinking proportion of world tonnage and world trade, we can help it again to earn the income which it earned for this country before the war.
I also submit to my hon. and right hon. Friends the importance of assisting all classes of research and development in this country. I do not mean only research into new and more modern methods of shipbuilding which would be assisted by the policies I suggest, but I am also speaking of aviation, electronics and all the fundamental industries on which the country must depend in future. It is essential that we should not sell out our long-term interests, either to the Common Market or to N.A.T.O.
I think of one particular example, the research and development which has gone into vertical take-off aircraft. We are very proud of the fact that in Northern Ireland we produced a vertical takeoff aircraft, the S.C.I, which was exceedingly successful at Farnborough and captured the interest of the entire world. It was favourably commented upon by aviation interests all over the world. The German Messerschmidt and the French Sud Aviation have followed the pattern in which we led, but I regret that no second development contract has been given for a similar plane in this country. One of the Hawker aircraft, a plane which uses an entirely different principle, is being developed to meet N.A.T.O. requirements.
In these circumstances, I should think that Government assistance should be given to both planes. After all, how can we be sure that this is right? The right hon. Member for Battersea, North, in an intervention when the Chancellor of the Exchequer was speaking, said that the suggestion of the Opposition was that there should be one plan for the future. I put it to the House that there is grave danger in one target being set for industry whether in coal, steel, motor cars or for aviation. There is grave danger in putting all our eggs into one basket. After the passage of time, when we are deeply committed, we may find 137 that the target which has been selected is the wrong target. What happens then? Then we lose everything.
§ Mr. Fernyhough
What happens then is precisely what happened to Blue Streak. The taxpayer finds £100 million, for nothing.
§ Mr. McMaster
That intervention underlines most strongly the remarks I am making. The taxpayer might well have paid £100 million for nothing, but what happens if all our production effort goes the wrong way?
§ Mr. Millan
Is it the argument of the hon. Member that we should spend £200 million on such a project?
§ Mr. McMaster
No, it is simply that we should not put all our eggs into one basket, but encourage several different types of development on parallel lines. In the case I cited is there not room for a multi-jet vertical take-off aircraft as well as a single-jet vertical take-off aircraft? The Hawker, we are told, is a subsonic plane and it is to fulfil only a temporary requirement of N.A.T.O.
§ Mr. Charles Loughlin (Gloucestershire, West)
The hon. Member referred to two types of vertical take-off aircraft and then proceeded to suggest that my right hon. Friend the Member for Battersea, North (Mr. Jay) was talking about one plan. Will not the hon. Member accept that there is an essential difference between a single, overall economic plan and concentration of effort in that one plan and the analogy of two separate aircraft of a vertical take-off type? It may be that the two types of plane would fit into one plan.
§ Mr. McMaster
I do not want to spend too much time on this example, but I see the point made by the hon. Member for Gloucestershire, West (Mr. Loughlin). It is that there should be one plan or, as the right hon. Member for Battersea, North said, one target. I ask what happens if after the passage of time that turns out to be the wrong target and the plan turns out to be the wrong plan?
Because the particular example is of concern to my constituents, I hope that my hon. Friend the Economic Secretary will convey my suggestion to the Minister of Aviation, because the future of this country depends on our success 138 in research and development and, therefore, the Government must encourage research and development. They should support development of any plane, particularly one which has attracted so much interest as the multi-jet vertical take-off plane has attracted abroad.
I conclude by saying to the Government Front Bench that it would be wrong in present circumstances to concentrate exclusively on our present export position. We cannot sit back and, as the words of the Government Amendment seem to imply, congratulate ourselves on the high levels of employment, the high level of investment and the high level of consumption. We need to spend large sums of money on development and research. The Government must do all in their power by way of university grants and other expenditure, to encourage research and development. By encouraging that, we shall obtain greater productivity. Only in that way can we secure the future of this country, because this country must live and we must support our large population by exporting the products of our brains and enterprise.
I view with some apprehension the emphasis in the debate on the present short-term imbalance of exports and imports. Such an imbalance may well be self-correcting. What happens when one imports more than one exports? Sterling balances are built up abroad which ultimately have to be spent either on increased exports from this country, on investment in this country or on financing Treasury bills. Money spent in any of these ways is an advantage to this country for it helps to maintain employment and thus helps manufacturers to provide for their research and development.
§ Sir Douglas Glover (Ormskirk)
I am sure that my hon. Friend would not like to give the wrong impression. Those balances which are built up overseas need not be spent on British goods. They can be spent on German goods, French goods, or any other goods.
§ Mr. McMaster
I am aware that in a system of multilateral trade, the money which a country earns by exports to Britain can be spent on imports from other countries. Suoh money might be spent in Germany, and Germany in turn 139 could import from this country. We know that the system is interlocked and interwoven and that the banking system plays a great part in all this. But, whether we export to the country concerned or to another country, what does it matter as long as we export and keep the people in this country fully employed? Only by keeping them fully employed can we ensure the wherewithal for technical advance and improvement.
I welcome my right hon. Friend's announcement that he intends to encourage export plans by cutting red tape, by allowing the Bank of England to discount merchant bills and by similar measures. There is an important place in the country's economy for merchants and the merchant banks. The services which these people render are of the greatest importance to our economy, and I disagree with my hon. Friend the Member for Peterborough (Sir Harmar Nicholls) who suggested that taxation concessions should be made to manufacturers in order to encourage exports. Such a tax concession to manufacturers would miss the most impotrant persons in the whole picture—the merchants and the merchant banks. It was the merchants who, in the eighteenth century and between the wars, went out and found markets for our products abroad. Our exports largely depend on the merchant.
We must remember that such tax concessions are extremely difficult to administer, and, following my earlier remarks on the importance of increasing productivity, research and development, and improving our export position, I suggest that the Government should make special tax concessions not simply to the manufacturers of goods for exports; they should encourage all our productive effort by reducing taxes, particularly on our scientists and other key members of our economy. The Government should do all they can to encourage productivity, research, development, enterprise and the use of the brains and initiative of our people, and they should bring our tax system into line with those of our competitors.
§ 8.33 p.m.
§ Mr. Cyril Bence (Dunbartonshire, East)
I was amazed by some of the statements made by the hon. Member for 140 Belfast, East (Mr. McMaster), especially his proposal to remit taxation in difficult times to companies which have had a pretty good time in the past. That might be an excellent proposal for the companies and for Conservative hon. Members who might lose their seats at the next election, but it is a fantastic suggestion, which is quite impracticable and unacceptable.
I was also amazed by the way in which he picked up the idea of one plan. I do not think that I have ever listened to such nonsense in all my life. The point made by my right hon. Friend the Member for Battersea, North (Mr. Jay) was one which I can illustrate from before the war, when the British motor industry, led, I am sorry to say, by an American company, the Ford Company, both at Trafford Park and then at Dagenham, but also by William Morris, now Lord Nuffield, and Sir Herbert Austin, began a movement for mass-producing motor cars. By 1934, although we were reaching our target for the production of cars, we could not get enough steel, because the steel manufacturers had no target and no faith in the ability of the motor industry to mass-produce cars. We have experienced the same problem since. The motor industry still has to import sheet steel because we had our target but the steel industry did not match it.
It is not only Socialists who are asking for some forward planning. Even large industrialists and the merchant bankers are asking for it.
§ Mr. Bence
Even the F.B.I. is now asking for some forward planning. The hon. Member said that it is not the manufacturers we want to encourage, but the merchant bankers. I have seen a few manufacturers go into liquidation, but I have never seen a merchant banker do so. Have Lazards or Hambros ever been bankrupt? When the nation is prosperous, the banks pay handsome dividends. When the nation is broke and industrialists are broke and the banks are putting the pressure on, they still pay the same dividends. The only people who do not go broke are the merchant bankers.
§ Mr. McMaster
I do not want to be misinterpreted. I do not suggest that 141 special concessions should be given to merchants, merchant bankers or insurance companies. All I say is that the position of these people and the valuable contribution they make to our export trade through invisible earnings in the City of London should not be overlooked. Merchant banks, insurance companies and merchants play a very vital part in our export trade. Therefore, any concession which is made should cover them as well as all other parts of the economy.
§ Mr. Bence
That is enough. There are hon. Members opposite as well as some of my hon. Friends, who have spent their lives in British engineering. We strongly resent being eliminated from the range of people who have done so much for the country. The men who matter are engineers, technicians, and practical men working on the factory floor, in the drawing office, in the design department, in the estimating department, and so on.
§ Sir D. Glover
The hon. Member for Dunbartonshire, East (Mr. Bence) is usually very fair, but he is being very unfair to my hon. Friend the Member for Belfast, East (Mr. McMaster). My hon. Friend introduced this argument when he said that the disagreed with my hon. Friend the Member for Peterborough (Sir Harmar Nicholls), who advocated taxation incentives for exporters. My hon. Friend the Member for Belfast, East said that he did not agree with that because so many segments of the economy would be left out. He merely cited merchant bankers, etc. He did not intend to leave out the great engineering industries. He expected them to benefit far more.
§ Mr. Bence
My objection is that the incentives are for what are called the companies. What about the fellows on the shop floor? What about the men in the factories? What about the managers, the £2,000 a year men? What 142 about the technicians? Those men are not the company. The company is to recover tax, but the men on the floor will not. Already we have legislation putting more and more taxation on the men on the floor. The company is something apart. Hon. Gentlemen opposite always think of the company, whoever that may be. It may be Lord Kindersley, who has very little patriotism when it comes to foreign exchange.
The hon. Gentleman speaks of patriotism and the pocket. Admittedly he is young, but he can take it from me that in business if one has an overdraft with one's banker friend, and one also has shareholders to face and patriotism is a threat to that, away goes the patriotism and one must get on with the business. The hon. Gentleman should make no mistake about that. Whether the person is American, British, Scottish, Welsh or an Ulsterman it makes no difference.
§ Mr. McMaster
If the hon. Gentleman reads my speech he will see that I stated very specifically that tax concessions should be made to all. I included the workers in that statement.
§ Mr. Bence
I am glad to hear the hon. Gentleman say that. This week we shall be debating a Motion of censure because we think that further taxation is being put on the workers—a poll tax. I hope that in that debate the hon. Gentleman will vote with us.
I am tired of the people who run our mass-production industries, who have created a tremendous power to produce an enormous quantity of goods, and who say to each Government in turn "You must give us a safe home market". My experience is that it is no use thinking in those terms at all. A mass-production unit with its huge output must, in order to get the highest profitability out of the plant and labour employed, think in terms of one world market—and go and get it.
We shall not solve our problems of balance of payments or of full employment, nor will those who believe in this system of organised production and distribution solve their own problems, as long as there is this attitude that we must have a safe home market for the products of an industry. Modern industry's capacity to produce is such that this island of ours, with its 50 million people, cannot 143 take it all. We can only get a good product at a reasonable price out of an industry if that industry has a world market. In modern conditions the whole thing works the other way round. Sixty years ago, with old methods of production, a good and secure home market may have meant that an industry could export cheaply, but nowadays one cannot get a cheap product on the home market unless one has a big world market. I believe this cry for a protected home market to be false. What we want is a Government lead that will help and encourage exporters to get into the world markets.
A couple of the directors of one company complained to me—and I admit that this was 12 months ago, and that the situation may have altered—that the whole system of export credits and the premiums they had to pay constituted a very high charge on their product, whereas other companies in other countries, manufacturing like products, got far easier terms for their insurance on export credits. It may be said that they were grinding their own axe, but that is what they said.
We have, so we are told, a Government of brains and business, yet a British Chancellor of the Exchequer stood at that Dispatch Box—who prepared his brief, I do not know, but it was a shocking effort by the Chancellor—and made the great proposal that we should stick a suggestions box outside the Treasury. That is what it amounted to. We had suggestions boxes in industry, and have them now. I was a great practical joker in industry, and I could tell a wonderful story about them.
We all know the suggestions that would go into this one. We know what the suggestion would be from that side of the House—cut Surtax and Income Tax. That is all they are interested in. They think that that would solve the problem, but I do not believe that it would—
§ Mr. H. Wilson
Is not the hon. Gentleman aware—and, of course, this House is in the position of a suggestion box—that when we debated the Radcliffe Report on 26th November, 1959, we on this 144 side made some very constructive proposals for helping exports by means of export credits and an export-import bank, and many other things? The Government said that they would consider them. Now, fourteen months later, they have announced a slight step towards that end but have not yet acted on the suggestions we put in the suggestion box.
§ Mr. Bence
I thank my right hon. Friend for making that point. This has been the experience of the last nine years. This always happens. It is inherent in Conservatism that one does not do things until it is too late, or else one does too little or nothing at all. There is a sort of schizophrenia. Today we have heard speech after speech about private enterprise backed up by public money.
There was a time when competitors were looked upon as competitors, but when I.C.I. or Unilever, or Hugh Fraser, or Charlie Clore, or Stedeford, or Lord Kindersley, see a competitor they treat him as a pirate. To enter into the market today is piracy, not competition. I have in my pocket a letter from a big haulage company complaining about competition from another haulage company, and it asks me to do what I can to stop the other company getting a licence. These people want to preserve to themselves as far as possible the field in which they are operating. That is, I suppose, human nature.
One thing which annoys me is that we hear a lot—we heard it in the Chancellor's speech—about Germany, the Common Market, and the United States, but not a word about the Commonwealth. Surely, if it is useful, as it is, to have these associations with E.F.T.A., the Common Market and the United States, the Government should make some effort to develop a co-ordinated Commonwealth activity in our economic affairs. Surely the background and traditions of the Commonwealth are such that some effort should be made to develop this activity not only between this country and the Commonwealth but among the other Commonwealth nations. The resources exist. Surely, even if it means making sacrifices, it is better to strengthen the economic ties of the Commonwealth than to dither as the present Government have been doing over the past few years.
145 I now wish to say something about shipbuilding. Many of us who are concerned with the shipbuilding industry—my constituency is very interested in that industry—are tired of having at the head of affairs a cyclist. It would be much better if we had a man who knew something about the sea. When dealing with transport on land one can build spectacular highways, but when dealing with the sea it is diffioult to be spectacular, especially in this age. The shipbuilding industry, and merchant shipping in particular, is facing a more difficult situation than any other industry in this country. Everything is against it.
I listened to a speech by Sir Nicholas Cayzer, who said that, in the main, in international trade, liner services and so on, the business is largely governmental. All over the world Governments are behind their countries' maritime business. British shipbuilders and British merchant shippers just cannot compete as commercial companies with these semi-governmental institutions.
Indeed, this is the only maritime nation, I think, where shipping and shipbuilding stand on their own feet, or try to do so. The fact is that they are falling. Our percentage of world shipping is falling. Last year, our exports were about 550,000 gross tons and our imports were 470,000 gross tons. We are almost in balance between our exports and imports of merchant shipping, and such a situation has never existed in this country before.
I should be the first to admit that the Government have done all they could in the way of conferences, but this is not helping the shipbuilding industry. The others will not give way. What with flags of convenience and all the rest of it, the British shipping industry cannot stand up to the pressure.
Are the Government writing off the shipbuilding and merchant shipping industries of this country? For years, millions of pounds have been poured into aircraft development, and the aircraft industry competes with shipping in inter-continental transport. Millions of pounds of taxpayers' money have been poured into the aircraft companies. The Air Corporations are absolutely dependent for running their services and for development on thousands of millions of pounds of Government money.
146 There is no doubt about that. Vickers may have put a great deal into research, and so, I imagine, has Rolls-Royce, but I venture to suggest that, if only we could get at the acoounts, we should see that more public money has been poured into this industry than into any other and, of course, in international transport it is a direct competitor of shipping. Obviously, in such a situation shipping has not a chance. This is nothing new. The British mercantile shipping trade was built up with subsidies. There were, for instance, the mail subsidies in the last century.
I suggest to the Government that we should have a Department responsible for shipping. There must be more coordination between the ship-owning companies and the shipyards. Some of the shipyards have spent millions of pounds in the last few years in reorganisation. Because of the pressure of orders and the need for ships, it was difficult for them in the immediate post-war years to undertake extensive development, but on the Clyde great things have been done during the last three years.
I recommend hon. Members to go up to the Clyde and take a trip down the water to see the examples there of the wonderful modernisation which has taken place. But, notwithstanding all the modernisation, notwithstanding some of the most modern techniques in the world, the British shipbuilders have no chance of competing against the yards of Japan, Germany, the United States and France when these foreign yards have their building programmes financed in non-commercial conditions. It cannot be done.
There have been many proposals. Professor Cairncross and Mr. Paterson have suggested that the industry has suffered in its development as a result of the ups and downs which are traditional in the shipbuilding industry. We need planning. I followed my right hon. Friend the Member for Battersea, North (Mr. Jay) very closely when he spoke about planning. We must do what is done in the industry in Germany, Sweden, Norway, France and Japan. There must be a co-ordination of plan between the ship owners and the ship builders. I admit that there was some integration many years ago. We find directors of shipbuilders on the boards of shipowning companies, and vice 147 versa. But this is for taxation and monetary purposes, not necessarily for the physical process of building ships.
The time has come when we must have a Minister of Shipping who will be responsible for the liners, the tramps and the shipping industry in general. There must be some co-ordination and integration between the two sides so that we can maintain a reasonable mercantile marine. Being an island and the centre of an oceanic Commonwealth, it is essential to our country and to the Commonwealth.
§ Mr. A. C. Manuel (Central Ayrshire)
In the excellent case he is making, my hon. Friend spoke about the large sums which have been devoted to research. In Scotland's present position, especially concerning shipbuilding, would not be agree that it would be vitally important if we could get by Government direction the order for the new Cunard liner for the Clyde?
§ Mr. Walter Monslow (Barrow-in-Furness)
May I make a plea for Barrow? We have the finest craftsmen in the world.
§ Mr. Bence
The tender for the new Cunard liner is going out and the firms are preparing their draft tenders. Vickers have joined Swan Hunter and Wigham Richardson in tendering. They feel that they cannot do it independently, because it is too big a job. John Brown and Co., Ltd. is also tendering. If the Cunard Company wants the finest liner on the North Atlantic run, then it must get it from John Brown. I will go no further than that.
I am not too old to be able to look back to what are called the good old days. The people of our country imagine that the world owes them a living. I blame the Government partly for this. We are becoming a nation of chancers with football pools, gambling of all kinds, takeover bids and watching the Stock Exchange to see if we can make a few "bob". It is gambling all along the line. Every other man one speaks to says that he will do this or that if he wins the pools—he will start a business or buy a boarding house if only he wins the pools. I was brought up to work. If I work hard enough and conscientiously enough I might be able to do that. But today we have the Hugh Frasers and the 148 gamblers on the Stock Exchange. The financial columns of the newspapers are getting bigger and bigger with reports of Stock Exchange gambling. This is becoming a nation of Stock Exchange gamblers.
Half the business executives are more worried about what is happening to their shares in the market or what is happening to the financial manipulators in the City of London than about what is happening to their industries. The Government started it off with the Premium Bonds. They passed legislation establishing betting shops. Yet the Treasury is the biggest betting shop in the country. Every Post Office is a betting shop. We have an instinct for gambling to get something for nothing and to make fortunes out of as little as possible. I resent that. I was brought up to work and not to believe that I was owed a living by working men. There are too many people who believe that. The heads of businesses believe that the working man in industry owes them a fat living. He does not. It is a shocking society when there are companies and huge groups who can still, as much as they could in the past, deny human beings to use their skill and their labour in the production of goods and services for their fellow citizens.
Before the war I remember being thrown out of a meeting addressed by Stanley Baldwin. I had a new suit on which was ripped. It cost £7, which was a lot of money to me in those days. Stanley Baldwin was speaking in the Central Hall in Newport and saying that we were poor because we were producing too much; we should cut production and then it would be better. When it came to question time I said that if that was true, why not cut production to nothing and then we would all be millionaires. That was the great Lord Baldwin in 1934, and there are companies still acting like that today. They take over other companies and shut them down. Beardmore's was shut down by John Brown's.
Many of these take-over bids of industrial plants are not to expand them or integrate them or their production with the home company, but to shut them down. Their idea of business is to make as much money as they can with the expenditure of as little money as possible. That is what the capitalist 149 system of production is. When one is living in a world in which Governments are playing a tremendous part in the new countries to expand their own industrial effort to employ all the resources of the Government in building up their resources, this country cannot survive under the chaotic system of leaving the planning of our production to groups of people like Clore, Hugh Fraser and others.
§ 9.2 p.m.
§ Mr. Ian MacArthur (Perth and East Perthshire)
I rise to support the Amendment and I hope that the hon. Member for Dunbartonshire, East (Mr. Bence) will forgive me if I do not follow him in his fascinating arguments.
It is clear from speeches made on both sides of the House that the future progress of our economy rests on a large increase in our export trade and that this, in turn, depends on obtaining a careful balance between a buoyant home market and a reasonable degree of restraint in home consumption. In the face of growing competition abroad we cannot allow inflation to return.
I believe that there is today a wider appreciation of these needs than ever before, but if they are to be met I suggest that our present approach to the pattern of Government expenditure and revenue-raising may require a certain review. I do not say that in any spirit of reproachful criticism, because I applaud the immense achievement of this and previous Conservative Governments in guiding the country from the critical times of 1951 to the prosperity in which it still stands today. In view of the economic challenge before us, it is no longer appropriate, surely, to adhere to an annual tax review which knocks 6d. off there and puts 3d. on here, but keeps to the same basic structure of taxation. There are certain aspects of our fiscal and social practice that seem to me to hamper the creative and commercial genius of our people. Moreover, I speak as a Conservative, and I find it difficult to reconcile these with Conservative principles.
First, I wish to refer to the distribution of taxation. There is, surely, a strong case for recommending a shift of emphasis from direct taxation on income to indirect taxation on expenditure— 150 [HON. MEMBERS: "Oh."]—so that people can at least handle for themselves a larger share of what they earn. I have in mind a new and wider form of Purchase Tax which would apply to consumer goods other than food and basic essentials. Money saved would thus attract a lower rate of tax than money spent. This process should make it possible to reduce the lower rates of Income Tax and substantially increase the starting point of Surtax. In this way, a better reward would be obtained by the managerial and executive classes and by the skilled worker, on whom economic progress depends.
If we want to encourage thrift, we cannot continue to penalise economy. Estate Duty is levied on estates of £3,000 or more and the rate rises steeply. This bears particularly heavily on the successful middle class with a modest fortune. These people do not employ accountants and, in any event, they cannot afford to pass on their capital. Where a small or middle-sized private business is involved, the present system encourages the acceptance of a take-over bid to avoid the crippling financial burden which rests on the family under the present system.
The object of this partial shift from direct to indirect taxation would be to encourage a new upsurge of enterprise and effort. If this is to be effective, the new tax structure must be seen to be just. T wonder whether further consideration should not, therefore, be given to a capital gains tax. Whatever the difficulties of administration and however small the revenue, it must seem unjust to the vast majority of taxpayers that a short-term speculator can make a large, quick profit without paying one penny in tax.
My last point concerns the effect on our economy of the growing cost of the social services. I do not suggest that these services should be reduced where they are needed, but some hon. Members, at least, may agree that we need to define more clearly the purpose of these services and to adjust our administration of them to conform with that definition.
There are some aspects of social service where financial aid is given whether it is needed or not. For example, a rich man can claim his family allowances. One official pays them out and another taxes most of them back. Surely, that 151 is a wasteful roundabout. At another and more humble level, I am myself drawing twenty-one pints of welfare milk a week and no attention is given to my income in granting this privilege, nor is the benefit taxed back in any way. I welcome this benefit personally, but it seems a little hard, perhaps, on my neighbours. [HON. MEMBERS: "Why draw it?"]
I hope that this outline of the first steps of a new approach to taxation and to some aspects of the social services may commend itself to my right hon. Friends.
§ 9.9 p.m.
§ Mr. Edward J. Milne (Blyth)
I have listened with a great deal of interest to most of the speeches made today. From the opposite benches the general plea has been for some sort of tax concessions in order to induce people who hon. Members opposite think really matter to carry on the useful work of the community, but I would remind them that the real work of the community is done by the people in the shipyards, by the miners, the people in the factories and the industrial communities which we represent and which are in themselves the basis of this nation's productive effort. For nine years they have watched with dismay the activities of a Government who have been rewarding the people who do not count for so much in this economy of ours.
I was surprised to notice in the speech of the Chancellor of the Exchequer the gloss which he put on the situation in which we find ourselves. I began to wonder indeed just precisely why he had been making so many alarmist statements throughout the country. One can only conclude from his deliberations that we were being prepared for one of the worst Tory Budgets of the nine years of their rule.
In my maiden speech some four Parliamentary weeks ago I had occasion to point out to the Government that in facing the challenge of the new age in which we are living the Government had to turn their backs on some of the traditional policies which they were pursuing; and their failure to turn their backs, or even to appear to wish to turn their backs, on their traditional policies will not solve the type of problems which they are facing today.
152 In my own and in neighbouring constituencies in the (north-east of England complaints have been heard at the complete failure of the Government to deal with the problem of the declining major industries. Even when economic and industrial matters were considerably brighter than they are at the moment voices were raised about that. It was the Conservative candidate in the Blyth by-election who coined a phrase which I think is worth repeating:The affluent society has stopped short at the borders of Northumberland.If that was true some six months ago it is causing now even greater concern.
I am glad that the President of the Board of Trade has returned to listen to this debate, because less than a year ago, in a party political broadcast on 20th February, 1960, he had this to say about the nation's economy:At the turn of the year we in Britain as a whole were more secure and we were living better than ever before. We in the Conservative Party could claim that it would nor have been possible unless Government policy had been wise and well conceived.Then he said:In the South and Midlands there is a great demand for labour, while, by contrast, in districts like the North-East of England there is serious unemployment. We intend to set about putting this right by checking the expansion of industry in the crowded districts"—The right hon. Gentleman is nodding his head, because they have done that, but he went on to say:by encouraging business men to build their factories in areas of high unemployment.The right hon. Gentleman cannot nod his bead at that statement with the same intensity as he did on the previous statement, because in the Blyth constituency in particular there is no evidence of anything being done at all. The President of the Board of Trade certainly attempted to bolster up the Tory candidate in the by-election by stating that he would look at the possibility of scheduling Blyth as a Development Area. The Parliamentary Secretary to the Board of Trade certainly visited the area on 4th and 5th January, but if what we have been given as a report of this visit is any indication, we are no further forward than we were before he made the visit.
Our unemployment figure, which we received from the Ministry of Labour 153 this afternoon, shows a further decline in the position. The shipyards, the main employing factor in the town, are on their last order; there are no further orders at all on the books.
This arises, as I said at the commencement, from the outlook of the party opposite. Every time any reference is made to the years between 1945 and 1951 there are scoffs and sneers from the benches opposite. But those were six of the most tremendous years in British history, and a great deal of the failure of the present Government has arisen because they have spent their nine years in office dismantling many of the things that were created during that period. In the course of this dismantling of the fabric and structure of a new order of society in Britain following the war, they have given way to the take-over bid merchant about whom we have heard so much, to the speculators and the other people who get rich not by producing the wealth of the nation but by cornering it when it is produced. The people who really matter—the designers, the technicians, the planners and the layout experts—have increasingly been relegated to the background since 1951.
With Government orders in the nationalised industries running, I believe, at a rate of about £1,500 million per annum, it should be possible for some work and assistance to be directed to the areas on behalf of which I have made an appeal. It should be possible for the nationalised industries and the Government to say that because there is a high incidence of unemployment in certain areas, contracts should go to those areas in order to level out the amount of work that is available.
One hon. Member opposite asked for assistance to be given so that more houses could be built in areas which were looking for jobs. Surely it would be much more economical, and surely it is much more socially necessary, to direct the jobs into the areas where the people want them. It is very often argued that the type of labour in an area is not suitable. In this day and age any available labour can be made suitable for the jobs which are directed to an area, and it is along those lines that the Government should have a look at this situation.
Coming at this time, our Motion of censure is an exceptionally important 154 one. We could forgive in many ways the misdemeanours of some of the other Ministers if the Prime Minister showed some appraisal of the situation. I have quoted a speech by the President of the Board of Trade, and I should now like to quote a speech by the Prime Minister which he made a little later than the one made by the President of the Board of Trade to a mass meeting of Women Conservatives on 2nd June, 1960. The Housewives' League has been disbanded, but these would probably form the core of a new body when a Labour Government is returned to power.
This is what the Prime Minister had to say:A Victorian writer remarked, 'Women have more of what is called good sense than men'.
§ Mr. Milne
It depends, of course, on the woman to whom one is referring. The Prime Minister went on:Certainly last October they had the sense to see that life was indeed better with the Conservatives and they had the sense to lake the necessary action to make sure that Labour did not get the chance to ruin it.The Prime Minister would, of course, say today, "Why let Labour ruin it when we can do the job much more effectively?"
The real trouble with Toryism in Britain is that it is twenty or thirty years out of date. They have proved themselves totally unfitted to lead a great industrial nation in the second half of the twentieth century, and this House can mark a change in the destiny of this nation by supporting the Motion that is before it at the moment.
§ 9.20 p.m.
§ Mr. Dan Jones (Burnley)
I support the Motion because, like many hon. Members on both sides of the House, I am apprehensive that, although world trade is increasing, our share is not rising accordingly. For a country such as ours, which is predominantly, if not almost exclusively, a manufacturing country, that can be exceedingly dangerous.
The only raw material that we have is coal, and I am not satisfied that we are exploiting it properly. It has been said 155 that steel is one of our raw materials, but I do not believe I am wrong in saying that if we stopped importing iron ore our steel industry would be seriously prejudiced. If we are to solve any of our financial problems, we must first solve this one.
The hon. Member for Peterborough (Sir Harmar Nicholls) said that this debate was very welcome but that no constructive suggestions had been made from this side of the House. I do not agree. My right hon. Friend the Member for Battersea, North (Mr. Jay), while covering a wide scope, was nevertheless relevant and he pinpointed remedies that could be effected with benefit. There were, however, other points whioh the hon. Member for Peterborough made with which I agreed, and I should like to spend a moment in dealing with them.
He said that those companies which chose to take it on themselves to export were undertaking a much more difficult task than those people who were selling at home, and as a consequence ought in some way to be encouraged. The hon. Gentleman is quite correct. He went on to say that it ought to be within the ingenuity of our financial experts to arrange certain financial concessions. He gave details of how this could be done. I have made similar suggestions in this House, and I go a stage further and say that those people who take it on themselves to export should not only get concessions of the kind suggested by the hon. Gentleman, but should be given concessions with regard to top quality materials, and so on.
As a trade union official, I remember being told by machine-tool manufacturers in 1952, 1953 and 1954 of their great difficulties in getting steel. Apparently it was customary at that time for manufacturers of pin-tables to get precedence over them. That is wrong economic planning. The pin-table boys make little or no contribution to our well-being. Machine tool manufacturers obviously do very much more for the country.
I want to refer to a subject which I have mentioned on three previous occasions, namely, the situation in the car industry. I suggest that that is perhaps our most valuable exporting industry, and that it is needlessly stagnating. I 156 would put three points to the people in the industry. First, I am sure that they could lower profit margins. The last occasion I suggested that was shortly before the European Motor Show opened. Although my point of view at that time was contested by hon. Members opposite, I remember that the car producers of Italy, France and Germany at that show were lowering prices of their products from £64 to £104. British manufacturers could behave similarly.
Secondly, the quality of our products could be improved. In this connection I am mindful of some of my own experiences on the Continent. At Bonn, Cologne, Brussels, Blankenberge, Amsterdam and The Hague, I asked the main car distributors if I could buy a British oar. There first reaction to my request was, "Why do you want a British car?" I said, "Because I am British and I want to buy a British product." I was told that our cars were very inferior to the Continental products.
I was not happy to receive that reply, and I checked up with one of my constituents, who earns his living selling, distributing and servicing cars. Incidentally, he also races cars at Le Mans. He is, therefore, in a position to know, and in my cabinet I have a list of what he considers to be wrong with our products. Unless we remedy these defects we have little chance of competing in world markets.
Vicious as is the challenge in this very important industry today, it is likely to get even worse. European countries are now concentrating upon a greater production of cars, as is the United States of America—and that country is not noted for its industrial philanthropy.
The last point I would put to the people in the industry is that they must cut out all kinds of unofficial stoppages. If these three points are adhered to we have a chance of success.
I now turn to the Chancellor's objection to planning. In reply to my right hon. Friend the Member for Battersea, North, he said that we cannot plan our national economy unless, at the same time, we are prepared to plan the people within it. I do not accept that. I have been in the engineering industry for more than twenty years and have asked many 157 firms, from time to time, "Do you employ a planning staff?" Whether the firm concerned has employed 20, 200, 2,000 or even 20,000 people, it has replied, with an air of pride, "Certainly we employ a planning staff." The suggestion is that it would be ludicrous not to do so. I humbly suggest that what is so vital for these companies is even more necessary in a factory with over 20 million people, namely, our nation.
§ Mr. Gresham Cooke
Of course that is quite a false analogy. It is true that large companies may have planning staffs, but they are planning the production of machines—they are not planning human beings or 20 million people.
§ Mr. Jones
I do not know that that interjection has made very much difference. We are all planning production, or at least I hope so. I have every reason to believe that what happened in the years 1952, 1953 and 1954 with machine tool manufacturers could be repeated in some other industries. We ought to have our priorities right and, in that connection, I am of the belief that they should be properly planned.
One Front Bench speaker said that the Budget is a regulating feature, and it is. I do not consider it enough. There should be other degrees of planning. For many years the Government have been giving voice to empty planning slogans, and now they are running away from the plan which would bring about the cure we are all seeking. This most important industry must be regarded imaginatively. The hon. Member for Aberavon (Mr. Morris) said that not only the car industry was involved; there was also the steel industry. He referred to Port Talbot and South-West Wales where there was increasing anxiety because of the fall in demand. When considering the economy of the nation we cannot exclude this very important industry which I consider, in an economic sense, has been prostituted over the years.
§ 9.33 p.m.
§ Mr. Alan Green (Preston, South)
This is the first time in a debate I have found myself to be the last speaker from this side of the House. I hope it will not be regarded as presumption on my part if first I congratulate my hon. and gallant Friend the Member for Carshalton (Captain W. Elliot) on his maiden 158 speech. He referred to a topic very relevant to this debate, namely, that of industrial relations. Again if I am not being presumptuous, may I say that I think he did so very well. I hope that on many future occasions, he will tell us much more about a subject in which he is so interested, as we all are.
I must address myself, at least to start with, to the Motion moved by the Opposition. Listening to most of this debate, it struck me that very little has been said about the Motion. I seemed to detect at an early stage a slight resentment among hon. Members opposite that more was not being said by hon. Members on this side on which they could "have a go". Hon. Members opposite have said very little in support of their Motion, and I think I know why. Last Thursday, the hon. Member for Coventry, East (Mr. Crossman), who is also, I believe, chairman of the Labour Party, speaking during the Second Reading of the Army and Air Force Bill, said:Nothing is more dangerous in politics than to undertake to maintain commitments without the strength to do so."—[OFFICIAL REPORT, 2nd February, 1961; Vol. 633, c. 1260.]I entirely agree. I have spent a little time, which perhaps hon. and right hon. Members opposite have not, in adding up the number of priorities they demand in their Motion of censure I make it a demand from them for six priorities. That, of course, means no priority at all. That is the first comment I must make on the Motion of censure. What a pity that they have not applied their own chairman's very realistic remark to their comments on economic policy today. If they had done so they might perhaps have produced a real Motion of censure and been able to produce a really relevant attack upon the Government instead of spending most of the day bewailing the fact that the Government have given them no opening. When they read HANSARD tomorrow they will see that that is their real complaint made today.
I wish to address myself to the right hon. Member for Battersea, North (Mr. Jay). I express sympathy with him and the leader of his party because the Leader of the Opposition could not lead off today. The right hon. Member for Battersea, North had to jump into the 159 batting order, presumably at rather short notice. Perhaps that is the reason why he did himself less than justice in launching the Motion of censure. One or two of the points he made are perhaps worth picking up. He said that steady expansion should be our aim and we should accept the necessary disciplines for it. I completely agree. He then went on to attack my right hon. Friend the Minister of Health over his action about the National Health Service. My right hon. Friend made it abundantly plain that discipline and planning were his stated aims within this Service. I thought it not unreasonable that it should go through my mind that that austere fellow, Sir Stafford Cripps, put a ceiling on the expenditure of the National Health Service in the course of his time as Chancellor of the Exchequer.
§ Mr. Green
What my right hon. Friend has done is more constructive than that. He has not limited expenditure on the National Health Service, but sought to ensure a bigger income for its expansion. He is certainly not seeking to destroy that Service, but rather to provide both the discipline and the planning within which it can be made more useful to all our people.
I move on to the next rather remarkable passage in the speech of the right hon. Member for Battersea, North. He kept telling us that the real indictment was that our economy had stagnated. Stagnation, stagnation, stagnation, was the cry from hon. Members opposite. He produced what struck me as quite the most curious possible cure for that alleged condition which has yet come to my ears. He said there should be legislation to judge whether any business merger should be allowed. I cannot think of a finer prescription with which to ensure stagnation in the British economy than to demand that every business transaction must be subjected to bureaucratic approval.
I fundamentally agree with much of the speech of the hon. Member for Grimsby (Mr. Crosland). I agree with him entirely that we require a major increase in the competitive pressures upon our economy. The one thing which we surely cannot afford in this country 160 is complacency. The one thing which we need to get the economy not moving, because it is moving, but moving faster is a rather sharper edge of competition within it and a rather less amount of protection for it. This is surely the first thing that we require. If that had been put forward as the main basis of the Opposition's Motion of censure, no doubt it would have been possible to agree with it, but that is not the Opposition's Motion of censure.
§ Mr. Millan
Is it not extraordinary that the hon. Member should be extolling the virtues of competition and at the same time pouring scorn on the idea that we should look into mergers and the tendency towards monopoly?
§ Mr. Green
I did not say that at all. I said that it was a very curious suggestion that the cure for stagnation was to stop business mergers. I did not say that all business mergers were competitive. If the hon. Member looks at HANSARD tomorrow, he will see that I did not say that.
The hon. Member for Grimsby was academically certain about the effects of personal taxation upon executives in what he called the lower Surtax ranges. I do not doubt that all his training has taught him that that is so, but as a practising industrialist I wish to tell him quite plainly that the younger executive earning £2,000-£5,000 a year is an important and decisive element in British industry. It is not only the very highly paid man at the top, the chairman—and I am a chairman—who matters in industry. I have often told my friends outside the House that essentially in modern industry the only people who can manage and afford to come here are the chairman and the office boy. The people who cannot afford to come here are just these lower Surtax limit executives whom the hon. Member for Grimsby said had no influence and no importance in making top business decisions.
What he said is plainly not true in my personal experience. Hon. Members opposite ought not to hug the illusion that what he said is true, because from my experience I would say that it is not true. These lower range Surtax people, as they have been described, are the life-blood of British industry and have a tremendous effect upon the decisions of directors, of the Clores and Cottons or 161 whoever else hon. Members name. If they are any good at all, these people know quite well that they rely upon the energy, the intelligence, the training, the skill, the good will, the courage and the endurance of precisely those people who were dismissed by the hon. Member for Grimsby as not being important to decisions in industry. What the hon. Member said is simply not true. Apart from this, where I think he was misled, no doubt by his strictly academic training, he had things pretty well right.
§ Mr. D. Jones
Would not the hon. Member agree that, while the people to whom he refers make decisive contributions within industry, they are not the people who take the decisions? That is what my hon. Friend the Member for Grimsby (Mr. Crosland) said, and that is a vital difference.
§ Mr. Green
I willingly agree that it is not their nominal decision, but if anyone inside or outside the House thinks that the person who takes the decision is such a chump as not to pay real attention to the opinions, needs and desires of those people I hope that he will forget the illusion, because it simply is not true.
I return to the Motion of censure. I presume it is that which interests the Opposition, otherwise they would not have moved it. At some not too distant time I should very much like to know from them whether when they talk of "social justice" the word "social" before the word "justice" alters in any way the meaning of "justice". Unless they can tell me, I strongly suspect that they do not know themselves what they mean by "social justice". Certainly they will have difficulty in connecting a demand for social justice with a demand for an increase in exports.
I will take one possible definition, namely, that "social justice" means higher living standards—that is, a greater ability to consume—for the poorest sections of the community. That is one tenable definition of "social justice". If that is the priority in the Opposition Motion, there can be only one consequence of conceding it, even if it is right to concede it. That will be greater internal consumption, higher imports and not higher exports. How the two can be combined is something which the Opposition have simply not bothered to think out.
162 It is for that reason that the Opposition have tabled a Motion of censure which is self-contradictory and, in strict terms, hardly worthy of debate. This is perhaps why they have not debated their own Motion this evening.
It is agreed within the nation, not in party political terms either, that continuing care shall be given to those who cannot help themselves. I believe that it is also agreed on both sides of the House that the gravest injustice within our society would be inflicted upon those people if there was inflation. One way to do injustice is to have inflation. I believe that it is also agreed on both sides that, whatever the colour of the Government, we do not have an easy task within present world circumstances.
From time to time today we have heard the plain statement from hon. Gentlemen opposite that we have an unusual combination of commitments for a country as small and as old as we are. We have the burden of defence within the West. Occasionally an hon. Gentleman opposite, with complete honesty, will say that we should drop the defence burden in order to do other things. He at least is honest. He has a priority, and in that respect he is honest. It is not a priority with which I agree, nor, I gather, is it one with which at least the Front Bench opposite agree, but the hon. Gentleman has a priority.
We have this burden of defence with which we are entangled in order to maintain, as best we may, the strength of the Western Alliance.
We also have the real burden—a very real burden that we are meeting—of helping those under-developed countries to which hon. Members on both sides have referred. When we are compared with Germany, it is forgotten that, whereas in. the years 1954–59 the German people gave some 274 million dollars in aid overseas, this country gave over 1,000 million dollars in aid overseas. That is another reason that I would have expected to have heard mentioned from the benches opposite why our investment performance at home does not appear to be quite so good as that of the Germans. It is a very honourable reason. It is one that I believe commands the support of hon. and right hon. Members opposite, but we do 163 not hear a word of it from them—not one word.
There is a third reason and, again, it is an honourable one. We did not lose the war. Because we did not lose it we did not have that almost total erasure of public debt which is the curious paradoxical windfall for our defeated enemy. We have continued to struggle along, and hon. Members opposite, when they were in power, had this appalling problem, too, so they should be aware of it. We did not have that wiping out of our public debt that those whom we defeated in war had as a subsequent windfall to their own post-war economic development.
These are all very honourable reasons why it is easy to prove that our pace of economic growth in the post-war years has not been as fast as that of the Germans. These are honourable, not dishonourable reasons, and I hope that hon. Gentlemen opposite will not attempt to destroy those honourable reasons for our own apparent relative lack of progress.
None the less, I agree, as the Government Amendment says, that we must now make a new departure and have our priorities. If I talk in those terms then, of course, as an ordinary back bencher, I must at least be prepared to indicate what I now think should be the main line of policy for the Government to take. So far, we have done extremely well. We have full employment, and have had since the end of the war—
§ Mr. Green
By any reasonable terms of definition we have had full employment. We have social services that it is our intention to put and keep on a sound footing, so that they may expand—but they must be on a sound footing. We have substantially increased our investment at home and abroad. We have, in the last difficult year of world trading, increased exports by 6 per cent. We have a higher standard of living than we have ever had before.
We have all that, but everyone recognises that that is not a point at which one stops but a point which impels on one a new and even more positive departure. I. therefore, willingly agree with my right hon. Friends on the 164 Treasury Bench that we must find a greater outlet for our exports relative to the amount of home activity we encourage. We must have more exported as a proportion of any additional activity we undertake at home. That is the priority—not higher consumption at home, not all these massive six commitments that the Labour Party—without having the means or the strength to support them, in the words of their own Chairman—would have the Government undertake. There is one single priority now, and that is, out of any increase in economic activity we can secure here, to increase the share that goes abroad. Without that, no real growth will be possible in this.
If I may say a word about this magic word "growth", growth at all costs, I am sure, was not what hon. Members opposite were calling for, even if occasionally they gave the impression that they were. After all, by the most modern methods I can grow a splendid patch of nettles in my kitchen garden and call it growth, but this denies me the use of my kitchen garden for real purposes. So it is not growth at all costs that any of us wants, and I suggest that we ought to be very clear about that, otherwise the doctrine of growth at all costs will be the next heresy that may perhaps seize us by the throat. We want growth of a kind that will permit us to send abroad, either as requited exports or as unrequited exports, goods of a useful and usable kind. That is the kind of growth we want, and not just any growth of any kind at any cost.
How is it to be achieved? There are two main things to be done. I suggest that taking into account the naturally conservative outlook—I do not apologise for the use of the word because I spell it with a small "c"—of the British people, as well as a state of full employment and a state of really substantial social security on which to fall back, it will not be very easy to get people to change from the thing less desirable to do now to the thing more desirable to do tomorrow. There is no particular reason why anybody should move from serving the home market to serving in the export market. There is no particular reason, precisely because, in terms of the Government's Amendment, the Government's policy has to date been so successful.
165 The first thing for us all to understand is that we must not spend any more effort upon propping up declining industries in this country. Otherwise room cannot be made for that kind of growth which both sides of the House say the whole economy must have. That must now be our priority. Whatever the quite understandable squeal from hon. Members opposite, we must assist in this process by helping people to move, because in this process of acquiring the necessary degree of movement and of change, it is people who matter, not things, nor plans, nor systems. It is planners not the plans, and people not the systems, who matter.
We must help people to move, and to do this let us, for mercy's sake, lower the direct rate of tax upon them. We should encourage people in this way and, if we have to, discourage those things that we want to discourage by taxing the things. Let us tax those things and not the people, and let us have as a priority that help towards a change of occupation which alone can give the growing point that both sides of the House quite properly desire to have.
Debate adjourned.—[Mr. Chichester-Clark.] Debate to be resumed Tomorrow.