HC Deb 25 July 1961 vol 645 cc229-35

Finally, I have decided to take action to fortify our reserves by a substantial drawing from the International Monetary Fund. This is being put in hand. The actual amount will be announced shortly when the discussions with the Fund are concluded. I would remind the House that such drawings have to be repaid within a period of three to five years, and this means that it is all the more necessary for the policies and measures I have outlined to be pursued with resolution.

I believe that these measures will protect our position in the immediate future and will form the basis for a long-term improvement in the balance of payments. They mark the first steps, following upon the five-year review, to establish a better relationship between public expenditure and the national resources. They will enable essential investments in productive industry to continue. At the same time, they will assist to restore our competitive power, to expand our exports, and to promote soundly based growth in the economy.

Mr. H. Wilson

It is, of course, a truism to say that the whole tone of the statement of the Chancellor of the Exchequer was utterly inconsistent with the prospectus on which the Government got back to office. Perhaps it will take the smirk off the Prime Minister's face if he is reminded that the boasts of prosperity on which he won the last General Election are now being sustained by borrowing sixteen years after the war.

The Chancellor's statement lasted for half an hour, and I want to put these questions to him. First, is he aware that his whole statement has shown the classical bias of the Government against public services and public expenditure, while, despite his warning, their tenderness to the private sector? The Chancellor referred to labour shortages. Will he tell us why, despite labour shortages and a record investment programme over the last year, there has still been no increase in productivity? How does he explain that?

The right hon. and learned Gentleman said that rewards should not go ahead of the increase in productivity necessary to earn those rewards. Wild he tell us, then, why we had nothing from him in his proposal about scrapping the Surtax concession in the last Budget?

Turning to the specific proposals, is he aware that the most clear and specific ones are the restrictions in housing, in house purchase, which are to be administered by Government fiat, and, at the same time, the increase on the interest rates which, of course, will bear far more harshly on local authorities than on the private sector? Will the right hon. and learned Gentleman also try to justify his attack on wages in the public sector, including the salaries of teachers?

Does not this once again show the Government's bias against people who, in the main, are underpaid and are essential to the community against other people, whose spending power is increasing all the time with Government help?

With regard to the private sector, while we welcome the Chancellor's halting progress towards a capital gains tax on the lines that we have suggested many times, will he tell us why he is doing nothing to repeal relevant provisions of the 1957 Finance Act, which enable private companies to keep their profits overseas as a means of avoiding taxation? Warnings here are not good enough.

There are a great many other points which we shall want to debate tomorrow and on the succeeding day, but in relation to this regulator, this 10 per cent. increase in indirect taxation, has not the Chancellor yet understood, as we told him repeatedly during the discussions on the Finance Bill, that this is a measure which will press most heavily on ordinary families? An increase of 5d. on an old-age pensioner's tobacco is a very serious thing, of which the Government really ought to be ashamed. This will press on ordinary families, but he is doing nothing to increase, by a similar surcharge, the level of direct taxation on the wealthier taxpayer, in that he is still maintaining his Surtax concession.

Will the right hon. and learned Gentleman say how he can justify this discrimination between the essential, on the one hand, and the inessential, on the other; between the public sector and the private sector; and, finally, between ordinary families and the richer taxpayers who are getting away with it?

Mr. Lloyd

The right hon. Gentleman began his questions by referring to prospectuses. That is a matter which we are very ready to debate with him and his right hon. Friends. He also referred to borrowing. The right hon. Gentleman and his hon. Friends have some experience of that, too.

The right hon. Gentleman went on to say that my statement showed a classical bias against public expenditure. It did nothing of the sort. It showed my belief that we have to bring public expenditure under proper control in relation to national resources.

The Surtax proposals do not come into effect until 1963, but I maintain that the proposal I have made for restricting credit in these present circumstances is fair between the public and the private sector.

The Opposition did not vote against regulator No. 1 when it went through in the Finance Bill, and I would have thought that it was clear from the facts I have outlined that these are precisely the circumstances in which that sort of regulator ought to operate.

Mr. Eden

Before my right hon. and learned Friend concluded that he should in any way reduce any overseas spending, what consideration did he give to the question of the financing of the social services generally? For example, is it still justifiable that the State should bear about £68 million a year on school meals and milk? [HON. MEMBERS: "Oh."] Is he aware that he will have the fullest possible support for any measures he takes to strengthen the value of the £, such as he announced this afternoon?

Mr. Lloyd

I note what my hon. Friend said. I will bear it in mind, but I have tried to keep a proper balance in these proposals.

Mr. Grimond

Is not the upshot of what the Chancellor of the Exchequer said that nothing new or unexpected has developed in the world economic scene? What we have been told is that Tory economic policy has been totally mis- calculated and totally inadequate. Is it not only three months since we had a Budget in the House, which is now shown to have been quite irrelevant to the economy of the country? Have not we been told today that the only thing the Government can think of in the current year is again to put up the Bank Rate and increase Purchase Tax? Is it not time that a Government who have come to the end of their road should resign?

Mr. Lloyd

I do not think that the hon. Gentleman can have listened very carefully to my statement. As regards the suggestion of miscalculation, I indicated very clearly in my Budget speech what the trends were, and the hon. Gentleman knows quite well that the international situation has certainly not improved since then. The figures which I have given show that internal demand has continued beyond what was to be expected. I do not remember at any time during my Budget speech any hon. Member of the Labour Opposition, or even of the Liberal Party, suggesting that the Budget ought to be harsher. Therefore, I think that there is a considerable element of humbug in this sort of criticism.

Mr. Nabarro

While congratulating my right hon. and learned Friend on his tough, resilient, and realistic statement this afternoon, may I ask him to answer two short questions? First, what does he intend to do with the extra £140 million in taxes that he is raising under Section 9 of the Finance Act in the current year, and £210 million in a full year? Is it intended to put it back into a fund for perhaps post-crisis tax credit to those who paid it, or what does he intend to do with it?

Secondly, in view of the dangerous inflationary pressures which he has explained this afternoon, would not it have been advisable to increase the incentives to personal savings, and to study the drop in the results of the National Savings movement in the last few months and perhaps have a new issue of National Savings Certificates, the 11th issue, or increase the limit on the present issue—but at least do something as a further hedge against inflation by giving people incentives to save instead of to spend. Would not that have been advisable?

Mr. Lloyd

The yield of the extra tax will be used to fortify the surplus and diminish the inflationary pressure. I think that my hon. Friend's second point is a matter for debate. I am not at all out of sympathy with the suggestion that he put forward, but I think that it is a matter for debate.

Mr. Gaitskell

Will the Chancellor of the Exchequer agree that during the past year there has been virtually no change in British industrial production? Can he say whether the measures that he has announced this afternoon are intended, as far as he is concerned, to increase production, to reduce production, or to leave it unchanged? Can he also say by what means the Government propose to increase the long-term efficiency and competitive power of British industry?

Mr. Lloyd

The answer to the right hon. Gentleman's second point is, "By reducing costs". As for the first point, I believe that the best way upon which to build an increase in British production is to have the economy soundly based, to have public expenditure in proper relation to resources, and also for the steps to be taken in industry which I intimated in my statement.

Mr. Biggs-Davison

My right hon. and learned Friend spoke of drawings from the International Monetary Fund. Is he aware of disturbing reports that I.M.F. assistance to sterling may be made conditional on our merging with the Common Market? If such pressure is applied, do the Government realise that if they tell the people and trust the people they will have the unswerving support of the nation for any measures necessary to resist such interference in British affairs?

Mr. Lloyd

There is no question or possibility of any such condition being imposed. As for drawing upon the International Monetary Fund, I would remind the House that during last year we strengthened our drawing powers by about £130 million. Our view of this Fund has always been that it should be used for immediate recourse in time of temporary difficulty.

Mr. Shinwell

In his survey of the economic position of the country has not the Chancellor overlooked one very important item, namely, the fact that we are now spending £1,600 million a year on military organisations? When he referred to the need for maintaining our obligations to N.A.T.O. and, at the same time, called upon the Minister of Defence to review our overseas military expenditure, what did he mean? Did he mean that we intend to withdraw some of our forces from the West, or are we to reduce our military commitments in some other theatre? Can we have some clarity in these matters?

Mr. Lloyd

As for military expenditure overseas generally, what I said stands. The Minister of Defence will have a review to see whether the burden upon our foreign currencies can be reduced. As for Western Europe, we are acting in accordance with the terms of the W.E.U. Treaty and in accordance with the procedures established by N.A.T.O.

Sir H. Legge-Bourke

Is my right hon. and learned Friend aware that the farming community will expect to make some contribution towards the national effort to overcome our difficulties? Nevertheless, has he taken full account of the fact that what has led to the subsidisation bill increasing at the ratepayers' expense year by year has been the uncontrolled nature of imports of products similar to those the stimulation of production of which is being encouraged by the Government? Can he therefore give an assurance that the whole question of import policy with regard to those commodities which are subject to the encouragement of Price Reviews will be fully examined?

Mr. Lloyd

The answer to the first part of that supplementary question is "Yes, Sir". The second part opens up wider issues.

Mr. Monslow

Does the Chancellor think that the trade union movement will accept the philosophy of wage restraint in the light of the decisions that he has announced today?

Mr. Lloyd

I should certainly think that the answer was "Yes".

Several Hon. Members

rose—

Mr. Speaker

I am in the hands of the House, but I would point out that we shall have two days in which to debate these matters.

Mr. Gaitskell

Since I gather that it is your wish, Mr. Speaker, that we should not proceed too far in this matter today, may I ask the Chancellor of the Exchequer one further question? Is he aware that there is not a single specific measure that he has announced this afternoon which seems likely in any way to increase productivity or exports of British industry? Is he further aware that he has lost a great opportunity of achieving a sense of national unity in this crisis by the gross unfairness of the proposals that he has put forward?

Mr. Lloyd

rose—

Hon. Members

Resign.

Mr. Speaker

One right hon. Gentleman has asked a question of another. I hope that the House will allow the other to answer.

Mr. Lloyd

I quite understand the dislike of that question receiving an answer, but the right hon. Gentleman asked it. When he considers my statement I think that he will see that I have been fair in my proposals—that I have tried to deal fairly with both sectors of industry—public and private, and that in my suggestion of restraint I have covered not just the wage earners, but other sectors of the economy.