ECONOMIC SITUATION

HC Deb 27 July 1961 vol 645 cc610-72

Order read for resuming adjourned debate on Amendment to Question [26th July]: That this House endorses the policy of Her Majesty's Government as outlined by the Chancellor of the Exchequer on 25th July for the purposes of upholding the strength of sterling improving the balance of payments and maintaining a sound basis for the continuing prosperity of the nation.—[Mr. Selwyn Lloyd.]

Which Amendment was, to leave out from "House" to the end of the Question and to add instead thereof: has no confidence in the policies of Her Majesty's Government as outlined by the Chancellor of the Exchequer on 25th July which, being most unfair in their incidence, are calculated to divide rather than to unite the nation, offer no long-term remedies for the weakness of the British economy and resemble in many respects those adopted by Her Majesty's Government in the past with such lamentable consequences for the country".—[Mr. H. Wilson.]

Question again proposed, That the words proposed to be left out stand part of the Question.

3.37 p.m.

Mr. George Brown (Belper)

There is, as was shown yesterday, a threefold charge against the Chancellor of the Exchequer in particular, and the Government in general. First, that in so far as he got the problem facing Britain right in his analysis when he referred to our lack of growth, our lack of competitiveness and our lack of productivity, his proposals are largely irrelevant, and, we think, almost wholly ill-conceived.

Secondly, that to a large extent he has completely misconceived the problem. In consequence of that, his proposals, particularly the attack that he is making on the communal provision that we make for our life, will actually do harm to our position.

Thirdly, that by the nature of the proposals he has made, both those which are positively in, and those that he has left out, he has failed, and notably failed, to create a climate in which there can be a call for national action. Indeed, it can be said that he has done the opposite.

I will not waste time proving by reference to past documents—although that would be very easy—that over the years, and particularly over the three years during which the Chancellor of the Exchequer said that we had been consistently running a balance of payments deficit the Prime Minister has regularly and continuously presented the country with a false appreciation of our position. The whole country knows this to be true. The right hon. Gentleman is sufficiently discredited, and there is nothing more that I need say on that subject.

But so that hon. Gentlemen behind him do not think that they are not also tainted, I thought it as well to bring to the House one or two prospectuses on which they were returned at the General Election. I am only using documents used in 1959. There is a magnificent assortment if anyone wishes to go farther back. The first one I have, which hon. Gentlemen will no doubt recognise, is the one which says: Conservative government means lower taxes for all which, on the whole, is a little out.

The next one is: Homes or no homes". That question has now been answered. The Chancellor has stopped the homes. The third one is headed: Fair shares for all". Then, in small print, which perhaps all hon. Members' constituents do not read, it says: Sounds good, doesn't it? But it depends on what you mean by 'fair shares for all'. I can almost see the Prime Minister writing it.

Then there is a little gramophone record which no doubt was played around the constituencies of right hon. and hon. Members opposite. It is headed on the cover: An even better life by the Tories … for best results use only … at 33⅓ revolutions per minute. There, the Chancellor of the Exchequer is living up to the promises that he made.

The fact is that the Government, on the basis of their speeches and their propaganda, lack any moral claim from which they can call the nation to action, as my right hon. Friend the Member for Huyton (Mr. H. Wilson) said yesterday. I guess that never again in their lifetime will they be able to do it. They might hope that things will eventually im- prove. No doubt the Prime Minister hopes that. He no doubt recalls that in 1957, two years before the last General Election, things looked bad for them, but things improved for them with the aid of these false prospectuses. They can hope that things will improve and that the nation will forget.

Mr. Peter Tapsell (Nottingham, West)

rose—

Mr. Brown

No, I do not intend to give way.

They can hope that the nation will forget. They can hope to be able to distribute largesse before the next General Election, as they did before the last. They can hope for all these things, but if the nation's trouble is as deep-seated and long-term as the Chancellor has told us it is, whatever they get in the way of accidents like that this Treasury Bench can never hope to deal with it.

There is no doubt that this time the people of our country really showed themselves to be tired of these recurrent crises and of the rather old and stale ways of dealing with them. There is evidence that the people were impressed, and were to some extent frightened, by the comparison between us and our rate of progress, if that is the right word, and Continental Europe and its rate. There is good evidence that our people are conscious that we have been "living it up" and of the consequences of doing so.

I believe that our people were waiting before this Budget and would have accepted strong, and even tough, measures if there was some evidence that those measures were relevant and that their incidence as between one group and another was fair. The measures that they have now had presented to them, as is shown by every comment on them outside the House, as well as in the House, do not seem to be specially relevant and certainly do not seem to be fair in their incidence as between one group and another.

As a result, there is a much greater sense of let-down among our people and, to some extent, a considerable sense of anger, since they feel that the opportunity has been so clearly taken to attack one group, namely, the wage and lower salary earners, instead of dealing with the problem and making us all share the burden of it. I suggest to the House, politics apart, that we, this country, this Legislature, will pay a very heavy price for the fact that these two feelings have been put into the minds of our people.

The Chancellor of the Exchequer outlined the problem facing us well enough, both in the previous economic debate and when he made his statement. The problem he outlined well enough is not new. He is not new in his job. He has had very nearly one year now to come to grips with it. He should by now have been able to offer the country a realistic national plan. He ought by now to have been able to offer an appreciation of the requirements which will face this country in the five years ahead. He ought to have been able to make a shot at matching our resources up to those requirements.

In consequence, the Chancellor ought to have been able to establish the gap and lay down the priorities. He ought, therefore, to be able by now, if not before, to have called in industry—that means both sides of industry, management and labour—and the public authorities to ensure their effective participation in that plan. He ought to have been able to do this by now. He has not done it.

Further, why did he not, in his statement, in view of his own analysis, show a willingness and an ability to control imports, obviously so very large a part of our trouble? There is no commentator outside the House who does not hold the President of the Board of Trade, whose proper decency is not taking part in this debate we all mark with respect, very largely responsible for the situation we are in, because of the enthusiasm with which he abolished our ability to control imports.

Why did not the Chancellor put right the mistake his right hon. Friend made? Why did he not show himself willing to limit inessential and luxury building work, so many examples of which are all around us? It might have been too much of a political pill to expect him to swallow, but why did he not at least suspend the Surtax gifts he has promised to his wealthy supporters? Why did he not make a real move in on capital gains and other tax evasions, instead of the tentative, half-hearted proposals he is making?

I mention these things for no party reason, but—[HON. MEMBERS: "Oh."] Well, it is very often possible to get a party advantage out of the most obvious truth, and that is what will happen as a result of this debate. I mention them to echo something that my hon. Friend the Member for Southwark (Mr. Gunter) said last night. Had he done these things, or a number of them, he could so easily have set the climate for discipline and responsibility among our people. It is his failure to establish the prerequisite of the climate in which our people would be willing to exercise restraint and discipline that convicts the Treasury Bench of its culpability in this situation.

Instead, we get a very sloppy halfway house to planning. It was exciting and impressive to hear the Chancellor say that planning was no longer a dirty word to him, but I gathered from the way in which he said it that he felt rather like the publishers of Lady Chatterley's Lover—not so dirty that he will not print it, but that he does not particularly want to use it any more often than he has to.

We get a very half-hearted reference to a body called the N.A.C.P.I. I have no doubt that when the Chancellor mentioned the discussions he was to have with that body, some of his right hon. and hon. Friends behind him hardly knew what he was talking about, which is not surprising. This is not planning; this is not the way to plan. I know that body; I have been on it in former days, and I know its value and its limitations. That is not where planning is done, and it is not relevant to what is meant by planning. While the word may not be dirty to the right hon. and learned Gentleman any more, clearly, so far, it is not very well-known to him in its proper meaning.

All we have had from the Chancellor is the same dreary old succession of measures, for some of which, in a different setting, maybe a short-term case could have been made, but a dreary succession of measures which, in this setting, are the only measures proposed, where there is no long-term setting in which to put them, and which, in this context, could do little good and might, as they have done in the past, do a very great deal of harm.

What have we had? First, the increase in the Bank Rate, which has been revised, presumably, to increase our competitiveness, but it is bound, inescapably, in some respects, to reduce our competitiveness. It is bound, because of the price it puts upon expansion, because of the price it puts on—is there anything wrong with the Economic Secretary, the hon. Member for Doncaster (Mr. Barber)? I listened to him last night, and he might perhaps now listen to the answer to what he said. It would be more intelligent than just sitting there grinning. [HON. MEMBERS: "Oh."] This is an old game, which I also play, so I know all about it.

It is bound to discourage expansion, because of the price it puts on obtaining the credit with which to do it. It is bound to increase, some day, our long-term problem, because the hot money, the funk money, which it attracts here will go home again some day. When it goes home again, we shall, therefore, be faced with a much more serious problem than we are faced with now. It is bound to increase our payments across the exchanges, and that is one of our problems at the moment.

It is bound to increase the Exchequer's present interest payments internally, and is bound to make it more expensive for us to do any of the communal services which we have to do. Every £1 that our local authorities and public authorities have to borrow for any of the social services they have to do will be more expensive after this than it was before this. To that extent, it cannot possibly increase our competitiveness but can only reduce it.

We then get the so-called regulator. This is a newer name for an old device. What does it do? It increases the prices of essentials and inessentials indiscriminately, and its incidence falls proportionately more heavily upon essentials than it does on luxuries. For example, the effect of the regulator will be heavier on some foodstuffs, comparatively to what people spend on them, than it will be on television sets or motor cars or other luxuries.

It falls very much heavier on old-age pensioners, on those with large families, and on those on small fixed incomes, who spend a higher proportion of their incomes on these things, than it will fall on some better-off people, who spread their spending over a very much wider range of things. While doing that, and, therefore, while increasing the existing inequity in our country, it will fail to damp down demand.

The point that the Chancellor was making was that it will take £200 million out of the demand. This rests on assumptions which, I think, are not provable, because the incidence of the increase is not big enough to deter buying. The claim that because we put 30s. extra on a television set at £69 we therefore take £69 out of the demand, which is the point of the claim, is ridiculous. The person who will pay £69 will still pay £70 cf0s. The argument that if we increase the price of a motor car costing £800 by £30, we have taken £800 out of the demand is nonsense. The person who will pay £800 will still pay £830. I will tell the Government what they have done.

Sir Alexander Spearman (Scarborough and Whitby)

I wish the right hon. Gentleman would learn a little elementary economics.

Mr. Brown

Well, what is the point?

Sir A. Spearman

If more is spent on one thing, there is less to spend on others.

Mr. Brown

The obvious retort to that that is that it is a pity the hon. Gentleman has never got beyond elementary economics, because my next point is that it does not deter the members of my union from buying, but that it is an absolutely invaluable pinprick, driving them to ask for more wages to finance the purchase. That is what happens. It is no good the hon. Gentleman shaking his head, because this is how it works. I listened yesterday to some dreadful nonsense from the other side of the House about how manual workers act, and it will not do right hon. and hon. Gentlemen opposite any harm today to listen to someone who has spent many years in that atmosphere.

Sir A. Spearman

rose—

Mr. Brown

No, I have given way once.

What will happen? If hon. Gentlemen opposite really believe—and I did not realise that this was the basis of their thought—that if one of my union members has to fork out 30s. in extra tax for something costing £70, he will write it down in a little book and spend 30s. less on something else, they have got it absolutely wrong. That is not how it works. I assure the House that if the Government put this kind of marginal increase on everything he buys, what they will have done will be to produce an invaluable aid to all those who are making claims for additional wages. This is exactly what they will achieve, and, as a trade union official, I assure them that that is exactly what we shall have to contend with and pass on to them.

Several Hon. Members

rose—

Hon. Members

Sit down.

Sir Cyril Osborne (Louth)

Is the right hon. Gentleman arguing—

Hon. Members

Sit down.

Mr. Julian Ridsdale (Harwich)

rose—

Mr. Speaker

The right hon. Gentleman has been good enough to give way. Perhaps he would now be good enough to indicate to whom he gave way.

Mr. Brown

In view of the competitiveness of hon. Members opposite, I have now withdrawn the offer, Mr. Speaker.

This action of the Government will be an invaluable pinprick to claims for higher wages, and every industrialist on the other side knows it.

Mr. Ridsdale

Will the right hon. Gentleman give way?

Mr. Brown

Sorry, but the hon. Gentleman has missed his chance.

What I have just been saying referred to the regulator. What is the next thing that appears? It is this tremendous attack on what I call the communal services, the things that we provide for ourselves without primary regard to making profits out of them. I refer not only to the social services, like health, housing and education, all of which are attacked by the measures in this "Budget" and all of which will be reduced, but I am thinking also of the publicly-owned sector of industry which, for the most part, covers the essential services which we found could not adequately be provided for the country on any other basis.

I mentioned a prospectus entitled "Homes or no homes". How much does any hon. Member opposite believe that to handle the long-term situation which the Chancellor analysed we have to deny people wanting to buy pre-1919 houses the opportunity to borrow the money with which to do so? Does any hon. Member opposite believe that classes of 40 or more in our public education service must not be reduced, to satisfy the long-term needs which the Chancellor set out?

I listened yesteday to the speech of the right hon. Member for Flint, West (Mr. Birch). I am sorry that he is not here now. I also heard the speech of the hon. Member for Bath (Sir J. Pitman), and I am sorry that he, too, is not here. I have never heard such nonsense as they spoke on this subject. Our problem is not that we have been providing too much communal service for each other. That cannot be said when our schools have classes of 40 and upwards. That is not the problem.

Sir C. Osborne

The problem is exports.

Mr. Brown

The problem is that we have not raised our production as high as our competitors [HON. MEMBERS: "Exports."] Had we raised our production, our competitive production, and increased our exports—[HON. MEMBERS: "Ah."]—we could have afforded all that we have been providing and more. When hon. Members opposite shout "Ah", they remind me of what I heard yesterday. They kept on talking about what we had not done—we had not exported enough, we had not done this, and we had not done that. But it is they who have been in power for ten years. It is ten years since we were in office and it is hon. Members opposite who have the responsibility, that set of tired and worn-out gentlemen.

Several Hon. Members

rose—

Mr. Brown

I will not give way, because that will only take time from other speakers.

The point I want to make is of tremendous importance. To cut back the provision of essential communal services, which is what the right hon. Member for Flint, West would do, is exactly the wrong way round. If we cut back so that we can keep within the results of our stagnant economy, we accept stagnation, and that way we can only die. What we ought to say is what amount of communal provision we must maintain. We ought to do more. We ought to accept this as a challenge and see how we can raise productivity and raise output and direct it into export channels in order to be able to afford more of these things.

The basic difference between hon. Members opposite and hon. Members on this side of the House is that, as in the 1930s they are stagnant-minded and would like to settle down on a lower level, a lower level of output and a lower level of communal provision, rather than make the effort to push it up.

Sir C. Osborne

Rubbish.

Mr. Brown

The hon. Member says "Rubbish," which is the most erudite word that he has ever used.

How else can we explain the Chancellor's policy? How else can we explain the speech of the right hon. Member for Flint, West? The whole burden of his complaint was that we were doing more than we could afford, so we should cut back to what we could afford, not saying, as I would, "Let us afford more and find out how to do it".

To cap all that, the Government then produced the wage freeze. If hon. Members opposite are in the mood to listen, let them hear me now. There is no worse way of trying to get a worker expansion-minded than to talk to him about holding back his wages. The moment he is conditioned to understanding that his wages are being held back—if one succeeds—so he will also be thinking in terms of holding back production. There is no way into the one without the other.

The Prime Minister is to speak to us tonight, after a long interval. Will he explain how this wage freeze is to be achieved? I understand that, first, hints are to be dropped to arbitrators; secondly, that there is to be a call to private industry managers to fall into line; and thirdly, as we have seen from the Minister of Education, that there is to be active intervention in the actions of joint negotiating bodies.

What a way to get the workers interested in joint consultation with their employers! What a marvellous basis for going out to sell the idea that management and workers ought to cooperate when the first thing they are told when they do is that, if the Government do not like what they decide, they will step in and stop it.

What will all this achieve in the private sector? It will introduce friction between management and men where friction does not now exist. Even where industrial relations are good enough for management and workers to get on, because the Government have called upon the management to act differently and the management loyally does friction will be produced in industrial relations where, hitherto, there has been none. My poor friend and comrade, Ted Hill, got into trouble for using some injudicious words. I must say that the Government are going out of their way to give his words effect and meaning and point.

What is the use of increasing charges and costs in three Budgets this year—and this is the third? First, the Government increased taxation on the worker by increasing the cost of his National Insurance stamp. Then they taxed him when he was sick by increasing his health charges. Then they raised Purchase Tax and Excise duties. Incidentally, do not let us forget the action which the manufacturers took very quickly during the last two weeks. They put up the prices of everything, particularly beer and cigarettes, just before the Chancellor's announcement. All these measures, spread over three Budgets, have raised the cost of living to an extent which cannot be hidden.

Having done that, manufacturers continue to advertise with all their power on television every night. We will be told how many more transistors, how many more television sets, how many more cosmetic outfits and how many different kinds of drink we could have, and should have, even at the increased prices. Prices have gone up and costs have increased, and then we have advertising like mad and Ministers still saying how good the situation is. Incidentally, by the time the Economic Secretary had finished speaking last night I was nearly convinced that we did not have a crisis!

What is the point of doing all that at the very moment when the workers are being asked either not to ask for a wage advance, or, if they ask for it, to do without it when it is refused? As any kind of argument, political or economic, it is absolutely barmy. This is not the climate we want. This is not the lesson we want to be drawn, and it cannot lead to the conclusion which we want to be reached.

May I try to get the wage issue clear and to put the level of wages and wage advances into perspective? This, again, arises from the nonsense that was talked yesterday by hon. Gentlemen opposite. The idea that in Britain we have average earnings of around £15 per week, and that this is the amount which our union members take home each week, is absolute rubbish. A very large number of British workers do not take home £10 a week.

Mr. William Yates (The Wrekin)

We do not believe the right hon. Gentleman.

Mr. Brown

When hon. Gentlemen opposite say that they do not believe me, they do themselves discredit, not me. I urge them to go and check these facts for themselves. All the public services, agriculture, a very large part of the mining industry—[HON. MEMBERS: "Oh."]—yes, and railways, come under what I have just been saying. I can assure hon. Gentlemen opposite that if they say that they do not believe me, they have it all wrong.

Mr. W. Yates

No.

Mr. Brown

There is nothing one can do with the blind who will not see. I assure hon. Gentlemen opposite that they are supporting a wrong policy—perhaps their Ministers are as blind as they are —because they are being misled by the selective stuff that is being put around. This can be proven.

But let me make it clear that the Chancellor did not hang it on the level of wages. He was wiser than the hon. Gentlemen behind him. He hung it on the increase an increase, he said, which exceeded our industrial output increase. But to do that the Chancellor took only one year—last year—and to show just how selective his figures were, had the right hon. and learned Gentleman taken two years instead of one he would have arrived at the position where the increase in wages was less than the increase in industrial output, and quite notably so.

The rate at which wages have been rising recently is less than that of our competitors and is notably less than that of Western Germany, which is so often urged against us. If one takes 1953 as being, for this purpose, 100, one finds that whereas our present hourly wage rates are 140, in Western Germany they are 163, Holland 155, Sweden 149 and only in Belgium are they near ours, at 138. If one also remembers that in many of those countries there are social wages paid by employers that here are borne on tax, the comparison would be even better from our point of view.

I do not claim that our balance is right, or that there is not a problem. All I am saying is that the House should get the matter into perspective and understand that it is not the level of our take-home pay that is so very high. It is not the comparison between our wage rates compared with our competitors. It is that our production and productivity is worse than in these other countries.

I now put an argument which, perhaps, everyone will not accept. We would be far better to realise that personal incomes at this low level are bound to rise. Workers on £8, £9, £10, or £11 a week cannot be asked not to want higher personal incomes. It is an absolute waste of time to argue that one can stop them rising. The thing to argue about is how one can relate the rise to productivity to ensure that it is paid out of increased earnings. [HON. MEMBERS: "Hear hear."]

Hon. Gentleman opposite say "Hear, hear", but that is not what the Chancellor is doing by his policy. If he were to address himself to this question and create a climate to achieve it, we might be able to come nearer together. I will try to be as honest as was my right hon. Friend the Member for Huyton yesterday and try to put to the House—as my right hon. Friend did in the field of taxation and our balance of payments—my ideas.

First, let us look at the Government's intended actions. Take teachers as an example—although do not let us think that they are the only example. There are also the firemen. If ever a body of men have an absolutely outstanding case for a substantial increase in pay it is the firemen, who are being grotesquely treated. If they are to be interfered with in the middle of their wage claim, as have the teachers, there will be a very serious situation for this House to face within a short time.

As for the teachers, I wonder just how proud are hon. Gentlemen opposite about what the Government are doing. I say straight out, as a trade union official, that the teachers were very ill-advised not to have accepted the Burnham award when it was made. But, had they accepted it, it would not have made any difference, because it would not have been ratified until today and, in any case, the Chancellor made his statement yesterday. Nevertheless, I urge hon. Members to think of their case and I put this to the Prime Minister in the hope that he is still approchable.

I know a young girl—[HON. MEMBERS: "Oh."]—my daughter, and I hope that hon. Gentlemen opposite know their daughters, too—who, at the age of 22, and in teaching, has got a class next term of 40 children. She has five Ordinary level and two Advanced level certificates, the sort of person referred to on three occasions during the last week by the Minister of Education, in an offensive overtone, as a two-year trained teacher. That was not what was said to her when the Government were trying to get her into teaching. However, at 22, with five O levels and two A levels, her pay is £520.

What would an industrialist pay for her? She gets no luncheon vouchers, or any of the "perks" paid by hon. Gentlemen opposite to workers in their offices. And, of course, her pay rises slowly, so slowly, up the scale. Compare that with a shorthand typist aged 18 or 19, let alone 22. Compare it with the executive grades in the Civil Service. I do not ask hon. Members to compare it with the teachers. Perhaps such a comparison would not be realistic. Let us make sensible comparisons, with commerce or industry. Can anyone say that the starting figure which has been agreed of £600 at age 22, with those qualifications, is unreasonable, or out of keeping with what is being paid outside? Yet this is what the Chancellor has instructed the Minister of Education to say to them.

What conclusion should the teachers draw? Should they leave teaching, at which they have worked so hard and for so long, and go into commerce? Should they lose their idealism? Hon. Members opposite must consider how we are to get the sort of nation that we all say we need in order to work our way out of the problems which we face. Thus, today, I put this to the Prime Minister. Both sides of industry met in their free negotiating body, as the Home Secretary was so proud to label it in 1944, when he told them that they could have full freedom to do what they thought best.

They met, and both sides decided to reject the intervention of the Minister of Education. They decided to reject his attempts to tell them what the global sum should be. They decided to reject his attempt to tell them how to split it up. They decided to send forward the recommendation for the increase on which they had both agreed. This is a matter of tremendous importance for us. I ask the Prime Minister to be big enough to withdraw the announcement which his right hon. and learned Friend made yesterday. Let this deserving group of people have the increase which has been agreed.

Although I feel strongly about that particular case, it is not that which worries me so much. I am more worried about the consequences of the principle involved. The Minister overrules a joint agreement. He interferes with a free negotiating body. Will other Ministers follow suit? If they do, where will it get us in industry? Does the Prime Minister realise what will happen? Once it is understood in industry that free negotiating machinery is no longer free, but is subject to arbitrary direction by the Government, whose hand does the Prime Minister think will be strengthened?

Has it occurred to the right hon. Gentleman that it is no use appealing to responsible trade union officials to face their members fairly at the very moment when he is doing the other fellow's arguing for him? Does he understand that, if we are to overcome our present trouble, we must keep industry at work, we must get management and work-people co-operating together for new techniques, for productivity and for proper working during working hours? This requires mutual trust. It requires a belief in each other's capacity to make an agreement and to honour it.

Does not the Prime Minister realise that the policy of interfering with the results of negotiations can do nothing but prevent any of those ends being attained? It can only provoke industrial strife. It can only sow mistrust and it can only support those who say that joint negotiating machinery is the way in which the bosses tie the workers up for their own benefit—which is what is said.

I beg the right hon. Gentleman to understand that, although the Government's policy may seem attractive to him for a short-term purpose, in the long term, as those of us who have been a long time in the business know, it can only undo everything which has been done since the Mond-Turner Committee after the 1926 General Strike began a new outlook in British industrial relations.

It has been said—it was said yesterday by the right hon. Member for Flint, West and by the hon. Member for Bath—that trade unionists, the workers, bear a special responsibility in regard to restrictive practices, strikes and a lack of productivity. I do not accept that. I do not believe that it is true. If any hon. Gentleman opposite can show me an industrial concern with a notably bad record in industrial relations, he will, perhaps, be able to show me also an awkward union and some disaffected shop stewards, but I shall be able to show him a bad management. It is astonishing how bad at industrial relations and how bad at consultation many of our best firms are.

Sir. C. Osborne

What about the London docks?

Mr. Brown

I shall come to that.

I shall not go into details, but I was recently in touch with a firm working on a national contract for one of our great atomic installations. I know the management very well. I know them to be good people. I was surprised at what I read in the chairman's speech. I asked him to come and see me. We had a talk about it, and he told me of the troubles that he had had with a certain union on a particular job. I asked him whether he had seen the secretary of the union. He had not. Had he seen the president of the union? He had not. Had he seen any permanent official of the union? He had not. I asked him why. He said, "The employers' federation would not like me to see them direct". I replied, "For goodness' sake—how do you think that industrial relations work?". I arranged for him to see them. While this was not the only thing which was done, the subsequent history of the work was completely different from its previous history.

Of course, we have men in our ranks who are awkward. Of course, there are particular industries where there is a tradition of resistance. But I am sure, also, that where management takes this aspect of management seriously we do not have the troubles that we have elsewhere.

My hon. Friend the Member for East Ham, North (Mr. Prentice) and I recently visited a firm in Greenwich, G. A. Harvey & Co., a large firm in heavy engineering and heavy steel work right down to quite light work, which employs a very large number of people. It was quite astounding to find, in an industry not notable for good relations that this firm's productivity record was tremendously impressive and its record in industrial relations was outstanding. Also—mark this—at every level, from the training of apprentices to the training of the top ranks of management, there were first-class schemes. The firm took the whole thing seriously and spent a great deal of time and money on it.

When I went round the works. I met the shop steward convenor. He did not come from what is called one of the responsible unions. He was a convenor and shop steward of the Electrical Trades Union. I said, rather jocularly, to this man, "What are you doing about educating the chairman?" I had been having quite an argument with him. The shop steward replied, "Nobody educates anybody here. We educate each other. We have," he said, "the best relations here. We have the best production record of any firm in south-east London".

I could duplicate that type of case. Why do some firms in the car industry have a notably good record while other firms in the car industry have a notably bad one? The answer is not that we have not responsibility, but that, in this matter, using men as using machines, the ultimate responsibility is on management, and, in fact, when things go sour, it is usually because management is not up to the job.

If the House would like it, I will accept, just for the sake of carrying the argument a stage further, that the trade unions have a special responsibility. Let us accept that the workers have a special responsibility. How will we put things right? It must be the desire of all of us to put them right. Can we do it in the Chancellor's way, by putting a premium on conflict in industry, by destroying negotiating machinery, by making people restriction-minded instead of expansion-minded? We submit that that is not the way.

A dynamic approach to economic growth in individual plants, in industry and in the nation as a whole, and to industrial co-operation, productivity and reduced costs requires self-discipline. All those things require self-restraint, because in a democracy one cannot impose discipline or restraints; there must be self-discipline and self-restraint.

Mr. Tapsell

And in speeches, too.

Mr. Brown

This calls for willing acceptance of and eager participation in the plans which the Government seek to put over, and to obtain that acceptance and participation requires an instinctive feeling by men that social justice is the aim of the country.

In conclusion—I hope that that cheers up the hon. Member for Nottingham, West (Mr. Tapsell)—if our people are given, as they are not, fiscal and social policies which clearly indicate that the burdens and benefits will be fairly shared, we shall then have a climate which will lead to the Government having a consistent—that is very important —and realistic national industrial plan, with the priorities that they deduce we need and with the physical means of achieving them matching the resources with the requirements. If we have complete participation in consultation—I do not merely mean information after the event—between the Government and industry, between the two sides of industry and between the two sides of individual undertakings, then I think that we shall be on the right road nationally instead of being on it in only isolated and outstanding cases.

There would still be resistances, but we would have the climate in which to deal with them. Industrial statesmanship would be applauded and it would get its reward instead of seeming so often to be a way of not getting what one's union members think one ought to get for them. We should also have a wholly new national outlook. Our industrial scene would be transformed, because cynicism and unfairness would no longer be the keynote of our national policies.

As I said at the beginning of my speech, the great cross of the Prime Minister is that he has fathered and campaigned for, and has succeeded in getting accepted, a very shoddy image. "Budgets" as unfair as this one fit in with the cynicism and shoddiness which his speeches have so often portrayed. It is because of that that all of which I have spoken cannot be achieved under his Administration.

4.32 p.m.

The Financial Secretary to the Treasury (Sir Edward Boyle)

The right hon. Member for Belper (Mr. G. Brown) has raised a number of points to which I shall endeavour to reply. He said—hon. Members may have forgotten this point; it was made some time ago, at the outset of the right hon. Gentleman's remarks—that the regulator which my right hon. and learned Friend the Chancellor of the Exchequer has introduced falls comparatively heavier on foodstuffs than on television sets.

In case that is taken up outside, I should put the record right straight away. As far as food goes, the regulator affects only the duties on sugar, tea, cocoa, coffee and chicory, all of which —[Interruption.] The approximate yield from the 10 per cent. surcharge on the items which I have mentioned will be very little over £1 million a year of the total sum of £210 million a year which will be brought in by the regulator.

Mr. G. Brown

That was not the point that I made. I said that people on small fixed incomes, such as old-age pensioners, spend more on tea, sugar and other food than on television sets.

Sir E. Boyle

I heard the right hon. Gentleman correctly, and I thought it right to get the figures on the record. Many hon. Members wish to take part in the debate and, therefore, I intend to confine myself to three subjects: first, the economic background to the measures which we are debating: secondly, the measures themselves and, thirdly, the long-term objectives of our economic policy.

I do not think there can be much doubt about the background. Today, Britain is faced with the problem that her overseas balance of payments has been tending over a period of years to get worse. It has now reached a state in which strong remedial action has become essential. The main underlying factor of this deterioration has been simply that home demand has been increasing too fast relatively to our production. I do not wish to weary the House with a mass of figures, but I think that it is instructive to compare the figures for the financial year 1959–60 with those for 1960–61.

Between those two years, total home demand, measured in real terms, rose by about £1,100 million, private consumption by about £425 million, public authorities' consumption of goods and services by about £125 million, fixed investments by about £300 million and investment in stocks by about £250 million. Against this total extra demand of £1,100 million, home production rose by only about £650 million.

The gap between these two figures was filled, as was inevitable, by a large increase in the excess of imports over exports. In other words, there was a deterioration in our balance of payments on goods and services account, and this was a big factor—indeed, it was easily the main factor—in the worsening of our overall balance.

Mr. Hugh Gaitskell (Leeds, South)

What period does that cover—1960?

Sir E. Boyle

This is a comparison of the financial year 1959–60 in real terms with the financial year 1960–61. The final figures for 1960–61 were not available either at the time that my right hon. and learned Friend prepared his Budget speech, or when he delivered it.

It is true that the balance of trade was better in the second quarter of this year than in the first quarter. But I must make it clear to the House that, contrary to what some people outside have suggested, there was no reason to suppose that, in default of the Chancellor of the Exchequer's measures, the balance of payments situation would have righted itself by next year. On the contrary, all the indicators suggest that the pressure of home demand has been building up still further in recent months.

In the first place, capital investment is still rising strongly. I hope that the Leader of the Opposition will not repeat tonight what he said during the Budget debate, namely, that manufacturing investment is now only at about the 1956 level. Even in 1960, manufacturing investment was running well above its previous peak level in 1957. As for the present year, fixed capital expenditure by industry continued to rise in the first quarter, when it was 10 per cent. above the previous year. The figures for deliveries of capital goods and for imports of machinery suggest a further rise in the second quarter. The forecast for this investment in 1961 is that there will be a 20 per cent. rise on 1960 as a whole.

Secondly, consumption is also rising. Retail sales in the second quarter of this year were higher in real terms than in the first quarter. Car registrations in June were almost as high as in June, 1969, the highest figure so far recorded. Hire-purchase sales of cars have been high, and the hire-purchase debt, which was falling for twelve months after April, 1960, has now turned over to a rising trend. However, experience has shown that the best general indicators of the pressure of demand on productive resources are those provided by the statistics of the labour market, especially by the figures for unemployment and unfilled vacancies. There is no doubt that these figures reveal a very tight situation.

In July, the unemployment percentage was only 1.2. In five of the ten regions of Great Britain, the unemployment percentage was below 1. Unfilled vacancies were well in excess of the number of unemployed, and there are labour shortages over by far the greater part of the country as a whole. [HON. MEMBERS: "Not in Scotland."] We had a debate on trade and industry in Scotland only the other day and, therefore, I am justified in giving these figures for the country as a whole.

Mr. Harold Wilson (Huyton)

In view of the figures which the Financial Secretary has given—the record increase in manufacturing investment and the chronic labour shortage which he has mentioned—I wonder whether he will answer the question which, I think, hon. Members on both sides of the House would like him to answer: why is it that production is no higher than it was a year ago?

Sir E. Boyle

I think that the simplest answer to that question is this. In the second half of last year, consumer spending was fairly stable; it was not rising. The investment boom had not yet reached its peak. On the other hand, stock building was going up fairly rapidly. In the first half of this year, investment and consumption rose, but stock building did not. I do not wish to complicate the matter by referring to stock building further, but it is likely that it will start rising again. I have little doubt that we shall see a sizeable increase in production during the course of this year as a whole. Another point which we must not forget is the reduction in the standard hours of work in a good many industries.

It would be grossly optimistic in the light of the figures, and quite irresponsible, for the Government to assume, in a situation such as the present one, that there would be no difficulty for our industry in meeting an increase in export demand should such an increase take place.

I know that there are some sectors of industry where production has not risen since the spring of 1960, and even some where it has fallen. If we could have an increase in demand which was entirely concentrated on these particular sectors we should, no doubt, have a rapid response by way of increased production, without any pressure on the labour force of other industries. It would, however, be quite irresponsible for the Government to make this assumption. An increase of export demand is just as likely to come in a sector of our economy which is already stretched to its full capacity, or which, in order to expand its output, would need further supplies of labour which it cannot get.

I have no doubt that the present level of home demand is one which, over a period, is bound to impede the development of our export trade. If we are to restore our balance of payments to a healthy condition, there must be a substantial reduction in the domestic use of our resources relative to total home production. This is the primary object of the measures which my right hon. and learned Friend has brought forward.

Now I come to the measures themselves. Quite clearly, for the reasons I have given, my right hon. and learned Friend had to bring about an effective restraint on total home demand. The only way to cope with the problem of excess demand is by limiting or curtailing the general level of purchasing power by one means or another. My right hon. and learned Friend has tried by these measures to spread the burden broadly between different sections of the cornmunity—[HON. MEMBERS: "Oh."] Certainly. I have a lot to say to hon. Members opposite about this—and between different industries. This does not mean that the measures are completely indiscriminate. On the contrary, my right hon. and learned Friend has attempted so far as possible to exempt capital investment in productive industry from the scope of his measures. The decision of my right hon. and learned Friend is reflected both in the fact that investment allowances have been preserved, and also in the terms of the request to the banks.

The Leader of the Opposition complained on Tuesday that there was no measure which seems likely in any way to increase productivity or exports of British industry".— [OFFICIAL REPORT, 25th July, 1961; Vol. 645, c. 235.] The decision of my right hon. and learned Friend to give this relative degree of priority to productive investment, in sharp contrast to what was done by the Leader of the Opposition in 1951[Interruption.]—and what the present Government did in 1956, I agree, must help our productive efficiency, not least because, if other claims on resources are held back, businessmen will be able to carry out their investment plans at a faster rate than would otherwise have been possible.

There remains a broad field of expenditure, including a large portion of personal consumption, some kinds of private commercial or property development and the field of public-sector expenditure, over which the effects of the measures will be widely spread. My right hon. and learned Friend has used both fiscal and monetary measures, and I do not see how it could be argued fairly that the Government have shown an undue degree of reliance on either type of measure. As I have pointed out on many occasions, they are much more likely to be successful when used in combination with each other.

I want to say something, in particular, about the surcharge on Excise duties—what one might term the "Clause 9" regulator. The great advantage of this surcharge—against which hon. Members opposite did not vote on the Finance Bill; many of them actively supported the Passage of that Clause of the Bill—is that it curtails total demand by a considerable amount, but its impact is not concentrated on a particular range of industries. Nobody, on the one hand, could say that this is a niggling measure —that it both irritated people and, at the same time, was niggardly. It is not. A sure which withdraws purchasing power at an annual rate of £210 million cannot he called a niggling measure. It does not, however, have the same heavy incidence on Particular sectors of our economy as, for example, the severe restrictions on hire-purchase credit which have sometimes been used in the past.

I want to answer the charge made by the Opposition that the Government have concentrated the burden of their measures on ordinary families in an unfair way. For a number of reasons, that charge is completely unjustified.

Mr. James Dempsey (Coatbridge and Aidrie)

Nonsense.

Sir E. Boyle

In the first place, despite the imposition of the regulator, the yield of progressive direct taxation will still be higher, as a proportion of our total tax revenue, during the financial year 1961–62 than it was in 1960–61.

I believe I know what the right hon. Member for Huyton (Mr. H. Wilson) is about to say. If it is about the National Insurance contributions, which he has questioned sometimes before, do not let us forget that they go up this year by some £399 million, but that £200 million of that £300 million is represented by the graduated contribution, which is not a flat rate and, therefore, not completely regressive. It simply is not true to say that under the present Government the direct taxpayer is not paying his full share of the cost of our social benefits.

The second and more important point is that ordinary families have just as great an interest as anybody in hoping that we secure the national objectives at which the Government are aiming. They could not possibly be exempted from the evil consequences which would follow if we suffered a disaster in our overseas economic position [An HON. MEMBER: "They have suffered for it."] To those who are interrupting, let me say that those of us who remember what happened after the 1949 devaluation soon found that it had considerably bigger effects on prices than just on the price of bread, which was all that the late Sir Stafford Cripps spoke about in his broadcast.

Mr. Harold Lever (Manchester, Cheetham)

Surely that is a valid argument for the total abolition of Income Tax and the placing of these burdens on small families who, of course, have a vital interest in the welfare of the country as a whole.

Sir E. Boyle

The facts which I have been adducing show that the burden should be spread fairly as between general flat-rate taxation, on the one hand, and progressive direct taxation, on the other. That is exactly what the Government are doing, as the figures clearly show. This is not simply a party interest, because there is an overwhelming national interest in preserving the stability and international strength of our currency.

Furthermore, the Government's measures are designed to preserve the stability of the internal value of money. Surely, this is a matter of great importance to ordinary families. Of course, those who are in a strong bargaining position have always been able to maintain, or even to improve, their relative position despite rising living costs. There are, however, many ordinary people among the rank and file of the retired and other pensioners, and other groups also, who are not able easily to raise their money incomes and for whom price stability is the greatest of all economic interests.

The Government's measures have as one of their principal objectives the creation of conditions for such stability. It is highly misleading to speak as though ordinary people had no interest in their success and could not, therefore, be asked to make their contributions towards that success.

I turn for a few moments to Government expenditure. There is more misconception on the benches oppostie, and, to judge from this afternoon, misconception by the right hon. Member for Belper, over the state of the public sector under the present Government than over any other major topic. This is partly the result of right hon. and hon. Members opposite being taken in by their own headlines, and partly the result of what one can only call an unlucky accident, so far as clear thinking about British politics is concerned, namely, the publication of Professor Galbraith's book The Affluent Society. A good many of us, on whichever side of the House we may sit, may feel that there is force in Professor Galbraith's criticisms concerning the United States; but the concept we so often hear of "private affluence and public squalor", as applied to Great Britain today, simply does not begin to make sense.

Today—I advise hon. Members opposite to listen to these figures, because they are striking—the public sector in Britain employs nearly 6 million people, almost one-quarter of the total working population of 24½ million people. The public sector does over 40 per cent. of total capital investment in this country. Most important of all, total public expenditure, that is, expenditure by central and local government and investment by nationalised industries, has been rising during recent years as a proportion of the gross national product. In 1957, the figure was just over 40 per cent.—40.1 per cent.; in 1958, it rose to 40.9 per cent.; in 1959, to 42.6 per cent. The figure for 1960 is not yet readily available, but I can tell the House that it is unlikely to be lower than the figure in 1959.

I think that it is extremely important that we in the House should take a balanced view of this subject. As I said in the debate last year—I think that the right hon. Gentleman the Member for Huyton was kind enough to quote me in the Guardian about this: It is just no good thinking that we can, as a House of Commons, approve a major step forward in social reform, and ensue it, without the expenditure of a great deal of public money."—[OFFICIAL REPORT, 7th April, 1960; Vol. 621, c. 588.] I also agree with what was said by my hon. Friend the Member for Mitcham (Mr. R. Carr) on that occasion—he made a very helpful speech yesterday, and he probably remembers the debate to which I am referring—when he pointed out that there are certain sectors of expenditure Which, however affluent our society becomes, can never be undertaken by individuals. But the fact remains that the Government just cannot allow public expenditure as a whole to increase at a rate out of line with the development of our economic resources. As the Chancellor pointed out in his statement in Tuesday, unless public expenditure is brought into a proper relationship with the resources likely to be available in the long term, our chances of sound growth will be gravely prejudiced.

The Chancellor spoke of reducing the rate for 1962–63 by about £175 million compared with what it would otherwise have been. This figure will be made up of two parts. £100 million is the contemplated reduction in the Estimates for 1962–63, compared with the forecast Estimates as submitted to the Treasury. These have come in at a figure, in real terms—that is to say, on the same pay and prices basis £225 million above the level of the 1961–62 Estimates. My right hon. and learned Friend has announced his intention to do his utmost to keep this increase to within £125 million, which would mean cuts in the forecast Estimates of £100 million. As for the £75 million, this is the amount by which the Government have reduced the proposals for investment expenditure by local authorities for the year 1962–63; as a result, the level of this expenditure will not be significantly higher than for the year 1961–62.

In addition, my right hon. and learned Friend also referred to savings of £125 million below the line. The below-the-line figures for 1961–62 include £88 million for advances to steel companies and £39 million net for loans to house purchases. With the completion of the steel loans and the suspension of the house purchase scheme, there will be no expenditure below the line under these heads for 1962–63.

My right hon. and learned Friend believes that these decisions are the minimum which he could have taken in order to bring back the growth of public expenditure into line with the development of our resources. So far as investment is concerned, the Government's proposals will not involve any wasteful disruption in plans which are sound and justifiable in the long run. But I want to make it plain to the House that my right hon. and learned Friend regards the objective of keeping the growth of public expenditure in line with the development of our resources as a long-term objective of the highest importance, if we are to pay our way in the world and to maintain sterling as a strong international reserve currency.

There is just one other aspect of Government expenditure to which I want to refer, and that is overseas aid. I think that the whole House was impressed when the Lord Privy Seal pointed out, in a recent debate, that during the last six years this country had given four times as much aid to underdeveloped countries as the Soviet Union. Indeed, the figures are impressive. Assistance to underdeveloped countries has risen from about £80 million in 1957–58 to about £180 million during the current year. I really do not think that there is anything to be ashamed of in our decision to see that that increase is contained, in view of our present balance of payments situation.

Before I come on to the important subject of personal incomes, wages and salaries, I want briefly to amplify what my right hon. and learned Friend said on Tuesday about tax-free profits. First, let me make quite plain—I want to leave no doubts in the minds of any hon. Members about this—that this legislation will not be retrospective in its effect. Quite apart from the general objection to retrospection, I should have thought that such a procedure would be particularly hard to justify when the legislation can be described only in general and not in comprehensive terms. But I want to say something about the scope of this legislation.

So far as share transactions are concerned, it will cover any transaction which would popularly be described as "stagging" a new issue of shares; and also any transaction in which shares or securities are bought and sold within a short period. As for transactions in real property—I think that this is part of the proposal which perhaps people have been more puzzled about—transactions which cloak "trading" profits in capital form, the sort of case the Chancellor has in mind is that of an operator who is in substance dealing in property, but who forms a chain of companies, with suitably framed articles of association, through each of which he puts one transaction only.

These examples are purely illustrative. My right hon. and learned Friend's review of this difficult field is not complete, but he has reached a definite conclusion that some action is necessary, and he has indicated the main fields which he intends to cover.

Mr. H. Wilson

Since this is necessary, and since, quite obviously, we on this side of the House would offer the Government a very easy passage for legislation of this kind, and since the Prime Minister himself made an announcement in February, 1956, about which he did not legislate for several months, in connection with investment allowances, why does not the Chancellor come to the House and make proposals to legislate in the autumn? We would not call it an autumn Budget.

Mr. Gerald Nabarro (Kidderminster)

How very kind.

Mr. Wilson

We might call it a management Bill, anything he likes. Since this needs to be done, why should it not be done with retrospective effect to the day of the Chancellor's announcement?

Sir E. Boyle

The Chancellor authorises me to say, in answer to the right hon. Gentleman, that he will bear that offer in mind.

Mr. Nabarro

Would my hon. Friend permit one question from this side of the House? When he talks about "stagging" a new issue, has he in mind, also, catching the capital gain within a single Stock Exchange accounting period? Is that to be the limit of the catch of the gain, or is it to be based on a general capital gains tax which might then be extended, from a single Stock Exchange period at the begining to further periods later? It is on that that we want an assurance.

Sir E. Boyle

I would rather not say mor than I have done this afternoon except to say that, of course, what my hon. Friend has said will certainly be borne in mind.

I come, lastly, to that part of the statement which referred to personal incomes. It is no use any of us in this House burking the fact that between the years 1959–60 and 1960–61, the total income arising from our productive system went up twice as much as the volume of production. The right hon. Gentleman said that if we go back another year we get a different picture. Well, may be; but I can only quote to the right hon. Gentleman what my hon. Friend the Economic Secretary said last night. Over the past ten years, wages and salaries per head have risen on the average by 6 per cent. a year—for ten years—while productivity has risen by only 2 per cent. To meet that situation such as occurred last year it has inevitably meant rising prices and the tendency for our international competitive strength to be eroded.

In the field of personal incomes, as the Chancellor pointed out, there was an increase of about £1,450 million. Of course, not all this increase in incomes was devoted to increased consumer spending. Indeed, in this particular period there was a considerable increase in personal savings, I think connected to some extent with changes in the amount of borrowing on hire-purchase credit.

Certainly, again, some of the increased income was taken away in taxes. But there was still a rise of about £650 million in consumer spending, and this would have been enough by itself to eat up practically all the increase in home production if there had been no rise in prices and no rise in imports. In fact, there were also other large demands on the available supplies of goods and services. I have already given the House the figures that show that additional home demands outside the field of consumption amounted to £675 million in real terms. In such a situation as this price increases and balance of payments trouble are the natural and inevitable result.

I do not want to appear to preach or exhort in any way, but it seems important for the House and the country to realise just how closely this problem of wage costs is bound up with the question of economic growth. If personal incomes of all kinds rise faster than the nation's real income, we are bound to get into balance of payments difficulties, and the Government of the day, of whichever party it may be, and whoever is Chancellor, will be bound to have to take restrictive action. In other words, unless we have restraint in personal incomes, the inevitable effect must be a lower rate of economic growth than we could otherwise have achieved.

The object of my right hon. and learned Friend's policy measures is to deal with two prime and connected evils —the tendency for home demand to run too high in advance of home production, and the tendency for home incomes to increase much faster than home production. Once we have got rid of these evils we have to avoid letting them creep back. The measures which have been introduced must be regarded as the be ginning of a new phase in our way of conducting our economic affairs, and not just a series of short-lived devices to overcome a short-term emergency.

A certain amount has been said this afternoon on the subject of teachers. There is no question of my right hon. and learned Friend's having, as it were, picked specially on teachers. The Government's offer means, in effect, a £42 million increase. That is an increase of 14.6 per cent. on the salary bill, or a rate of increase of almost 6½ per cent. per year over the period of the present Burnham awards. That would be a rate of rise entirely in line with other salary increases. My right hon. and learned Friend's action in this matter seems to me an entirely sensible way of proceeding, given the machinery with which we are working, under which there is no alternative open to him other than a flat acceptance or a flat rejection. From the point of view of that procedure, I cannot see that my right hon. and learned Friend can be accused of having picked on the teachers unfairly.

I have said a great deal this afternoon about my right hon. and learned Friend's measures, because failure to solve our short-term problems could have very serious long-term consequences. I want to emphasise as strongly as I can that there is no question of the Government's liking restrictive measures for their own sake. As the Chancellor said clearly in his statement, we want to see a steady growth in our economy, related as it must he to growth in exports.

I want to refer once again, in this connection, to the question of economic planning. Like many of my hon. Friends, I have never objected either to the word or the thing, but the right hon. Member for Huyton does considerable damage to the cause of planning by his persistence in equating it with Socialist planning. I shall seek to justify that remark. Only yesterday he said: No Conservative will give it"— a plan— the backing it needs in terms of controls and an extension of public ownership in the key centres of the economy."—[OFFICIAL REPORT, 26th July. 1961; Vol. 645, c. 452.] That was good old Clause Four stuff. It is quite possible to be a planner without agreeing with the right hon. Gentleman about the need for any more nationalisation and without agreeing with him on the specific issue of building controls, which we have discussed so often, and to which I am sure he attaches disproportionate importance. If he believes that a belief in building controls makes a person a good planner, why should not that belief extend to controls over other forms of investment, which neither he nor any of his colleagues ever attempted to operate?

The Government are often advised by the benches opposite to see what lessons they can learn from the French system of economic planning. So far as I am aware, there is no suggestion in France today that the success of the French plan depends either on an extension of public ownership or on the application of physical controls. [HON. MEMBERS: "Yes."] I do not think so. France has a public sector, just as we have, but to the best of my knowledge no one suggests that there should be an extension of public ownership or the application of physical controls.

Mr. H. Wilson

Does the hon. Gentleman suggest that the Monnet Plan, hydro-electrics, nationalised railways, the nationalised motor car industry, which has been so successful in exports, the nationalised aircraft industry, and now the development of national resources, in sulphur and natural gas, are all unrelated to public ownership?

Sir E. Boyle

We have ourselves a public sector of considerable size, but I do not believe that most of those concerned with planning in France think that the success of their planning depends on the extension of the public sector.

The point which my right hon. and learned Friend made yesterday was that he wanted to achieve, with the help of both sides of industry, a more purposeful approach to our economic problems. He envisaged a joint examination of the economic prospects of the country, stretching five or more years into the future, and covering both the growth of national production and the distribution of our resources between the main users —consumption, Government expenditure, investment, and so on.

I do not propose to add to what my right hon. and learned Friend said, except to comment on one quite fair point made in a thoughtful leading article in the Guardian today. I would say, in passing, that my right hon. and learned Friend would, of course, agree that if industry is to have a firm measure by which to assess the adequacy of its own expansionary programmes there must at least be an agreed forecast of the rate of economic growth that is likely to he attainable over a given period.

I want to reply to what has been said in the House, both last week and this, about materialism, and what the Leader of the Opposition described the other day as the devaluation of moral standards. It seems to me that there is a real problem here, and that one cannot conjure it away simply by using long and severe words. It is clearly very much easier to call for a national effort in wartime, or during the immediate postwar years, than it is to call for a similar effort sixteen years after the end of the war, and at a time when many millions of people enjoy greater freedom and opportunity than ever before.

I do not think that the Leader of the Opposition ought to dissent from this, because he was one of the first people to draw attention to this problem and this feature of our national life. I was very much impressed at the time, as I am sure were others, by the article that he wrote in Socialist Commentary, in July, 1955. He said: I fancy that in the last year or two, more and more people are beginning to turn to their own personal affairs and to concentrate on their own material advancement. No doubt it has been stimulated by the end of post-war austerity, T.V., new gadgets, and so on. Call it if you like a growing Americanisation of outlook. I believe it is there, and it is no good moaning about it. The right hon. Gentleman went on to quote a letter from a member of the Manchester Labour League of Youth, who said: My generation is living well and looking to the future where it appears the Tories are looking. Indeed, my ordinary working-class friends, engineers, clerks and the like, expect when they are older and married, they will enjoy such a consistently high standard of living as to be able to afford a house and a car. I have considerable sympathy with the author of that letter. Surely we can all agree, on whatever side we sit, that one of the prime objects of our economic policy ought to be to ensure that an ever larger number of our fellow citizens can enjoy those levels of freedom and opportunity which only a minority has enjoyed until very recently. This was the theme on which I fought my own election in 1959, and I do not regard myself as a culpable materialist for thinking that freedom and opportunity for other people are good things.

I cannot see any reason why an opportunity State, in which freedom and wellbeing are becoming steadily advanced, should not also be a community marked by a spirit of idealism and national purpose. If we can achieve, over a term of years, steady expansion and a sound currency, we shall be in a position to ensure justice for all sections of our community and not only for those who are in the strongest position to advance their claims. We shall be in a far stronger position to aid those countries, especially within the Commonwealth, which most need our help, and, above all, we shall be able to play our full part as a member of the Western Alliance of free nations.

It is with these wider aims in view, and not just with the present emergency in mind, that the Government ask for the support of the House and the country in carrying through the measures which my right hon. and learned Friend has announced.

5.10 p.m.

Mr. Edward Short (Newcastle-upon-Tyne, Central)

The Financial Secretary came much nearer to the heart of this problem in his closing sentences than he did in any other part of his speech. I shall have something to say about the closing part of his speech later. He referred to Professor Galbraith's "Affluent Society" and said that he felt that Professor Galbraith's comments did not apply to this country. I hold quite a different view.

One of the two topics about which I wish to speak is the so-called affluent society created by the Government. The hon. Member for Bath (Sir J. Pitman) said yesterday that he felt that the root of the trouble was the need for an honest currency. I feel that the root of the trouble is the need for an honest Government, and it is about the need for an honest Government that I want to speak.

I have sat throughout most of this two-day debate, and I feel that it has been cluttered up, obscured and clouded by a lot of economic technicalities. I want to speak, quite simply, indeed almost starkly, about these two topics—the sort of society that the Government have created and the need for an honest Government.

The Government have now been in office for nearly ten years. They won the 1951 election, I believe, because the country at the time was not prepared to face up squarely to the problems inherent in our post-war changed position. The country then preferred the glittering but fraudulent prospectus of the Tory Party election manifesto. It is a political phenomenon of our times that on two occasions since then the country has fallen for the same confidence trick. For example, the 1959 Conservative Party manifesto said: The paraphernalia of controls have been swept away. We have cut taxes. We have stabilised the cost of living. We have shown that Conservative freedom works. Perhaps the best illustration of the potency of modern advertising is that the public should have fallen for this again in 1955 and again in 1959. After all, nowadays good advertising can persuade anybody to buy an inferior article, whether it is toothpaste or a Prime Minister.

Those three elections have put into office, and kept in office for a decade, a Government which has blatantly sacrificed the national interest in order to retain power. Today, ten years after the Government got into office and sixteen years after the war, we are in the middle of the most serious crisis since the war. It has not been caused by any external factors. There has been no American recession, no change in the terms of trade, no Korean war, no external factors whatever to cause our present crisis.

Mr. H. Wilson

Except the Tory Government.

Mr. Short

Except the Tory Government, as my right hon. Friend says, and they cannot escape responsibility for the present position caused by the impact of their policy on the nation.

However much the Government try to wrap up their apologies in technicalities, and appeals for a bipartisan approach, as the hon. Gentleman did in his closing words, they cannot escape responsibilty for what is happening at this moment. If in October, 1963, when the next General Election is held, they claim again to have set the people free, let the people remember that they will have been set free from the mess into which the Government have got them. Let that not be forgotten.

The party opposite talks a great deal about patriotism. When they make election speeches they drape the rostrum with the Union Jack and end the meeting by singing "Land of Hope and Glory". They claim a monopoly of patriotism, but in the past ten years the Government have cynically and selfishly manipulated the economy of this country —housing subsidies, taxes and everything else—in order to suit the interests of those who own the Conservative Party and whose tool the Conservative Party is. They are the men whose philosophy has been summed by in that infamous comment, "It's bad for sterling, but who cares, it's good business."

The Government have manipulated the economy for a decade in order to serve their interests. It is high time that this was said, and said clearly. In doing so they have created in Britain a society in which the spiv does better than anyone, a nation of Bingo players. Premium Bond-holders—that was the Prime Minister's only original idea—property speculators, take-over bids, and tax dodgers. The Chancellor told us about the best brains being put to work on this.

This is the sort of society which the Government have created. They have created it simply because it is the sort of society in which the people who own the Conservative Party thrive. In this decade of power, they have created the most unwholesome atmosphere in Britain since the Restoration. They cannot escape responsibility for it. The crime and violence figures are the highest in the history of our country. Who dare say that it is not related to the way we have been governed in the past ten years, to the philosophy of the Government and the kind of inspiration they have provided?

The Christian principle of interdependence has been almost completely usurped by the principle of "grab what you can." The manipulators and speculators do increasingly well at the expense of the hard-working, decent members of the community, in a society in which the Government give £80 million to the Surtax payers and £42 million to the teachers on whom the future of the country depends. That is the sort of society this Government have created. It is a society in which the people that I represent, most of whom live in slums, are bearing an increasingly disproportionate burden in order to relieve the well-to-do. They have had their National Insurance increased in recent weeks; 4d. a packet put on their cigarettes yesterday. But the Surtax payers get £80 million more. It is a society in which the Mr. Cottons and the Mr. Clores can, by putting through two telephone calls in a morning, earn more than a teacher earns in the whole of his working life.

It is a debased, unwholesome society. I believe that the chief architect of it is the Prime Minister. I am sorry that the right hon. Gentleman has left the Chamber. His cynicism, amounting frequently to arrogance, has been seen by us all repeatedly during his years in office. Who cares if the Conservative Party diddles the Post Office? It does not matter; it is just a little incident.

Who cares? Who cares about the principle of Ministerial responsibility when a Minister is shown to be absolutely incompetent? Who cares about Ministerial responsibility today when the Government have a majority of 100? Who cares if the Home Secretary drops a colossal brick in Spain? Who cares about public protests when the Prime Minister pushes his relatives into the jobs? Who cares about all these things? The Prime Minister cannot complain now if he sees his cynicism reflected in the face of the nation and the people who run the economy.

In my view, this Prime Minister has been an unmitigated disaster for Britain, and I am sure that history will show this. If he gets his way about the Common Market, he may well be an unmitigated disaster for the Commonwealth as well as for Britain. He has inspired a society over the last few years where it is praiseworthy to get something for nothing, where getting something which is not earned by service is the highest kind of endeavour.

In my political philosophy, a society based on private property is unjust anyhow, but when it is based on private property which is acquired without service, as this society increasingly is, it is not only unjust but immoral as well. The Conservative Party now faces the acid test. If the Tories really want for a change to try honest government divorced completely from the fortunes of the Conservative Party, this man the Prime Minister must go. He is a national disaster. Britain cannot afford this Prime Minister any longer. The national well-being cannot any longer be subordinated to the demands of the Conservative Party, as it has been for the past ten years.

The first essential, therefore, to put our national malady right, if it is to be cured, is to get rid of the principal carrier of the disease, its principal inspiration—the present Prime Minister. If the Tories want to put things right for Britain, the Prime Minister must go.

The second essential, in my view, is not a dog's dinner of half-baked measures such as was announced by the Chancellor of the Exchequer the other day, which as my right hon. Friend so brilliantly said can only aggravate the two specific problems at which they are aimed—inadequate exports and inadequate production. What we want is not that but a restoration of some sense of national purpose, some confidence that in this community of ours, in Britain, service to the community will be rewarded, and that anti-social conduct, just as much in the boardroom and on the Stock Exchange as in the back streets of Newcastle, will not be tolerated. It is not tolerated in the back streets of Newcastle, but it is tolerated on the Stock Exchange and in the boardroom.

This calls for leadership of the highest order, which the present Prime Minister can never give because he has lost the right to give it. But it also calls for something else. It calls for a restoration of education from the debased position into which ten years of Tory rule has relegated it to a central position in the pattern of our national life. The harm done to the ethical and moral standards of Britain by a decade of "You've never had it so good" philosophy cannot be undone by a box of Treasury tricks, but it can be undone by the schools and their teachers, given the right sort of leadership and the right sort of inspiration at the top.

I have always believed that a civilisation—as well as an individual—can be judged by its attitude towards its teachers. It is very significant that the only body of workers singled out for special treatment by the Government in the Chancellor's statement was the teachers, the people who perhaps alone can put Britain right. I think there is an over-whelming case for a revaluation of the importance and the role of education in our society, for two reasons: first, because it has a direct relevance to the efficiency and health of the economy; and, secondly, in restoring our debased standards. There is not only an overwhelming case for it, but if we do not make this revaluation of the place of education in our society we are doomed to ethical and, indeed, economic deterioration.

How do the present Government evaluate education? I will give the House one or two figures. We pay an executive officer in the Civil Service £42,000 far a life's work. He is a man who sits an a high stool and manipulates figures all day long; no doubt he performs a useful function. We pay a qualified teacher for a life's work £35,000, £7,000 less than an executive officer. We tell a qualified man teacher that he must work for seven years after qualification before he reaches the national average earnings. We pay a police constable, with his emoluments, on his maximum, £1,326 a year. We pay a qualified teacher on maximum salary £1,110 a year. If the chairman of the Building Societies Association is to be believed, the great majority of our teachers will never be able to own their own houses.

The teachers have the whole nation behind them in asking for a reassessment of their role in society, but not the Government. The teachers rejected the provisional agreement of the Burnham Committee because it did not amount to that sort of re-assessment of their role in society. Now the Government reject even this provisional agreement, which amounts to £42 million against the £80 million which the Surtax payers are to get. Even this provisional agreement would leave the qualified teacher worse off than the police constable. Were the teachers responsible for the economic crisis? Did they squander their miserable salaries and upset the economy? Then why single them out for this special treatment?

Nothing in the Chancellor's statement reveals more clearly and more starkly what is wrong with Britain than this deplorably mean little statement about the Burnham Committee. The debasing of the standards of the teachers is symptomatic of the debasing of our national life by the vicious, voracious Toryism under which we have lived for ten years.

I believe that the purpose of government is to achieve human happiness. The Government believe that we can judge human happiness by counting the number of motor cars, refrigerators and television sets. This is the eternal fallacy. These things are important, and we want people to have them, but they have little to do with human happiness.

Mr. R. Gresham Cooke (Twickenham)

But the hon. Member has been making an eloquent plea for higher-paid teachers?

Mr. Denis Howell (Birmingham, Small Heath)

You silly man. What about it? Do they not deserve it?

Mr. Short

The Government's policy starts from the erroneous premise that it is this sort of society which satisfies people. I believe that human happiness can be measured only by the degree to which men and women feel that they are rendering some service to the community, and it is this which these ten years of Toryism has very nearly extinguished in Britain.

To sum up, I believe that we need a national renaissance under a new and more honest leadership which will put Britain before the interests of party, a new leadership based upon an avowed and conscious effort to restore the old qualities of care for each other—especially for the under-privileged—service to the community and hard work.

This debate, of course, has been an economists' picnic, but I believe the malady is fundamentally not economic at all. The maladjustments in out economy this time are basically on the plane of human behaviour and standards. I doubt very much, of course, whether the party opposite, which insists on reducing everything to terms of £ s. d., can appreciate this. But unless the country is prepared to appreciate it we are in for real trouble.

It may well be, and I do not think that this is fanciful at all—this is my viewpoint—that if this sort of harsh, selfish society which is being created in this country continues to develop, the next generation will reject it and may well turn to Communism, which by then will have surpassed the West in many things. In the next generation Communism will be a really serious competitor for the allegiance of people throughout the world. In a generation from now this kind of capitalist society, this "grab-all-you-can" society, which the Government are creating will not any longer be an adequate alternative to Communism.

Let the country remember that the Conservative Party governed the country for eighteen out of the twenty-one years between the two wars. That party caused untold hardship in those years and led the country to the very brink of military disaster in 1940. The challenge twenty years from now, in the next generation of our children, will not be a military one. The challenge then will be economic and political. In my view, if the kind of rule which Britain has had for the last decade continues this country will be a Communist State within twenty-five years, because the next generation will reject this sort of society. This, I believe, is the long-term danger, the long-term perspective in which this crisis ought to be viewed. The country will neglect this aspect of it at its peril.

5.33 p.m.

Sir Alexander Spearman (Scarborough and Whitby)

The hon. Member for Newcastle-upon-Tyne, Central (Mr. Short) devoted a great deal of his speech to attacking the Prime Minister. That may be good or it may be bad party tactics.

I wonder whether the hon. Gentleman thinks that the country as a whole believes that the Prime Minister was an unmitigated disaster when, so largely thanks to him, we recovered from the disaster of Suez?

I wonder whether the country as a whole regarded my right hon. Friend as an unmitigated disaster when he so courageously and clearly expressed the views of this country about apartheid in South Africa, and when he has done so much, in conjunction with my right hon. Friend the Colonial Secretary, to find a liberal and peaceful solution in Central Africa.

I wonder whether the country as a whole regards my right hon. Friend the Prime Minister as an unmitigated disaster when it looks at his wise handling of the international situation and his negotiations with Mr. Khrushchev and Mr. Kennedy.

Before the speech of the hon. Member for Newcastle-upon-Tyne, Central, this debate was largely about inflation. One thing about inflation is that many of us mean quite different things by that word. Perhaps I should make it quite clear what I mean by it. I believe that inflation is a state where incomes increase more quickly than the goods to be bought. High prices are a consequence and not a cause of inflation. Another thing about inflation is that although we all say that we disapprove of it, and oppose it, many people like it. Wages go up very well, profits go up very well and employment, of course, is always full.

However, the price we have to pay for inflation is not only that the cost of living goes up—that is very bad and cruelly harsh on some—that the balance of payments position inevitably deteriorates, but that it creates the situation in which businesses tend to be inefficient. We are all quite determined that we never want to go back to the appalling deflationary period between the wars, with mass unemployment. But we have a lesson to learn from that. It is not always remembered that between 1932 and 1937 there was a greater increase in production in this country than there ever was before or has been since—a 41 per cent. increase in production.

Many hon. Members opposite—and not only on the benches opposite—have complained about my right hon. and learned Friend's measures because they were the same old thing. They wanted something wonderful and new, a magic wand that would solve our problems. What I think that they really wanted was to have all the advantages of inflation with none of its disadvantages.

I believe that there are only two ways of keeping prices stable. One is a great deal of free competition and the other a great deal of controls. Hon. Members opposite, I know, do not have the same aversion to controls that some of my hon. Friends have, but the controls that would keep prices stable in an inflationary situation are controls of wages and a direction of labour. Are hon. Members opposite prepared for that?

I personally would much prefer competition, but it must be regulated competition so as to make sure that we do not get back into the position of wasting our resources. We must strike a balance between spending and the goads available. Some years ago this was put very clearly by the Leader of the Opposition. He said that if incomes go up more than production goes up then prices will rise. The truth is as simple as that. That was said by the Leader of the Opposition ten years ago, and the right hon. Member for Huyton (Mr. H. Wilson) said very much the same yesterday. I congratulate him on having caught up with his Leader after ten years.

Mr. H. Wilson

I said the same thing in 1951, but even after ten years the hon. Gentleman does not seem to have understood the simple point. It is that the right way to prevent prices rising is neither by competition nor by controls, although they may both have their part to play. The simple thing is to increase production, and that is what the Government's policy in the last few years has been designed to prevent.

Sir A. Spearman

The right hon. Gentleman is very foreseeing; he foresaw what I was going to say. I was coming to the reasons for this position.

The fact is that incomes have been gong up and that production has not been rising nearly as fast. I have not heard any suggestion from the hon. Members opposite since this debate began as to how they would effectively stop incomes rising. I have heard suggestions for increasing production. It is a matter of opinion whether they would succeed, but it is clear that with unemployment at only 1.2 per cent. they will not sensationally increase production immediately.

The Opposition's criticisms of my right hon and learned Friend's measures—perhaps the right hon. Gentleman will agree with this—might be fairly summed up as irrelevant and unfair. I want to examine why incomes have been going up so fast and why production has not been going up equally fast. I want to try to show why I believe that my right hon. and learned Friend's measures are neither irrelevant nor unfair.

Incomes really mean wages and salaries. I accept, of course, that a big increase in dividends can have a bad psychological effect, but as far as the inflationary situation is concerned dividends are only about one-tenth of wages and salaries. What is not always remembered is that half the dividends are not paid to private individuals, but to institutions, pension funds and such things. So the rise in incomes is largely due to increased wages and salaries.

I believe that wages go up not because of aggressive tactics by the trade unions. I make no criticisms of them.

We have, for instance, seen the wages of domestic servants, who have no trade unions, going up more than most people's. I believe that workers, quite rightly and naturally, press for more wages when they think they will get them. That is only human nature. There may be some people who do not want more, but most of us, whether we ride about in a Rolls-Royce or, as I often do, on a push-bicycle—

Mr. Arthur Lewis (West Ham, North)

What about the chairman of British Railways, with £24,000 a year?

Sir A. Spearman

I do not think that that is entirely relevant.

I was saying that, whether we drive about in expensive cars or ride on bicycles, it is human nature to try to get more if we can get it fairly and honestly. Employers do not resist giving wage increases if they know that they can put them on to the prices. Why should they go to the trouble and difficulty and disagreeableness of strikes when all they have to do is to pass the increases on in higher prices?

It is always possible for employers to do that if demand is so great that the public will buy at the higher prices. I think that wages go up, not because costs rise but because the workers think that they can get increases and employers are willing to give them. Now my right hon. and learned Friend the Chancellor of the Exchequer is reducing demand, so that in future it will be very much more difficult for employers to raise their prices without losing sales. His measures should thus lead to much smaller increases in wages and keep those increases in proportion to the increase in production.

I have said that I believe that my right hon. and learned Friend's remedy will slow down increases in wages so that they are in tine with increased production. I come now to production itself, and wish to suggest why it has not been rising as fast as we would all like to see. First, I believe that it is because there is more physical capacity in the country today than there is labour available. I want to quote from an article by Colin Clark in the Financial Times, on 17th July. He said: Careful examination of the figures of industrial production … indicates that when the figure of unfilled vacancies is at one of its peaks—1947, 1951, 1955, and 1960—industrial production is unable to expand further. Each employer, attempting to expand his production, in fact only succeeds by taking away labour from someone else. The second reason is one that I think is widely agreed on both sides of the House. Last night, we heard a most interesting speech about restrictive practices from the hon. Member for Southwark (Mr. Gunter). That aspect, of course, does not come within the Chancellor's measures, but in his statement my right hon. and learned Friend said that a determined attempt was needed to deal with restrictive practices, and I hope that he will keep his colleagues up to the mark in playing their share in this matter.

Thirdly, I believe that production is not going ahead as well as it could because of the resources that have been wasted in investment in the nationalised industries. The National Coal Board has spent a vast amount of money trying to produce, and succeeding in producing, coal regardless of whether it is wanted, or whether it is economic to do so from certain mines. On the railways, a vast amount of money has been spent on capital investment which is not showing an adequate return.

Finally, I accept the Chancellor's view that there are many concerns which are very efficient, but I have no doubt that there is a great deal of inefficiency and I believe that that is inevitable unless there is more competition. As I have said, by right hon. and learned Friend's measures must create more competition at home by reducing demand, and if he carries out the Government's intention of reducing tariffs then we will get more competition from abroad.

Sir E. Boyle

We do attach importance to the nationalised industries attaining their financial targets. My right hon. and learned Friend the Chancellor of the Exchequer mentioned that on Tuesday. The point about efficiency and the efficient running of those industries has not been neglected by my right hon. and learned Friend.

Sir A. Spearman

I am glad that my hon. Friend rose to say that, because I had omitted to say that the Chancellor had made it clear that the investment programmes of the nationalised industries are to be scrutinised far more carefully in future than in the past.

Mr. Jack Jones (Rotherham)

Why does the hon. Gentleman believe that too much money has been spent on the nationalised industries? Does not he agree that it would not have been necessary to spend such a large amount of money if the private owners of these industries had left them in decent condition?

Sir A. Spearman

I do not want to go back too far. But I was a member of the Select Committee on the Nationalised Industries, and it is perfectly clear that a vast amount of money was spent on coal from mines which were uneconomic. The Coal Board was often not concerned with whether a mine development would be economic, but with whether it could produce coal.

I am sure that the Chancellor's measures are in the right direction Whether they are sufficient or not it is difficult for someone without official information to judge. But I trust that the Government, when the measures begin to work and to hurt, will not prematurely stoke up the economy again.

I said that I would try to show that these measures are not unfair. Some Members opposite, including the hon Member for Newcastle-upon-Tyne, Central, may well take the view that they are unfair. If they think that there should be no cuts on the less well off until the better off have been reduced to their level, then they are being unfair. If they think that there should be no inequality of incomes, then they are being unfair. There is presumably no inequality in Princetown, but it is not a very happy life there. I believe that everyone is to contribute to solving our economic troubles. If my right hon. and learned Friend's measures work, profits will be squeezed, particularly the profits of the inefficient. Everyone in the country will contribute.

Mr. Short

Does the hon. Gentleman claim that there is a fair distribution of incomes in the country now, and that present incomes are related to the services which people render to the community?

Sir A. Spearman

I think that the distribution of incomes should be that which will most create a general wealth in the country so that we can expand the social services and make the country richer. A Member opposite talks about Surtax. I realise that to some hon. Members opposite Surtax concessions are just a jolly good weapon with which to attack the Government, and, therefore, they will take no interest in what I am going to say. But I am sure that some other hon. Members opposite, and some people outside the House, in the Socialist Party, are definitely disturbed at the Surtax concessions in the last Budget.

I would ask those who are generally disturbed about them just to listen to what I have to say. If the Chancellor had made these concessions on general Surtax assessments of earned and unearned income alike, and if he had done so—and many of my hon. Friends would, I think, have liked it—because he thought that it was the Surtax payers' turn, that everyone had had a reduction except them, I could understand the point of view of those who disagree. But they must remember that, whether it was right or wrong, successful or not successful, the Chancellor's objective in granting these concessions was not to reward any particular section of the community. Concessions were given solely as an incentive to management.

Before the concessions were made, a man who was earning £5,000 a year and who, by extra effort—and it might be a great deal of effort, an effort such as shortened his life—and so earned another £1,000, he kept £400 whereas, in America or Western Europe, he would, in similar circumstances, keep double.

It may be that this will not succeed in getting more dynamic management, but that was the objective—

Mr. A. Lewis

Is not the hon. Gentleman aware that the Chancellor himself admitted that out of the £83 million in Surtax concessions, about £17 million related to unearned income? If it was as the Chancellor said, how does that help the managerial class?

Sir A. Spearman

Much as I admire my right hon. and learned Friend, I do not pretend to remember every word that he has spoken.

These tax concessions were not aimed at rewarding any particular part of the community, but were meant as an incentive. It may be right or it may be wrong, but it gives no one any ground whatsoever to try to stir up bitterness and discontent. Let us also remember that the money for the concessions will come from increased Profits Tax, so that those with unearned income will get that much less.

The right hon. Member for Belper (Mr. G. Brown) allowed me to interrupt on whether taxes are inflationary, and I should now like to take up that point I am quite sure that taxes are not inflationary. Prices go up until there is a balance between demand and supply. If that balance is obtained by increasing taxation, no more incomes are created and the vicious circle is broken. But if prices go up because incomes are greater, there is a further increase on demand and the spiral continues indefinitely. There is no doubt that because incomes have been going up prices have increased by about £500 million. In the process, more incomes have been generated, so further pressure is put on prices.

Turning to the long-term situation, if we are to continue to take a leading part in the world and if—and to me this is much more important—we are to maintain a high standard of living and full employment, we can do so only if our costs are in line with those of our competitors. Are we to continue to shelter high-cost industries behind tariffs? Are we, by subsidies, to keep in existence declining industries?

Personally, I should like to use subsidies only to help people to get out of declining industries into prosperous industries. Here, I must mention some criticism of my right hon. Friends. As my right hon. Friend the Member for Flint, West (Mr. Birch) said yesterday, there has been altogether too great a tendency to back losers; to reinforce failure instead of reinforcing success. Are we to continue putting up our costs of production by refusing to buy cheap coal and gas? Are we to handicap our industries by forcing them to invest in places where costs are higher, in the supposed interest of the development areas?

Are we to continue trying to take work to the workers? I am sure that there are cases where that is a good thing to do—I would be delighted if it were done in my constituency, provided that it was done nowhere else—but I do not think that we can afford always to be taking work to the workers, and to be producing in high-cost districts when other countries do not do the same—

Mr. Richard Marsh (Greenwich)

Leaving out the moral principles which, in any case, are difficult to define, will the hon. Gentleman name the occasions on which he went to the Lobby and showed his courage?

Sir A. Spearman

The hon. Gentleman has been here some little time now, and must know that party politics depend on supporting one's party even if one does not think it right—[HON. MEMBERS: "Oh."]—unless one thinks the occasion is so great that one would rather the Government fell. There have been occasions, I do not know whether this would apply to the hon. Gentleman, when I have voted against my party on a three-line Whip, but I shall not do it on every issue on which I disagree with the Government.

I believe that after the war we were able to do all these uneconomic things. We were then so much richer than other countries that had been devastated. I do not think that we can do it now. If, today, by reducing tariff barriers we expose our industries to competition, and if, as I hope, we go into the Common Market, then I believe that some employers will lose profits and that some workers will have to change their jobs, but the go-ahead, expanding industries will gain opportunities and resources. I believe that only in that way can we continue to maintain our social services and expand them, and have a rising standard of living.

5.57 p.m.

Mr. Denis Howell (Birmingham, Small Heath)

The speech of the hon. Member for Scarborough (Sir A. Spearman) typifies the tremendous gulf there is between the approaches of the two parties, not only to this present economic crisis but to the life of the nation as a whole. I must say that when the hon. Member spoke of supporting his party even when it was wrong, I compared that attitude with the behaviour of the Financial Secretary to the Treasury who, if I may say so without embarrassing him, has a great record of public decency in the conduct of his own affairs.

He had the courage to resign from the Government at the time of Suez, and not to behave as the hon. Gentleman applauds the Prime Minister for behaving—being the first to bring us into trouble and the last to take us out; to take the credit for getting us into the mess and then to take the credit for putting right the mess he himself created.

Not only does the behaviour of the two hon. Gentlemen differ, but I also think that the hon. Member for Birmingham, Handsworth (Sir E. Boyle)—and I may get into trouble in Birmingham for saying so—has made the one realistic, moral and ethical speech in this debate from the other side of the House—

Sir E. Boyle

In fairness, I think that if the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) reads the speeches that my hon. Friend the Member far Scarborough (Sir A. Spearman) made at the time of Suez, the hon. Member would think that he was going a little too far in his comment.

Mr. Tapsell

And if the hon. Member is to relate his remarks to the behaviour of the Prime Minister, he might bear in mind that nobody showed greater integrity and independence of action during the 'thirties than did the Prime Minister in repeatedly attacking his own party.

Mr. Howell

I am reminded of the philosopher who said that all power corrupts but absolute power corrupts absolutely, and that applies to the Prime Minister.

I had not intended to refer to the Prime Minister. I hoped to refer to the moral and ethical standards of the nation and to relate them to the economic and Sociological problems of the day. I have a great respect for economists, but I am getting a little fed up with them in this debate. The House and the Government ought to listen more to sociologists, and to a little more sermonising. I am sorry that the right hon. Member for Flint, West (Mr. Birch) has left the Chamber. Yesterday he said some cynical things about moralising.

I do not know why other hon. Members entered politics, but I did so because I thought that the nature of our society was an important factor in life; that the moral basis on which political parties based their actions was very important.

There is nothing wrong with moralising. What is wrong is not to suit one's actions to one's words. That is the difficulty in which the Government have placed us on almost every conceivable occasion.

When the right hon. Member for Flint, West was Financial Secretary he had a unique opportunity to put into operation the long-term measures to solve our recurring crises which he now bemoans. What we remember about the right hon. Member for Flint, West after his service at the Treasury is that memorable phrase, "Nigel was very depressed on the grouse moors this morning". Nigel was very depressed in exactly the same sort of circumstances which we are discussing today—an economic crisis. He was not depressed over the debasing of human standards. He was depressed over the effect on the stock market of an economic crisis.

We get the same sort of attitude from the hon. Member for Kidderminster (Mr. Nabarro). I am sorry that he, too, is not here. I have been waiting for two days to say this to him. Since I came into the House in 1955 I have heard him ask about 4,261 Questions complaining about the level of Purchase Tax, and I have read about 524 Motions which he signed. He pressed hon. Members on both sides to demand a reduction in the Purchase Tax on motor cars. He came to me and said, "You represent a motor car industry. Sign this." It was a tenable proposition, but what happened on Tuesday? When the Chancellor sat down after having put a 10 per cent. increase on Purchase Tax, the hon. Gentleman was one of the first to rise and say, While congratulating my right hon. and learned Friend on his tough, resilient and realistic statement this afternoon …"—[OFFICIAL REPORT, 25th July, 1961; Vol. 645, c. 232.] What humbug and nonsense. I hope that the House will never again give way to the hon. Member for Kidderminster to put Questions about Purchase Tax. I know that in Kidderminster they have the Kidderminster Harriers. The hon. Gentleman has gone to see the Harriers this afternoon.

Mr. Ellis Smith (Stoke-on-Trent, South)

Gone to the barber.

Mr. Howell

Dealing with efficiency, I do not think that there is much difference between the two sides of the House about the need for planning. We all seem to be planners. We all agree that we must have plans. In fact, the Budget is planning, but the difference between us is the type of planning we are to have, and the sociological basis of that planning.

In my constituency there are some farsighted managements. There are some first-class firms. Part of our crisis, as my right hon. Friend the Member for Belper (Mr. G. Brown) pointed out today, is due to the failure of management to manage. One cannot ignore the fact that whenever there is an industrial dispute in the Midlands it is due to bad management. It is not the size of things which determine industrial disputes. I.C.I. and Lucas are virtually monopolies, but they do not have strikes, for the simple reason that industrially they behave properly. There is consultation all the way through. The workers are taken into the confidence of the management.

The same considerations apply to productivity. It is no good hon. Gentlemen opposite blaming the workers for lack of production. I hazard a guess that in our production today well over half the workers have no control over their efficiency or speed of production. In the Midlands they are governed by the speed of the conveyor belt. The man putting wheels on a motor car has to start his operation when the conveyor belt reaches one point, and complete it when it gets to another point. He does not control the speed of the conveyor belt. He does not control the efficiency of the machine, or the machine-tool industry. What we hear from hon. Gentlemen opposite is absolute nonsense.

I hope that the Government will do some of the things which hon. Gentlement opposite have been suggesting in the last few days, and start differentiating in our tax system by giving incentives to manufacturers who are doing the right kind of thing. I hope that we will get the trade union movement to agree to that also, and by greater efficiency bring down prices.

Gamages are selling a Swedish refrigerator for £45. Wages in Sweden are higher than in this country. I am told that this Swedish refrigerator is first-class—I do not want to advertise it —and the Government ought to look at how Sweden is able to produce a good machine like that at that price. Industry also ought to look at it.

Does one get the impression that industry is on the ball? I am sorry that the hon. Member for Mitcham (Mr. R. Carr) has left the Chamber. He made a good speech yesterday. I was very interested in the Carr Report on apprenticeship training. The whole future of the country is bound up with it. If one makes inquiries into apprenticeship training, or group apprenticeship training, one finds that one or two firms have good apprenticeship training schemes and are delighted to show one around. But when I asked the Federation of British Industries in Birmingham to talk about apprenticeships and group apprenticeship training, it would not allow one of its representatives to talk to me. I was told that the matter would have to be referred to London.

It is surprising that in the second half of the twentieth century the F.B.I. is not prepared to talk to a Member of Parliament about apprentices. It is, of course, entitled to adopt that attitude, but that is typical of industry today. The trouble is that the most efficient people in Birmingham are not represented on such bodies as the F.B.I. We have the situation that the top range of industry is not providing the leadership that it ought to provide.

Dealing with the general social implications of what the Government are doing, I agree with my hon. Friend the Member for Newcastle-upon-Tyne, Central (Mr. Short) that one cannot possibly divorce the psychological reactions to what the Government are doing from the responsibility of the Government. During the last two days I have wondered how many times hon. Gentlemen opposite visit the schools in their constituencies, or look round their slums and talk to working people.

The hon. Member for Twickenham (Mr. Gresham Cooke) earlier made rude noises about the teaching profession. I do not know whether he goes into the schools in his constituency. I do not know whether he spends any time talking to the teachers and the children. If he does, he ought to be concerned about the situation, because the quality of the people going into the teaching profession is not as high as it ought to be. If we do not have top quality people going into the teaching profession, on what basis can we build our future prosperity?

Mr. Gresham Cooke

We are all concerned about the teaching profession and we are all in favour of going forward. I was only pointing out that the teachers are having an advance of 14 per cent., or £42 million, and that is not a very bad advance.

Mr. Howell

It is a very bad advance when compared with their lack of advance in preceding years. On any conceivable comparison teachers come out very badly. There are thirty-six schools in my division and I do my best to visit them all, as I did elsewhere when I was the Member for another division. The country owes a tremendous debt to teachers not only for what they do in school but for the time they put in absolutely voluntarily. Hardly any group of people in the country do more voluntary work than do the teachers. They organise sports on Saturdays, and cultural work of all kinds and trips abroad. I regret to say that all the character building that is done in the country can be said to be in the hands of the teaching profession.

I hope that the teachers learn the political lessons from what is going on. Greatly as I admire their work, I feel when I meet them in Birmingham that they have completely divorced their moral outlook from a sensible realisation of politics. I hope that in future we shall have the teachers coming to a realisation of politics based on the values which they are trying to inculcate in the schools.

The Chancellor of the Exchequer told us yesterday about sport and, picking it out of the air, as it were, as the sort of thing that was desirable but which he had to curtail, he mentioned the Report of the Wolfenden Committee on sport. Incidentally, he did not say "Sport and Recreation" which is its full title. Anyone who is concerned with psychological trends in this country must be concerned about the whole field of youth activity. I assure the House that the best interests of the country, as is the case with other countries, depend as much on sport activities as almost any other activity.

I would remind hon. Members of the young lad who won a bronze medal for diving at the last Olympic Games and who when he was training had to get up early every morning to catch a train from East Ham to Cardiff in order to practise in the only swimming bath in the country that measured up to Olympic standards. These facts became known to the nation after he had won his medal. We all basked in his reflected glory and delighted in what he had clone. Since then seven swimming baths have been built but not one of them comes up to Olympic standards. Now we are perpetuating and worsening the situation in sports activities.

The point I want to make about the Government cutting back on youth work is very important. The hon. and gallant Member for Down, South (Captain Orr) appears to be laughing, but anyone who is concerned about the lack of facilities for the Youth Service can only deplore what the Chancellor did. Only a week ago the Economic Secretary was so concernad about youth that he said that he was consulting the Minister of Education to see whether there could be a debate on the subject, but within a week we find that there is to be no money to provide recreational facilities, Youth Service facilities and better youth clubs.

What alternative has youth but to resort to the coffee bar, the dance hall and the street corner? The sort of speech which the Chancellor made yesterday and the sort of exception that he singled out mean that those who are concerned about the creative training of young people will remain disappointed for even longer. I hone that hon. Members opposite who will be supporting the Chancellor's proposals in the Lobby will not in future utter their nauseous humbug deploring the state of the nation's youth at party conferences when at the same time they are repressive in providing facilities for people to play games and follow healthy pursuits.

The effect of the Government's proposals on the public services are absolutely alarming. I think of the problems in the Financial Secretary's constituency and in mine. I know that the hon. Gentleman would be the last person who wants to stop slum clearance. I spent the whole of my school life living in a back-to-back house in the hon. Gentleman's constituency. Those houses which have neither bathroom nor kitchen are still there and people are living in them. We in Birmingham do our best to deal with the situation but that effort is now to be cut back for years. The Economic Secretary has said that public investment is to be held back over the long term.

Let us consider the effect of these measures. This is all part of the problem of the lack of a moral approach among hon. Members opposite. Many young people are now trying to set up home. I regret to say that most of them voted Conservative at the last election. They took the ward of hon. Members opposite and they mortgaged their future for many years. They worked out what they could afford by way of interest rates and now they are faced with a terrible social problem. Not only is the Bank Rate going up, but year after year since they started to buy their homes there has been an increase in mortgage rates. Every time we run into an economic crisis it is the usury in our society that is elevated to the highest pinnacle. Local authority rates will also be going up, because local government finance is being put into an impossible position.

The Financial Secretary said that the Chancellor did not say that one of the regulators was an alternative to the Bank Rate, but the right hon. and learned Gentleman certainly gave that impression and many of us thought that the regulator was a much more reasonable instrument than the blunt instrument of the Bank Rate. But, having got the Finance Bill on the Statute Book, the Chancellor comes with a weapon in each hand, the blunt bludgeon of the Bank Rate in one hand and the rapier of the regulator in the other. This is not the way to behave fairly by people who are trying to set up home.

The best people in our society are trying to look after themselves, solve their own problems and raise their families, and they are being rapidly put in the hands of moneylenders, financiers and usurers. How can we ask the man who is buying his house and is struggling to pay for it, putting everything he has into building a home, not to ask for a rise when he now finds that all this will cost him 10s. or more a week?

It typifies the inherent contradictions in our system when public services and education are cut back. In Birmingham there were 17,773 live births in 1955. During the following few years, and especially in 1959–60, when the nation was told that we had never had it so good, the husbands in Birmingham seem to have got cracking. The birthrate in that year was 21,240. This is a phenomenal increase in the city's birthrate which worries the education authority beyond belief. Where will the authority have the schools in which to put these young people?

I do not know what the Financial Secretary is saying to his hon. Friend the Member for Twickenham. I would remind the Financial Secretary that he represents a Birmingham constituency, as I do, and I do not think that he wants the primary classes in the schools in that city, which now number over forty pupils, to increase still further in size. But, with the phenomenal increase in the birthrate in Birmingham, if we retard the capital expenditure programme relating to education, and if we are not to encourage more people to enter the teaching profession, a serious crisis will face the education authorities of the city.

The same applies to the hospital service, and one could discuss other public services which are similarly affected. I happen to be the chairman of a hospital management committee and I know that the Minister of Health was anxious that there should be a dramatic surge forward in our efforts to get rid of old hospitals. The right hon. Gentleman wrote to those people who are concerned with the management of hospitals, and I know that hundreds of people who are members of hospital management committees in various parts of the country spent many hours working out details. They were under the impression that this was the hour; that the great and glorious time was at hand when we should get rid of all our old and obsolete hospitals.

We ask young girls who have entered the nursing profession to work for far too long for a remuneration which is far too small. They are the people who are bearing the burden of nursing the sick. We hear scornful comments from hon. Members opposite about the national average in wages, but in effect that means that we are asking young girls to nurse 30 or 40 patients throughout the night, and the rates of pay which they receive are terrible. They should not be asked to work in such circumstances.

Dr. Sheldon made a report to the Midland Regional Hospital Board which was so extravagant in its language—although so justified—that it received headlines in the national Press. All this work is to be held back now, and we are told that the pace at which the Health Service can go forward in the future represents only 2½ per cent. of our present progress. We cannot rebuild the hospitals of this country with such a programme. It would not be so bad if what the Chancellor referred to represented a pause, but the right hon. and learned Gentleman has made it clear that in respect of the public services this is not a pause but a long-term programme. It applies to education and to the Health Service and to everything else.

In my view the present crisis demonstrates the complete failure of the capitalist society as epitomised by hon. Members opposite. Their sort of unequal planning is collapsing. In an island economy such as ours, where we have to be careful about imports and where we must stimulate exports, and where we must give priority to the right type of production, planning is needed by people who believe in the right sort of social and economic planning.

I do not believe that hon. Members opposite wish to go out of their way to ruin the aspirations of many young married couples, but that is the effect of the policy which they support. I do not think that they want to create unemployment or short-term employment. But when they talk about over-employment in industry the natural consequence is the creation of unemployment, with all its effects upon individuals. Any one individual in this country is as important as another, and there is no reason why he should be put in economic jeopardy in order to extricate the Government from the economic mess in which they find themselves.

I do not want to see the old folk continually over-burdened as they are. It does not give me any pleasure to go to the theatre, as I did the other night, and see a production like "Beyond the Fringe" in which there is a sketch of the Prime Minister, presented in a masterly fashion by one of the actors. The man who impersonates the Prime Minister speaks of the right hon. Gentleman's tour round the world. He continually points at a model of the globe and he speaks in a halting and hesitant manner which is absolutely reminiscent of the Prime Minister. He says, "I have a letter here from a gentleman in Fife," and he produces a letter. The letter says, "I want to ask the Prime Minister—I have been a lifelong supporter of the Conservative Party—how I am to get on on £2 7s. 6d. a week. I am an old-age pensioner. What is the Conservative Party going to do for me? "Then the actor who is impersonating the Prime Minister tears up the letter and says, "As I was saying when I met Mr. Khrushchev in Moscow …" Nobody takes pleasure in that sort of thing—

Viscount Hinchingbrooke (Dorset, South)

Surely it is funnier than that?

Mr. Howell

It was very funny.

Viscount Hinchingbrooke

The hon. Gentleman does not make it sound funny.

Mr. Howell

It was very funny, and am happy to tell the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) that the night I was present the applause was led by his right hon. Friend the Minister of Transport, who was sitting in one of the boxes. That is how funny it was. I took careful note of the reaction of the Minister of Transport.

But this skit underlines the tremendous crisis in the homes of thousands of old people in this country about which the noble Lord the Member for Dorset, South has no comprehension. I do not believe that hon. Members opposite wish to keep our old people in such a state—not even the noble Lord—but it is the inevitable consequence of Conservative policy, and what happens when we get rid of proper methods of distribution and collective bargaining. It represents the failure of Government policy in all fields of public service.

I hope that we shall return to a Government who base their programme unashamedly—yes, unashamedly, as I would tell the right hon. Member for Flint. West—on moral and ethical foundations, and upon those features of social justice to which the national will still respond today as it has done in the past. Our people will not respond—as they have plainly shown in the past and as they are showing today—when the actions of the Government do not conform with their words. The moral considerations of the Financial Secretary are not suited to the activities of this Government. The right hon. Member for Flint, West criticises the nation for moralising. There is something wrong in this Conservative day and age, says the right hon. Member for Flint, West, in a nation which wishes to try to moralise. What a depth of meaning there is in that.

I hope that people will understand the true purpose of our society and the true purpose of our political parties. I hope that they will appreciate the social and ethical foundations upon which the Labour Party, at least, is based. When the nation realises that, it will not be taken in for a third time by the bogus acquisitive society programme of hon. Members opposite. Then we shall have a society led by a Government of the Labour Party whose policy is based on social justice for all the people of our country.

6.28 p.m.

Sir John Barlow (Middleton and Prestwich)

I do not propose to follow the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) very far. We have one thing in common, neither of us is an economist, and I think that the whole House would agree about that. The hon. Member blamed the management of industry in this country for not managing. That is a very easy statement to make and I regret that he did not offer any solution. It would be just as easy for me to refer to the failure of the workers to work in this country. There is an element of truth in both statements. But to make such a statement and leave it at that is not very helpful.

The hon. Member criticised the F.B.I. for its lack of leadership. I have criticised the F.B.I. at various times and I may well do so again, but I wish to point out to the hon. Member that a large number of our most able businessmen devote a large portion of their time to the affairs of the F.B.I. and to industry as a whole. Without the F.B.I. the industry of this country would lack a great deal of the leadership which at present it enjoys.

I think that all hon. Members will agree with what the hon. Member for Small Heath had to say about the difficulties over the provision of athletic training facilities. We should like to see far greater facilities for all kinds of sport for the youth of the country. Great strides have been made in this respect in the last two years. I hope that much more progress will be made in the years to come. I know of the great interest in these matters of the hon. Member for Small Heath, and I appreciate it, but he should remember that Rome was not built in a day and that we cannot provide Olympic standards in a day. We are making good progress.

I welcome the Chancellor's statement of yesterday. It may not deal with the situation sufficiently quickly, but, in view of the enormous amount of knowledge and information he has at his disposal, he is in a position to know. He showed very good reason why he did not make the statement sooner, at the time of the Budget. He has been criticised in all quarters of the House for not doing that, but it will be remembered that at the time of the Budget he took certain powers to meet this situation if he thought it necessary in the next few months, as has turned out to be the case.

I must confess that I would have been much happier if 'he had met the situation a year or eighteen months ago. It appeared to me that this situation was bound to arise before very long. It is infinitely easier to stop a vehicle running down hill if one puts on the brakes early rather than late. I wonder whether the brakes are sufficiently severe at the moment and whether it might not need a little more braking of the vehicle a little later, which I think would be unfortunate and a pity.

Most of the remedies which the Chancellor has suggested are of a traditional nature. The first, perhaps the most traditional, is the raising of the Bank Rate very substantially by 2 per cent.—which is most unusual in this country. In the circumstances it was probably necessary to do that, but I hope he realises that it can best be used only as a temporary measure. It will attract an enormous amount of what is called "hot" money from abroad. It will be very useful to us for a short time, but it will be expensive and we know it will not remain here permanently. So the sooner Bank Rate can be reduced and that money let go, the better it will be for the country.