HC Deb 18 December 1967 vol 756 cc921-34
The Prime Minister (Mr. Harold Wilson)

Mr. Speaker, with permission I should like to make a Statement.

I feel it right, before the House rises for the Recess, to make a full Statement of the Government's intentions about the way in which we are now engaged in deciding on the measures necessary to ensure that industry, trade, agriculture— indeed, the country as a whole—take full advantage of the opportunity presented by devaluation.

The Government have made clear that, in order to achieve a progressive and massive swing in our balance of payments over the next two years, a substantial diversion of resources will be needed to exports, to import replacement and to investment.

The Statement of my right hon. Friend the Home Secretary on 20th November outlined the first package of measures directed to this end.

The Government have made clear that progressively up to the Budget, and indeed at any time afterwards, when this becomes necessary, steps will be taken to ensure that home demand, including Government expenditure, is not allowed to develop to a point where the necessary shift of resources to the priority purposes of earning a payments surplus is for one moment endangered.

As my right hon. Friend the Chancellor made clear, the intention is to ensure beyond all doubt that as exports, import saving and investment build up, the resources will be available to meet them.

It is our intention to maintain economic growth and rising employment, taking progressively the measures needed to shift the emphasis from a consumer-led expansion to an export-led expansion. At the same time, it will be the determination of Her Majesty's Government not to allow that steady expansion, as it develops over the next year and into 1969, to degenerate into a Situation of inflation and excessive pressure on resources and capacity.

As the policy develops through the period of the Estimates, the Budget and subsequently, it will mean reductions in the growth of personal expenditure and reductions in the growth of public expenditure. On personal expenditure, the success of the Government's prices and incomes policy is of crucial importance. While I cannot anticipate my right hon. Friend's Budget Statement or any other measures which may be needed to restrain consumption, the severity of such restraint will clearly depend on the Cooperation which the Government receive in implementing their prices and incomes policy.

So far as public expenditure is concerned, the House will be aware, through long experience, that expenditure programmes take several years to mature and that decisions taken at any moment of time may have little impact on immediate Estimates. But decisions taken now can in certain spending areas have a growing effect in the second year and a decisive effect in the third and subsequent years, provided that the decisions are taken now.

The examination of spending programmes which this involves is being tackled in a mood of urgency. While I should like to have given the House all the necessary details before the Recess, hon. Members will, I think, agree, in view of the important nature of the expenditure areas to be considered, that it would be wrong to press on with over-hasty decisions without considering all the implications. Full details will be given to the House and decisions which have to be taken will be taken in time to govern the 1968–69 Estimates, as well as subsequent Estimates.

But I should tell the House this: first, we are not approaching this expenditure review, whether in respect of home or overseas expenditure, on the basis of candle ends, or simply on the basis of minor administrative economies, though we shall not, of course, neglect any opportunities here. Neither are we looking for prospects of under-spending or the shifting of expenditure from one financial year to another. We are bringing under stringent review all major areas of policy, both at home and overseas, where substantial expenditure is involved.

Secondly, no area of expenditure can be regarded as sacrosanct for the purposes of the searching examination we are making; no spending commitment whether inherited three years ago, or incurred since.

Thirdly, it will cover local government expenditure as well as central Government expenditure.

Fourthly, as I have made clear, the review will cover defence and overseas expenditure as well as home civil expenditure.

The review as a whole is being related to what is essential in expenditure here at home, and to what is appropriate at a time when we have been, and are, reassessing Britain's role in the World. This must involve overseas policy.

In this connection, the Government have completed their examination of the question of the supply of defence equipment to South Africa and have decided that their policy on this matter, namely to conform to the Security Council Resolution of 18th June, 1964, remains unchanged.

I should add that I have the authority of the whole Cabinet categorically to repudiate as inaccurate reported Statements about the position taken by the Cabinet as a whole, by a Cabinet Committee which met a week earlier, and also about the position taken by the Prime Minister and other individual Ministers.

When, next month, the House is given the results of our examination of all the expenditure programmes—and, indeed, throughout the further development of all our policies—I intend to ensure that the totality of decisions taken will be fair as between Citizen and Citizen; that while everyone must bear burdens the burdens will be fairly shared; and that, while established assumptions and traditional spending commitments will have to be called in question and, in appropriate cases, sacrificed, the questioning and the sacrifices equally will be fairly borne.

At the end of the day the Government will be responsible for achieving a fair balance, whether of economic or political sacrifice, and submitting it to this House. They will then call on the House to take its full responsibility in endorsing it.

Mr. Heath

That slob of wet blancmange hardly sounded like the smack of firm government. The intention of the general economic Statement, which the Leader of the House told us on Thursday would be made only in the event of an emergency, is very clear. It is to wrap up and disguise a Statement about South African arms in an attempt to preserve a spurious unity in the Cabinet.

Seldom can the House have heard a general economic Statement so flatulent and platitudinous as this has been. It can only do more harm than good—[HON. MEMBERS: "A question."]—and will further undermine any confidence which is left in the Administration—

Mr. Whitaker

On a point of Order. Is this question time or debate?

Mr. Speaker

The Chair usually allows a little latitude to the Leader of the Opposition.

Mr. Heath

It can only make the Chancellor's task more difficult. In a critical Situation, when the world is waiting for a Statement of Government action, we expected something more —

Mr. Faulds

Can't they find better than him?

Hon. Members


Mr. Speaker

Order. Hon. Members must contain themselves.

Mr. Heath

—we expected more than general Statements of pious intent.

I want to put two questions to the Prime Minister. Does his Statement mean that the South African Government's request for arms for self-defence has been turned down by Her Majesty's Government? [HON. MEMBERS: "Yes."] Has it been turned down? [HON. MEMBERS: "Yes"] The Prime Minister said that the policy remains the same, but has this request been turned down? Has it been turned down only for the present? Is it to be reconsidered in the policy review, including overseas policy, which the Prime Minister has included in his Statement? May we have clear and specific answers to those questions?

The Prime Minister

Yes, Sir. I will not compete with the right hon. Gentleman in such flights of Parliamentary oratory as "blancmange" and "flatulent", because we are concerned this afternoon with important issues of policy, and the right hon. Gentleman, as usual, failed to face up to it.

First of all, on the economic Statement that I have made, the right hon. Gentleman could use his time better—[HON. MEMBERS: "Answer."] He will get the answer, but I am going to—[HON. MEMBERS: "Answer"] He will get the answer; I am commenting on some of his Statements, which as usual, of course, will be taken outside as a support for those who want to undermine Sterling.

The right hon. Gentleman would spend his time better preaching to his friends in industry and telling them to do what we say here—go out and get those export orders.

Secondly, with regard to the right hon. Gentleman's Statement about my right hon. Friend the Chancellor of the Exchequer, the examination on which we have begun, which will be reported to the House, will be the greatest possible help to the Chancellor of the Exchequer. Since the right hon. Gentleman has repeatedly called for cuts in expenditure, I confidently expect his full support for every measure of Government economy which we will put to the House.

With regard to South Africa—[HON. MEMBERS: "At last."] I have got to this answer much more quickly than the right hon. Gentleman got to the question. With regard to the right hon. Gentleman's question about South Africa, when I said that the policy of adhering to the line taken by the Security Council would not be changed that meant that this arms order will not be supplied and that we are not changing the policy. When the right hon. Gentleman asked if this would be reconsidered, I made it clear in my Statement that this, in view of the great public interest in this question, is an item of policy which we have considered ahead of the general package on expenditure which will be reported to the House.

Mr. Heath

Does the Prime Ministers last Statement mean that this request for arms cannot again be considered under the overseas policy review? May we be quite clear about that?

The Prime Minister

Yes, Sir. That is exactly what it means.

Mr. Thorpe

Is the Prime Minister aware that there will be delayed relief that he has rejected the advice which he has been receiving from many quarters that this country can maintain those principles which we hold provided only that they are not expensive? But is he aware that his Statement today adds up only to a series of good intentions and no hard policy? May I ask him whether we will be considering cancelling the F111 contract, withdrawing from the Persian Gulf, cutting tariffs and boosting home agriculture?

The Prime Minister

I am aware, as the right hon. Gentleman suggests, that I have only announced that we are engaged in this very searching expenditure review. I think—I hope—that the House will agree that the areas to be examined are so important, both at home and abroad, that we must give them very thorough consideration and report to the House as early as possible.

I will not indicate what the outcome will be, but no area of expenditure, including those referred to by the right hon. Gentleman, is sacrosanct in the sense that it will not be subject to the most searching review. As to the outcome of the review, it would be wrong for me to try to anticipate it until we have reached our conclusions.

Mr. John Hynd

In resisting this pressure for the sale of arms to South Africa, will my right hon. Friend bear in mind that the figure of £200 million—or whatever the cost to this country—should be set against the infinitely greater sacrifices which this country made to defend principles in Europe only a few years ago? Will he seek economies in other areas where we are spending even greater amounts of money in the face of only Potential dangers?

The Prime Minister

As I say, these are very difficult matters. We have considered all the implications, economic and international, and this is the decision which we have reached.

Mr. Winnick

Is my right hon. Friend aware that there will be great satisfaction within the Parliamentary Labour Party and in the Labour Party outside that arms are not to be sent to South Africa, and that there is no change in policy? Is he aware that there is a great feeling of contempt for those hon. Members opposite who want to sell arms to a Nazi-like State which bases itself on police terror and brutality in Order to keep going?

The Prime Minister

This decision is one which was taken many years ago, in Opposition. Indeed, it was taken in the time of my predecessor as Leader of the Labour Party. We have considered this and we have often debated it in the House, and I will not join at this stage, unless I am tempted too much, in saying what I think of the policy of right hon. Gentlemen opposite in this matter.

Mr. Selwyn Lloyd

What did the right hon. Gentleman mean by the phrase "political sacrifices"?

The Prime Minister

Simply that it is not possible to review any substantial area of Government expenditure—the right hon. and learned Gentleman has great experience of this—if cuts are made, without trampling on doctrines cherished by one party or another, or by one group or another, inside or outside the House, and that, if there is to be a successful attack on this problem of public expenditure, it is inevitable that some political doctrines—at this stage, I cannot indicate which they are likely to be—will be sacrificed, and that, just as there will be economic sacrifices, there will have to be sacrifices of certain ideological considerations.

Mr. Paget

Would my right hon. Friend tell me how democracy is served, or how the United Nations is served, by providing that South Africa should be armed by France instead of by Britain and by adding Simonstown to the Suez Canal as the property of what is becoming the Franco-Arab bloc, hostile to this country?

The Prime Minister

We are not handing the South African question over to France: we are carrying out the policy which we have announced, which was laid down by the resolution of the Security Council. If other countries decide not to follow that resolution, that is a matter for them and not for us. We have decided our own policy in this matter.

Mr. Marten

The right hon. Gentleman said that no area is sacrosanct. How does he Square that with the reference in his television broadcast to housing, schools and hospitals?

The Prime Minister

All areas will be reviewed. I have said that, and it includes all those areas. At the end of the day we will take decisions in accordance with our priorities and principles.

Mr. Barnett

Would my right hon. Friend inform hon. Gentlemen opposite that no price is too high to pay for one's principles? Will he also expose the fallacies contained in the point that is constantly made about the price of this particular arms deal with South Africa, in that we already expect to see full employment next year, including in the companies which would be supplying these arms; so that, in a sense, will not this be nothing other than a marginal cost to this country?

The Prime Minister

I refuse to believe that this country can pay its way abroad only on the basis of shipments of this kind. The fact that right hon. Gentlemen opposite reached the conclusion in 1964 that, under their régime, we could pay our way only by shipments of this kind, does not provide a precedent which we want to follow.

Sir D. Walker-Smith

Would the right hon. Gentleman now identify the group of nations, to which he referred on Thursday, which sells arms to South Africa ii breach of the United Nations resolution? What proportion of them would, in any event, be in a position—of those who took the decision—to sell any arms? Is the policy of this country now to make the economic decisions of Britain dependent on the views of other countries which will not suffer the economic loss flowing from the decision, and in some cases may benefit from it?

The Prime Minister

The group to which I referred contained those which had dissociated themselves from the Security Council resolution. I would want notice of the question before giving the exact list, because I would want to make sure that it was exhaustive; but I would be glad to make it available to the House.

Mr. Whitaker

Is my right hon. Friend aware that the Cabinet's decision on this South African matter will be welcomed by all who believe that Britain is something greater than a nation of shop-keepers? Will he also bear in mind that the ancestors of his Lancashire constituents were proud to make the necessary financial sacrifices to end the slave trade?

The Prime Minister

I agree with my hon. Friend and I referred to that matter in a debate on a similar issue when the House discussed Rhodesia after the H.M.S. "Tiger" agreement about a year ago.

Mr. Boyd-Carpenter

Before deciding to turn down this immensely valuable South African order, which would have brought lifeblood to our shipyards, did the right hon. Gentleman seek assurances from the French Government—the French also being a member of the Security Council—that they would not fill such Orders which were refused? If he did not seek or obtain such assurances, what Practical effect does his decision have?

The Prime Minister

We did not, of course, seek these assurances. I have said that we have decided our line in relation to the Security Council. It must be for France and other countries to decide theirs. I do not feel that, in other matters, where profits can be earned for particular activities—for example, from the sale of drugs—it would be the right answer for us to say, "We had better sell these noxious drugs. If we do not do so someone else will sell them". We have our Standards to maintain. Other countries must judge theirs.

Mr. Wyatt

Would my right hon. Friend explain why it is all right to sell large quantities of arms to Saudi Arabia, where slavery still flourishes, and to Spain and Portugal from time to time, but not to South Africa, although the United Nations' resolution is not mandatory?

The Prime Minister

I agree with my hon. Friend that this is not a mandatory resolution of the United Nations. That is certainly true. These questions have to be decided in accordance with their merits and the principles which we are trying to follow in these matters, as I explained a moment ago. We do not, for example, supply arms to Portugal for use in her colonial territories.

This is a quite clear policy on the part of Her Majesty's Government. I think that it is justified and, for the same reason, the announcement which I have made today merely reiterates our Position, which is right.

Mr. Hugh Fraser

In view of the absence today of any serious Statement as to what the Government propose to do, would the right hon. Gentleman seriously consider the recall of Parliament earlier than 22nd January so that the Government may make a Statement about their plans, in view of the uncertainty in industry, among trade unions and on the foreign exchange market; since, after 30 days, there has been no serious Statement made by the Government?

The Prime Minister

Serious Statements have been made. However, the right hon. Gentleman's question is a fair one. We will get on with this review as quickly as is humanly possible, having regard to the very big issues which are involved. Certainly, if it is possible to make a Statement, we would regard it as right to recommend the recall of Parliament rather than to make any such Statement during the Recess, when Parliament was not sitting.

I cannot promise that it will be possible —there are very big international as well as domestic implications involved in this —to complete this at an earlier date than the end of the Recess, but if it is possible we would certainly recommend the recall of Parliament.

Mr. Mikardo

While warmly joining with those who have welcomed what my right hon. Friend said about no arms for South Africa, may I ask him to assure us that, in considering other possible changes, he will not reject any merely on the grounds that they have been consistently proposed to him from these benches and brusquely rejected in the past by the Treasury Bench and the benches opposite?

The Prime Minister

I am grateful to my hon. Friend for that helpful Suggestion. I must make it clear—and this must have stood out in everything I have been saying and in everything that my right hon. Friend is doing—that we shall neither preclude economies merely because they have been suggested and rejected in the past, nor shall we reject economies because my hon. Friends put Motions on the Order Paper saying that certain areas must remain sacrosanct.

Mr. Tapsell

Would the Prime Minister tell the House whether revelation to an unauthorised person of discussions held in Cabinet, or Cabinet committee, would constitute a breach of the Privy Councillor's oath or of the Official Secrets Act?

The Prime Minister

These must be matters for my right hon. and learned Friend the Attorney-General, certainly so far as the Act is concerned. I have already made it clear that the Statements which I read over the weekend—and which, I understand, other hon. Members have read—have been categorically repudiated as being incorrect by the whole Cabinet.

Mr. Sheldon

While congratulating my right hon. Friend on his Statement, may I ask him to say what action he is contemplating in an effort to make sure that he has international support for his action, bearing in mind that the demand for arms will not be stopped by our refusal to give them but that South Africa may be Shopping in many other countries?

The Prime Minister

This must be a matter for continuous international discussion through the United Nations and elsewhere. However, in view of the great interest in this question, it was thought right, as I have said, that we should settle our policy on it; and our policy is to continue the line which we have so far taken.

Mr. Hastings

Is it not a fact that the U.N. resolution concerning arms to South Africa is not even mandatory? Has this been taken into account?

The Prime Minister

I am grateful to the hon. Gentleman. If he had been listening a few moments ago, he would have heard that the same question was put by my hon. Friend the Member for Bosworth (Mr. Wyatt), and I confirmed that it is not mandatory. However, that does not mean that we do not have an Obligation to consider and then to decide our action upon it. Rather than wait for others to decide their policy, we have considered it and have decided ours.

Mr. Molloy

Is my right hon. Friend aware that this issue is not merely confined to this House or our nation, but that millions of ordinary people all over the world, and especially in oppressed countries, will welcome what has been said in the House this afternoon, and will deplore the attitude of the right hon. Gentleman the Leader of the Opposition, who purports to know the price of everything and confirms that he knows the value of nothing?

The Prime Minister

No, Sir. I do not think that very much interest will be taken in the line of right hon. Gentlemen opposite in these matters, but this was, as my hon. Friend mentioned, one big consideration. It is a very difficult decision: I do not pretend that it is not. I am not ashamed of the fact that on his side we have been divided on the matter—[HON. MEMBERS; "Oh"] I am not ashamed of that— [HON. MEMBERS: "Oh."] I said that I am not ashamed of the fact—[HON. MEMBERS: "Oh."] I said that the whole Cabinet denies those particular stories— [HON. MEMBERS: "Oh"] I am not ashamed of the fact that there are divisions on this side of the House on this matter—not ashamed at all. I would be ashamed to be a member of the party opposite, united and in their own way.

Sir C. Osborne

The Prime Minister said that burdens would have to be shared by all. Will he tell the House and the country how big those burdens will be; how soon they will be imposed; how soon the people will be told of the burdens? If we refuse to export to all the countries with whom we disagree, will it not bring mass unemployment and bread rationing nearer?

The Prime Minister

The hon. Member will recognise from my answer that, as I said, my right hon. Friend the Chancellor of the Exchequer must continue to see that the resources are available on a developing basis to switch from home consumption to exports. Therefore, the first step will be the announcement of expenditure economies to which I referred and, as I have said, this will be at the earliest possible time, either when the House resumes or even on an earlier recall. These are the public expenditure reviews. As I said, I cannot anticipate my right hon. Friend's Budget Statement, but this must be a continuing development because, obviously, the whole switch from home consumption, private or public, to exports, does not take place all at once. So I would say that the two stages the hon. Gentleman should watch for are the economy in expenditure Statement and, of course, the Budget.

Mr. Dickens

While I warmly welcome my right hon. Friend's Statement on arms to South Africa, will he, in making this forthcoming review, bear in mind that the reality facing the country is that we would have no deficit on balance of payments were it not for heavy foreign exchange costs on military spending and the net outflow of private investment to advanced industrial countries abroad?

The Prime Minister

Yes, Sir. Again, I am grateful to my hon. Friend. I said that the burdens will be fairly shared, fairly borne. It will be for the House to decide whether our conception of this is fair in the view of the House as well as of the Government, but it also means not only that areas of defence expendi- ture, home and overseas, must come under review, but so must every item of home expenditure. My hon. Friend must be prepared to find that there are some cuts that are not as acceptable to him as the one he keeps on urging on the Front Bench.

Several Hon. Members


Mr. Speaker

Order. We must move on.