HC Deb 01 November 1968 vol 772 cc345-54

11.16 a.m.

The President of the Board of Trade (Mr. Anthony Crosland)

With permission, I wish to make a statement about hire-purchase controls.

The Government have been reviewing the level of domestic demand. There are now signs of a continuing buoyancy of consumer spending which, if it were to continue unchecked, would pose a threat to our balance of payments objectives.

It now seems likely that, in the second half of this year, consumers' expenditure will be at the same level as in the second half of 1967, whereas it had been expected to be somewhat lower. Retail sales in the third quarter were 1 per cent. higher than in the second quarter, and there has been a significant revival in new registrations of cars.

In the light of this situation, the Government have decided that some further restraint on consumption is needed. I have accordingly made Orders, coming into operation at midnight, which will increase the restrictions on hire-purchase and rental contracts.

For cars, the new minimum deposit will be raised from 33⅓ per cent. to 40 per cent., and the maximum period of repayment reduced from 27 months to two years. For most other consumer durables, the new minimum deposit will be 33⅓ per cent., and the maximum repayment period 24 months. For furniture, the new rates will be 20 per cent. and 24 months, instead of 15 per cent. and 30 months. Corresponding changes have been made in the rental regulations.

I regret that we have to take these measures. But personal consumption is running at a high level and we must ask consumers to accept these measures in the interests of achieving our over-riding national objective, which is to increase our exports, import-saving production and capital investments.

Mr. Maudling

Is the right hon. Gentleman aware, in the first place, that his statement calls into question the entire Budget judgment and that this, together with the effects on the industries concerned, we shall wish to discuss next Tuesday?

Second, and more serious, does he realise that the statement calls into question the personal honour and truthfulness of Ministers, including the Prime Minister himself? Does he recall the statement made last Wednesday by the Prime Minister, and the statement by the Secretary of State for Employment and Productivity again on Wednesday, that there was no economic freeze on the way, confirmed as recently as yesterday afternoon by the Leader of the House himself?

As those statements cannot be reconciled with this morning's statement, and as there is, therefore, clear evidence of a deliberate attempt to mislead the House and the country, we intend to pursue this matter with the utmost vigour.

Mr. Crosland

First, as to the Budget judgment, the right hon. Gentleman is quite wrong. My right hon. Friend the Chancellor of the Exchequer specifically kept this measure in reserve when he introduced his Budget proposals with a view to the possibility of its being needed in the autumn. This is in no way a reflection on the strategy which my right hon. Friend explained in the Budget.

Second, as to honour and truthfulness, what my right hon. Friend the Secretary of State for Employment and Productivity said at Bassetlaw—this is all that has been referred to in the exchanges in the past two days—was: There is no economic freeze on the way."— No one in his senses—certainly no one in touch with the present mood and the rising production of industry—could possibly apply the word "freeze" to a measure designed to restrain consumer lending by £100 million in relation to a national income of £34,000 million.

Mr. Maudling

May we take it from that that today's announcement was known to the right hon. Lady at the time that she made that statement?

Mr. Crosland

I do not know exactly when the Minister made that statement. It was made at a by-election.

I would say, about timing, that the Government had originally intended to announce this measure next week in the context of the economic debate that is to take place on Tuesday. However, in the evening newspapers the day before yesterday, and still more in the morning newspapers yesterday, there was intense speculation that this measure might be on the way. I might add that it was speculation strongly encouraged by the most irresponsible Tory rumour-mongering. In the light of that speculation the Government decided that it would be sensible to introduce the measure at the earliest possible time, and this morning is the earliest possible time.

Mr. Dickens

Is my right hon. Friend aware that his deplorable statement this morning represents the fifth deflationary step taken by the Government in less than 12 months? When will he and his Cabinet colleagues realise that there is something more to economic policy than simply deflation and foreign borrowing?

Mr. Speaker

Order. Questions must be brief. We have a debate ahead of us.

Mr. Dickens

Secondly, as we are about to enter the third successive winter with 600,000 people out of work, what estimate has my right hon. Friend made of the effects on unemployment of the measures that we have heard announced this morning?

Mr. Crosland

We have a situation now in which production is rising and unemployment is falling. We have evidence both from the C.B.I. survey and the Board of Trade survey of investment intentions that confidence in industry is at an exceptionally high level, but the danger is that too much of this rising production will go to home spending and too little to export and capital investment. In that situation the Government would have been wholly irresponsible if they had not taken this action.

Sir C. Osborne

While I agree with the policy that the Government are pursuing over this matter, may I ask the President of the Board of Trade when the Cabinet made this decision? Was the decision known to the Leader of the House yesterday when he made his statement, and was it not rather dishonourable to mislead the House deliberately yesterday?

Mr. Crosland

The hon. Gentleman talks about "dishonourable". I had hoped that he rose to make an apology for his conduct last night when I went out of my way, as a matter of courtesy, because it was a Friday, to attempt to give exceptionally early notice to my opposite number on the Opposition Front Bench that I would make this statement, but this courtesy was abused by the hon. Member in the most extraordinary way.

Mr. Orme

Is my right hon. Friend aware—

The Lord President of the Council and Leader of the House of Commons (Mr. Fred Peart)

Mr. Speaker. May I ask the hon. Member for Louth (Sir C. Osborne) to—

Mr. Speaker

Order.

Mr. Peart

On a point of order, Mr. Speaker.

Mr. Speaker

Yes, that is better. A point of order, Mr. Peart.

Mr. Peart

Would it be in order for me, Mr. Speaker, to have an opportunity to refute the accusation that I misled the House yesterday on this matter? I have never misled the House in any way. Would it be possible for me to answer that?

Mr. Speaker

That is not a point of order. It is a point of argument. Mr. Orme.

Mr. Orme

Is my right hon. Friend aware that many of us feel that these measures can lead to a rise in unemployment, which is at an unacceptable level at present, and that many of us are not prepared to accept 2 or 2½ per cent. as a reasonable basis for unemployment? Further, can my right hon. Friend tell the House why he has not taken other measures, including import controls, to restrict consumption, and take in some positive physical measures as opposed to creating more unemployment?

Mr. Speaker

Order. A long question cuts out one other hon. Member's question.

Mr. Crosland

With regard to unemployment, I take my hon. Friend's point. Had the unemployment prospects been what they appeared to be two months ago we should not have taken this measure. But the whole picture has changed in the last two months. Unemployment has fallen by 30,000, seasonally adjusted, and, therefore, I do not on this point share the gloom of my hon. Friend.

We have discussed the question of import controls many times. Government policy has been made clear in the past, and I have nothing to add on the subject this morning.

Mr. Boyd-Carpenter

Can the right hon. Gentleman now say when the decision to impose these restrictions was taken?

Mr. Crosland

No, Sir. The right hon. Gentleman has been a distinguished member of a Government for a long time. He has also been a member of a Cabinet for a long time. Therefore, he knows perfectly well that it is never the custom to say at what meeting or at what time a decision was taken.

Mr. Macdonald

When will my right hon. Friend pay heed to the recommendations of the Radcliffe Committee which, 10 years ago, pointed out that the economy cannot be closely controlled by jerks in hire-purchase regulations? Why does he not rather seek to restrain the amount of credit available to finance companies so that they may exercise restrictions by distinguishing among the credit-worthiness of their customers? I hope that he will not plead the necessity for speed as an excuse, because he has had ever since devaluation to consider the possibility.

Mr. Crosland

My hon. Friend has a serious point. There are—it has always been known—objections to using hire-purchase restrictions, but there are also strong arguments in favour of doing it.

The other point that my hon. Friend mentioned is a very serious one. It was because of our anxieties on the question that a few months ago we established the Crowther Committee to look into these matters and make recommendations.

Mr. Bessell

In view of the right hon. Gentleman's admission in his statement that there has been no increase in home consumption, is he aware that these measures are very dangerous, because any reduction in home production must result in a reduction in the industrial capacity of the country and, consequently, in an increase in export prices?

Mr. Crosland

No, Sir. The whole situation at the moment is that if we had more capacity available we could export more than we are exporting today. The level of home consumption, as almost every commentator has been arguing in recent days, poses a definite threat to the achievement of our balance of payments objectives, and I say again that in that situation it would have been irresponsible for any Government not to have acted in the way that we have.

Mr. Howie

Does my right hon. Friend recall that one of the very welcome features of the Budget statement was that it left the motor manufacturing industry alone? Has he noted the excellent record in exports of that industry since devaluation? Would he not agree that it is perhaps a mistake to be continually chopping and changing the financial context in which that industry functions? Is it not encouragement that the industry needs more than anything else?

Mr. Crosland

I recognise my hon. Friends constituency interests here. I also recognise, and would like to pay tribute to, the remarkable export achievements of the motor industry. Nevertheless, the position of the industry was accurately described by Sir George Harriman a few days ago, when he said: Our dealers are crying out for cars and our order books are full for months to come. Our problem to to turn out the vehicles fast enough. In these circumstances, we must make sure that a higher proportion goes to exports and a lower proportion to the home market.

Mr. Kenneth Lewis

Is the right hon. Gentleman aware that many people believe that his blaming of rumour for making the statement cannot justify the statement not having been made before the Bassetlaw by-election instead of now? Secondly, what are the Government preparing to do about Government expenditure? Is it a case of the Government being cosy with their own expenditure while the people "carry the can" for this kind of statement?

Mr. Crosland

Government expenditure is kept continuously under review. It is only a few months since it was subjected to some very sharp cuts indeed which caused great anxiety in many fields. No doubt those cuts will be discussed in the debate that is to follow this morning.

As to the timing in relation to the by-election, I hope that the natural disappointment of the Conservative Party over failing to win Bassetlaw will not lead hon. Members opposite into hypocrisy on this matter. Perhaps hon. Members opposite will be interested in one precedent, when Mr. Harold Macmillan, then Chancellor of the Exchequer, came to the House on a Friday and announced not only far more severe hire-purchase but also a rise in interest rates, the withdrawal of investment allowances, severe cuts in public expenditure, and an increase in the prices of bread and milk.

By a curious coincidence, his statement came just after three by-elections—Taunton, Hereford and Gainsborough. Mr. Macmillan defended his action—I think that I have been a good deal more honest than he was—when he said that he was making his statement that day so that hon. Members might have an opportunity of digesting it before the debate the following Tuesday.

Mr. C. Pannell

Is my right hon. Friend aware that if he had not made this statement on 1st November, and things had been allowed to take their course, he would have faced a Motion of censure from hon. Members opposite in the same way that they rebuked the Chancellor of the Exchequer for not acting quickly enough after devaluation?

Mr. Biffen

Referring to the point raised by the hon. Member for Chislehurst (Mr. Macdonald), may I ask whether the President of the Board of Trade is aware of the very strong representations that were made about the particularly harsh form of regulations contained in hire-purchase controls for the motor industry and in the report of the "Little Neddy" on the motor industry? Can he say what consultation he had with the "Little Neddy" on the motor industry before making this announcement today, and what representations he received from its members?

Mr. Crosland

I am very well aware of the views of the "Little Neddy". I had the pleasure of hearing its chairman express these views in the strongest terms. The Government took this decision in the full knowledge of the views of the "Little Neddy" on this subject, but I must point out that when we reach a situation in the motor industry where we could export much more than we are now exporting, but, nevertheless, home production has been going up from July through August to September—registrations were higher in the third quarter of this year than in the second quarter—we must ask the motor industry to send a higher proportion of its production abroad and a lower proportion to the home market.

Mr. Dalyell

Is my right hon. Friend aware that some of us, who represent sections of the motor industry and are familiar with the order book situation, support what he has done?

Mr. Gresham Cooke

As the exports of the motor car industry are up this year by about 25 per cent. by volume as compared with last year, is not the right hon. Gentleman's statement, so carefully concealed from the good people of Basset-law, a grave disappointment to millions of workers, because it affects the whole of industry? Are we not really heading back to July, 1966?

Mr. Crosland

The hon. Gentleman must be utterly out of touch with the mood of industry if he seriously thinks that these measures have anything in common with those of July, 1966.

As to the motor industry, I again pay my tribute to it. It has exported more this year than last. We have taken these measures only because we now think that the rise in home demand for motor cars is beginning to endanger this export performance.

Mr. Christopher Price

Is my right hon. Friend aware that there will be some relief that, contrary to earlier rumours, the motor industry is not taking the full and total brunt of these changes in hire-purchase regulations? But would he confirm that he does not subscribe to the general thesis brought out by the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd), when Chancellor of the Exchequer, that the only way to increase exports in the motor industry is by squeezing home demand, because many of us on this side would very much disagree with that thesis?

Mr. Crosland

I think that the thesis of squeezing home demand makes no sense when there is no possibility of transferring production to exports, but in a situation such as the present, when many export markets are crying out for British cars which they cannot get, a restriction on home demand is healthy.

Miss Harvie Anderson

Will the right hon. Gentleman recognise that one of our great difficulties is getting our car exports into those countries in Europe which have put very heavy tariffs against us? Will he bend his mind to the need to securing some alleviation of those high tariffs, otherwise a quick increase in car exports is extremely difficult to achieve?

Mr. Crosland

The motor industry has been exporting to a number of European markets at a very healthy rate this year. The hon. Lady must know that this Government, like their predecessors, have tried to do something to reduce the tariffs, but if she has any brilliant idea for getting a further reduction I will be only too glad to hear it.

Mr. Arthur Davidson

Can my right hon. Friend confirm, in terms that the Opposition can understand, that there is not, in fact, an economic squeeze on the way; and that the words of my right hon. Friend, the First Secretary of State were absolutely correct?

Mr. Crosland

If the Opposition are not capable of understanding the way in which I have already described it, I think that they never will.

Mr. Eyre

If consumption at home is too high and imports are too high, will not these measures strike at one of the most important industries in this country, and would it not be better to encourage savings at home as a positive measure?

Mr. Crosland

We are not striking at the motor industry. The industry has a very large volume of orders which it cannot currently fulfil. What we are doing is to take action to ensure that a higher proportion of future output goes to export and a lower proportion goes to the home market. If the hon. Member read the statement by Sir George Harriman, which I have quoted, he would not say that we are striking at the industry, or are in any way likely to damage it.

Mr. Atkinson

Does not my right hon. Friend's last reply prove the illogicality of the original statement? As we understand, the motor industry is not at present able to fulfil the orders or the demands-made upon it. Will not the effect of these new restrictions on hire purchase merely be to balance demand on the motor industry, so that there will ultimately be no saving, and no transfer to the export market?

Mr. Crosland

No, Sir. The object of the measures is to restrain home demand for motor cars, and hence restrain production of motor cars for the home market so that the industry may produce more for export.

Several Hon. Members rose—

Mr. Speaker

Order. I must protect the business of the day.