ECONOMIC SITUATION

HC Deb 05 November 1968 vol 772 cc698-830

3.38 p.m.

Mr. Speaker

Mr. Iain Macleod.

Mr. James Dickens (Lewisham, West)

On a point of order. May I ask, Mr. Speaker, whether you have decided to take for a Division the Amendment standing in the names of 53 hon. Members, dealing with the economic situation?—At end add: but humbly regret that the Gracious Speech fails to reappraise the Government's post-devaluation economic strategy, by mobilising our immense resources abroad to protect sterling and repay our foreign creditors and, thus, to provide for more rapid economic expansion at home, to improve the inadequate rate of investment, to annul the cuts in social services expenditure, to remove prescription charges, to further restrict the export of capital and, above all, to resume full employment. May I respectfully ask you to consider that this Amendment should be taken for a Division tonight? On a previous occasion—on 7th November, 1967—I endeavoured to persuade you to reconsider your decision to take an Amendment standing in the names of 45 hon. Members, dealing with the economic situation. I then indicated that in the Parliament of 1946 it had been the practice to take back-bench Amendments during the King's Speech of that year. You replied on that occasion that the great issue which prevented you from dealing with the matter in the way in which Mr. Speaker Clifton Brown dealt with it then was the fact that eight days had then been given to the debate on the King's Speech against six days last years and five days this year.

May I draw your attention to the fact that a reduction in the number of days given to the debate on the Address gravely diminishes the opportunities of back-bench Members to put forward Amendments of this or any other nature? May I also remind you that in the Parliament of 1930, during a six-day debate on the Loyal Address, Mr. Speaker Fitzroy, your distinguished predecessor, accepted for a Division a backbench Amendment moved at that time by Mr. Fred Jowett and seconded by the present Lord Brockway? It was taken to a vote on that occasion.

I feel, too, that the question of the allocation of time for debates on the Address, while an important consideration, is not of crucial significance. I am putting it to you, Mr. Speaker, for your consideration, that there is a very strong case for saying that the amount of time taken up in debates by moving an Amendment and by having a Division on the Amendment at the end of the debate is not in itself significant.

Moreover, Mr. Speaker, I draw your attention to the number of Members who have signed this back-bench Amendment, 53 in all, a very high figure, eight more than the figure last year, a figure exceeded on only three occasions since 1946. I am suggesting to you—

Mr. Speaker

Order. We have an important debate ahead. I am not questioning the hon. Member's right to put the point of order, but I hope that he will do it briefly.

Mr. Dickens

I conclude briefly, Mr. Speaker, by saying that I think there is a very strong case for stating that when over 50 hon. Members signed a backbench Amendment you might wish to consider this as being a qualitatively different matter from other back-bench Amendments commanding lesser support. I should be grateful for your guidance on this very important point of procedure.

Mr. Speaker

May I say, first, that the number of days given to the debate on the Queen's Speech is not a matter for Mr. Speaker.

If I do not rule at length today it is because I ruled last year on this issue very carefully, very thoughtfully and very sympathetically.

The selection of Amendments is a matter of special difficulty for the Chair, and for that reason no subject receives fuller or more careful consideration by Mr. Speaker. Yesterday, after several days of general debate on the Address, I called on the Official Opposition to move their first Amendment, and, as I then stated, I have selected the second Official Opposition Amendment for today's debate. Clearly, only one Amendment can be debated at one time. To enable other Amendments to be debated, it would be necessary, and, indeed, theoretically possible, for the first Amendment today to be disposed of, and the remaining Amendments on the Order Paper could then be called, provided always that we had not reached 10 o'clock.

As the House knows, its practice does not contemplate this process in this kind of debate. It does, however, during the Committee stage on Bills, and even there the process of selection of Amendments has usually to be applied so as to get through the business within the limits of the Parliamentary timetable. As I have previously explained to the House, this practice as followed by the Chair does not prevent the expression of many points of view in the course of a debate, even though only one Amendment, that of the Official Opposition, has been selected. Most of the viewpoints which are expressed in the various Amendments on the Order Paper, including the hon. Gentleman's own Amendment, might have been canvassed in the general debate—indeed, I have already called seven of the hon. Members whose names are attached to the hon. Gentleman's Amendment—and some may still be canvassed by hon. Members who catch Mr. Speaker's eye.

As I reminded the House last November—I quote my own words then: As one who zealously wishes to protect the rights of minorities in the House, may I point out that this does not mean that Amendments put down on the Order Paper serve no purpose. Although the occasion does not permit their selection, the viewpoints expressed by those hon. Members and their supporters who put them down are stated on the Order Paper. Hon. Members may follow up those viewpoints in debate if they catch Mr. Speaker's eye. I have tried as far as possible, and I shall try today, to see that every point of view expressed in an Amendment on the Order Paper has an opportunity of expression in debate. "—[OFFICIAL REPORT, 7th November, 1967; Vol. 753, c. 847.] This, incidentally, I have done this year, and this I shall do today. Mr. Iain Macleod.

Mr. Thomas Swain (Derbyshire, North-East)

On a point of order, Mr. Speaker. My Amendment on the Order Paper, to add, at the end of the Question, but humbly regret that the Gracious Speech contains no reference to the setting up of an independent inquiry into the costings of the energy-producing industries, with particular reference to nuclear energy and natural gas or to a comprehensive review of the 1967 White Paper on Fuel Policy. will, no doubt, receive the same Ruling from you—attached to it are the names of a number of hon. Friends of mine and my own name—that it will be dealt with, in your wisdom, through the selection of speakers.

May I respectfully suggest to you that there are more than 50 names attached to the Amendment in my name, but up to now, in this long debate, only two hon. Members have had an opportunity of reflecting the views expressed by 50 hon. Members as stated in the Amendment?

Mr. Speaker

I remind the House that equally difficult to the task of selecting Amendments is the almost impossible task of choosing speakers. I have said before that there are something like 629 points of view seeking expression in the debate on the Queen's Speech. I try to be as fair as I can. Mr. Iain Macleod.

Mr. Iain Macleod (Enfield, West) rose—

Mr. Peter M. Jackson (The High Peak)

On a point of order, Mr. Speaker. Would you not agree, Mr. Speaker, that hon. Members were very confused by the Ruling that you gave on the point of order raised by my hon. Friend the Member for Lewisham, West (Mr. Dickens)? Would you please explain to the House the circumstances which would lead you to accept a back-bench Amendment?

Mr. Speaker

No, because that has not arisen yet. Mr. Iain Macleod.

3.46 p.m.

Mr. Iain Macleod (Enfield, West)

I beg to move, at the end of the Question, to add: but humbly regret that few of the proposals in the Gracious Speech have any relevance to the declared intention of strengthening the economy. The Amendment is a statement of fact which, I should have thought, would claim general assent. It is deliberately drawn wide enough to include as many as possible of the points of view that have been put on the Order Paper, including the one put forward by the hon. Member for Lewisham, West (Mr. Dickens), to which I shall refer in due course.

There is a good deal of ground to cover, and perhaps, right at the beginning, I could say that there are a number of subjects which are of great importance, but which I do not intend to cover in my speech. They include special drawing rights, the question of third country sterling, the important debate now going on about money supply and its importance in the handling of our economy and, except in passing, the Basle Agreement.

We hope very much that it will be possible to have an opportunity—we should prefer in Government time—to debate some of these matters, some of which are not controversial but all of which are of very great interest to the House. Naturally, I shall deal in my speech with some of the matters that have caught the headlines since our Amendment was tabled.

I start, however, by discussing the problem of unemployment. The October figures show—and we are all glad to see it—although a small numerical increase, what may be an important seasonal drop, and that certainly is very welcome indeed. The facts, however, are very rough and must be put bluntly before the House.

During the 13 years in which there were Tory Administrations there were, as I have previously reminded the House, eight months in which the seasonally adjusted figure of the wholly unemployed—which, of course, is the key figure—went over 500,000; eight months in 13 years. The October figure completes the eighteenth consecutive month under the present Government in which that figure has been surpassed. November will be the nineteenth, December will be the twentieth, and so on.

I cannot believe that any hon. Member in any part of the House does not realise the significance of these figures. Clearly, they are the worst since 1940. Month by month the particular month has been recorded as the worst figure since 1940. These figures call in question, as some Amendments specifically do, the commitment of the present Government to full employment. We recall very well the statement made by the Prime Minister on 20th July, 1966, when almost casually it seemed in response to a supplementary question he let drop the phrase about 1½ to 2 per cent. after all the shake-out and after the redeployment and the rest of it had taken place. There can be no doubt that, in a matter which has been raised by many hon. Members below the Gangway, Sir Leslie O'Brien, when in Rio de Janeiro, thought that he was declaring—and, in my view, was declaring—Government policy.

I will assume for this part of my speech, although I will challenge it later, that the euphemisms offered by the right hon. Lady the Secretary of State for Employment and Productivity for her comment last week are accurate. She said that what had been done by the Government was a touch on the tiller, a slight flexible adjustment here and there. The truth is that up to £100 million is being taken out of consumer demand, that this is a classic exercise of the classic pattern of deflation stop-go, that it is designed to create unemployment and that it is the clearest possible indicator, first, that full employment is no longer a matter of great significance to the Cabinet, and, secondly, that it is really a searing comment upon the scale of deflation to which we have become accustomed that even an expansion of the figure by up to £100 million seems as if it were unimportant.

Now, in October, even after the seasonal change, which I have welcomed, the unemployment figure, seasonally adjusted, is 551,000. The figure in February, 1963, with which hon. Members opposite made such play then and since, was 549,000 seasonally adjusted. Therefore, the position is mildly worse even than at the height of the 1962–63 winter.

This part of my speech at least is non-political. I want to draw attention to the position of the Northern Region. In October, 1968, the total number of unemployed in that region was 4.8 per cent. But the figure for male unemployment was 6.2 per cent. That compares with a total of 4.2 per cent. and a male unemployment figure of 5.2 per cent.—a whole point less than at present—in October, 1967.

Lord Beeching has challenged the accuracy of seasonally adjusted figures and seems to believe that it is odd that, in two consecutive years after adjustments have been made, the summer figure is higher than the winter. I would have thought that if one ironed out the seasonal fluctuations, in roughly half the years, the summer figure would be higher than the winter because the figures would then be affected by such matters as interest rates, trends of world trade or trends of trade in other countries which are not necessarily directed to factors in this country as to whether it be June or January.

Looking back over the 18 years in which we have had seasonally adjusted figures, I find, as one would expect, that in 10—roughly half—these summers, the seasonally-adjusted figure has been higher than that of both the preceding and the succeeding winter. Perhaps in another debate the right hon. Lady will take up this interesting point. I see no reason to think that seasonally adjusted figures are inaccurate, but the Government cannot have it both ways. They cannot claim that the figures are inaccurate and yet pray in aid an improvement in the figures, as the right hon. Gentleman the President of the Board of Trade did on Friday.

Secondly, I am concerned particularly with the effect on the Northern Region, but, of course, there may be others. I make it clear that I do not think there is any case for general reflation and I am sure that I carry the Chancellor of the Exchequer with me on that. But when we look at some figures in relation to male unemployment in a whole region, there may well be a case for selective regional reflation in such areas, and I ask the Chancellor to turn his mind to one or two possibilities of labour-intensive works, such as minor works, which are always valuable and have a swift effect in mopping up unemployment.

Mr. Arthur Blenkinsop (South Shields)

Is not the right hon. Gentleman aware of the announcement made of works of this nature for the northern area?

Mr. Macleod

Indeed, I am. I am also aware that the latest figures I have given show in that area, in which the hon. Gentleman lives and with which he is concerned, a continuing and deteriorating trend. I would have thought that he would support me in the case I am putting in this part of my speech.

One of the levers of regulating demand that the Government are supposed to operate is the prices and incomes policy. I find the Government's devotion to this compulsory policy absolutely astonishing. Almost everyone is against it. The Labour Party conference was against it by a majority of 4½ to 1; the Tory and Liberal Party conferences were virtually unanimous in opposition to it. It has been politically disastrous for the Government, and they know that very well.

But the interesting point is: why, in face of: hat, and of the evidence that it does lot work, do the Government go on with it at all? The answer is that they have to. It is not anything as crude as a condition, but it is an understanding that they will pursue this policy and is one of the reasons why the Government have so little room for manoeuvre. After all, if this be a sovereign remedy for us, it is very odd that all the countries which urge it upon us too do not try it for themselves. It would be an excellent thing it the Government would abandon the legislation, since, quite clearly it does not work.

I want to consider the failures of judgment of both the Chancellors of the Exchequer in four successive Budgets. I simply record their hopes and forecasts, year by year. The previous Chancellor of the Exchequer, now the Home Secretary, said, on 4th May, 1965: I expect to see us well on our way towards balancing our payments in 1965 and completing the process in 1966. "—[OFFICIAL REPORT, 4th May, 1965; Vol. 711, c. 1083.] On 1st March, 1966, he said: Our aim is to achieve external balance over a two-year period—that is, by the end of 1966…and we are well on the way"— same phrase— to achieving it."—[OFFICIAL REPORT, 1st March, 1966; Vol. 725, c. 1105.] By 9th September, 1966, the years 1965 and 1966 had been abandoned.

As for 1967, he said: …on the basis of our revised policies, I am looking forward not merely to a bare balance, but in fact, I hope for a surplus. In fact, it was one of the largest current account deficits in our history. But on 7th July, 1967, he said: I still see the prospect of a substantial balance of payments surplus in 1968."—[OFFICIAL REPORT, 7th July, 1967; Vol. 750, c. 1695.] The present Chancellor has been a little more cagey in his forecasts, but he made himself clear. According to The Times of 26th September last, Whitehall now expects that this year's balance of payments deficit will exceed £500 million, but a £250 million surplus is expected in 1969. Ministers concede that the post-devaluation programme has slipped six months behind schedule… This puts an interesting light on the Prime Minister's election pamphlet at Huyton in March, 1966, which stated: A new Labour Government's action will strengthen our financial position and make sure that never again do we drift into debt. How did this happen? They were wrong in 1965, 1966, 1967, 1968 and they have altered their forecasts for 1969. In part, it has been a plain refusal to acknowledge the obvious and, in part, it has been a sort of drunken optimism—of always painting everything in the brightest possible light.

To illustrate this, the previous Chancellor of the Exchequer, the present Home Secretary, whom I am glad to see in his place, produced last year's Budget, which we will never forget, in glowing terms. It was all "steady as she goes", with £500 million to £562 million of Supplementary Estimates to follow. The very first question asked in the Third Report from the Estimates Committee was for an explanation of this, and the answer included this remark: A certain amount of it is probably due to the fact that Estimates were drawn very tightly last year and this emerges from the very large number of comparatively small items that have come in".

An Hon. Member

Cooking the books?

Mr. Macleod

I would not go as far as that. I have called it "drunken optimism". If everything had conceivably gone right—this is the basis on which the figures were submitted—it would have been just possible for those estimates to have worked. But in the light of the facts as we know them, the figure of Supplementary Estimates is not at all surprising.

Exactly the same illustration occurred when the present Chancellor of the Exchequer made his announcement in the summer about the Basle Agreement. He went out of his way to emphasise that it was not a loan. The guidance to the newspapers at the time was that it was unlikely to be drawn on. There was no mention of drawings in the White Paper when it was finally published in October, 1968. But when I asked the right hon. Gentleman a supplementary question on this score he said—this should have been in the White Paper—that 600 million dollars had been made available to us.

I take the judgment of the Governor of the Bank of England on both parts of the Basle Agreement. He said at a bankers' dinner: Under the agreement the United Kingdom will be assuming a large addition to her burden of overseas debt falling due for repayment within the next ten years. But without an agreement the immediate burden of conversion of sterling balances could well have been so great as to be insupportable, leading to chaos". That is, in itself, part of the continuing condemnation of the Labour Government. There is not a single important economic action that they have taken since October, 1964, that they wanted to take, whether it was devaluation, any of the deflationary measures, the end of our rôle east of Suez, Basle or their handling—a subject to which I shall come—of what has been called the spending spree. The answer from the Labour Government is always that they could not think of anything else to do. It is their entire failure to keep any sort of options in Government open that has been one of the main criticisms we have brought against these two Chancellors.

There are, in a sense, three policies before the House. There is the policy of the Tribune group, signed by 53 hon. Members, which I can summarise fairly by saying that they would liquidate many of our assets overseas and go for maximum growth and minimum unemployment at home. There is, secondly, the policy of the Government—of devaluation, deflation and stop-go. Thirdly, there is the policy which we have been putting forward consistently in these debates—of direct taxation reductions, savings boosts and a drive on Government expenditure.

Both the Chancellor and the Prime Minister in recent speeches have said that one cannot call for increased expenditure in any sphere, even if balanced by savings in another, and yet call for lower taxation. That proposition is absolute nonsense. If the economy is at all normal, nothing is easier, and during the 13 years during which we were in power, we reduced taxation rates by £2,000 million a year, and, at the same time, increased in real terms the value of the social services, both local and national.

We know, of course, what has gone wrong since 1964. Growth has disappeared. It is easy to make a calculation, whether one takes the last six years of Conservative rule or the six years of the National Plan, which had a rather similar target, and compares them with what has happened. If we make an allowance for the remaining years, at current prices, assuming a 3.5 per cent. growth rate, between 1968–69 and 1969–70, the difference between the Tory or National Plan proposals, if they had been achieved, and what the Labour Government will achieve is very nearly £10,000 million. That is the cost of Socialism and that has been the cost over these years.

Mr. John Mendelson (Penistone)

In view of the various policies which the right hon. Gentleman says are before the House, and which he has attempted to summarise, would he tell us whether he is still continuing, as he has done for the last two-and-a-half years, to encourage the Government to tread the rocky road of deflation? Where does the Tory Party stand? What policies would the right hon. Gentleman pursue?

Mr. Macleod

Had the hon. Gentleman listened to my remarks, he would be aware of my view on deflation. I said in categorical terms that there is no case for general reflation. I do not urge that. [HON. MEMBERS: "Answer."] I do not believe that there is a case for general reflation. I said—and this is within the recollection of the House—that in some regions, and I identified the Northern Region, there may be a case for selective regional reflation. That is fair, and I stick by it.

I come to the announcement on hire purchase, which is the latest—it is not really the latest, because school meals takes that position—or the penultimate of 40 deflationary statements made in this Parliament. I have an indirect interest in this matter, which, in accordance with the tradition of the House, I declare once more.

The Chancellor will recall that in his Budget speech he considered, and rejected, altering the position in relation to what is called terms control in this sphere. He said that the Budget was concerned with an 18-month to two-year strategy and that to alter terms control would not be compatible with his objectives. Clearly, particularly if we have slipped six months, which is now admitted, we are still in the same time-scale.

It is equally clear that the Chancellor's arguments, which I accepted as valid at the time of the Budget, must be valid today. Thus, would the right hon. Gentleman tell us why, if the main objective is to push production towards exports, he has included furniture in these proposals? Hon. Gentlemen opposite will recall the howl of fury that used to go up from them, and their cries about the young marrieds and the others. They will be aware that there is little export content in this sphere.

As for the motor car industry, I had hoped that it was common ground between the parties that this industry needed a strong home base from which to operate and from which to continue its brilliant exporting achievements. It is ironic in the extreme that the Government picked to move the Address the hon. Member for Birmingham, North-field (Mr. Chapman), who made a plea on behalf of his constituents which, if he had only known, had already been answered against him.

The question of the restrictions up to £100 million calls into question a large part of the Chancellor's Budget judgment. We have said consistently that he has quite under-estimated the strength of the spending spree in this country. From this Box in January, I urged upon him at the time of the cuts the use of the regulator. Other commentators rightly urged that this should have been used last November at the time of devaluation itself. To take a typical commentator's argument, Mr. Michael Shanks, in The Times of 18th March, argued that the Chancellor had lost about £200 million by not acting earlier. I agree. In the regulator debate, perhaps our best on the Finance Bill, at least a dozen hon. Members from this side urged the same action upon the right hon. Gentleman.

There were many forecasts. I remember particularly the excellent ones done by the Sunday Telegraph at the time which openly challenged the figures upon which the Treasury were relying. Even three weeks ago my hon. Friend the Member for Lewes (Sir T. Beamish) asked the Chancellor, in a supplementary question: What is the right hon. Gentleman's answer to the charge that the main reason for the disastrous gap which has appeared between the forecast and the reality was his own blind refusal to face the facts of devaluation during the wild spending spree which followed? "—[OFFICIAL REPORT, 15th October, 1968; Vol. 770, c. 178.] That was exactly right. That was three weeks ago. The Chancellor, in the Budget, in the regulator debate, on Third Reading of the Finance Bill and in answer to my hon. Friend, still said that consumption was moving as the Government had expected and forecast at the time of the Budget.

There is now a serious situation in front of us. There is something like a flight from money going on in this country. If saving is a habit—it is on this that we have based our savings proposals—then be very sure that spending is equally a habit. We can see clearly the disastrous results of the actions of the Chancellor and his predecessor simply by looking at the savings ratio, what is called the residual calculation. During the last Tory year, it was 8.5 per cent.; in 1965, 81 per cent.; in 1966, 7.8 per cent.; in 1967, 7.6 per cent.; and in the first two quarters of 1968, 7.4 per cent. We have not got—unless the Chancellor has them; presumably he has not yet—later figures, but, clearly, what he has done is cause an alteration in the spending and, therefore, in the saving habits of the people. Very much of this lies at his door because of the lack of judgment in not acting immediately upon devaluation.

I do not wish to pass even briefly from this side of the argument without saying a word on what one might call the brighter side, in particular exports. They were sluggish for some months. Now, they are moving above the main forecast and probably above the higher forecast, and that is excellent news. I welcome every single export order that I see.

On the other hand, the import propensity remains very high, worryingly high, and everybody may have underestimated the natural propensity to import. If so, we have a more serious task before us than we thought. I put to the Chancellor one point which I do not necessarily expect to be answered. I understand that he has—touch wood—closed his mind to import controls, and I agree with him. But is his mind equally closed to any restrictions upon import credits, perhaps on the pattern of the Italian system? I do not know whether he would like to comment on that point.

The facts which I have illustrated showing a continuing attack on the Chancellor's judgment of the spending spree, certainly for the whole of this year, and, for those who were wise enough to see, even from devaluation and November, show clearly that the Chancellor's judgment has failed him in this matter. That is one of our charges. My right hon. Friend the Member for Barnet (Mr. Maudling), commenting on the President of the Board of Trade's statement last Friday, said that it called into question the Budget judgment—I have dealt with the spending spree side of that—and also the position of Ministers. I should like to comment on the second point.

The Times leader yesterday took the view, with which I agree, that the true issue in this matter is not a question of timing. I have made no comment or complaint about that; it is not the business of a Government to time their announcements to suit the Opposition, and it never has been. Nor do I believe that Bassetlaw is the main point at issue. We think that Bassetlaw, which we last won in 1924, was a brilliant result, and we are more than content with the majority of 250 in the next Parliament which it indicated. The real issue is not the by-election or timing. The real issue is whether Ministers told the truth.

I have been to some trouble to find out the precise context of the question which was asked of the First Secretary of State. This was: Mr. Chairman, in one of today's papers, it is reported that an economic freeze is on the way. A yes or no answer, please. Is it true?". I quote from the Sheffield Telegraph of the next day: …Mrs. Castle, speaking at Retford town hall, said briefly and bluntly: ' There is no economic freeze on the way.' The Times verdict on that is as follows: It cannot be justified by sematic distinctions between an economic crisis and a touch on the tiller. It was liable to mislead. It has left many people with the impression that it was intended to mislead. That is one comment, but the First Secretary knows very well that there were others, in much blunter terms, read by about 10 million people in the country. I have them here, but will not read them. I could, by reading them, get on record in HANSARD, in particular, a word which we are not permitted, as hon. Members, to use in debate, but the First Secretary must be clear that if there is nothing to add to her flurry of jejune statements, then judgment must be given by default.

For some, the verdict will be that what she said was misleading, but for many—I am one—the harsher judgment must be the true judgment. We must be clear about the distinction between the two charges. It is the Chancellor's economic judgment which I have challenged. But I believe that the Prime Minister and the First Secretary of State have fallen below the standards of this honourable House. We know—we have always known—that there are incompetent Ministers in this Administration, but I put it flatly on record that the Prime Minister and the First Secretary have shown by their conduct last week that they are quite unfit to hold Ministerial office.

4.20 p.m.

The Chancellor of the Exchequer (Mr. Roy Jenkins)

Mr. Speaker, the right hon. Member for Enfield, West (Mr. Iain Macleod) announced on Friday, via the Evening Standard, that his speech was to be one of his fiercest ever. When he tried to quote me he was reduced to quoting from The Times. When I read things like that in the Evening Standard I have a pretty good idea where they come from.

If the right hon. Gentleman gave less attention to building up his speeches in advance they might come as less of an anti-climax when he actually delivered them. It is perfectly clear that what he intended to do today was to make a few typical points of destructive, certainly not constructive, criticism—in the early part of his speech not a single word of constructive economic proposal emerged—and then to ride them off at the end with a few sentences of bile against my right hon. Friends the Prime Minister and the First Secretary of State.

But the right hon. Gentleman struck a somewhat more muted note than the right hon. Member for Bexley (Mr. Heath), whom we are all glad to welcome to his first economic debate for seven months. The right hon. Gentleman cancelled the last one altogether and at the one before he had a very pressing engagement, as we remember—[Interruption.] The right hon. Gentleman—[Interruption.]

Mr. Speaker

Order. This is a fierce debate, but it need not be a noisy one.

Mr. Jenkins

The right hon. Member for Bexley—[Laughter.] I do not see why right hon. and hon. Gentlemen should laugh when the name of their Leader is mentioned. This is a very extreme and not altogether respectful reaction from the hon. Member for Peterborough (Sir Harmar Nicholls).

Sir Harmar Nicholls (Peterborough)

If the right hon. Gentleman is starting off with personalities, he will have nothing left to which to descend—and he usually goes pretty low—[Interruption.]

Mr. Speaker

Order. We must debate seriously.

Mr. Jenkins

I will get on with the greatest pleasure as soon as right hon. and hon. Gentlemen opposite stop making a noise.

The right hon. Member for Bexley—I hope that I can mention his name this time—appeared on Friday to be whipping himself up into a frenzy across Shropshire. In speech after speech which was reported he accused the Government. Of what did he accuse them? Apparently of deceiving the House—[HON. MEMBERS: "Hear, hear."]—and of misleading the electors of Bassetlaw. Those were the charges.

The first charge does not begin to stand up. My right hon. Friend the Prime Minister made a holding statement on Wednesday—[Laughter.]

Mr. Speaker

Order. The Opposition spokesman was heard in comparative quiet. [Interruption.] Order. The House will be equally fair to both sides.

Mr. Jenkins

—such as any Prime Minister would have made in the circumstances, such as many have made before, and he said absolutely firmly that we would take measures when they needed to be taken. My right hon. Friend the Leader of the House also made it clear that a statement would be made when it was ready. What my right hon. Friends said was totally compatible with an early announcement such as my right hon. Friend the President of the Board of Trade made on Friday.

On the second charge, I am amazed that the right hon. Member for Bexley had the brazenness even to mention it. Is my memory wrong—[HON. MEMBERS: "Yes."]—or was he Chief Whip in February, 1956, that famous occasion referred to by my right hon. Friend on Friday morning? Then, as the right hon. Gentleman knows, we had a whole range of measures: not merely hire-purchase restrictions, but the abolition of investment allowances, a general credit squeeze and a great number of others. There had been three by-elections, admittedly not the day before, but three days before. Why had these by-elections been held on the Tuesday—a rather unusual day—and not on the Thursday? I will tell the House. Because on the Tuesday, but not on the Thursday, the stale register could be used—with all that was involved in that—with 3,500 postal votes in Taunton alone.

Who moved the Writs for those by-elections, selecting the day with loving care—[Interruption.]—to get the right hon. Member for Taunton (Mr. du Cann) returned by a majority of 657? I think that the right hon. Gentleman may have regretted that at times in the last year. Who moved the Writ selecting this day so as to use the stale register but the right hon. Gentleman?

I agree with my right hon. Friend the First Secretary of State that the right hon. Member for Bexley has been not only frenzied, but hypocritical. I agree with her that there is not a word to withdraw in her Bassetlaw remarks—[HON. MEMBERS: "Oh."]—or in the Prime Minister's reply in the House or in the answer of the Lord President of the Council. No one in his right senses would think that a Government should announce in advance that they were to lay an H.P. Order—even the right hon. Member for Enfield, West admitted this—and no one with any idea of the meaning of words would call what we have done an economic freeze—[Interruption.]

We will continue to enjoy—and I will come to this a little later—a rapid rate of growth—[Interruption.] Certainly we will, and I will give some figures. Therefore—[Interruption.]

Mr. Speaker

Order. I must ask the House to control itself.

Mr. Jenkins

The third statement with which I agree is that of the Parliamentary correspondent of The Guardian on Saturday, that this has all been a storm in a cup of very weak tea; and not even the right hon. Member for Enfield, West has been able to put any strength into it this afternoon.

I therefore turn to a more interesting point which was made, not unnaturally, by the right hon. Member for Barnet (Mr. Maudling) on Friday morning. He suggested, in what I think for him were uncharacteristically hyperbolic terms, that the alteration of hire-purchase rates calls into question the whole Budget judgment…"—[OFFICIAL REPORT, 1st November, 1968; Vol. 772, c. 345.] The right hon. Member for Enfield, West is a bit more cautious. I gather he said that they called into question part of the Budget judgment, thus endorsing that this was a most extraordinary view for the Deputy Leader of the Conservative Party, who shared collective responsibility for all the decisions of the late 'fifties and early 'sixties, to put forward.

Let us look briefly at the record. We had hire-purchase changes in July 1955. That presumably disposed of Lord Butler's Budget judgment. We had them again in February, 1956, so that disposed even of his after-thoughts in the autumn Budget of 1955. We had them in December 1956, which disposed of Mr. Macmillan's Budget judgment. We had them in May, 1957, only six weeks after that Budget, which disposed of Lord Thorneycroft's Budget. We had them in September, 1958, which disposed of Lord Amory's judgment, and again in October 1958, which doubled disposed of it.

We had them in late April, 1960, three week after the Budget, which treble disposed of it. We had them in January 1961, which quadruply disposed of it. There were four lots in a year, and I always understood that Lord Amory was supposed to be the embodiment of stable policies at the Treasury. Then we had them again in June, 1962, eight weeks after the Budget, which presumably disposed of the judgment of the right hon. and learned Member for the Wirral (Mr. Selwyn Lloyd). Then there was a pause and they were not used by the right hon. Member for Barnet, which, no doubt, explains why he showed such enthusiasm about the subject on Friday morning. We know what a mess his mastery inactivity during 1964 left to be cleared up.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

If the right hon. Gentleman had been at Bassetlaw last Wednesday night, and had been asked the same questions as his right hon. Friend the First Secretary was asked, would he have given the same answer?

Mr. Jenkins

I have never known anything less productive than being—

Hon. Members

Answer.

Mr. Jenkins

I shall—

Sir Gerald Nabarro (Worcestershire, South)

Do not run away from the question; answer it.

Mr. Jenkins

I shall answer the question if the hon. Member for Kidderminster—I am sorry, I always forget that the hon. Member for Worcestershire, South (Sir G. Nabarro) is not exactly where he was 15 years ago. I shall never lay claim to choose the same words as my right hon. Friend did, but I should certainly say without any question that if I had been asked whether there was to be an economic freeze I should most certainly have said, as she did, that there was not to be one.

The view of the right hon. Member for Barnet is extraordinary, not only in relation to his colleagues, but to the sense of the matter. To suggest that any act of demand management between Budgets is a confession of failure is really the biggest nonsense that I have ever heard. It shows a totally irrational fixation on the annual rite of the spring Budget. There is no magic in April or even in March. Moreover—and I say this frankly and seriously to hon. Gentlemen opposite, some of whom no doubt will greet it with the hoots of uncomprehending laughter to which one begins to get accustomed—all Budget judgments are wrong to some extent. The best one can hope for is that the errors will balance themselves out, and this is partly the case this year.

Some things have gone better than we expected, some worse. Exports are better, imports are worse. Prices are better, at least lower than as expected, and consumption, partly as a result is higher, which in a sense means worse. But productivity is higher and growth is greater. Unemployment was a little worse during the summer, but now shows signs of significant improvement.

The individual Budget forecasts of last March are more open to criticism—I choose my words carefully here—than is usual, not because they were more wrong—rather the contrary—but because they were more explicit. I published much more than had ever been done before, and I intend to go on doing so. I did so because I thought that it would contribute to a more intelligent understanding and debate, and I believe that this has been the case, even though not all hon. Gentlemen opposite show a desire to participate in it. The inaccuracy of individual forecasts, which I never thought could be avoided, in no way alters the fact that the main Budget objective that of moving towards a big and continuing balance of payments improvement, shows every sign of working out.

The improvement in the third quarter on current and capital account combined will, I believe, prove striking. While the individual components may be different, I think that the underlying trend should also be favourable in the fourth quarter. This underlines the outstanding difference between nearly every previous tightening of hire-purchase controls, and our measures last week.

The previous ones were almost all taken against the background of a deteriorating balance of payments situation. They were reactions to a worsening economic prospect. Last week's measures, on the contrary, were taken against the background of improving trade figures, stronger sterling, and an improving balance of payments prospect. We took them not in a desperate attempt to turn the position round—there was no need for that—but to underpin and accelerate an improvement which was already taking place.

The right hon. Member for Enfield, West tried to make a certain amount of the fact that in my Budget speech I deployed certain arguments against using hire-purchase controls at that time. So I did, but if he assumed that meant that I was throwing away the weapon for all time he is much more foolish than I believe him to be. I said that I thought there had been enough changes for a single year. I did, but that year is now well past. There has been no change for more than 11 months, and as, under successive Governments, and very largely under the Governments of hon. Gentlemen opposite, whose record I have mentioned in this respect, there have been 18 changes in 12 years, this must be reckoned a substantially above-average interval for changes.

I said that it was a measure which worked quickly and that then after six months or so its effect fell away, and that was not the sort of measure for which I was then looking. I then had all the fiscal measures at my disposal, and I was laying the basis of a two-year strategy. Now I want a limited, quick-acting measure, and the fact that its effect will be declining after about six months is no disadvantage. It will enable me to resurvey the position and take decisions one way or the other at the time of the Budget.

I said then that I did not want to put further restrictions on the home market of the motor industry. I did not, at that time. I wanted to see how it reacted to the increased Purchase Tax, the increased licence duty, and the higher petrol tax. We have seen that. We have seen production up by 16 per cent. in the first nine months of this year compared with the same period of last year. We have seen production for export up by no less than 38 per cent. during this period. We have seen pressure on the industry greater than at any time since 1964. We have seen long waiting lists for cars, both at home and abroad. We have heard Sir George Harriman, whose most revealing remark was quoted by my right hon. Friend on Friday.

The motor industry chiefs are singing a different note now. They always do whenever their home market is squeezed. Let us not forget that Sir Donald Stokes, for whose industrial leadership I have the greatest respect, said on the evening of Budget day that he could see "practically no future in the motor industry"; the Budget, he thought, was un-realistically harsh. An increase in 16 per cent. in production and 38 per cent. in exports is not bad for an industry with no future. I have not the slightest doubt that without the Budget measures the industry would never have achieved its export performance in recent months and that would have meant much harsher measures this autumn, for we just cannot afford a motor industry of anything like its present size, unless it is very strongly export orientated.

Captain Walter Elliot (Carshalton)

The right hon. Gentleman is quoting a percentage figure for increased exports. Is this a percentage of value or of volume? If it is of value, what is the volume?

Mr. Jenkins

It is of volume, which, I think, underlines the force of my case.

Captain W. Elliot

What is the percentage of volume?

Mr. Jenkins

This is volume. I have given the percentage of volume.

Sir Donald Stokes, I believe, was wrong in March and I believe that his fellow motor chiefs are wrong today. I have a high respect for the motor industry and a great interest in it, for my constituency is very much dependent upon it. But I do not believe that the industry need fear this change. Sir George Harriman's remark on 28th April is well worth repeating: Our dealers abroad are crying out for cars and our order books are full for months to come. Our problem is to turn out the vehicles fast enough. It is suggested that the industry itself does not allow home demand to influence its level of export supply. Even assuming that this were wholly so—I am bound to say that I feel some scepticism about it—it ignores an important factor, which is the level of our car imports. Their share of the home market was 9.5 per cent. in August, compared with 7.3 per cent. in the first quarter and 7.6 per cent. in the second.

A rise here has a bad effect on our import levels. Inevitably, also, it causes our own manufacturers to be constantly looking over their shoulders at the home market, when they should be concentrating on the export drive. The new restraint will bite at least as hard on imported models as on home-produced ones.

Some of the other considerations apply to the other categories of goods involved. The motor industry has not been singled out. Of the estimated reduction in hire-purchase debt it will provide only 50 per cent. of the total. Furniture and other durables will provide the rest. In almost all cases demand has been strong recently and in most there is a substantial import content.

This leads me back to another false assumption, as I believe it was, underlying part of the speech of the right hon. Member for Enfield, West. If it was right to do this now, he implied, it must have been wrong not to have done it at the time of the Budget. This is false, for two reasons. The first is that it is nonsense to expect that what is necessary in early November should always be apparent in March. This, if accepted, would be a recipe for almost complete immobilism, and this is not at all how I see the sensible development of economic policy. Nor is it the way the right hon. Gentleman then saw the situation.

I tried to follow the right hon. Gentleman closely and I apologise if I have got him wrong. He almost stated in his speech that in our debate on the regulator in Committee on the Finance Bill, which, I agree with him, was one of the best debates we had then, he indicated to me that I ought to have been thinking of using the regulator, that I ought to have been taking more demand out of the economy.

Mr. Iain Macleod

Purely on a question of fact, when I made that reference from this Box it was in the debate, as the right hon. Gentleman will find, in January on the cuts. That is when I first suggested that the regulator might be used.

Mr. Jenkins

Clearly, the right hon. Gentleman knows what is in his own mind, but I do not think that he is right in what he said to the House half an hour or so ago, because he specifically referred to the debate on the regulator during our discussions on the Finance Bill. I remember that he said that he thought that it had been a good debate. That stuck in my mind. He then went on to say, "We then urged the importance of the regulator because we were worried that the Budget objectives would not be achieved".

I remind the right hon. Gentleman that on 13th May, admittedly under some pressure, which is always necessary if one is to get anything approaching a clear statement of economic position out of the right hon. Gentleman, he told the Standing Committee which was considering the Finance Bill that he thought I had gone too far. He said this: My view is that on the whole the Chancellor has taken too much out of the economy, but I do not propose and I have never have proposed"— he could have said that bit again— to identify that more closely, and time alone will tell."—[OFFICIAL REPORT, Standing Committee A, 13th May, 1968; c. 719.] More important, however, than this is the fact that even if I could have foretold the future with perfect accuracy, which I would never begin to lay claim to, I would still have regarded it as right to have used the hire-purchase control in the autumn and not in the spring. We now have a much higher level of export demand than we had then, one which I believe we can further exploit. The right hon. Gentleman always pays great attention to the unemployment figures, and he spoke about them at great length and in considerable detail this afternoon. To make sure of avoiding any adjustments in the autumn, I would have had to go in for over-kill in the spring, which I did not do. The inevitable result of an even bigger Budget before the export demand had built up would have been heavier unemployment during the summer change-of-gear period.

That, indeed, would always be liable to be the result of an "annual fixation" carrying with it the view that room must be left in the spring for all eventualities throughout the coming 12 months. Now, however, I believe that the prospects for the economy are such that a growing buoyancy will continue in spite of last week's restrictions.

In this connection, perhaps I may deal with some of the doubts in the minds of some of my hon. Friends. They see this measure, as I believe they see nearly everything else at the present time, as a return to deflation. I do not agree with them. Let us look at some of the main factors. Between August, 1967, and August, 1968, the last month for which we have figures, industrial production rose by approximately 6 per cent. In manufacturing industry, it was up by 7½ per cent. There is every indication that the trend has since continued and perhaps accelerated. As a result, we expect that the figures for growth this year which I gave in my Budget are likely to be exceeded.

Productivity rose fast in the spring and early summer and this contributed to keeping the unemployment figures up. However, the unemployment position is now changing rapidly, and I believe that it is changing rapidly whatever side of the controversy about seasonal adjustment one came down on. Between August and October there was a drop of 34,000 in the seasonally adjusted figure of wholly unemployed. I am convinced that the fall is continuing and probably gaining momentum. Unfilled vacancies show an equally strong movement. They have been increasing for some time, and are now as high as in the early months of 1964, a period of marked upswing.

All this is in itself very desirable, but my primary duty is to see that this incipient boom is channelled in the right direction—towards exports and investment. Without that, it will do us no good and will endanger future employment prospects more than all the hire-purchase restrictions in the world.

The prospects offered by investment and exports are good. So far, investment has played little part in the pickup, but the indications for the future are very favourable. Industrial development certificate approvals have been rising. The latest investment intentions inquiry of the Board of Trade points to an upswing in the remainder of this year, with a very strong rise in 1969, leading to a volume of outlay up by perhaps 10 to 15 per cent. on the 1967–68 level. The C.B.I. survey fully confirms this, and shows investment intentions nearly up to the two strongest years of the decade.

Exports, on the other hand, have already been rising strongly. In the third quarter, the volume of goods sent abroad was 7 per cent. higher than in the second, and 15 per cent. higher than a year earlier. On the latter comparison, the sterling value increase was much greater—about 25 per cent.—but I think that the volume gives a truer guide.

Nor do I see any reason why the trend should not remain encouraging. We have had a rapid growth of world trade so far this year, and it may be that so far we have been benefiting from this more than from the competitive edge of devaluation. There may be some decline in the growth of world trade over the next six months or so, although the United States market now shows signs of holding up better than was expected a few months ago, and Western Europe should continue to go ahead. If there is an overall decline in export growth, we should be able to compensate for it by a small increase in our share of world trade. Devaluation certainly offers us this possibility, and the reports from individual industries give no reason to doubt its reality.

The general climate is, therefore, one of substantial buoyancy, accompanied during August and September by a rapid move towards the elimination of our deficit. In addition, the Basle agreements have given a new stability to sterling, and October was a month of considerable debt repayment, which we were able to accommodate, combined with a substantial repatriation of capital to the United States on account of the Thorn deal, with only a very small loss to the reserves. It was one of the best months we have had for a considerable time.

Mr. Peter Hordern (Horsham)

Can the Chancellor say how much has been drawn on the Basle agreements?

Mr. Jenkins

No, Sir. It is never the practice to do that, and it would be wrong to retreat from the practice. But I would tell the hon. Gentleman that the drawings have been smaller than I expected when I replied to one of his right hon. Friends some time ago.

Mr. Iain Macleod

How much less?

Mr. Jenkins

Substantially.

None of this means that we do not have a long way still to go. We need, and I am determined to get, not a balance but a very substantial surplus.

I do not think that I need comment on the effusions, for such I think they were, made on this subject by the right hon. Member for Wolverhampton, South-West (Mr. Powell) last night. He said that it was absolute nonsense to talk of needing a surplus. Those effusions were in even sharper contrast with the remarks of the right hon. Member for Bexley last week, when he gave an exaggerated view of the surplus we need, than with my own thought. I think that I can leave the right hon. Member for Bexley to deal, or perhaps not to deal, with the right hon. Member for Wolverhampton, South-West on this point.

Mr. Edward Heath (Bexley)

Will the Chancellor then say what surplus is required month by month to the end of 1971 to repay the indebtedness we have incurred, or, if not month by month, just give the repayment figure to 1971?

Mr. Jenkins

I have said that we need to work towards a surplus at the rate of about £500 million a year as quickly as possible and to keep it there.

Mr. Heath

Answer.

Mr. Jenkins

That is a perfectly reasonable answer. If the right hon. Gentleman does not think that it is an answer, he is entitled to his view. It is the answer I have given, and it is my firm view, to which I stick, that if we achieve it we can, as a result of that and other factors, perfectly well manage our debt repayment. Therefore, I dismiss what the right hon. Member for Wolverhampton, South-West had to say on the matter, and I leave it to the right hon. Member for Bexley.

I am sorry that the right hon. Member for Kinross and West Perthshire (Sir Alec Douglas-Home) is not in his place. I mentioned that I would refer to him this afternoon. I see that the right hon. Gentleman is now entering the Chamber; I congratulate him on his perfect sense of timing. He has recently made some excursions, after a fairly long pause, into fiscal and economic policies. They seem to me to be in the sharpest possible contrast with what the Leader of the Opposition has said.

The Leader of the Opposition has announced that he cannot tell what he will find when he gets into office, and that he must, therefore, be cautious. But such caution apparently does not worry his right hon. Friend the Member for Kinross and West Perthshire, who, after all, speaks with all the authority of an ex-Prime Minister. He can obviously see into the future much more clearly and with much more confidence. He has probably been consulting his old economic advisers, Messrs. Bryant and May.

Sir G. Nabarro

Balogh and Kaldor.

Mr. Jenkins

At Kettering last Monday evening, the right hon. Gentleman announced that in the first month of a new Conservative Government, taxation would be reduced. But the right hon. Member for Bexley said at Blackpool: That is why I repeat again to you today my pledge: we shall make no promises which we cannot be absolutely certain we shall be able to fulfil. I wonder who that "we" included. Presumably not the right hon. Member for Wolverhampton, South-West. But equally, presumably, the right hon. Member for Kinross and West Perthshire was included. He surely is part of the magic circle.

I therefore ask the Leader of the Opposition to tell us quite clearly whether his right hon. Friend's statement at Kettering about taxation reductions in the first month of office of a Conservative Government counts as one of his absolutely certain pledges. I willingly give way to the right hon. Gentleman.

Sir Alec Douglas-Home (Kinross and West Perthshire) rose—

Mr. Jenkins

Before the Opposition Chief Whip gets too excited, I will, without hesitation, give way to the right hon. Member for Kinross and West Perthshire, and shall be very glad to hear what he has to say, but I very much hope that this will not enable the Leader of the Opposition subsequently to avoid answering the question.

Sir Alec Douglas-Home

Although I do not recollect my speeches quite as well as some right hon. Gentlemen, if I remember correctly I said that the reduction of taxation following the pledge of my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) would be one of the first acts of a Conservative Government.

Mr. Jenkins

That quotation, which I read very carefully—[An HON. MEMBER: "From where?"] From the Financial Times. The quotation from the Financial Times was, I repeat: …in the first month of a new Conservative Government taxation would be reduced. I would like to know—[An HON MEMBER: "Where is the cutting?"] The cutting is not here, but I checked it extremely carefully this morning. The hon. Gentleman must take serious points. I wrote the words down this morning from the Financial Times of 29th October.

I am sure that the right hon. Gentleman would not deny it if he had said it, but, if he did not say it, he was seriously misreported, and if he was so misreported I imagine that he would like to put it clearly on record, not that he cannot remember what he said but that he did not make this promise.

Sir Alec Douglas-Home

As the right hon. Gentleman recognises, how could one make a promise about the first month of a Conservative Government? If I had said the first months of a Conservative Government I should not be so very far out. What I think I said was "One of the first acts."

Mr. Jenkins

The right hon. Gentleman's remarks, which I assure him were widely read and noted, even if not by himself widely read and noted, gave an impression a great deal more precise than that which he has now given, but I am glad that he has withdrawn or corrected this, and I accept without hesitation what was his meaning.

The Opposition, with a prior build-up of publicity, chose deliberately to concentrate this debate on a narrow party issue which has awakened no echo in the national Press nor I believe in the public at large. They preferred to announce that this was the great issue of the debate. Admittedly, they are not pretending it now, because they allowed the whole thing to die after the speech of the hon. Member for Enfield, West, but the public has only to realise the vast build-up which the Opposition went in for before and their charges against the Government in this respect have fallen completely flat.

I am amazed that the right hon. Gentleman the Member for Bexley, in his speech on Friday—he presumably will not say that he was misreported—allowed himself to get into such a state of frenzy about this. It seemed to me to come most inappropriately from the biggest by-election rigger of all time. At Blackpool, the right hon. Gentleman also announced that the process of democratic government could not survive the return of another Labour Government. He meant by this—"If people do not vote for me they do not believe in democracy". That would be a most dangerous and presumptuous thing for any party leader ever to say.

But it is worse than this, because this piece of smugness and hypocrisy comes from a leader of a party which has presided happily over everything that has happened in Northern Ireland for the past 45 years. If the right hon. Gentleman believes that he alone is the guardian of everything that is important in democracy, and that everything that has happened there has been correct, this is self-deceit on a scale very unusual even for him.

Several Hon. Members rose—

Mr. Deputy Speaker

If the House will give me a moment of silence I will announce the next speaker. Sir Gerald Nabarro.

5.10 p.m.

Sir Gerald Nabarro (Worcestershire, South)

The Chancellor of the Exchequer is not blessed with a very good memory. A few days before the 1966 General Election he was chosen by his party to represent Labour on a party political television broadcast in the Midlands. I was chosen by my party to represent the Tory view, against him. [AN HON. MEMBER: "Why?"] Indeed, why not? At least, my constituency elected me by a much larger margin than the right hon. Gentleman's constituency elected him.

The significant thing about our controversy on television, in Birmingham was that the whole of the economic accusations made by the present Chancellor against the Tory Party rested on the financial dyspepsia of 13 years of Conservative rule and the constant chopping and changing which he alleged took place in hire purchase regulations. He claimed that a Labour Government, with extraordinary financial foresight, would never indulge in economic or financial dyspepsia of that kind. They would always anticipate events; they would grasp time by the forelock; it would never be necessary to create unemployment for economic reasons.

So, when the Chancellor today wishes on my hon. Friends and myself the alleged sins of altering hire-purchase arrangements many times during our 13 years of rule he is conveniently forgetting the whole of his own past political history, for he climbed to power on the back of these accusations, that Labour would always do so much better than the Conservative Party. In fact, they have in four years done far worse.

When the right hon. Gentleman twitted my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) with the unemployment figures at 550,000 approximately, the Chancellor conveniently omitted to tell the House that 120,000 of those unemployed have been out of work for more than nine months and have no prospect whatever of finding work under Labour policies in the foreseeable future. They are the deliberately created Labour hard core of unemployment. It is now the policy of the Labour Government to maintain an increased and increasing pool of unemployed for the purpose of serving their economic policies. Not a squeak of denial comes from the benches opposite.

An Hon. Member

They are asleep now!

Mr. Peter Mahon (Preston, South) rose—

Sir G. Nabarro

No, not now.

The Secretary of State for Social Services (Mr. Richard Crossman)

Oh.

Sir G. Nabarro

I will give way in a minute. The Secretary of State for Social Services is the most arrogant Member of the House. He never gives way.

I want to address my comments to the hon. Member for Lewisham, West (Mr. Dickens) and his 52 colleagues. I will give way to the hon. Member for Preston, South (Mr. Peter Mahon) when I have finished my remarks to the hon. Member for Lewisham, West. There could not be any more savage indictment of his Government's policy than the wide-ranging and penetrating Amendment to the Motion for the Address which he has put down on the Order Paper: …that the Gracious Speech fails to reappraise the Government's post-devaluation economic strategy, by mobilising our immense resources abroad to protect sterling and repay our foreign creditors and, thus, to provide for more rapid economic expansion at home, to improve the inadequate rate of investment, to annul the cuts in social services expenditure, to remove prescription charges, to further restrict"— that is a horrible split infinitive; it ought to be "further to restrict "— the export of capital and, above all, to resume full employment. Never in the annals of Queen's Speeches was there a more savage indictment of the policy of a Government than that which has come from the 53 rebels on the benches opposite. Why have they neither the spunk nor the guts to vote against their own Front Bench tonight? Why will they troop obediently into the Lobby behind the Chancellor, in spite of their brave words on the Order Paper? I hope that the hon. Member for Lewisham, West will answer that question in due course. Now I will give way to the hon. Member for Preston, South.

Mr. Peter Mahon

The hon. Member seeks to indict the Government on the score of unemployment. Will he explain how he reconciles his opinions with the fact that I am able to hold my head high in my constituency because unemployment is 1.8 per cent., which is the lowest that it has been for a very long time?

Sir G. Nabarro

Of course, it is patchy. The hon. Gentleman is lucky. However, he should not boast to his less fortunate colleagues. He should be consoling them and offering to go to their aid. He should be castigating his right hon. Friend the Chancellor for his deliberate creation of these pools of heavy regional unemployment, in various parts of the country, due to failure of economic policies.

Mr. Swain

Is the hon. Gentleman aware that, on numerous occasions when his own party was in office, the hon. Gentleman, who was then the hon. Member for Kidderminster, threatened to abstain from voting or to vote against his Government, but, unfortunately for the House and the country, he took the pill before the moment came?

Sir G. Nabarro

The hon. Member for Derbyshire, North-East (Mr. Swain) was not here in those days. If he cares to do a little modest research, he will find that probably I voted against my own party far more than he and the great majority of his hon. Friends have ever voted against theirs. I do not boast. That is a matter of historical fact. The hon. Gentleman needs a researcher.

I pass, then, to the speech of the Chancellor of the Exchequer, which, as I observed last weekend, having regard to his policies, is characterised by smug complacency and a failure to recognise the horrible post-devaluation drift in our financial and economic affairs.

The right hon. Gentleman talked today of buoyancy in the economy. The whole of our economic troubles under Labour have sprung from our failure to balance our overseas trade. But I must have regard to any improvement which has been secured in our visible trade balances post-devaluation. There is no evidence to support the Chancellor's view that these visible trade balances are improving. Over the first nine months of this year, they are actually worse than they were over the first nine months of 1967.

The official figures obtained from the Board of Trade show that, in the first nine months of 1967, the deficit on the visible trade account was £540 million and that during the first nine months of 1968, the deficit was £547 million. Comparing nine months this year with nine months last year, we are worse off by £7 million, measured as an aggregation over the nine months. It is true that, at the end of the third quarter, in the month of September, 1968, there was an upturn. That was on a single month's figures. But it is very dangerous to gauge a trend on a single month's trade figures.

Notwithstanding the huge additional taxation imposed in this year's Budget, rising £1,000 million, all the inconvenience which springs from harsh controls and economic and financial measures imposed by the Government during the last year to secure a balance in our overseas trade, and only that factor, all have been brought to nought by the results of the last nine months. I refute for myself and, I hope, for my party the Chancellor's statement that the economy is buoyant and that progress is being made towards balance in our overseas trade. My judgment is at least as good as his. My advice is at least as good as his.

On the occasion of the television broadcast that we did before the last election, when the right hon. Gentleman would not let me speak for longer than a few seconds without interrupting me, so impatient was he, I said, "Stop muttering, Roy", and I reduced him to silence.

Mr. William Hamling (Woolwich, West)

Who is arrogant now?

Sir G. Nabarro

I am repeating what is on the record. The hon. Member for Woolwich, West (Mr. Hamling) probably was electioneering and not listening to the broadcast. If he consults the records, he will find that dialogue between the Chancellor and myself.

I am advised by the business community. The Chancellor is advised by Treasury bureaucrats. Almost unfailingly, the Treasury is wrong in most of its advice.

Mrs. Renée Short (Wolverhampton, North-East)

Hear, hear.

Sir G. Nabarro

I am glad to have the support of the hon. Member for Wolverhampton, North-East (Mrs. Renée Short). British industry, trade and commerce are much more likely to be right in their judgment.

I pass now to another factor of our economic affairs which is immensely important. I reminded the Chancellor earlier of a fact of which, apparently, he is unaware. Whereas, in my former incarnation as hon. Member for Kidderminster I was concerned largely with carpets and motorcar workers, I am much more concerned now with motorcar workers and agriculture. However, I have as many motorcar workers in my constituency as the Chancellor has in his, and I am very concerned about the affairs of the industry, because what he has done in hire-purchase matters will not help my constituents. It will probably make their prospects worse and put quite a lot of them out of work.

The other factor of constituency interest and wide national interest is agriculture. Here, the Government have failed even more than in other spheres. When the Prime Minister made his statement on 16th January about public expenditure, I was fortunate enough to ask one of the first supplementary questions from this side of the House. At a distance of 10 months, it bears repeating. On that occasion I said to the Prime Minister: Is he aware that British agriculture, in the form of its spokesmen, the N.F.U.s, has estimated imports' saving of £250 million a year given realistic prices instead of the present debased prices? Why did the Prime Minister deliberately omit any reference to agriculture, and its huge import saving potential, from his lengthy statement?"—[OFFICIAL REPORT, 16th January, 1968; Vol. 756, c. 1601.] The Prime Minister then delivered an answer which covered half a column in HANSARD and admitted, in a half-hearted kind of way—as he has few farms in the Huyton division of Lancashire—that there are important import substitution possibilities inherent in a policy of increased output of British food, and he told me to wait until the February Price Review was published.

All the agricultural Members on this side of the House, together with myself, waited for the Price Review, expecting that real incentives would be given to the farming community to raise a great deal more food. In fact, a policy called selectivity was said to be pursued and price advances said to compensate for devaluation, in a total of £52 million, were given. During the ensuing period, farm output has risen hardly at all, but imports of food have risen by nearly 1 per cent. Farm output is said to have increased by 5 per cent. post-devaluation, although I can find little or no evidence of it.

I hope none will deny that if we continue to run a deficit on visible trade account of more than £500 million it is madness to continue to import hundreds of millions of pounds worth of excess foreign food which, largely, could be grown in this country, provided the British farmer is given realistic incentives to produce more and an end is put to the dumping of foreign food on British farmers at artificially low prices.

I hope that the Leader of the House, who is to reply—speaking with all the authority of a former Minister of Agriculture—will tell the House what progress has been made in this policy of import substitution, about which the Prime Minister made such great play on 16th January and which, so far as I can tell, has not been brought to fruition.

I coin the Chancellor's phrase, used in a speech which he delivered some months ago. It is one of those statements of a problem to which no effective solution has been advanced by this Government. He said that exports are inadequate and that imports are excessive.

Mr. Jenkins

When?

Sir G. Nabarro

The right hon. Gentleman does not remember saying it? I have not brought the exact reference with me but that is the effect of his words and I am sure that he will not quarrel with that interpretation of the position that has existed in recent years. Our exports have done very well since devaluation. I do not dispute that. But, we are selling many of our manufactured goods at far too low prices on the world's market as a result of devaluation. Goods which were highly competitive before devaluation have now been artificially debased in price, post-devaluation, and we are selling them too cheaply—notably goods which have a high content of scientific and technical skills, embraced in the sophisticated finished product.

What we have made no progress with, is a reduction in imports by the policy of import substitution, the greatest single contribution to which can undoubtedly be made by British agriculture.

Mr. Peter Bessell (Bodmin)

The hon. Gentleman is making a valuable point, and I agree with him, but will he say how he would control the dumping of artificially subsidised goods on the home market?

Sir G. Nabarro

By two methods; first, by the substitution of a policy of import levies for the present policy of subsidies—my policy would raise the prices of foreign imported food, thereby making it less competitive with home-produced food—and, secondly, by a vigorous implementation of the anti-dumping powers already possessed by the President of the Board of Trade. Those two replies are impeccable.

Mr. Iain Macleod indicated assent.

Sir G. Nabarro

Even my right hon. Friend the Member for Enfield, West is nodding his agreement.

Sir Harmar Nicholls (Peterborough)

Does not he usually do so?

Sir G. Nabarro

No, he does not always do so.

Much of my speech has been directed to strong support for the Amendment tabled by my right hon. and hon. Friends, humbly regretting: that few of the proposals in the Gracious Speech have any relevance to the declared intention of strengthening the economy. I shall march through the Lobby this evening, in support of that Amendment, with enthusiasm and alacrity. I invite the 53 Socialist rebels opposite to succour me and sustain me in that Lobby, thereby denoting to their own leaders the futility of the Government's policies and the absence of any Socialist content in those policies.

5.26 p.m.

Mr. Douglas Jay (Battersea, North)

In the characteristically modest speech to which we have just listened there was no practical suggestion whatever. The only suggestion made was that this country should impose import levies on foodstuffs—which would do the utmost harm to our national economy. The speech of the right hon. Member for Enfield, West (Mr. Iain Macleod) contained no constructive suggestion that I could detect. The only constructive suggestion made by the right hon. Member for Kinross and West Perthshire (Sir Alec Douglas-Home) was hastily withdrawn, as I understood it, which means that so far we have not had a very practical contribution from hon. Members opposite.

Only those who mistakenly regard economic forecasting as an exact science will object outright to the Government's taking further measures to restrain spending this winter. I question to some extent whether it is wise to impose a new limit of a 40 per cent. down payment on cars, because of the pronounced effect that it had on the motor industry on the winter of 1966–67. Even after devaluation a strong case has to be made out for that. But nothing said today has disproved the case for some sort of restraint.

But if it has to be done there is all the more reason for anxiety about the present level of unemployment, especially in development areas. If new curbs are necessary there is surely all the stronger case for more vigorous action than we have already in the development areas. I hope that we shall not become complacent with the present levels of unemployment, and that the disappearance of the phrase "full employment" from the Queen's Speech is nothing more than a variation in the Queen's English. Unemployment, seasonally adjusted, seems now to be tending to fall, but the true figure for October, total registered unemployed, non-seasonally adjusted, is 2.4 per cent. in Great Britain and 7.1 per cent. in Northern Ireland. This is too high by any long-term standards, and represents a continuing waste of national resources. We have fewer people employed in Britain today than we had one year ago or two years ago, and we cannot be content with that.

It means that in the development areas—although the gap between them and the national average has been narrowing in the last few years—the total is still much too high. With the national average at 2.4 per cent., the true figure today in Scotland is 3.6 per cent., in Wales 3.9 per cent. and in the Northern Region, 4.8 per cent.

Do not let us forget that, as I would judge, the real grievance in Scotland and Wales today which provokes all the talk of devolution and all the rest of it is lack of employment comparable to what we have in the South of England. People in those parts of the country would be even more grateful for more jobs than they are for more Royal Commissions. The Government are, therefore, in my view, quite right to have set aside another £10 million for immediate public investment schemes in the development areas. I hope that they will push on with them quickly and get them going while this winter's unemployment is still with them.

There are, however, two other things which I believe that the Government should do now. The first is to launch a new advance factory programme in these areas and in the pit closure areas in particular—for instance, in West Cumberland, where the situation is very acute. We had four advance factory programmes between 1964 and the summer of 1967, but we have had none launched since. It is fortunate that we started those four when we did in view of the present pit closures and the rundown of the coal industry. The figures show that those programmes have proved a success.

Mr. J. Bruce-Gardyne (South Angus)

In what the right hon. Gentleman says about advance factories, do we not have to bear in mind the fact that a large number of the advance factories announced in the programmes to which he has referred are currently standing empty? There are 15, for example, in Scotland alone. How many more can we have in addition to those standing empty?

Mr. Jay

The hon. Member is quite wrong, as I was just about to explain. The figures show that of the 124 advance factories approved in those programmes, 98 have already been completed, nearly 80 have been allocated to firms and more are being allocated week by week at a quickening rate. The hon. Member's figures are out of date.

I know that the Board of Trade now has what it calls a rolling programme by which a few factories are started in areas where others have been let, but we have had only 12 of these in the last 18 months. It is, therefore, time to launch another major instalment of this successful programme, to get building this winter and to locate the factories in the most needy areas.

Secondly, the Government must, I believe, firmly and emphatically resist the pressure for a relaxation of the industrial development certificate control in the congested areas. There could be no worse folly, at a moment when development area policy is at last really beginning to yield results, than to weaken the i.d.c. control. We could spend hundreds of millions of £s on grants in those areas, but if we weaken the control we will spend all that money and not produce any effective results.

It is perfectly natural that industrialists in the congested areas—and the Midlands in particular—should periodically protest about these controls and, indeed, that the C.B.I. should do its job and convey those protests to the Government. Many people do not realise what a very large number of i.d.c.s are given in the congested areas in any event wherever a strong case can be made. To weaken further than this and to loosen the control altogether would wreck the recovery which is now beginning in the Northern Region and in Wales and Scotland.

Looking at the Queen's Speech as a whole, I do not criticise the Government—I do not think that even the hon. Member for Worcestershire, South would do so either—for giving the main priority at the present time to national solvency. We all know that this is the first need if anything is to be achieved. I would, however, be far happier about the Speech, and I believe that the Government would recover a good deal more support in the country, if their economic measures were balanced by rather more progress in social reform and, in particular, some advance towards greater equality in the distribution of property. It is perfectly possible to move forward on both those fronts at the same time, and there are some measures aimed at the wider ownership of property—for example, through more saving—which would help industrial effort also.

Since 1964, many improvements have been made by the Government in social benefits, and more are promised, but for a Labour Government which has been in office for over four years it seems to me that remarkably little effort has been made to achieve a fairer ownership of property. Indeed, the ownership of property may even be getting worse. I know that we are rather vaguely promised a wealth tax—quite understandably, not in the Queen's Speech—and that I have always supported. There is, however, an even stronger case for tightening even more effectively our existing inheritance taxation.

To tax capital which a man has inherited is even more obviously justifiable than to tax what he has saved, which will always be somewhat more controversial. Yet there are still many notorious loopholes in our estate duties, the worst of which I regard as the 45 per cent. rebate on the tax rate which is given for property in agricultural land. I am glad that my right hon. Friend the Chancellor is present, because I sincerely hope that he will not let another Budget go by without putting that one right.

Nevertheless, it is not enough to cream off into the public revenue some of the really large estates. What is equally important and would help the national economy in every way would be to enable the mass of wage earners and salary earners to save regularly in such a way that they can build up some reserves of their own.

At present—I do not know whether hon. Members are aware of this figure—there are 34 million accounts in the Post Office Savings Bank and the Trustee Savings Banks. I apologise for mentioning the Post Office. Yet the number of people owning equity shares, even now, is probably only about 2½ million as compared with 34 million. This means that over 90 per cent. of the adults in our population are saving on a fixed-interest basis, very largely at 2½ per cent., while a minority of under 10 per cent. are being protected against falling money values by sensible investment in equities which show a long-term rise in values. This has always seemed to me to be fairly near to a swindle on the great mass of small savers. It means that we still have two nations in investment.

Mr. Michael Alison (Barkston Ash)

In moving on to this point following his earlier discussion of a tax on accumulated or saved wealth, at what point does the right hon. Gentleman propose to avoid the tax on the sort of wealth which he now wishes to encourage the working man to save in equities, for example?

Mr. Jay

At a pretty high level. I am, however, now making a different suggestion.

With the two Stock Exchange booms of the last 10 years, this two-nation situation may mean that the distribution of property has got worse. By tar the best and most practical way which I commend to my right hon. Friend the Chancellor to start putting this right—although in addition to other measures such as the hon. Member has mentioned—would be for my right hon. Friend to authorise the Post Office to launch a Post Office Savings Bank unit trust, investing in equities on the general lines of the already successful Trustee Savings Bank Unit Trust.

I know that there are special investment departments in both the Post Office Savings Bank and the Trustee Savings Banks, and these are admirable in themselves, but they are not enough. What is needed is an instrument which would enable the 34 million people now depositing in the Post Office and the Trustee Savings Banks to get the chance of putting small amounts regularly into a reasonable spread of equity shares. Of course, the ordinary City unit trusts cannot supply the complete answer, either, because they do not, like the Post Office, offer a counter in every town where the ordinary man is used, as a habit, to paying in his savings regularly.

I believe that the Chancellor would find support from the National Savings Movement itself for this sort of proposal, and, indeed, it could be operated through the existing National Savings Movement machinery.

It would greatly benefit the small saver—steadily as time went on. It would almost certainly tap new savings as the attraction became generally known, and might divert quite a bit of money from bingo halls, perhaps, and it would offer a new supply of capital to industry. It seems to me that, over time, it would really begin to even out the distribution of property in this country in a way in which almost nothing else can. I really hope that the Chancellor will seriously examine this proposal between now and the next Budget, when, I hope, this will attract him. For unlike most of the dilemmas and nightmares which confront him every day, this proposal ought to help both social progress and economic advance. And, indeed, it might even be popular.

5.41 p.m.

Mr. John Biffen (Oswestry)

The right hon. Gentleman the Member for Batter- sea, North (Mr. Jay) has acquainted the House with an argument he has very persuasively given to a wider public through the Financial Times over recent weeks, and I am fairly certain that more will be heard of it when we come to the Budget. At least there is this consensus between him and this side of the House, namely, the very great anxiety for a very striking recovery of the level of savings in this country. No doubt one of the most disturbing things from the Chancellor's point of view has been the diminution in the amount of our national income now being saved, and the fear that, may be, there has been a very real flight from money and particularly from any money which is invested with Government. For, if this be so, it means the ability of this Government genuinely to borrow on the market is very severely limited indeed. That was certainly the consequence, it seems to me, which was borne out by the I.M.F's consideration of our economy. Whether we like it or not it seems to me these are considerations which are most clearly governing the Chancellor's Budget strategy.

However, I do not want to look ahead, albeit through a glass extremely darkly, at the kind of debates we may be having some months hence. This is a debate about the Queen's Speech and the Loyal Address in reply. There is something felicitous and endurable about the Queen's Speeches, because they always end with the remark that "Other Measures will be laid before you". One knows perfectly well from past experience, with all Governments and particularly this Government, that many of those Measures which dribble out during a year are sometimes because they are thought to be improvements on Budgetary techniques, and sometimes with a sense of some embarrassment; but one thing is certain, that we shall have a whole series of Measures of economic consequence laid before us during the coming 12 months which were not revealed in the Queen's Speech. Indeed, we have already the hire-purchase changes, one of the earliest indications of this financial and fiscal flexibility.

I should like to keep my remarks brief and, therefore, narrow, and touch only on these hire-purchase regulations, and I should like the House to share with me these questions: whether some kind of restraint is necessary; if so, whether the hire-purchase restrictions were the most suitable form of restraint; whether the timing of the restraint, in particular in strategical terms, was justified; and whether there was some element of deception in the particular enterprise which has excited the House and the country over the last few days.

I must confess, and I do so with some temerity in the physical presence of my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), that I do not share his—I thought—qualified gloom about the level of demand in the economy. I would have thought that on the whole we are seeing a fairly booming economy in the United Kingdom at the present time, and I believe that there is a developing picture of rising demand.

Quite a lot of comment has been made about the export performance. What I often think is a more helpful guide is the index of export orders of the engineering industry, which indicates a rising total of exports, and these are statistics of engineering export orders which obviously will become part of a manufacturing process in the months ahead. The index shows that between December, 1967, and August, 1968, the volume of exports has risen from 162 points to 170 points. To my mind, this gives very encouraging prospects of a high level of engineering activity derived from exports during the coming months.

What, I think, is even more important has been the evidence recently made available by the Board of Trade in the Survey of Industrial Building and Approvals. I quote from the Board of Trade Journal, which shows that the average rate of 27.6 million square feet so far this year shows a marked increase of 26 per cent. compared with the 1967 average, and is now considerably higher than at any time in recent years. The point I would emphasise is that these are approvals and this will mean that they will be put into effect in the coming months. I think that this gives one some ground for hoping that through exports and industrial investment the pressure of demand on the economy during 1969 will be quite significant. There are plenty of other indicators, including the C.B.I's own comments on the acute, developing shortage of skilled labour, which point to the fact that we could be in difficulties in the economy. I am taking into account mentally that public authority capital expenditure is supposed to fall off at the beginning of next year.

Therefore, I have no hesitation in believing that some restraint was absolutely essential, and I am glad that the Government took measures of restraint on consumer expenditure. Indeed, the whole philosophy of their Budget was that domestic consumption had to be restrained.

On the second point, whether or not the hire-purchase regulations were the appropriate form of consumer restraint—that I would favour—I have very great doubt. When the President of the Board of Trade made his announcement in the House on Friday his hon. Friend the Member for Chislehurst (Mr. Macdonald) put what I thought was a particularly pertinent question when he asked: 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?"—[OFFICIAL REPORT, 1st November, 1968; Vol. 772, c. 349.] There is no doubt that one of the consequences of the hire-purchase regulations is that they bite selectively and harshly, and particularly at the rates which are now imposed, and this was a point touched on by the right hon. Gentleman the Member for Battersea, North. I find that the evidence of the motor industry's economic development committee puts this point particularly persuasively, and I should like to remind the House of paragraph 37 which says: Since the changes in the hire-purchase regulations are such a significant factor in causing instability in the United Kingdom motor market, particularly in the last three years, it is worth noting that far less use has been made of this form of economic control in the leading Continental countries. In Germany and Italy, except for the period from December. 1964, to January, 1966, there have been no Government regulations on hire purchase. My fear it that consumer spending will not be so much restrained by hire-purchase regulations as deflected into a pre-Christmas spending spree. We all know that Christmas is a time of high levels of consumer spending, particularly in respect of foodstuffs and beverages. I do not want to elaborate on this too much, but the emphasis given to foodstuffs consumption pre-Christmas tends to be in what is known as fancy foods, which are very largely imported foods, and in beverages, in respect of which need I say any more than that there is a very substantial degree of importation of wines? Let hon Members think of the enormous boost always given to cigar sales at Christmas. Was there ever an industry so cyclical unless it was the fireworks industry, if I may work in that highly contemporary allusion?

There is no doubt that the import content that could be involved in the deflection of consumer demand deriving from the hire-purchase restraints could give a boost to imports, which on the Chancellor's own reckoning was an area of weakness in his calculations. He emphasised this when he said—I thought it was a rather defensive gesture—in respect of the domestic consumption of motor cars that rather less than 10 per cent. are imported. He was trying to say that it would have some effect on imports. But it seemed to me that the deflection of expenditure that one could foresee arising from this would be to areas where the import content would be much higher than 10 per cent.

Mr. Robert Sheldon (Ashton-under-Lyne)

The hon. Gentleman may be right when he speaks about the effect of the hire-purchase restraints on certain industries, but surely there are other cases where there will be nothing like as serious a deflection to Christmas shopping. For instance, when one buys a £300 car one spends only £100, but when one spends £100 on Christmas shopping, that is the total.

Mr. Biffen

I accept that the hon. Gentleman is trying to drag me into the muddy waters of micro-economics to discuss the multiplier effect. I will stick to my own argument. Doubtless he will have the chance to advance the nuances of the multiplier effect. I weigh it and discount it.

I do not want to run away from this. If I say I believe in restraint but do not particularly favour hire purchase, I accept that I must answer the question "What kind of restraint would I have preferred?". I say without hesitation that it would have been the Excise and Purchase Tax regulator, particularly as that was one which in respect of certain classes of wines, for example, could have had a very clear impact upon at least a sector of our goods which are imported. Who knows, it might have given an opportunity to bring some tax justice so that the unit alcohol content of Scotch whisky would no longer be at a disadvantage compared with imported fortified and table wines. I make that point out of respect for my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne).

If I answer the second of my questions by saying that I believe the restraint was necessary and that it should have come with the Purchase Tax regulator, I should like to consider whether in the broad strategic sense this has been a case of good timing.

The Chancellor was anxious to pretend, I thought in a fairly bland way, that in his world things on the whole move predictably and even if the plusses and minuses were there, on the whole they all balance out and present a fairly satisfactory picture. This is the kind of optimism which, while it might make a good debating speech in the House of Commons, is fearfully frightening for the many commentators who watch the course of economic management of our country, persons outside this House and persons in the International Monetary Fund.

The Chancellor was very anxious to limit the discussion as to whether it had been discussed early in the year or during the Committee stage of the Finance Bill. But the last occasion when the House discussed it was a good deal later, just before it rose, on the Third Reading of the Finance Bill. On 4th July the Chancellor said: On consumer spending, therefore, the measures have begun to bite, and the effects are beginning to show up in the indicators. These effects should become more pronounced in the coming months as we adjust to a new level of consumer spending".—[OFFICIAL REPORT, 4th July, 1968; Vol. 767, c. 1790–1.] He was not just wrong; he was dead wrong. It was not as though there were no voices raised in that debate saying, "Now is the time you should be increasing consumer taxation and doing this if only to restore confidence in case there is again pressure on sterling". Goodness knows, we now realise that that is what has occurred. We realise, for example, that had confidence been restored by some action by the Government in the closing period of July it might not have been necessary to have the financial Munich of the Basle Agreement. If measures had been taken then, I believe they would have obviated the necessity for the measures that we are taking now. I believe that the restraint has been, in the strategic sense, badly timed because it should have been carried out earlier.

My last point is whether there was deception. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) dealt with this admirably when he said that we do not expect in this vale of tears Governments to make unpopular announcements for the benefit of the Opposition. So I will not engage in comparative morality. I think I should win. It is just generosity that is preventing me from doing it. I would merely say that it is all very well but the Prime Minister has need of credibility, particularly in respect of the Rhodesian talks, for example. Anyone reading the Prime Minister's remarks when he was very skilfully examined by my right hon. Friend the Leader of the Opposition can only conclude that on that occasion the Prime Minister showed cleverness beyond the call of intelligence.

I think a much more serious question is whether the right hon. Lady the First Secretary of State and Secretary of State for Employment and Productivity was deceiving herself. My right hon. Friend—I do not blame him—suggested that she knew what it was all about and was pulling a fast one. That is quite a generous, maybe, interpretation. I have a harsher one, and that is that she doss not know what it is all about and that she genuinely believes that the Government strategy is one in which domestic consumption is not expected to suffer as a result of the devaluation strategy. This could be the most serious thing of all.

No one who either heard or read the brilliant speech by the hon. Member for Birmingham, All Saints (Mr. Walden) in the Standing Committee on the Finance Bill will have any doubt about the latent schizophrenia between the Chancellor of the Exchequer and the First Secretary of State. This is very serious indeed, be- cause only this afternoon the Chancellor of the Exchequer was enumerating some of the advantages, some of the things that had gone well, and some of the things that had gone badly. He said that prices had been kept down. That is a good point. He said that consumer expenditure had gone up. That is a bad point. But they are related. What is a good point on the one hand that has an immediate consequence that is a bad point; it can only give rise to immense puzzlement.

Every time the Government succeed in making a marginal brow beating of the private sector not to proceed with pricing policies which it believes to be in its commercial interest it adds to the Chancellor's difficulties of dealing with the level of domestic consumption. The seriousness of the situation is that the right hon. Lady really believes that it is the rôle of her Ministry and of the Government to bring about a situation in which the public consequences—in terms of public expenditure and private living standards—of devaluation are not to be experienced. Recently, in the presence of the Chancellor, Sir Leslie O'Brien said: All I will add now is that none of us concerned with these matters"— referring to the management of the economy— can afford to make mistake. It is late in the evening for the right hon. Lady to indulge in her own good-natured self-deception. We all suffer from that. Certainly the Chancellor suffers, and it was unfortunate that, when responding earlier to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), the right hon. Gentleman did not take the opportunity of distinguishing more clearly the fact that he does not share her illusions.

6.2 p.m.

Mr. Joel Barnett (Heywood and Royton)

The one thing to be said in favour of the hon. Member for Oswestry (Mr. Biffen) is that in an economic debate he can generally be relied on to speak about economics, which cannot be said of many hon. Gentlemen opposite. I was somewhat surprised to hear him say that he believed in restraint. I always thought him to be a Powellite freebooter, but I am glad to note the change.

Mr. Biffen

I am sure that the hon. Gentleman would not wish to misrepresent me more than is tolerable in these circumstances. If I had chosen this occasion to debate the levels of public expenditure, I would then have chosen to reduce the levels of tax reduction. I would have done my own Morecambe. I was proceeding on the assumption that we have levels of public expenditure which have been decided and proceeded upon and which, unfortunately, cannot be changed. In other words, I was being realistic.

Mr. Barnett

The hon. Gentleman has made my point. He said that he would control this, that and the other. I had thought him to be a freebooter. Now he says that he is a freebooter in controlling the economy, but in his way.

The hon. Gentleman made the interesting comment that the hire-purchase restrictions might have a deflecting effect on consumer expenditure in the pre-Christmas boom. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) corrected him in one regard. Another is that while there is some truth in what the hon. Gentleman said, one must bear in mind that for importers the problem of stocks for pre-Christmas booms does not arise in the last few weeks pre-Christmas because their buying must be done many months before that period. Thus, the dangers of which the hon. Gentleman spoke can be over-stated.

I wish to comment briefly on the hire-purchase restrictions introduced last Friday morning. I completely accept that the decision to announce them on Friday was because of the Bassetlaw by-election. [HON. MEMBERS: "Oh."] I have never doubted that. This is one of the human frailties that I accept in political life and I am surprised that so much has been made of it.

I object, however, to the manner in which hon. Gentlemen opposite have treated this event—the hypocrisy inherent in what has been said by them—because it is obvious, from what the right hon. Member for Enfield, West (Mr. Iain Macleod) said, that he at least accepts that there should not be any reflation. Whether or not there is an amount of deflation in this piece of hire-purchase restriction, it is certainly not so great as to warrant the sort of comments made by the right hon. Member for Enfield, West and the right hon. Member for Barnet (Mr. Maudling), particularly the latter right hon. Gentleman who said on 1st November: …his statement"— referring to the words of the President of the Board of Trade— calls into question the entire Budget judgment…". That was as nonsensical a comment as one could get from a former Chancellor of the Exchequer, particularly when he added: Second, and more serious,…the statement calls into question the personal honour and truthfulness of Ministers…".—[OFFICIAL REPORT, 1st November, 1968; Vol. 772, cc. 345–6.] That is nonsense, and hon. Gentlemen opposite know it. Such remarks are unworthy of them. The trouble is that remarks of that kind do not just debase and hurt opponents but debase the whole of our political life and standards. They do the maximum possible harm because the public knows that they are humbug. If the decision to which I referred was taken by the Government for the reasons which I have stated, it is possible to criticise it without all this cant and humbug from hon. Gentlemen opposite. They cannot expect to be taken seriously when the best they can do is the sort of speech made by the right hon. Member for Enfield, West today.

The right hon. Gentleman made yet another critical analysis of what has gone wrong, of the guesses that were made but did not turn out to be right and of the forecasts that have proved to be incorrect over a period of time. We should not be surprised when forecasts are wrong. In economic terms, it is surprising if any economist ever gets a forecast right. It is a matter of making variously better or worse-informed guesses. That is all we have had from the right hon. Gentleman.

Anyone making guesses and forecasts about the economy is as likely to be wrong as right or right as wrong. The margin of error must necessitate a regular adjustment of any judgment, budgetary or anything else, and I would have thought that most of the more serious Front Benchers opposite would accept that. As a non-guesser, I am prepared to take the average of all the various economists' guesses and from that reach the conclusion that we are not going to get a surplus next year of anything like the figures that have been bandied about. I suggest that we will have a surplus next year of about £200 million.

The hazards of forecasting, particularly on the total of current and long-term capital account, are such that it is impossible to be even as accurate as that because fluctuations in capital outflow alone are enough to make impossible any guesses about what will be the total balance, deficit, or surplus in a given year. For example, in 1961 there was a surplus on net capital outflow of £68 million. In 1964 there was a deficit of £370 million. When one is faced with wide variations of this order in capital outflows—let alone what can happen on current account—one appreciates the hazards of making forecasts about a balance of payments surplus or deficit 12 months from today.

My complaint is not that the Chancellor guessed wrong but that we are in danger of not seeing the wood for the trees. We are in danger of becoming bemused by balance of payments deficits and surpluses—so bemused as almost to lose a sense of objectivity.

The Chancellor is constantly repeating the need for a surplus at the rate of £500 million a year. The Leader of the Opposition treated us to a somewhat idiotic statement on 30th October, when he said: …we need not an improvement so that there is still a deficit of £30 million a month, but a surplus of trade of £40 million a month continuously for at least 40 months; and a surplus of invisibles has to be added to that…"—[OFFICIAL REPORT, 30th October, 1968; Vol. 772, c. 25.] The surplus of invisibles is running at the moment at a rate in excess of £240 million a year, which means that the right hon. Gentleman was saying that we need a surplus on balance of payments of about £720 million a year for 40 months.

If he really believes that, he is welcome, but I do not know how he can also believe that he can reduce taxation and maintain full employment—which is what the right hon. Member for Enfield, West implied—and increase investment along with a continuous surplus of £720 million a year for 40 months. It was an incredible statement and I should be interested to hear tonight whether that is still the official view of the Opposition.

Returning to the Chancellor's idea of a steady surplus of £500 million, I do not believe that we could maintain such a target anyway. Indeed, at this point, I am in some agreement with the speech yesterday of the right hon. Member for Wolverhampton, South-West (Mr. Powell). I query the need for such a surplus. It stems from a commendable and understandable desire to reverse the trend whereby we have been living beyond our means, on hire purchase, as it were, but it is possible to go too far the other way.

We are almost approaching the old-fashioned Victorian view of debt, that all borrowing is evil. We certainly borrowed too much as a nation in the past and have spent money which we have not earned, but it does not follow that, as a nation or as individuals, we should take an eternal vow never to borrow again until we have paid every penny we owe. This is impossible any way—

Mr. Hordern

Is not the difficulty that we said that we would repay, and within a very few years?

Mr. Barnett

The hon. Gentleman can make his own speeches about what we did or should have done and what we said or should have said. He is happy making his party political points: I prefer to stick to the economic points.

There is nothing wrong with borrowing—in moderation. Of course, if we were prepared as a nation and as individuals to put off all spending until we had paid every penny of debt, it would be very simple. If the nation would accept that sort of view, we should have no problems. Everyone would exercise self-restraint and Governments would have no problem, but the nation is not prepared to do that. It is prepared to spend some of its earnings of tomorrow today. There is nothing wrong with that. There is no evil in getting some pleasure today from tomorrow's earnings. Many wealthy people think that it is terrible because they have never had that problem, but ordinary working class people are prepared to work harder tomorrow to get some pleasure today. I do not blame them, and Governments should not blame them.

It is this, which individuals are doing, which adds up to our national situation, but I see nothing evil in borrowing in this way. In practice, anyway, it would be impossible to resist the blandishments of creditors if one wanted to cease all borrowing. An apt comparison in industry is that a creditor does not want a customer to stop all borrowing and buying until he has paid his debts, since that would put the creditor out of business. Equally, he would not want him only to borrow and never to repay, which is what we have been doing as a nation for some years.

His ideal would be a customer whose debts were commensurate with his resources and also of a size which had adequate security and could be serviced. This is particularly apt, because we now have a more realistic exchange rate, we have adequate security for our debts and we can service them. What our creditors would not want and would not allow would be for us to reduce the size of our debts too rapidly. Certainly £500 million a year for 40 months, let alone £720 million, is a rate which other countries would not stand. So we should stop talking about the impossible and set our sights on a smaller target. We should stop talking about massive repayment of debts—[Interruption.] If I am contradicting something which the Government previously said and am therefore saying that they were wrong, I am prepared to do so and to concede to the hon. Member, who is calling from a sedentary position, that the Government were wrong, if that is what he wants to hear.

I believe that we need to work for a small but consistent surplus, and that then we would find, as in industry, that it was not a problem of keeping creditors at bay but of preventing them from lending us more than we wanted to borrow. This is the problem, rather than finding the enormous sums which we hear about to make the massive repayments which would be needed if we were to repay all our debts. This may sound odd to those who know that our nation has not been paying off its debts at all for years, but anyone who knows anything about creditors in industry will know how astonishingly quickly they change from pressing for repayment to being quite happy that one is in a sound way and allowing one not only to maintain a debt but to increase it.

If one accepts this thesis, it should be taken together with the unexpected stability of the two-tier system of gold, which looks like being more long-term than was ever thought—even though it is not perhaps as stable as one would hope, it seems to be much more enduring than anyone dared to hope when it was introduced—and it should also be seen together with the arrangements made at Basle. Incidentally, the House has been somewhat churlish about that settlement. It has paid no compliments to the Government, and I should like to do so. I believe that there has been some controversy about whether credit should go to the Financial Secretary, the Bank of England, or Treasury officials. I do not mind who it was—I imagine that everyone involved had something to do with it—but that arrangement, from which I hope we will move on, will help us to move away from the impossible previous situation of short-term borrowing, which left us with the volatile debt position we have faced since 1964. I hope that we can move on further from that so that we can get away from the whole idea of sterling as a reserve currency.

With this stability, we can get to a higher rate of growth than we have known for some time, and without any major measures which would simply mean increasing next year's surplus say, from £200 million to £400 million, which would not solve our problems but could create even greater difficulties.

There are still two inhibiting factors on balance of payments. The first is on defence which is still far too high for comfort, particularly in the dollar cost of equipment. When we talk about all the statistics of balance of payments we exclude purchases and dollar payments for defence equipment as if these were irregular payments, but these payments to the United States for equipment, far from being irregular, are very regular. They are likely to become even more regular. They should be included in all our statistics and show how clearly we are spending too much in this field.

The second point on the inhibiting factors of balance of payments is the question of private investment abroad. I am not in favour of taking over the whole portfolio of investment made as some of my hon. Friends want to do. Without going into too much detail, it would mean replacing creditors who cannot compel us to do what we would not want to be doing at present. But I am very much in favour of action to prevent the continuing outflow of capital. I am sure that in the year 2000 our successors will look at this period of our economic history and think that we have been crazy. On the one hand, we have been restricting growth and causing unemployment here at home because of balance of payments deficits while, at the same time, boosting that deficit on private capital invested abroad.

Look at the figures. In 1958 capital investment abroad, both direct and portfolio, amounted to £310 million. In 1967 it amounted to £424 million. The outflow in the same 10-year period was £3,286 million. This was at a time when we had stop-go in this country and were restricting growth and deliberately causing unemployment. This is absolutely crazy. Capital investment here during that same period amounted to £2,573 million. Nevertheless the net deficit on capital outlay was of a very hefty nature. And looking at all the evidence available, the capital investment in this country, or the greater part of it, would certainly continue if we restricted capital investment abroad because the two things do not necessarily or wholly go hand-in-hand.

I certainly do not argue that we should completely stop capital investment abroad. That is not possible anyway. Reddaway, in his interim report, despite the provisos he made, made quite clear that some investment is more valuable than others, but he went on to give some figures, despite many qualifications in which he found that on average the initial yield on investment of every £100 was just £9. That seems too high a price to pay for restricting growth and causing unemployment at home. I hope that the Government will now give serious attention to the whole question of capital investment abroad.

I conclude that if we can cease our obsession with the need for a surplus at the rate of £500 million and if we can forget prices and incomes legislation—I am happy to see that we seem to be forgetting the legislation on incomes—and if we can couple this with action to prevent capital outflow, we can look forward to a greater degree of economic stability than has been known for many years.

6.24 p.m.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

I think it is almost exactly four years since on this same occasion of the debate on the Address I had the honour of following the hon. Member for Hey-wood and Royton (Mr. Barnett) who then made his maiden speech. I believe I congratulated him on an agreeable speech, as it was, and said that I looked forward to hearing him again. Time has gone on and I do not think I would have praised it exactly in those words if I had then known what was in store for me in debates in the Finance Bill Committee and on the Floor of this House.

The hon. Member said that he did not go so far as his hon. Friend the Member for Lewisham, West (Mr. Dickens) but I think he should examine his speech textually very carefully with the aid of a spy-glass to see if there is any difference between the hon. Members' views. They are sitting very happily together, and, because this is a debate in which many hon. Members want to take part, I do not wish to create any rift between those allies.

In his reply to my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) I do not think the Chancellor of the Exchequer was in his best form, but he at any rate contributed one phrase to our language. There has always been the difficulty, Mr. Speaker, of which you more than anyone else are aware, that we cannot use the word "lie" on the Floor of this House. I believe the late Sir Winston Churchill spoke about a "terminological in-exactitude". Now the Chancellor has produced a new phrase for us. We might also conjugate it like this: I was misreported, you were inaccurate and he—the right hon. Gentleman referring to the Prime Minister—made a holding statement. This is new Parliamentary definition, which we shall be able to use again.

The hon. Member for Heywood and Royton said that we had been rather grudging in our attitude towards the Basle Agreement. On the other hand, my hon. Friend the Member for Oswestry (Mr. Biffen) characterised it as "a Munich". I feel that I must spend a few minutes on this matter. In 1922 the then Chancellor of the Exchequer, Mr. Stanley Baldwin, in company with the then Governor of the Bank of England, Mr. Montagu Norman, concluded an American debt settlement with the United States authorities which won universal approval. I believe it was criticised at that time only by the Daily Express and Sir Charles Addis, chairman of the Hong Kong Bank. Everyone in the City and in politics thought it an admirable agreement. It provided that we should repay the entire sum borrowed from the U.S.A. for war purposes over 60 years plus 3½ per cent. interest regardless of any payments we might or might not receive from former allies in Europe in this connection. This was not a settlement but a capitulation. I shall try to show that the Basle Agreement is also a capitulation.

I should not particularly wish to dwell on this had I not had the opportunity of hearing at the bankers' dinner the Chancellor of the Exchequer and the Governor of the Bank of England who were freely exchanging tributes to each other's powers of navigation when the ship to which they referred was to all intents and purposes beached on a sandbank. It was an occasion for decent humility, not for boasting. There is nothing to be proud about in a complete surrender.

What was the position before the agreement to which the hon. Member for Heywood and Royton referred in such tender terms? There were holders of sterling here perhaps to a total of £4,000 million—I would not know the exact amount—and technically speaking they were entitled to convert their sterling balances on payment into foreign currency. As the White Paper says, this became acutely difficult in the second quarter of last year when there were substantial withdrawals—depletions, I think is the word—of £230 million in our gold reserves due to this other happy phrase, "diversification of sterling balances".

With £1,000 million nominally in gold, a steady drain of £230 million a quarter could not be tolerated. This, of course, came about primarily as a result of the agreement made by the Chancellor with the Hong Kong Government who immediately after devaluation came to London and said, "We shall take all our money away unless you give us guarantees for the dollar content of our sterling balances." Again, one does not have figures, but the example of Hong Kong was contagious. All the other holders of sterling balances said, "Now you must give us a guarantee."

What is the agreement? We have drawing rights to repay anything from one-fifth to a quarter of our liabilities, and those rights exist for a maximum of three years. I understand from some of the exchanges across the Floor that they are already being used. When the Chancellor made his announcement in July I said that, while we wished him well in his negotiations, to the extent that they were successful they would represent a transfer of our debts from creditors over whom we had some control to creditors over whom we had no control. The right hon. Gentleman advised me to wait and see. I did, and now we all see the result in the White Paper.

There might have been a tenable argument for telling our creditors that we had a standby of about a quarter of our liabilities, and would therefore give them a guarantee on a quarter of their deposits, and that they should make the best of that. But we have given them a guarantee for 90 per cent. of their deposits. It is clearly physically impossible for us to meet this guarantee from the resources made available to us by the standby. I suspect that the size of the standby—2,000 million dollars—was, roughly speaking, arrived at because in the eyes of the people who knew about our financial situation, which I do not pretend to know about, it was approximately the amount of our as yet uncommitted reserves. In other words, we were pledging our gold reserves in advance as and when the standby is drawn. We have to arrange the repayment over 10 years, in hard currency, to an institution or country over which we have no control.

I wonder what the price of that was. One thing that has taken place to which no one has drawn attention is the end of something we learned about at school. I am sure that the hon. Member for Heywood and Royton is familiar with "the bill on London". We learned at school that one of the great advantages of being at the centre of a trading empire was that simply by having knowledge of customers abroad one could finance movements of goods from, say, Burma to France, and make the arrangements in London to deal with the shipment. This meant that one could make sure that it was shipped in a British ship and insured with a British insurance company. "The bill on London", which was a classic phrase showing the advantages of a trading empire, has now come to an end. A regulation has been passed that no trade not touching the sterling area can now be financed from London. I do not argue that the system of the bill on London was not open to abuse. I dare say that some people got some extra credit by means of it, but I am sure that there were great advantages to it, both to the British shipping lines and to the insurance companies.

I have a question which I hope the Chief Secretary—whom I congratulate on his new appointment—will ask his right hon. Friend to answer. Was the withdrawal of the facilities of the bill on London a spontaneous action by the London authorities, or was it in any way a condition of the granting of the Basle credit? The whole matter has been treated very quietly. No attention has been drawn to it, and I have noticed no Parliamentary reference to it. I should be very relieved if I could be given an assurance at the end of the debate that this action was taken entirely by our authorities on their own initiative for the advantage of this country.

It is relatively easy to criticise an agreement once it has been made. But this is not an agreement; it is a capitulation. One of the points about which the hon. Member for Lewisham, West (Mr. Dickens) and his friends are concerned is the amount of British investment money now being invested in such places as Australia. British pounds in London have no dollar guarantee, but if a British individual sends £100 to Australia that sum has a theoretical dollar guarantee. In other words, simply by transferring his funds from London to Sidney or Melbourne any capitalist in this country gets what is virtually a dollar guarantee for the funds he has transferred.

The Australians are very sensitive about this. The mere threat of the withdrawal of British investment from Australia caused severe tumbles in the Australian market. I should have thought that in negotiating with the Australians we might have made a condition that if the guarantee was given, it would not apply to transfers made after such and such a date, but this has not been done. That is why I characterise the deal as a capitulation.

We have given a guarantee which we are not in a position to carry out, and we have given it for the whole of the debt. My hon. Friend the Member for Horncastle (Mr. Tapsell) used the word "humiliating" in a Motion, and I share that view. It is humiliating to give a guarantee which one cannot carry out. And there is a bit more to this. We read in the White Paper that it is hoped that the funds drawn from London on the basis of the standby will be deposited with the Bank for International Settlements at Basle. That is really saying "We do not like the way you keep your books in London." When a company is in trouble and the shareholders complain, there is a demand for an investigation of the accounts.

I can best sum this up by saying that any shareholder who sees that Cooper Bros, are looking into the firm's books had better get out, unless he wants to be caught on the dance floor after the music has stopped. Here we are suffering the special humiliation of the holders of sterling being told, "You can take your money out of London, but you must put it in the Bank for International Settlements", which is only an office. We have now reached the moment when the accountants are looking us over. The next stage can be to put in a receiver.

What will be the situation when my right hon. Friend the Member for Bexley (Mr. Heath) and his colleagues take office in two years' time? The 2,000 million dollar standby will be ex-exhausted, the bill will be coming in. The remedy, in business terms, is to get rid of the board of directors and the chairman, and I hope that the electors will take this to heart.

6.40 p.m.

Mr. James Dickens (Lewisham West)

The speech of the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), despite its totally unconvincing ending, was a typically thoughtful contribution to our debate which made some interesting points about the Basle Agreement. I have the gravest reservations about that agreement. In my view, it opens up for this country immense problems for the 1970s. I think it deplorable for a country which has immense assets abroad, now totalling over £11,000 million, to deliberately pursue an economic policy which inhibits growth, creates unemployment and pursues a demonstrably unfair incomes policy for the sake of borrowing £835 million from the Bank for International Settlements. I make my position on that perfectly clear.

Instead, I again urge the Government to take steps to liquidate the dollar portfolio as part of a carefully phased exercise, and to use the revenue from that source to underwrite the more volatile short-term sterling balances, both the official and the unofficial balances, and to start the repayment of debt to the I.M.F. and other creditors.

Tonight, on what is very close to the first anniversary of devaluation, the House turns its attention to the Government's economic policy. I shall not go over the alternative economic policy which I have outlined in some detail on several occasions in the past. I shall summarise the argument and bring various aspects of it up to date, but I shall speak mainly about some of the effects of the Government's policy, particularly on unemployment and the social services.

In passing, I must express my surprise at hearing the hon. Member for Oswestry (Mr. Biffen), for whom I have some respect, congratulate his right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) on what I thought was a rather disreputable attack on the personal integrity of some of my right hon. Friends. Those of us on this side who have differences with the Government on economic policy have always confined those differences to matters of policy, and we have never sought to argue the case on personalities.

The right hon. Member for Enfield, West has, alas, left the Chamber. It is a pity that he has, for it will not do for him or any other member of the Opposition to complain about the present level of unemployment. He was a member of two successive Conserva- tive Cabinets which deliberately put up unemployment to well over 600,000, in the winter of 1958–59, and again in the winter of 1962–63. Moreover, he and his party are backed financially by the those who make up the Industrial Policy Group of British industrialists and businessmen, who are now openly urging the deliberate creation of a permanent pool of unemployed in Britain of 2 per cent. and more. Indeed, they have said in their very first pamphlet that full employment should no longer be regarded as a major item of policy by political parties.

It is time the Opposition came clean on this matter. What level of unemployment do they stand for? Do they support the Industrial Policy Group? Are they in favour of the permanently higher level of unemployment which we are now experiencing in Britain for the first time since 1939, or are they not? The House and the country are entitled to know.

The Government's attitude towards unemployment is an extremely serious matter, too. Full employment is a basic principle of the Labour Party. Yet we are entering the third successive winter with the prospect of 600,000 of our fellow citizens out of work. We on this side find that prospect, as a permanent feature of British economic life, utterly intolerable. We watch with the greatest anxiety the way the Government are reacting now to the many pressures being put on them from sources at home and abroad. For example, the Bank for International Settlements, which arranged to underwrite the official sterling balances in the recent Basle Agreement, in its most recent annual report openly attacked the policies of British Governments in the 1950s and 1960s for creating an over-full employment level of demand, as it put it. If that is not urging a higher level of unemployment now, I should like to know what is.

We have also had certain remarkable statements recently attributed to members of the Government. On 21st September, the Business News section of The Times reported that Mrs. Barbara Castle said the acceptable"— note the word "acceptable"— figure of 2 per cent. unemployed would be achieved 'as our export drive gathers strength'. I raised this matter privately with my right hon. Friend yesterday, and she went to great pains to deny the report. I fully accept that. Obviously, her position would be one of great difficulty if it were felt that, as a leading member of the Government, she had succumbed to the present propaganda. It was, perhaps, shall we say, a Freudian slip on that occasion.

Not only is the present level of unemployment serious as it is, but it is becoming a chronic feature of the economy. In July, 1966, there were 108,000 adult males aged 18 and over out of work for eight weeks or longer. The corresponding figure on 9th September this year had grown to 265,000. This is intolerably high. Unemployment is not so evident, perhaps, in prosperous Lewisham and South-East London, but for people living in South Wales, the North and Scotland the figures are frightful.

The Government must get rid of the idea that they can run the country at a rate of economic expansion of 3 or 4 per cent. per annum, taking unemployment simply as a balancing factor in the equation. There must be an early return to full employment, and the rate of economic growth must be increased to a level between 5 and 6 per cent., which, taking account of the rapid increases in productivity, is the very least we must attain to bring the level of unemployment down to about 425,000.

But let this be clear. Those of us who have signed the Amendment to the Address on this occasion are saying—I certainly am—that we utterly refuse to accept that there is any advantage for this country in having about 400,000 people avoidably unemployed today or throughout this winter.

Mr. Hamling

Is my hon. Friend saying that: the Government are deliberately creating unemployment and that the total of unemployed now is avoidable?

Mr. Dickens

I am saying that the figure of 550,000 presently out of work contains within it, according to the best estimates which the Department of Employment and Productivity can provide, about 400,000 who are avoidably unemployed. I say also that the Government's policy since 1966, and, I regret to say, since devaluation, has been to pur- sue an economic strategy which allows for a permanently higher level of unemployment.

I turn now to the central question of the Government's economic strategy. I supported the devaluation of the pound in November, 1967, as the first step which this country had to take to reappraise our financial position in the world for the remainder of this century and beyond. On the first Monday after the announcement of devaluation, I said at Question Time to the present Home Secretary that devaluation must be supported by a package of measures designed to readjust this country to a new world financial rôle, that it was not only nonsense to go on maintaining the world military rôle which the Government were then seeking to maintain but nonsense also to go on trying to uphold a world financial rôle and, in particular, to put the interests of the City of London in the international economy before the long-term interests of British industry.

Now, the Government have taken some steps to reassess our world position. I give them full credit for their decision in December and January last to effect a military withdrawal from east of Suez in 1971. I said then, and I say now, that that was a step of great historical importance.

Mr. John Lee (Reading)

But three years late.

Mr. Dickens

But, as my hon. Friend points out, three years too late. If this step had been taken in 1964–65, Britain would now be getting some of the benefits in terms of reduced foreign exchange spending.

It is true initially, after devaluation, the Government tried to go for something like a new economic policy. The House and the country should know that the present Prime Minister was arguing privately for a rate of economic growth of 6 per cent. We have lost all sight of that, at least in 1968. The Bank for International Settlements, the International Monetary Fund, the Treasury, and the financial establishments here, quickly knocked my right hon. Friend off that argument. The consequence is that we have settled for a much lower rate of economic growth this year, with all its accompanying dangers for the country.

What do we put forward as an alternative policy? I have argued this in some detail in the past. Perhaps the most concise statement of our position is contained in paragraph 188 of the recent and wholly admirable Economic Review published by the Trades Union Congress. I should perhaps explain that the General Council of the T.U.C. were arguing in this paragraph about the consequences of reflating the economy. For only by reflating the economy this year, by having a planned reflation of domestic demand and a much higher level of public investment, can we get unemployment down. The paragraph says: The General Council accepted that reflation of the economy would bring with it risks on the balance of payments front. They reached the conclusion that it would be possible to contain these risks, given determination by the Government to adopt radically new attitudes to the use of such measures as import controls and the use of the dollar portfolio. But, more fundamentally, they took the view that to restrain expansion indefinitely would have been not only to postpone a solution but indeed to aggravate the basic problems facing the economy. That is the position in a nutshell.

Let us take the first point for which the General Council argues. If the Government were to decide to reflate the economy, to go for a much higher rate of economic growth in 1969, thus encouraging a much higher level of in vestment, particularly in the private sector, thus reducing unemployment, what other steps would they have to take? The very first measure would be to protect the present vulnerability of the £ sterling as an international reserve and trading currency by bringing back the exchange controls which the Tories dismantled in the 1950s; by, if need be, suspending sterling convertibility; by, if need be, too, freezing some of the more volatile sterling balances. Of course, this would cause uproar in the City and outrage in the Treasury.

But these are, from a Socialist point of view, attractive incentives. I put it to my right hon. Friends that short of taking these steps they will be faced with an economic policy over the next decade. With deflation and foreign borrowing as the two main pillars of their policy.

What if we were to take a look at our vast resources abroad? We occasionally get the impression in these economic debates that we are a poor, weak and enfeebled country. Nothing of the kind. At the end of 1967 Great Britain's external assets amounted to £21,000 million. Our total external liabilities, excluding private investment in this country, amounted to about £14,000 million. Of the £21,000 million of external assets, some £11,000 million was made up of private investment abroad. For example, the portfolio investments have greatly appreciated in value in recent years and now total £4,250 million as against £3,000 million in 1962. Why on earth go to the bankers to borrow money when we have these immense resources available?

Mr. Bessell

I think that the hon. Gentleman has put his case a little unfairly. He says that there are £21,000 million of assets abroad. I agree that this is the figure. There are £14,000 million in terms of liability, excluding the amount in private sector investment. We must add the two together to arrive at a fair assessment, if he chooses to take the second as a basis of credit for his argument.

Mr. Dickens

I would have thought not. Private investment in this country is a liability only in the most narrow bookkeeping sense. No one seriously argues—not, I think, the hon. Gentleman—that there is any question of withdrawal as to the bulk of this money. On the contrary, the present indications are that the trend is going the other way. All our anxieties are about the increasing rate of private investment in Britain.

However, if we were to take a decision to liquidate our dollar portfolio, we should not use it in the way that the Chancellor propounded at the Labour Party conference at Blackpool, in some obscure way to secure a standard of living that we have not earned. That is not a proposal which I have ever advocated, nor have I any recollection of those who urged the proposal on the Chancellor ever arguing this point of view. On the contrary, we would take, concurrently, many other measures to get the balance of payments right. I repeat, we would use the revenue as part of a carefully timed exercise to protect the currency, to buy out the more volatile short-term sterling balances, and to repay some of our foreign debts, with fair compensation to existing holders.

The second thing we would do—here I take up the point made by my hon. Friend the Member for Heywood and Royton (Mr. Barnett)—would be to put a restriction on the outflow of private capital to advanced countries in the sterling area. My hon. Friend dealt with this point at some length. I will confine myself to saying this, and I say it in the presence of my right hon. Friend the Chancellor of the Exchequer. I will give way to him willingly if he has any new statement of Government policy to make in this respect tonight. It is not for the lack of any urging on my part that he has not had the opportunity of doing so earlier.

I asked my right hon. Friend yesterday to review again the Government's policy on the export of private capital from Britain to Australia, South Africa and other advanced countries in the sterling area. Unfortunately, there still has been no response from him, despite the fact that in the first six months of this year we exported £348 million of capital, the highest figure in any six monthly period since records were first kept in this form a decade ago. It is much worse than the figure for the first six months of 1964, which was £220 million; and that, I would remind the Chancellor, was the year of the £800 million deficit.

I recognise that this is a sensitive point. I put it to my right hon. Friend that the days turn into weeks, and weeks turn into months, and this tremendous strain on the balance of payments continues. When does my right hon. Friend intend to take action on this critical matter? I urge him to look at this again as a matter of urgency and to recognise that Britain cannot afford any longer to be a mainstay of capital supply for racialist, Fascist South Africa, on the one hand, or Australia, on the other.

In particular, it is time that the Government paid special attention to the very heavy outflow of capital to portfolio investment in Australia, much of which has been going to Australian gold mining shares, iron ore shares, and so forth. We have now got to the stage where unit trusts are openly advertising as one of their major features that they will invest a substantial proportion of their portfolio in this sort of investment abroad. This nonsense has got to stop, and the sooner it stops the better for Britain's economy.

In the course of this year we on this side of the House have become accustomed, unhappily, to the fact that the Government, in their desire to pander to the most reactionary financial elements in Europe, have whittled away some of the basic fundamental principles of the Labour Party. By "reactionary financial elements" I mean, for example, the Bank for International Settlements which in its last annual report dealt with the British economy and called for a higher level of unemployment, for cuts in public expenditure, for a really effective incomes policy—and we all know what that means—and for new trade union legislation, in terms that sound almost identical to those used by the Tory Party.

I tell the Chancellor that we are getting very tired of watching some of the principles which the Labour Party has always stood for being eroded. In January we had the cuts in education, the disgraceful decision to postpone the raising of the school leaving age, the mean decision to withdraw the milk supply from children in secondary schools, and the contemptible decision to reimpose prescription charges.

I tell my right hon. Friends that when we look over the last year and also witness what happened in the House yesterday over the cuts in the school meals service rightly described in The Guardian this morning as a mean and inept cut designed to meet the Treasury's passionate desire for candle ends, we are bound to ask when these cuts will stop. When will it be recognised that our social services are inadequate, that we are spending less per capita on them than, for example, free enterprise America? When will we see that these are not sacred cows, that they are to many of us basic elements in the policy we were elected to this House to carry out and, above all, they are elements that we are determined to defend? For we are not prepared to see full employment or our social services being lost in a welter of complacent reactionary humbug emanating from the Treasury, from Washington or from Basle.

7.2 p.m.

Mr. Peter Bessell (Bodmin)

I hope that the hon. Member for Lewisham, West (Mr. Dickens) will forgive me if I do not follow his argument too closely. I am bound to say in passing, however, that I find his case in respect of Britain's apparent overseas wealth somewhat difficult to accept.

In the interjection that I made I pointed out that the hon. Member had agreed with the published figures of overseas assets of £21,000 million compared with an overseas liability of £14,000 million if private investment is excluded. His reply was that it was reasonable to exclude the liabilities to the private sector on the ground that there was no chance of its being withdrawn. I think that is true only in so far as Britain remains economically stable. In any case, it is not the kind of accountancy that I should like Her Majesty's Government to follow. I say that, with respect, because I believe that it is a false way of presenting the picture to the House.

I much preferred the argument put forward by the hon. Member for Hey-wood and Royton (Mr. Barnett). I believe he is absolutely right to emphasise that there is no need to talk in terms of surpluses of £500 million and more per annum. I do not think we should set our targets at such unrealistic figures. I believe, with him, that we can as approach the problem of Britain's international and national economic difficulties in realistic terms and at the same time not be afraid of repayment of our international obligations, if necessary over a very long period.

I do not want to dwell on these points, although they are ones that fascinate me, and it is a long time since I had an opportunity to take part in a debate on economics. There are only three matters upon which I want to touch, and I intend to do so briefly as I do not want to deprive other hon. Members of the opportunity of taking part in a very good debate.

First, I refer to the additional hire-purchase restrictions, announced by the President of the Board of Trade on Friday. I accept that it is all right for the Opposition to kick up a hullaballoo about this announcement. I thought, too, there was substance to some of the points that were put forward regarding the manner in which the announcement was made, although I should not be able to accept the argument that was put to the House by the right hon. Member for Enfield, West (Mr. Iain Macleod), who, I thought, became rather dramatic at the end of his speech in suggesting there had been a deliberate attempt to mislead the House. I certainly acquit the Leader of the House of any such intention on this or any other occasion.

I do not think that it would have been responsible of the First Secretary of State and Secretary of State for Employment and Productivity, upon a public platform, to have answered the question, in the manner in which it was put to the House by the right hon. Member for Enfield, West—"Is a further credit squeeze on the way?"—with other than "No". If she had answered "Yes" there is not the slightest doubt that the following morning there would have been an appalling run on our reserves, and it would have affected the whole of our present economic position.

I think that the right hon. Lady was put in a very difficult position. If she knew—I do not know whether she knew or not—that there was to be an announcement about hire-purchase restrictions the following day, I think that she was still right to answer in the way she did. Whatever may be said about these restrictions, the fact remains that it cannot be said that this is another credit squeeze. It may be an extension of the restrictive measures which the Government have felt it necessary to impose, but it is certainly not by any wild stretch of the political imagination a new credit squeeze.

Having said that, I do not want to leave the subject without emphasising the dangers which I believe exist in any policy which results in over-deflation. I agree with the right hon. Member for Enfield, West that it would be folly at this stage to commence a general policy of reflation, although I think he was right to mention that there are certain areas of the country where a certain amount of reflation could be justified and this is necessary for the general economic health of the country. He mentioned the northern areas. I also would mention the South-West. But, also, I think there is a danger, if we are not to start reflation, in pursuing a policy of deflation which is too keen and which can have certain very serious long-term results.

One short-term consequence of deflation, on the credit side, is an improvement in the balance of payments, which we are already seeing. This follows from an improvement in our export performance, which all of us welcome. I wish very much that there could be a decline in the amount of our imports. However, I believe that the general trend is one which can cause some quiet confidence.

On the debit side, a policy of this sort inevitably results in something which is repugnant to many of us; an increase in unemployment. It results, too, in a degree of regional hardship which is out of proportion to the rest of the country. It is this which I believe the Government have failed to tackle as realistically as they should in conjunction with their present programme.

If we take the long-term consequences of a deflationary policy, unemployment is not very easily corrected, but, of course, there is also a danger to the Government's own policy of redistribution of labour because, as I have said, the areas that suffer most are the under-developed regions. There is also the problem of the hampering of technological progress. This is something which has not been referred to previously in the debate but I believe the Government should bear it in mind.

The risk to our exports is real. It is all very well to talk about depressing the home market but, even on the Chancellor's figures, given on Friday, there has been no increase in the actual amount of consumer spending at home in the last part of this year compared with the latter half of last year. If we are to embark upon the dangerous course of restricting home spending, one of the risks is not only short-term unemployment but that it will make us less competitive in exports because of inevitable increases in prices which must result from lower rates of production.

These are matters upon which there is a good deal of agreement on both sides. I believe that however finely the arguments may be balanced, there is considerable uneasiness about any policy which puts deflation upon deflation. I would prefer to see the Government at this stage—with full recognition of the problems they confront and of the need to maintain the steady growth of exports and to restrict imports as far as possible—use the regulator or to introduce perhaps for a short time some form of sales tax—and here I speak for myself and not perhaps for my party—both of which would have immediate consequences and might produce the kind of results the Government believe are necessary to stabilise the economy in the long term.

One thing which bothers me more than anything else about the Government's economic policy is the absence of what I would describe as a long-term strategy. I have said that there is a danger resulting from deflation upon deflation, that there is a danger to the regions which is especially acute in parts of the country like Cornwall. But the most serious danger from the Government's present policy is the absence of the essential, long-term planning of which we have had little evidence either in the Chancellor's speech today or in the speeches he has made on previous occassions.

I know that the Government pin much of their hope upon Britain's eventual entry into the European Economic Community. But, in the present situation, this is not as realistic a hope as some would wish. Again I speak for myself. But whether we do get in or not, one thing is clear: the Government, irrespective of the party they represent, should do some contingency planning.

It is a matter of concern to many hon. Members and to business interests here and in North America that the idea of an open-ended free trade area, not as an alternative to British participation in Europe but as part of a grand strategy of reducing trade barriers, is not being examined more closely either here or, at the moment, in Washington.

A number of studies and investigations have been carried out by responsible organisations in the United States, Britain and Canada. These include various papers which have been published here by the Atlantic Trade Studies Group, together with the extremely valuable contribution by the British-American Committee, and in particular the National Planning Council of America, the Centre for International Studies in New York, and several other less significant bodies.

One thing clearly emerges. Whether or not we get into Europe, it is right that there should be some coherent policy followed by the countries of the Western and, indeed, of the Eastern bloc if they should join with us, which will enable a continuing reduction of tariffs to take place. I do not believe that any member of my party would disagree with me in saying that the policy of any responsible Government should be directed towards a gradual reduction of tariff barriers. This is the very basis of international good will and trading.

If we look at this proposal for an open-ended free trade area comprising the United Kingdom, the United States, Canada, Japan and E.F.T.A., it is worth looking at the attitude adopted towards it by responsible opinion in the United States. We know that, in this country, there are many adherents to the proposal in commerce, banking and politics.

I would like to mention a few of the organisations with which I had discussions in North America during the summer, since this may serve to show the genuine interest that there is in the proposals. These organisations include the British-American Chamber of Commerce, the National Foreign Trade Council of America, the National Association of Manufacturers, the American Importers' Association, and representatives of companies like General Electric and Macey's Stores together with the International Chamber of Commerce and various banks which it would perhaps be indiscreet to mention here. I also had discussions with representatives of the Department of State as well as with politicians.

One thing is clear to me. There is no absence of sympathy for the broad concept and there is certainly a willingness on the part of responsible opinion in America to look at the proposal, subject to Britain taking an initiative. This is understandable because the Americans do not want to be accused of creating policies for their neighbours. In this situation, as was said to me at the State Department, and as I said in an interjection last Thursday, if Britain wanted this kind of policy to be examined, they would certainly examine it, but the initiative would have to come from us. This is an important factor which the Government should take into account in considering their future economic development of the country in association with our partners.

This does not cut across the intention of Britain to enter the E.E.C. because one hopes that an open-ended free trade agreement would include the Community. In the same way, I would not wish to imply that there is a desire on the part of the United States to hinder us from pursuing our application to join Europe. On the contrary, it is America's desire to do all it can to assist us in that course if that is our wish. It was made clear to me at the State Department that the present United States Government supports to the full the British policy of applying for membership. But today a Presidential election is being held and, in a few hours, there will be a President-elect elected by the American people.

Mr. Jeremy Thorpe (Devon, North)

Not necessarily.

Mr. Bessell

It is true that there may be a hung election, but out of today's voting a new President will emerge, as my right hon. Friend will concede. Surely, when a new President takes office and appoints his Administration, it would be useful for Her Majesty's Government, perhaps privately, and not necessarily in any public sense, to suggest that the proposal for an open-ended free trade area should be investigated in depth. It should be examined in the light of our present economic conditions, of America's own economic problems and of the success of the E.F.T.A. partnership, which would make a particularly useful guide to any policy which might emerge from investigations of this sort. This is something which I would commend to the Government in considering future strategy for Britain's economy.

7.20 p.m.

Mrs. Renée Short (Wolverhampton, North-East)

I was interested to hear the suggestion of the hon. Member for Bodmin (Mr. Bessell) that a sales tax should be introduced. I think of this as a horrid Common Market innovation which he would not want. A sales tax has recently been introduced in France. It has had a catastrophic effect on the cost of living, which was already high as a result of the Common Market. To consider the introduction of a sales tax or value-added tax on everything we buy, including food, is something that we could not contemplate; at least, I hope that a Labour Government would never contemplate it.

I was also interested in what the hon. Member for Bodmin said about an open-ended free trade area. Having looked at the Gracious Speech very carefully to see what the powers that be said on the vexed question of entry into the Common Market, and having seen the usual genuflexion in that direction, I say to my right hon. Friends on the Front Bench; is it not time that we stopped this? We are continually taking a humiliating and undignified posture in knocking on a perpetually closed door. We are debasing ourselves in trying to persuade them to take us in when we know perfectly well that neither West Germany nor France wants to take us in. It is not in their interests to let us in, or to make life easier for their main competitor.

To set one group of the Six against another in support of our application causes a great deal of difficulty and embarrassment to them. We have had proof, as my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) said, that the Common Market is an ineffective, capitalist set-up, wasteful in the extreme. We have seen what has happened in agriculture. Some Common Market countries are now in such a state of over-production that they are talking of feeding back dairy produce to cattle and deliberately contaminating food in order to sell it more cheaply. This is obscene and a dreadful indictment of a useless capitalist organisation. Surely we want no part in it.

I ask my right hon. and hon. Friends how they can in their hearts contemplate taking this country into such an organisation. We have an efficient and effective agricultural system, with splendid farmers and growers who ought to be alerted to the danger that lies ahead if we enter the Common Market. My message to the farmers and growers of Britain today is to get lobbying hon. Members opposite. They cannot lobby many hon. Members on this side since not so many represent farming constituencies, but it is high time they started to lobby those hon. Members for whom they voted.

I am sure that the president of the Asparagus Growers' Association, who I am pleased to see rising to make a bow so that everyone shall know I am speaking of him, will agree that in his pan of the country there are some fine producers and growers. What does the Gracious Speech say about agriculture? Very little. Yet we debated before the Summer Recess the N.E.D.C. report on the possibilities of import savings in agriculture of approximately £220 million. That is not to be sneezed at. We ought to encourage our farmers and growers to make that sort of saving.

Sir G. Nabarro

If the hon. Lady would permit me to intervene, while reaffirming everything I said in my speech earlier, I must correct her. I hold the honorary position of vice-president of the Vale of Evesham Asparagus Association. I explained these matters thoroughly to everyone in the Vale of Evesham before I was elected and I have since looked after them continuously. I am in favour of breaking off the Common Market application now—

Mr. Speaker

Order. We cannot have too many interventions now. All hon. Members here have been sitting all day wishing to speak. Mrs. Short.

Mrs. Short

I stand corrected on the hon. Gentleman's honorary title. I apologise if I made a mistake. What I said about the activity on the benches opposite on behalf of the farmers and growers was not directed to him but to those who have been in favour so far of our application to go into the Common Market.

Our economic situation shows a great deal of improvement in certain directions. I am delighted that our export figures have improved. We need still larger markets, which we must go out and get. There is a great potential for our exports in Eastern Europe and Latin America. We could well take a leaf out of West Germany's book and work harder at finding more outlets for our manufactured goods.

Economic and political considerations should not prevent us from investigating an open-ended free trade area, and I would like my right hon. Friend to deal specifically with this tonight. Why can we not hedge our bets and have an alternative proposal? We are spending a large amount of taxpayers' money, money which has been contributed by millions of people who are, in fact, opposed to going into the Common Market. The fact that we had a six line whip in the House does not mean that the country as a whole is in favour of our entry. There are many people who are opposed to it for various reasons.

Mr. Stanley Orme (Salford, West)

Increasingly so.

Mrs. Short

Increasingly so, since they can see the economic and political disadvantages which will result. It is totally unacceptable to me, as an opponent of entry into the Common Market, that my money should be spent in supporting Common Market front organisations. If this is known, it will be totally unacceptable also to millions of other people. At least a similar effort should be put into examining the alternative. This application has failed. It failed when Mr. Macmillan tried, and this was held against him. It failed when we tried. We must now look energetically and with sincerity into the viable alternative. We cannot go on for ever knocking at the door and claiming that there is no other solution. Here is a solution, here is an alternative, and my right hon. Friends should investigate it.

My right hon. Friend the Chancellor drew attention rightly to the improving export situation. It started off rather disappointingly after devaluation, but the level is now about 17 per cent. above the 1967 level. However, just as I find it hard to understand why the Government continue to knock on the door of the Common Market, I find it extremely difficult to understand their continued refusal to deal with the rising level of imports, which seems to be a permanent feature of the economy.

Why are my right hon. Friends unwilling to take steps to deal with the problem? It is as equally wrong economically as the rising level of capital exports, about which my hon. Friend the Member for Lewisham, West (Mr. Dickens) spoke so eloquently earlier. The West Midlands is the powerhouse of the country, and an enormous number of very good engineering firms export far more to more diversified markets than they did three or four years ago. Their efforts are being undermined by the rising level of imports and the Government's refusal to take steps to deal with it. As long ago as last May, the National Institute warned the Government to prepare a scheme of import controls. Has it been done? Has thought been given to it in the Treasury or the Board of Trade? If it has not been done, why not?

Obviously none of us would support an overall cut down of imports. It must be selective and, if it is, it can be done without upsetting either G.A.T.T. or E.F.T.A. regulations. Clearly, we cannot clamp down on raw materials which are needed for industry, because that would interfere with the export drive. For the same reason, we cannot cut down on imports of base metals, timber and industrial paper, but we could save on non-essential food imports by adopting the system of agricultural substitution that I mentioned, in which our farmers and growers are only too anxious to co-operate. We could save on imports of manufactured and semi-manufactured goods. We are still importing enormous quantities of useless manufactured goods and other goods which we could manufacture ourselves and so go some way to reducing the present level of unemployment.

After the speeches made by my right hon. Friend the Prime Minister before the 1964 General Election, why do we continue to import fruit machines? Even £20 million a year saved on them would be £20 million on the right side. But when my right hon. Friend the Chancellor was asked about them at the Labour Party conference in Blackpool, he dismissed the matter in one sentence of his reply to the debate on import controls. He said something to the effect that the Government were not prepared to consider it. But that is not good enough when imports have continued to rise for years and have been endangering our tremendous export effort.

Mr. Bessell

The hon. Lady knows that I agree with much of what she says, but, if we are to impose restrictions on imports, how can we hope to increase our exports to the countries from whom we are buying?

Mrs. Short

That is why I say that our controls must be organised very delicately. Imports need a tender touch, and any controls must be selective. I hope to indicate how it could be done without discriminating against countries or groups of countries, so that no retaliation against us would be called for.

Clearly, we do not want to set up a difficult administrative organisation, because that is not worth the candle. It would whittle away any advantage that we gained, and no one wants to see an army of civil servants employed to operate import controls. There have been proposals which would not entail a great deal of administration. It has been suggested that would-be importers should have to tender for licences in much the same way as Treasury bills are issued. Firms which needed goods most would get them. I am told that the whole system could be worked on a computer and done with the minimum of effort. Alternatively, for a certain period the Government could say that imports must be paid for at the time of ordering and, with the exception of goods essential for industry, allow no bank credits for imports. That would have the effect of cutting down imports and, if we could save £100 million or £150 million plus the savings which are possible in agriculture, a vital contribution would be made to our balance of payments position.

I do not want the House to infer that I think that this is necessarily a simple exercise. I appreciate that it requires much thought. I am asking my right hon. Friends to give thought to it, because it is worth it. The returns would be considerable. The less that we do it, the more we shall continue along this foolish and Gilbertian path of working hard to improve our exports and not getting the benefit of them while we allow imports to rise.

7.36 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

The hon. Lady the Member for Wolverhampton, North-East (Mrs. Renée Short) made an impassioned plea for more free trade in the North Atlantic area; indeed, she wanted to join such an association. She spent the rest of her speech adumbrating ways of unfreeing trade and making it impossible for anyone to want us in any free trade area, if she had her way. However, she touched on the problems of the supply of money, and later in my speech I will follow some of her remarks about that.

The central theme of the debate has been the management of demand, and I approach the question from a slightly different angle. It is that of mounting Government expenditure.

Since 1964, the Labour Government have increased total Government expenditure by 50 per cent., from nearly £9,000 million to nearly £13,250 million a year. That includes the Government's investment, which has gone up by nearly half, from £1,100 million to £1,700 million in this year's Estimates.

I do not want to criticise in my speech the mounting Government expenditure. Of course, I criticise it greatly, but that is not the point that I wish to make. My point is that the rising capital investment by the Government has not been financed by any other means than wishful thinking.

The demand management calculations are done in relation to revenue expenditure. It has been assumed for many years that capital expenditure looks after itself because it is borrowed on the market from the public. In fact, the record of the Labour Government shows that about half of the money that they have lent has come from borrowings abroad, about another quarter has come from the banks, and only the remaining quarter has come from the non-bank public. On top of that, massive tax surpluses have had to be applied.

What worries me is that this item of Government investment can only grow. I wrote to all the chairmen of the nationalised industries now in existence, and I have fairly accurately computed the growth of Government investment in the nationalised industries in the next few years. In 1963–64 it was £1,028 million, for the current year it is £1,890 million, and four years hence, on the basis of the existing nationalised industries, it will be about £2,100 million. But the Government are adding many more nationalised industries. We are told that the docks will be nationalised as well as the Transport Bill industries and that many others may follow. The growth of Government capital investment is becoming a very menacing thing.

Non-industrial Government investment is another matter. Schools, hospitals, roads, houses, and the more frivolous amenities like playing fields, swimming baths, town halls and new offices—all these items of Government capital expenditure are starved. Our road system is very much out of date. Is there an hon. Member who can honestly say that his local education authority is satisfied with its allocation of school building money? Where are the new hospitals? We know that our hospitals are a disgrace. As for the amenities, I had the greatest trouble getting any loan sanctions, or any money at all, for good projects in my constituency.

We find ourselves in a dilemma in wanting to see these good causes provided with the proper resources while, at the same time, keeping down Government expenditure. Many of my colleagues have found this to be a difficult position, which the Treasury Bench, with great skill, has done its best to exploit. It is always throwing back at us the allegation that we are advocating things which will cost more money while, at the same time, we are saying that we want to reduce taxation. But if Government services were properly handled Government capital investment would be a great deal higher—and it is my opinion, supported by the Brookings Institute, that it will be a great deal higher in the next two years—and every kind of public investment must rise considerably.

How are we to finance this? The worst possible way is that by which the Labour Government have financed it. The Home Secretary, when Chancellor, printed more money than any other Chancellor in history. He has earned the title of "Printing Jim". Last year he printed £1,450 million. In the word "print" I include the increase of money supplied by all the different techniques at the Government's disposal. That is the reason for the persistently buoyant demand, and it is incredibly stupid to keep having to increase taxation and hire purchase, and all these little clawbacks with one hand while the Treasury is pumping money into the economy with the other hand.

It is as though we were dealing with a flood by organising a bucket chain. The best course to adopt is to stop the breach in the river bank. We must deal with the matter at the point of supply, and not always try to mop up the water that is swilling around our houses. The policy of creating money to fill the gap should be eschewed by both parties. It results in inflation. It causes us to impose this unpopular prices and incomes policy, which most hon. Members reject. It causes us to carry out endless deflationary operations to pick up the money which we have just released into the economy. This is no way to finance public investments.

The next source of finance is genuine borrowing. To the extent that the Government can win back credibility and achieve some genuine borrowing from the non-borrowing public we may be able to manage to deal with the problem. But to do the things they would have to do would be more than they could swallow. They would have to abolish the distinction between earned and unearned income; they would have to stop talking about unearned income in such deprecatory terms; they would have to reduce the level of indirect taxation to a point which it could not afford; they would have to put all kinds of savings incentives in the way of the people—and even then they would experience great difficulty, during the transition period from over-taxation to the situation in which people had enough of their own money in their pockets to be able to save.

I hope that all these things will be done, but if they are not, it does not help to attempt to solve the problem of financing Government capital expenditure. So we come back to the need for a solution, provided we do not borrow abroad or, as the hon. Member for Lewisham, West (Mr. Dickens) argued, liquidate our overseas investments in order to spend here. Eating the seed corn is the best way to describe his Amendment and the policy that he announced in his speech.

But in default of this we come back to taxation. This was the reason for the massive increase of £932 million in this year's Budget. It was because the present Chancellor acknowledged that hi predecessor had failed to borrow and therefore had had to go for increased taxation in order to meet the growing total of Government investment. This is intolerable. The levels of taxation are too high. They are impossible to increase still further, so I submit that the Chief Secretary is faced with a real problem. He cannot increase taxation. He cannot, without eating so many words that he would get serious indigestion, increase savings by a large amount, and he is faced with the need to cut back Government investment. The only way in which he can do this is to reduce the commitments of the Government. The Government: have taken on too many programmes themselves. It is not possible for them to provide 50 per cent.—as it is at the moment—of the nation's services and to tax people enough to find the capital needed for those services.

This is true of modern technological industries like telephones, steel, electricity and gas. Why should taxpayers be asked to produce the capital for these growing industrial concerns? The sum required in respect of the Post Office is £2,000 million and in respect of North Sea gas, £2,400 million over the next three years. These vast sums will have to come from Income Tax.

These large sectors of public control have become too great, and the dilemma which faces the Government can be expressed in the question, "Where shall we make the cut?" The only thing they can do, if they want to regain financial solvency, is to make a cut in some area which gives back the control of the relevant services to private finance. I know that that is a very unpalatable truth for Socialists. It is unpleasant to feel that the Socialist machine is clogged and overburdened. But the main cause of our economic malaise is the greatly overburdened Socialist capital expenditure, which is not matched by finance from any recognisable source.

7.48 p.m.

Mr. Robert Sheldon (Ashton-under-Lyne)

The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) pointed out the dilemma that his own party is in in trying to match its increasingly generous statements with the kind of public expenditure that it wants. Hon. Members opposite find themselves unable to foot the bill. This is the dilemma of hon. Members on both sides of the House. It is a general problem, and one that is likely to stay with us until some time in the future when the economic growth rates that we have seen in the last few months have become a more permanent feature of our economy. It is then that we can start spending.

We have consistently failed to estimate accurately the long-term nature of our economic problem. It is one of the problems that have arisen with the end of the Empire. The Empire, that we had for so long, brought with it immense financial advantages. These have now gone, and we have not made the transition from a great Empire to a country that is off the shore of Europe, somewhere between Europe and the United States. It is because of this lack of adaptability that we have suffered in the recent past and, unfortunately, it will require from us perhaps rather more effort in the future than even the pessimists have recently estimated.

The advantages, as I see them, which came from the Empire were largely those deriving from the ability to control the economies of so many countries to our advantage. One can say that it came to a head round about the year 1960, which at the time was called Africa Year, when so many countries in Africa became independent and we ceased to control their flourishing economies to our advantage.

This point can be highlighted by comparing over the years the main places to which our exports went. In the inter-war years, from 1920 to 1938, 40 per cent. of our exports went to the Commonwealth. In the 1950s, the proportion had risen to 47 per cent. Last year, however, the figure had fallen to 29 per cent.

If, therefore, the rate of exports to the Commonwealth during the inter-war period was a rate which might reasonably be expected, it can be said that between £500 million and £1,000 million of exports has been permanently lost to us. To me, this is one of the most important factors causing the economic difficulties with which we are faced. It is why further adjustments still have to be made to overcome our difficulties.

Our great advantage in those countries was the ability to organise their tariffs in our favour, to organise trade agreements with countries, particularly in Africa, in our own interest and against the interests of such countries as, for example, Japan, and whereby people from this country organised the buying habits of those countries and were able to place orders with the country which they knew—Britain. They knew the industrialists in Manchester and Birmingham and placed their orders here. Even at this late stage, we still have an advantage as a hangover from those days. Some of the people in the buying positions in those countries are still friendly disposed towards and know the manufacturers in this country slightly better than they do those of Germany and Japan. However, this advantage is waning. It would be wrong if we failed to assume that we had reached the end of that long decline that went with the end of empire, though some temporary benefit still remains.

The end of empire also produced another great disadvantage for us in the matter of defence. In the inter-war years, from 1919 to 1938, Government expenditure overseas—a large part of which was defence, but there were other items, too—amounted to an average of less than £3 million a year. In 1967, that figure had risen to £449 million. This again is closely tied up with the end of empire, because before the war those countries paid for their own defence, their own embassies and the troops based on their own soil. They also raised their own forces which contributed to the defence of their countries and there were various other offsetting agreements.

That came to an end and the time when the Commonwealth was becoming less of an asset to us was strangely the time when we started spending more on defending it. We therefore had a declining advantage coming from the Commonwealth and an increase in the expense of servicing that Commonwealth.

When we compare our overseas Government expenditure of £449 with West Germany, which makes a surplus, with Japan, which makes a surplus, with France, which achieves an approximate balance, and most other countries which achieve something near to a balance, we see that those trading competitors of ours have enjoyed enormous advantages, whereas we have been saddled with two great burdens. One is the end of our trading agreements based upon the Empire and the other is the defence of that Empire.

The transition is still not complete. It is essential to understand the long-term nature of the problem arising from the end of empire; otherwise we may still fool ourselves that we have discovered the solutions. The point is that so much of our manufactures, even today, are based on the sale to the Commonwealth of certain kinds of goods. The transition to the newer kinds of markets is still not complete and has yet to be made.

As to the present situation, I believe that the Government, whose decision to devalue I fully supported, have tended to make too much of their rôle in the world monetary sphere also. As an example, things like import quotas could well have been introduced in 1965, or in 1966. They might even be marginally of use today if we were to tot up the balance of advantage on the one side and the balance of disadvantage on the other side and make a rational decision of this kind rather than a decision based on international obligations and its effect on the world community.

We have today a situation in which British trade, although of importance, has nothing like the overriding importance that it had years ago. We are in a world with vastly wider markets and many more countries interested in obtaining the kind of trading patterns that we regarded as almost uniquely ours only a few years ago.

We should not need in these days to think from outdated positions of world power status based on empire. As a result of this kind of thinking, we saw the reluctance to consider devaluation because of its suggested impact on so many other countries, whereas, as we have seen, its impact was nothing like as much as was expected. It has been rather absurd that a country which has depended so much on its world trade was unable to have the right exchange rate. If there is one thing which is crucial for a country which depends upon trade, it is that its rate of exchange should be right. That was the fundamental reason for devaluation.

I see this kind of readjustment coming not only in trade and industry, but also in the attitude of the Government to the real problems before us which arise from the liquidation of the Empire.

In all their economic thinking the Government should test entirely on its merits any argument which is put forward. They should think rather less of its impact on the world at large, and less of the retaliation which our rather reduced rôle makes increasingly unlikely.

The present position of the Government is that they are proceeding on the basis of letting devaluation work. It is not a long-term strategy, but an interim strategy. The strategy is to let devaluation work to restrain consumption as much as one can, to try to keep incomes down as a result of the prices and incomes policy at the same time being realistic and being prepared to settle at best whenever a threat comes to the advantages which we hope to obtain from devaluation.

The policy is that of keeping unemployment at a level of between 2 per cent. and 2½ per cent., both to keep wages down as well as to keep consumption down, as well as to transfer numbers of people from one firm to another. We also see the initiatives being shown to help industries to rationalise, to move towards larger organisations. All these are valuable, though they are limited compared to the economic problems ahead of us.

This policy of the Government is essentially a very simple one, but it is for a limited period. It is essentially a transitional policy to take advantage of devaluation. Soon, sometimes towards the end of next year probably, we will start to look at the long-term strategy, and it is about this strategy that I feel most keenly, because this is the time when we must reassess our attitudes to growth, reassess our attitudes to expansion in the light of how we have seen devaluation work.

There are those who say we should immediately strive for the economic growth which was hoped for when the Labour Government were returned in 1964, but there are some new theorists arising row who are saying that there is no such thing as an understanding of economic growth, that these are theories which have yet largely not been invented, that the Government cannot proceed on the basis of an assumption that there is a consistent theory of economic growth, and that they should proceed cautiously, moving step by step, always aware of the problem of the balance of payments, that for Britain, an old-established industrialist corner of the Anglo-Saxon world, this is our lot, and that there is no theory that can disprove it.

I find this impossible to accept. I believe that no Government can be neutral in this matter. It may well be that there is no fully satisfactory theory of economic growth—I am sure there is not at the present time—but if the Government must take a view on this, then the view must be optimistic. I myself would sooner fail in an optimism of this kind than take an alternative pessimistic view which underrated the British people because there is no theory that substantially provides an answer.

There is still a case to be put for economic growth based an expansionist policy, based on an expansion leading to increases in productivity. It is essential that economists should come to terms with this although one cannot prove this, and one has only one's personal experience to demonstrate it, from experience at each factory, when there is an increase in production or productivity.

The instance I would like to choose is one which concerns me closely and typifies so much of the way in which industrial changes are made as a result of Government policy. I would cite the occasion when I was in charge of a machine shop which was producing 20 compressor bodies a day. There came a time when things were going well and we were selling well, when the machinery of the company was inadequate to produce more than 20 compressor bodies a day and as a result there was a threatened bottleneck in production.

What happened was something that everybody knows happens. Immediately we got together to see what could be done. In this case the result was that we had a complete analysis of what could be done and how much we could produce as a result of various methods, and we concentrated our thought and attention on that, and production was increased to 30 a day. It is not often that one finds that kind of concentrated attention, but it is not untypical of what happens. Of course, there were consequential savings in costs and also there were certain advantages in design; but that was incidental.

This is the kind of thing that happens whenever the pressures of demand operate upon a factory. I visited fairly recently a large machine tool firm, and one of the things I found was that it is an extraordinarily difficult thing to sell a machine tool on the basis that it is going to improve productivity. It is extremely difficult to sell a machine on the basis that output will be improved. It is easiest to sell when demands are such that a firm needs increased capacity. That is the time when one can get in with modernising equipment and many great advances in productivity and design. It is when pressure of demand comes upon a firm that the firm produces new ideas, gets new machinery and produces the goods which are cheaper as a result.

The reason I have dealt with this so fully is that I believe that we still need growth based on expansion of demand, and I expect that at the present time there is not likely to be an opportunity of this, mainly because we want to see the effects of devaluation and to make sure that we do not interfere with this in any way. But we have to get our long-term sights organised so that we gain the real performance for which most of us came to this House, and make sure that the prosperity of this country is increased in the way we said it would be increased, in a way which will distribute the prosperity to the people as we said it would be distributed. It is because of this hope that I very much hope the Government's present measures will succeed.

8.8 p.m.

Mr. Peter Hordern (Horsham)

I have, as always, listened with the greatest interest to the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and, in particular, his contribution this evening on the long demise of the Empire, and his thoughts about growth. It was in marked contrast to the speech of his hon. Friend the Member for Heywood and Royton (Mr. Barnett). Generally it is very difficult to put a pin between the two hon. Gentlemen. I thought that the speech of the hon. Gentleman the Member for Heywood and Royton was extraordinary for one who, I understand, is chairman of the back-bench Labour Finance Committee. It was not so much that he agreed with his hon. Friend the Member for Lewisham, West (Mr. Dickens), the Isaiah of the Tea Room, but the fact that he said that not only was it unlikely that we should achieve the necessary scale of surplus on our balance of payments but that it was wrong that we should even attempt to do so.

Mr. Barnett

I should like the hon. Gentleman to quote me correctly. I specifically said I disagreed with my hon. Friend the Member for Lewisham, West (Mr. Dickens), and I said that, on the rate of surplus, I agreed with the right hon. Gentleman the Member for Wolverhampton, South-West (Mr. Powell) that we did not need—indeed, it is wholly wrong—to go for a rate of surplus at £500 million, or, as the Leader of the Opposition was saying, about £720 million a year.

Mr. Hordern

My right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) was talking in terms of a floating exchange rate, and I did not hear the hon. Member speak about that.

We are faced with specific commitments, which must be repaid to our creditors by 1975—commitments which have all been undertaken by the present Labour Government. I urge the Financial Secretary to press on the Leader of the House that in his reply he should make it clear that the Government have every intention of honouring the commitments which they have undertaken under the various loan arrangements.

It would be difficult to pick one cardinal error among the very many errors for which the Government have been responsible in their handling of economic affairs, but I suppose that it could be the fact that from the moment the Government took office there has been a dual control of the economy—and it has been dual control not in the sense of a united control but in the sense of a split control. First, we had the right hon. Member for Belper (Mr. George Brown). Then we had the Prime Minister—and I ignore his creature, the Secretary of State at the Department for Economic Affairs. Now we have the Secretary of State for Employment and Productivity. All these have spoken with different voices, and all have contradicted the Chancellor of the Exchequer of the time. One spoke of expansion and another spoke of sacrifice. As to the third, it is impossible to believe that anyone other than the Secretary of State for Employment and Productivity could have replied in that way to the question put at the by-election. She talks of "a touch on the tiller". In fact, we are faced with precisely the same conditions as those which we endured in the July, 1966, measures, and I do not believe that they could be described as a mere "touch on the tiller".

The job of the Chancellor of the Exchequer has been made almost impossible by his colleagues. Indeed, it is virtually impossible anyway, given the Government's economic policy, for the trouble is that the boat has become waterlogged and it is failing to answer to the tiller at all, and that is the Chancellor's fault. He has always done too little, too late. He should have produced these hire-purchase restrictions almost a year ago, when we urged him to do so. Above all, he should have set about reducing Government expenditure sharply instead of allowing it to rise this year, as it will, by 10 per cent. in money terms.

We have the worst of almost every world—high unemployment, a credit squeeze, stupid restrictions on travel and on the financing of overseas business and a low level of industrial investment. Despite everything which the Government have thrown at commerce and industry, both are making higher profits now, but as yet there is no signs that industry is increasing its investment. Despite the C.B.I. forecast of investment intentions, those who have direct experience of the machine tool industry, as have many hon. Members opposite, know that there is no significant upturn in the level of orders as yet. This makes the situation very serious, because even if investment in manufacturing increases by 15 per cent. next year, it will still be from a very low base, because investment has declined by 5 per cent. in each of the last two years. Mr. Catherwood said the other day that the level of investment in 1969 would certainly be quite inadequate to take up the increase in the volume of exports which we need to produce a £500 million surplus.

That, surely, is the crux of the whole matter. The base from which our exports arise, manufacturing industry, is too small compared with that of our competitors and it is being increasingly overwhelmed by the public sector. Taking the growth of fixed asset formation, for example, the public sector now subsumes about 50 per cent. compared with 44 per cent. four years ago. I do not take the view—very few people do—that all public expenditure and investment is ipso facto harmful. I merely point out that we cannot export the production of public investment and that it is exports which we need. Yet in order to make room for exports, it is always the private sector which is hammered and never the public sector.

What is so particularly nauseating about the Government's handling of the situation is their refusal to accept responsibility for this situation and also for the methods of financing this high level of expenditure. Not only is the level of Government expenditure too high, both absolutely and proportionately, but the method of financing it relies as much on the printing press as it does on genuine borrowing. It is the Government's refusal to curb the growth of the money supply which has produced these latest restrictions, and much else besides. In the year before the election, up to March, 1966, the money supply increased by over £1,000 million, double the largest increase in any year up to 1960. In the second quarter of this year alone, the money supply rose at an annual rate of 9.9 per cent. I guess that the seminar—I like the word as a description of what took place—between Mr. Polak of the International Monetary Fund and the Treasury was a great deal more practical than it was academic and theoretical. Not that I do not find the academic argument particularly fascinating with the debagging of the neo-Keynesians by the Chicago school.

But however fascinating, there is no need to argue in a vacuum. What is there exists for all to see. For there is another country with more or less the same population as ourselves which over many years has consistently achieved higher production, much higher wages and a smaller increase in costs than we have, as well as a continuing surplus on balance of payments—to such a degree that it has already revalued once and is being pressed to revalue again because of what is described as the German problem. I understand that it is to repay its loans under Marshall Aid.

Surely we can cast aside economic theory and judge by practical experience. This is a country in more or less the same position as Britain and it has made these great achievements by operating a market economy, as opposed to a centrally directed economy, and a liberal economy as opposed to a collectivist economy. It is a country which has no part at all in its strategy for a prices and incomes policy. It has pursued a strategy of active denationalisation and non-interference in the private sector. It is a policy and country which the Socialist Party in Britain must do their best to pretend does not exist.

For our part, I would say that although Germany is not a country which we need necessarily to emulate, it is a fact that the practices which the Germans follow entirely accord with what a Conservative financial policy should be. On the contrary, the Labour Government have used the economic system of a banana republic—the siesta, the sombrero and manana: "Double your money while you sleep."

I do not know whether the I.M.F. will exert stricter monetary control over this country. What I do know is that the primary fault, the level of Government expenditure, will never be reduced by this Government and by these men. The answer is that both should go.

8.19 p.m.

Mr. William Hamling (Woolwich, West)

May I first say, Mr. Deputy Speaker, what a great pleasure it is for me to speak in the House for the first time under your Chairmanship and to wish you a long and very happy stay in the Chair.

The speech of the hon. Member for Horsham (Mr. Hordern) is to some extent an echo of one or two earlier Conservative speeches, and they are, I submit, shot full of contradictions, because the Conservatives want the community to spend more money in various ways while at the same time they want to reduce the amount of money which the community is spending. This is a kind of split-mindedness to which I will return.

My hon. Friend the Member for Lewisham, West (Mr. Dickens) made a deplorable speech. He began by saying that he would not make a personal attack on Ministers and proceeded to make what I can only describe as the most damaging attack that could be made on any Minister at any time. He accused my right hon. Friends of the worst kind of inhumanity. He said that the Labour Government were deliberately creating unemployment as an act of Government policy. I can think of no act by any Government which would be more inhumane and cruel. Indeed, if my hon. Friend believes that the Government are deliberately creating unemployment he should resign from the Labour Party. If I thought that, I would resign because I could not belong to a party or support a Government who had that as their aim.

My hon. Friend went on to use other expressions of opinion which I could not regard as anything but a personal attack. He talked, for example, about the Government's "complacent, reactionary humbug". I put it to him and other of my hon. Friends who hold his views that they must say where they stand in relation to the Government.

I will not spend too much time on my hon. Friend's speech because I wish to come to the main burden of my remarks, which is an analysis of the comments of the Opposition Front Bench. One of our difficulties is that we must spend so much time rebutting that sort of attack made by my hon. Friend and others of my hon. Friends that the Opposition are able to get away with murder. Internal disputes in the Labour Party help hon. Gentlemen opposite. My hon. Friend made a 22-minute speech of which only four minutes were devoted to the Opposition and 18 minutes to attacking the Government.

What advice would my hon. Friend have given to the electors of Bassetlaw had he been invited to address them? Would he have spoken to the complacent humbug of the Labour Government? Would he have told them that they are deliberately creating unemployment? I ask my hon. Friends who have tabled an Amendment to the Address why the electors of Bassetlaw or any other constituency should vote Labour if that is what my hon. Friends believe? Who would have defended the Government at Bassetlaw if my hon. Friends had been called on to undertake that task?

As a result of this sort of Amendment, the Tory Party, both in the House and in the country, can get away with murder. The searchlight of public inquiry and opinion is never put on their policies. How much time has been spent in this debate analysing the terms of the Opposition Motion? The answer is very little. Hon. Gentlemen opposite can get away with talking a lot of contradictory nonsense because their remarks are not subjected to real examination.

Some of my hon. Friends spend so much time attacking their own side that the Tory record is forgotten and Tory policies are not examined. By this means my hon. Friends are helping to elect the next Tory Government. The Government's case is going by default. We are told, for example, by the right hon. Member for Enfield, West (Mr. Iain Macleod) of the dishonest attitude of my right hon. Friends over the so-called freeze. There was a lot of synthetic indignation in the right hon. Gentleman's closing remarks, and the same can be said of the comments of the right hon. Member for Bexley (Mr. Heath), whose synthetic indignation is normally almost hysterical.

We have had by-elections in other mining areas. Pit closures most damage the Labour cause in mining constituencies. Were there no pit closures announced just before various by-elections in other mining constituencies? Of course there were, and there were in this case. Increasing Purchase Tax on motor cars from 33 per cent. to 40 per cent. is not worth a halfpenny compared with pit closures from the point of view of the Labour cause in mining constituencies.

We want less of this damned nonsense from hon. Gentlemen opposite. Let us not worry too much about what the Tories were doing when they were in office. We know precisely what they did, and if there is any dishonesty and deception now, it is in the speeches which Conservatives are making. They call for reductions in Government expenditure and the same day call for increases, too. One need only consult the Notice Paper to see the many Questions tabled by hon. Gentlemen opposite asking for increased expenditure on the National Health Service, education, universities, roads in their constituencies, housing and allowances for private occupiers of houses to spend on repairs. They have the nerve to talk about reductions in Government expenditure when all the time they are demanding that the Government should spend more. They demand bigger agricultural subsidies and then have the cheek to complain about Government expenditure.

Hon. Gentlemen opposite speak with two voices and they can get away with it because their record and programme are not sufficiently analysed. For example, when trying to explain what the official Opposition Amendment was all about, the right hon. Member for Enfield, West talked about a cut in direct taxation. He did not say that if the Tories were in power they would also increase indirect taxation, with the result that the lower-paid would have a worsened standard of living. Unfortunately these things are not said.

Another example of this split-mindedness and dishonesty on the part of the Conservative Party came from one of the Tories' main speakers at the Bassetlaw by-election. He was the right hon. Member for Wolverhampton, South-West (Mr. Powell), who is certainly no friend of any scheme to give Government assistance to the development areas. The right hon. Member for Enfield, West complained today that the Government were not doing enough, yet so many in his party feel that the Government do far too much in that direction.

Many hon. Members opposite think that the Government should not interfere, that there is too much public investment. Therefore, presumably, they would side with the right hon. Member for Wolverhampton, South-West and not the right hon. Member for Enfield, West. This also is an aspect of Tory party policy which is not sufficiently examined. If public opinion and scrutiny were given to their policies, that opinion would have a completely different aspect.

If the right hon. Member for Wolverhampton, South-West were to be followed, it would mean that the North would die and the South-East wax fat and even more prosperous. But that is not the voice which we heard this afternoon. The country is entitled to know what is the real voice of Tory policy in this regard. We know, for example, what big business says about expenditure on education, hospitals and housing—that the community is spending too much. If they had their way, we would cut down tremendously on education.

What does the Front Bench say? Question after question last week and this week was directed towards asking for more money and giving the impression at by-elections that the Government are not doing enough and that, if the voters voted for them, they would get more, when we know what their real paymasters are saying behind the scenes. We know that the voice of big business and high finance, the real voice of the Tory Party, wants huge cuts in public expenditure. In this debate, too little time has been spent analysing the real policies of the Conservative Party.

We had from the right hon. Member for Barnet (Mr. Maudling) the other night on television an argument about the social wage—a very pleasant and engaging argument, at least on television. But in real political terms, it means that we would spend less on housing, education and hospitals if the social wage were reduced. More would be put into personal consumption. That is what the argument is about, and put in human terms, it is not so nice and cosy.

The Tory Party has been saying for the last four years that public expenditure is out of control. What is the major thing that they would do if back in power? They would increase defence expenditure by many millions. Then they have the cheek to talk to us about reducing Government expenditure. They would not reduce it in that direction. They could only decrease the total if they decreased expenditure on education and social services even more than some of their spokesmen suggest.

The Opposition Amendment is dishonest and deceptive. I will throw back at them their charge that my right hon. Friends have been deceiving the country. They themselves deceive the country every day by pretending that they believe something and are putting forward policies for which they do not stand.

8.33 p.m.

Mr. Michael Alison (Barkston Ash)

I think that the hon. Member for Woolwich, West (Mr. Hamling), for whom I have a great regard and with whom I often debate, was jumping the gun and straying from the Queen's Speech in anticipation of being on the Opposition benches attacking Conservative policy when we are in government. In other words, he moved right ahead to when the whole preoccupation will be with Tory policies. It was a long way from the Queen's Speech. If he has found fault with the Opposition in allegations that we always want the best of all possible worlds at no cost, I am sure that he will agree that, if he is in opposition on these benches in a few months or years, he may be prone to exactly the same shortcomings and sins of omission and commission. So I hope that he will not be too anxious to throw stones.

I want to concentrate on a new trend which I detected today in the Chancellor's approach to forecasts. He seems to be getting touchy and irrational on the subject. Economic forecasts are extremely important and it is not a question, when the Chancellor makes a forecast, of something like a bet on who will win the American Presidential election and that, whatever the outcome, it does not affect us directly. Treasury forecasts are crucially important, because they are followed by a pulling of levers and we are all tremendously affected.

It is not good enough for the Chancellor to suggest, as he seemed to do today, that if one gets a forecast wrong that does not matter because what one loses on the swings one can pick up on the roundabouts. The result would be catastrophic, and it has been catastrophic. It suggests that it does not matter if, for example, export performance does not come up to expectation provided that some other component or final demand compensates for the shortfall. This seems to be one of the arguments put by the Chancellor about fundamental mistakes in forecasting.

It is no defence of wrong forecasts to say, "We publish our forecasts". The fact is that those forecasts existed, published or unpublished, and if they were wrong they led to wrong decisions. If the Government go on being as wrong as they have been, the only remedy is for them to get out of the area in which they forecast so ineffectively. They should diminish the area in which they have to forecast if the forecasts are to be so disastrously wrong.

Then there is the stage which follows forecasts. One of the staggering things we have found since the Socialist Party came into power is not only the enormously increased area of Government interference, but the utterly perverse effect of economic decisions which they make and the levers which they pull. On the general question of employment, perhaps the blackest mark against this Administration is that the Government of planners and full employment specialists, as they claim to be, have succeeded by the year 1968 in having something like 100,000 fewer men and women in the employed labour force than when the Tories left office in 1964. That is almost staggering, but it is a fact.

This is against a background of an increase in the population of one million. It is almost breath-taking that the Government have not only failed to maintain employment in step with the growth of population, but have actually gone in the opposite direction. More and more British brains and brawn have become available since 1964, but fewer and fewer jobs have been found for them. This is surely a crippling indictment, or it should be if people have eyes to see.

Within the sectors where employment has continued—I shall not say increased—one finds again the most perverse and irrational results of Socialist economic manipulation. In June, 1965, which I take as the first peak month of employment alter the Socialists came into office, there were just over 9 million people employed in manufacturing industry and in the same month in the service industries there were just short of 9,700,000. This was the pattern of employment when the Socialists came to power. Two years later, in June, 1967, the latest date for which figures are available, after two years of Socialist planning—the National Plan, Selective Employment Tax and the whole gamut of incentives to try to shift resources out of the service industries to manufacturing industries—we find an utterly perverse and contrary result. There has been an actual drop in employment of 150,000 in manufacturing industry and an increase in service industry employment of 80,000.

That is precisely the reverse of what was expected and designed. It appears from the way that the Government are running the country as if there is a chimpanzee in Downing Street to whom a bucket of paint and a canvas has been given, and members of the Government sit back to see if any rational result comes from the splashings.

Whatever happens, it is absolutely the reverse of what the Government sought to do. They have succeeded in massively diminishing employment overall. Within the diminished total they have succeeded in giving a substantial boost to employment in service industries and a crippling diminution to employment in manufacturing industries. What is the point of a Government who not only get their forecasts wrong but who when they press the button to get the green light get the red light, and when they press the button to get the red light get the green light?

Some people would assert that on the manufacturing side it does not matter so much, in that it could be argued that the decrease in employment in manufacturing industry has been counteracted or was designed to be counteracted, by a growth in capital employed in manufacturing industry, so that capital was being substituted for labour in this sector.

There is again the ludicrously perverse result that exactly the opposite has happened. In 1966, the base year of the present Administration, the level of investment in manufacturing industry was £1,233 million, at 1958 prices seasonally adjusted. One year later, in 1967, the figure had dropped to £1.176 million. This year it is running at the rate of £1,118 million. This is a drop of £115 million or getting on for 10 per cent. in investment in manufacturing industry.

Against the background of the substitution of investment grants for investment incentives, and of the Selective Employment Tax, which was designed to inhibit and restrict growth in the service industries and correspondingly to give a boost to manufacturing industries, there is the utterly perverse and contrary result of a steady drop in manufacturing investment.

Incidentally, this calls into question the whole range of special investment and other measures of assistance which is being given to manufacturing industries in development areas. Here I must tread cautiously because some hon. Members have constituencies which are involved. The Prime Minister quoted the figure of £250 million a year rather proudly in the speech he made on the first day of our debate on the Loyal Address. He referred in a rather cavalier way to the mere £18 million which my right hon. Friend the Member for Bexley (Mr. Heath) spent in 1964.

But even with the expenditure of £250 million in the development areas, the level of regional unemployment has without exception moved up in all the development areas, in spite of this fantastic increase in special assistance compared to the last year in which the Tory Party was in office—that is, the time when my right hon. Friend the Leader of the Opposition was responsible. One must question whether the £250 million which is going into the development areas, apparently simply increasing potential demand in the economy whilst doing absolutely nothing to increase supply to requite this demand, is having any effect other than increasing the money supply. This seems to be one of the basic causes of the problem which the I.M.F. team has come over to look at.

In the development areas there is rising unemployment and decreasing production, against the background of the staggering rise in this universal, undiscriminating, hand-out assistance to selected areas. To see how ludicrous it is, it is only necessary to reflect that Yorkshire and Humberside, which is a "grey" area and enjoys no special assistance, have more men unemployed than either Wales or the South-Western areas; yet we get nothing. The whole system is totally irrational and fails to produce any of the desired results.

What worries one about the trend of the Government's failure in their forecasting and in their failure to pull the right lever to produce the designed result is that we are confronted with a most serious situation instead of the Utopia—the golden fleece—which has been held out before us. We are now told that the great leap forward is coming, that the export-led boom is on the threshold. If that really is so, industry is in a poor position to take the leap forward, particularly because of the serious cut-back in investment to which I have referred. Indeed, the signs of the time for a great leap forward and an export-led boom fill one with all the forebodings which might, in retrospect, have been felt in 1964 as one looked ahead to the deficit that year.

As the Chief Secretary is aware, no doubt, the stock-building figure is now very worrying. I think I am right in saying that manufacturing stocks, by which I mean fuels and raw materials, fell by £160 million in the six months up to March, 1968. If a drop in manufac- turers' stocks of that scale as recently as up to March, 1968, is the background against which we are to expect a substantial leap forward in manufactured exports, the import bill which will be generated by a significant rise in industrial activity based upon manufacturing for export become breath-taking. It will certainly be a great deal larger than the huge stock-building boom which occurred in 1964. Against the background of a serious drop in investment, we shall not only have a huge inflow of fuels and raw materials to give industry its launching pad for the export-led boom but, more than that, we shall be bound to have a huge inflow of capital equipment. This is already happening in electricity generating equipment and electrical machinery.

To return to the question of forecasting, against the background of the further cut which he was bound to make and against the sort of demand level which we have now, with the pressure on sterling and all the rest, the Chancellor was quite wrong yet again to give us his euphoric view of prospects round the corner. It is the wrong psychological medicine to offer the House. He must know that his investment forecasts and projections of an upturn in investment are questionable, to say the least. I quote here from the current October issue of the broadsheet issued by the Department of Economic Affairs, which refers rather wistfully to what has happened to investment. In the concluding paragraph of the piece on investment prospects this is what we read: Forecasts supplied in November/December 1967 indicated an expected rise of 5 per cent. in the volume of manufacturing industry's investment between 1967 and 1968, compared with a drop of 4½ per cent. between 1966 and 1967. This expected 5 per cent. increase, however, did not happen. The broadsheet goes on rather coyly to say: However, the continued fall in manufacturing investment in the first half of 1968 creates some uncertainty about the timing of the upturn"— one of the most delicious and "dodgy "question-marks hung over an official forecast that one could possibly find.

Yet the Chancellor solemnly tells us today that the investment boom for manufacturing industry is only just around the corner. Against the background of the new restrictions on hire purchase which we have just had, it is extremely unlikely that we shall have it, but, if the boom does come, it will be in imports of investment goods because British industry will be loo ill-equipped to produce them.

This is the great indictment against the Government. Their forecasts were wrong and the levers which they pressed produced perverse effects. The sooner the Government leave the economy alone and we have industrialists and businessmen running it, the better and healthier it will be for Britain.

8.49 p.m.

Mr. John Cronin (Loughborough)

The hon. Member for Barkston Ash (Mr. Alison) made an interesting though somewhat polemic speech. He seems to take a rather lugubrious view of the country's prospects altogether. He made the point that there has been a decrease of employment in manufacturing industry, but he did not add that there has been an increase in the production of manufacturing industry. Plainly, what employment there has been is often put to more effective use under a Labour Government than it has been hitherto.

This is a rather difficult debate in which to speak, because the course is uncertain. Nobody knows exactly what will happen in the immediate future. I am delighted to see here my right hon. Friend the Chief Secretary to the Treasury whom I congratulate on being in the Cabinet, which will be a better place for his being there. I am sure that although he is taking note of our views with care he appreciates that it is difficult to give advice at this stage. We are advising my right hon. Friend the Chancellor rather as we should advise a man who is half way across a tight rope. It is difficult to know exactly what to tell him. One can only wish that all will go well.

I think that so far the Chancellor is doing a very good job. This is shown to some extent even by the criticisms made about him in recent months. A short time ago there was a fear that unemployment would be much greater. More recently there has been a fear that there would be more inflation. That rapid change of criticism between the two extremes suggests that he is going along roughly the right course.

But I should not like the Chief Secretary to think that I shall speak entirely in praise of everything that has happened. The school meal cuts in the past few days were an example of the Treasury at its worst. The saving is paltry, and it gives the impression that the Government are depriving some school children of their meals. It is not a happy political gesture. Perhaps it would have been helpful if my right hon. Friend the Secretary of State for Education and Science had specified what the alternative expenditure would be, but he simply said that the money would be spent more wisely. It would have been better for everyone if that rather paltry cut had not been made.

Today's debate is really based on giving economic advice to the Chief Secretary, and it is difficult to say exactly what should be done, because the choices available at present lie between emphasis on growth, external equilibrium, internal stability, regional balance, and social progress. Since the right hon. Member for Barnet (Mr. Maudling) is here, I might mention an alternative economic goal—winning the next election, which was something he did not succeed in doing, though he tried very hard.

The Government are obviously giving priority to external equilibrium, and in the national interest this must be the top priority. It is only on the opposite side of the House that national interests are subjected to immediate electoral ones. It never happens on this side of the House. In the interests of my own political future, I sometimes wish that Ministers had a little less integrity in looking after the national interest at the expense of political popularity.

It is clear that the wage freeze is politically unacceptable. It is temporary, and I think that it is transient in its effects. There is uncertainty as to whether devaluation will work by itself. In spite of the 14 per cent. devaluation there has already been an increase of 8 per cent. in export prices, and I am not convinced that the margin of 6 per cent. will make all the difference to our export trade. It is even more uncertain whether the inflationary measures taken by the Government will help. This is a time-honoured form of treatment for economic ills which has been carried out every few years in the last 20 years—with considerable lack of success on every occasion. If one looks at the graph of production over the last 20 years, it is almost a continuous horizontal zig-zag. So it is difficult to say that deflation by itself will be very helpful.

I suggest to the Financial Secretary that there should be some definite direct attack on the balance of payments problem. It is overwhelmingly obvious that there has been a great excess of imports over the last few years. The Government should attack this directly. But even if we have an export boom, which is what everybody wants, it will suck in a big increase of imports not necessarily of a particularly helpful nature to the economy. So it would be helpful if the Government would give serious consideration to having import quotas.

Import quotas are completely permissible under the terms of G.A.T.T. and E.F.T.A., and if they were used for certain selected imports of a luxury nature I do not think it likely that there would be any serious reprisals against us in world trade. Also it would be helpful to have some restriction on credit for imports. This could be handled easily through the ordinary financial machinery, again without any possibility of reprisals by other countries.

Mr. Bessell rose—

Mr. Cronin

I am sorry, but I cannot give way. The time is short.

The Government ought also to practise a policy which was very successfully pursued by the 1945–51 Labour Government. They should put more investment into factories which use import subsidies.

Finally on the question of imports, there is much to be said for the withdrawal or modification of investment grants. At present we are importing about £800,000 worth of plant and machinery, and it seems absurd that this is being directly financed to a substantial extent by the Government. It is also having the effect of putting pressure on our own machine tool industry. There is a strong case for removing the investment grants at the earliest possible opportunity.

There is obviously some room for improving the imports situation, but there is an unlimited prospect for increasing exports, and I think that could be achieved very much by giving more incentives to exporting firms. The Government could easily divert Government contracts to firms which have good export records. A very large number of firms live on Government contracts and make little attempt to increase their exports. The Government should attend to this.

There is also much to be said for preferential taxation for firms which export on a large scale. At present preferential taxation is devoted solely to expenses. If an executive takes a foreign buyer out to dinner and a night club, that can be put against taxation. So there is nothing unprecedented in the idea of having preferential taxation treatment for exports. Possibly the reintroduction of share options for export executives might be helpful.

Having given that piece of advice to the Government, I want to give a little consolation. One of the most impressive aspects of the debate is the barrenness of Opposition policy in the economic situation. The speech of the right hon. Member for Enfield, West (Mr. Iain Macleod) suffered from an advance publicity build-up rather suggestive of the heavyweight prize ring. It was a rather mild speech. At no time did he produce any constructive suggestions. All he could say was that the Conservatives would reduce taxation and he produced an extraordinary theory that this would increase savings. He did not go on to point out that the reduction in direct taxation would be brought about by increasing indirect taxation, which would have an adverse effect on the vast mass of the population.

My consolation to the Government, therefore, is this: whatever difficulties we are going through economically, we can at least say that the prospective alternative Government are completely barren of useful policies.

9.0 p.m.

Mr. Reginald Maudling (Barnet)

I was interested in the suggestion of the hon. Member for Loughborough (Mr. Cronin) for the restoration of stock options. He meant the restoration of the taxation position on stock options for executives engaged in the export business. It is certainly an idea to consider.

I was taken aback when the hon. Gentleman talked in favour of discriminatory import controls. Nothing could do worse for our trade. He referred also to investment grants. We cannot have a system whereby we pay investment grants only on British and not on imported equipment. Every trade rule we exist by rules that out.

Some hon. Members opposite have advocated controls on what they call unnecessary goods from abroad. The hon. Member for Wolverhampton, North-East (Mrs. Renée Short) was among them. But how many things that we sell overseas can be defined as wholly necessary? Whisky is among our greatest exports but it could be said to be unnecessary, although not everyone would agree with that. We depend upon selling woollen and leather articles and other goods which might well be described as unnecessary. It is an illusion for hon. Members opposite to think that we could cure our trading problems by refusing to buy from others the sort of things we are trying to sell to them. I hope that the Government will continue to resist these blandishments.

We are now in the concluding stages of the debate and, in accordance with tradition, the Leader of the House is to reply. I believe that he will range widely and will not merely concentrate on our Amendment. I shall spend most of my time on the economic situation, but I have one or two other things to say first.

Our condemnation of the Government is that so few of the proposals in the Gracious Speech have any relation to current economic problems, and anyone listening to the debate could not fail to be convinced of the accuracy and validity of our argument. In the Gracious Speech are many worthy Measures which I am sure the House will approve and pass, but few of them have any relation to our economic problems.

Of the non-economic Measures, I think that most attention has been focussed, by the Prime Minister particularly, upon the constitutional proposals, and these are, of course, of considerable interest. But one point about the proposed Constitutional Commission has been taken outside in other quarters, and this is that it seems odd to proceed immediately with reform, for example, of the Upper Chamber before the Constitutional Commission has considered generally the constitutional set-up which might itself be reflected in the Upper Chamber. This is something that we can discuss later, but we on this side believe that it is right to try and proceed with reform of the House of Lords by agreement.

We were rather surprised when the Prime Minister had his little huff a little while ago and broke off the conversations, but we are glad that he has come back to the position, roughly speaking, which had been reached in the discussions between the various parties. Certainly, we hope that an agreement can be maintained between the parties and a solution found to the future constitution of the Upper House which will enable it to make the maximum contribution to our country and to our constitution. In these discussions we on our side always reserved our position on timing. We do not think it right to introduce the new composition of the Upper Chamber based on the electoral situation of 1966. The reformed new Chamber should come into effect after another election and reflect the political realities at the time that it is introduced.

I turn now to the main question, the economic situation. Nearly a year after devaluation the balance of payments situation is still causing the Government great concern and, as my right hon. Friend so rightly itemised this afternoon, time and time again the Government's forecasts of "rounding the corner", "success ahead", "easy waters ahead", have been falsified, and there is no reason why either the House or the country should believe that they are right now when they have been wrong so often in the past.

The balance of payments and the trading figures on current account are the most important figures which show the genuine over-spending of our country. The balance of payments on trade account in 1964 was over £500 million, and what a hullaballoo there was about that—the wicked Tories, the wicked Chancellor of the Exchequer to allow the deficit to escalate to £500 million. Now despite £2,000 million additional taxation and unemployment at historically high post-war levels, the trade deficit for the last 12 months was not £500 million, nor £600 million, but very nearly £900 million. This is the condemnation of the Government's conduct of our economy which they must endeavour to answer.

As my right hon. Friend said this afternoon, unemployment is high. In 1964, the economy was moving ahead fast and unemployment was low. Now, after these years of Labour government, unemployment is high and, whatever the loyal hon. Member for Woolwich, West (Mr. Hamling) may say, the measures announced last Friday are designed to increase the amount of unemployment. They are designed to cut down demand, and if demand is cut down then unemployment is increased; it is as simple as that.

Then there is the serious problem of our exports being threatened in some vital industries by strikes. We have to recognise that, as industry becomes more efficient and more modern, so strikes becomes more serious. An efficient, integrated, modern industry, with supplies of components coming from one or two sources, and very low stocks held, is always far more vulnerable to wildcat strikes in one sector, and no problem which we are facing today is more serious than this.

Then there is the burden of debt, to which reference has been made. I hope that the Prime Minister is prepared to listen to what I have to say about the burden of debt. It has grown a great deal in the last three years, partly by reason of our overspending as a nation, and partly by reason of devaluation itself, which increased by a large sum the real burden of our international indebtedness. Now we have the Basle Agreement. I for one think that in the Basle Agreement the Bank of England bailed out the Government from a very awkward situation, but it was at a price, and we still want to know the price. The Chancellor of the Exchequer recently gave my right hon. Friend a figure of £600 million. Now he says that it is not £600 million, but he is not prepared to say what it is. If he could the other day give the figure of what he thought would be drawn, why can he not now give the actual figure?

Then we have the Budget judgment. I am sorry to disagree with the Chan- cellor. I think that his Budget judgment has been falsified. He was estimating a reduction in consumption. There has been no reduction. Now he is taking these new measures affecting hire purchase and school meals, and I am sure that we shall not know for some time what more is to come. It is an extraordinary situation. If the variation from the Chancellor's plans is so small, if £100 million is so little in our economy, why is it necessary to do what the Government have done about school meals for the sake of £4 million? It is a very odd scale of priorities upon which the Government operate.

So we say that in all these matters—in the failure over the balance of payments, the threat to exports from strikes, the burden of debt, and the failure of the Budget judgment—the Government are failing in their economic measures. Above all, they are failing to restore confidence, and confidence is essential to the prosperity of a trading country like ours.

We all agree, of course, that exports are doing well. We are glad to see that, but it has a long way to go. British industry, men and management, has to make and sell 17 per cent. more to get the same foreign exchange earnings that it got a year ago. The Prime Minister really cannot claim, as he tried to last week, the credit for his Government for the achievements of British industry in exports. It is true that the Government have done something to help. They could hardly fail to do something. But, by taxation and by interference with the processes of trade and commerce, they create problems and burdens for industry which are extremely heavy.

To take one or two examples of what the Prime Minister said, shipbuilding orders are up by £100 million, but "only because of the reconstruction following the passage of the Shipbuilding Act." That was a typical remark by the Prime Minister. I agree that there is some truth in it. The Act, based on the Geddes Report, is a very valuable one. However, as the Prime Minister knows, I have a personal interest, and anyone who knows the industry also knows that the main reasons for the increase in orders are, first, the high freight rates and the international order situation; second, the fear of devaluation in the past and uncertainty about sterling now which leads people to buy sterling ships; and, third, the credit terms available for foreign purchasers which were instituted by the Conservative Government. Those are the real reasons for the increase in shipbuilding orders.

Taking another example of the Prime Minister's efforts, he says that the motor industry is able to take advantage of increased export orders because of Government aided restructuring under the I.R.C. Act. He really said that. Let us see what has happened. The I.R.C. has played some part in the merger of B.M.H. and Leyland. That merger is good for the industry, but whether it has played a decisive part, no one knows. When it comes to exporting, it must not be forgotten that British Motor Holdings-Leyland exports went up by 35 per cent. That was a very good effort. However, Ford, not restructured, increased its exports by 45 per cent., and Vauxhall, not restructured, increased its exports by 66 per cent. How can the Prime Minister seriously come to the House of Commons and claim credit for the increase in motor export orders?

For good measure, he added that export orders of engineering products generally were up by 8 per cent. I should hope so. Until they get to 17 per cent., they will not get back to where they were before devaluation.

The trouble with the Prime Minister is that he never reveals the whole situation. Always he says part of it. Look at how he dealt with the question of aid to the development districts. There was a very interesting passage in his speech in which he said that the present Government's assistance is now £250 million, whereas the assistance that we made available was £18 million. That implies that that is all that there is to it, with £250 million from them and only £18 million from us. That was his point.

I do not often question the Prime Minister's figures, because he can get the Civil Service to give them to him and because he knows that, if he gives an inaccurate one, we can catch him out. However, again, he does not give the whole truth. He said that £18 million is all the aid that we gave. An Answer given by one of his colleagues earlier suggests that the figure was not £18 million but £30 million. But the Prime Minister forgot the small item of depreciation and allowances. The present Government have given investment grants, but they have taken away investment allowances. He has forgotten the little matter of free depreciation which, on our plans, in 1966–67 would have given £45 million to the development districts. Again, that little item is forgotten. Possibly the Prime Minister has also forgotten the old principle that, if one suppresses what is true, one suggests what is false.

Mr. Michael Foot (Ebbw Vale)

Since the right hon. Gentleman is such a powerful advocate of the desirability for telling the whole truth, will he now tell us on what date he forecast to the country the 1964 deficit?

Mr. Maudling

I shall be delighted to answer that question. I forecast in my Budget speech in 1963 that there would be a substantial deficit in 1964. Throughout 1964 every trade return and every figure was published without emendation or delay. That is more than hon. Members opposite can say.

Mr. Foot

I am not accusing the right hon. Gentleman of suppression. I am asking when he announced it. Is he now telling us that the deficit achieved in 1964 was achieved on purpose?

Mr. Maudling

I am saying that I said in 1963 that we would have a deficit in 1964 in order to get the economy expanding, and that we would draw on our working capital from the World Bank. At that time my statement was received with the full approval of the present Prime Minister

The Prime Minister (Mr. Harold Wilson)

The right hon. Gentleman knows that we publish the trade figures a great deal faster than he did. In view of the very bad trade figures that were published on 16th October, a few hours after the polls closed, will he say at what hour those figures were in the hands of the Government?

Hon. Members

Answer.

Mr. Maudling

Of course I will answer. Those figures reached my hands at 8.30 p.m. on polling day. If the Prime Minister is suggesting that at any time I caused a delay in the publication of the trade figures I hope that he will have the guts and decency to say so openly.

The Prime Minister

The right hon. Gentleman has told us at what time he got them. At what time did the President of the Board of Trade get them? In view of the fact that, 20 years ago, I always had the trade figures on the 11th day of the month, why did he not have them until the 16th?

Mr. Maudling

The Prime Minister is talking nonsense. They never arrive on the 11th day of the month. It is a different date each month, as he knows, from the situation under his Government. I am saying that if he is accusing me of delaying the publication of the figures, let him say so. We want to know this. Is he accusing me? He tried this one three years ago. I have taken a lot about 1964 and I will take no more from the Prime Minister. I am not prepared to accept these sedentary expressions. [Interruption.] The right hon. Gentleman is not worth getting angry with.

I return to the main subject of our Amendment, from which I was diverted by the Prime Minister. It is that the measures in the Queen's Speech have little if any relevance to our economic situation.

Of course, the measures on Friday had some relevance. In the Gracious Speech we were told that the Government would safeguard employment, which they proceeded to do by putting on hire-purchase control. How important were these measures? I think that the Chancellor would like overseas opinion to think that they were important, but the First Secretary and the President of the Board of Trade say that they are nothing—a mere £100 million, or nothing at all in the great turn which we have seen of the deflation which the Labour Government are imposing on this country.

They could have been avoided. There were other ways of cutting back on consumption. If there had not been the spending spree in the early months of this year, last winter, they would not have been necessary. I know that the current Treasury doctrine was that people could not spend money twice, but, with modern methods of borrowing, they can. As my right hon. Friend said, once they get into the habit of spending, it is a habit which will continue. There has been a flight from money, occasioned by the Government themselves.

When they say, of course prices will go up, what do they expect people to do? They go out and spend money before prices do go up. Then they are assured by the Prime Minister that the pound in their pocket has not been devalued. If the Government had managed their prices and incomes policy better, things might have been different. What has happened under the right hon. Lady the First Secretary? Under the right hon. Member for Belper (Mr. George Brown) prices were restrained to some extent, but incomes were not and they created a far greater inflation than would have happened otherwise. It was the cause of the 1966 crisis and the 1966 measures and it is the cause of the present economic freeze.

Yet Government expenditure marches rapidly on. The Government are curious about expenditure. As I said, they are prepared to impose this policy on school meals which many of their supporters dislike, for the sake of £4 million, yet the increase in the Civil Service, which they treat with such complacency, if not with pride, is 57,000 people, since they came in, a cost of £145 million a year—a 34 per cent. increase in cost. If they had tackled the problem of Government expenditure and savings instead of talking about wealth taxes and what they did about the Married Women's Property Act policy, if they encouraged savings, they could cut back on consumer expenditure without the sort of measures which they have now, belatedly, been forced to introduce.

One of the great omissions from the Gracious Speech is any positive action to deal with labour relations. The Government have promised a White Paper, but this is not fast or urgent enough. The Chancellor himself, I think, would say that the two main threats to his balance of payments forecast come from the labour problem. On the one hand, there are crippling strikes and on the other there is a break-through in incomes which must force up our costs to uncompetitive levels. This is the most urgent and fundamental of all our problems. Certainly, the effect of unofficial strikes on our exports has become very serious. It is not merely the delay in export deliveries which causes concern but the loss of future orders and the loss of confidence abroad in this country's ability to deliver what we say we will deliver.

I implore the Government to realise the urgency of dealing with this situation—[An HON. MEMBER: "Do your own dirty work."] We should be very happy to do the work which we believe the country needs. We think that legislation is needed to bring the law relating to the unions and their individual members up to date in the interests both of society as a whole and of the individual union members. We believe that it is time to provide in our law that, when people make a bargain, both sides should be kept to that bargain, if necessary in a court of law.

We believe also that the time has come for some provision whereby there would be a cooling-off period when strikes are threatened which are a real national danger, followed by a secret ballot before a strike is held. People say it is difficult to legislate. Of course it is, but I would make three points on that. First, other countries do it. In fact, most other countries have legislation of this kind. Second, I believe that if we set all these problems of labour relations in a proper legal framework which reflected what the community wants to see, there would then be a new opportunity for responsible trade union leaders to impose the leadership and get the following which they really want to achieve their ends. Third, I am quite convinced that the public as a whole, including members of trade unions, are sick and tired of the present situation and are entirely ready, willing and anxious to see legislation of this character enacted by this House.

Mr. Eric S. Heffer (Liverpool, Walton) rose—

Mr. Maudling

I am sorry, but I am very short of time.

I have been asked to deal with the positive things we think should have been in the Gracious Speech. I have given one very definite one, legislation on trade unions. I give another very definite one—cutting back on Government expenditure. [HON. MEMBERS: "Where?"] I have given one example already—the enormous growth of the bureaucracy costing £150 million. I give a third one, increase in savings. I give a fourth point, cutting back on taxation, particularly a: the higher levels of earning. The present penal level of tax on those who make the greatest success of their trade or business or industry discourages them, and not only them but all the ambitious young men below them. These are the kinds of things which should have been included in the Gracious Speech, and we regret their absence.

I turn, finally, to the question raised already of the position about the announcement on Friday morning on hire-purchase controls. Let it be quite clear that this was the position, as we know from what the President of the Board of Trade said, that the decision was taken before this debate began. [An HON. MEMBER: "Oh, no."] Oh, yest. Look at what the right hon. Gentleman said on Friday. Quite clearly, he made that absolutely plain to all of us. It was in line with what the Prime Minister said on that previous occasion when the Prime Minister was challenged repeatedly by my right hon. Friend on this particular point. He was asked to say whether this was so.

I quote my right hon. Friend: Would the right hon. Gentleman now answer my question about measures to limit consumer demand? Are they or are they not to be taken?"—[OFFICIAL REPORT, 30th October, 1968; Vol. 772, c. 49.] That was his question. The Prime Minister knew at the time that there was only one truthful answer, which was, Yes. He did not give it. He preferred instead to talk about announcements being made when they were considered to be necessary. What made it necessary on Friday, when it was not on Wednesday or Thursday?

Then we had the right hon. Lady, whose words were confirmed by the Leader of the House, who will wind up this debate. I bring him in because he is to wind up and will be able to answer. The right hon. Lady said on Wednesday that there was no economic freeze on the way. It was confirmed on Thursday by the Leader of the House who also said that the Chancellor had no statement to make. The fact is the President of the Board of Trade made the statement the next day. The Leader of the House must have known this statement was coming along. Both Ministers knew perfectly well at the time that the decision had been taken by the Government to impose these new controls. Of that we must be absolutely clear.

What is their excuse? Their excuse is that the hire-purchase clamp down is not an economic freeze. It is a very poor excuse. They knew perfectly well that what was in the minds of the public and their elected representatives in the House was hire-purchase controls, because their scheme had leaked to the Press on Wednesday. It was not just speculation. It was a very definite leak, and when that leak occurred in the Press on Wednesday Ministers conspired to make the public believe that those leaks and rumours were not true when they knew they were true.

As to whether it is a freeze or not—well, if we look at the controls imposed by the Order on hire purchase, they exactly coincide with the freeze of 1966 in every single detailed particular. It may be that the right hon. Lady will say that it is only part of a freeze, not a complete freeze. She may be right on that, but this is the important charge against the Government, that they do not tell an absolute untruth, but they never tell the absolute truth, either. It is always half truth, of which the Prime Minister is a past master. By the contempt with which they treat the electors and by the standards of their own conduct in office, they have forfeited their right to be the Government.

9.31 p.m.

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

Today we have had two speeches from the Opposition Front Bench which have both highlighted what they described as a charge of bad faith against the Prime Minister, the First Secretary and myself. The right hon. Member for Enfield, West (Mr. Iain Macleod) did not mention me, but the right hon. Member for Barnet (Mr. Maudling) mentioned my name both earlier and again in his last speech. I want to deal specifically with that charge before I turn to the main issues of the debate. It is right that I should deal with it early as it has been taken up by the Press. We have been accused not only of bad faith but of not telling the truth. As the importance of that charge goes beyond the immediate debate, I must put the record straight.

Last Thursday afternoon, following the Business statement, I made two comments on this matter. First, I confirmed the remarks of my right hon. Friend when, in reply to a heckler in a by-election, she said that there was no economic freeze on the way. I agree with that. Secondly, several times, and once in answer to a specific question about an Order relating to hire-purchase restrictions, I said: If a statement is necessary, I will see that it is made. Within hours my words had been distorted. It was claimed that I had said that there were to be no hire-purchase restrictions. I was accused by the hon. Member for Louth (Sir C. Osborne) of not telling the truth. If we are talking of bad faith, may I ask who leaked in formation to the hon. Member for Louth? Who broke the confidentiality which is traditional in the way we conduct our discussions through the usual channels? The Leader of the House should address his attention to that question—

Mr. Heath

The Leader of the House?

Mr. Peart

I mean you—the Leader of the Opposition.

Mr. Deputy Speaker (Mr. Sydney Irving)

Order. I hope that the right hon. Gentleman will use the traditional form of address.

Mr. Peart

I am sorry, Mr. Deputy Speaker.

When we hear about charges of bad faith, that question should be examined by the Leader of the Opposition. It is accepted that we have conventions which make the House work, and since I have been Leader of the House I have tried to respect the Opposition, the Leader of the Opposition and, indeed, all hon. Members. I will go on doing that, despite misrepresentations in relation to my intervention during my controversy with the Leader of the Opposition when I announced Business. He ought to look at this matter. It was deplorable. I hope that there will be an apology?

Mr. Heath

What about?

Mr. Peart

Will the right hon. Gentleman offer an apology?

Mr. Heath

The Leader of the House knows full well that there was no official leakage on this matter of any kind whatever. The Leader of the House must ensure that these things are done through the usual channels and not in the casual way in which they were done on this occasion, which resulted in information being passed in a way in which it became common knowledge. I say to him frankly that we always observe the conventions. I put this to the right hon. Gentleman: in answer to me on Thursday—

Mr. Peart rose—

Hon. Members

Sit down.

Mr. Deputy Speaker

Order. The right hon. Member for Bexley (Mr. Heath) has the Floor. If his intervention becomes too long, I will inform the House accordingly.

Mr. Peart

I gave way.

Mr. Heath

On Thursday I put this question to the Leader of the House: Yesterday, I pressed the Prime Minister to say whether there would be a statement by him or the Chancellor of the Exchequer about further credit restrictions in the light of the categorical statement by the Secretary of State for Employment and Productivity…. Can the Leader of the House say again categorically that the Chancellor will not now be making a statement to this effect? That referred to my previous remark about no limitation on credit. The right hon. Gentleman replied: Certainly, because what my right hon. Friend the Secretary of State said was perfectly true. He therefore said that there would not be a statement. The next day there was a statement.

Mr. Peart

I made the first statement about confidentiality. I now ask the right hon. Gentleman if he seriously believes that there was no leak.

Mr. Heath

There was no official leak.

Mr. Peart

I am talking about confidentiality. Is the right hon. Gentleman saying that his hon. Friend the Member for Louth was not informed by a certain person? I am asking for the right hon. Gentleman to investigate this. It is a serious matter. [HON. MEMBERS: "Get on."] I do not want an evasive reply and the Leader of the Opposition is being evasive. We went into this through the usual channels and showed all courtesy. This is deplorable. [HON. MEMBERS: "Hear, hear."]

As to my position as Leader of the House, I said, when the Leader of the Opposition questioned me: I cannot…"— answer— at this stage. If a statement has to be made on a matter, I will make the necessary arrangement. The right hon. Gentleman pressed me again and asked: Will the right hon. Gentleman confirm that the Chancellor will not be making a statement? I did not mislead the House. Later the hon. Member for Worcestershire—

Sir G. Nabarro

Worcestershire, South, if the right hon. Gentleman does not mind.

Mr. Peart

I hope that hon. Gentlemen opposite will let me proceed. I said that I thought that it was not a Business question, because Mr. Speaker had ruled that it was not in order. Then I rose and volunteered a statement because I was anxious to help. I said in reply: If a statement is necessary, I will see that it is made."—[OFFICIAL REPORT, 31st October 1968; Vol. 772, c. 164–8.] I cannot understand why the Leader of the Opposition and his hon. Friends have got themselves into such a frenzy about nothing. They seek to distort the position. [Interruption.] They seek to distort—

An Hon. Member

Lost the place? Start again.

Mr. Peart

There is no question of my having to start again. I believe that right hon. Gentlemen opposite have sought to distort the position, and I cannot understand why the Leader of the House has got himself into such a frenzy. [HON. MEMBERS: "Hear, hear."] I apologise. I should have said "Leader of the Opposition". After all, the right hon. Gentleman has not answered my charge. He knows that he cannot get away with this. I have asked him once and I repeat my claim that he should hold an inquiry.

I turn to the arguments that have been deployed. [Interruption.] When hon. Gentlemen opposite carefully read what has been said they will find that their leader's frenzied neurotic approach is not becoming of the Leader of the Opposition. [Interruption.]

Mr. Deputy Speaker

Order. Mr. Peart.

Mr. Peart

I cannot believe that hon. Gentlemen opposite honestly think that the hire-purchase restrictions amount to a new freeze.

Hon. Members

One hundred million pounds?

Mr. Peart

At a time when production, productivity and exports are rising and when unemployment is beginning to fall, one cannot describe as a freeze measures which are designed to act on £100 million out of a national income of £34,000 million to ensure that export orders are not frustrated by excess home demand. It cannot possibly be said that we are now in a position of a new freeze. That is what we have said over and over again. The right hon. Gentleman has exaggerated. I can almost imagine that if I gently embraced one of his lady colleagues, he would shout "Rape".

Mr. Mark Carlisle (Runcorn)

Since the right hon. Gentleman is so vehemently denying the charge which has been made that he, the First Secretary and the Prime Minister deliberately misled the public in the statements they made, may I ask whether he proposes to issue writs for libel against the Sunday Express?

Mr. Peart

I do not know whether the hon. Member heard the speech this afternoon of the hon. Member for Bodmin (Mr. Bessell). The hon. Member put it right. When asked to say "Yes" or "No" in reply to a direct question, my right hon. Friend's reply was right in those circumstances. Of course it was right. Hon. Members know that. Therefore, this is not a freeze, as the hon. Member should know. I hope that right hon. Gentlemen opposite will realise that this policy of instant accusation based on ill-founded facts does them no good, neither can it reverse the present opinion poll trends of declining support for them. Most important of all, it is not worthy of the right hon. Member for Barnet.

On this point, as in their campaign against the two-tier postal system, I wonder why the party opposite have panicked into so desperately overplaying their hand. I believe that it is because they have not made fundamental criticisms. I got that impression when I listened to the speech this afternoon by the right hon. Member for Enfield, West.

If I may deal now with the issues that the right hon. Gentleman and many hon. Members have raised, I will refer to an important matter which was raised by many of my hon. Friends. I refer to regional policies and employment. This is probably one of the most serious parts of our discussions today.

Regional development policy and planning have been key elements in the Government's economic policy ever since they came to power. For the first time, the problems of the regions are being tackled systematically and comprehensively. Our object has been to bring about a fairer distribution of economic opportunity and social conditions throughout the country. We also aim certainly to make use of the unused resources of the less prosperous regions for the benefit of those regions and the whole of the national economy.

I should like to record our appreciation of the work of the regional economic planning councils and boards. They provide effective machinery in the regions. We are having special studies from them which will enable decisions to be taken not only by the Government, but by local authorities and by industries.

I believe it right to concentrate in the first place on the development areas. We have to recognise that in the past their economy has declined or stagnated because of their heavy dependence on some of the older basic industries whose markets have changed and whose manpower needs are contracting. I know this problem very much because I represent a constituency in West Cumberland. The right hon. Gentleman today mentioned the problems of the Northern Region. I agree with him that they are very serious and they must be solved. They bear heavily on the individual worker and particularly on the mining community who have had to bear the brunt of change with colliery closures. Even in times of boom these areas have had unemployment levels twice the national average.

We recognise—this is mentioned in the Queen's Speech—that this is a very serious human problem and, above all, a waste of valuable manpower resources. It also creates major problems for the proper maintenance of the economy in the more prosperous regions. The Government have done much to help development areas in the last three or four years and to attract more industrial development to them. This has been appreciated by hon. Members on both sides of the House.

We have had the special incentives under the local employment Acts and the Industrial Expansion Act and the radical step of introducing and guaranteeing for seven years the Regional Employment Premium; and the Selective Employment Premium has been retained for the development areas. Far greater resources are being put into training and retraining in development areas. Additional assistance has been provided for certain parts of the development areas, even areas within the designated special development areas such as Cumberland, and additional benefits are available there in the industrial projects. We have stressed the importance of this.

In winding up for the Opposition, the right hon. Gentleman mentioned the amount of aid. I shall give figures showing how these measures have transformed the scale of special assistance to development areas over and above what they receive in common with other parts of the country. The total has risen from under £30 million annually before 1965 to £300 million this year. It is too soon to assess fully the effect of all these incentives, particularly that of R.E.P., but inevitably this will have a tremendous effect on areas such as the Northern Region, Scotland, Wales and parts of the South-West. The development areas' share of all i.d.c approvals has been running at one-third of the national total so far this year. The Government are well aware of the importance of this matter.

My right hon. Friend the Member for Battersea, North (Mr. Jay), a former President of the Board of Trade, pleaded for more advance factories. He asked for figures. The position at 31st October was that 99 had been completed covering an area of 2,400,000 square feet and 80 of these have been allocated. Sixteen are under construction and a further 26 are to be planned. My right hon. Friend the Economic Secretary to the Treasury, in a Written Answer to my hon. Friend the Member for Hampstead (Mr. Whitaker) announced a new programme to attack levels of unemployment in the regions this winter. The total amount which can be allocated for this purpose has had to be limited to £10 million, but it will be of considerable help in dealing with this problem and the Government consider that it should be a high priority.

Unemployment is still too high in certain areas. We are well aware of this. This is why we are tackling it through many of the measures I have mentioned.

As to strategy on many other issues, let us take the matter of prices and incomes, which was raised by the right hon. Gentleman when winding up for the Opposition and by many of my hon. Friends. No hon. Member is more anxious than my right hon. Friends and myself to finish with statutory controls, as long as other satisfactory arrangements take their place. The majority of hon. Members, even those opposite, know in their hearts that a return to the law of the jungle is not good enough.

Some have questioned whether all the agony has been worth while. It has been agonising to try to introduce some element of order in an area dominated up to now by the law of the jungle. They point to estimates that the Government's policy has restrained increases in prices and incomes by only 1 per cent. in its first year. While not necessarily accepting this figure, I must point out that such figures cannot be better than well-informed guesses, with wide margins of error. It is the last 1 per cent. which is vital. If we could increase our competitiveness in costs and prices by just 1 per cent. a year, our troubles would soon be over.

Some of my hon. Friends cannot accept the Government's policy on this, and to some considerable extent I sympathise with their objections. They are expressed in their Amendment. I believe, as they do, that the rights of free trade union bargaining had to be so bitterly fought for and were so dearly won that they will never be lightly set aside.

Trade unions, given the philosophy underlying their foundation, must never become in practice merely organisations whereby those with strength grab most without regard to the weaker. They were conceived, and must continue, as organisations where the strong help the weak, with objectives designed to ensure economic justice. This is right. The time has come when we must think just how that philosophy should be applied in practice.

Half the hon. Members opposite, however, reject any form of policy and planning in relation to prices and incomes. If they had their way, many of them would go back to the unrestricted workings of the law of the market place. We last tried the unrestricted workings of that law in the 1930s. I believe that the nation has decisively rejected that course. When dealing with the livelihood of men and women we must never travel that way again.

I was asked by many hon. Members about import saving. The hon. Member for Worcestershire, South (Sir G. Nabarro) made a very effective plea for import saving. He made a strong defence of British farming. He addressed the question specifically to me because of my previous responsibility as Minister of Agriculture, Fisheries and Food.

The hon. Member seems to be under the impression that agriculture is not contributing to import saving. That is precisely why the selective expansion programme was brought in. I can remember the arguments which took place with hon. Members opposite who represent farming constituencies on this very matter. We said when we introduced the selective expansion programme that we expected that home agriculture would be able to meet the major part of the additional demand expected by 1970 totalling £200 million on food for human consumption. If the hon. Gentleman is looking beyond the period of the selective expansion programme he is a little premature. The Report of the little N.E.D.C. for agriculture has stated that an import saving of about £220 million should be technically feasible by 1972–73. We have taken this assessment into account in our studies.

On the other hand, the hon. Gentleman will appreciate that there are problems here in regard to import substitution. We are partners in many international agreements, some of which were put to the House by my predecessors but which we are continuing. I think of the bacon sharing agreement and the wheat agreement, for example. These are important matters which have to be borne in mind. Neverthless, I believe that agriculture can make a major contribution, and, as we have said in the White Paper, and as I have repeatedly said to the industry—it was accepted—in order that growth in the industry may be achieved, the machinery for the purpose must be the Price Review.

Sir G. Nabarro

I accept absolutely the right hon. Gentleman's sincerity. But will he knock it into the head of the Chancellor of the Exchequer who is utterly urban-minded and introspective in these important matters? I sit for an agricultural constituency—

Hon. Members

Oh.

Mr. Speaker

Order.

Mr. Peart

The hon. Gentleman has forgotten. I gave a very good Price Review last year. I gave a very good Price Review the year before. Exchequer support was forthcoming. My right hon. Friend and his predecessor helped me to achieve it, and this was accepted by the farming community. The industry is not stagnating. It is increasing its production. [Interruption.] This is an important point, and I hope that hon. Members will forgive me for dealing with it.

There are many other important matters covered in the Queen's Speech which time does not allow me to develop. I think, for example, of aid for the fishing industry, another vital interest. Many economic measures are foreshadowed, and there is also the question of the set ting up of a Commission on the constitution. Here I pay tribute to the speech made by the Leader of the Liberal Party, although I did not agree with all of it. The right hon. Gentleman regards the setting up of the Commission as a matter of great importance. I pay tribute also to the speech of my hon. Friend—

Mrs. Anne Kerr (Rochester and Chatham)

On a point of order, Mr. Speaker. It is impossible to hear what is being said, and among what some hon Members seem to think are unimportant questions there is a matter of considerable importance. I wish to ask why Miss Pat Arrow smith is in prison tonight. Having been fined £2 and having refused to pay the £2, she has now been sent to prison for six months.

Mr. Speaker

Order. It would be no disservice to Parliament if we heard the last words of the debate. Mr. Peart.

Mr. Peart

I am sorry that I did not hear the question which my hon. Friend raised in her point of order.

We are now near the end of our debate on the Queen's Speech. The arguments which have been raised in regard to the proposed Commission will be carefully noted by the Government. We regard the setting up of the Commission as an important matter, and we shall speed up the talks on the terms of reference. [Interruption.] I hope that hon. Members will allow me to finish my speech. If they wish to be discourteous, I can do nothing about it, although I am sorry.

There remains much in the Queen's Speech to be debated and discussed, and there will be major debates on all these matters. Many people believe that the Queen's Speech will not impose heavy burdens on hon. Members. I assure the House that it is a heavy programme. There will be major pieces of legislation to be considered—the reform of the House of Lords, electoral reform, and many other matters which will have to be debated on legislation by the House itself. There will be a full period of work for hon. Members on both sides, and I hope that it will not be regarded lightly.

Question put, That the Amendment be made:—

The House divided: Ayes 247, Noes 310.

Division No. 4.]	AYES	[10.1 p.m.
Alison, Michael (Barkston Ash)	Dance, James	Hiley, Joseph
Allason, James (Hemel Hempstead)	d'Avigdor-Goldsmid, Sir Henry	Hill, J. E. B.
Astor, John	Dean, Paul	Hirst, Geoffrey
Atkins, Humphrey (M't'n & M'd'n)	Deedes, Rt. Hn. W. F. (Ashford)	Hogg, Rt. Hn. Quintin
Awdry, Daniel	Digby, Simon Wingfield	Holland, Philip
Baker, Kenneth (Acton)	Dodds-Parker, Douglas	Hooson, Emlyn
Balniel, Lord	Donnelly, Desmond	Hordern, Peter
Barber, Rt. Hn. Anthony	Doughty, Charles	Hornby, Richard
Batsford, Brian	Douglas-Home, Rt. Hn. Sir Alec	Howell, David (Guildford)
Beamish, Col. Sir Tufton	Drayson, G. B.	Hunt, John
Bell, Ronald	Eden, Sir John	Hutchison, Michael Clark
Bennett, Dr. Reginald (Gos. & Fhm)	Elliot, Capt. Walter (Carshalton)	Iremonger, T. L.
Berry, Hn. Anthony	Emery, Peter	Irvine, Bryant Godman (Rye)
Bessell, Peter	Errington, Sir Eric	Jenkin, Patrick (Woodford)
Biffen, John	Eyre, Reginald	Jennings, J. C. (Burton)
Biggs-Davison, John	Farr, John	Johnson Smith, G. (E. Grinstead)
Black, Sir Cyril	Fisher, Nigel	Jones, Arthur (Northants, S.)
Blaker, Peter	Fletcher-Cooke, Charles	Jopling, Michael
Boardman, Tom (Leicester, S. W.)	Fortescue, Tim	Kaberry, Sir Donald
Body, Richard	Foster, Sir John	Kerby Capt. Henry
Bossom, Sir Clive	Galbraith, Hn. T. G.	Kershaw, Anthony
Boyd-Carpenter, Rt. Hn. John	Gibson-Watt, David	Kimball, Marcus
Boyle, Rt. Hn. Sir Edward	Giles, Rear-Adm. Morgan	King, Evelyn (Dorset, S.)
Brinton, Sir Tatton	Gilmour, Ian (Norfolk, C.)	Kirk, Peter
Brown, Sir Edward (Bath)	Gilmour, Sir John (Fife, E.)	Kitson Timothy
Bruce-Gardyne, J.	Glover, Sir Douglas	Knight, Mrs. Jill
Bryan, Paul	Glyn, Sir Richard	Lancaster, Col. C. G.
Buchanan-Smith, Alick (Angus, N&M)	Goodhart, Philip	Lane, David
Buck, Antony (Colchester)	Gower, Raymond	Langford-Holt, Sir John
Bullus, Sir Eric	Grant, Anthony	Legge-Bourke, Sir Harry
Burden, F. A.	Grant-Ferris, R.	Lewis, Kenneth (Rutland)
Campbell, B. (Oldham, W.)	Gresham-Cooke, R.	Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Campbell, Gordon (Moray & Nairn)	Grieve, Percy	Lloyd, Ian (P'tsm'th, Langstone)
Carlisle, Mark	Grimond, Rt. Hn. J.	Lloyd, Rt. Hn. Selwyn (Wirral)
Carr, Rt. Hn. Robert	Hall, John (Wycombe)	Longden, Gilbert
Cary, Sir Robert	Hall-Davis, A. G. F.	Loveys, W. H.
Channon, H. P. G.	Hamilton, Lord (Fermanagh)	Lubbock, Eric
Chichester-Clark, R.	Hamilton, Michael (Salisbury)	McAdden, Sir Stephen
Clark, Henry	Harris, Frederic (Croydon, N. W.)	MacArthur, Ian
Clegg, Walter	Harrison, Brian (Maldon)	Mackenzie, Alasdair (Ross&Crom'ty)
Cooke, Robert	Harrison, Col. Sir Harwood (Eye)	Maclean, Sir Fitzroy
Cooper-Key, Sir Neill	Harvey, Sir Arthur Vere	Macleod, Rt. Hn. Iain
Cordle, John	Harvie Anderson, Miss	McMaster, Stanley
Corfield, F. V.	Hastings, Stephen	Macmillan, Maurice (Farnham)
Costain, A. P.	Hawkins, Paul	Maddan, Martin
Craddock, Sir Beresford (Spelthorne)	Hay, John	Maginnis, John E.
Crouch, David	Heald, Rt. Hn. Sir Lionel	Marples, Rt. Hn. Ernest
Crowder, F. P.	Heath, Rt. Hn. Edward	Marten, Neil
Cunningham, Sir Knox	Heseltine, Michael	Maude, Angus
Currie, G. B. H.	Higgins, Terence L.	Maudling, Rt. Hn. Reginald
Dalkeith, Earl of
Mawby, Ray	Pounder, Rafton	Taylor, Sir Charles (Eastbourne)
Maxwell-Hyslop, R. J.	Powell, Rt. Hn. J. Enoch	Taylor, Edward M. (G'gow, Cathcart)
Maydon, Lt.-Cmdr. S. L. C.	Price, David (Eastleigh)	Taylor, Frank (Moss Side)
Mills, Peter (Torrington)	Prior, J. M. L.	Teeling, Sir William
Mills, Stratton (Belfast, N.)	Pym, Francis	Temple, John M.
Miscampbell, Norman	Quennell, Miss J. M.	Thorpe, Rt. Hn. Jeremy
Mitchell, David (Basingstoke)	Ramsden, Rt. Hn. James	Tilney, John
Monro, Hector	Rawlinson, Rt. Hn. Sir Peter	van Straubenzee, W. R.
Montgomery, Fergus	Rees-Davies, W. R.	Vaughan-Morgan, Rt. Hn. Sir John
Morgan, Geraint (Denbigh)	Renton, Rt. Hn. Sir David	Vickers, Dame Joan
Morrison, Charles (Devizes)	Ridley, Hn. Nicholas	Waddington, David
Mott-Radclyffe, Sir Charles	Ridsdale, Julian	Walker, Peter (Worcester)
Munro-Lucas-Tooth, Sir Hugh	Rippon, Rt. Hn. Geoffrey	Walker-Smith, Rt. Hn. Sir Derek
Murton, Oscar	Rodgers, Sir John (Sevenoaks)	Wall, Patrick
Nabarro, Sir Gerald	Rossi, Hugh (Hornsey)	Walters, Dennis
Neave, Airey	Royle, Anthony	Ward, Dame Irene
Nicholls, Sir Harmar	Russell, Sir Ronald	Weatherill, Bernard
Noble, Rt. Hn. Michael	St. John-Stevas, Norman	Webster, David
Nott, John	Scott, Nicholas	Wells, John (Maidstone)
Onslow, Cranley	Scott-Hopkins, James	Whitelaw, Rt. Hn. William
Orr, Capt. L. P. S.	Sharpies, Richard	Williams, Donald (Dudley)
Orr-Ewing, Sir Ian	Shaw, Michael (Sc'b'gh & Whitby)	Wills, Sir Gerald (Bridgwater)
Osborn, John (Hallam)	Silvester, Frederick	Wilson, Geoffrey (Truro)
Osborne, Sir Cyril (Louth)	Sinclair, Sir George	Winstanley, Dr. M. P.
Page, Graham (Crosby)	Smith, Dudley (W'wick & L'mington)	Wolrige-Gordon, Patrick
Page, John (Harrow, W.)	Smith, John (London & W'minster)	Wood, Rt. Hn. Richard
Pardoe, John	Speed, Keith	Worsley, Marcus
Pearson, Sir Frank (Clitheroe)	Stainton, Keith	Wright, Esmond
Peel, John	Steel, David (Roxburgh)	Wylie, N. R.
Percival, Ian	Stodart, Anthony
Peyton, John	Stoddart-Scott, Col. Sir M.	TELLERS FOR THE AYES:
Pike, Miss Mervyn	Summers, Sir Spencer	Mr. R. W. Elliott and
Pink, R. Bonner	Tapsell, Peter	Mr. Jasper More.
NOES
Abse, Leo	Corbet, Mrs. Freda	Galpern, Sir Myer
Allaun, Frank (Salford, E.)	Craddock, George (Bradford, S.)	Gardner, Tony
Alldritt, Walter	Crawshaw, Richard	Garrett, W. E.
Allen, Scholefield	Cronin, John	Ginsburg, David
Anderson, Donald	Crosland, Rt. Hn. Anthony	Gordon Walker, Rt. Hn. P. C.
Archer, Peter	Crossman, Rt. Hn. Richard	Gray, Dr. Hugh (Yarmouth)
Armstrong, Ernest	Cullen, Mrs. Alice	Greenwood, Rt. Hn. Anthony
Ashley, Jack	Dalyell, Tam	Gregory, Arnold
Ashton, J. W.	Davidson, Arthur (Accrington)	Griffiths, David (Rother Valley)
Atkins, Ronald (Preston, N.)	Davies, Ednyfed Hudson (Conway)	Griffiths, Eddie (Brightside)
Atkinson, Norman (Tottenham)	Davies, G. Elfed (Rhondda, E.)	Griffiths, Rt. Hn. James (Llanelly)
Bacon, Rt. Hn. Alice	Davies, Dr. Ernest (Stretford)	Griffiths, Will (Exchange)
Barnes, Michael	Davies, Harold (Leek)	Gunter, Rt. Hn. R. J.
Barnett, Joel	Davies, Ifor (Gower)	Hamilton, James (Bothwell)
Baxter, William	Delargy, Hugh	Hamilton, William (Fife, W.)
Beaney, Alan	Dell, Edmund	Hamling, William
Bence, Cyril	Dempsey, James	Hannan, William
Benn, Rt. Hn. Anthony Wedgwood	Dewar, Donald	Harper, Joseph
Bennett, James (G'gow, Bridgeton)	Diamond, Rt. Hn. John	Harrison, Walter (Wakefield)
Bidwell, Sydney	Dickens, James	Hart, Rt. Hn. Judith
Binns, John	Dobson, Ray	Haseldine, Norman
Bishop, E. S.	Doig, Peter	Hattersley, Roy
Blackburn, F.	Dunn, James A.	Hazell, Bert
Blenkinsop, Arthur	Dunnett, Jack	Healey, Rt. Hn. Denis
Boardman, H. (Leigh)	Dunwoody, Mrs. Gwyneth (Exeter)	Heffer, Eric S.
Booth, Albert	Dunwoody, Dr. John (F'th & C'b'e)	Herbison, Rt. Hn. Margaret
Boston, Terence	Eadie, Alex	Hilton, W. S.
Bottomley, Rt. Hn. Arthur	Edelman, Maurice	Hobden, Dennis
Boyden, James	Edwards, Robert (Bilston)	Hooley, Frank
Braddock, Mrs. E. M.	Edwards, William (Merioneth)	Horner, John
Bradley, Tom	Ellis, John	Houghton Rt Hn. Douglas
Bray, Dr. Jeremy	English, Michael	Howarth, Harry (Wellingborough)
Broughton, Dr. A. D. D.	Ennals, David	Howarth, Robert (Bolton, E.)
Brown, Rt. Hn. George (Belper)	Evans, Albert (Islington, S. W.)	Howell, Denis (Small Heath)
Brown, Hugh D. (G'gow, Provan)	Evans, Fred (Caerphilly)	Howie, W.
Brown, Bob (N'c'tle-upon-Tyne, W.)	Faulds, Andrew	Hoy, James
Brown, R. W. (Shoreditch & F'bury)	Fernyhough, E.	Huckfield, Leslie
Buchan, Norman	Finch, Harold	Hughes, Rt. Hn. Cledwyn (Anglesey)
Buchanan, Richard (G'gow, Sp'burn)	Fitch, Alan (Wigan)	Hughes, Emrys (Ayrshire, S.)
Butler, Herbert (Hackney, C.)	Fletcher, Fit. Hn. SirEric (Islington, E.)	Hughes, Hector (Aberdeen, N.)
Callaghan Rt. Hn. James	Fletcher, Ted (Darlington)	Hughes, Roy (Newport)
Carmichael, Neil	Foot, Rt. Hn. Sir Dingle (Ipswich)	Hunter, Adam
Carter-Jones, Lewis	Foot, Michael (Ebbw Vale)	Hynd, John
Castle, Rt. Hn. Barbara	Forrester, John	Irvine, Sir Arthur (Edge Hill)
Chapman, Donald	Fowler, Gerry	Jackson, Colin (B'h'se & Spenb'gh)
Coe, Denis	Fraser, John (Norwood)	Jackson, Peter M. (High Peak)
Coleman, Donald	Freeson, Reginald	Janner, Sir Barnett
Concannon, J. D.

Jay, Rt. Hn. Douglas	Millan, Bruce	Ryan, John
Jeger, George (Goole)	Miller, Dr. M. S.	Shaw, Arnold (Ilford, S.)
Jeger, Mrs. Lena (H'bn&St. P'cras, S.)	Milne, Edward (Blyth)	Sheldon, Robert
Jenkins, Rt Hn. Roy (Stechford)	Molloy, William	Shinwell, Rt. Hn. E.
Johnson, Carol (Lewisham, S.)	Moonman, Eric	Shore, Rt. Hn. Peter (Stepney)
Johnson, James (K'ston-on-Hull, W.)	Morgan, Elystan (Cardiganshire)	Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Jones, Dan (Burnley)	Morris, Alfred (Wythenshawe)	Short, Mrs. Renée (W'hampton, N. E.)
Jones, Rt. Hn. SirElwyn (W. Ham, S.)	Morris, Charles R. (Openshaw)	Silkin, Rt. Hn. John (Deptford)
Jones, J. Idwal (Wrexham)	Morris, John (Aberavon)	Silkin, Hn. S. C. (Dulwich)
Jones, T. Alec (Rhondda, West)	Mulley, Rt. Hn. Frederick	Silverman, Julius
Judd, Frank	Murray, Albert	Skeffington, Arthur
Kelley, Richard	Neal, Harold	Small, William
Kenyon, Clifford	Newens, Stan	Snow, Julian
Kerr, Mrs. Anne (R'ter & Chatham)	Noel-Baker, Francis (Swindon)	Spriggs, Leslie
Kerr, Dr. David (W'worth, Central)	Norwood, Christopher	Steele, Thomas (Dunbartonshire, W.)
Kerr, Russell (Feltham)	Oakes, Gordon	Stewart, Rt. Hn. Michael
Lawson, George	Ogden, Eric	Stonehouse, Rt. Hn. John
Leadbitter, Ted	O'Malley, Brian	Strauss, Rt. Hn. G. R.
Ledger, Ron	Orbach, Maurice	Summerskill, Hn. Dr. Shirley
Lee, Rt. Hn. Frederick (Newton)	Orme, Stanley	Swain, Thomas
Lee, Rt. Hn. Jennie (Cannock)	Oswald, Thomas	Swingler, Stephen
Lee, John (Reading)	Owen, Dr. David (Plymouth, S'tn)	Taverne, Dick
Lestor, Miss Joan	Owen, Will (Morpeth)	Thomas, Rt. Hn. George
Lever, Harold (Cheetham)	Padley, Walter	Thornton, Ernest
Lever, L. M. (Ardwick)	Paget, R. T.	Tinn, James
Lewis, Arthur (W. Ham, N.)	Palmer, Arthur	Tomney, Frank
Lewis, Ron (Carlisle)	Pannell, Rt. Hn, Charles	Tuck, Raphael
Lomas, Kenneth	Parker, John (Dagenham)	Urwin, T. W
Loughlin, Charles	Parkin, Ben (Paddington, N.)	Varley, Eric G.
Lyon, Alexander W. (York)	Parkyn, Brian (Bedford)	Wainwright, Edwin (Dearne Valley)
Lyons, Edward (Bradford, E.)	Pavitt, Laurence	Walden, Brian (All Saints)
Mabon, Dr. J. Dickson	Pearson, Arthur (Pontypridd)	Walker, Harold (Doncaster)
McBride, Neil	Peart, Rt. Hn. Fred	Wallace, George
MacColl, James	Pentland, Norman	Watkins, David (Consett)
Macdonald, A. H.	Perry, Ernest G. (Battersea, S.	Watkns Tudor (Brecon & Radnor)
McGuire, Michael	Perry, George H. (Nottingham, S.)	Weitzman, David
McKay, Mrs. Margaret	Price, Christopher (Perry Barr)	Wellbeloved, James
Mackenzie, Gregor (Rutherglen)	Price, Thomas (Westhoughton)	Wells, William (Walsall, N.)
Mackie, John	Price, William (Rugby)	Whitaker, Ben
Mackintosh, John P.	Probert, Arthur	Whitlock, William
McMillan, Tom (Glasgow, C.)	Pursey, Cmdr. Harry	Wilkins, W. A.
McNamara, J. Kevin	Randall, Harry	Willey, Rt. Hn. Frederick
Mahon, Peter (Preston, S.)	Rankin, John	Williams, Alan (Swansea, W.)
Mahon, Simon (Bootle)	Rees, Merlyn	Williams, Alan Lee (Hornchurch)
Mallalieu, E. L. (Brigg)	Reynolds, Rt. Hn. G. W.	Williams, Clifford (Abertillery)
Mallalieu, J. P. W. (Huddersfield, E.)	Rhodes, Geoffrey	Williams, Mrs. Shirley (Hitchin)
Manuel, Archie	Richard, Ivor	Williams, W. T. (Warrington)
Mapp, Charles	Roberts, Albert (Normanton)	Wills, Rt. Hn. George
Marks, Kenneth	Roberts, Gwilym (Bedfordshire, S.)	Wilson, Rt. Hn. Harold (Huyton)
Marquand, David	Robertson, John (Paisley)	Wilson, William (Coventry, S.)
Marsh, Rt. Hn. Richard	Robinson, Rt. Hn. Kenneth (St. P'c'as)	Winnick, David
Mason, Rt. Hn. Roy	Rodgers, William (Stockton)	Woodburn, Rt. Hn. A.
Maxwell, Robert	Roebuck, Roy	Woof, Robert
Mayhew, Christopher	Rogers George (Kensington N.)	Wyatt, Woodrow
Mellish, Rt. Hn. Robert	Rose, Paul
Mendelson, John	Ross, Rt. Hn. William	TELLERS FOR THE NOES:
Mikardo, Ian	Rowlands, E.	Mr. Charles Grey and Mr. Ioan L. Evans.

Main Question put and agreed to.

Resolved,

That an humble Address be presented to Her Majesty, as follows: Most Gracious Sovereign, We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

To be presented by Privy Councillors or Members of Her Majesty's Household.