HC Deb 02 December 1971 vol 827 cc668-76
The Chancellor of the Exchequer (Mr. Anthony Barber)

The meeting of the Group of Ten which has just concluded in Rome was in two important respects different in character from the recent meetings of the same group in London and Washington.

In the first place, the United Kingdom for the first time was able fully to participate in the discussions of the finance ministers of the E.E.C., so as to ensure the fullest co-operation and to facilitate a common approach in the interests of Europe as a whole.

In the second place, the greater part of the Group of Ten discussion was in closed session confined to finance ministers and governors only. This made possible a much fuller and franker discussion of the conditions necessary for the realignment of currencies, the return to fixed parities, and the removal of the U.S. import surcharge and the discriminatory job-development tax credit.

As a result of this discussion lasting over several hours on Tuesday and yesterday, it was agreed that sufficient progress had been made to justify a resumption of the talks at an early date.

As the House will be aware, we have agreed to meet again in Washington on 17th and 18th December.

Mr. Roy Jenkins

I welcome the fact that some progress appears to have been made on a matter of the highest importance for the state of world trade, and also the fact that the next talks will not be long delayed.

Could the right hon. Gentleman tell us what is the main point outstanding for decision? As I understand it, both a change in the dollar-gold price and the matter of the United States surcharge are no longer insurmountable difficulties.

The basic question here is the health of the economies of the world. Could the right hon. Gentleman now, therefore, tell us whether, in view of the appalling and worsening unemployment here, we are to have further measures before Christmas, or whether the matter is to be left to deteriorate still further?

Mr. Barber

I am grateful to the right hon. Gentleman for his remarks about the progress achieved at this meeting. As for outstanding points, I think the right hon. Gentleman will understand when I say that it would be unwise for me to say anything about the details or even the principles which were discussed at the meeting—[Interruption.]—and I do not want to say anything which might prejudice a solution. Having said that, I hope the right hon. Gentleman will not press me further.

My answer to the other points which the right hon. Gentleman raised is that, as he knows, successive Chancellors of the Exchequer have always taken the view that speculative stories, however absurd, should be neither affirmed nor denied because to do so inevitably provokes further kite-flying and speculation. I am sure that this attitude is, in general, the right one.

The House will therefore understand why I took no notice of the speculative story which appeared in Monday's Daily Mail, but as the inference drawn from later stories in The Times and the Financial Times was that there was some disclosure of intentions in connection with, or in the course of, international meetings, the circumstances are different, and I therefore thought it right, at the first opportunity after my return this morning, that I should tell the House that such stories were wholly without foundation.

In particular, as the stories which were datelined "Rome" referred to cuts in purchase tax and the use of the regulator, I would only add that there was no discussion or, indeed, mention of these matters, either formally or informally, and, what is more, they are not being considered.

Mr. Roy Jenkins

I accept what the right hon. Gentleman says on this matter, and I am glad that he has cleared it up, though in a way which I believe the Prime Minister might have done a little earlier.

I am concerned not to pursue this point but about the substance of the matter. Is the right hon. Gentleman now telling us that, despite the deteriorating unemployment situation, the rumours are absurd and that he has no intention of putting any further measures before the House in the immediate future?

Mr. Barber

I thought I had made the position clear—[HON. MEMBERS: "No."]—Yes, I have—first in the debate on the Address and next only last week when we debated unemployment. I clearly said that whenever the changing circumstances and the forecasts warranted it, I would not hesitate to take appropriate action, and take it at any time during the financial year.

Mr. Hordern

Is my right hon. Friend aware that the firmness and clarity of his statement will be widely welcomed? [HON. MEMBER: "Oh."] Coming to the Rome discussions, does he agree that they were rather more successful than had been generally anticipated? Will he do his best to ensure that if at the forthcoming talks in Washington there is any question of fixing international exchange rates, they will be fixed with the widest possible margins?

Mr. Barber

One matter for consideration in the Group of Ten is the question of wider margins, and if there are to be wider margins, which, as I have said publicly in the past, I think there should be, then the extent of the widening of those margins.

I have just received authority to inform the House—and hon. Members will realise that I returned from Rome only at lunchtime today—that Mr. Sam Brittan has this morning sent a message to the Treasury saying that, in view of the suggestions that are being made, he wishes to make it clear that the stories that Mr. Peter Jay and he wrote about reflation were not based in any way on anything that had been said by any member of the United Kingdom delegation to the Group of Ten.

Mr. Grimond

Is not this almost unprecedented [HON. MEMBERS: "Hear, hear."] Who is running the Exchequer when the Chancellor is away? I have no doubt that Mr. Brittan and Mr. Jay are important people, and I am glad that they have cleared up this matter.

May I ask the right hon. Gentleman a little more about what he said about not taking further measures to deal with the unemployment situation? There is some real confusion about the Government's intentions in this matter. The Chancellor of the Exchequer has constantly reiterated the view that unemployment was due to inflation created by the Labour Government. Incidentally, a junior Minister said not long ago that it was due to the unprecedented squeeze imposed by the Labour Government. It seems that one can read it either way. The remedy suggested by the right hon. Gentleman so far is further reflation, but this is, clearly, not working—

Mr. Speaker

Order. Is the right hon. Gentleman making a speech or leading up to asking a question?

Mr. Grimond

I have finished my speech. I am now about to ask a question, Mr. Speaker.

Does the right hon. Gentleman intend to take no further measures to increase spending power in the economy? If not, what measures does he now propose to take to cure unemployment?

Mr. Barber

The right hon. Gentleman raises two points. First, he seems to be under a misunderstanding about the reason why I referred to The Times and the Financial Times. I did so simply because the matter was raised by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) on the information which he then had before him and which other hon. Members had before them. I had just returned: I was told that it was a matter of public interest, and I therefore wanted to clear it up.

On the second matter raised by the right hon. Gentleman, I have nothing further to add.

Mr. du Cann

While congratulating my right hon. Friend and his colleagues on the fact that progress is undoubtedly being made in these Group of Ten discussions, and while acknowledging that the unprecedented prosperity of the world since the war was due in large measure to the Bretton Woods Agreement on fixed parities, may I ask him to bear in mind that there is a large and growing volume of opinion which, after deep thought, is clearly of the view that, in general, flexible rates of exchange are better than fixed rates?

Mr. Barber

I said in my statement that the discussion which we had was concerned with the conditions necessary for a return to fixed parities. It is the view of all the members of the Group of Ten that this should be the ultimate aim. I will of course bear in mind what my right hon. Friend said about flexibility. If he is considering matters such as wider margins and so on, then that is another matter.

Mr. Sheldon

Is the Chancellor aware that the most charitable view that can be taken of what he has said is that he is failing to do anything about unemployment because of his desire to achieve some sort of international co-operation and not to vary the United Kingdom exchange rate unnecessarily without the co-operation of, in particular, the Italians and the French?

Is the right hon. Gentleman aware that it would be the greatest disaster if we were, in an attempt to show ourselves as good Europeans, to enter the Common Market with far too high an exchange rate, which would limit us severely in the chances we may have?

Mr. Barber

I have said in the past that our first priority in this country must be to ensure that the United Kingdom remains competitive, and that is our view.

Mr. Tugendhat

Does my right hon. Friend agree that one of the principal causes of the lack of sufficient industrial investment in this country and of unemployment is the continuing international crisis and that it is, therefore, the major priority of the Government to ensure that the surcharge and other American measures are lifted? Does he also agree that it is putting the cart before the horse to suggest new measures while the uncertainty persists, when the uncertainty is likely to be brought to an end within such a very short time?

Mr. Barber

I think that all the members of the Group of Ten would agree that the uncertainty which now prevails is an important factor in the deferment of decisions by businessmen.

Mr. Shore

Is the right hon. Gentleman aware that he made an almost complete non-statement, except in relation to what we were privileged to hear from Mr. Sam Brittan. Turning to the substance of the matter, which is the important question of international trade and currency relationships, has he taken the opportunity to urge on the Six that the common agricultural policy and this rather absurd proposal for an economic and monetary union should be among the matters to be discussed and negotiated with the United States in broader and longer-term efforts to establish a more sensible world trade and payments system, which I hope will arise out of the Washington conference?

Mr. Barber

I do not agree with the points which the right hon. Gentleman has made. We discussed a variety of matters, and I do not propose to go into details.

Mr. Kenneth Baker

Does my right hon. Friend appreciate that there will be a warm welcome in all parts of the House for the fact that the countries of Western Europe seem to be resolving their differences of opinion on monetary matters? Would he bear in mind at the meeting in Washington that the uncertainty in international trade is now a major factor in inhibiting the upturn in world business, particularly in the commodity markets and shipping? Since time is not on our side, may I express the hope that some real and effective progress will be made in a fortnight?

Mr. Barber

I agree with the latter part of that question. As for the first part, concerning my discussions with the Finance Ministers of the E.E.C., the position is that it is very important to do everything possible to reach an overall world settlement. As a result of a number of meetings which I had with the Finance Ministers, which, incidentally, for the most part were wholly limited to Ministers of Finance and governors without officials being present, there is no doubt that those discussions were extremely successful and made a real contribution to the progress which we made in the Group of Ten.

Mr. Leadbitter

The right hon. Gentleman has been quite precise on what he is not considering in regard to the deteriorating unemployment situation. He has been less than precise about what he is considering. May I ask him one question about a firm statement that he made? He said that he had nothing further to add. Is it his opinion that the deteriorating state of unemployment is such that he has decided that no new measures are required at all?

Mr. Barber

I said that I had nothing further to add to what I said in our whole day's debate on unemployment last week.

Mr. Bruce-Gardyne

Would my right hon. Friend not agree that there is another aspect to the question of the return to fixed parities, even with wider margins? Is it not a fact that one of the major terms of the Bretton Woods Agreement up to 15th August was that international traders would be prepared to accept the polite fiction that exchange rates were immutable? Surely it will be very difficult, whatever agreements are made, to re-establish that polite fiction now?

Mr. Barber

There is no doubt—my hon. Friend's views are well known—that if we can reach agreement in the Group of Ten on a return to fixed parities on a new pattern of parities, with the removal of the United States surcharge and the discriminatory job-development tax credit, this will make a significant difference to business prospects throughout the world.

Mr. Albu

In the Chancellor's reference to reports in the Press about Treasury matters, he laid most emphasis on the fact that these were not discussed in the meeting which he had with other Finance Ministers—which was never suggested in the Press. Do I understand him to confirm that he has no proposals under consideration for other immediately reflationary measures? I am referring to them having been discussed not with the other Finance Ministers but in the Cabinet here at home.

Mr. Barber

On the specific matters to which I referred, and also with regard to the more general matters which we discussed on Tuesday of last week in the unemployment debate, I have nothing further to add to either.

Mr. Roy Jenkins

As the Chancellor has nothing immediate to put forward at home, does this mean that he has returned to his July view—however mistaken that then proved to be—that unemployment would level out over the next two months and then begin to come down?

Mr. Barber

No. Sir. The fact is that, as the right hon. Gentleman knows only too well, I did, both a month or so ago in the debate on the Address and again only last week, set out the Government's position at considerable length. What I have said is that I have nothing to add to the explanation which I gave at that time.

Dame Irene Ward

While my right hon. Friend and the House are waiting for the next stage of the Group of Ten meetings, would it not perhaps be helpful if my right hon. Friend, when referring to what he said in the debate on unemployment, just set out the figures of money which has been made available through various Ministers into the economy to bring forward all sorts of good schemes which are needed in the constituencies? This would be helpful. Would he bear in mind that it is very difficult for the country to remember all that is said when they are worried about unemployment? It is helpful to know what is done. We should like him to let us know the amount of money. We hope that the local authorities are taking advantage of the opportunities which have been offered to them. We would be grateful if he would just repeat this.

Mr. Barber

I think that this is a very good idea. If my hon. Friend will put down a Question, I will answer it. If she wishes to have any assistance with the drafting of the Question, I am at her disposal.

Mr. Joel Barnett

Although the House will be glad if the right hon. Gentleman can achieve success at his next meeting, is he aware that he, as Chancellor, has created a unique situation? Instead of taking advantage of a unique opportunity for economic growth, he has created an economic shambles. The only effect of his statement can be to delay increasing consumption and increasing investment. His statement is disastrous. To tell us now that Samuel Brittan and Peter Jay say something or other instead of giving his own statement of new measures can only add to the worsening unemployment situation, and will do actual harm to investment and growth.

Mr. Barber

The view that I should not have cleared up what was written in the Press while I was away will not be shared by many other people.

Several Hon. Members


Mr. Speaker

I am afraid that there must be a limit. Mr. Peter Walker.