HC Deb 18 March 1971 vol 813 cc1645-6
Q4. Mr. Sheldon

asked the Prime Minister if he is satisfied with the co-ordination between the Department of Trade and Industry and the Department of Employment and other Government Departments in dealing with the relationship between prices, incomes and unemployment.

The Prime Minister

Yes, Sir.

Mr. Sheldon

But referring to today's appalling unemployment figures, is the right hon. Gentleman aware that, whatever he may say, the whole House knows, as he must know, that he has the power to reduce unemployment immediately by reflating the economy? Why does he not do it?

The Prime Minister

The hon. Gentleman also knows clearly what the cause of the present unemployment largely is—[HON. MEMBERS: "You!"] Hon. Members will not avoid the fact by trying to shout me down, because they will not succeed and they will have to face the facts. The facts are these—that, over the last 12-month period for which full information is available, import prices rose by under 4 per cent., company profits fell by 2½ per cent., indirect taxation rates remained the same, but labour costs per unit of output rose by over 12 per cent. And that is the cause of men becoming redundant today.

Sir G. Nabarro

Would not my right hon. Friend agree that this very unfortunate and grievous state of affairs[HoN. MEMBERS: "Hear, hear."]—of falling company profits is responsible for the low level of investment today, which is a fundamental cause of rising unemployment in the industries responsible for manufacturing capital equipment? In the forthcoming Budget, will he do everything possible to encourage an increase in company profits?

The Prime Minister

I cannot anticipate my right hon. Friend's Budget Statement, but my hon. Friend is, of course, quite right: it has been the squeeze on profitability which has prevented so many companies from having the necessary resources for investment. My right hon. Friend the Chancellor took action about this last October, when he reduced corporation tax by 2½ per cent., effective from 1st January last.

Mr. Frederick Lee

For how long, in the right hon. Gentleman's opinion, have increased labour costs had this terrible effect on inflation? Did they, for instance, have this effect during the years when he led his troops into the Lobby in support of every group who tried to break the maximum imposed by the Labour Government's income policy?

The Prime Minister

The attitude of the Opposition at that time was quite clear—that a satutory incomes policy would not work. The fact is that it did not work, and the right hon. Gentleman knows full well that when that statutory policy was removed, the dam was broken and then the large wage demands came forward. But it is very odd, in these circumstances, to hear this remark from the right hon. Gentleman, whose Government said that wage increases should not exceed between 2½ per cent. and 4½ per cent.