HC Deb 25 July 1974 vol 877 cc1807-10
Q2. Mr. Tim Renton

asked the Prime Minister whether the speech made by the Chancellor of the Exchequer, calling for reflationary policies to overcome oil deficits, on 10th July, to the American Chamber of Commerce, represents Government policy.

Q4. Mr. Nigel Lawson

asked the Prime Minister if the public speech by the Chancellor of the Exchequer on economic policy to the American Chamber of Commerce on 10th July represents Government policy.

Q8. Mr. Norman Lamont

asked the Prime Minister whether the speech by the Chancellor of the Exchequer to the American Chamber of Commerce on 10th July on economic matters represents Government policy.

The Prime Minister

Yes, Sir.

Mr. Renton

Will the Prime Minister tell the House whether he would prefer to enter the very difficult year that lies ahead of us enjoying the approximately £3,000 million balance of payments surplus that Germany currently has, or with Britain's £4,000 million deficit? Will he then pause and reflect for a moment, after his electioneering speech last night, on the fact that Germany is achieving that balance of payments surplus by deflation and by encouraging private enterprise at every turn, and how that contrasts with his Chancellor's policies?

The Prime Minister

Yes, Sir. If the hon. Member was listening to my very objective speech yesterday he would know that there was a very severe balance of payments deficit in this country under the previous Government, before the advent of the oil problem, and that in the last few months this has fallen very substantially. But the points he has raised were covered at great length in the last two days in the debate on the economic situation, and the views of my right hon. Friend the Chancellor were obviously so persuasive that the Conservative Opposition decided to support the Government last night.

Mr. Lawson

If the Prime Minister really is concerned to procure a harmony of economic and industrial policies within the Western world, might it not be the most sensible first step for the Government to drop their doctrinaire proposals for nationalisation and State control?

The Prime Minister

Harmony is concerned within the Western world. I have had discussions on this with the Federal German Chancellor, and my right hon. Friend the Chancellor has also been discussing these matters within the last week. I think that the first need for harmony is not only in relation to petro-dollars but in order to persuade Germany and certain other countries to follow the same policies that we are following, and to avoid any approach to deflation.

Mr. Edwin Wainwright

Will my right hon. Friend take into account that the Chancellor has said that any attempt by the Western countries rapidly to eliminate the balance of payments deficit caused by the oil situation would be a recipe for disaster? Will he comment on the "mournful minnies" opposite, with their carping criticisms of the Chancellor's mini-Budget, which was intended to increase employment and help the balance of payments?

The Prime Minister

I hope that my hon. Friend will not be unfair to right hon. and hon. Members of the Opposition. Whatever they may have said they did not mean, otherwise they would not have supported the Government in the Division Lobby.

Mr. Lamont

Did the right hon. Gentleman notice the important remarks of the Chancellor in that speech about the strain on the capacity of the banking system? Is he aware that there is some concern about the reserve ratios of the clearing banks? Would it not be a good idea for the Prime Minister to emphasise that in order to maintain advances to industry it is in the interests of everyone in this country that the clearing banks should continue to earn high profits?

The Prime Minister

I do not go along with the hon. Gentleman about high profits. The banks got vast uncovenanted profits earlier this year. That is the main reason for the wage settlement between the banks and their employees, who have naturally seen the height of those profits. On the serious point raised by the hon. Gentleman at the beginning of his question, in relation to the strain on the banks, the Chancellor and I referred to this same problem yesterday. The hon. Gentleman will know—I think that he is something of a monetarist, although I may be wrong, as I am not sure how he voted last night—that under the present Government there has been a much sharper fall in the inflationary situation caused by the printing of money, which was one of the main characteristics of the Government who preceded us.

Mr. Skinner

Referring back to the question of how the hon. Member for Blaby (Mr. Lawson) voted last night, is my right hon. Friend aware that some of us will need a little advice—although not a great deal—during the course of the forthcoming campaign as to which of the Opposition coalitions we fight on successive days? For instance, 14 per cent. of the Liberals joined 9 per cent. of the Tories and decided to fight us or the ratepayers, or both, in the Division Lobby last night. Will my right hon. Friend help us by telling us which battle we shall be fighting against which coalition on the days in question during the election campaign that is coming shortly?

The Prime Minister

That is a very serious question. I agree, as I forecast last night, that even the Petty Coalition disappeared last night. But I had not allowed for the confusion on the Conservative and Liberal benches. However, the advice that my hon. Friend seeks is that he will be fighting the next General Election on the record of the present Government and their policies, and the total absence of policy of the Conservative Party.

Mr. Tapsell

Is it not clear, whatever the Chancellor may say, that if Britain reflates at a time when most of our industrial competitors are deflating it will inevitably produce, in the course of time, an increase in the already vast balance of payments deficit, a run on sterling, the final collapse of the market in British Government securities, and a rate of inflation at home which will threaten the continuance of our democratic institutions?

The Prime Minister

My right hon. Friend and I both warned very seriously of the problems that we were facing. We did not accept some of the arguments put forward by the minority who voted last night as the right way of dealing with these problems.

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