HC Deb 11 November 1976 vol 919 cc637-45
4. Mr. Wyn Roberts

asked the Chancellor of the Exchequer what will be the amount of sterling borrowed per household in the United Kingdom if the 3.9 billion dollar loan requested from the IMF is granted.

7. Mr. MacGregor

asked the Chancellor of the Exchequer when he expects to complete his discussions with the International Monetary Fund about the application for the further IMF loan.

8. Mr. Ridley

asked the Chancellor of the Exchequer if he will make a statement about the visit of the team from the IMF.

9. Mr. Jessel

asked the Chancellor of the Exchequer on what date he next expects to meet representatives of the International Monetary Fund.

11. Mr. Aitken

asked the Chancellor of the Exchequer if he will make a statement on the progress of his talks with officials of the International Monetary Fund.

13. Mr. Adley

asked the Chancellor of the Exchequer when he next intends w meet the IMF.

Mr. Healey

On 29th September I announced my intention to apply to the International Monetary Fund for a standby which would make available our remaining credit tranches in the fund. As hon. Members will be aware, a team from the fund is now in London to discuss the application. I have met the senior members. Discussions with officials began this week and I expect that they will take a fortnight or so. In order to finance the United Kingdom drawings, the International Monetary Fund will need to call upon the Group of Ten countries to activate the general arrangements to borrow. When arrangements with the Group of Ten have been completed, the United Kingdom application will go forward for discussion and approval by the Executive Board of the IMF. At current exchange rates the borrowing will represent some £125 per household.

I believe that this application to the IMF is a prudent and necessary reinforcement for our economic strategy. Representatives of the European Community have expressed their wish and ability to help at the right time, but there has been no formal consultations with them.

Mr. Roberts

I am grateful to the Chancellor for that reply, but is he not aware that this addition of £125 per household to the already heavy debt incurred by this Government will appal the people of this country, on whom borrowing of £461 per household has already been incurred by this Government?

Mr. Healey

My impression—I suppose we all derive our own views from contacts with our constituents—is that the British people would prefer to maintain the highest possible standard of living at the expense of borrowing at very low rates over a reasonable period rather than to incur the sudden and dramatic fall in living standards which would be involved if we did not succeed in arranging this loan.

Mr. Alexander W. Lyon

Why should a borrowing requirement of £600 per household be such an enormous deterrent to the average family, which borrows about £8,000 for its mortgage?

Mr. Healey

My hon. Friend has made a point that has often struck me, that the Conservative Party believes in home ownership by borrowing through building societies for the most important and largest single item of expenditure in personal spending, and that its enthusiasm to cease borrowing has never extended to abolition of the building societies.

Mr. McGregor

Bearing in mind that the Chancellor's last package to reduce Government borrowing included misguided and ill-timed extra burdens on industry, will be now agree with the Director-General of NEDO that the next set of measures should be concentrated on non-productive public expenditure—in other words, not capital expenditure and not indirect increases in taxation—and has he expressed this view to the IMF?

Mr. Healey

I think that the hon. Gentleman is referring to the remarks made by the current Director-General of NEDO the other day. He is, of course, free, like all his predecessors, to express his personal views, at the risk of being told by members of the National Economic Development Council that they do not agree with him. Some members of the Council have already expressed that view.

Mr. Molloy

Will my right hon. Friend explain how he can reconcile what he has just said about maintaining the high standards of life of the British people with the fact that a Treasury adviser has recommended, according to a report in The Times this morning, a high rate of unemployment? The statement of my right hon. Friend and the statement of the Treasury official are irreconcilable. Will my right hon. Friend state quite clearly that it is not his policy to create a high rate of unemployment?

Mr. Healey

I suspect that my lion. Friend entered the Chamber after I answered an earlier question on this specific point. Mr. Alan Lord, in giving a lecture the other day, did not make the remarks which were attributed to him by the sub-editor of the report in The Times. What he said was—I apologise to the House for repeating it—that. if we are to get the increase in productivity which is our common objective, steps must be taken to replace the jobs which will be lost through new investment and lower manning levels with new jobs in productive industry. I am sure that my hon. Friend shares this objective.

Sir G. Howe

The Chancellor made a very important statement when he asserted that the British people would prefer to go on borrowing—at whatever interest rate—and maintaining their standards of living in that way rather than face the realities of economic life. Does the Chancellor realise that so long as he continues to misjudge the mood of the British people in that way his economic strategy is doomed to failure?

Mr. Healey

The right hon. and learned Gentleman, as so often, completely misrepresents what I said. I referred to borrowing at an exceptionally low rate of interest from the IMF. I remind him that the Government of which he was a member started the programme of public authority borrowing in order to maintain living standards in 1973, at interest rates which were very much higher than those charged by the IMF. I think that the right hon. and learned Gentleman should sometimes show some recall of the activities in which he and his right hon. Friends indulged when they carried the responsibilities that I carry now.

Mr. Watkinson

When my right hon. Friend has further discussions with the IMF will he bear in mind that the world boom seems to be bottoming out much faster than we expected, and will he draw to the attention of the IMF that it cannot be helpful either to the world or to this country to have further massive deflationary measures imposed upon us?

Mr. Healey

I shall certainly take my hon. Friend's advice. But the responsibility of the countries with substantial reserves and surpluses on their balance of payments to take action which will allow world recovery to proceed somewhat faster is a responsibility which is now acknowledged by authorities as various as the Director-General of the International Monetary Fund, Dr. Witteveen in his speech in Manila the other day, and the leader writer of the Financial Times.

Mr. Ridley

Does the Chancellor remember writing to the IMF just under a year ago to the effect that an essential element in Government strategy was the continuing and substantial reduction in the public sector borrowing requirement? Since he has now told us that it is up £2 billion on the estimates for next year, what will he do about it?

Mr. Healey

Melodramatic shrieks add to the liveliness of our discussions but not very much to our information. The hon. Gentleman made three misstatements in his short intervention. The likely level of the borrowing requirement this year, which was the subject of my undertaking to the IMF last year, is certainly likely to be met. Hon. Members will have seen the latest published figures of the central Government borrowing requirement, which is an important component in that. As for the likely size of the borrowing requirement next year, the next financial year does not begin for another five months, and the reports to which the hon. Gentleman is referring have not been confirmed by me. The hon. Gentleman must await events to see what forecasts can realistically be made for that year.

Mr. Wrigglesworth

Is my right hon. Friend aware that many of us on the Government side of the House think that in addition to negotiating the $3.9 billion loan with the IMF, the Government should also be negotiating the phasing out of the sterling balances? Has my right hon. Friend been able to make any progress with that?

Mr. Healey

The Prime Minister has already expressed in public the Govern- ment's desire to phase out the reserve role of sterling, and this has implications in the handling of the sterling balances. I have already made clear that we have had a number of discussions with the relevant authorities on this matter.

Mr. Jessel

Will the right hon. Gentleman see that the negotiators from the IMF are aware that they are dealing with a Government who had lost the confidence of the country, as shown by the by-elections last week, and who are gradually losing the confidence of Parliament, as shown by the Divisions last night?

Mr. Healey

I am glad to say from my contacts with members of the IMF staff that they have a good deal more understanding of political realities in various countries than the hon. Gentleman assumes. They may have noted that the last Labour Administration had similar temporary and local political difficulties at the same time in its period of office and that, before the next election took place, the Government had achieved a surplus both on the balance of payments and on the public sector borrowing requirement, which was disgracefully squandered by right hon. and hon. Gentlemen on the Opposition Benches when they took office.

Mr. Ioan Evans

Since the United States of America has a great effect on IMF decisions, will my right hon. Friend have early discussions with President-elect Carter's financial advisers, as, in his election, President-elect Carter fought on a programme to increase public expenditure and to bring down the unemployment rate, which is the very opposite of what the Opposition stand for?

Mr. Healey

It is a relevant consideration that President-elect Carter said during his campaign—and this would be the view of the British Government—that in his country it was impossible to bring down the rate of inflation so long as there were 8 million or 9 million unemployed, and that to solve this problem by increasing unemployment, which is the policy of the Conservative Party, flies right in the face of all experience and logic.

Mr. Aitken

Is the Chancellor aware that if the recent by-election results are anything to go by, most households in this country will be extremely dismayed at the prospect of having to pay another £125 a year in financing the Government's spendthrift borrowing? Is it not about time that he started to listen to the voice of the people rather than to the voices of some of his hon. Friends and put the nation's house in order by starting to introduce some serious public expenditure cuts?

Mr. Healey

I listen to the voice of the people, I suppose, as regularly as anyone else in the House, both when I visit my own constituency and when I visit the constituencies of other hon. Members on both sides, and I do not get the message which the hon. Gentleman purports to receive. But I dare say that I visit constituencies that are more representative of the broad mass of the working population of this country.

Mr. MaeFarquhar

I heard my right hon. Friend's earlier remarks about the misrepresentation of Mr. Alan Lord in The Times today, but will he say nevertheless whether he thinks that it is a good idea for a senior civil servant to make speeches of that kind, which can be misinterpreted? Secondly, did my right hon. Friend see the speech and approve it before it was delivered?

Mr. Healey

First, I think that it is a very good thing for senior civil servants to be able to talk in public. I believe that one disadvantage of the British system in the past has been the inability of very able men who are responsible for carrying out Government policy to explain what they are about. I did see and approve the lecture. I shall arrange for a copy of it to be put in the House of Commons Library so that all hon. Members, including my hon. Friend, can see that the headline in The Times completely misrepresented its message, as indeed, was clear from the quotation in the report that followed.

Mr. Adley

Although the Chancellor's record post-war devaluation of over 30 per cent., exceeding that of his Socialist predecessors Cripps and the present Prime Minister, is humiliating enough, can the right hon. Gentleman not understand that IMF visitors having to come here and be forced to live under assumed names is an appalling comment on the level to which his Government have brought visitors to this country?

Mr. Healey

I think that the House on the whole—even if it were slightly contrary to the rules of the House—would prefer the hon. Member to read his supplementaries rather than try to recite them in that incoherent way, from memory.

Mrs. Millie Miller

Will my right hon. Friend bear in mind that even if the reports that he has given us about Mr. Lord's actual speech are correct, the problem which arises, if his aim to get greater productivity succeeds completely, is that fewer and fewer people will be required in productive industry? If that is the case, will my right hon. Friend take it that we hope that he will produce a strategy for other types of employment as well as productive?

Mr. Healey

May I remind my hon. Friend that the countries which have succeeded in having a growing manufacturing sector in which employment has increased, not fallen, in recent years—such as France and Japan—have done so by increasing productivity and output? It is no good anybody in this country imagining that we can sustain a higher number of people in unproductive employment unless we have more people in productive employment making better use of existing capital and using more capital than they now have. This was the message that Mr. Lord sought to put over in his lecture, and I strongly advise my hon. Friend to read it, because I think that it is the view of the great majority of people on both sides of the House and on both sides of industry who believe that industrial regeneration is the key to an improvement in Britain's economic performance.

Mr. Nott

Following that answer, will the Chancellor say how industry will go for more productive investment at a time when interest rates are at their present record level and when profitability, as he well knows, has fallen to an all-time low? How can the resources required by British industry be found unless the Chancellor is prepared now to have a dramatic cut in public spending? It cannot make sense unless he does.

Mr. Healey

As the hon. Gentleman knows, the views of the CBI, which can be regarded as representative of British industry, are completely different from his. The last survey published by the CBI, which was taken after the recent increase in interest rates, forecast a very large increase in manufacturing investment over the coming year. The profitability of British industry has at least doubled in the past two years, and exporting, which must be the key component of demand for economic growth in this country—as the hon. Gentleman, I know, would agree—is more profitable than it has ever been in our history.