THE ECONOMIC SITUATION

HL Deb 18 March 1964 vol 256 cc850-60

3.2 p.m.

EARL ALEXANDER OF HILLSBOROUGH rose to draw attention to the economic situation of this country; and to move for Papers. The noble Earl said: My Lords, I beg to move the Motion standing in my name on the Order Paper. The economic position of this country has been fairly widely discussed lately. It has been discussed in another place; it has been the subject of many speeches of propagandists, and notably of the speeches of the Prime Minister. On February 17 the Prime Minister expressed his great confidence in the state of the economy which, he said, had seldom been so good. But the next day the published trade figures showed a gap, unprecedented for a period of one month, of £120 million. Three days later, however, he expressed his strong and continued view that he was justified still in what he had said. Then, a fortnight after he had made the first declaration of confidence the bank rate was raised by 1 per cent.

In my view, the economy of this country has been steadily improving for the last two or three months, especially in regard to industry. We are all glad to see that. We are all delighted to see, too, the drop in unemployment that has come, slowly, but more rapidly in the last few weeks, except that there remain pockets of unemployment in certain regions which continue to be most disturbing and which bring great anxiety and suffering to the families of the unemployed in those places. I noticed this week, with regard to the general import and export imbalance, that the Prime Minister made another forecast, and I wondered why he had not on the previous occasion done the same homework as he did this week, because he must have had the same opportunity on February 17 of knowing what the announcement was going to be the following day. He gave a most confident forecast of the position of the country again this week-end.

However, in a 29-day month the adverse balance was yesterday said to be £68 million, and we may take it as being a fairly confident estimate that in a full month the adverse balance would have been over £70 million. That is a great improvement on the unprecedented adverse balance in January, but it is still much above the average of the monthly gaps that have occurred. I looked back this morning through the various statements of the balance of trade over a long time, and I must say that it would be difficult to find an average which worked out at much more than £48 million to £49 million a month. So the likely £70 million in a full month at the present time is not satisfactory.

Nevertheless, in some regards there are special signs of progress. The output which has been coming more recently from steel and the manufacture of cars and in engineering in general has been a slight relief from some of the experiences of the past twelve months, and I hope it may go forward. But, looking at the matter all the way round, and judging by the general expressions of opinion that one reads in financial and trade papers and journals, there is no real room for constantly spoken confidence of the kind that we have had recently.

It may well be that in the course of the next few weeks things could be held reasonably steady, but from reading all these forecasts I should say that it would not justify the Government holding on until October without having in mind the possibility of some sort of balance-of-payments crisis. I think they might well take note of my opinion. For the sake of my country I should prefer that we should have no such balance-of-payments crisis at all. But in the absence of any policy of control of imports and other matters of that kind, and the absence of a really effective incomes policy—and when I say "incomes" I say it advisedly, not confining it to increases in wages, but including a proper policy with regard to all incomes—then, I think there may well be a danger of another crisis in trade.

There does not seem to be an improvement such as we should desire to see, or at such a pace, in export trade. The export trade becomes much more important than perhaps most of the general public realise, because of its effect upon the balance of payments. We in Parliament, with experience of Parliamentary reading, are accustomed to examine our returns from month to month, to see how things are going, and we get our regular figures as to what goes to make up the final statement of a monthly, a quarterly or an annual balance of payments. I am quite certain that one of the great difficulties of the Government—they must have had great difficulty in contending with it—in the last ten to twelve years has been the steady decline in the value to be taken into account in the balance of payments of invisible exports. I looked today at the figures, as I usually do if I am thinking about trade and finance. I see from those figures that in 1950, for example, the net valuation of invisible exports was £415 million. In 1951, towards the end of which year the Conservative Government came into office, it had fallen to something under £400 million. By the period 1962–63 (I think I am quoting the right date), it had fallen to £170 million. When one has to rely on one's actual physical export trade in a particular year to make up a difference in balance of a long way over £200 million, it must create difficulties for any Government which is in office to meet such a situation.

That situation has been largely due to the decline in the advance we made in the first few years after the war, when other countries were in the course of reconstruction as to their general equities, trade and output. During that period our exports had gone up and we were very nearly the top nation in the world in percentage of exports. Now we have fallen very nearly down to the bottom of the international ladder. Thereby we lose the receipts from shipping; we lose a large part of the insurance business connected with it, and we lose considerable profits in relation to credits connected with the trade. This provides a very difficult situation for any Government to face. Therefore we surely ought to give our minds to how we can rearrange our controls of the economy of the country so as to avoid a situation in which this kind of problem is constantly before us. I believe that this can be done.

It is interesting to me to see that, whereas we were thrown out of office mainly on the basis of what was called "Setting the people free" or getting away from the wicked Socialist controls, by 1961 our economic position had so altered that the Government had at last decided to try to exercise something like physical control. It began, perhaps, with the Selwyn Lloyd proposals. We had the "Neddy" and "Nicky" institutions. But so far we have not had a great deal in the way of results. One of the reasons is that there seems to be nothing like the same time and study given to the control of profits as is now being strongly urged in the case of wages.

Industry was accused the other day in another place—and I do not think the accusation is unsound—in connection with other difficulties of our internal economy, such as the cost of living and the way in which it affects our other organisations, of not helping matters, certainly as to a great section of the productive industry, by the way in which they deal with their costs. For example, the head of the Coal Board (who was recently widely praised in this House for the way in which since his appointment to office he has controlled the Coal Board operations, which have become so much more successful than they were previously) said that, within 24 hours or so of the 5 per cent. wage award to men in the Amalgamated Engineering Union, the Coal Board received circulars, hurriedly put out on cyclostyle machines, putting up all the prices of machinery which the Coal Board had ordered or wanted to buy by anything from 4½ to 8 per cent.

It is quite wrong to assume—and I speak from experience of both productive and distributive industry in a very large movement—that any manufacturer or distributor is entitled to raise his prices by whatever rate of increase has been given to the wage earner. If one works out the costs of industry and of distribution, it is certainly true to say that the people who are running the business have nothing like 100 per cent. of the costs to bear. In fact, they have in many cases been proved to be as low as 7, or 10, or 11 or 15 per cent. as to a great part of the distributive industry, certainly not more than 16 per cent. of the actual costs of production. Yet the 5 per cent. is put straight on, and this provides a tremendous handicap to all the other businesses concerned. In fact it will make a difference of 4½ to 8 per cent. on the prices to be paid by the Coal Board for essential machinery.

If one carries this argument into other spheres, one can clearly see how tremendous would be the impact on industry all the way round. I dare say that the attitude of many of the bigger industrialists and manufacturers would still be: "You scratch my back and I'll scratch yours", and that if prices go up in one place they might as well go up in others. It is taking a rather different line from that which is now being pursued as to some distributive prices. It is extraordinary that these things should be allowed to go on without any control when one wants to make use of "Neddy" and "Nicky" and, having regard to all the pressures being applied, to secure a reduced rate of wage and salary increases in the country.

Of course, the costs of industry are also affected by other things as well. As to the possibility of industry in general, and its power to contribute to general finances and the finances of the nation to run not only its essential business but to cover its social costs, it is essential that these things should be looked into from that point of view. To take, for example, the cost of land to-day, what an extraordinary situa- tion this shows! You Lordships recently heard my noble friend Lord Lindgren sneak on this matter in this House; it has also been mentioned in the other place. There are many outstanding instances to-day in which the Government have made it clear, whether by decision of the Housing Minister or by other Ministers—and this was finally confirmed in a recent speech by the Prime Minister—that the Conservative Party consider it essential that the market in land should be kept completely free. Indeed, the Prime Minister, in what he said, made it clear that the only alternative is to nationalise the land, which is to take the land from the owner and I do not suppose anybody would want to take it without some reasonable compensation. But there are other methods of dealing with undue prices for land—and, as I have indicated, prices for land are phenomenal to-day.

First of all, there has been a complete absence of any control at all in the London area with regard to the cost of land for the building of great suites of offices, when we ought to be providing extra housing accommodation for the people. Enormous prices have been paid for these sites. To take the question of housing itself, in the last few years in the areas outside the Metropolitan and South-East areas there has been an increase of more than 25 per cent. in the cost to those who want to buy their own house. All over the country the rents on State-provided housing estates have gone up phenomenally—and all that has been caused, first, by the cost of land.

Take the extent to which farming land has been brought into this question. I remember by noble friend Lord Lindgren giving an example at (I think it was) Bishop's Stortford. That was an extraordinary case where a release had to be given by the authorities. I do not know whether it was the local authority or whether the matter had first to go to a Ministry of the Government, but a release had to be made of an existing reservation of 170 acres of agricultural land. What was the result? What would have been the normal price for agricultural land a few years ago? If you had got £80 an acre for it, you would have been doing fairly well. Five years ago, perhaps, if you had got £100 an acre for it as a farming proposition you would have been doing fairly well. If you were going to develop the land for housing in those years, you might have got it reasonably assessed at £250 an acre, which would have given a substantial profit to the people who sold it, and would not have had the staggering effect which took place in this case in Bishop's Stortford, where the value of the land, when finally put into housing and sold, was £1¾ million for the 170 acres. What sort of Government have we got that cannot stop that sort of thing, with all its effect upon housing?

Take the cases that were quoted the other day in the other place. In a borough which we know very well and which is represented in the other place by Mr. Macleod there were two outstanding cases. I need not go into the details, but there the Minister overruled the fair decision of the local authority, in one case in regard to property of which they were already in possession and in the other case in regard to property of which they were seeking to get possession and finally seized. It was a site that could have been acquired quite cheaply, so enabling them to keep up a tradition in the borough of having public allotments for the benefit of the citizens of the borough. But the final cost to the council of the land, if they could have got it and kept it for allotments (it was about 12 acres, I think) would have been something like £250,000 a year. That is an amazing situation. It has been repeated in an even worse case, with regard to a housing place. By the ruling of a Minister, it meant that the land that the borough council were going to buy—the borough represented in the other place by Mr. Macleod—was going to cost a very high sum indeed.

These things are all vastly important to industry. Where you have, for example, a curtailment of housing for the people by reason of these very high prices, you are certain to get, first, an abstention from the purchase of other goods until the people, if they are strong enough in a trade union, can manage to force from the employers some little increase in wages towards the enormously increased expenses they have to meet. It is fantastic to put the blame, as people do, upon the wages discussions in which the trade unions engage, when you see what is really going on around us. It is really fantastic to lay the blame upon them. In the meantime, it means that in all spheres—in the cost of material, in the proportion of increased wages which take their place in industrial costs, all the way round—our capacity to compete in the markets of the world is impaired. And all this is simply because the Conservatives in 1951 said: "Set the people free and abolish controls!"; until finally the people themselves are under control, a bound control, from which they cannot extricate themselves.

It is perfectly true that there have been different times during the progress of the last ten or twelve years when, after a rise in wages, there seems to have been freedom, spending and the like. People then get the idea that as they have £1 more in their pockets they are well justified in trying to keep up with the Joneses and everything that the Jones family has got. Then, suddenly, there comes the extra pressure. I do not want anybody to think that I do not take account of that; but, at the same time, side by side with it, there are great sections of the people, including the old-age pensioners and the people who have retired on small incomes, who are constantly harassed by the narrowing of their margins.

The manner in which the local authorities are being left to deal with their problems by the Government is equally fantastic. You may say that the 1 per cent. increase in the bank rate recently imposed would make little difference to local authorities, but in fact, of course, the immediate net cost—undoubtedly, the gross cost would be more—on the present commitments of the local authorities, is £25 million a year; and all that has to be added to the rates. Bearing in mind their problems and their share of the cost of housing—the buying of land at exorbitant rates and the very high charges now made for building materials, quite apart from the element of labour in the actual building—one can understand how, even when they have subsidised to some extent the actual rental value of the houses they have erected, there still comes a heavy burden upon householders themselves who have taken council houses. They are then in difficulty, and constantly bound to press for wages; and the older people are squeezed both by the rent and by the strongly increasing rates. That is a very important factor in the economic position of our country to-day.

Let us look at the great programme that the Government have announced in recent months of what they want to do in order to try, I think partly, to catch up with the arrears of the social provisions they ought to have made in medical, nursing, hospital, education and many other services. A large spending programme has been announced, and there was pressure in the House of Commons for the Government to issue to Parliament a Paper which would try to show, at least for a period looking ahead, up to 1967–68, how the part of the programme that they thought they would complete would work out. That was letting them off some of the very large statements they had made about the future programme. They produced a White Paper in December. What does it show? It shows that by 1967–68—and, so far as I can tell from reading the Paper, without having made allowances for increased costs influencing the price of all work they have to do by 1967–68—the increased charge upon the State, local authorities and public bodies, as published, would apparently amount to £1,950 million in four years from now. And that is a staggering thought.

One of my colleagues in your Lordships' House reflected yesterday on the great attempt made in producing the Defence budget. It was not produced to us as costing the £2,000 million which had been forecast weeks ago by the Defence Minister, but was brought down to just a little below that figure so as to make it look better. Nevertheless, the White Paper published in December (I wish I had mentioned it yesterday; but I can mention it now) shows that the increase in the Defence budget alone in that period will be £265 million per annum. When I think how the cost of wages and materials increases all the time, then I am led to believe it will increase even more than that. And when I think there is a danger—and perhaps there is nothing more than a danger at present—of a Tory Government continuing in office, and of their following the policy of absolute freedom of trade in land, I hesitate to think what will be the final cost upon the State.

My Lords, there is much more that I want to say; but I will try to finish with one point that I think we must consider from now on in regard to the economy of our country. We see what things are going on now, and I have given a picture of some of them, but I hope the Government and the country are keeping their eye upon the population statistics of our country. The population has already exceeded 52 million. I can remember that when I was a young person the population in the area covered was only just under 40 million. We have now seen the estimate that by the year 2002 this population figure is likely to have increased to something like 63 million. I know this is looking forward a good deal—it is looking forward about 38 years—but 38 years is simply three times as long as the Tory Government have been in power, that is all, and the population is going to go up to that figure.

What kind of provisions will have to be made if the population continues to increase at that rate? At present there is every indication that it will. I am thinking of the claims that will arise for housing alone. Then I think of how many acres are likely to have to be acquired—very often compulsorily—from farming land. I think of the sites that will be required for the provision of education, for the distribution of the new population in new towns, for shops and for the distributive services throughout the area. Think what will have to be provided from farming land for roads for access to and through the new centres of population—although, it is true, we are already losing very many thousands of acres in farming land.

The cumulative effect by the year 2002 will mean that the agricultural industry will have the most difficult task in the world to maintain their present output with such a reduction in the amount of land available. It is perfectly true that, but for increased efficiency in farming, our general state of trade and our economy might have been very much worse than it is to-day. Actually the agricultural industry has saved us well over £4 million a year in imported food. However, when we come to the position I visualise in 2002, 38 years ahead, and what will have to be done in the meantime, I feel sure that if we have a policy of go-as-you-please, think-how-you-like, with no good regional or national plan, letting things take their course as in the last twelve years, then the nation will be very much worse off. I hope we shall have a little more attention given to this matter than we have had in the last twelve years.