HC Deb 27 January 1966 vol 723 cc409-537

3.49 p.m.

Mr. Anthony Barber (Altrincham and Sale)

I beg to move, That this House deplores the failure of Her Majesty's Government to curb the rapid rise in the cost of living. During the coming weeks there will be a number of Supply days when the House will have an opportunity of debating subjects chosen by the Opposition. I want to explain why, on this second Supply day after the Christmas Recess, we have chosen to debate the cost of living. We have done so for three reasons: first, because there is no aspect of Government where the contrast between promise and performance is greater than in the case of rising prices; second, because much of the rise in the cost of living since the General Election is due, as I shall show, to the Government's financial and economic policies; and, third, because all the indications are that, over the next few weeks and months, the cost of living will soar at an even faster rate.

It is incredible to recall that, only 15 months ago, the man who is now First Secretary of State—[HON. MEMBERS: "Where is he?"]—was stumping the country during the General Election campaign and proclaiming to the electorate: The continual rise in the cost of living can, must and will be halted. At the same time, the Labour Party published a manifesto in which it stated: Labour will attack the problem of rising prices at its roots. What have the right hon. Gentleman and the Labour Administration achieved? I will tell the House.

During the first year of this Government, the cost of living rose faster than during any comparable period in the previous ten years. It is difficult to conceive of a more blatant example of political deception. There is no doubt at all that hundreds of thousands of electors in October, 1964, genuinely believed that a Labour Government would produce policies which would stabilise the cost of living. But they were duped. It is no use right hon. and hon. Gentlemen opposite pretending that the increase in the cost of living which has taken place has been outside their control. The cause of the increase can be stated quite simply and it is twofold: first, the deliberate increase in taxation introduced by the Labour Chancellor of the Exchequer; second, the wholesale failure of the Government's prices and incomes policy.

I want to say something about each of these factors. Whatever may be the economic reasoning behind the measures introduced by the Chancellor of the Exchequer in his Budget, the fact is that he set out quite deliberately to raise the cost of living and he succeeded with a vengeance. The details are well known to hon. Members—the increased tax on petrol, whisky and the cost of car licences, not to mention the 6d. on the standard rate of Income Tax and the import surcharge, all of which added to the cost of living.

We now read that the First Secretary of State proposes to refer to the Prices and Incomes Board the brewing industry because he wants to keep down the price of beer. This may be a very laudable objective, but it is worth recalling that it was his right hon. Friend the Chancellor of the Exchequer who, only a few months ago, put up the price of beer by increasing the Excise duty.

Of course, the Chancellor is still at it. I was told only this morning that the abolition of investment allowances will add another 1 per cent, to the operating costs of the bus companies; and I do not need to elaborate on the consequences of that for the consumer and the traveller. There was the whole succession of price increases in the nationalised industries, all approved by Ministers of the Labour Government—rail fares up by 8 per cent., some commuter fares by as much as 40 per cent., electricity up by 8 to 14 per cent., coal up, postage up—and so one could go on.

The consequence was that, by April of last year, the Government had achieved another record. The Index of Retail Prices for that month, after the Budget, recorded the biggest monthly rise for 10 years, and well over half that increase was directly due to the Budget. In fact, in that one month of April last year, and mainly due to the Budget, the cost of living rose more than in the whole of 1963, the last full year for which the Conservatives were responsible.

That was in April and it was in the same month that the First Secretary of State published his White Paper which he hopefully entitled, "Prices and Incomes Policy". Nobody doubts that, when the First Secretary of State launched his prices and incomes policy, he was genuinely and sincerely concerned and, indeed, determined to do all in his power to make it work. But it is equally true that now, nine months later, that policy is in ruins. I am pleased that the Parliamentary Secretary to the Ministry of Technology is here to speak in the debate, because, of course, no one has made a more telling contribution to the failure of the incomes policy than his right hon. Friend the Minister of Technology.

The hard fact is that the Government's inability to stem the tide of rising incomes, coupled with falling industrial production, which is the direct consequence of the Government's economic policies, must inevitably lead to a flood of rising prices. This is precisely what is happening. The Labour Government have contrived, within 15 months of taking office, to establish the classic inflationary situation of rapidly rising money incomes and falling production.

In the words of one of the few Labour Ministers who is prepared to face the facts and tell the truth to the country, the Minister of Labour: Production has been almost stagnant, whilst incomes have risen and risen. The Labour Government took over from the Conservatives in a year when industrial production rose by 5 per cent. and, at the election, the Prime Minister, more than once, promised the nation increased production under a Labour Government. As he put it on one occasion: Labour plans to get our economy on the move again so we can have steady industrial growth all the time. What a laugh! That was said in a year when industrial production rose by 5 per cent.

What have the right hon. Gentleman and his colleagues achieved? It is not steady growth, it is not even industrial stagnation, about which we used to hear so much when we were in Government. The truth is that we are now slipping back, because the latest Index of Industrial Production shows output actually less than it was in January of last year.

That is bad enough, but what is really alarming, and should be concerning right hon. and hon Gentlemen opposite, is the conjoined effect of falling output and soaring incomes. Inevitably, the consequence must be increased labour costs and a flood of rising prices. When the Declaration of Intent was signed, the First Secretary captured the headlines with the proud boast: History is being made today. But now the dream of the right hon. Gentleman is over, and it is the British people who have to suffer the reality of rip-roaring inflation. That inflation and the rising prices which are still to come are due more than anything else, whatever the good intentions of the right hon. Gentleman the First Secretary of State, to the collapse of the incomes policy.

Again, I should like to quote to the House chapter and verse in support of what I am saying. The Government published their White Paper on Prices and Incomes Policy in April last year. If one applies the most generous analysis possible to the Government's incomes policy and assumes that the Government had no effect whatever on the level of incomes between the General Election and April last year, when they published their White Paper, what then are the facts? During the six-monthly period from April to October, average weekly earnings rose by 5.5 per cent., that is to say, at a rate of 11 per cent. a year, or more than three times the norm laid down by the right hon. Gentleman and his colleagues.

There is not a man or woman in Britain today, apart from the First Secretary of State, the Prime Minister and the handful of their colleagues, who any longer pretends that the Government's incomes policy is a reality. For the Prime Minister to go on pretending that the policy is working and, what is even more serious, for the Government to base their future policies on that pretence is to court disaster.

The hard, unpalatable fact is that the prices and incomes policy, for all the First Secretary's good intentions, has been a fiasco. Neither the British housewife nor our friends overseas—who study the figures and who are not quite so simple as Ministers opposite thought when they first took office after the General Election —will be bamboozled any longer by the artifice of a public relations exercise which runs counter to the facts.

This debate is concerned not only with the past, but also with the future, and the House need not accept my word about the future. There is not a newspaper in the land which has not predicted a further surge in the cost of living during the coming weeks and months. I will read a few of the headlines of the sort of thing which has been appearing in the Press.

The Sunday Citizen: Up go your food bills Further price shocks face them". "Them" being the housewives.

The Daily Express: Mr. Rising Price Knocks Brown". The paper added: And it looks as if this flood of increases will soon turn into an avalanche…". The Financial Times stated: New Flood of Price Increases". The Daily Sketch announced: Prices—The Bubble Bursts and stated: Remember what Wonder Wilson promised at the General Election? 'New and more relevant policies to check the persistent rise in prices.' And Brother Brown trumpeted: 'The continual rise in the cost of living can, must and will be halted to give the housewife relief and her family a genuine rise in their standard of living'. Then, under the heading "All silent", it continued: Today, those clarion calls sound a hollow mockery. As the cost of living takes off, there is no use in pretending any more: Inflation is back. But not one word from Harold Wilson. The rising cost of living is causing concern and hardship not merely to all those people at home who are living on small fixed incomes. That in itself is bad enough. What is far more serious in the long run, as the Chancellor of the Exchequer most certainly realises, is the consequence for our balance of payments.

Since the Labour Party took office Britain has been living on borrowed money and borrowed time—£1,000 million of international debt has been run up by the Chancellor, an amount equal to the total of our gold and convertible reserves. The purpose of those borrowings can be stated simply. It was to enable the Government to have time to restore the confidence which they frittered away during the first few months of being in office—and one essential element of that restoration of confidence was the maintenance of the United Kingdom's international competitive position.

Time and again during the past year my right hon. and hon. Friends and I have said that we did not believe that, in general, our prices to our overseas customers were out of line with those of our principal overseas competitors. And it was that single fact, more than any other, which led people to the conclusion that British exporters were operating on a sound basis. But it is no good burking the problem which now lies ahead of this country. If the Government are not able to hold back the flood of rising incomes at a time when industrial production is falling, the threat to this country's international competitive position will be great indeed.

In this connection the Government's attitude to the railwaymen's claim will be crucial. If I say no more than that, it is only because I do not wish to prejudice the discussions which will take place in the next few days.

Sir Harmar Nicholls (Peterborough)

My right hon. Friend is rightly emphasising the attitude of the Government. Apart from that, should he not draw attention to the attitude of this House? Here we have the first debate after the Christmas Recess on a topic which affects the nation perhaps more than any other, and the benches opposite are depleted and hon. Gentlemen opposite are streaming out of the Chamber.

Mr. Barber

I am grateful to my hon. Friend for mentioning that, but, of course, that is nothing new. This has happened time and again when we have been discussing important matters of concern to the people.

So far, I have concentrated on prices, but the citizen's cost of living is composed of two factors, the prices of the goods and services he buys himself directly and the taxes he pays to the Government. I should have thought that the rise in prices is apparent to all and that nobody will seriously attempt to deny it. But what of the prospects for taxation at a time when money incomes are shooting ahead of production?

The answer was given clearly by the Chancellor of the Exchequer in a debate we had on 29th November of last year, when he said: …if during the course of next year"—that is, 1966— I thought that…our balance of payments was likely to be threatened by the rise of money incomes, I would not hesitate to take action…to offset it."—[OFFICIAL REPORT, 29th November, 1965; Vol. 721, c. 1020.] That statement, considered in the light of the latest figures of wage increases published by the Government, can lead to only one conclusion: that the Chancellor is preparing to impose even higher taxation on top of the additional £600 million per year which he imposed during his first year of office. I must say that it is hardly surprising, in these circumstances, that we read from time to time reports in the Press that the Prime Minister is considering holding a March General Election.

Even so, Ministers are putting the best face on the situation that they can. There was the extraordinary statement of the Chancellor of the Exchequer in a speech he made the other day at Hull. It was so ludicrous that it confirmed to some of us that the right hon. Gentleman writes his own speeches. He asked this question What are the prospects for prices in 1966? He went on: My view is that from the spring onwards there is a real chance that prices will rise more slowly than they did throughout 1965, provided that all costs, including incomes, are kept in check. The right hon. Gentleman will be telling us next that we can stabilise the cost of living if only we can keep prices steady. But, of course, the right hon. Gentleman is indulging in sheer fantasy, because there is not the slightest indication, certainly at present, that the Government will have the rise in incomes under control by the spring. It is worth recalling that only a few weeks earlier, away from the heady atmosphere of the Hull by-election, the Chancellor observed that "spring may be a little late this year".

There are two other aspects of the cost of living which I must mention. I do so because they loom large in the minds of many people who genuinely believed that the specific and unqualified promises made at the last election by the party opposite would be kept. They are no longer under that illusion. I am, of course, referring to the level of mortgage interest and to rates.

When I last quoted to the House the words of the Labour Party's manifesto on mortgage interest rates and the now historic pledge of the First Secretary at the General Election, with a characteristic gesture the right hon. Gentleman indicated that he was somewhat bored with hearing this being repeated. But anyone who has had experience in his constituency of talking to owner-occupiers knows perfectly well that throughout the country hundreds of thousands of owner-occupiers switched to Labour on the strength of that promise. They will not easily forget it. If hon. Gentlemen opposite think that there is any likelihood of owner-occupiers forgetting that promise I assure them that we on these benches will take good care that they do not forget it.

The Prime Minister's television broadcast 14 days before polling day now has a somewhat hollow ring about it. Referring to the Tory Government, he said: The Government, as a matter of policy, have raised interest rates, and this is why…building society mortgage repayments and rates have gone up. If the Prime Minister had any sense of responsibility to the electorate he would be a very humble man today—but our Prime Minister is not renowned for his humility. The pledge on rates in the Labour manifesto was quite specific, and I will quote it once more to the House because it is very relevant today. The manifesto said: …We shall seek to give early relief to ratepayers by transferring a larger part of the burden of public expenditure from the local authorities to the Exchequer. That was the pledge—that was the vote catcher. They promised early relief but, of course, instead of early relief the overburdened ratepayer last year had his rates increased by no less than 14 per cent., and we now have it on the authority of the Minister of Housing and Local Government himself that this year they are likely to rise by a further 10 per cent., and that may well be an underestimate.

The facts and figures I have given come almost entirely from Government sources and they are beyond dispute, but what is really illuminating is to see how the rising cost of living under Labour is actually hitting the individual. If I take, by way of example, the young family with a small child and an earned income of £1,500 a year, I do so because that is the example which the Chancellor of the Exchequer himself took in his first Budget speech on 11th November, 1964. It is worth recalling the solicitude the Chancellor of the Exchequer then expressed for this family. He said: I recognise fully that burdens and commitments grow with an increasing income and that to the young family with a small child and an earned income of £1,500 a year, even another 4s. a week can be meaningful. This is especially true when they are burdened with the cost of buying a home at high interest rates or renting accommodation and paying fares to and from work.—[OFFICIAL REPORT, 11th November. 1964: Vol. 701, c. 1038.] But if the right hon. Gentleman was concerned in November, 1964, about the family man earning £1,500 a year, and if he then took the view that an additional burden of 4s. a week, to use his own phraseology, "can be meaningful", what must he now be feeling about the same man who, as a result of 15 months of Socialism, finds that his cost of living has gone up by 30s. a week, and by even more if he is buying his own home on mortgage? This means that the young manager earning £1,500 a year, in the circumstances laid down by the Chancellor of the Exchequer in his example, in order merely to maintain the same standard of living that he enjoyed in 1964, would now require an extra £75 a year after tax or, allowing for his increased taxation, an addition to his gross income of £110 a year.

Those are the cold, hard facts of Socialism. This is what it means in practice, and not all the honeyed words of esteem by the Prime Minister for the young technologist and the rising executive will make life one jot easier for either man. Ministers may talk, they may set up emergency committees and try to switch attention from the unpalatable, but, at the end of the day, neither the slick banter of the Prime Minister nor the buffoonery of the First Secretary can camouflage or hide the rising costs of living. The Government have failed, and they know it.

Mr. Speaker

I should like to announce to the House that I have not selected the Amendment in the name of the right hon. Member for Orkney and Shetland (Mr. Grimond).

4.15 p.m.

The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Richard Marsh)

The whole House will agree that the right hon. Member for Altrincham and Sale (Mr. Barber) is always extremely impressive in his arguments—[HON. MEMBERS: "Not today."] I must disagree with my hon. Friends. I do not think that he has ever put on a more impressive performance that he has today. For a man who was a member of a Government who in their time saw the cost of living go up by 51 per cent., I must say that his speech compared very well with that of the man I saw in Trafalgar Square selling the pigeons to the tourists.

The right hon. Gentleman made a great point about rates. It was symptomatic of his whole speech. There have been increases in rates and—yes—there will be an automatic increase in rates as long as the present system exists. The average built-in rate of escalation of rates during the whole period of office of the right hon. Gentleman's Government was 9½ per cent. per annum, and in some years it was much higher, but in the whole 13 years the party opposite did nothing whatever to change that system. That is typical of so many things. The right hon. Gentleman can point to the problems and to the difficulties, and I cannot help wondering why the rating system he now criticises was left intact for so long by a Government with so great a majority.

It is not surprising that the Opposition should use this opportunity to debate the problem of rising prices and the cost of living. During their period of office they collected a wealth of experience on what all of us on both sides of the House will agree is a very real, important and tragic problem—particularly for people on fixed incomes. But let me make one thing quite clear at the very beginning. The right hon. Gentleman really was exaggerating his case a little. Any suggestion that we are in, or are even moving towards, a period of runaway inflation is not only nonsense, but extremely dangerous nonsense. I am always intrigued by the abandon with which hon. Members opposite exaggerate the difficulties with which the country is faced, and the way they squeal if anyone ever criticises anything they are doing when they are in office —but I am not complaining about that.

During the last 10 years, prices have risen every year, with the solitary exception of 1959, which was a General Election year—[HON. MEMBERS: "And this year."]There is nothing new about this. I should not imagine that this would be an election year. There is not much point in it. With this sort of opposition we could go on for years. We had regular censure debates like this while right hon. and hon. Members opposite were floundering from one unsuccessful attempt to another to solve this problem.

The cost of living has remained a problem for all Governments. We can all remember the strange titles which were applied to each abortive attempt by the other side to control the economy: "The Macmillan Price Plateau"; "The Selwyn Lloyd Pay Pause"; "The Guiding Light"; "The Three Wise Men"; "The National Incomes Commission". Each for a time dominated the headlines of the newspapers. They became part of our national language—and, without exception, they failed.

In the years 1957 and 1961, both broadly comparable in previous cycles with 1965, prices rose by 4 per cent. and 4½ per cent., respectively, and even in the last year of Conservative government—if I may use the word "government" rather loosely—the index rose rapidly from 103.7 in October, 1963, to 107.9 a year later. I do not make these points in any attempt to divert attention from our own policy, the success of which I want to deal with at some length. I just want to establish right at the beginning—because I am quite sure that, leaving the party arguments to one side, we will all agree with this—that this is not a Labour Party problem, that it is not even a specifically British problem, but a problem that has faced all Governments for many years in this and in many other countries.

Sir David Renton (Huntingdonshire)

I am sure that the hon. Gentleman will do his best, but could he tell the House why there is no representative here from the Treasury or from the Department of Economic Affairs or from the Ministry of Labour or from any Department other than the Board of Trade, directly responsible for the Government's policy on the matters which he is about to discuss?

Mr. Marsh

I think that the right hon. and learned Gentleman has missed the point. On this side Ministers are busily engaged in running their Departments. It is hon. Members opposite who have so much spare time now. Ministers on this side are running the country, while hon. Members opposite are in opposition. In any case, it cannot seriously be suggested that we need a whole array of Ministers to deal with the case which has just been put.

My submission is that the Government are facing an old problem which both sides of the House have had to face, which the Labour Government between 1945 and 1951 did not solve, and which no one in his wildest dreams would suggest that the Conservative Governments from 1951 to 1964 managed to solve. We are facing old problems, and my case is that we are applying to those problems different policies.

Mr. Barber

Before the hon. Gentleman leaves his reference to the past, would he just confirm or deny the figures which come from Government sources which show that during the first year of the Labour Government—or, if he likes, during the first 13 months or during the first 14 months of this Government—prices rose faster than in any comparable period during the previous 10 years? Will he say whether that is true?

Mr. Marsh

If the right hon. Gentleman goes on being so impatient for enlightenment, he will miss the rest of the speech. It is all in there. We shall come to it in due course. There will be a veritable deluge of information washing about the ears of right hon. and hon. Members opposite, if only they will listen to it.

The total rise—this is the point the right hon. Gentleman has just raised—in the cost of living since we took office in October, 1964, has been 5.7 per cent. This is a large increase. It would be absurd to deny it. Faced with serious internal disputes, it is quite understandable that the Opposition should seek to get the maximum political advantage out of the nation's difficulties; but I do not complain about that.

Despite all the right hon. Gentleman's skill, the case he put forward was very weak indeed. It was made all the less convincing because it was grossly exaggerated. In the first six months of the Labour Government, prices rose between October, 1964, and April, 1965, by 3.8 per cent. As has been said many times, and as will be said during the course of the debate many more times, this was a very rapid rise indeed. It was these figures which caused the Opposition's chief spokesman in last year's debate to forecast, with that abandon that the Opposition show on these occasions, that the annual increase in the cost of living this year would be 7 per cent. to 8 per cent.

The right hon. Gentleman did not go that far today, because events have shown that this rapid increase in the cost of living has not been maintained. Although prices rose by 3.8 per cent. in the first six months of the Labour Government, in the following eight months they rose by only 1.9 per cent. [Interruption.] The right hon. Gentleman who keeps on bubbling there obviously has in mind that there are seasonal factors involved in this as well. This is true. Nobody disputes it. There were seasonal factors in the last year of the last Government, but compared with that this is a considerable reduction in the rate of increase.

Clearly, it is impossible to talk about the cost of living except in the context of the general economic situation. And, wriggle though they may, right hon. and hon. Members opposite cannot deny responsibility for the economic difficulties which necessitated the policy which the Government have adopted in the past three or four months. Nobody opposite can seriously suggest that, when the Labour Government took office, they were able to operate without being very much concerned with the economic difficulties they had inherited. We knew that the measures the Chancellor of the Exchequer took would be unpopular. We also knew, as did everyone else, inside and outside the House, that the position at that time was so bad that those policies had to be followed if we were to get out of the economic mess we were in.

So this is the argument I want to put to the House. First, it is true, and it would be idle to deny it, that there has been a highly undesirable increase in the cost of living. Secondly, it is true that a large portion of that increase in the cost of living resulted from the emergency measures which were taken in the opening months of this Labour Government. Thirdly, it is my proposition that the position is now under control and that the policies which the Government are pursuing are policies which will enable us to make better headway in this direction than has been the case in the past.

Sir Alexander Spearman (Scarborough and Whitby)

The Parliamentary Secretary is talking about the future. Would he not agree that up till now manufacturers have been able to absorb some measure of the increasing costs by increasing their turnover? Now that they can no longer increase their turnover, is it not clear that prices must go up much more sharply?

Mr. Marsh

The hon. Gentleman has just brought up the point which I shall come to later. I will, with respect, make my speech in my own way. I thought that right hon. and hon. Members opposite were complaining about the way in which the debate was being treated on this side of the House. I assume that they want to hear the Government's views. They may disagree with those views, but they may well like to hear them.

I have no doubt that many speakers in the debate will take a look at the past and make their own assessments as to the achievements of the two parties. I hope, because this is an important issue, that most of the discussions will centre round what the Government are doing, what their policies are, and what the policies of the Opposition would be if they were in office.

I mentioned just now that this problem is not peculiar to Britain. Virtually all the countries of Western Europe face the same difficulty. There is an article on this in The Guardian today which I am sure the right hon. Gentleman, who is an assiduous reader of newspapers, must have read. It makes this point, which is very true: Inflation in this sense is the price most countries seem to have to pay in return for full employment. What makes the problem, in many ways, more serious for us in Britain is that rising prices have for far too long been accompanied by a very slow rate of economic growth. Our problem is not just the rate at which incomes are rising but the rate at which they rise in relation to productivity. This is important, because I think that there is a tendency to try to isolate wages and prices from productivity. This is, in my view, the reason—I am not making a party point here—why so many previous attempts to solve the problem have failed, and it is, in my view, the reason why I believe that the policies which we are pursuing will succeed.

Since the White Paper on Prices and Incomes, which set out the considerations for determining price movements, manufacturers and traders have been more reluctant to raise prices than in the past. Some of them have gone to very considerable trouble to absorb cost increases without passing them on to the customer. This is as it should be.

All these dramatic references to a price-dam about to break seem to imply that to absorb cost increases without raising prices is an artificial exercise. Obviously, there are limits, at least in the short term, to the extent to which increased costs can be absorbed, and it must be understood that if incomes continue to rise at a rate the country cannot afford this must eventually have an effect on prices. [Laughter.] Hon. Members opposite do not usually get to this condition until much later in the evening.

The prices and incomes policy, however, is not a wage freeze. Wage freezes can never be the answer to this particular difficulty. The idea that an increase in cost automatically has to be passed on from the manufacturer to the wholesaler, to the retail shopkeeper, and so to the housewife, is an idea which has got to go. It is far too prevalent in discussions on this subject. People assume that increases in prices have to be passed right down the line. There is still too little attempt to absorb increases in prices by increased productivity and increased efficiency.

We must have both long-term and short-term policies designed to maintain a relationship between prices, incomes and productivity; and all three go together. Any attempt to rely on fiscal and monetary policies alone to keep increases in incomes in step with increases in output can result only in a higher level of unemployment and an inadequate rate of growth. Equally, a faster rate of increase in productivity would not prevent money incomes necessarily outstripping the rise in real output.

On the question of the prices and incomes policy—

Mr. Dudley Smith (Brentford and Chiswick) rose

Mr. Marsh

No; I have given way five times already, and the interventions got worse as we went along.

It would be absurd to underestimate the difficulties, but I have yet to find a viable alternative to the Government's policy of trying directly to influence movements of prices and incomes with the object of relating them to the growth of output. The right hon. Gentleman made a number of criticisms of the prices and incomes policy, but he has been a consistent supporter of the search for an incomes policy for many years. While one can criticise the incomes policy, what we are entitled to ask for from those who have supported it over so many years—there are some hon. and right hon. Members who do not support it—is what we ought to be doing, what is wrong in detail with this specific policy, and what changes they would make.

Since it was established in April last year, the National Board for Prices and Incomes has been extremely active. So far, it has published 10 reports. It is not surprising that some of them are controversial. One of the problems in this country, a general problem, is that everyone is in favour of change, but, at the same time, wants an almost cast-iron guarantee that it is the other chap one is talking about and that the change will not affect him personally; and this, with respect to my hon. Friends, is not confined to any particular section of the community. But the fact that the reports of the Board are not always unanimously welcomed is no reason for declaring that the policy has failed. I sometimes feel that it is the decisions which do not precipitate a row which we ought to be most worried about in this connection.

It is almost impossible to quantify the degree of success of the prices and incomes policy since it was introduced, but there are clear signs that the Government's policy has already had a restraining effect on the trend of prices. The rises in the wholesale and retail price indices have certainly been less than might have been expected from the movement of labour costs and import prices during the past year.

It can be argued—it was argued quite fairly at some length—that the policy has had less effect on the level of pay settlements last year. I do not regard this as surprising. By the beginning of 1965, there were forward commitments for pay increases or reductions in hours, or both, for nearly 7 million manual workers and well over 1 million non-manual workers. Claims for another 3 million workers were already in the pipeline. Again, I do not imagine that anyone on either side of the House would seriously suggest that it would have been possible to have an immediate effect on those. About half the increases in hourly wage rates which took place in 1965 were, in fact, accounted for by these previous forward commitments.

Nevertheless, there are signs that the policy is influencing negotiations. It is not always possible to give specific examples, because much of the discussion we have with private firms and bodies in this connection inevitably has to take place in confidence. But, to mention the much-publicised increase in the price of the standard loaf recently, about which, understandably, there was a great deal of concern, this was by no means a defeat for the policy. I think that no one will dispute that, had it not been for the prices and incomes policy, the housewife would have been paying higher bread prices at least eight months earlier than she has in fact.

To give another example, it is now generally known that, as a result of the Board's interim report last June, the Road Haulage Association has abandoned its practice of recommending general rate increases, and hauliers are now expected to fix rates with regard to their own costs and the prospects of greater efficiency.

A prices policy is not a price freeze. Increases are bound to occur. The aim of the policy is to ensure, by every means open to the Government, that increases occur only in the circumstances which the White Paper foresaw. The present incomes policy is not just a Labour Party affair. It has been accepted by both sides of industry. It has already progressed further and done more to change ingrained habits and attitudes of mind—I think that this is probably the real problem in these economic matters—than any previous attempt in this direction. It is today more widely accepted than ever before.

I do not claim this as a Labour Party achievement. Industry has joined in with far more enthusiasm than we have had from the Opposition. There is now a greater realisation than ever before that movements of prices and incomes are not merely the concern of those directly involved but are matters which affect the nation as a whole and the nation has a right to be involved in the decisions.

I know that people disagree with us. The right hon. Member for Wolverhampton, South-West (Mr. Powell) leads a perfectly legitimate body of opinion that the policy is fundamentally wrong.

Mr. J. Enoch Powell (Wolverhampton, South-West) indicated assent.

Mr. Marsh

I see that he nods assent to that. He has always been very open about it. He says that it cannot succeed, and I do not think that he will disagree if I say that he would probably argue that it should not succeed.

Mr. Powell indicated assent.

Mr. Marsh

The right hon. Gentleman nods even more vigorously to that. He is, of course, a member of the Shadow Cabinet.

Mr. Powell indicated assent.

Mr. Marsh

I have heard the right hon. Gentleman's arguments. I have debated them with him. On this issue I believe that he is terribly wrong. But his is a perfectly legitimate point of view which he is entitled to hold, and all of us respect the very considerable intellectual ability with which he backs his particular arguments.

What I cannot respect is the attitude of hon. and right hon. Gentlemen opposite who consistently support the attempt to obtain an incomes policy when the Conservative Government are in office and now deny their support to an incomes policy which succeeds because they dislike the complexion of the Government in power. They would do very well to have a word with some of those people who violently disagree with this Government's politics, but who have devoted very considerable energy and time to helping the policy along not because they support the Labour Party but because they believe it to be in the national interest to try to solve this problem.

What we are entitled to have, at least from members of the Shadow Cabinet—it is no good taking it out on one chap if one is scared of tackling the big fellow —is an answer to this question: does the right hon. Gentleman's opposition to the incomes policy represent the policy of the Shadow Cabinet of which he is a member, or does it not?

Mr. Frederic Harris (Croydon, North-West)

What about the great disputes on the Government's own Front Bench?

Mr. Marsh

There is no dispute between members of this Front Bench that they are in support of a policy which links together prices—[HON. MEMBERS: "Look who is coming in."] It is rude to interrupt someone when he is in the middle of a sentence, and I am quite sure that my right hon. Friend is quite capable of speaking for himself.

In any event, one should first of all make sure whether there is anything with which he wants to disagree. There is no dispute within this Cabinet or among Members on this side, who are in favour, as my right hon. Friend has always been in favour, along with his colleagues, of a policy which links prices, productivity and incomes together.

The Minister of Technology (Mr. Frank Cousins) indicated assent.

Lord Balniel (Hertford) rose

Mr. Marsh

Let me just finish this bit. Now that I have dealt fairly with that point from this side, will the right hon. Member for Altrincham and Sale now assure me that there is no difference be- tween him and his right hon. Friend the Member for Wolverhampton, South-West?

Mr. Barber

What we would really like to know—[HON. MEMBERS: "Answer."] We do not mind whether the hon. Gentleman or the Minister of Technology answers—is whether the Minister of Technology is in favour of the Government's incomes policy or not.

Mr. Marsh

The position is clear. What I am putting to right hon. and hon. Members opposite—[Interruption.] They are about as straight as a load of rubber corkscrews on this issue. I am asking a simple question. I will leave it if no one opposite wants to answer it. Perhaps the right hon. Member for Wolverhampton, South-West might wish to intervene. Does the right hon. Gentleman's view represent the view of the Shadow Cabinet?

I can justify those who disagree with this policy. They have a perfectly respectable argument. There is no monopoly of argument on either side. But what we and, I think, the House as a whole, deplore is the consistent attempts by some hon. Members opposite to do everything they can to sabotage this policy. That sabotage started on the day this Government took office and was purely the result of the election of this Government.

No policy which concerns itself solely with prices and incomes can possibly succeed. One of the main tasks of the Government has been the production of policies designed to stimulate technological efficiency and increased productivity in industry. The Ministry of Technology was established for this specific task. [HON. MEMBERS: "What has it done?"] I am grateful to be invited to tell the House. I thought at first that it might take up too much ime, but now I have been given the opportunity I will tell the House.

The Ministry of Technology has done a great deal. It is not enough merely to ask, "What has the Ministry done?" It is not enough to say that one disagrees with a particular aspect of the Ministry's policy. We are entitled, again, to a straight answer. Do the Opposition believe that the Ministry of Technology should continue or do they not? It is not enough merely to make carping criticism. We want constructive comment as well.

Some people say that the Ministry of Technology is primarily concerned with the invention of gadgetry.

Mr. Geoffrey Hirst (Shipley)


Mr. Marsh

Such a view is based on misunderstanding of the major problem of the economy. The country is not short of scientific invention. Our scientists and technologists are as competent and imaginative as any in the world. We tend sometimes to lose sight of the very wide range in which we lead the rest of the world.

The main obstacle to accelerated technological development in Britain is not lack of new inventions and techniques, but the failure of a significant section of British industry to make full use of those which already exist. Right hon. and hon. Members opposite must get used to the idea that one cannot talk about the cost of living except in this economic context. One cannot just solve a prices problem. All previous Governments have tried and have failed because they failed to face up to the fundamental economic difficulties.

There is almost no limit to the factors which affect technological development. There is the resistance of workers who have yet to realise that the rapid spread of automation and mechanisation, far from threatening their standard of living, is the one thing which can maintain it. There is the short-sightedness of some managements. For example, there was the multiplicity of screw threads, which were not common with those used in Europe that existed when we took office. We all recognised that this was a small but significant contributory factor in our difficulties. As I say, it was a small problem but significant, but it was not until there was a Ministry of Technology that anyone did anything about it. The significance of that problem was not that it was large, but precisely that it was so easy to overcome; and right hon. and hon. Members opposite, when they were in office, failed to face up even to that.

Then there has been the realisation that the metric system will not just disappear if we try to ignore it. All these things the Ministry of Technology is concerned with, along with many others, in an effort to get increased productivity. But productivity is not just a question of manipulating machines. If the policy is successful it is bound to have a considerable impact on the lives of ordinary people.

If we are to succeed, many men, as a result of making the country more efficient, will have to change their jobs and homes. That is not a joking matter. It is certainly important for those involved. One of our greatest needs is not just for improved geographical policies, but for an improved occupational policy. That is nothing new. Both sides have known it for years. Our complaint is not that right hon. and hon. Members opposite did not recognise the fundamental problems, but that they did not do anything about them.

Since taking office, the Government have introduced the Redundancy Payments Act as part of the general, total economic policy of trying to get industry more mechanised. We have undertaken as well considerable expansion in the numbers of men at the Government training centres. At these centres, men from declining industries are being trained in six months on crash courses in a variety of skilled trades. That is with the agreement of the trade unions, and I want to stress that point because the unions are not always given credit for what they have done in bringing about change.

One can argue against any or all of the policies that the Government have pursued so far, but it is not enough for the Opposition to confine themselves to pointing out the difficulties we face. Stable prices are essential if the weakest sections of the community are ever to get their fair share of the nation's wealth. No previous Government have ever succeeded in achieving price stability for any prolonged period. If the Opposition have alternative policies to ours they have a duty to let us know what they are. Their record has proved how incapable they were of dealing with such a situation in the past. This debate demonstrates that they would probably do even worse in future.

4.48 p.m.

Mr. Norman St. John-Stevas (Chelmsford)

I wish that I could follow the usual courtesies of the House and congratulate the Joint Parliamentary Secretary on his speech, but to do that would not be courtesy but a kind of deranged generosity, because his was one of the feeblest and most complacent speeches we have had the misfortune to suffer in this Parliament from the Government benches. In that competition, in which there are a considerable number of entrants, I congratulate the hon. Gentleman on carrying off the palm.

It would be ludicrous, if it were not so tragic for the people of the country as a whole, that the only reply that he could give to the appallingly accurate picture of our economic position, so ably and briefly outlined by my right hon. Friend the Member for Altrincham and Sale (Mr. Barber), was to say that the whole problem was inherited from the previous Government. Even if that were so, which it is not, surely nearly 18 months later something could have been done to have dealt with this inheritance.

In fact, our position is now infinitely worse economically than when the Government came to office. It is the Government who are in the dock today and not the Opposition. We are here to criticise the performance of the Government and no kind of wriggling by the Parliamentary Secretary or any of his supporters can change that basic fact.

This debate is rightly concentrated on the cost of living, because that is the question uppermost in the minds of the people. Other questions may be at the forefront of our minds, for we are directly involved with politics—questions of foreign policy and Rhodesia, for instance—but to the ordinary man and woman it is the prices in the shops that count. They are right in thinking that it is important, right not only because their own self-interest is involved but because their self-preservation is involved as well, because the cost of living is the best indicator of the success or failure of the whole of Government economic policy.

On the stability of prices depend not only the happiness of people at home, but the whole future of the country abroad. After all, a soaring cost of living is only a reflection of rising prices and as prices rise, so inevitably shall we be kept out of our markets abroad. There can be no political strength abroad without economic strength at home.

If one reflects for a moment on the problem of Rhodesia, whatever our views on that may be, how much stronger would Government policy be if it were backed by a strong economy at home! Surely one reason why it is proving such an intractable problem is that the Rhodesians know that in attempting to quell this rebellion we are placing a great strain on our economic position which has been so weakened by the present Government.

I do not want to go into a great many figures and statistics because they have been extremely brilliantly and trenchantly put by my right hon. Friend the Member for Altrincham and Sale.

Mr. A. E. P. Duffy (Colne Valley)

What figures?

Mr. St. John-Stevas

If the hon. Gentleman was not here to hear them, I was.

I can add that the only figure needed in this debate is perfectly simple. It is that in the first year of the Labour Government the cost of living rose by 5 per cent., the highest rate of increase in the cost of living for the last 10 years. That is the relevant figure and the only figure we need to know to asess the performance of the present Government.

It is not only every reputable journalist who has forecast a further rise in prices and a further rise in the cost of living. It is also true that every reputable economist in the country has forecast that there will be a further upward swing in prices in the first months of this year, and the evidence is there. Commodities have consistently gone up in prices; commodities from pork pies to coal, rates, fares, fuel bills, petrol—the list is very long and dismal.

Against the background of this situation, the hon. Member for Greenwich (Mr. Marsh) said that it was dangerous nonsense to talk about an inflationary situation. The dangerous part of the situation today is the extraordinary complacency which is shown by that remark of the Government spokesman today, an extraordinary complacency indeed when all over the country, hardship is being suffered because of the rises in prices, particularly by pensioners and those living on small incomes.

The hon. Gentleman went on to say that this was not a Labour Party problem. But, of course, it is a Labour Party problem. It is a problem created by the present Government, who, as my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has pointed out, have succeeded in combining for the first time stagnation and inflation. The only sense in which it can be said not to be a Labour Party problem is that it is quite clear that it has no idea of how it is to be solved.

The rise in prices and the rise in the cost of living are not matters of opinion, but of fact. Our duty is not to make the facts known—every housewife in the country knows the facts—but to make the causes known. The rise in prices can be attributed to any of a number of causes, but that which surely stands out is the failure of the Government's incomes policy. There are other contributory causes—we have had no industrial expansion and externally we have been loaded with £1,000 million of debt—but it is the failure of the Government's incomes policy which is primarily responsible for our present situation.

Before I pursue this line of criticism, I should like to take up one comment of the hon. Member for Greenwich. It is illustrative of the growing tendency of the Government to treat any criticism of their economic policy as being in some way unpatriotic. This was the line taken by the First Secretary who, when he was speaking at the Hull by-election, referred to us as saboteurs. This afternoon the hon. Member for Greenwich again spoke of the "sobatage" of Government's economic policy. They are confused about their constitutional position. The first Secretary is not a member of the Royal Family. He and his colleagues are temporary trustees—and I stress "temporary" and after midnight tonight it will be even more so—of the economic future of the nation. It is our duty, which we shall discharge undeterred by these accusations of being unpatriotic, to criticise sharply and constructively the discharge or non-discharge of that trusteeship.

The measures or non-measures which the Government have taken to remedy the economic crisis into which they so foolishly and unnecessarily plunged the country when they came into office 18 months ago—[Interruption.] Oh, yes they did. The Government undermined our credit abroad by exaggerating our difficulties at home; and credit is like a woman's reputation—as soon as it is suspected, it is gone. The Government succeeded in making the credit of Britain suspect in every financial capital in the world. That is the root of our present difficulties, not the 13 previous years of Tory expansion and good government.

Dr. David Kerr (Wandsworth, Central)

If one accepts the hon. Gentleman's premise, would he explain how sterling is at its present strength and exports are at their present height?

Mr. St. John-Stevas

Certainly. It is quite easily explainable. It is a tribute to British industry which, despite all the handicaps of the present Government, has managed to survive and to get its products sold abroad. But that is in spite of the Government and not because of them.

I want return to the central question of the incomes policy and the cost of living. Again, a very simple statistic is suitable. The guiding light, or whatever it is—"will o' the wisp" might be more suitable—of 3 to 3½ per cent. has been matched by actual increases in wages averaging 8 per cent. Although the Government succeeded for a time in holding back price increases, precisely because they failed to hold back wages, the increase in prices will now go on faster than ever. That is the measure of the failure of the incomes policy.

A challenge has been thrown out by the hon. Member for Greenwich—and I am never one to avoid a challenge—to state what our position is on an incomes policy. I am perfectly willing to put my criticism of the Government in that setting. I am not against an incomes policy as such and nor is the Tory Party as a whole. The theory of the Government's incomes policy is admirable. It is the practice which is so lamentable. It is perfectly logical to be in favour of an incomes policy but not in favour of the shadow of an incomes policy which is all that the present Government have so far produced.

Of course, in modern conditions of full employment we have to have an incomes policy, but the Government's mistake has been that they have tried to make the incomes policy do too much. They have used it not as an aid to policy, but as a substitute for policy; they have failed to back up the incomes policy by the right fiscal and monetary measures and above all, and this is the great failure of the Government, they have failed to put it into practice in the very sphere where they have the most influence—in the nationalised industries.

The acid test, it is said, will come when the Government make up their mind on their attitude to the railwaymen's pay claim. Certainly, if the Government give way to the railway unions and abandan their Prices and Incomes Board, the incomes policy will be reduced to the level of a farce. One can go back to a point in time earlier than this to when the whole policy perilously approached the point of vaudeville. The guiding light, the will o' the wisp, is 3 to 3½ per cent. If one applies that to the railway industry one sees that the increases in railway wages are now, leaving out of account the decision of the Prices and Incomes Board, running well ahead of that guiding light. It was calculated by the Board that by May of this year the workshop men will have an increase of 6½ per cent., and that there will be a further increase of 3½ per cent. by October. The Government are now dithering as to whether there should be a further increase in the future.

The truth is that if the Government were serious about their incomes policy they should have intervened in the railway industry not today but six months ago. If they are prepared, even now, to stand by their own policy, they may save something from the wreckage. The only example we have of a successful incomes policy in Britain was the period after the London bus strike of 1958–59 when the Conservative Government of the time stood up to the busmen. We had a successful incomes policy for 18 months.

The Incomes and Prices Board has a part to play and I believe that its Chairman, Mr. Aubrey Jones, has pushed it in a very worthwhile direction. He has directed it towards the task of increasing efficiency and exposing restrictive practices. He set a very good pattern in the Road Haulage Report and one saw the same enlightened approach in the report on printing. The Board has succeeded in that it has made the public aware of its direct interest in wage increases, because these tend to be immediately passed on in increased costs to the consumer. As a result of the Board's activities people are more aware of this than at any time in the past.

Where the Board has been let down, where it has been sabotaged, if I may use the phrase of the hon. Gentleman the Member for Greenwich, is not by the Opposition, but by the Government, because they have expected Mr. Jones's Board to become a kind of viceregal body which will fill the gap left by the Government through their failure to take appropriate action, either fiscal or monetary, to manage the economy.

The Government attitude towards their own Board has been both unrealistic and irresponsible. If the rumoured decision that all dividend increases are to be referred to the Board is true the Board will become ludicrous, because it will break down under the burden placed on it.

Mr. Norman Buchan (Renfrew, West)

How does the hon. Gentleman equate his demand that the railwaymen must be treated severely by the Prices and Incomes Board and the Government with his comment that dividends should be excluded from such treatment?

Mr. St. John-Stevas

I hive never suggested that dividends should be excluded from a prices and incomes policy. I was saying that it is ludicrous to think that every dividend increase can be referred to the Board and that the Board can deal with that sort of volume of work. It can no more deal with that volume than it can deal satisfactorily with the volume of wage settlements which have been referred to it at present.

If every wage settlement was referred to the Board it would collapse. The truth about the Government policy is very simple. It is that the Government have no means, no knowledge, of how to break out of this wage-price spiral. There is only one means which is coining into sight, and it is coming clearly into sight to everyone except the hon. Gentleman the Member for Greenwich. That is compulsion.

This is where the strain will be placed upon the loyalty of the Minister of Technology because the only possible outcome for the Government's policy, other than that of complete collapse, seems to be a legislative control of wages and prices. That is the policy towards which the First Secretary of State is inevitably moving, and it is this policy which is causing the rift between himself and his colleague, the Minister of Technology. That is the conflict of which the hon. Gentleman the Member for Greenwich is so blissfully and happily unaware. If that policy of compulsion is adopted by the Government it will be rejected, not only by this side of the House but by the whole trade union movement.

Dr. David Kerr

I am not very impressed by rifts on this side, I am much more interested in causing rifts on the other side. I wonder what the hon. Gentleman's views are about compulsory reference to dividends to the Prices and Incomes Board, and if we were to accept the dictum which he has just promulgated, which dividends would he select to go to the Prices and Incomes Board and on what basis?

Mr. St. John-Stevas

The second part of the question does not arise, because I am not in favour of a compulsory reference of all dividends to the Board any more than I am in favour of a compulsory reference of all trade union decisions on wages to the Board. I hope that that answers the question.

The fault of the incomes policy is the same as the fault in the National Plan. At least, the Government are consistent in that neither appears to have any relation to reality. The Government are not lacking in aspirations; they are full of aspirations and hopes, but what they are lacking in are practical proposals to translate these aspirations into reality. There seems to be no awareness that while an incomes policy has some part to play it must, if it is to be effective, be accompanied by steps to fashion a more competitive and efficient society than we have today.

I regard efficiency as a means and not an end. The gospel of efficiency is certainly not an inspiring one but it may be a necessary one at this period in our history. There is a new realism in Britain today which knows that we can neither help ourselves nor can we help anyone outside unless we come to terms with our own economic problems. Rising prices are the bitter fruit and the symbol of our failure to tackle our root economic problems. It is the failure of the Government. It is the Government who are indicted this afternoon. Rising prices are the visible and painful signs of the Government's lack of economic policy, which threatens the whole future of Britain in the world and that is why—

Mr. George Rogers (Kensington, North) rose

Mr. St. John-Stevas

—the Opposition has been right to table this Motion of censure and that is why we shall do all in our power to carry this Motion in the Division Lobby tonight.

5.10 p.m.

Mr. Kenneth Lomas (Huddersfield, West)

It is a privilege and at the same time something of a disappointment, to follow the hon. Gentleman the Member for Chelmsford (Mr. St. John-Stevas) because, until this afternoon, I was firmly of the opinion that he was a liberal-minded Tory. He seems to have proved quite conclusively that he is as bad as the rest. The whole point of his argument seems to be to prove, perhaps to himself, that the Conservative Party has some semblance of a policy after all. He mentioned that the success or failure of a Government should be judged by the cost of living. We accept this as a fair comment. But it must also be said that, as my hon. Friend the Joint Parliamentary Secretary pointed out, during the 13 years that the Tory Party was in power the cost of living rose by more than 50 per cent. I suggest that the hon. Gentleman waits until we have been in power for 13 years and sees then by how much it has increased.

The hon. Gentleman also made the point, which he thought was very telling, that in order to be strong we must have an economy which is sound and strong. This is all very well. He went on to accuse the Government of weakening the economic situation. It was hardly possible to weaken a situation in which we had a £800 million deficit when we came to power. In the latter part of his speech the hon. Gentleman referred to what he presumably considered to be the successful prices and incomes policy of the Tory Party under which, for example, over £80 million was given to the Surtax payer and 6d. was offered to the nurses. We reject this sort of thing.

I agree with my hon. Friend the Joint Parliamentary Secretary that the cost of living has risen. There is no denying this; there can be no argument about it. But the question which we should be debating is not whether it has risen but what have the Government tried to do about it, and what would the Opposition have tried to do about it if they had been sitting on these benches. Because we know the history of the Tory Party and its mentality, we realise full well that the attack which has been launched today is a sham, an empty and a meaningless gesture, in the hope that it will influence the by-election result in Yorkshire. It will not, because the fact is that if the policies advocated by right hon. and hon. Members opposite over and over again had been put into effect the cost of living would have soared infinitely higher than it has done under this Government, who have done everything in their power to control rises in costs.

Our first task on coming to office was to establish elementary social justice. We set out as a Government—and this is what we have been doing over the past 15 months—to ensure that those who could least afford to pay any increases in the cost of living would be protected by the legislation which we brought before the House. We did this in our very early days of office in spite of opposition from hon. Members opposite. People on small incomes, pensioners and those at the bottom of the wage scale are grateful to the Government for the measures which they have taken. The unemployed and the sick are thankful for the measures which we introduced early on when we came to power. The Insurance Bill which will be debated in the very near future is a clear indication of where our priorities lie—in helping those people at the bottom of the scale.

We have tried, through the National Board for Prices and Incomes, by our incomes policy and by budgetary measures, to ensure that taxation was fairer than it has ever been before and that people pay their rightful contribution and do not escape their responsibilities to society. We took the view that as soon as we could establish a more equitable system of taxation and the mechanics of a prices and incomes policy this would create the means whereby we could have the sort of social equality we sought.

As has been said, the Prices and Incomes Board, in the short time that it has been in existence, has dealt with road haulage, soap and detergents, and bread. Many other matter will be referred to it. I want the scope of its inquiries to be extended. I see no reason why it should be confined merely to matters such as these. Contrary to the hon. Member for Chelmsford, I look forward to the day, not very far off, when firms, before they declare their profits and dividends, give early warning of them to the Board so that they can be examined to see whether they are in the national interest. This is what we should try to do.

During the last 15 months we have been engaged in a levelling up exercise We have been engaged in an exercise to achieve the social equality which we believe essential. I cannot understand why hon. Members opposite should say that the railway workers must receive only so much when many hon. Members—and perhaps the hon. Member for Chelmsford knows of this better than most—can obtain in five or ten minutes on television a fee more than the average railway worker earns in a week. We must have some sense of values about wages and incomes. The Government, by the efforts which they are making to create social justice, are earning the applause of the people who have been neglected by successive Tory Governments for so long.

Reference has been made to housing and rates. This is fair enough. But, as has been pointed out, there is an inbuilt escalator in rates. As an interim measure, the first thing which we are trying to do this current year is to ensure that rates do not rise so quickly and that those who own their own homes and who are on low incomes and have to pay rates are relieved of a certain proportion of the rates due. This is the sort of thing towards which we are moving—the transfer of charges from the local authorities to the Government. This is the sort of thing which will help people and help to reduce the cost of living.

We seek to control price increases, but we get precious little help from hon. Members opposite. We must relate the cost of living not merely to cost but to the standard of living. This is an important factor. We must, therefore, try to raise the standard of living of the people, and I believe that the Government, over the past 15 months, have set about doing that in the correct way. It is true that the cost of living has risen. But I say without fear of contradiction that it would have been far worse under the Conservative Party, with its declared policies of uncontrolled rents and of a jungle law mentality about supply and demand.

Speaking on 13th January, 1965, the right hon. Member for Wolverhampton, South-West (Mr. Powell) said: There is only one price which a firm or person is justified in trying to get for his goods or his service. That is the price which he believes will bring in the best return. To attempt to get this price is every seller's duty. In other words, the right hon. Gentleman was saying, "Forget the national interest. Get what you can. Charge whatever you can if your product is in short supply. Make the biggest profit you can." We on this side of the House are a little more conscious of the fact that any increase in price is reflected in the living conditions of our people.

Right hon. and hon. Members opposite are political hypocrites, something which I have called them many times in the House, in that time after time they have argued that if they were in power we would see a massive increase in the building of houses, schools and hospitals, and the right hon. Member for Enfield, West (Mr. Iain Macleod) said on television a few days ago that all this would be done and that at the same time the Conservative Party would reduce taxation and make tax cuts the order of the day. We are entitled to ask: if this is so, where is the money coming from so that these tax cuts can be made and who will pay the price of high Toryism? These are the sort of questions we are entitled to ask and to which we are entitled to have an answer.

In an article in British Industry, the hon. and learned Member for Bebington (Mr. Howe), who I understand is an official spokesman of the shadow Cabinet —one does not know these days who is in the shadow Cabinet; its members come and go almost at will—argued, and it has been argued by other hon. Members from time to time, that if the Conservative Party was in power, housing subsidies would be cut, which would inevitably mean a rent increase for people living in council houses; private building would increase, which would encourage even further the rackets which go on concerning flats and accommodation for people in need of a home who cannot afford the high price of private housing; and prescription charges would be reimposed, regardless of those in need. As part of its agricultural policy, the agricultural deficiency payments, which run at £175 million, would be abolished. Its official spokesman said in a speech not long ago that as a result of this the food bill would go up by over £400 million. Who will pay for this? The housewife and the person at the bottom of the wage scale will suffer most.

Right hon. and hon. Members opposite have argued over and over again in connection with their pensions scheme that there should be a movement away from the central Government contribution and that the cost should be passed to the employer and employee. Who will bear the brunt of this?—the very people who today we are trying to get to accept the idea of a policy of submitting wage claims so that they can be considered in the light of the National Plan and the policy which we are pursuing. We can never hope to get that kind of co-operation if the suggested Tory policies were carried out.

The Labour Party and Government, throughout the 15 months they have been in office, have sought by practically every means at their disposal to level up, and create a situation in which we can have the assurances from industry and from the trade unions that we intend working closely together for the common good and not for selfish interests.

We are stimulating industry. We are introducing new techniques and methods of technology. We are harnessing the benefits that science and automation can bring. These things will reduce the cost of living if they are introduced and applied properly.

I do not know the Tory Party's view on the investment allowances. Possibly they will oppose them for the sake of opposing. We, however, are doing something, which is more than the Tories ever did, to make the Prices and Incomes Board a reality, to make our prices and incomes policy work and to obtain the maximum co-operation of the trade union movement, with industry and the Government working three-in-one for the common good of the nation as a whole. We are trying desperately hard to do something to stop the spiralling of costs and prices.

I believe that today, in the important by-election to which the hon. Member for Chelmsford referred, we shall get the credit at Hull for trying to do this. It will be found that the electors of Hull will turn their backs on the cheap electoral gimmicking policies of the Tory Party and will keep a Labour Government in office for a long time so that we can build upon the foundations of social justice which we have laid and on which we can as a consequence build a better Britain.

5.21 p.m.

Mr. Peter Mills (Torrington)

I am grateful for this chance to put before the House the effects of the rapidly rising cost of living. Before the election, it was one of my jobs to put to many people in the South-West the danger of allowing a Socialist Government to come into office. I said that there would be a rapid rise in the cost of living. I never thought that my words would come true so quickly. Just as we said it would happen, it has happened.

I recall that my Liberal opponents, who are the chief ones in the South-West, laughed. They said that I was overstating my case. Now, they know better. Where are the Liberals, particularly from the South-West, in this important debate on the cost of living? It is extraordinary that they have disappeared.

Mr. George Y. Mackie (Caithness and Sutherland)

May I point out to the hon. Member that there is a higher proportion of the Liberal Party present than there is of the Tory Party?

Mr. Mills

I never knew that the hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) came from the South-West, but we have much to learn. It is a sharp reflection on the Liberals in the South-West that none of them is here for this important debate.

Mr. Dan Jones (Burnley)

Will the hon. Member give way?

Mr. Mills

I am sorry, no. I have just given way and I want to continue.

I want to concentrate these few words upon the effects of the rise in the cost of living in the South-West. It is true to say that the elderly and those living on fixed incomes suffer most. I must draw the attention of the House to these people and the problem that confronts them. We have in the South-West a very large number of elderly people and those living on fixed incomes. It is, I think, true to say that this proportion is greater than in any other region.

We have always welcomed those people into the South-West. They have come from various parts of the country to the South-West to retire. We are grateful to them for what they do for the community and the help they give. But these people who live on fixed incomes in the South-West, who have retired for peace and to enjoy a little of the beauty, who had saved, so they thought, enough to live on and enjoy life on a modest scale, are the ones who are suffering through the very steep rise in the cost of living. One of them came to me the other day in Bideford. He was pretty rude to me. He said, "What are you going to do about it?" I answered back pretty smartly and said, "We are not going to do very much about it while we have this lot in power."

I have been a Member of Parliament for only about 18 months. Many people have come to me with their problems and difficulties, but the problem which hurts most of all is the rise in the cost of living and its effect upon the elderly and those who are trying to live on a fixed income. They are in a helpless position. Surely, it is the duty of any Government to deal with this problem. I regret to say that in my view the Government have done absolutely nothing about it.

Mr. Dan Jones


Mr. Mills

What I am saying is true. Indeed, the Government have aggravated the situation by their actions and have caused this steep rise in the cost of living.

It is not only the elderly who are affected, but the young as well. They are caught up in this spiral of rising costs. In the South-West, we find that the cost of living affects us just the same as it affects people in any other region. We have to pay the extra penny on this, the 2d. on that and, of course, the extra taxation.

Unfortunately, however, in the South-West our wages and incomes do not rise anything like as fast as in other areas. We have a lower level of earnings, for a variety of reasons. Therefore, the younger people in the South-West are hurt even more, perhaps, than people in other regions. We find that our wages cannot keep pace with this rapidly rising cost of living. It hurts the young people as they start out in life and as they start to build their homes. They find all this very difficult with a lower income. This is a headache not only for the elderly and those on fixed incomes, but also for the young people starting out in life. This is a headache that has been brought on by the Government.

The effect on transport in the South-West also is very apparent. Transport in the South-West has not escaped this spiral of rising costs. Travel is costing considerably more. This is a big and important item in the South-West, particularly when one lives in a rural and scattered area. To say the least, it is not helping the rural folk who live there.

Bus fares have gone up. We have just had another increase. Train fares are up and car expenses are higher. It is in many cases simply a question that one cannot afford now to go into the town to see one's relatives or to visit people in hospital. Many people have said this to me. The rural bus operators are in a jam. They are finding that costs have risen so rapidly that it is almost impossible to continue to operate these rural services, and many of them are going out of business. This was, I believe, the direct result of the increase in fuel taxation. Coupling all this with the closure of many of our branch lines, one begins to think that perhaps a return to the bicycle is the only means of transport while we have a Labour Government in power.

We are experiencing a rapid rise in the cost of transporting essential goods such as food and fuel. Road transport is playing an ever-increasing part in the distri- bution of these goods in the South-West. There is no other way. There are long distances between the towns and these costs are rising rapidly. We find that goods in the shops are more expensive in the rural areas than in the towns. The extra cost of transport is the reason. These costs have been increased by the fuel taxation and by the increase in the cost of licences. The South-West is particularly hit by this combination of circumstances. One thing that the Government could do to help the problem would be to reduce the fuel tax. This would help to cheapen the cost of distribution.

Rates have been affected seriously in the South-West. The rapid rise of approximately 14 per cent. is a real burden to us, not only amongst the elderly and to every householder, but among our hotel and boarding-house keepers. The hotel industry is an important one in the South-West and vital to our economy. The rise in rates has particularly hit these people when coupled with the increased cost of food. There is a limit to the price that they can charge visitors who come to the South-West. Competition is severe. People tend nowadays to go abroad, and those in the South-West find themselves in considerable difficulty. The hotel and boarding-house industry is being affected severely by the increase in rates.

Even in our smaller towns in the South-West people are finding the burden of increased rates very considerable. In my constituency and in some of the towns affected, they are very concerned about this. More and more demands are placed upon their shoulders and more and more is asked of them, all with one end in view. It means increased rates and, therefore, an increased cost of living.

The reasons for this have been stated clearly this afternoon. They were mentioned by my right hon. Friend the Member for Altrincham and Sale (Mr. Barber). I believe that much of this burden is a direct result of the Government who are now in power. I say that this burden is intolerable and that it is time it was removed.

I cannot get on my feet without saying something about the effect on the farming community of the rising cost of living. This rise affects the farmer, the farm-worker and all who live by the land. The effect is considerable. Another man came up to me the other day and said, "Everything is going up, Maister". How right he was. Everything is going up. The cost of food, lighting, fuel or whatever one likes to mention is going up.

Unfortunately, the farmer finds that his income is being reduced. There is a sharp drop in his income and he finds it difficult to meet these added expenses. I am prepared to say that the community in which I live is an unhappy community. Resentment is widespread at these tremendous increases in costs without any extra return to the farming community.

Mr. Cyril Bence (Dunbartonshire, East)

The price of beef.

Mr. Mills

I could say quite a bit more about this, but perhaps I had better not or hon. Members opposite will accuse me of being biased.

Mr. Bence

Oh, no.

Mr. Mills

The effects that I have mentioned add up to a very sorry state of affairs. I believe that the people of the South-West will remember this Socialist Government as the Government who caused a rapid rise in the cost of of living.

5.35 p.m.

Mr. A. E. P. Duffy (Colne Valley)

Unlike the last hon. Member to speak in his comment on the speech of the hon. Member for Chelmsford (Mr. St. John-Stevas), I cannot compliment the hon. Member for Torrington (Mr. Peter Mills) on his speech. That is not through any lack of generosity, but we are dealing with a very important subject and an attempt to deal with a rise in prices which has been going on now for 20 years. I do not know whether we shall succeed or not. Some people are determined that they will have nothing to do with this policy. I suspect that the hon. Memberber for Oswestry (Mr. Biffen) is one. The right hon. Member for Wolverhampton, South-West (Mr. Powell) is not the only one in the party opposite who has said that.

Equally, my hon. Friends have a sublime faith in the efforts of my right hon. Friend the First Secretary of State and the Secretary of State for Economic Affairs to bring off such a success. I do not share that confidence. I do not know whether he will, but I hope he will. I am fascinated by all the attempts which are being made in this direction. No one could have done more in the last 15 months than my right hon. Friend with his Declaration of Intent, the setting up of the Prices and Incomes Board and the Report. All these are fascinating documents making most important contributions to the transformation of the climate of industrial relations. Now we have the early warning system, and I do know what will come next. If one shares the concern of the hon. Member for Torrington, one should recognise that price rises have been going on since 1945 and one hopes that the First Secretary will now be able to make a change.

Sir William Robson Brown (Esher)

I agree with everything and support and endorse everything that George Brown has done, but will the hon. Member for Colne Valley (Mr. Duffy) say what is the obstacle that prevents George from succeeding? Would he indict the employers in this respect?

Mr. Duffy

That is a fair question, but I think these questions need to be—

Sir W. Robson Brown

Will the hon. Member tell us the main obstacle to success?

Mr. Duffy

No, because I have not the main responsibility in the matter. I think we know George well enough—

Mr. Deputy Speaker (Sir Samuel Storey)

Order. This has gone far enough. Hon. Members on both sides of the House must refer to Ministers in the usual manner.

Mr. Duffy

We know the First Secretary well enough to know that he is unlikely to hedge on such matters. The hon. Member asks for helpful contributions, but we did not have a helpful contribution from the hon. Member for Torrington. His was an electioneering speech. Certainly one such as I, who knows the South-West and has campaigned there for a long time, knows that there it would come in for a tougher hearing than it did in this House, but it was not a helpful contribution. Neither was the speech of the right hon. Member for Altrincham and Sale (Mr. Barber). I admire the right hon. Member, but I do not think he deserved compliments for his contribution this afternoon. His speech was surprisingly short. That may have been welcomed by other hon. Members who wish to speak, but it lacked substance.

Like his two colleagues, he presented an exaggerated picture which did not square with experience abroad nor in this country. We know why that was so; it was because he was so selective in his quotations. He spoke about 10 years, not 20 years or 11 years. We know why he stopped at 1956. It was because the rise in prices in the previous year was greater than in last year. I hope that I shall not be too selective, but I cannot help mentioning two things. I hope to be more objective than he was when I refer to the experience of the last Labour Government and to the succeeding Tory Government and compare like with like.

The House should know that from 1945 to 1951 the United Kingdom's experience placed it seventh from the top in the international league table of price rises, but from 1951 to 1964—the period of Conservative Government—the United Kingdom went up to third position. I do not know what conclusions we can draw from that, and I do not wish to draw any conclusion, but I make the point that price rises have been going on for a long time and we should be careful about making comparisons. We know the reasons and we know the strain on the economy, but we should be careful about the price rises we are talking of. Some prices, for example, have gone down over the last few months while others have gone up.

If prices represent one thing which has happened in the last 20 years and one cost we are paying in our society—which we are all prepared to pay—it is the prolongation of full employment. The mood of society has changed in recent years, and not merely since October, 1964. Society is no longer prepared to accept this as an ever-continuing burden. We are prepared to do something about price rises. Just as prices did not start to rise a year ago so attempts to deal with price rises did not start a year ago. I hope that when the hon. Member for Torrington speaks to audiences in the South-West he will accept my voice as one who knows them very well there and will not mislead them in this way but will remind them that price rises took place from 1959 to 1964, under the last Government, of 14 per cent, to 15 per cent.

I have not been in this House for very long, but in the few months I spent in the old Parliament, the last three or four months under the old Government, I distinctly recall two debates on this subject of the cost of living. We have had only one such debate in the 15 months of this Government. We know the reason for that. It is that over the last year, except in the early part of 1965, prices rose by only 2½ per cent, to 3 per cent., which is less than the rise under the Conservatives in 1964.

I make an allowance for the increases in prices due to taxation increases in the early part of 1965, which I suppose account for about 2 per cent. If that 2 per cent, is left out of account, we see how much better is Labour's record in its first year of office than that of the last year of Conservative Government. Why should we not do this? Taxpayers are still getting the article, although they are paying more for it, and are making a contribution to increased social services which do not figure in the cost of living index. Although indirect taxes do so, such additions to the cost of living index are misleading.

Mr. Peter Walker (Worcester)

I am interested in the hon. Member's argument, but, in his view, were the increased taxes put on by the Chancellor for the purpose of giving increased social services or for the purpose of creating a more deflationary position? If it were the latter, has it failed?

Mr. Duffy

I should say the latter, but it would still have the effect of the first. I hope the hon. Member does not dissent from that view.

Sir Harmar Nicholls

I suppose that I ought to put into words what I was muttering. I was surprised at the sort of argument which says that it is a 5.3 per cent. increase in the cost of living now, but if we deduct the 2 per cent. of taxes the increase is only 3.3 per cent. and if we deduct something else of something else it is down to nothing. That argument seems to be a kind of window-dressing.

Mr. Duffy

Although the hon. Member may think it window-dressing, it is the argument which was used by his right hon. Friend the then Chancellor of the Exchequer the right hon. Member for Barnet (Mr. Maudling) in the last cost of living debate in 1964. He will find the reference in Vol. 689 Of HANSARD in col. 181. I accepted it then and I accept it now.

If we look at price rises in the last year we see that the further we get from the Tory Government which ended in 1964 the more does the price record improve. [HON. MEMBERS: "Oh."] Oh, yes. As the First Secretary told me just before the Christmas Recess, from May to October prices rose by just over 1 per cent. From last spring to the present time prices have held remarkably steadily.

Sir W. Robson Brown

This is a very important point. I agree that prices have not risen so spectacularly until now. It is now that the rise is beginning to show. This has been due to the control by manufacturers and all others who have the nation's affairs at heart to hold down prices against all pressures from all sides, wages, transport and everything.

Mr. Duffy

I agree and I think that because of what the Government are trying to do there is no evidence to contradict the view that I have put forward that prices have held remarkably steadily since the spring of 1965. Our export success is the best proof. We have little room for manoeuvre because of what has been happening in other countries, notably some competing countries. Nevertheless, we could not go on increasing exports as we did last year and establish an all-time record as recently as last December if prices were in the runaway state which hon. Members opposite would have the country believe. If the dam were bursting as the right hon. Member for Enfield, West (Mr. lain Macleod) has said—

Mr. Dan Jones

And as hon. Members opposite hoped.

Mr. Duffy

My hon. Friend makes the point that it seems some hon. Members are anxious to give the impression that prices are going up. But if we look at the prices of food in countries such as France, Germany and Sweden and compare them with those in England, we find that in Paris the French traditionally spend over 50 per cent. of their incomes on the housekeeping budget. On the national radio and television food prices are given, but they are treated as a joke. Germany compares favourably with Britain, but in Sweden as in France prices are astronomical.

I am making a genuine attempt to give a more balanced picture at home as well as abroad, but in trying to do that I have to make reference to the reasons for the spurt which took place in prices in 1965. Hon. Members opposite tried to gloss over the reasons when they were mentioned by my hon. Friend the Member for Huddersfield, West (Mr. Lomas). They seemed unimpressed, but I do not think it can be stressed too often that the reasons for the taxation measures were the consequence of the balance of payments crisis at the end of 1964, and notably the surcharge. When its renewal was debated I opposed it because I want it to be taken off as soon as possible. The remarkable thing is that as a country we have remained so competitive and kept prices so steady, given the surcharge which I intensely dislike.

There is another reason for the spurt in prices during the early part of 1965, namely, the demand inflation, which we also inherited. In some ways I take this more seriously than I do the balance of payments crisis, because when the right hon. Member for Barnet introduced his Budget in 1964, many hon. Members of my party criticised the Budget simply because we thought it was too mildly deflationary, and now, of course, we know that it was. We therefore inherited not merely a balance of payments crisis, but a demand inflation. We now have a cost inflation, and for that we are responsible, but I repeat that we inherited a demand inflation.

Mr. Peter Walker

Surely the hon. Gentleman realises that the White Paper on the economic situation published by the Government a fortnight after they came to power specifically stated that there was not a demand inflation, and that no measures were necessary to deal with it?

Hon. Members

Answer that.

Mr. Duffy

I cannot, because the hon. Member for Worcester (Mr. Peter Walker) has the advantage of me, but I shall look at this matter again. All I can say is that there was no shortage of critics, both outside and inside the House, of his right hon. Friend in the spring of 1964.

The increase in 1964 in the cost of many imported foods only worked its way through to the shops in 1965, and, in fact, some are only now beginning to be felt in the shops. There were a large number of wage increases in the pipeline when the present Government came into power, and these had to be dealt with in 1965. When we came into office the 40-hour week was already on the way, and we now know how that aggravated costs daring 1965. That is not an exhaustive list, but those were the real reasons for the spurt in the price increase in the early part of 1965, and I think that hon. Gentlemen opposite will agree that the implications of them were to a considerable extent outside the control of the present Government.

I am sure that the hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) will agree with me about that, and yet he and his colleagues are proposing to vote against us tonight. They are proposing to vote with the Opposition. I do not see how he can accept my analysis, and still oppose us. He will go into the Division Lobby with the hon. Member for Torrington, who has attacked him and his colleagues. We know why the hon. Gentleman attacked the hon. Member for Caithness and Sutherland. He did so because his main opponent at the General Election was a member of the Liberal Party.

I, too, had a Liberal opponent, but I do not attack the Liberals, and I am sure that the hon. Member for Caithness and Sutherland will bear me out on that. I do not attack the Liberals in my constituency, and I do not attack them in the House, and yet the hon. Gentleman is going into the Division Lobby with someone who, although he has been in the House for only 18 months, has attacked him and his colleagues.

If the hon. Member for Caithness and Sutherland had been in the House a little longer he would have discovered just how often Members of the Conservative Party attack the Liberals. In fact, the hon. Gentleman does not know what it means to be opposed by those with whom he is going to vote tonight. He ought to consult the former Member for Bolton, West.

Mr. George Y. Mackie

I should like to explain to the hon. Gentleman that the Liberal Party looks at each case on its merits and that there is no doubt in my mind or in the minds of my colleagues that we would rather go into the Lobby with an honest man like the hon. Member for Colne Valley (Mr. Duffy)—on a personal basis—than with the nauseating hypocrisy evinced by the hon. Member for Torrington (Mr. Peter Mills).

Mr. Duffy

No doubt if the hon. Gentleman gets an opportunity to do so he will tell us the merits of the Liberal case for going into the Division Lobby with the Opposition tonight.

The hon. Gentleman and his colleagues know of the success which has attended the Government's policies. They know that the balance of payments deficit has been halved, that exports are booming, and that for some months sterling has been above parity with the dollar. They know that we have achieved this while preserving a high level of employment. This is the big difference between the Conservatives and ourselves. The country was faced with a similar situation in 1961, and we know how the Conservatives tackled it, and what it cost in terms of unemployment. Whatever view hon. Members may take of the Government's efforts, I am sure they will at least concede that the Government have managed so far to preserve employment.

Moreover, the hon. Member for Caithness and Sutherland and his colleagues know that our policies have been selective, and have been good liberal policies. They have been so selective that they have paid a good deal more attention to the hon. Gentleman's part of the world than the previous Government did. The Liberals also know that the Government's policies have been carried out in such a way that they have enabled industry to continue to build up productive capacity on which future productivity depends. I do not pretend that a price has not been paid. These policies have been carried out at the cost of production, which must inevitably lead to a rise in unit costs. That has been going on, and is continuing.

Mr. F. A. Burden (Gillingham)

I apologise for interrupting the hon. Gentleman, but there is one point on which I find it very difficult to follow him. He said that increased prices due to Conservative policy had now started to filter through. I would remind the hon. Gentleman that on 11th March last year the Chancellor of the Exchequer said that any increase in taxation must increase prices. If these two facts are added together, it is apparent that we have not yet started to reap the whirlwind of price increases which will result from the policies of the present Government.

Mr. Duffy

I hope that I am not doing the hon. Member an injustice, but I wonder whether he has only lust entered the Chamber. I do not think that he has been present throughout the whole of my speech, otherwise he would not have made that intervention.

Mr. Dan Jones

Would my hon. Friend agree that if the measures now advocated by the Prices and Incomes Board are accepted by both sides of industry there will be no whirlwind at all?

Mr. Duffy

I hope that we shall get this break-through in productivity which we have been promised for so long. There have been many false dawns. We are working with our fingers crossed, just as hon. Gentlemen did two or three years ago, but I am a little more optimistic than they were then. Until we get this rise in productivity, we shall have the cost inflation which is with us now. The Liberals know this. They know the difference between the efforts of the Conservatives in 1961 and their aftermath, and the efforts that we are making now. They know the qualified success which we are having, and yet they are going to vote with the Opposition tonight.

My right hon. Friend the First Secretary has had astonishing success with his policies. We remember the Declaration of Intent, which was a tour de force even for the First Secretary. The Prices and Incomes Board was set up and we have seen the high pressure way in which it has worked, and here I pay tribute to the chairman and members of the Board. I share the hope expressed by the hon. Member for Chelmsford that the Board will not be overworked. It is better that the Board should produce a few good reports in terms of industrial relations on which firms can act, rather than that, because of pressure, it should produce reports which have not been properly thought out, and which are unlikely to be acted on.

The Liberals will vote with the Conservatives even though they know that the Conservatives have not yet made up their minds about incomes policy making, and one suspects that there is a fundamental cleavage in their ranks on this subject. It is not merely that members of the Conservative Party are indifferent to an incomes policy; several hon. Members opposite do not believe such a policy to be necessary. If they do not believe that it is necessary I should like to know what is going on in their minds, because they cannot insist that there is not a need for such a policy now, given the present high level of employment and the present state of the labour market.

They must be thinking that if only we had a higher level of unemployment we would not need an incomes policy. That is probably correct. Professor Paish wrote about this. He said that we probably do need an incomes policy now, although I suspect that he was not greatly enamoured of the idea. In justice, I think that he would say that an incomes policy is more likely to be realised with a level of unemployment of 2 per cent. or 2½ per cent., and that above that level we do not need one at all. I suspect that that is the view of some hon. Members opposite.

Yet the centre in British politics is watching the attempts of this Government at income policy-making more closely than it is watching any other item of Government policy. I got that impression last week, when I met the electors of Hull, North on their doorsteps. I am quite sure that the electors—and not merely those in Hull, North—are prepared to make many allowances for the stumbling that has taken place in incomes policy-making, and which may yet take place. I think that they realise how difficult it is. No other country in the Western world has gone as far in this direction as they would like. We are surely out on the frontier of development, certainly in our industrial relations, and I suspect that many of our people appreciate this and want the Government to persist in their efforts. They will go a long way with the Government in this direction.

This does not mean that criticism cannot or should not be made. It should, and it is. Not all of it has been fair and justifiable. Dramatic success simply was "not on." It is not good enough to say, as the hon. Member for Torrington said, that the Government have done nothing about the cost of living. They have tried. No one could have expected us to do more than we have in the time. I insist that dramatic success simply was not a starter.

Our attention to prices has come in for some criticism, but I cannot see how we could have done otherwise than start with prices if we wanted to break out of the wage-price spiral. Only by starting with prices could we ease the pressure of shortfall wage increases. If we can bring pressure to bear on industrial profit margins we may be able to ease the pressure of shortfall wage increases where it really matters—not at national level or in the high echelons of collective bargaining, but on the shop floor.

I may carry the hon. Member for Worthing (Mr. Higgins) with me in this. He has done more thinking about wage drift than anyone else in the House, and he may agree that it is the biggest single obstacle to incomes policy making. It is the most intractable problem that arises in such policy-making at the moment. That is why I believe that the Government have been right to start with prices. They may be able to slow up and eventually arrest the wage drift on the shop floor.

Furthermore, pressure on industry's profit margins should have the effect of promoting interest in cost-saving innovations. In this and in other ways employers must be encouraged to absorb as much of their increased costs as possible, and not pass them on in the form of higher prices, as some are still prone to do. It has been so easy for them to do so for so long, and with the best will in the world some of them cannot be expected to behave differently now. The home market has been too easy for too long.

Vigorous wage pressure can undoubtedly be a stimulus to increased productivity, and it ought not to be deplored as it is by some hon. Members opposite. I submit, in all modesty, that I have tried to be a little more constructive than hon. Members opposite have been so far—including the right hon. Member for Altrincham and Sale.

Mr. Dan Jones

And my hon. Friend has succeeded.

Mr. Duffy

All this presumes that such a policy does not threaten investment. All the indications at the moment are that business confidence is still strong. This was borne out in the Board of Trade's inquiry into industry's investment intentions recently. The latest Report of the National Institute of Economic and Social Research is very hopeful—and this before the cash incentives scheme was announced.

So the Prices and Incomes Board is quite right to stress productivity and, above all, to seek to match it to income growth. I agree with the hon. Member for Chelmsford about the need for efficiency. I am sorry, however, that he did not show equal concern for social justice, because productivity bargaining by itself—and we are all interested and even fascinated by the attempts that have been made and are still being made in industry in this respect—cannot be an adequate substitute for planning, manpower and social justice.

It is easy to say, "We have to stand up to the railwaymen". I agree that the First Secretary must stand firm in the face of pressure, and even intimidation, from whatever quarter it comes, but, having said that, I go on to point out that right at the beginning of the incomes policy-making by this Government it was stressed that the norm might have to be waived in favour of exceptional cases—and the railwaymen's case may be in this category. We cannot just talk productivity—always assuming that we can define it—in relation to the railway industry, and to the low-paid workers in it. We must have as much regard for social justice as for productivity bargaining. Neither will be easy. In some cases social justice will be even more difficult to achieve than productivity bargaining, but it must not be lost sight of.

If we can do all this on a voluntary basis we shall want to do so, but in my opinion we shall have no choice but to put the matter on a legislative basis if we cannot make it work voluntarily. Our overall economic position does not allow us any choice in the matter.

6.10 p.m.

Mr. Terence Higgins (Worthing)

I rise to support the Motion, because the cost of living is surely the area in which the complete failure of the Government's economic policy is most evident. I hope to cover some of the points made by the hon. Member for Colne Valley (Mr. Duffy).

There has been some discussion of statistics in the debate and some question whether the statistics have been chosen selectively. But every elector and person in the country knows that the rise in prices recently has been at a much faster rate than it was under the previous Administration. The hon. Member for Colne Valley suggests that prices have been going up for 20 years. I put it to him that they have been going up for much longer than that. But it is the rate of inflation which is so important and which I believe that we on this side of the House are rightly deploring this evening.

We should be quite clear at the outset that the responsibility for this must be laid at the feet of the Prime Minister. He created the Department of Economic Affairs in addition to the Ministry which is normally responsible for maintaining the stability of the currency. By doing so, and by failing to co-ordinate the work of the two Ministries, he has been largely responsible for the rapid rate of inflation which we have had in recent months. Therefore, we should be quite clear that the responsibility is first and foremost that of the Prime Minister.

It is also, I would suggest, the responsibility of the Chancellor of the Exchequer, because one cannot hope to maintain price stability unless the Chancellor, by his fiscal and monetary measures, is prepared to maintain a level of aggregate demand which will induce employers to resist unjustified wage claims. It is only if he maintains such a responsible policy that we can hope for anything approaching price stability.

When he came into office, the present Chancellor imposed a number of measures which came into effect only gradually, so there was no immediate incentive for employers to resist wage claims. At the same time, the First Secretary was going about declaring that he would have an incomes policy. It was surely to be expected that, in these circumstances, any trade union which had the interests of its members at heart was likely to put in wage claims earlier and to put in larger claims than it would otherwise have done.

Therefore, in the early months of the Labour Government, there was an increase in wage claims, not controlled by downward pressure on aggregate demand. This combination built up the pressure which, as my right hon. Friends the Members for Enfield, West (Mr. kin Macleod) and Barnet (Mr. Maudling) have rightly pointed out, is now likely to lead to an even faster rate of inflation in the coming months.

We are by no means at the end of this sad tale and it is, therefore, right that we should deplore the Government's failure at this stage and also warn that, on figures like those which the First Secretary gave to a Question of mine recently, we are likely to face a much greater increase in the future.

The policy which the Government are pursuing is entirely irresponsible. They have been so aware of the fact that there is a danger of a stop-go policy when one is balancing on the knife edge between unemployment and inflation that what we have now is not a stop-go policy but a "go-go" policy—"go" with wage claims, "go" with an increase in prices. This is likely to go on until the Labour Party has gone from office.

This is our situation at present. It is particularly unfortunate for a number of reasons, first, because it creates not only problems for export markets, but also very real human problems on the domestic front. We should be particularly clear that there are three groups of people who are particularly badly affected by inflation. Pensioners are always badly affected by inflation. The increases in pensions given soon after the Labour Party came to power are gradually being whittled away.

Also affected are some aged groups, particularly old age non-pensioners, who could have been helped by the Bill introduced by my hon. Friend the Member for Abingdon (Mr. Neave) last Session and by one which will shortly be introduced by my hon. Friend the Member for Honiton (Mr. Mathew). These old age non-pensioners have no protection whatever against inflation and their real standard of living has declined 5 per cent. during the last year.

I hope that this will be recognised by the Government and that they will be prepared to accept the Bill which my hon. Friend the Member for Honiton is to introduce and not resort to the disgusting tactics which were employed when the similar Measure came before the House before. Otherwise, these old people have no way of protecting themselves against the effects of inflation.

The second group are the people trying to buy houses on mortgage. The promises made by the First Secretary before the General Election are notorious. The reason that interest rates have remained so high and it has been necessary to maintain them at such a high level is that which I gave at the beginning of my speech: wage claims have come in so rapidly following the announcement of the incomes policy that it has been necessary to maintain interest rates at a continuously high level, whereas previously they tended to fluctuate up and down. Therefore, it is the Government's own policy which has prevented them from getting anywhere near achievement of their election promise on mortgage rates.

Finally, one should consider ratepayers. Mention has been made of them. They have suffered badly. The rate increase of 14 per cent. this year will probably have grown, at the end of two years of Labour Government—if they are in power so long—to about 25 per cent. This is in the face of a promise from the Labour Party at the General Election that they would give early relief to ratepayers by transferring more of the cost of public expenditure from the rates to the Exchequer.

They have made no attempt to implement this promise. The only excuse given by the Minister of Housing is that this was impossible because of the economic situation. What absolute nonsense. The economic situation is quite irrelevant to a consideration of whether the money comes from ratepayers or taxpayers. Therefore, this group of people have suffered very badly from the effects of inflation and nothing has been done to help them.

The Chancellor has, it is true, tried to reassert his responsibility for price stability while he has been in office, but it has been an extremely naive attempt. I will quote from a speech which he made at Swansea: How long are we going to deceive ourselves into believing that a wage increase greater than the norm will make us better off, if output per man hour only goes up by the 3 per cent.? The difference will take the form of higher prices at some point or other. We might as well take 3 per cent. in the first place and save hardship for those who are unable to get the larger increases. Is this not an incredibly naive statement for a Chancellor of the Exchequer to make? Does he really believe that, if he makes this kind of speech, trade unionists and others will not put in wage claims? If he could tell them, "If you do not put in a claim bigger than this, I will guarantee that the cost of living will not go up", his speech might have some effect. This kind of ear-stroking, this kind of mere exhortation without a sensible fiscal and monetary policy, is completely irresponsible, naive and not fitted to a Chancellor of the Exchequer of this country.

There are several points in connection with the Government's income policy that need to be made clear. It would be a great help to the country if we knew when the policy was supposed to have started, so that we might appraise how successful or unsuccessful it has been. So far, we have been given no starting date to take as a yardstick for this purpose.

The Minister of Labour has made no attempt to provide figures covering "wage drift", broken down into regions and areas. Such statistics would be of immense help to any Government in attempting to succeed in their incomes policy. Unless we get this kind of data we will find ourselves having constantly to rely on figures for wage rates which are not as meaningful in this context. The hon. Member for Colne Valley described the Declaration of Intent as a tour de force, but I would describe it as an unmitigated disaster for the reasons I gave earlier.

It is abundantly clear that while the Prices and Incomes Board is fulfilling a useful function in examining specific claims, it is no substitute for an overall incomes policy as such. It is really a separate exercise. It may, by example and by bringing out some of the principles involved, fulfil a useful purpose, but that in no way exonerates the First Secretary, the Chancellor and the Prime Minister from adopting a responsible overall policy. Nor does it exonerate them from putting into effect the recommendations of the Prices and Incomes Board, because it is the Government and not the Board who are responsible for taking this kind of action.

It is important to appreciate the crucial impact of action in the public sector. The disastrous aspect of the Government's policy is not merely their failure to achieve an incomes policy for the country as a whole, but their failure to stand up to unjustified wage claims in the public sector which, after all, are under their control. The events of the next few weeks, particularly over the railwaymen's claim, are likely to be extremely important because, as the hon. Member for Colne Valley knows, that claim is far above the norm. I do not see, in the light of the Report of the Prices and Incomes Board, how he can maintain that it can be justified as a special case.

Mr. Bence

The hon. Gentleman is talking about unjustified claims. Would he consider that the claim of the British Aircraft Corporation for a £1¼ million interest-free loan of the taxpayers' money so that it could obtain a market in the Middle East for aircraft was justified or otherwise?

Mr. Higgins

That is totally irrelevant and I would be out of order if I attempted to answer the hon. Gentleman. I assure him that I will deal with investment allowances. The system of investment allowances which we had would have been better from the export point of view than the system being introduced.

I come to the points made by the Joint Parliamentary Secretary to the Ministry of Technology. He asked for my hon. Friends and I to explain our policy in this sphere. In view of the disastrous nature of the present Government's policy, I do not know why we are called on to answer at this stage since they are the Government and not us. Nevertheless, it may be helpful to outline what I believe to be a sensible policy from our point of view.

First, we must get rid of certain aspects of the present policy which are bedevilling the whole income policy concept. One is the idea of giving increases in wages on the basis of increases in productivity. If this means that a productivity bargain should be struck, as a result of which restrictive trade practices are removed in exchange for a wage increase, then that is something which we can all agree upon.

However, it is a mistake to extend this argument and to maintain that, whenever productivity goes up, wage increases are justified, for this is to take only a partial view of the process of wage determination. It may be that if productivity goes up one will want fewer higher paid people in a certain employment. One must, therefore, not only consider productivity, but whether more of the articles being produced can be sold to the public at the higher level of productivity. It is dangerous to adhere to a simple productivity argument of the kind the Joint Parliamentary Secretary seemed to have in mind.

It is all the more dangerous if one combines this productivity view with another equally prevalent argument which is based on the principle of "comparability". If one has a 3 per cent. increase in productivity in an industry and, therefore, argues a 3 per cent. wage increase is justified, and then one adopts the idea of comparability—that the same percentage should be awarded in a different comparable industry—the 3 per cent. increase given to both groups of workers becomes 6 per cent., and inflation results. We must, therefore, not only take a sophisticated view of the productivity argument, but also get away from the idea that the justification for a wage increase in a particular industry is that a wage increase has been given in another industry which is said to be comparable.

It is crucial to understand—and I suggest that this could form the basis of a reasonable incomes policy—the importance of the question whether one wants to attract more people into an industry or encourage them to go to another industry which is making goods the consumers want more. We must make it clear that a wage increase is justified in order to attract people into an industry, and that no increase is justified if we wish to encourage people to move elsewhere. This should be the heart of an incomes policy.

I do not think that there is any difficulty in reconciling the views which all my hon. Friends hold. We agree, in contrast with hon. Gentlemen opposite, that one must maintain a sensible monetary and fiscal policy before one can hope to achieve an incomes policy and that the incomes policy itself is concerned with the question whether one wishes to attract labour into one industry or to attract it to another.

Increases above any norm are justified if there is clearly a shortage of a particular kind of labour. It seems absurd that when we have the undermanning which now exists in the police force, and the resultant difficulties of attracting people to the force, wages in this service are not increased. There is an entirely justified case for an increase. On the other hand, if, in another industry, there is no shortage of labour, the Government should—particularly in their own sector—state that no increases are justified, regardless of what is happening to earnings in similar industries.

I appreciate that I have expressed a very Right-wing view, but I am sure that it is the only way to break the wage price spiral in which the country has found itself in successive periods. To illustrate my point, it sems certain that, from a regional point of view, we must get away from the concept of national wage agreements, for at present, if there is a shortage of labour of a particular kind in, say, Birmingham or London, that shortage is being used to raise wages in other areas—say, the North-East or the North-West—where there is no such shortage. Inevitably, national labour agreements are, therefore, inflationary. I believe that we must get back to a regional incomes policy rather than an overall policy based on national wage agreements—

Mr. Geoffrey Howe (Bebington)

Would not my hon. Friend agree that the two halves of his argument can be closely linked together; that for the police themselves one needs a much more sensitive regional policy so as to attract police to the areas where there is shortage?

Mr. Higgins

I am grateful to my hon. and learned Friend, and I entirely agree with him. I trust that the House will follow the argument I was trying to outline.

I want to deal with the question of regional policy, because the whole heart of the dilemma in regard to the cost of living has been that whenever we have increased aggregate demand in order to cure unemployment in some areas, prices have risen in other areas, such as London and Birmingham. On the other hand, when we have taken deflationary measures, before we have stopped inflation in London, Birmingham, and so on, we have created unemployment in, say, the North-East and the North-West. It is this regional imbalance that we need to stop.

I think that a regional incomes policy would do much to help in this situation. It is also true that the Conservative Government were right to introduce investment allowances, which attracted firms to the areas which were typically places of high unemployment; and also to increase investment which was likely to increase productivity and, therefore, ultimately justify increase in real wages throughout the country. I want to make quite clear my view that the system of cash grants which the Government are proposing to introduce is not likely to be anywhere near as beneficial as the measures which we on this side introduced when in office: first, because the impact of the original allowance has been diminished to a considerable extent by the Government's Corporation Tax; and, secondly, because the cash grants will go to all firms regardless of whether they are profitable or not.

It seems to me that a system where the profitable firm benefited but the unprofitable firm did not was the right approach. We want to encourage the profitable firms—profitable either because they are efficient or because they are meeting the increasing demand of consumers, or both—but we do not want to encourage firms that are either inefficient or are not meeting the demands of consumers.

It was argued against our tax allowances that they could only with difficulty be calculated by firms. I think that this difficulty has been over-estimated. The new cash grants will go to all firms, whether they were capable of calculating the benefit of the previous allowances or not. But we were surely right to encourage firms that had managements sufficiently efficient to calculate the benefit of depreciation allowances. We will not get any stabilisation of prices if we give cash grants to firms which cannot even calculate the advantage of tax allowances or even do not have the good sense to employ an accountant to do it for them.

These arguments are even more true in regard to development districts. It is there that we want more efficient firms, more profitable firms and well-managed firms. We do not want unprofitable firms that are badly managed.

The Government propose to hand 40 per cent. cash grants to firms in the development districts, even if they are unprofitable. I may be a little suspicious, but I think that if we give 40 per cent grants to unprofitable firms is may be rather easy, if the Labour Party ever has a larger majority, for the Government to say that these firms have been helped by the Government, they have "failed the nation" and should be nationalised. That view is reinforced by the proposals made in the last few days by the First Secretary in regard to the Industrial Reorganisation Corporation.

We cannot hope to maintain price stability unless we can get the most efficient industry possible, and I do not believe that this Corporation will help the country to become more efficient. The argument advanced by the First Secretary was that this body would enable mergers to take place that would not otherwise take place, and help firms that might otherwise have difficulty in getting sufficient capital is unconvincing. If there is any imperfection in the capital market or in management it is not, I think, in the field of obtaining capital for large firms or facilitating mergers.

Here, again, there is a real danger. It is true that this will not be nationalisation by the back door—this was denied by the First Secretary—

Mr. Eldon Griffiths (Bury St. Edmunds)

The side door.

Mr. Higgins

My hon. Friend says that it is nationalisation by the side door, but I think that it comes a great deal closer to nationalisation by the front door. I do not believe that any move towards more nationalisation—a thought that appears to be firmly in the minds of the party opposite—is likely to result in the kind of industrial efficiency and wage structure that will enable the Government to pursue a policy of price stabilisation.

In short, I believe that we are absolutely right to deplore the Government's performance in this field of price stabilisation so far. We are equally right to be suspicious of their likely performance in the future, because their measures and their whole philosophy afire inflationary and will remain inflationary until such time as they are removed from office.

Mr. Speaker

Order. The last two speeches have taken over an hour between them. I hope that hon. Members who are called will remember their colleagues who are waiting to be called.

6.35 p.m.

Mr. Norman Buchan (Renfrew, West)

I shall not seek to detain the House at great length, Mr. Speaker.

This discussion has ranged very widely, and I do not intend to follow all the points raised by the hon. Member for Worthing (Mr. Higgins). But there have been one or two disturbing things about the debate and, in particular, the concentration which has been put on the prices and incomes policy from one point of view only. Speech after speech from the other side has referred to the need to be tough with, for example, the railwaymen, but there has not been one speech to say that if the prices and incomes policy is to work it must be based not only on economic efficiency but on elementary human justice.

The hon. Member was, perhaps, getting on to that point when he said that it was also a human problem, but in referring to this being the crux when dealing with the railwaymen's position in a few weeks' time I do not think that he really saw it as a human problem.

While I accept that a wages and prices policy is necessary, I do not think that the kind of prices and incomes policy envisaged by hon. Members opposite will produce either the kind of efficiency, investment, and so on, that they anticipate, or the kind of co-operation from the people from whom productivity must come. The Tories, of course, have a prices and incomes policy. They had their own prices and incomes policy working very well for a long time, and I shall quote some figures which are very interesting and important, because the policy operating during that period is also a blueprint for the future.

The kind of society that was emerging in that period, and the imbalance in terms of wealth and the ownership of wealth, is a kind of blueprint in line with their policy statements for the future. The "pacemakers' society" is based on that concept. When we examine the period 1954–62 we find that the top 6 per cent. of incomes amounted to more than the bottom 40 per cent., representing nearly half the people. This was after taxation [Interruption.] The hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) always gets to the heart of the problem. Therefore, despite all the talk about the use of fiscal measures—taxation, etc.—to produce a more equitable society, it was producing an increasing disparity in wealth.

Breaking it down even further, the top 3 per cent. had nearly 12 per cent. of the total income. So the Tories had a prices and incomes policy very much in line with the kind of pacemaker policy which is advocated in their current policy statements. We cannot tolerate that, because in the twentieth century mankind is concerned with more than the economically efficient.

Now a tough line is advocated by hon. Members opposite to the railwaymen's claim. Those Members include intelligent economists such as the hon. Member for Worthing, some of the crude Right wing of the Tory Party, and also isolated liberal elements of the Tory Party such as the hon. Member for Chelmsford (Mr. St. John-Stevas). They have all been asking for a tough line towards the railwaymen. But we must have a balance between social justice, on the one hand, and the country's needs, on the other, rather than a show-down line, which is basically what is demanded by some hon. Members.

Mr. Burden

The hon. Gentleman has been quoting some figures. The House would be interested to know the source of those, figures.

Mr. Buchan

The source of these figures, as always, is the Library. They are based on the National Income Blue Book, table No. 21. There are also the Retail Prices Index, the Consumer Average Prices Index, and so on. I have some other stuff from the Library. The Library is a most interesting place. Hon. Members opposite should consult it a little more often.

Mr. Burden

The Library merely provides the information. It does not provide the source.

Mr. Buchan

It enables me to use the information in the House and to ensure that the public is given the information, because if some of these things were more well known there perhaps would not be this discrepancy in wealth.

Mr. John Biffen (Oswestry) rose

Mr. Speaker

Order. Before the intervention, may I say that I hope that we shall not continue discussing the Library. There is a Motion before the House.

Mr. Biffen

Perhaps the hon. Gentleman would be kind enough to say whether the figures he quoted relating to the distribution of wealth came from an article written by someone else or whether he has a reference to the original source.

Mr. Buchan

The source is table 21 of the National Income Blue Book, 1962. The table here shows the personal incomes between 1954 and 1962. It appears in an article by an Oxford economist, Mr. John Hughes. I hope that that answers the hon. Gentleman.

I was discussing the attitude of hon. Members opposite. Two factors are involved when considering the cost of living. Hon. Members opposite say that it is governed entirely by wages. However, I remind the House of the title "Prices and Incomes Board". In my innocence I have always thought that the cost of living is somehow related to prices, but hon. Members opposite assert that prices do not enter into it and that only wages are involved. One of the contenders for the leadership of the Conservative Party—I never remember constituencies; this is one of my problems—I will refer to him as the shadow Foreign Secretary.

Mr. Michael Foot (Ebbw Vale)

The right hon. Member for Barnet (Mr. Maudling).

Mr. Buchan

I am obliged to my hon. Friend.

The right hon. Gentleman has said that: The failure of the Government's prices and incomes policy lies in their actions and inactions whereby prices have been held down while costs continue to rise. Therefore, apparently prices is the answer; prices are allowed to rise and then by some magic costs can be brought down. I cannot follow that one. If prices are allowed to rise automatically, apparently the cost of living will come down. No doubt we shall hear the answer later.

Hon. Members have asked for toughness. Will hon. Members co-operate in securing toughness about price control? This is where some toughness is needed. It can be done. The hon. Member for Chelmsford, when he was challenged about which dividends he would refer to the Prices and Incomes Board, said that he could not say. He was then asked which prices he would refer to the Board. We were then told that care must be exercised; a whole deluge of prices could not be unloaded on the Board, we are told, because it could not cope with them.

But this is done in other countries. The system exists. It happens elsewhere, so it can be done here. For example, Denmark has a Monopolies Control Authority, a system under which there is an obligation to obtain advance approval of prices of many types, including the prices of wholesale materials, such as building materials. In France, there is in existence a very rigid price freeze system which they have been freeing bit by bit as the free economy has developed since 1956. However, in fact the system still exists of a very competent and not too complicated price freeze system.

Mr. George Y. Mackie

Denmark had the highest rise in the cost of living of all European countries in 1964–65.

Mr. Buchan

Of course. This is not the point we are making. The question is whether such a system can be introduced.

France, too, had a very heavy rise in the cost of living, but it nevertheless has a competent system which operated until it began freeing itself from the system as it existed up to 1956 by making exceptions from the system. It is not the practical application that we are discussing but its practicality and feasibility. The system is in operation. I shall not argue that the French example of a free economy should operate here. We are trying to prove the feasibility and the possibility. In Norway, almost half the commodities that are brought into the price index are brought under one form or another of price control, either profit control or some other control. Therefore, prices can be controlled.

Hon. Members opposite demand toughness towards the railwaymen. I have seen this attitude adopted in my profession over the last week or so in relation to Scottish schoolteachers. It should be remembered that this can operate both ways. It is time that some teeth were put into the Prices and Incomes Board by applying it also to prices, not merely to wages.

I promised to be brief. I have been brief. I exhort hon. Members opposite, who tell us that exhortation is no substitute for fiscal policy, to join those of us who advocate the operation of fiscal measures by a real price control system. Then they will be happy. I shall be happy. No doubt the Government Front Bench spokesman who will reply tonight will also be happy if we control the economy in this way, remembering that social justice can depend upon price control and remembering that wage demands referred to the Prices and Incomes Board should also be settled within the criterion of justice as well as raw economic efficiency.

6.48 p.m.

Mr. Edward Gardner (Billericay)

I do not in any way wish to impugn or criticise the sources which the hon. Member for Renfrew, West (Mr. Buchan) has just relied upon, but it has seemed at times, listening to the debate, as if some hon. Members opposite rely upon academical and statistical sources rather than what, in fact, can be easily found out by anyone who cares to move out of Westminster and go into some of the constituencies which surround London.

This is where the truth can be found of the problems created by the rise in the cost of living. Let there be no mistake about it. I am sure that no one in the House will think I exaggerate when I say that the feeling about the rise in prices has produced some of the most bitter frustration which has been felt by people in this country for years.

Let no one mistake the way in which the electorate can remember promises made at a previous election. One of the firmest and clearest of promises made by the Socialist Party in its election manifesto in October, 1964, was a promise to check the rise in prices and to attack the problem at its roots. This, presumably, was one of those instant policies which the First Secretary of State promised would surprise us by Christmas—referring not to last Christmas, but to the Christmas before. What has surprised us is not the rise in prices under the Socialist Government, for this was to be expected, but the rapidity of the rise.

The only statistic which I shall impose upon the patience of the House is this. I agreed with the Parliamentary Secretary when he said earlier today that the problem of rising prices is one which must be tackled by any Government and it had given all Governments trouble. But when we were in power, for 13 years, the average annual rise in prices was a little more than 3 per cent. When the Socialist Party was in power last, between 1945 and 1951, the rise was more than 6 per cent.

It is no good hon. Members opposite saying that this is a problem which we all have and, as one hon. Member put it today, there is no dramatic or quick solution to it. If they knew that, as they must have done, how on earth did they come to give an undertaking to the electorate in October, 1964, that they had in their possession some magic formula which would solve a problem which they now admit is very nearly insoluble?

Mr. Patrick McNair-Wilson (Lewisham, West)

Deliberately misleading.

Mr. Gardner

It is misleading. Since this Government came into power, prices have risen fast, furiously and mercilessly, like a beanstalk, only this time none of us, including Jack himself, will be all right in the end. Moreover, this dramatic rise in prices has been accompanied by a dramatic pageant of events which never happened. One seriously wonders whether the promise to solve this problem of rising prices is another of these "nonevents", like the visit of the Parliamentary Secretary to the Ministry of Pensions and National Insurance to Hanoi, which never happened, like the Commonwealth peace mission which did not take place, or like the recent visit to Salisbury by the Secretary of State for Commonwealth Relations, which never happened.

Is their promise somehow to solve the rise in prices another non-event like the investment by trade unions in Fairfield's or the promise that the power supply problem would somehow be solved by the Winter Emergency Committee?

Mr. Burden

Or 3 per cent. mortgages.

Mr. Gardner

Or 3 per cent. mortgages and many other things of that kind.

The people are being treated as though they were an audience promised a wonderful show. The footlights go on. The orchestra begins to play. The compère comes on the stage, smoking his pipe. Although he may not look like everyone's favourite uncle, he manages somehow to give the impression that he will not really do a great deal of harm, and this impression is strengthened by our noticing that his left hand is, apparently, tied behind his back. Within a moment of promising a superb performance, he has to tell the audience that, owing to circumstances which are entirely the fault of the previous management, the show cannot go on, but, so that none of us will be disappointed, he has arranged an even better show which will take place tomorrow, or next year, or in a decade.

The curtain never rises. But we know what lies behind. If ever it did rise, we should see what has so far been hidden from our eyes, an empty stage, without scenery, without merit, without hope. Of course, the Government will prevent our being embarrassed by the embarrassing spectacle of a naked non-event.

Statistics are only a dull reflection of the realities and serious consequences created by the rising cost of living. I prefer to relate the problem to what anyone can find out by travelling in the Home Counties and talking to people there. I speak of the Home Counties because my own constituency is in the Home Counties.

I do not for a moment pretend that I could address the House with interest or with authority on statistics. Whether I can ever address it with interest is, perhaps, debatable, but I say with no immodesty that I can tell the House with authority—I think it relevant that these things should be said because some hon. Members on the Government Front Bench do not know—what the people who live within 30 miles of this City are feeling and saying today about the problem of the unchecked rise of prices.

I do not wish to make a constituency speech. That would, obviously, be offensive, and I am not doing so, but I think it right and justifiable to relate what I have heard to a particular part so as to give it proper importance in its context and also to put to the House what is being said in the place I happen to know well. Incidentally—I do not boast about it—there are more people living in my constituency than in any other constituency in the country. Obviously, it is a very good place to live in.

What is being felt and said in my constituency is being felt and said by millions of people in the constituencies around London. Young and old alike have one serious constant complaint, and that is about the cost of living. We all know this. In housing, they now find—they did not find it a year ago or two years ago—that prices are moving out of sight of their means. Mortgage interest rates have reached the record high level of 6¾ per cent., but only the day before yesterday I had two young people complaining to me that they were being asked to pay more than 7 per cent. on a mortgage. The prices of food, electricity, coal and essential services have all rocketed up.

Many of these people commute to London every day and when they have paid for the increased cost of living in the constituency they have to find extra money for increased fares on trains, buses and tubes. In addition, this is just about the time when they are faced with the biggest demand for taxation on their personal incomes—bigger than they have ever had before.

Among the old people living on pensions, the continuing topic of conversation is round the question, "What are we to do?" They say that, on the one hand, they have been given an increase in pensions by the Government, but that during the whole year afterwards it has dwindled in value. What of those on fixed incomes whose capital is monthly going down in value? Many of them find that the money they once thought would carry them through will not do so after all.

What about those who have no pensions—people who are now in their eighties—many of whom have no means and who are too proud to ask for National Assistance? Could not the Government begin to think about helping these people? They have not many years left. Could not something be done for them? The Government contains people who have boasted that they have more or less an exclusive concern for people of this kind, so surely something can be done. Is it not shameful that there is a complete and apparent neglect by the Government to do anything to assist these people.

The country, instead of getting a solution to the rise in prices, is being fed on a daily diet of headlines. The Prime Minister and the Government know, and the country is beginning to learn, that the daily manufacture of headlines is no substitute for sound Government. When the Prime Minister decides—I hope that it will be soon—to go to the country [HON. MEMBERS: "Hear, hear."]—and after tonight's result it might be sooner than some hon. Members opposite would wish—I hope that the voters will bear in mind the words of Prospero: Our revels now are ended; these our actors, As I foretold you, were all spirits, and Are melted into air, into thin air. I hope that the country will never again follow this fantasy of unfulfilled promises to appear.

7.3 p.m.

Mr. Cyril Bence (Dunbartonshire, East)

I have listened to many debates on prices and incomes over the last 15 years. The dramatic interlude to which we have just listened was a wonderful performance by the hon. and learned Member for Billericay (Mr. Gardner) and I congratulate him. He must have done a course at drama school rather than at a school of economics. He obviously had good training. I enjoyed his language. I thought that his gross exaggerations were good for the hustings and typical of the 19th century. But I do not think they could be compared in any way with the meritorious contribution of the hon. Member for Worthing (Mr. Higgins).

From time to time, when I read the economic history of our country in the 18th and 19th centuries, I am always amused by the revelation that in those years in which there was widespread poverty and suffering prices were falling, according to the economists. The prices of grain and leather and all sorts of things fell, but the Liberals went on with free trade and an unregulated market and we had tragedy. Then in came the progressive Tories calling for a regulated market and we got a period when prices rose. The history of such an era was of prosperity because prices were rising. Then we came to the terrible slump in the early part of the 20th century when people finally got fed up with the unregulated market. Indeed, not even the Liberals now believe in an unregulated market.

Mr. Biffen

If the hon. Gentleman heard his hon. Friend the Member for Renfrew, West (Mr. Buchan) he will remember that there has been some interest in sources. Could he now help us by quoting the source of this economic history he is relating?

Mr. Bence

The source of the history of the years of prosperity under the Tories in the 19th century comes from the Tory Party and the reports of the years of prosperity under the Liberals come from the Liberal Party.

The Conservative Party took office in 1951 having convinced the people that, after six years of Socialism, the Conservatives would mend the hole in the purse. There were posters all over the country showing a purse with money running through it. Thirteen years later, a period during which there was an incomes policy from 1960 onwards, we found that the average increase per annum in the cost of living was between 3 and 4 per cent. I well remember that, at one time, there was the unfortunate phenomenon of the price of potatoes beginning to fall, for example. The price of barley also began to fall at one time, as did even meat prices. I recall the awful row because tomato prices were going down. There was a demand for quotas to be put on imports to prevent prices falling. Indeed, whenever there was a tendency for temperate zone foodstuffs to fall in price there was lobbying for higher tariffs. The hon. Member for Devon, North—

Mr. Peter Mills

I am not the hon. Member for Devon, North, but for Torrington.

Mr. Bence

I beg the hon. Gentleman's pardon.

I met some farmers recently and they were protesting most strongly that both this Government and the last had expected them to produce more and more for the same income. If they increase their productivity they want an increased income. I am sure that the hon. Member for Torrington (Mr. Peter Mills) would support them in their claim that their income should be raised to match increased productivity, but the hon. Member for Worthing must be careful because he will have all around him hon. Friends supporting the N.F.U., which is demanding a proportionate increase in incomes.

Dame Patricia Hornsby-Smith (Chislehurst)

That is exactly what the trade unions are asking—that they should have a share of any increased productivity in wages.

Mr. Bence

I am glad that you have saved me the trouble of saying so.

Mr. Speaker

Order. I would never save any hon. Member.

Mr. Bence

I beg your pardon, Mr. Speaker. I should have said that the right hon. Lady has made the point.

The hon. Member for Worthing was criticising the trade unions for asking for increased wages based on increased productivity. But that is what the farmers intend to do. I do not argue the merits one way or the other, but the hon. Member for Worthing, and those who said "Hear, hear" when he made that point, will have to support the Minister of Agriculture when he tells the farmers that they have to increase their productivity without necessarily proportionately increasing their incomes.

Mr. Higgins

The hon. Gentleman has not quite correctly paraphrased what I said. I was simply arguing that productivity alone was not sufficient.

Mr. Bence

That does not get away from what I was saying. For 13 years there has been an effort to regulate the market and at least to bring some stability into prices of commodities and services without intensive deflation. It is a delusion to believe that it is possible to move from the old system of the free market and fiscal policy and intensive deflation to relieve pressure on the market to the modern system in a very short time. The old system operated before Keynes and operated in 1922, when there was the great deflation in currency, a reduction in the quantity of money leading to a reduction in pressure on the market and thence to the terrible slump with falling prices and mass unemployment, poverty in the midst of plenty.

Governments have learned from those years that the old technique of stabilising prices cannot be applied again and that no modern society can stabilise price levels through the operation of the market.

Mr. Burden

That is what the hon. Gentleman's party promised at the last election.

Mr. Bence

One cannot with certainty stabilise price levels over a period. What one can do and what we have said would be one of our first priorities of economic action is to try to achieve that very objective, but I have never believed that any Government could achieve it in 18 months, or even in four or five years. This is a great change from the old concept of the free market. What we can do is to achieve reasonable stability in price levels if all of us, in whatever job we do, in the factories and the workshops and on the farms, or in whatever services we give, increase our output and so put more and more goods on the market. Some items will rise and some fall, but at least it would be worth giving a long trial to the techniques employed by the previous Government and the present Government so as to get reasonably stable prices without resorting to the old fiscal policies of devaluation and revaluation.

Mr. Burden

If the hon. Gentleman is correct, he must agree that the Gov- ernment must not increase taxes. On 11th March last year, the Chancellor of the Exchequer said that to increase taxes automatically increased prices.

Mr. Bence

We spend £2,000 million a year on defence, an enormous figure. The hon. Gentleman says that to reduce prices we should reduce taxation and leave more purchasing power in the hands of those who go to the market place. But if taxes are to be lowered, some expenditure must be cut. I am in favour of cutting a great deal of expenditure, but we have to decide where it is to be cut. If national expenditure is reduced by £100 million a year and taxation is reduced by £100 million a year, the same amount of money is in circulation so that there is the same pressure on the consumer market.

If our export drive is successful and productivity increases and more and more goods are sold not in our own markets, but in foreign countries, purchasing power in this country will increase and the prices of the goods to match that purchasing power will tend to rise. These are the problems and are among the phenomena of our modern age. These are the problems we have to solve, whichever party is in power, and they will not be solved within the next decade.

While these problems are in course of solution, prices will tend to rise. I only hope that the rise will not be too rapid. We never promised that we would bring prices down or stop them from rising. We promised that we would do everything we could to keep them down. The increase over the last 15 months has been about 5.3 per cent., which is only about 1 per cent. more than it was in the preceding 15 months under the last Government.

Mr. Burden

The hon. Gentleman's party has hardly started yet.

Mr. Bence

The hon. Gentleman should not make prognostications. That is always a dangerous thing to do. If I were to read some of the literature published by the Conservative Central Office between 1950 and 1959, there would be a long story of broken promises. I remember that Sir Winston Churchill said that he would never preside over the dismemberment of the British Empire—a famous phrase—and the Tory Party wants to forget what it used to say about the hole in the purse.

Hon. Members opposite are concerned that the prices of the products which their businesses produce should be kept up so that they can get good dividends, but they want prices of the raw materials which they buy to fall or remain stable. That is human nature and I do not complain of it, but they should not complain about Governments which have to try to harness these divergent interests and resources and to regulate the market, as everyone wants. I think that only the right hon. Member for Wolverhampton, South-West (Mr. Powell) wants a free market, but the farmers do not want it and the big manufacturers do not want it.

If we are to have a regulated market, there have to be disciplines, from the office boys to the chairmen of directors. There have to be disciplines right through the economy so that we can get that stabilisation which I believe is essential. For many years we have been living beyond our income. There have been concessions for years to anyone and everyone. The time has come when the Government have to be strong, right through the economy. We have to earn our living and we have not been doing so.

During the last year of the last Administration we ran up an adverse balance of payments of nearly £800 million. We cannot do that again. We all know that. In Europe and in various other parts of the world people knew what was happening. We must remember that the party in power was spending those 10 months not in governing the country, but in electioneering. The Leader of the Opposition said so at the time. He said that his party must be concerned in the next 12 months with electioneering, with winning the confidence of the people. While this was happening, the country was "going to pot", and we built up this huge debt of £800 million.

Let us make no mistake about it, everyone has to pay for that little stunt. The people have to pay and they are paying for it. We are all paying for it. In my view this Government have been very steadfast, direct and forthright and very successful in restoring confidence among people all over the world, in assuring them that we are determined, within this new world concept, to regulate markets, to get some stabilisation in our price factor, to get some stabilisation in our incomes and to try to stop the spiral of wage demands and price rises, although very often the price rise comes before the income demand.

My right hon. Friend has made a declaration of faith and hope that we can achieve in a longer term this policy of prices and incomes stabilisation. If this does not succeed, either under this Government or some other Government we will have to go back to the sordid efforts of the Liberals in the 19th century and use fiscal policy to drive people down into the sort of despondencies that we had in the 19th century.

7.22 p.m.

Lieut.-Cmdr. S. L. C. Maydon (Wells)

The hon. Gentleman the Member for Dunbartonshire, East (Mr. Bence) went back a long way in history. Like good old soldiers and good old trade unionists he is very fond of fighting today's battles in the terms of last year's campaigns or, as he did, in the terms of the last century's campaigns. I would agree with only one thing which he said towards the end of his speech, when he wished that the Government would be tough. We have had a lot of talk about prices and incomes and the Prices and Incomes Board. It is time that someone paid a tribute to that body which is doing a very difficult job with consummate skill. I wish that the Government were doing their side of the job with equal skill.

People talk about being tough with the railwaymen, being tough with this claim and that claim. I want to see a Government who have the courage to say, "A plague on all your houses, we are going to be tough with the lot of you." Then we shall start getting somewhere. We need a Government who have the courage to say that it is not a question of a claim but one of no money at all. We shall not get the country out of the mess that it is in today nor begin to see any results until that is done.

When historians come to write the history of this political generation they will note five inevitable consequences of each Labour Government in the United Kingdom. First of all, an international crisis in confidence; secondly, increased taxation; thirdly, and following closely on the heels of this, inflation, and the increased cost of living which follows that, and lastly the reduction in voluntary saving. All of these things are very bad for the economy. The honest stalwarts of the Labour Party in the past admitted this quite openly. I refer to people like John Strachey and Stafford Cripps. They knew that these were inevitable consequences of Labour policies. Within a month of taking office the Prime Minister referred in this House to a new crisis of confidence which had aggravated our economic position and caused the Government to raise the Bank Rate in order to protect sterling. In a year taxes, postage costs, insurance contributions have risen by about £1,000 million.

Now we are all expecting more to come in April. We have a wages-prices spiral and instead of the much-advertised norm of 3½ per cent. we are certainly getting 8 per cent. and some estimates talk of 9 per cent. or 10 per cent. There is every sign of further lack of restraint, and there is also every sign that this much talked of prices dam is going to crack and burst at any moment. Whichever way one likes to look at the Labour Party record this is true. I do not take this present Government's record alone. Let us go back to the end of the last war. In the last five years of the previous Labour Administration the Retail Prices Index rose 38 points, an average of 7.6 points each year. That rise of 38 points was precisely the same as the rise in the first 11 years of the Conservative Government which followed.

The annual rise under the Conservative Government in those 11 years was 3.5 points per annum, less than half the previous rate of rise. If one takes the whole 13 years of Conservative Administration the cost of living went up by 50 points, which was 3.8 points per annum overall, precisely half the rate of rise of the previous Administration. Now, in these first 13 months of Labour Government we have a rise of 5.7 points, a 4.8 per cent. rise in the cost of living in the first 13 months, and this after all of those promises which Labour made at the time of the last election.

Savings are the other side of the coin because if costs and prices go up people have not got so much to save and they cannot invest in National Savings. When one examines National Savings during our Government's Administration they were more than £200 million a year on average. In the first year of the Labour Administration National Savings have gone down by £26 million. This is bound to happen. These are the things which both Stafford Cripps and John Strachey, and other courageous men who believed in the party opposite, put their fingers on. They knew about it, they wrote about it, they spoke about it. In the words of the 1964 Labour Party election manifesto: Labour is ready. Poised to swing its plans into instant operation. Impatient to apply the 'new thinking' that will end the chaos and sterility. I ask hon. Members opposite: what have we got today? Industrial production is stagnant. We are told one thing today and something different the next, as is illustrated by one of the motor manufacturers in his telegram to the Prime Minister about the gas shortage in the Midlands. The position is chaotic. All that I can say is that if the Labour Party was ready, it took a mighty long time to swing these wonderful plans into instant operation, despite what the Prime Minister said at Glasgow on 2nd October, 1964, just before the last election about his dynamic, exciting, challenging plans.

How the Prime Minister likes that word "dynamic". It is rapidly becoming a very over-worked cliché. I prophesy that by the end of this century the writers of the new Oxford Dictionary and the new Fowler's Dictionary of Modern English Usage will insert a little note on "dynamic". They will say something like this: "A modern colloquial meaning; something which does not go off; a damp squib; origin: the Labour Party's manifesto of the 1960s".

It is easy to bandy statistical figures across the House. We have had plenty of them today. But let us consider the matter in human terms and think of what happens to an ordinary family. The national expenditure survey figures for last year showed that in 1964 the weekly expenditure on goods and services for a man, wife and child with a gross income in the £25 to £30 a week bracket was £22 8s. If we apply to that the current rise in the cost of living, that man and his family in 1965 would have been, and probably is today, spending £23 9s. 6d. a week, a rise of £1 1s. 6d.

Mr. Marsh

I am sure that the hon. and gallant Gentleman would not wish to mislead the House, but when he refers to the increase in the cost of living which has occurred in the previous year for this family, does not he think that he should take into account increases in wages and salaries?

Lieut.-Commander Maydon

But the complaint is that wages and salaries are not keeping up with the cost of living. Naturally one could compare wages and salaries. We do not know what work this man was doing or whether his wife had a job. The gross income of that family was in the £25 to £30 a week bracket. If those figures are projected to the present time, that family is £1 Is. 6d. worse off than it was in 1964. Something must burst. Either the family's budget bursts or the Labour Government bursts. After we have seen what happens in Hull, North tonight, we shall know which will burst first.

7.35 p.m.

Mr. James Wellbeloved (Erith and Crayford)

As the most recent Member of this honourable House, I have been reading the newspapers over the last week with great interest and expecting to come to this debate today and hear a vigorous new attack on the Government by the party opposite. What have we had?—a dismal, turbid, ridiculous, "phoney" attack supported by about six or seven Members who are now on the benches opposite. This is the much heralded Tory attack on the Government. I only wish that the electors of Hull, North could have been here to see what is taking place.

Like the hon. and gallant Gentleman for Wells (Lt.-Commander Maydon), I wish to deal with a few statistics. I agree with him entirely that it is very easy to bandy statistics about, but this is what is being done, here and in the country. From October, 1963, to December, 1964, the cost of living increased by 5.5 per cent. Taking a comparable period, from October, 1964, to December, 1965, the cost of living increased by 5.7 per cent. Hon. Members opposite can, therefore, say with glee that the cost of living has risen by .2 per cent. Take another set of figures. From December, 1963, to December, 1964, the cost of living went up by 4.8 per cent. From December, 1964, to December, 1965, a comparable period, the cost of living went up by 4.5 per cent., a decrease of 0.3 per cent. We on this side of the House can put these figures forward with equal glee.

I want to quote another set of figures to show how stupid and futile it is to use percentage increases in the cost of living in political argument. From November, 1963, to November, 1964, the cost of living increased by 4.8 per cent. From November, 1964, to November, 1965, the percentage increase in the cost of living was exactly the same, 4.8 per cent. Therefore, we get nowhere by making these ridiculous comparisons. If there is very much difference in the figures for a comparable period of 12 months between the two Administrations it is so small as not to he worthy of discussion.

What we have to consider are the serious implications of what has taken place under the administration of the Conservative Party and what is taking place under the administration of the Labour Party. I think that it was the hon. and learned Member for Billericay (Mr. Gardner) who said that we should consider this matter from the point of view of how it affects ordinary people. Indeed we should. Let us see how the cost of living of pensioners, widowed mothers and the 10s. widow has been affected by the activities of this Government. It has been affected very favourably. The 10s. widow has had an increase in her pension to 30s. Let right hon. and hon. Members opposite go out and tell these fundamental truths to the people. Of course they will not. They would rather follow the lead of the right hon. Member for Enfield, West (Mr. Iain Macleod), with his famous statistics on television.

Let us take pensions generally. Does anybody say that the old age pensioners have not had tremendous assistance to deal with the cost of living when they have received the second biggest increase they have had since the war? Let me remind the House that the biggest increase was made by the first Labour Government after the war. What about the forthcoming rate relief which will have a fundamental effect on the cost of living of old people when the rate relief Bill is in operation, providing that the party opposite allow us to get it through in time for this year's rates? I will return to this matter because I come from a London borough and I want to say something about the effect of the Tory Government's Greater London Act.

I wish to say a few words about the cost of living as it applies in real human terms to a man I met in my constituency during my by-election campaign in November last year. He worked on the railway. He had been paying 16s. a week in prescription charges. If anyone doubts that, he should see this man. His cost of living has been fundamentally reduced by the Government's activities, because he does not have to pay that 16s. now. He said to me, "I have not taken my family on holiday for years". He will be taking them on holiday this year because his cost of living as a family man has been reduced by 16s. through the abolition by the Labour Government of prescription charges.

I want to say a few brief words about rates particularly as they apply to the new Greater London Council area. The Conservative Party forced the London Government Act through the House against the advice of the then Opposition and of almost all the local authorities in the London area. It forced it through without providing any basis on which local authorities could evaluate the impact of that Act on rates in the London area.

Let me tell the House what the effect has been in the London Borough of Bexley, to which I belong. It has meant a substantial increase in salaries alone because, in common with all the other authorities in Greater London, we have found ourselves forced, in the market for local government officers, to increase substantially salaries for doing precisely the same work. There was not a single thing that a local authority could do to avoid this.

My own former authority, the Erith Borough Council, pleaded in representation to the former Minister to postpone the implementation of the Act so that we could stabilise the cost of living in the London area by an evaluation of the impact of the Act and by a serious attempt to introduce sensible arrangements between the boroughs affected in amalgamation to avoid this great cost. Obviously, there will be an increase in the cost of living of Londoners this year when the rates are declared, again as a direct result of the situation created by the London Government Act in the great Metropolitan area.

Here is another instance of what has happened in my constituency concerning the cost of living and what the Government have done about it. Some constituents of mine, a young couple with one child, were living in two rooms, paying £4 10s. a week rent and having to share a toilet with six other families two flights below their two rooms. Their cost of living has been substantially reduced by the activities of my right hon. Friend the Minister of Housing and Local Government in the introduction of the Rent Act. On my advice, those constituents have gone to the rent assessment officer and I have every reason to believe that shortly they will have a substantial reduction in their cost of living. These are the things that matter.

Hon Members opposite can look at their "phoney" figures, but there is not much to choose. They can point to an odd .01 per cent. perhaps. When it comes down to real terms of the impact on the cost of living of ordinary people of the things that this Administration have done in terms of pensions, the Rent Act, the Bill to give rating relief and in terms of bringing about the country's recovery quickly, there is no comparison between the record of those 13 dismal, stagnant years without the courage to do any of the things for which the party opposite now clamour and the record of the last 15 months.

The record of the Government is one of which we can all be proud. It is a record of the recovery of the nation's economy, of the recovery of the nation in its social consciousness and of recovery in real terms in the cost of living. We repudiate the "phoney" figures put out by the right hon. Member for Enfield, West. I am sorry that the right hon. Gentleman is not in his place. He was here when I first came into the Chamber. We all know that he is an imaginative, versatile political sportsman. Most hon. Members will probably recall when he played away from home and lost. He got thrown out, I believe, and became an idle spectator standing on the touchline. I am sure we are all delighted to see that by some touch of magic he is back in the circle.

I hope that the House will reject this "phoney" Motion by the Opposition and support the great endeavours of the present Administration to do something real towards reducing the cost of living.

Mr. Speaker

Mr. Mackie—Mr. Barber.

Mr. Barber

I do not wish to prolong the speech of the hon. Member for Erith and Crayford (Mr. Wellbeloved), but I wonder whether he would say in what particulars he objects to the figures given by my right hon. Friend in his broadcast.

Mr. Wellbeloved

One can give all sorts of figures. One can use figures, as I have done, by quoting three sets taken from three comparable periods in time. The figures given by the right hon. Member for Enfield, West in his party political broadcast—I do not recall whether he gave his sources of information; I assume that they were from the Tory Central Office—bear no relation to the figures quoted on page 133 of the current statistics.

Mr. Marsh

Would not one justifiable complaint about the figures to which my hon. Friend has referred have been that although the right hon. Gentleman mentioned 250 items which had increased in price, he omitted to mention 600 which had gone down, which were advertised by a major grocery chain immediately before and immediately after the television broadcast of which my hon. Friend complains?

Mr. Wellbeloved

Quite so. I now resume my seat.

Mr. Speaker

That shows the danger of allowing anyone to intervene in a speech which has already finished.

7.45 p.m.

Mr. George Y. Mackie (Caithness and Sutherland)

I will endeavour to be brief, knowing that many hon. Members wish to speak from the Government side and also because I am hungry. I have listened to the debate with a certain amount of interest. With respect to the two Front Benches, I thought that the hon. Member for Colne Valley (Mr. Duffy) and the hon. Member for Worthing (Mr. Higgins) were the only two who said anything worth while. That position will probably obtain after I have finished my speech.

Nevertheless, I should like to say one or two things which appear to me to be relevant to the situation. One is that we have the continual argument between the Front Benches, of which I am getting very tired, of saying, "You said this." "Who?" "You said that." "Who?" "My bastard is a smaller one than yours and, anyhow, sucks to you." This does not seem to me to be logical political argument.

The hon. Member for Colne Valley made a great appeal to the Liberals and seldom have I been moved with such vigour and at such length. He asked why we were voting against the Government on this occasion. The answer is that it is a debate on the cost of living, and the cost of living has risen considerably. During the past 13 months it has gone up by over 5 per cent., whereas even the Tories in the previous 13 months put it up by only 4.8 per cent. Nevertheless, it has still gone up. It is a problem that the Government have been unable to tackle.

I do not deny that the Rent Act, to which the hon. Member for Erith and Crayford (Mr. Wellbeloved) referred, will help some people's cost of living—of course it will. We have, however, to deal with the cost of living of the majority of people, and the cost of living has gone up. This has gone on since the war. The first post-war Labour Government dropped the value of the £ to 14s. in their period of office. The Tories dropped it to 13s. in a rather longer time, but with many favourable factors in their favour.

Mr. William Baxter (West Stirlingshire)

Will the hon. Member give way?

Mr. Mackie

No. I am about to give the hon. Member the favourable factors which he was just about to mention.

The Tories had an advantage in the fall of commodity prices after the Korean war which, if the Labour Government had the courage to hang on, they would have got, too. Under the present Government, the £ has fallen about Is. in value. This goes on and on. If it was accompanied by a large rise in production, one could tolerate a fall in the value of money, but this is not happening. We are well behind other countries in the productivity rise. In total terms, we are falling behind several European countries. France, Denmark, West Germany, Sweden and others have surpassed us in total income per head of the population.

There are many factors in the rise of the cost of living, but the biggest is our failure to produce competitively. There are many examples of this. One of the industries which cannot be blamed is agriculture. The farmers have been under heavy squeeze, and because they want to protect their standards of living they have been forced to take measures about productivity. We all know the figures. The farmers have put up their productivity by 6 per cent. in each of the last four years. They have done this because they have got to, and because farmers, like me, anyhow, like a high standard of living. Therefore, we follow advice and we do it to keep up our standard of living. We do not do it because the Government exhort us.

Farming has now got to the stage when we must have higher returns, because what we will get now in farming is a fall in production to keep up the standard of living of the farmer. The only way that he can do this is by producing less and saving costs. In the nation as a whole, however, there is little doubt that exhortation will not do this.

When some hon. Members opposite talk of not applying the old disciplines and how terrible they were, I cannot understand their argument. It does not mean that because market discipline has been bad in the past we must not use it in the new controlled environment. That is nonsense. It is like saying that because some people eat too much we should not feed anyone. Of course, we should use the market, and use it to advantage, as we can see around us in many examples in other countries.

The price of bread has gone up. We still have a 10 per cent. tariff on imported flour. We have tremendous monopolies including the C.W.S. Three big firms control practically the whole of our flour production. In addition, they buy up the bakeries and call it vertical integration. In fact, they are monopolies.

In 1964–65, the rise in the cost of living in the United States was one of the best at only 2 per cent. The United States has heavy anti-monopolistic legislation and legislation with teeth. In this country, we have a curious body without teeth and without any ability to force competition. I have a long string of figures. It is interesting that the United States is at the top of the list with the smallest rise in the cost of living, Denmark has the highest and the United Kingdom is comfortably esconced low down in the table at 5 per cent., as against 2 per cent. for the United States and 8 per cent. for Denmark.

There is little doubt that exhortation on the part of the Department of Economic Affairs will not make people more efficient. I do not think that to give away gifts to manufacturers who lose money, who are inefficient or who make too much money because of a monopoly situation, will improve productivity. Just because the productivity of countries with a high investment rate is good does not mean that if we artificially create a high investment rate, our manufacturers will become efficient and we shall "go to town". Of course not.

We have to use the weapon of competition, the stick as well as the carrot. The Government are maintaining a 10 per cent. extra tariff on manufactured imports. I know all the circumstances about the balance of payments and the need to correct it, but in what the Government are doing there appears to be no realisation that they are keeping up prices and making our manufacturers more and more inefficient. It is a simple fact that high investment rates will not do it alone.

One has only to look at Fairfield's, which invested up to the hilt. I am told that it is the most modern yard on the Clyde, but its management was bad and, therefore, it went to the wall. Now we are getting new management. The only really healthy thing about the Fairfield experiment is that new, good management may produce a new look in the labour relations and general efficiency of the yard, which might help the rest of the industry.

I could go on in this vein for some time, but I content myself with saying that it is a simple old truth that without competition in a mixed economy, we are unlikely to get the sort of efficiency which can make us compete in the world and keep prices down to a reasonable level. Until the Government learn this, all the exhortation will get them nowhere. I hope to goodness that they do not adopt the at least honest policies of Left-wing Members like the hon. Member for Renfrew, West (Mr. Buchan), who wants everybody to be ordered to keep prices down and to keep their wages down. I hope that we never come to this. It is, however, more honest than the present attitude of the Government in thinking that exhortation without competition can work in a mixed economy.

7.55 p.m.

Mr. Michael Foot (Ebbw Vale)

I hope to make a few remarks about the speech of the hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) in a few moments. I know that he is very hungry; we have seen him wilting before us. It is almost like cruelty to ask him to stay a bit longer, but there are a few comments I wish to make on his speech. I therefore hope that he will be able to restrain I himself a little longer.

I had not intended to try to participate in this debate. Therefore, I must apologise to the right hon. Member for Altrincham and Sale (Mr. Barber), because I did not hear the whole of his speech, and also to my hon. Friend the Joint Parliamentary Secretary to the Ministry of Technology, because I did not hear the whole of his speech. I think it discourteous not to listen to speeches of Members on the Front Benches, but on this occasion, for various reasons, it was not possible. I apologise on that account, but the speeches I have heard incline me to think that I have not missed much in those I did not hear.

I do not wish to be insulting, but I consider that this is the worst debate that I have heard in the House of Commons. The responsibility for that rests not with my hon. Friends, but squarely with the Front Bench opposite. For weeks past, as my hon. Friend the Member for Erith and Crayford (Mr. Wellbeloved) said, we have had forecast in the newspapers that a great campaign would be launched against the Government and that thunder- bolts would be let loose against them. We were told that this would happen when Parliament reassembled at the beginning of this week. The Opposition had it planned all very carefully and have worked out with extreme care which speakers they would deploy and which arguments would be presented. Today was to be the main day when the new, dynamic Opposition—to use a phrase which they seem annoyed with us for using—were to go into operation.

There may be a few Conservative newspapers which tomorrow will say that it happened, but no one who had the misfortune to be here would say that. Strangers in the Gallery come voluntarily, but we have to be here. No one who has listened to what has occurred could doubt that this has been probably the feeblest attack on a Government which has ever been delivered in the whole long 600 or 700 years of the history of Parliament. This is the best the Opposition can do even when the cost of living has gone up 5 per cent. Some of us should perhaps help them. We might have a try a little later. It has been a shocking exhibition. I hope that no newspapers will prophesy great attacks in future from this Opposition until we actually receive them. Even then, I hope that they will carefully consider whether there has been any attack.

It is possible that the figures in the National Opinion Poll this morning may have knocked the stuffing out of hon. Members opposite, but they have many years ahead of them if they get it knocked out of them as quickly as that. If this is the sort of opposition we get at the beginning of 13 years, what will it be like at the end? I hope that there will be a thorough examination of Her Majesty's Opposition after this debate. Up to this moment at least there has been absolutely—[Interruption.] I am not surprised at the withdrawal of the right hon. Member for Altrincham and Sale. I did not have the good fortune to hear his speech, but from all the reports of it I am not surprised that he has now left the Chamber.

Sir Harmar Nicholls

The hon. Member for Ebbw Vale (Mr. Michael Foot) must realise that all he has done so far is to admit that the rise in cost of living under this Government has been more than 5 per cent. He has admitted that. It was only 4 per cent. under the last Government.

Mr. Foot

I am going through all the arguments. First, I will deal with the Liberal Party. The hon. Member for Peterborough (Sir Harmar Nicholls) maybe has plenty of time, as he may have had his meal, but the hon. Member who represents the Liberal Party wants to be released. He has a great panacea. The Liberal Party has a solution for the complicated problem of how to get a stable price level in a modern industrial society—a problem which so far has baffled every modern industrial community.

Mr. George Y. Mackie

Including the United States for the past six years?

Mr. Foot

The hon. Member must live in a very strange world if he thinks that the United States has not been extremely concerned since 1945 with the problem of how to stop inflation. They have not succeeded even though they have many advantages over us. They have the advantage that they did not have to spend their wealth, or a great part of it, in the Second World War and to build up their export trade. They had the advantage of not having, as this country has had, a perpetual problem of balance of payments around its neck. Even so, they have had persistently great problems of inflation. The intervention of the hon. Member has only fortified my argument because, even in the United States with all their advantages, they have still had to face this problem. He spoke as if it hardly existed.

Mr. Duffy

Would my hon. Friend not agree that the hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) omitted to mention something else which the United States have and we in this country do not have—unemployment in the region of 4 per cent.?

Mr. Foot

We have collective oratory, but we do not need it on this side of the House. Nevertheless. I am grateful to my hon. Friend for his assistance.

The representative of the Liberal Party talks as if competition is the sole remedy for dealing with these problems. This is the great method by which we are to overcome these problems. He does not talk quite so confidently on that aspect of the matter when he is speaking in his capacity as a farmer. When speaking as a Liberal he is in favour of the purest milk of competition. As a farmer he gives some indication of it, but I am not sure that he is in favour of the full blast of competition. If so, my respect for him as a farmer diminishes; and my respect for him as a farmer is much more than my respect for him as a politician.

We have had some historical lessons here. If he looks at history he will see what happened to agriculture in this country throughout the 19th century, when for most of the period his party was in charge. The agriculture of this country suffered almost persistent decline. It was only in periods of wartime that agriculture was rescued.

Mr. George Y. Mackie rose

Mr. Foot

I will give way to the hon. Member in a moment. I am glad that I am overcoming his hunger.

Right from the time the Liberal Party succeeded in abolishing the Corn Laws there was a serious decline in the status and position of British agriculture and in the standards of the people who work—not the farmers who were landlords—on the land. It was only the intervention of the State or the community in wartime which altered that situation. The first Government which attempted in peacetime to stop this radical disease in British agriculture was the Labour Government after 1945, who deliberately interfered with the processes of competition.

In the face of such facts as these, for the hon. Member to advocate competition as the grand remedy for all our difficulties is to put him in the same class as the right hon. Member for Wolverhampton, South-West (Mr. Powell).

Mr. George Y. Mackie

I have tremendous respect for the hon. Member as a politician, but as an economist and historian he is slightly further out. The 19th century was the period of greatest expansion in British agriculture. The period right up to the 1870s was the greatest period of expansion in British agriculture when it led the world in expansion and organisation. I suggested that it is foolish to ignore the use of competition, not that competition is a panacea.

Mr. Foot

I am not denying that competition has its uses in proper cases, but in his speech, which can be recalled by anyone who heard it, the hon. Member said that what was totally wrong with the policy of the Government was the absence of any competition. He is supporting a Motion of censure on the Government yet the sole case he made was that the Government had failed to introduce more severe competition. Anyone who heard his speech will recognise that this is correct and that he did not have any other argument. Indeed, he simplified the whole question and protested that no one thought the question was a complicated one.

The way in which modern industrial societies are to establish non-inflationary systems of economics while maintaining full employment is a problem which no country has solved. To say that all we have to do is to have more competition is not to deal with the problem, but to take the same course as the right hon. Member for Wolverhampton, South-West and say, "I do not want to deal with the problem, but to replace it." If the Liberal Party wants to follow that course it should make it clear that we have had no contribution from the Liberal Party on the national incomes policy and how to make it work and share the national wealth. All that the Liberal Party says is that we should get back to fiercer and more competition. Take the case of the official Opposition—

Mr. George Y. Mackie

I am going out.

Mr. Foot

There may be some oblique references to the hon. Member, but I can excuse him now and he can go.

Take the case of the official Opposition. Their case is that the cost of living has gone up in the past year and that the Government are responsible. Let us take the strength of their argument. It is perfectly true that the cost of living has gone up since the Government have been in power. No one can deny it. They say that the Government have been responsible on two main grounds. First, because of the deliberate action of the Government in putting up taxes. That is the main part of their argument. Then they say that the incomes policy has broken down.

Take the argument about taxes. It is a little late in the day to have this argu- ment, for we have had it over and over again in this Parliament. We had it when the Budget was introduced, all through debates on the Finance Bill and now, as the first item in the major attack of the new, reorganised Opposition on the Government, they revive this old story of the Government putting up taxes.

The Government put up taxes; so far, the Opposition's argument is valid. Why did they put up taxes? First, they put them up because they wanted to raise old-age pensions. That was one reason, and a very good reason. It was partly done to assist the redistribution of the national wealth. The other main reason why the Government put up taxes was to deal with the balance of payments situation. If I were to say that we should discuss the balance of payments situation the Opposition would say, "Do not let us have that old story again." Of course they do not want to hear that old story.

The old story of the balance of payments is inextricably connected with the story of the increase of taxes, so let us rule them both out, or keep them both in, whichever way is preferred, but the idea that we can have a debate in which we are allowed to discuss taxes which the Government imposed a year ago in their Budget, but we are not allowed to discuss what happened in 1964, and the balance of payments, is an absurdity, and hon. Gentlemen opposite know that it is.

We know the line on which the Opposition are now embarking, not having had any policy to suggest as an alternative to what the Government have done. The chief demagogue is the right hon. Member for Enfield, West (Mr. Iain Macleod). He says, "Do not let us have any complicated discussions about economics, or the state of the nation, or the complications and difficulties which we have to face. Let us go up and down the country saying that we will bring down taxes." He says that that is how the Socialists got into power after 1945. He says that they did not worry about facing the problems which the nation had to tackle, or having to deal with awkward tasks which the Government had to deal with after 1945.

What the official Opposition's own Sir Winstone Churchill did in those days was to go to the country and say, "Every shortage is due to these wicked Socialists. Get rid of them, and we can deal with them all."

Sir Harmar Nicholls

The Conservatives brought down taxes.

Mr. Foot

They did not. They raised more and more money in taxes, and were responsible for greater and greater public expenditure, although they said that they would do the exact opposite.

The Opposition, having fixed on the idea that they do not wish to argue with the Government about the real problems facing the nation, wish to concentrate solely on saying "We will bring down taxes", hoping that people will believe them. That is all that they have to worry about. That has been their policy, and, therefore, they run a debate today in which the main charge, when we are discussing these matters in January, 1966, concerns taxes which the Government introduced in April, 1965. It is, indeed, a very poor kind of opposition.

The other part of their argument affects the incomes policy, and here, of course, they are in similar difficulties because they have not made up their minds about it. They do not know whether they should say that they are in favour of an incomes policy or not. One of the further reasons why they have conducted their propaganda outside on the lines of saying that they will bring down everybody's taxes is that they do not want to get involved in these difficult arguments.

But people throughout the country are much more intelligent than that. Whether they agree with an incomes policy or not, people throughout the country know that this is a serious argument. They realise that there must be some way of sharing the nation's wealth. As a Socialist I am strongly in favour of an incomes policy. I can understand those who are opposed to Socialism being opposed to any form of incomes policy, because they say—and the right hon. Member for Wolverhampton, South-West (Mr. Powell) says it more intelligently than anybody else—"Let us leave it to the present system. That is suitable to us, and the more intensively we restore the old capitalist influence, the more it will suit us".

There is some logic in the argument of the right hon. Member for Wolver- hampton, South-West. Indeed, as we can all see, he is winning. Every week the right hon. Gentleman gets stronger and stronger support from hon. Gentlemen opposite. The more they get into difficulties, and the more the Government come up against difficulties with their incomes policy, as they are bound to, the more the Conservative Party will follow the leadership of the right hon. Member for Wolverhampton, South-West.

The right hon. Gentleman is an extremely courageous and intelligent politician. He has staked out his territory very wisely and with great panache, and the more the Government have to face considerable difficulties over their incomes policy the more the Tories will say, "We will follow the standard of the man who says that we do not want any incomes policy at all".

The hon. Member for Worcester (Mr. Peter Walker) has changed his allegiance very swiftly. He was once the chief Tory opponent of entry into the Common Market. What does he say about that now? Maybe we will hear one day. He was once a great champion of a Tory communal policy. He was once a supporter of the idea of a controlled Tory economy. Now he is more and more following his newly elected Leader, and his Leader is more and more following the right hon. Member for Wolverhampton, South-West, so when the hon. Gentleman speaks at the end of the debate he will bring up a long trail. He will have to run very fast to catch up with the right hon. Member for Wolverhampton, South-West, but in the past we have seen how fast he can run to catch up, so I think that he will be able to run in that direction this evening.

There are a few who will stay put. There is the right hon. Member for Birmingham, Handsworth (Sir E. Boyle), who will stick it out to the end. There is the right hon. Member for Barnet (Mr. Maudling), but it is a bit awkward for him, because he has advocated an incomes policy so often that he cannot eat such a huge meal of his own words so speedily. Within a few months, and within the coming years, as they watch the Government trying to carry out their incomes policy, hon. Gentlemen opposite will follow the lead of the right hon. Member for Wolverhampton, South-West, and I prophesy that within about two years he will be the elected Leader of the Conservative Party, instead of being merely the unofficial, unelected leader, which he is at the present time.

I am in favour of an incomes policy because I think that it is the only way in which a modern industrial society can share its wealth, and the idea of leaving that to chance, of leaving it to market forces to decide how the nation's wealth should be shared, is utterly repugnant to me as a Socialist. I repeat that I am strongly in favour of an incomes policy, but I am critical of some of the things which the Government have done in the operation of that policy.

One of my criticisms arises because I do not believe that the Government have fully appreciated—something which the official Opposition do not appreciate at all—that there their main difficulty in carrying out their incomes policy is that they have to insert that policy, which is designed for sharing more fairly the nation's wealth, into a society in which the nation's wealth is already shared very unfairly. That makes it very awkward, because, with the best will in the world, the Government are not able to carry out all the rearrangements of society at once to enable an incomes policy to be inserted fairly.

It is often forgotten in the country that the Government have taken a number of measures designed to fortify the incomes policy and to assist its introduction, such as the Capital Gains Tax, which was designed to ensure that people who had not been paying any contribution to the nation's income should start to pay something—a very good measure—and Corporation Tax, which were designed to achieve these aims. There are many other measures which the Government have taken, such as the redundancy payments scheme. This is a good start in the right direction, but they will have to go further and give all the working people the same rights of redundancy payments as the middle classes have always had and at the same level.

All that countributes to making our society a little less unfair, but it does not alter the fact that the main source of the Government's difficulties with the trade unions, and with many of my hon. Friends who support their views, is not the nature of the incomes policy itself, but the fact that it has to be inserted into a society where the distribution of wealth remains very unfair.

It is very difficult to change that all at once. It is precisely for this reason that I think—though I am not an expert on these matters—the Government have put too many eggs in the incomes policy basket. I think that they have to introduce more measures of redistributing wealth in other ways to make their incomes policy acceptable. They have to go faster in bringing in other measures for sharing fairly the nation's wealth in order to make the incomes policy acceptable. That means that we must have more Budgets which are designed to redistribute the national wealth. Only after we have had two, three or four such Budgets shall we have an incomes policy which is accepted by the mass of the people. It is a very difficult operation in timing that the Government have to carry through.

The Government should not proceed with some parts of their incomes policy until they have been able to carry out more of their fiscal measures to reshape our taxation system. The Government have introduced many such measures. Many of the measures in their social services programme are designed partly to remedy defects in the social services, but also partly to carry forward the redistribution of wealth. The more that the Government can carry through their social services changes, and their changes in the taxation system, the more they will be assisted in trying to carry through their incomes policy.

I want to see a Government empowered to carry through their other measures. It is not possible to talk of a successful incomes policy in isolation; it must be accompanied by several other measures. I want to see a Government with a sufficient majority to be able to do this. Inflation is a great peril. It is not the only one, but everyone wants to curb inflation. It is not such a bad peril as mass unemployment, but it is bad enough. I want a society in which we have full employment and no inflation. That is our aim, but if we are to achieve it we must tackle some of the major causes of inflation, which we are not tackling to anything like a sufficient degree.

The major cause of inflation in the past 20 years has been the enormous expenditure upon arms. It is the biggest inflationary expenditure that the country has. If we could alleviate that further it would be of the greatest possible assistance to the Government's incomes policy. It would enable them to have more to share fairly under their incomes policy. It would be incorrect to say that the Government have not taken any steps in this direction; they have introduced many measures to try to restrict the soaring arms expenditure. The previous Government completely shirked this issue. Nothing was more pitiable—and that is a very high charge—than their record of refusal to deal with expenditure in the aircraft industry and many of the other huge expenditures which were being incurred.

All these things they voted against. Whenever the Government introduced a cut in arms expenditure hon. Members opposite voted against them. If their will had succeeded it would have pushed up the cost of living a good deal faster. The hon. Member for Worcester has cast many more inflationary votes in this House than I have. Every time he has voted against these cuts he has been voting for an increase in the cost of living.

The Government have made cuts, and I give them credit for it, but they will have to go much further. Wasteful arms expenditure remains the biggest source of inflation. It must be cut still further and much more drastically even than the Government have attempted to cut it if we are to fortify our incomes policy with other measures.

We must take many other measures if we want our incomes policy to work, and if we want a proper sharing of the national wealth to be acceptable it will have to come partly by Government intervention. I do not speak of it in terms of competition, but we must make much more intelligent use of our resources. Some hon. Members have spoken about the contribution to the increase in the cost of living caused by rising bus fares in London. A lot of blame is being attached to the busmen in this respect, but it is scandalous, because for years they have been putting forward proposals to solve the problems of London Transport. They have been telling the country and London for years that if much more radical steps are not taken to deal with London Transport there will not be enough busmen to drive the buses and many more people will have to walk to work.

They have been saying that for years, and they have been putting forward proposals for a more intelligent use of our resources. That is the real way to tackle the dangers of the cost of living.

In the same way we must intensify all the measures we have introduced for the better planning of industrial sites. I know that the President of the Board of Trade has been specially interested in this throughout his political life. That is one way to deal with the cost of living. If only we can stop the hideous process whereby more and more of our people have to spend more and more of their time travelling to and from work we can make a big cut in the cost of living as we can if we bring factories to the people on a proper planned basis. That is the way to tackle the cost of living and to bring down the huge and mounting costs of transport which are becoming increasingly difficult to deal with. We have to cut out much of the travelling that people now have to undertake. That is the solution to the problem. It is easy to talk about, but difficult to carry out. But we must aim at it.

These are the kind of measures which the Government are seeking to carry into operation in their transport policy and their idea of an integrated transport system. These are the kind of measures that we should be discussing. If the Government are seen by the public to be carrying through radical measures to deal with transport and the siting of industry, and introducing Budgets to make our taxation system fair—if the Government are seen to be proceeding as fast as economic circumstances permit to carry through great innovations in our social services, we can persuade the people that it is an intelligent thing to do to share out fairly the extra wealth that we get each year.

Of course, it is an intelligent thing to do, and it must be done, but it will be done only by the increasing intervention of the community. The idea that we can do it by having more competition is absurd. We must have a much more purposive, deliberate and consistent intervention by the community in our economic affairs, and the name for that is Socialism. I do not complain, because the Government have not been able to carry out Socialism with a majority of three, or two.

Mr. Eldon Griffiths

Or one.

Mr. Foot

Or one. That is why I am in favour of an early election. It is essential, so that the Government can carry out an incomes policy.

It would be a disaster for the nation—leaving aside the question of a disaster for the Labour Party, although the two things are connected—if the attempt to secure the intelligent idea of an incomes policy were destroyed because the Government that were attempting to put it into operation did not have the power and authority to see it through, but had to deal all the time with an unscrupulous and half-witted Opposition who had no desire to see such a policy work, but were out—to use a terrible word—to do everything they could to sabotage it. [HON. MEMBERS: "Oh."] Of course they are. That is the one idea they have of opposition. They believe that if only they oppose this policy they have a chance of getting back. That is all that they are concerned about.

We are concerned about something more. It would be a disaster for the nation if the whole idea of planning on a much more ambitious scale were to be destroyed because the Government seeking to do it had not the full authority to carry it through. Therefore, I am in favour and have been for a long time—if my advice had been taken last autumn, when many disagreed with me, we should be home and dry now with a majority of 30 or 40 and the Government would have four years ahead of them to plan, which is what we want. These measures cannot be carried out in three weeks. Most of the measures which the Government have in mind need time to fructify, time in which they can be put into operation and time in which their results can be seen in one Parliament.

The Government have been extremely skilful in their Parliamentary management. Although many of us have assisted them—much to our delight—in all these difficulties and have proved that, in Parliamentary terms, it is possible to carry on with a tiny majority, it is not possible in social or political terms over a long period. We need that bigger majority as soon as possible. I trust that what is happening tonight in Hull will give us a further spur in that direction. Whether we have it or not, I hope that the Government will consider these matters in all their aspects and put their confidence as early as possible in the determination of the people to have a real Socialist policy carried out in this country—[Laughter.] That is the last time the hon. Member for Worcester will be able to laugh. He does not do it very easily, does he?

If the Opposition had wanted an early election, we should not have been treated to a debate like this. If the Prime Minister wishes any further evidence of why he should have an election, all he needs to do is look in tonight and see that lot. I do not know whether the Prime Minister's P.P.S. is here, but I should like him to have a look. This is what the Prime Minister has to fight. This is the Tory Opposition off the leash and pulling no punches. This is them fighting absolutely all out. This is it. This is all we have to deal with—

Sir W. Robson Brown

I have been listening with great interest to what the hon. Member has said and he listened earlier this evening to me giving 100 per cent. support to the prices and incomes policy. He has been asking for more power to put the policy into effect. What more power does he want? Would he answer me?

Mr. Foot

I cannot recite the whole of my speech again: I might be "had up" for tedious repetition. I have been trying to explain that, if the incomes policy and the aim behind it are to be successful they must be fortified by a whole series of other measures. I do not think that the hon. Member for Esher (Sir W. Robson Brown) understands what an incomes policy is. The kind he wants is one which keeps incomes down—

Sir W. Robson Brown


Mr. Foot

If the hon. Gentleman is such a passionate supporter of the incomes policy, let him go and fight with his leaders and not with me. He had better find one of his leaders in favour of it if he himself is so strongly in favour of it. Let him listen to the hon. Member for Worcester, who is to wind up for the Opposition, and see exactly on what fence he is sitting tonight. Then we shall see whether the hon. Gentleman agrees with him.

I was concluding my few remarks by saying that the political situation has greatly altered over recent months and there is every prospect of a Labour Government being elected in a few weeks, I hope—at any rate in a few months—with a majority of 30, 40 or 50. We could do it with 20. Even 20, after recent years, would be rich, but with 30 or 40 our position would be better. What we need is time, time for all the people to understand that the Government are here to stay, time for many gentlemen abroad to understand as well, time for the Government to make more radical proposals on many of these matters and time for us to make it clear to the nation that we propose to carry through the full programme and to make it a real success. In the whole of this operation, the official Opposition will become even more irrelevant than they are at present, if, indeed, this is conceivable.

8.34 p.m.

Mr. Patrick McNair-Wilson (Lewisham, West)

This evening's exercise has been one long whitewashing operation from start to finish by a Government who know perfectly well that they have betrayed the electors of this country. They have not at any time during the debate come forward with one justifiable argument for the position in which we are vis-à-vis rising prices. It is perhaps just as well that neither the Chancellor of the Exchequer nor the First Secretary was here today to listen to the speeches of hon. Members opposite.

Speaker after speaker has risen in the most complacent manner and tried to persuade this House that there is no crisis, no problem at all. At the same time we are being exhorted by Ministers to tighten our belts and be prepared for tough times ahead. Indeed, the Prime Minister said only recently that 1966 would be a "make or break" year.

I regard this debate, certainly from the point of view of the speeches we have heard from hon. Gentlemen opposite, as one of complete hypocrisy. At the end of the day it will certainly be safe to say, on the basis of those speeches, that the only stain on the Government will be the whitewash and nothing else.

I believe that the situation today is extremely serious. The amber light has been showing for some time and now the red is firmly on. I believe that we are heading for real runaway inflation in this country. To get that into perspective it should be pointed out that one is bound to have a measure of inflation with increasing prosperity. Hence, one has the situation in which one has a measure of rising prices which nobody has been able to conquer.

That is not the problem about which I am mainly concerned. I am worried because the increase in inflation is now beginning to get out of control—that having, through the Prices and Incomes Board, managed to persuade manufacturers to swallow some of their increasing costs, we are reaching the position when the dam of price increases is about to burst. After all, true inflation can exist only in an economy in which one is unable to increase one's productivity; in the beleaguered city, perhaps, where stocks are running low and the value of money tends to fall. Thus, true inflation should not exist in the sort of economy which we have—that is, unless productivity either does not rise or is completely static and even falling.

That is the position in which we are tonight. Our costs, prices and incomes are rising but, under the present Government, our productivity is static. Indeed, as my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) pointed out, it is even worse than that. It is sinking badly.

Dr. David Kerr

Would the hon. Gentleman tell us to what he attributes the rise in the cost of living under the previous Government?

Mr. McNair-Wilson

I thought I had made it clear that in an increasing prosperity economy a measure of inflation is synonymous. I am saying that when one's productivity ceases to rise one goes into steep inflation.

My right hon. Friend the Member for Altrincham and Sale quoted from a recent speech of the Minister of Labour at Ilford, in which the Minister said that production had been almost static while incomes had been rising and rising. As a nation, we had been living beyond our means, the right hon. Gentleman said. This debate has proved the hypocrisy of the Government because it was not such fighting words as those that got them elected 15 months ago. They were the siren voices which the Prime Minister has told us to beware of.

The people who were persuaded to elect the party opposite were told that the Tory Party had mismanaged the country's affairs and that the Labour Party would conquer rising prices, that there would be cheap mortgages along with all the other benefits which have been shown to be a mass of paper promises, promises not even worth the paper on which they were written. Hon. and right hon. Gentlemen opposite did not say that mortgages would be at their highest level ever, but we read about the difficulties of the building societies, about what is having to be paid, and we are told that while the rate went up by 14 per cent. last year it may go up by another 10 per cent. this year. Hon. Gentlemen opposite may think that this is trivial and unimportant, but to the country it is not.

Mr. Walter Monslow (Barrow-in-Furness)

Is the hon. Gentleman not aware that his party promised many things and that, had hon. Gentlemen opposite been elected, the cost would have risen by £650 million if their promises were implemented?

Mr. McNair-Wilson

I am discussing the record of this Government.

Mr. Monslow


Mr. McNair-Wilson

Throughout this debate hon. Gentlemen opposite have been trying to find excuses and somebody else to blame. They are trying to persuade us that everybody is out of step except our wee Johnnie. They cannot blame anyone, whether we mention the breakdown in the gas industry, rising rates or anything else.

Mr. Sydney Silverman (Nelson and Colne)

Perhaps the hon. Gentleman will allow me, very humbly, to come to his assistance. Are we to understand that what he is saying to the House is that when prices rise for every one of 13 years of Conservative Government it is due to increasing prosperity but that when they rise during 13 months of a Labour Government it is due to lack of productivity?

Mr. McNair-Wilson

The hon. Member might have listened to me when I quoted his own Minister of Labour on the subject of productivity. The First Secretary told us that the continual rise in the cost of living could, must and would be halted. Those were the words we heard from him, and it was words like that that won the Labour Party the last General Election.

Political parties are always said to die in the end of swallowing their own lies. If that be true, I believe that the party opposite is in some danger of dying very soon indeed, because we cannot expect to keep prices down if all the time we allow our costs to rise. It is wonderful how many King Canutes we have, sitting on the beach in their armchairs and telling the tide to go out, when we have an economy, as it is at present, in which costs are being induced to rise all the time by direct Government action.

If there is increased Income Tax, petrol tax, vehicle licences, and all the other increases that have been directly caused by the Government, we must be prepared to face increase in costs, and thereby to find people asking for increased wages and manufacturers asking to put up their prices.

That is, perhaps, all right if productivity is also rising, but if, at the same time, we are telling those engaged in industry to cut their profit margins and, in the same terms, telling them not to invest more, we will trim our expansion and get the situation in which we are today where wages and prices go up, productivity is static, profits are down, investment is down. If I were asked to tell the House what that means, I would reply that it means real inflation of the type of which I spoke at the beginning of my remarks—not the inflation built into increasing prosperity, but inflation of a country of 52 million people needing to import over half of their raw materials to keep the island alive at all, and finding themselves in a situation where costs take the country out of the competitive position it should occupy in the world.

It is no good for the party opposite to try to ride away—as some hon. Members opposite have—on the basis that the Labour Government have been tough on the people who have had an unequal share of the profits. Profits are merely a visible sign that what one is producing is wanted, and why it should now be unfashionable to make profits when all the time the taxpayers foot the bill for any loss which may take place in the nationalised industries, I do not know.

The fact is that over the last 15 months the price of practically the whole range of goods has increased; from bread to mothballs, the housewife is today paying more. I have just been to Hull, and I am convinced what the result will be there tonight—[HON. MEMBERS: "What?"]—the Conservatives will win. The electors there are not interested in the statistics bandied about by hon. Members opposite. I asked housewives in the street what they felt about costs, and the prices they had to pay in their daily round of shopping. We should not ask politicians whether prices are going up, but the people of the country.

The fact is that we have inflation. We have £1,000 million worth of overseas debt—equal to the whole of our whole reserves—and we are now in what I believe to be a critical situation. The Parliamentary Secretary to the Ministry of Technology may be convinced that this is not a problem for the Labour Government—personally, I thought that to be one of the most disastrous things he said this afternoon—but if it is not their problem, whose problem is it? And why, if they are the Government, are they not tackling it?

Mr. Marsh rose

Mr. NcNair-Wilson

I am sorry—I am just coming to the end of my remarks—

Mr. Marsh

The hon. Gentleman cannot attack people without giving way.

Mr. NcNair-Wilson

If the Parliamentary Secretary tries to pretend that it is not the problem of the Government—

Mr. Marsh

The hon. Gentleman is entirely misrepresenting what I said. I said that this was not a problem of the Labour Government or the Labour Party as such. This is a problem which has faced all Governments.

Mr. McNair-Wilson

Exactly. If the Parliamentary Secretary had been here, he would have heard me admit that it was a national problem. What I am saying now is that it is no good the Government trying to run away from the situation in which they find themselves owing to the failure of their present policies and then trying to pretend that it is a problem which must be tackled by somebody else. They are the elected Government. They must get it right. They made the promises. They must honour them. This is the fourth Labour Government this country has had. If they feel so confident that their policies are right. I hope that they will do what the hon. Member for Ebbw Vale (Mr. Michael Foot) suggested, namely, call an early General Election and let the people judge them. I believe that they have been a dismal and costly failure.

8.45 p.m.

Mr. James Tinn (Cleveland)

I am sorry that the hon. Member for Peterborough (Sir Harmar Nicholls), who has been present for most of the debate, is not in the Chamber at the moment, because at the outset of the debate he drew attention to the fact that there were not so many Members on this side of the House as there were on his. If he were here and able to look behind him, he would see what is left of his hon. Friends after the dust of this debate. After all, this is a Supply day, when the Opposition have the choice of subject and when we expect to see a little of the dynamic Opposition of which we have heard so much.

What we have been treated to instead has been a spectacle which has become depressingly familiar, even in my short time here, of an Opposition bereft as they seem to be of leadership and devoid of practical alternative policies, desperately casting around for subjects on which they might attack the Government with some semblance at least of reality and substance. As the Government in their short time, about 15 months, in office have honoured increasingly their election pledges, so the Opposition has become even more shrill and strident and more and more divorced from reality.

I share the opinion of my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) about the quality of the Opposition, though I have, with the warmhearted generosity towards my opponents which is customary for me, some sympathy for the predicament in which they find themselves at the moment. I find it difficult to have sympathy for the hon. Member for Lewisham, West (Mr. McNair-Wilson), who accused my hon. Friends of seeking in speech after speech to whitewash the Government. I may be doing the hon. Gentleman an injustice. I hope that I am not. He may have been listening to the debate from outside the Chamber. I have been in the Chamber during most of the debate and I certainly have not seen the hon. Gentleman present throughout.

Mr. McNair-Wilson

I may not be a giant, but I am a fair size, and I have been here since the debate started.

Mr. Tinn

I accept the hon. Gentleman's assurance on that point. Perhaps the lighting in the Chamber is not all that it might be. I can understand, without sympathising with, the distaste that the hon. Gentleman and so many of his hon. Friends have for statistics. This is understandable in a party which is so anxious for itself and for everyone else to forget its immediate past and its responsibilities. One hon. Member opposite referred to statistics as a pale mirror of reality. Perhaps they are a pale reflection of reality, but in so far as they have been quoted prom this side of the House at least they are an accurate one. The real quarrel which hon. Members opposite have is with the accuracy of our figures and their uncomfortable implications for themselves rather than with statistics as such.

I shall not give a long list of statistics because, as well as being uncomfortable for the Opposition, statistics can certainly be boring to the House. But to put the question of price rises into perspective, it is necessary to point out that, taking the retail prices index based on 100 in 1955, over the years up to October, 1964, the index rose by 30.4 points. By June, 1965, there had been a rise of 5.8 points—statistically, this might seem uncomfortable for us, though I do not feel that it is—but by November of last year the rise was only 1.2 points.

Any objective observer of the economic situation is bound to be struck by the fact that the price increases which were steep in the earlier part of this Government's period of office have since levelled off as the Government got a grip on what was an emergency situation at the outset and as their measures began to work.

In support of this view and in order to establish something of the real responsibility for the price rises which we have been discussing, I shall quote from an authoritative source—some authorities have been challenged in the debate—the Economic Survey of the United Kingdom published by the Organisation for Economic Co-operation and Development. On page 28 we read: The attempt after 1961 to reflate the economy and to reach a steady and sustainable rate of growth of output had disappointing results". This was under the Conservative Government. The pressure and pattern of demand generated by the expansionary measures taken in 1962 and 1963 proved too great for price stability and balance of payments equilibrium to be maintained. By the second half of 1964, a renewed deflation of demand had, therefore, become unavoidable. This, coming from an international organisation whose objectivity, I think, will be unquestioned, places responsibility for the price rÏises which have been substantial fairly and squarely on the economic policies pursued by the previous Administration.

Leaving statistics and economic journals aside for the moment and looking at the ordinary across-the-counter transactions which, after all, most affect the individual housewife's mind, we know that there have been recent price increases. The journal The Grocer listed no fewer than 579 individual items on which there had been price increases in the four weeks after Christmas last year. But in the corresponding period in the last year for which right hon. and hon. Members opposite were responsible, no fewer than 716 individual items were reported as subject to price rises.

The price of beef went up last year, but no hon. Member opposite has drawn attention to the fact that other prices, for instance, the price of pork, have gone down. The price of milk went up last year, but my recollection of our debates on the Farm Price Review is that the Opposition's objection was that the price of milk had not gone up more; they were criticising us for not allowing the price to go higher, not for holding it down.

There is, perhaps, a depressing familiarity in the continued price rise which went on during the first months of this Government's period of office, but there is one great difference in the present situation from what happened in the past. This is the consequences on the regions. The hon. and learned Member for Antrim, South (Sir Knox Cunningham) ought to appreciate the difference between the treatment meted out to the North, to Wales, Scotland and most of all to Northern Ireland by this Government and the treatment accorded by the last Government.

Sir Knox Cunningham (Antrim, South)

Does the hon. Gentleman mean that the Plowden Report, which advocates a reduction of between 3,000 to 4,000 in the number of those employed by Messrs. Short Bros. and Harland—which now stands at 8,000—is something that Ulster can look forward to with happiness?

Mr. Tinn

In the closing minutes of the debate I would be foolish to allow myself to be sidetracked on a point of detail. The point of my argument, which appears to have escaped the hon and learned Gentleman, is that, while the Government have pursued policies to contain the surplus demand against which the Conservatives failed to take remedial action, they have been selective in operation, achieving the highly satisfactory result of maintaining at the same time high employment in the regions. It is true that the unemployment rate in Ulster is still deplorably high. Perhaps this is not entirely unconnected with the fact that Northern Ireland chooses to return, faithfully but misguidedly, Conservative Members of Parliament.

Again, we have been subjected to the depressingly familiar but still nauseating spectacle of the crocodile tears of the Opposition about pensioners, owner-occupiers and others. Not even the Opposition can pretend that the considerable and unprecedented increase in pensions, introduced by the Government as a first step to removing the neglect shown by the party opposite, has been eroded by such increases as have taken place in prices. The 10s. widow's pension was increased threefold. Try telling such a widow that because the price of apples, for example, has gone up less than 6d. her 300 per cent. increase in pension has vanished.

Reference has been made to the by-election at Hull, which is perhaps not unconnected with the choice of subject today by the Opposition. I do not pretend to have a crystal ball but I have a feeling that the electors of Hull will show the pretences of the Opposition for what they are worth. With perhaps the slimmest majority ever, the Government have, in an astonishingly short period, proceeded to carry out more of their programme than any previous Government have carried out their programme in the same time. But in doing so the Government have restricted the ground of possible attack by the Opposition so that right hon. and hon. Members opposite are reduced to the shadow boxing to which we have been subjected today.

Sir Knox Cunningham rose

Mr. Tinn

I have already given way once to the hon. and learned Gentleman and, as I am rather short of time, I know that he will forgive me if I do not give way again. In any case, for a comparatively inexperienced speaker, it is a great mistake to give way just as one is approaching one's peroration and to allow oneself to be caught short in it. I may already have done that.

I close by expressing the sincere conviction that the course which the Government have followed with conviction and skill in piloting the country through some of the most difficult economic waters which we have ever sailed entitles them to the confidence of the country, a confidence which, I am sure, will be reflected at the next General Election.

9.1 p.m.

Mr. Peter Walker (Worcester)

We have today witnessed a debate in which the Government have been endeavouring to defend their policy about rising prices. The only Member who defended it with any spirit was the hon. Member for Ebbw Vale (Mr. Michael Foot). It was his usual fluent, vigorous speech and one could see the signs of relief on the Front Bench opposite as right hon. Gentlemen found that at least for the first half of his speech the hon. Gentleman was basically supporting what they had had to say.

Then the hon. Gentlemen got to the second part of his speech and the theme was one of great confidence, confidence typical of a Socialist Member representing Ebbw Vale for another election. He thought that he would hold Ebbw Vale in another election. He was convinced that he would hold Ebbw Vale in another election and he pointed that out to us. The advantages to him are considerable, of course. He was much happier when he was the official Opposition instead of the unofficial opposition and, therefore, if the Government lost the election he would be happy.

Then the hon. Gentleman made his real contribution to the debate. He acted as the early warning system of what would happen if we had a Labour Government with a real majority. He said that with the present small majority the Government could not create the type of Socialist society in which his type of incomes policy would work. He said, "Give us a bigger majority and then we can create the real Socialist State which we want to achieve; then we can nationalise the industries; then we can do away with the defence programme; then we can have three or four Budgets of increasing taxation." This was the theme, the honest theme as always, of the hon. Gentleman and I hope that the country will take note of his words and know exactly what a future Socialist Government would mean.

This has been a remarkable debate for many reasons. One of them is that we have been debating prices and although there are two Ministries primarily concerned with prices, the Treasury and the Department of Economic Affairs, throughout the whole of the debate, with the exception of 11 minutes, no Minister from either of those Ministries has been present. If the Government's prices and incomes policy is so good and so effective, why has there been no attempt to have a Minister from the Department of Economic Affairs to defend it? There is no shortage of Ministers in either the Treasury or the Department of Economic Affairs.

In all fairness to the First Secretary, he did speak this afternoon on the prices and incomes policy—but not in the House of Commons. The Parliamentary Secretary to the Ministry of Technology, in his opening speech, when challenged on this issue, said, "Our Ministers are busy; they do not bother with the House of Commons; do not expect Ministers to bother with the House of Commons." That was his attitude. The general attitude of the First Secretary is that the House of Commons does not matter, that he is a kind of economic dictator who ought to be able to lay down the law and blast accusations about saboteurs and themes such as that, and yet never come here to answer for himself in the House Commons. That is a very poor reflection on the faith which he has in his policy.

I would like to deal further with the speech of the Parliamentary Secretary. He had a difficult task, because he was representing a Ministry not specifically concerned with this problem. One may wonder why the Government decided to put up the Parliamentary Secretary to the Ministry of Technology to speak on this subject. Perhaps it was because of his reputation as a good debater, or perhaps it was to persuade the country that there was at least one person in the Ministry of Technology who believed in the Government's prices and incomes policy.

It was a good attempt. First of all, there was the defence of the rising prices in the past year on the basis of, "Well, after all, it was not very much worse than the worst year of the last 10 years of Conservative Government. There were some years in the last 10 years when the Tories were almost as bad as we have been since we became the Government."

Then the hon. Gentleman moved on to the justification. This has been brought up by several hon. Members, particularly by the hon. Gentleman the Member for Colne Valley (Mr. Duffy), whose speeches on this subject are always listened to with a great deal of attention. But in his attempt to defend the Government he used the same argument as the Parliamentary Secretary—"Some of those rises were due to the Chancellor and one cannot really count those. They were due to the Chancellor raising taxes to deal with the balance of payments problem". Several hon. Gentlemen opposite argued in this way. They said that this was the reason why higher taxes were introduced.

If one is introducing higher taxes to deal with the balance of payments problem it is presumably because one believes that the higher taxes will have a deflationary effect on the economy. The Government says, "We have increased the cost of living, we have created inflationary policies as a result of our taxation and you will excuse us from those and deduct them from the calculations."

The third part of the speech of the Parliamentary Secretary was one of tremendous complacency and it is a complacency that has been repeated, of course outside this House, by the First Secretary of State this afternoon. It was argued that things had been much better recently, that recently the rise in the cost of living had been nowhere as great as it was up until the end of April. I believe that the figures given by the Parliamentary Secretary were that in the first six months of this Government the cost of living went up by 3.8 per cent., but that in the last eight months it had only gone up by 1.6 per cent. "Look what an improvement this has been," he said.

This afternoon the First Secretary of State said: The rise in prices has been much lower in the year we are talking about than it was in the comparable period before. What complacency for a Government Minister when, during the last two months, the cost of living has been rising at the rate of 5.4 per cent. The Government have based their figures on the last eight months, as the Prime Minister said in his letter to the Labour candidate at Hull. He remarked how stable prices had been in the last eight months. Not nine months, because that would have proved to be a very bad figure indeed. [An HON. MEMBER: "Like your 10 years."] Not two months either, because that, too, would have proved to be a very bad figure.

The reason for this is that this period, as the President of the Board of Trade well knows, includes the price stability of the period May to October. This has been the Government's case—looking at the stability from May to October. If one looks through the cost of living figures over the years there is always the seasonal stability from May to October,

From May to October last year the cost of living rose by less than 1 per cent. In the previous year, under the Conservative Government, it rose by less than 1 per cent. From May to October in 1963 and in 1962 it went down. From May to October over the last 10 years the increase in the cost of living was, on average, lower than it was last year. Therefore, this particular argument does not stand up. The fact is that in the last two months the cost of living has been rising again.

The Parliamentary Secretary moved on. Here was the Government going on the attack. It was a sad moment for the hon. Gentleman. He said with great emphasis. "Those hon. Members who are opposed to the Government's prices and incomes policy should come and say what is their alternative". Our hopes rose. In walked the Minister of Technology with great majesty to tell us what was the alternative. Here was a man who would tell us what the alternative was. We provided the opportunity for the right hon. Gentleman to do so. We urged the hon. Gentleman to give way to his Minister, but he did not do so. So we did not hear the alternative of the main oponent of the Government's prices and incomes policy.

The Parliamentary Secretary quickly moved on to his last argument, which was what the Ministry of Technology has done to bring down prices. He gave some examples. He said that it had done something very important in terms of getting an agreement about the thread on screws. He gave one or two other examples of the important work of the Ministry of Technology. He missed out the best argument. The greatest thing which the Ministry of Technology has done in supporting the Government's prices and incomes policy is to give a job to the general secretary of the Transport and General Workers' Union to keep him quiet. This has been the most successful role of the Ministry of Technology. [HON. MEMBERS: "Cheap".] Not very cheap, either—very expensive.

The fact is that in the first 14 months of the Labour Government's period of office the cost of living has risen by 5.4 per cent.

Mr. Walter Monslow (Barrow-in-Furness)


Mr. Walker

All right—a little more perhaps.

Let us see what arguments have been propounded on this issue. It is a question not only of the past performance, but of the present and future performance. The present performance, we know, is going back. We know that this month there have been increases in bus and rail fares, railway freight charges and bread prices, to name but a few. We know that other increases are coming along.

There has been far too little reference by the Government today to the rising prices coming from the nationalised industries. My hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) advanced very cogent arguments on this subject, and I hope that the President of the Board of Trade will answer them. We have had the promise that coal prices and electricity and gas charges will go up. It is announced today in reply to a Question that an increase of 7½ per cent. in the internal air fares of B.E.A. is not to be referred to the National Board for Prices and Incomes. If the Government are so keen on private industry absorbing the rising costs put on by them, they should be just as keen on the nationalised industries doing the same.

We are particularly concerned about the future. It was suggested this afternoon by the First Secretary that his policy was going well. But what are the prospects of the future? Nobody could be better quoted on this subject than the Chancellor of the Exchequer—quoted in the context of a by-election speech which he made at Hull earlier in the week. One would expect that in a by-election speech, and particularly in the official hand-out of that speech, the right hon. Gentleman would have put the most favourable light on the prospects about rising prices during the coming months of a Labour Government.

What did the Chancellor say about future prospects? These are his very words: What are the prospects for prices in 1966? My view is that from the spring onwards, there is a real chance that prices will rise more slowly than they did throughout 1965. What a prospect. Prices will seemingly rise until the spring at a rate faster than they did last year. Is that what the Chancellor meant? Was he suggesting on Monday that we can expect prices to rise at a lower rate than 4.5 per cent. only after the spring? What does he expect to happen until the spring? Has he in mind imposing extra additional costs in his Budget? What are the Government's estimates about the rise in the cost of living that will take place in the coming months?

We know that rates are going up considerably and that the coal price is going up. We hear every day of numerous other price increases. Will the Chancellor put further increases on top of these? Why does he give the country the warning that after the spring, the cost of living may rise at a rate lower than 4.5 per cent. per annum? This is very different from the talk at the last General Election.

Even this pledge by the Chancellor was limited, because he went on to say that that would only happen provided that costs remained stable.

The Chancellor of the Exchequer (Mr. James Callaghan)

What is wrong with that?

Mr. Walker

Anybody outside the Treasury would expect that if costs remained stable the cost of living would not go up. Even if they remain stable, however, the cost of living will seemingly go up a little less than 4.5 per cent. per annum.

The reason why the prices and incomes policy has failed is that the Government's actions have resulted in the substantial wage demands which have had to be met during the past year. The Chancellor added the import surcharge, Income Tax, the tax on petrol, tobacco tax and the motor vehicle tax, and his policies have resulted in an increase in the rates. The interesting comparison is the type of wage increase that is required purely to find oneself in the same position as in the week that the Labour Government came to office. In the last week of the Tory Government, after paying Income Tax and National Insurance stamp, the average industrial wage earner was taking home £16 17s. 0d. a week.

Simply to be in the same position as in October, 1964, the average industrial worker would require an increase in his wage of 7.4 per cent. purely to keep pace with the Government's rise in the cost of living and the increase in taxation. The fact is that many thousands of wage earners have kept pace with this. They have had increases of 7.4 per cent. and more. There are, however, many thousands of wage earners and people on fixed incomes who have not had that increase. They are the people who have suffered during this period.

There are many spheres in the cost of living where the Government have failed to keep their promises. Last night, television viewers were subjected to one facet of the argument. The Minister of Housing and Local Government modestly said, in the party political programme of the party opposite, that his Department had responsibility for certain matters that affected the cost of living. My word, they do. He said that he had responsibility for mortgages and for rates. Oddly enough, he missed out the responsibility for the price of houses, which was a great issue at the last election.

We know that the Minister of Housing and Local Government is a skilled politician. He is a great purveyor of propaganda for the party opposite. He has given a series of promises throughout the country about what he will do for those with mortgages and for rates. The remarkable thing is that the promise he made last night, on the eve of poll at Hull, on the subject of rates and mortgages, was identical with his promise at the Nuneaton by-election 12 months before.

The Minister of Housing and Local Government has trundled round the by-elections, from Nuneaton to Hall Green, to Roxburgh and Selkirk, to Hove and to Hull, making the same promises that we will hear any moment now that the Government will tackle their pledge on mortgages and are about to reduce the burden on the ratepayer. Month after month this promise has been made. And so the right hon. Gentleman goes his way. While he is doing this mortgages are going up, and so are the rates to a tremendous extent. If we study the responsibility of that one Minister, we find that the cost of houses under the present Government has gone up by a greater amount than in any of the 10 years since records were first kept.

We all remember those electioneering programmes in which various Ministers now occupying the benches opposite were horrified at the rise in the cost of houses. As for rates, the Parliamentary Secretary this afternoon came to the Despatch Box and said, "Of course, rates have gone up. Of course, they went up 14 per cent. last year, and they are liable to go up 10 per cent. this year. But," he said, "it is not the Government, it is the system that has made the rates go up." In its election manifesto, the party opposite did not say that it was a system that it would keep for two years [Interruption.] Not at all. As it so happens, I have the Labour Party manifesto. Let me read it: While the reform of the rate system and investigation of alternative forms of local government finance may take some time to accomplish, we shall seek to give early relief to ratepayers". That is what Labour said then. What an early relief it has been—14 per cent. extra last year and probably the same amount extra this year. Local authorities are burdened with higher interest rates, higher wage costs and no end of extra taxes imposed by the Government. That is the story of the rates. Throughout all the time that the Minister responsible for the rates has trundled the country saying, "I am all against the rates", his whole attitude could best be described as "The Rates Progress".

The fundamental reason for the failure of the Government is that they have introduced all the inflationary monetary and taxation policies which have brought about stagnant production, production which is apparently lower than it was at the beginning of 1965. They brought in all these policies for the purpose of being deflationary, for the purpose of bringing down costs, and the whole thing has been swept away by the complete failure to put into practice their so-called prices and incomes policy.

They say, what is our alternative? We do not want an alternative which puts up cost of living even more. The fact is that under this Government production has been stagnant, prices have soared, pledges on mortgages, rates and house prices have been broken. There is hardly a sphere of ordinary prices which affect ordinary people which has not been dramatically increased under the Government, in complete contrast to all their election promises. All that we have in reply to this is further propaganda.

We have had a debate in which neither the Board of Trade, the Department of Economic Affairs, nor the Treasury has been willing to take any part. With the exception of an 11-minute visit by the Chief Secretary to the Treasury, they have not been near the place. If the Chancellor of the Exchequer and the First Secretary of State for Economic Affairs had taken part in the debate, or any of their junior Ministers had done so, it would have at least had the advantage that the Treasury Minister could have opened and told us all that he had done to put up the cost of living and the Minister from the Department of Economic Affairs could have wound up and told us all that he had done unsuccessfully to keep it down.

Once again, we have a Labour Government; once again, prices are rising. It is because in every sphere that this Government made specific pledges that they would bring down the cost of living, and exactly the opposite has happened, that I certainly join the hon. Member for Ebbw Vale and wish that at the earliest opportunity the performance of the Government can be put to the test.

9.26 p.m.

The President of the Board of Trade (Mr. Douglas Jay)

As I listened to the words of the hon. Member for Worcester (Mr. Peter Walker) and also the speech of the right hon. Member for Altrincham and Sale (Mr. Barber) I could not help remembering that during the 13 years up to October, 1964, when the party opposite was in power, the cost of living rose by 55 per cent. The right hon. Member for Altrincham and Sale started by saying this afternoon that the cost of living rose more in the first 12 months of this Government's life than at any time in the last 10 years. He did not even get the figures right. For instance, in the 12 months—and I could take many other 12 months—from April, 1961, to April, 1962, living costs rose 6.2 per cent., compared with only 4.8 per cent. in the 12 months of which he was speaking. I think the right hon. Gentleman might at least start by getting his figures right.

I should have thought that in view of the record of those 13 years a rather heavy obligation rested on the party opposite to tell the country just how they proposed to stop this happening again. I notice that in the foreword to the Conservative Party's new policy statement—I have it here—[HON. MEMBERS: "Read it."]—I am going to read it—the Leader of the Opposition says that the country is looking for constructive policies—how we do things, rather than what needs to be done. We might have expected today that the Opposition would have told us just how and by what practical policies the cost of living could be kept down. They have completely failed, indeed they have not even attempted to tell us how to do that.

The truth is as even hon. Members opposite in their quieter moments understand that we all face a crucial dilemma which has got to be courageously resolved if this country is to survive. If we do not have the courage to carry through a deliberate policy for controlling and restraining the pressure on prices and incomes to rise then we must choose between two alternatives. Either we must take refuge in periodic bouts of deflation, falling production and rising unemployment—that is the solution which is put forward by the right hon. Member for Wolverhampton, South-West (Mr. Powell) although he is never candid enough to say so—or, if we try to run a fully employed growing economy without any incomes policy, we shall of course risk being faced with a runaway rise in prices. The House and the country would like to know which of these three possible policies the party opposite thinks ought to be followed. We have not been told today.

Now I come to the Government, and I know that this will give great pleasure to right hon. Gentlemen opposite. The present Government, and I believe all of us on this side of the House, explicitly and deliberately reject the alternatives of either outright deflation, or an uncontrolled runaway rise in prices and money income. We accept the implications of that decision, that it lays the obligation on the Government to attempt to secure by the greatest possible measure of democratic agreement an effective check on the upward pressure of prices and money incomes.

That in turn immediately implies two things: first, that such a policy, and the taxation measures which support it, has to be applied not merely to salaries and wages, but to prices, rents, profits, dividends, and all incomes capable of control. Secondly, as we understood perfectly well from the beginning, because we are acting here purely by persuasion and not by compulsion, that is bound to be an extremely difficult and arduous task. Indeed, nobody with the slightest understanding of this problem would expect major successes in the first few months of the attempt.

Sir Knox Cunningham

A few months?

Mr. Jay

I shall come to the timetable, and the hon. and learned Gentleman will understand better if he listens carefully.

I do not believe that anyone seriously doubts, either, that we at the present time at least have a better chance of success, and have come nearer to success already, than any Government who have attempted this before. The Prices and Incomes Board—I think that some hon. Gentlemen opposite forgot this this afternoon—was set up only last spring, and it was set up, let us remember, not just at the behest of the Government, but with wide agreement and support from every member of N.E.D.C., and from both sides of industry.

The policy which we are pursuing is a co-operative one which has been repeatedly endorsed by the most representative leaders of industry, both on the side of management and of labour. Even though the Board started operating only in the spring, it has already received 18 references, nine of them on prices, and made nine reports.

If the Board and the policy embodied in it succeeds, it will be a success—[Laughter.] I never expected hon. Gentlemen opposite to take this subject very seriously, but they might do better than that. As I was saying, if the Board and the policy embodied in it succeed, it will be a success not just for this Government, but for all the more constructive elements over a wide section of industry, as hon. Gentlemen opposite know perfectly well in their heart of hearts. If it fails, it will be a national failure, and I cannot really believe that many hon. Gentlemen opposite, despite their behaviour sometimes this afternoon, really want to be held responsible for that failure. Hon. Gentlemen opposite must take care not to incur on themselves responsibility by appearing at least to be trying to sabotage this policy.

Nor can any serious observer really doubt—and I ask hon. Gentlemen opposite whether they really doubt this—that had it not been for the Board's inquiries and reports, and the restraining pressure from the Government in all sorts of ways, the rise in prices last year would have been much steeper both in public and private industry.

Mr. Burden

In replying to a Question that I put to him the First Secretary stated that he would not send the agreement for a 7½ per cent. increase in internal fares in respect of the air companies to the Prices and Incomes Board. The Air Transport Licensing Board, in giving its decision, said that it could not properly decide whether or not the increase was reasonable, because it had not got the facts. Why did not the Minister agree to send it to the Prices and Incomes Board?

Mr. Jay

The hon. Member does not understand how the policy works. We have never suggested—nor has any other sensible person—that every rise in prices of every kind should be referred to the Prices and Incomes Board, but a number of price increases by the nationalised industries have been so referred, and I have no doubt that a number of others will be referred to it in future. If the hon. Member denies that the operation of this policy has done a great deal to keep prices down, how does he explain the fact that a number of private firms have said that prices would have been higher had they not kept them down at the request of the Government?

So many figures have been bandied about this afternoon that I should like to put the record straight. No sensible person imagined that a policy instituted by a general agreement in the latter months of 1964 could materially affect our economic life until well into 1965—say, until the spring of last year. The right hon. Member for Altrincham and Sale recognised this fact this afternoon when he pointed out that the White Paper on Prices and Incomes was published only in April, 1965. In order to be impartial I will take for my starting point the time chosen by him. It is interesting to note that it has been since last spring that the rise in prices has begun to slow down.

I noted what the right hon. Gentleman said about the dates. I have therefore taken as my starting point the date chosen by him, and I have taken as my finishing point the date chosen by the other right hon. Gentleman, that is to say. December—the latest month for which we have figures. Between April and December, 1965, the rise in the cost of living was only 1.9 per cent., compared with 3 per cent. between April and December, 1964. That is their choice.

Mr. Iain Macleod (Enfield, West)

By taking the dates that he has done—[Interruption.]—oh, yes—he has included in the Conservative figures three months of Socialist Government which included the increase in petrol tax and the import surcharge. That is grossly unfair. If he compares the comparable periods in 1963 and 1962 he will find that the figures were far smaller, and that they went down.

Mr. Jay

The right hon. Gentleman did not even listen to what I said, perhaps because he has not been here for most of the debate. I chose the periods April to December, 1964, and April to December, 1965, because those were the dates chosen by right hon. Gentlemen opposite—[Interruption.]

Mr. Speaker

Order. It is getting a little too noisy for me to hear the argument.

Mr. Jay

Since our policy came into operation, the rise in the cost of living has been substantially less than in the same period in the previous year. Even if we take the whole 12 months of 1965 and compare that period with the 12 months of 1964, we find that the rise slowed down from 4.8 per cent. in 1964 to 4.5 per cent. in 1965.

Mr. Barber

Would not the right hon. Gentleman agree that, during the first 12 months of this Government's period of office or during the first 13 months or during the first 14 months, which is the longest period for which we have figures, the rise in the cost of living was higher than at any comparable period during the previous 10 years? Yes or no?

Mr. Callaghan

Why 10?

Mr. Jay

No, Sir, that is not true—[HON. MEMBERS: "Oh."] The rgiht hon. Gentleman has simply got the figures wrong. There were no fewer than four 12-month periods, one of which I have already quoted, between 1961 and 1962, when the rise was greater. If one looks even at the individual items, between 1964 and 1965, one will find that the rise in price was much less in the second year. The price of clothes and footwear rose less in 1965 than in 1964 and less than at the average rate of the three previous years. The price of household durable goods rose less in 1965 than in 1964 and that of the group "miscellaneous goods" contained in the price index actually rose less than half as fast in 1965 as in the previous year.

Food prices also rose less—by 3.1 per cent. in 1965 and by 5.1 per cent. in 1964. The chief items which rose faster—I give the right hon. Gentleman this—were certainly tobacco and alcoholic drink, due, I agree, to deliberate Budget decision that it was better to restrain purchasing power this way than by raising the price of prime necessities of life like bread and clothes. But if the party opposite—I say this particularly because the right hon. and learned Member for The Wirral (Mr. Selwyn Lloyd) is with us—are going to argue now that it is wrong to restrain purchasing power ever by an increase in indirect taxation, they will have to explain to the House why they imposed repeated increases in indirect taxes in their 13 years of power.

The taxes on wines, beer and spirits went up under their Administration in 1964, as did the price of tobacco, the taxes on petrol, drink and tobacco went up in 1961 and the tobacco tax was raised by Tory Chancellors in 1956, 1960, 1961 and 1964.—[Interruption.] The right hon. and learned Gentleman was not here when his colleagues were talking about rises in indirect taxes—

Mr. Selwyn Lloyd (Wirral) indicated assent.

Mr. Jay

There was a general increase in the regulator on all indirect taxes in addition, including Purchase Tax in July, 1961, so right hon. Gentlemen opposite had better not talk too much about increases in indirect taxes.

Not merely did the party opposite carry through all these increases in indirect taxation in order to restrain purchasing power—which they now declare to be grossly unfair impositions on the public—but they did much worse than that. Gratuitously and unnecessarily, let us remember, they forced through the 1957 Rent Act and, altogether, by 1964 when we came to power, the housing element in the cost of living since the Rent Act had risen by more than 50 per cent.

Not content with that, the previous Government introduced the London Government Act which, by dislocating and disrupting a whole number of local government services, has been one of the main causes of the rise in rates in the Greater London area. That is why rates have risen much faster in London than the average for the country as a whole. We warned the party opposite that this would happen and the results have been even worse than we feared.

Again, to get the record straight—and it is becoming a lot straighter now—let us compare our performance with that of other major countries over the six months from the right hon. Gentleman's date of April, 1965, up to the latest figures available for the rise in the cost of living in other countries. That is fair enough. If we do that we on this side of the House need not be discouraged by our record.

From April till October of last year the rise in the United Kingdom cost of living was under 1 per cent. In Denmark it was nearly 5 per cent. In Germany and Italy it was 2 per cent. In France and the United States it was about the same as here, while in Sweden and Switzerland it was nearly 4 per cent. Therefore, on the record of the United Nations figures, our policies have already achieved substantial success, as measured against the records of other major industrial countries.

Mr. George Y. Mackie

Would the right hon. Gentleman give the figures for the full year?

Mr. Jay

I am grateful to the hon. Member for giving me a rest. I assure him that in due course he will have all the figures he wants.

Of course, the difficulties are great. Nobody but a fool would expect it to be easy both to restrain rising prices in a fully employed free society and to achieve it in an equitable manner at the same time. Indeed, I do not believe that the ordinary man really expects that to be possible. But if the Government had not been willing to tax capital gains, to bring back effective control of rents and to control prices as well as incomes I do not believe that we would have had any chance of success.

I put this question to hon. Gentlemen opposite. Are they willing to do these things? Do they intend to continue with rent control? Do they intend to maintain the taxation of capital gains and equitable taxation of company profits? Do they intend to maintain the Prices and Incomes Board with control over prices as well as salaries and wages? And would they—and I commend this question to the hon. Gentleman opposite who asked about the nationalised industries—abide by their White Paper on the Financial and Economic Obligations of the Nationalised Industries, which would compel those industries from time to time to raise their prices?

Hon. Gentlemen opposite have not told us today and, to get the answer, I looked once again at the Leader of the Opposition's "Statement of Conservative Aims"—which was prepared, as we know, by a number of secret committees—in an attempt to find the answer. There is no answer in this document. Indeed, the answer is as secret as the committees which prepared the document.

The only positive proposal in this great new statement of Conservative policy is a plan to put new taxes on our essential foodstuffs which would raise food prices by up to 10 per cent. and send the cost of living soaring upwards. The policy in this document would add at least £400 million a year to the cost of food to the housewife and would destroy any chance of achieving an agreed incomes policy or of keeping our export costs down.

Since, however, we get no other guidance on incomes and prices policy from the Opposition's official document, we must naturally look at the speeches of the right hon. Member for Wolverhampton, South-West and the right hon. Member for Barnet (Mr. Maudling). They are both still on the Front Bench, I understand. They give us a lot of practical advice, but they contradict one another.

The right hon. Member for Wolverhampton, South-West—he will not deny this—has been telling us for a long time that any sort of incomes policy is quite unworkable, but his right hon. Friend the Member for Barnet—and he is not here either; there has been a lot of talk about hon. Members not being on this side of the House, but where is he?—answered the right hon. Member for Wolverhampton, South-West on 4th January by saying that although his right hon. Friend's arguments might be true in theory they were completely untrue in practice. On the contrary, said the right hon. Member for Barnet, it is necessary … by effort, leadership and example to achieve restraint upon the growth of incomes as a whole. He said that the only alternative would be drastic inflation … and that would not be a solution, but acceptance of defeat. This important pronouncement was too much for the right hon. Member for Wolverhampton, South-West who, in an article headed by The Times Mr. Powell hits back at Maudling Thesis retorted not very politely by describing his right hon. Friend's views as a … superstition pitted and hedged round with absurdities … and as a piece of "mythology." I assure you, Mr. Speaker, that I am quoting; otherwise I might be out of order and unparliamentary—

Mr. Powell

The right hon. Gentleman is quoting some of the words, but he is not quoting the context.

Mr. Jay

I shall be delighted if every hon. Member reads the context for himself. [HON. MEMBERS: "You read it."]

No wonder, after this, that the hon. Member for Stratford-on-Avon (Mr. Maude) tells us that the Conservative Party has completely lost "effective political initiative" and has "become a meaningless irrelevance." However, I do think that it is, perhaps, rather rough on the hon. Member for Stratford-on-Avon that the right hon. Member for Wolverhampton, South-West still sits on the Front Bench opposite.

However, whatever happens to these holy men, we on this side intend to stick to our policies and carry them through to even greater success. Since these policies began to take effect in the spring of last year, the rise in prices, as I have said, has slowed down. We have now, in addition, gained control of rents—in face, of course, of the opposition of hon. Members opposite. The authority of the Prices and Incomes Board is steadily growing, and we shall legislate soon this Session to give it further powers.

We also introduced yesterday, and shall carry through into law as early as possible this Session, a major Bill for the protection of the consumer, including protection against unfair price practices, thus implementing the Report of the Molony Committee, to which we have given priority in a heavy legislative programme.

Frankly, I think that it was natural that after years of recurrent price increases, the price rise had to be slowed down before a major effect could be exercised on incomes. We have now reached this second stage, and for this reason, given co-operation and understanding of the problem by all concerned, there is now much better hope of success than there has been for years past. Who, for instance, would have imagined even a year ago that the T.U.C. by this day would have accepted, by agreement, the task of examining and expressing a collective view on individual wage claims? Yet that has happened.

And here is another sign which I believe is significant and hopeful. It was precisely in the second half of last year, when the rise in prices was successfully slowed down, that exports began to forge ahead more rapidly. For, of course, one of the basic aims of an incomes policy is to hold our costs down, and so secure the rapid rise in exports that we all know is our greatest national need.

In the past 15 months the Government have deliberately put the maximum effort and priority, even at the cost of postponing some other aims, into the export drive. As I promised more than a year ago, we have launched a whole series of incentives, stimulants and new export services, and there will be more to come, which the party opposite might have introduced, but did not, over the previous 13 years. Incidentally I have noticed that right hon. Members opposite have shown no desire to debate exports or export policy in recent months.

Thanks, I believe, in no small degree to our incomes and prices policy, as well as to the new direct export incentives, our exports increased in volume in 1965 by 5 per cent. over 1964. That was the biggest increase in volume for many years, and was very close, in the first year, to the target of 5½ per cent. in volume set out in the National Plan, which right hon. Members opposite condemned before they read it. The increase in value of our exports was 7 per cent. in 1965, substantially faster than in 1964, although world trade as a whole was increasing substantially slower. That is the real measure of the success of British industry over the past 12 months.

As a result of this accelerating success and of the active co-operation of industry in the export drive and in the National Plan, we have now halved the disastrous trade deficit left us by the previous Government and finished the year with two of the highest monthly export totals ever known.

Mr. Barber

I wonder if the right hon. Gentleman will comment upon two very important facts which I laid before the House at the beginning of the debate. The first was that during the first six months of the working of the prices and incomes policy average weekly earnings rose by 11 per cent., more than three times the normal. The second was that

Division No. 17.] AYES [9.59 p.m.
Agnew, Commander Sir Peter Burden, F. A. Fisher, Nigel
Alison, Michael (Barkston Ash) Buxton, Ronald Fletcher-Cooke, Charles (Darwen)
Allan, Robert (Paddington, S.) Campbell, Gordon Fletcher-Cooke, Sir John (S'pton)
Allason, James (Hemel Hempstead) Carlisle, Mark Forrest, George
Amery, Rt. Hn. Julian Carr, Rt. Hn. Robert Foster, Sir John
Anstruther-Gray, Rt. Hn. Sir w. Channon, H. P. G. Fraser, Rt. Hn. Hugh(St'fford & Stone)
Astor, John Chataway, Christopher Fraser, Ian (Plymouth, Sutton)
Atkins, Humphrey Chichester-Clark, R. Galbraith, Hn. T. G. D.
Awdry, Daniel Clark, Henry (Antrim, N.) Gammans, Lady
Baker, W. H. K. Clark, William (Nottingham, S.) Gardner, Edward
Balniel, Lord Clarke, Brig. Terence (Portsmth, W.) Gibson-Watt, David
Barber, Rt. Hn. Anthony Cole, Norman Giles, Rear-Admiral Morgan
Barlow, Sir John Cooke, Robert Gilmour, Ian (Norfolk, Central)
Batsford, Brian Cooper, A. E. Gilmour, Sir John (East Fife)
Beamish, Col. Sir Tufton Cooper-Key, Sir Neill Glover, Sir Douglas
Bell, Ronald Cordle, John Glyn, Sir Richard
Bennett, Sir Frederic (Torquay) Corfield, F. V. Godber, Rt. Hn. J. B.
Bennett, Dr. Reginald (Gos & Fhm) Costain, A. P. Goodhart, Philip
Berkeley, Humphry Courtney, Cdr. Anthony Goodhew, Victor
Berry, Hn. Anthony Craddock, Sir Beresford (Spelthorne) Gower, Raymond
Bessell, Peter Crawley, Aidan Grant, Anthony
Biffen, John Crosthwaite-Eyre, Col. Sir Oliver Grant-Ferris, R.
Biggs-Davison, John Crowder, F. P. Gresham Cooke, R.
Bingham, R. M. Cunningham, Sir Knox Grieve, Percy
Birch, Rt. Hn. Nigel Curran, Charles Griffiths, Eldon (Bury St. Edmunds)
Black, Sir Cyril Currie, G. B. H. Griffiths, Peter (Smethwick)
Blaker, Peter Dalkeith, Earl of Grimond, Rt. Hn. J.
Bossom, Sir Clive Dance, James Gurden, Harold
Box, Donald Davies, Dr. Wyndham (Perry Barr) Hall, John (Wycombe)
Boyd-Carpenter, Rt. Hn. J. d'Avigdor-Goldsmid, Sir Henry Hall-Davis, A. G. F.
Boyle, Rt. Hn. Sir Edward Dean, Paul Hamilton, Marquess of (Fermanagh)
Braine, Bernard Deedes, Rt. Hn. w. F. Hamilton, M. (Salisbury)
Brewis, John Digby, Simon Wingfield Harris, Frederic (Croydon, N.W.)
Brinton, Sir Tatton Doughty, Charles Harris, Reader (Heston)
Bromley-Davenport, Lt. -Col. Sir Walter Douglas-Home, Rt. Hn. Sir Alec Harrison, Brian (Maldon)
Brooke, Rt. Hn. Henry Drayson, G. B. Harrison, Col. Sir Harwood (Eye)
Brown, Sir Edward (Bath) du Cann, Rt. Hn. Edward Harvey, Sir Arthur Vere (Macclesf'd)
Bruce-Gardyne, J. Elliot, Capt. Walter (Carshalton) Harvey, John (Walthamstow, E.)
Bryan, Paul Elliott, R. W.(N'c'tla-upon-Tyne, N.) Harvie Anderson, Miss
Buchanan-Smith, Alick Eyre, Reginald Hastings, Stephen
Buck, Antony Farr, John Hawkins, Paul
Bullus, Sir Eric Fell, Anthony Hay, John

the latest figures of industrial production show it to be less than it was in January, 1965.

Mr. Jay

In order that I do not have to make my speech all over again, I suggest that the right hon. Gentleman reads it in HANSARD tomorrow.

The plain truth is that as a nation we shall never achieve economic growth and keep prices down at the same time without the most strenuous effort in partnership between all sections of industry and between industry and the Government. That is our policy. It is, I believe, beginning to succeed, and we mean to carry it through. It will certainly not be easy, but I am convinced that it is possible. I invite the country to renew and redouble the constructive effort of the last 15 months and the House to reject this ridiculous censure Motion from a party which has no policy, no unity and no hope.

Question put:

The House divided: Ayes 284, Noes 287.

Heald, Rt. Hn. Sir Lionel Maginnis, John E. Sinclair, Sir George
Heath, Rt. Hn. Edward Maitland, Sir John Smith, Dudley (Br'ntf'd & Chiswick)
Hendry, Forbes Marples, Rt. Hn. Ernest Smith, John
Higgins, Terence L. Marten, Neil Smyth, Rt. Hn. Brig. Sir John
Hiley, Joseph Mathew, Robert Spearman, Sir Alexander
Hill, J. E. B. (S. Norfolk) Maude, Angus Stainton, Keith
Hirst, Geoffrey Maudling, Rt. Hn. Reginald Stanley, Hn. Richard
Hobson, Rt. Hn. Sir John Mawby, Ray Steel, David (Roxburgh)
Hogg, Rt. Hn. Quintin Maxwell-Hyslop, R. J. Stodart, Anthony
Hooson, H. E. Maydon, Lt.-Cmdr. S. L. C. Stoddart-Scott, Col. Sir Malcolm
Hopkins, Alan Meyer, Sir Anthony Studholme, Sir Henry
Hordern, Peter Mills, Peter (Torrington) Summers, Sir Spencer
Hornby, Richard Mills, Stratton (Belfast, N.) Talbot, John E.
Hornsby-Smith, Rt. Hn. Dame P. Miscampbell, Norman Taylors, Sir Charles (Eastbourne)
Howe, Geoffrey (Bebington) Mitchell, David Taylor, Edward M. (G'gow, Cathcart)
Hunt, John (Bromley) Monro, Hector Taylor, Frank (Moss Side)
Hutchison, Michael Clark More, Jasper Teeling, Sir William
Iremonger, T. L. Morgan, W. G. Temple, John M.
Irvine, Bryant Godman (Rye) Morrison, Charles (Devizes) Thatcher, Mrs. Margaret
Jenkin, Patrick (Woodford) Mott-Radclyffe, Sir Charles Thomas, Sir Leslie (Canterbury)
Jennings, J. C. Munro-Lucas-Tooth, Sir Hugh Thomas, Rt. Hn. Peter (Conway)
Johnson Smith, G. (East Grinstead) Murton, Oscar Thompson, Sir Richard (Croydon, S.)
Johnston, Russell (Inverness) Neave, Airey Thorneycroft, Rt. Hn. Peter
Jones, Arthur (Northants, S.) Nicholls, Sir Harmar Thorpe, Jeremy
Joseph, Rt. Hn. Sir Keith Nicholson, Sir Godfrey Tiley, Arthur (Bradford, W.)
Kaberry, Sir Donald Noble, Rt. Hn. Michael Tilney, John (Wavertree)
Kerby, Capt. Henry Nugent, Rt. Hn. Sir Richard Turton, Rt. Hn. R. H.
Kerr, Sir Hamilton (Cambridge) Onslow, Cranley Tweedsmuir, Lady
Kilfedder, James A. Orr, Capt. L. P. S. van Straubenzee, W. R.
King, Evelyn (Dorset, S.) Orr-Ewing, Sir Ian Vaughan-Morgan, Rt. Hn. Sir John
Kirk, Peter Osborn, John (Hallam) Vickers, Dame Joan
Lagden, Godfrey Page, John (Harrow, W.) Walder, David (High Peak)
Lambton, Viscount Page, R. Graham (Crosby) Walker, Peter (Worcester)
Lancaster, Col. C. G. Pearson, Sir Frank (Clitheroe) Walker-Smith, Rt. Hn. Sir Derek
Langford-Holt, Sir John Percival, Ian Wall, Patrick
Legge-Bourke, Sir Harry Peyton, John Walters, Dennis
Lewis, Kenneth (Rutland) Pickthorn, Rt. Hn. Sir Kenneth Ward, Dame Irene
Litchfield, Capt. John Powell, Rt. Hn. J. Enoch Weatherill, Bernard
Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield) Price, David (Eastleigh) Wells, John (Maidstone)
Lloyd, Ian (P'tsm'th, Langstone) Prior, J. M. L. Whitelaw, William
Lloyd, Rt. Hn. Selwyn (Wirral) Quennell, Miss J. M. Williams, Sir Rolf Dudley (Exeter)
Longden, Gilbert Ramsden, Rt. Hn. James Wills, Sir Gerald (Bridgwater)
Loveys, W. H. Rawlinson, Rt. Hn. Sir Peter Wilson, Geoffrey (Truro)
Lubbock, Eric Redmayne, Rt. Hn. Sir Martin Wise, A. R.
Lucas, Sir Jocelyn Rees-Davies, w. R. Wolrige-Gordon, Patrick
McAdden, Sir Stephen Renton, Rt. Hn. Sir David Wood, Rt. Hn. Richard
MacArthur, Ian Ridsdale, Julian Woodhouse, Hn. Christopher
Mackenzie, Alasdair (Ross & Crom'ty) Roberts, Sir Peter (Heeley) Woodnutt, Mark
Mackie, George Y. (C'nese & S'land) Robson Brown, Sir William Wylie, N. R.
Maclean, Sir Fitzroy Rodgers, Sir John (Sevenoaks) Younger, Hn. George
Macleod, Rt. Hn. Iain St. John-Stevas, Norman
McMaster, Stanley Scott-Hopkins, James TELLERS FOR THE AYES:
McNair-Wilson, Patrick Sharpies, Richard Mr. McLaren and Mr. Pym.
Maddan, w. F. M. Shepherd, William
Abse, Leo Broughton, Dr. A. D. D. Delargy, Hugh
Albu, Austen Brown, Rt. Hn. George (Belper) Dell, Edmund
Allaun, Frank (Salford, E.) Brown, Hugh D. (Glasgow, Provan) Dempsey, James
Alldritt, Walter Buchan, Norman (Renfrewshire, W.) Diamond, Rt. Hn. John
Allen, Scholefield (Crewe) Buchanan, Richard Dolg, Peter
Armstrong, Ernest Butler, Herbert (Hackney, C.) Donnelly, Desmond
Atkinson, Norman Butler, Mrs. Joyce (Wood Green) Driberg, Tom
Bacon, Miss Alice Callaghan, Rt. Hn. James Duffy, Dr. A. E. P.
Bagler, Gordon A. T. Carmichael, Neil Dunn, James A.
Barnett, Joel Carter-Jones, Lewis Dunnett, Jack
Baxter, William Castle, Rt. Hn. Barbara Edwards, Rt. Hn. Ness (Caerphilly)
Beaney, Alan Chapman, Donald Ennals, David
Bellenger, Rt. Hn. F. J. Coleman, Donald Ensor, David
Bence, Cyril Conlan, Bernard Evans, Albert (Islington, S.W.)
Benn, Rt. Hn. Anthony Wedgwood Corbet, Mrs. Freda Evans, Ioan (Birmingham, Yardley)
Bennett, J. (Glasgow, Bridgeton) Cousins, Rt. Hn. Frank Fernyhough, E.
Binns, John Craddock, George (Bradford, S.) Finch, Harold (Bedwellty)
Bishop, E s. Crawshaw, Richard Fitch, Alan (Wigan)
Blackburn, F. Cronin, John Fletcher, Sir Eric (Islington, E.)
Blenkinsop, Arthur Crosland, Rt. Hn, Anthony Fletcher, Ted (Darlington)
Boardman, H. Crossman, Rt. Hn. R. H. S. Fletcher, Raymond (Ilkeston)
Bottomley, Rt. Hn. Arthur Cullen, Mrs. Alice Floud, Bernard
Boston, Terence Dalyell, Tam Foley, Maurice
Bowden, Rt. Hn. H. W. (Leics S. W.) Darling, George Foot, Sir Dingle (Ipswich)
Boyden, James Davies, G. Elfed (Rhondda, E.) Foot, Michael (Ebbw Vale)
Braddock, Mrs. E. M. Davies, Harold (Leek) Ford, Ben
Bradley, Tom Davies, Ifor (Gower) Fraser, Rt. Hn. Tom (Hamilton)
Bray, Dr. Jeremy Davies, S. O. (Merthyr) Freeson, Reginald
Galpern, Sir Myer MacColl, James Robinson, Rt. Hn. K.(St. Pancras, N.)
Garrett, W. E, MacDermot, Niall Rogers, George (Kensington, N.)
Garrow, Alex McGuire, Michael Rose, Paul B.
Ginsburg, David McInnes, James Ross, Rt. Hn. William
Gourlay, Harry McKay, Mrs. Margaret Rowland, Christopher
Greenwood, Rt. Hn. Anthony Mackenzie, Gregor (Rutherglen) Sheldon, Robert
Gregory, Arnold Mackie, John (Enfield, E.) Shinwell, Rt. Hn. E.
Grey, Charles McLeavy, Frank Shore, Peter (Stepney)
Griffiths, David (Bother Valley) Mahon, Peter (Preston, S.) Short, Rt. Hn. E. (N' c'tle-on -Tyne, C.)
Griffiths, Rt. Hn. James (Llanelly) Mahon, Simon (Bootle) Silkin, John (Deptford)
Griffiths, Will (M'Chester, Exchange) Mallalieu, E. L. (Brigg) Silkin, S. C. (Camberwell, Dulwich)
Gunter, Rt. Hn. R. J. Mallalieu, J.P.W.(Huddersfield, E.) Silverman, Julius (Ashton)
Hale, Leslie Manuel, Archie Silverman, Sydney (Nelson)
Hamilton, James (Bothwell) Mapp, Charles Skeffington, Arthur
Hamilton, William (West Fife) Marsh, Richard Slater, Mrs. Harriet (Stoke, N.)
Hamling, William (Woolwich, W.) Mason, Roy Slater, Joseph (Sedgefield)
Hannan, William Maxwell, Robert Small, William
Harper, Joseph Mayhew, Christopher Snow, Julian
Harrison, Walter (Wakefield) Mellish, Robert Soskice, Rt. Hn. Sir Frank
Hart, Mrs. Judith Mendelson, J. J. Spriggs, Leslie
Hattesley, Roy Mikardo, Ian Steele, Thomas (Dunbartonshire, W.)
Hazell, Bert Millan, Bruce Stones, William
Herbison, Rt. Hn. Margaret Miller, Dr. M. S. Strauss, Rt. Hn. G. R. (Vauxhall)
Hobden, Dennis (Brighton, K'town) Milne, Edward (Blyth) Stross, Sir Barnett (Stoke-on-Trent, C.)
Holman, Percy Molloy, William Summerskill, Hn. Dr. Shirley
Horner, John Monslow, Walter Swain, Thomas
Houghton, Rt. Hn. Douglas Morris, Alfred (Wythenshawe) Swingler, Stephen
Howard, Hn. G. R. (St. Ives) Morris, Charles (Openshaw) Symonds, J. B.
Howarth, Harry (Wellingborough) Morris, John (Aberavon) Taverne, Dick
Howell, Denis (Small Heath) Murray, Albert Taylor, Bernard (Mansfield)
Howie, W. Neal, Harold Thomas, George (Cardiff, W.)
Hughes, Cledwyn (Anglesey) Newens, Stan Thomas, Iorwerth (Rhondda, W.)
Hughes, Emrys (S. Ayrshire) Noel-Baker, Francis (Swindon) Thomson, George (Dundee, E.)
Hughes, Hector (Aberdeen, N.) Noel-Baker, Rt. Hn. Philip(Derby, S.) Thornton, Ernest
Hunter, Adam (Dunfermline) Norwood, Christopher Tinn, James
Hunter, A. E. (Feltham) Oakes, Gordon Tomney, Frank
Hynd, H. (Accrington) Ogden, Eric Tuck, Raphael
Hynd, John (Attercliffe) O'Malley, Brian Urwin, T. W.
Irvine, A. J. (Edge Hill) Oram, Albert E. (E. Ham, S.) Varley, Eric G.
Jackson, Colin Orbach, Maurice Wainwrlght, Edwin
Janner, Sir Barnett Orme, Stanley Walden, Brian (All Saints)
Jay, Rt. Hn. Douglas Oswald, Thomas Walker, Harold (Doncaster)
Jeger, George (Goole) Owen, Will Wallace, George
Jeger, Mrs. Lena (H'b'n & St. P'cras, S.) Padley, Walter Warbey, William
Jenkins, Hugh (Putney) Page, Derek (King's Lynn) Watkins, Tudor
Jenkins, Rt. Hn. Roy (Stechford) Paget, R. T. Weitzman, David
Johnson, Carol (Lewisham, S.) Palmer, Arthur Wellbeloved, James
Johnson, James(K'ston-on-Hull, W.) Pannell, Rt. Hn. Charles Wells, William (Walsall, N.)
Jones, Dan (Burnley) Park, Trevor (Derbyshire, S.E.) White, Mrs. Eirene
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.) Parker, John Whitlock, William
Jones, J. Idwal (Wrexham) Pavitt, Laurence Wigg, Rt. Hn. George
Jones, T. W. (Merioneth) Pearson, Arthur (Pontypridd) Wilkins, W. A.
Kelley, Richard Peart, Rt. Hn. Fred Willey, Rt. Hn. Frederick
Kenyon, Clifford Pentland, Norman Williams, Alan (Swansea, W.)
Kerr, Mrs. Anne (R'ter & Chatham) Perry, Ernest G. Williams, Clifford (Abertillery)
Kerr, Dr. David (W'worth, Central) Popplewell, Ernest Williams, Mrs. Shirley (Hitchin)
Leadbitter, Ted Prentice, R. E. Williams, W. T. (Warrington)
Ledger, Ron Price, J. T. (Westhoughton) Wills, George (Edinburgh, E.)
Lee, Rt. Hn. Frederick (Newton) Probert, Arthur Wilson, Rt. Hn. Harold (Huyton)
Lee, Miss Jennie (Cannock) Pursey, Cmdr. Harry Wilson, William (Coventry, S.)
Lever, Harold (Cheetham) Randall, Harry Winterbottom, R. E.
Lever, L. M. (Ardwick) Rankin, John Woodburn, Rt. Hn. A.
Lewis, Arthur (West Ham, N.) Redhead, Edward Woof, Robert
Lewis, Ron (Carlisle) Rees, Merlyn Wyatt, Woodrow
Lipton, Marcus Reynolds, G. W. Zilliacus, K.
Lomas, Kenneth Rhodes, Geoffrey
Loughlin, Charles Roberts, Albert (Normanton) TELLERS FOR THE NOES:
Mabon, Dr. J. Dickson Roberts, Goronwy (Caernarvon) Mr. Sydney Irving and Mr. Lawson.
McCann, J. Robertson, John (Paisley)
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