4.44 p.m.
Mrs. Margaret Thatcher (Finchley)
I beg to move, to leave out from “House” to the end of the Question, and to add instead thereof:
‘condemns the economic policies of Her Majesty's Government which during the last four years have resulted in record unemploy[column 1394]ment and stagnant living standards for the British people; deplores the continued use of blacklisting to enforce pay limits; and calls for the implementation of policies for economic recovery based upon realistic and responsible collective bargaining, cuts in personal taxation, and real rewards for hard work, skill and enterprise’.
I was rather surprised that James Callaghanthe Prime Minister sat down when he did. I was waiting for him to develop an intellectual argument. Perhaps that was a little optimistic. He is long on words; what a pity it is that he has been so short on achievement.
He usually starts almost any speech with a reference to the “unsavoury inheritance” . That was not what we were hearing at the last General Election. We heard nothing about an unsavoury inheritance then. Whatever the Government had inherited at that time, they had completely sorted out all the problems—or so they said. Denis HealeyThe Chancellor of the Exchequer—whatever he had inherited—said that he inflation rate was then 8.4 per cent. It can scarcely have been due to us that, after that, it went up to 27 per cent. His right hon. Friend said that there were no increases in the pipeline. Nevertheless, the rate of inflation rose to 27 per cent.—a record in the whole of our history. The former Prime Minister, the right hon. Member for Huyton (Sir H. Wilson), said that unemployment was beginning to fall and that the balance of payments showed a substantial improvement. We were in great difficulty a couple of years after that.
The Government claimed to have sorted out one policy after another at the last General Election. Anything that happened thereafter was due to their own policies. For the first time, food prices have doubled within a Government's period of office. That has happened during this Government's period of office. Unemployment has more than doubled. The standard of living is falling. As I listened to the Prime Minister, I felt that he did not care what happened so long as at the last General Election inflation was 8.4 per cent. and he could claim just about the same at the next.
The Government, after four and a half years of their own trials and other people's tribulations, have just about got us back to where they started in terms of output from our factories and the living standards of some who work in them. [column 1395]That is the very best that this Government can claim by way of progress after four years—and that takes little account of the tribulations which the people have suffered during these four years, the lowered living standards and the increased unemployment. Yes, perhaps there are more women out at work than there were. That is because they have had to go out to keep up a reasonable standard of living.
I turn to the White Paper. I noticed that the Prime Minister went very wide on subjects which, it seemed to me, did not touch on economic policy. That was his choice. I shall at least try to be relevant. I want to make it quite clear to the Prime Minister that any discussion or statement, in a White Paper, a debate or a forum, which leads to a greater understanding of the workings of the economy and of the continuing need for responsible and realistic collective bargaining in the light of all the circumstances is welcome.
Recently I had occasion to go through all the statements which have been made, since the employment White Paper of 1944, about the need for greater understanding of the matters which affect costs in industry, inflation and full employment. There is an astonishing similarity between the words which have been used at top level ever since the time of Lord Woolton 's full employment White Paper which was followed by those of Sir Stafford Cripps, Mr. Harold Macmillan and the then Mr. George Brown and our own incomes policy statement.
There is no doubt—we all know it—of the need to try to contain the increase in wages within the increase in production. The more discussion that we can have, and the more that that is understood, the better. But I and my right hon. and hon. Friends cannot accept that the objective is best achieved by having an absolutely rigid limit of X per cent. applying regardless of the several and many different circumstances of industry and commerce, regardless of the conditions on the shop floor, regardless of the profitability of various concerns. I do not think that we shall get the increase in production and prosperity which is what we all want by that method.
I have four points to make about the White Paper. First, as far as I can understand it, it has two paradoxical features. [column 1396]The 5 per cent. figures seems more rigid by far than the 10 per cent. figure last year. It is quite true that in the debate last year we were told that the 10 per cent. figure was a national increase and that there would be very considerable variations—it was an average. This year the 5 per cent. figure seems to be absolutely rigid and to be the total increase for any group compared with the previous year. I believe that this will make this phase of the incomes policy even more rigid than last year and that it will be even more difficult to bargain for the many variations that occur within our industry.
As events happened last year, the 10 per cent. did not turn out to be 10 per cent. at all. Even though the Prime Minister tried to make it more rigid, it turned out to be 15 per cent., or nearly seven times the increase in output by the summer of this year. That is my first comment. There is much greater rigidity this year in the 5 per cent. than ever before, rigidly applying to each group of people who bargain. But the paradox is that in the rest of the White Paper we seem to have similar provisions, accommodating productivity deals as before—and perhaps “accommodating” is the word.
I remember that last year Frank Chapple, in referring to the power workers' productivity deal, ridiculed the idea that the productivity deal just concluded in the industry was within the Government's pay guidelines. The deal was based on sales of electricity and appliances, and the latter at least were falling. “I cannot see how you can get a productivity scheme out of that” , said Mr. Chapple. Nevertheless, the Department of Trade managed to do so.
The point is that it is very difficult indeed to tell what kind of productivity scheme will be accepted. It depends very much on who does the negotiating and with whom in the Department it is done. And yet—and this takes me on to the second point on the White Paper—as a result of varied productivity deals, some of them very accommodating, sanctions are nevertheless to be applied and companies are to be subject to black lists, arbitrary action and pay clauses in Government contracts.
We cannot apply this kind of black list pay clause or sanctions unless we can [column 1397]be absolutely certain of their being consistent in their application. To do anything else is to introduce arbitrary law into our system, and that is the total negation of the liberty of the individual and everything for which we stand.
The right hon. Gentleman will know of the first company that a black list was applied to last year, although for a long time he denied that there was a black list. As late as New Year's Day of this year he said that it was a figment of the imagination. But it was no figment of the imagination for the companies which had the black list applied to them. It was first tried on an excellent company which exported 95 per cent. of its products overseas. The company, in Belfast, which employed 3,500 people, in fact paid its people lower wages than Short Brothers or Harland and Wolff to the tune of some £6 below what workers employed by the latter two firms were getting each week.
Therefore, the company decided—I should have thought that this would have been welcomed by those on the Labour Benches—to put up their pay. I understood that those on the Labour Benches were in favour of increasing the pay of lower paid workers. What did the company get for its trouble? It was put on a black list and finance to help it with its exports was stopped. Fortunately, the firm got the finance elsewhere. Whatever sort of policy was it that attempted to apply black listing provisions to a firm like that?
The truth is that we now have two kinds of law. First, there is legislation properly passed through Parliament and impartially administered. Then we have White Paper law or diktat which is arbitrary, secret and Socialist. It is passed by those who wish to control other people's lives but who have envisaged themselves only as controllers, not as the controlled.
It is interesting to consider what would have happened if, instead of an incomes White Paper phase 4, we had had “Competition in Aviation—Fourth Phase” ? Would Freddie Laker ever have been able to win his battle for Skytrain or the consumer have benefited from his determination? Of course not. He was able to win that battle because that ruling was against law upheld properly in a court. [column 1398]One could determine what the conditions were and gain justice in one's favour from a court.
In this White Paper, which goes in for arbitrary black lists and arbitrary sanctions, it is not possible to tell against whom those sanctions will be applied, except at the whim of the Government when they decide whether they can take on a company, or whether they can apply sanctions against a big company or only against some of the smaller ones, which suffer from so much damage.
I have a third point on the White Paper, I have been through it word for word and I cannot find the word “differentials” occurring even once. Nevertheless, there is a continuing and serious problem resulting from telescoping differentials under successive pay policies. That now presents us with one of the real problems about increasing production. Everyone knows that even in the midst of unemployment there is a shortage of skilled labour and that shortage is stopping the creation of more genuine jobs which will create prosperity as well as work.
Indeed, we have asked several times in this House about the ICI case at Teesside where there is difficulty in finding suitably skilled artificers. Because ICI cannot find these men—because it cannot pay enough to attract them—it is not now proceeding with a £20 million investment in new plant. Yet the White Paper makes no reference to the very serious problem of differentials. It refers to flexibility. Nevertheless, all the flexibility that it permits seems to be within the 5 per cent. limit. That is precious little or no flexibility at all.
The White Paper refers also to anomalous cases in the public sector. But in most of those anomalous cases—the police, the firemen, university teachers and doctors—the pay is determined by outside bodies. What sort of provision is made in the private sector where special groups have done particularly badly? Many of those are among middle management. The White Paper says that any special arrangement must be cleared through the Department of Employment. But, once again, the approach is totally arbitrary. That is a feature of the new White Paper law under this Government, it is totally arbitrary and no one know, where he is with it. [column 1399]
The fourth feature to which the Prime Minister referred—but briefly—was that of dividend controls, which will be debated on Thursday. I think that the future of the many people who are in insurance and pension schemes must be considered. For many, the main source of income comes from dividends from investments.
The Prime Minister knows that the Royal Commission on the distribution of income and wealth which reported in 1975 showed that the largest single group of beneficiaries from shares were the 14 million people saving through life assurance. The next group consisted of 11½ million members of occupational pension schemes. Furthermore, half of all recipients of dividends and interest had total incomes of less than £2,000 a year.
One would have thought that that kind of level of income would normally have been regarded by this Government as low and needing to be increased. If it was from earnings, it would be. For many of the people, that income is from hard-earned savings which have already borne the brunt of inflation. Does the Prime Minister really think it necessary to impose yet another round of dividend control?
I noticed that when the Chancellor of the Exchequer put it across he tended to imply that only wealthy people benefited from dividends. If wealthy people benefit much from dividends, they give most of what they get back to the Chancellor of the Exchequer pretty quickly at up to 98 per cent. rate of tax.
So much for the White Paper. The Prime Minister has set out certain objectives which the White Paper is designed to achieve. Time after time, he and previous Labour Governments have set out objectives on jobs, prices and growth. We could not disagree with the objectives because, of course, everyone wants increased prosperity, an increased standard of living, increased growth and falling inflation. We would agree with many of these objectives; but the truth is that the policies to put them into effect are just not forthcoming, and they never have been.
I agree that we must set this White Paper into the wider perspectives of our ambitions and objectives for the economy of the United Kingdom. I want [column 1400]to discuss briefly, therefore, three points on the economy.
First, if our objective is to have a prosperous, expanding economy, we must recognise that high public spending, as a proportion of gross national product, very quickly kills growth. We have noticed this during the period since the last war. If we examine public expenditure in that period as a proportion of the national income, we find that Conservative Governments tend to lower public expenditure as a proportion of national income. We have to remember that Governments have no money at all. Every penny they take is taken from the productive sector of the economy in order to transfer it to the unproductive part of it. That is one of the great causes of our problems, because this Government have increased the unproductive sector, and diminished the productive sector, so that during the lifetime of this Government we have had virtually no growth at all.
During the period known as the 13 years of Conservative Government, we kept down public expenditure. [Hon. Members: “Wasted years.” ] Hon. Members call them wasted years. Let us see what was the average performance in those 13 years. Let us see how it compares with the performance under this Government. Growth was at an average of 3 per cent., because we kept down public expenditure. Inflation was at an average of 4 per cent. Unemployment was at an average of 2 per cent. How many people would like to have those figures back again? They would put this present Government to shame. The average regular increase in growth was 3 per cent.
This Government have never achieved anything like that. They have only had a reduction in growth, if I may put it in that way, a fall in manufacturing output, a fall in national income and a fall in standard of living, together with a rapid increase in unemployment. Even the Prime Minister would welcome it if he were ever able to get down inflation to 4 per cent. Yet during that time we were constantly being criticised for not having got growth up to a higher level.
It is interesting to look at the Labour Party manifesto for 1964. Labour's manifesto complained that companies were vying with each other for scarce labour. We were in a period when wealth was [column 1401]being created and when jobs were creating prosperity. There was a steadily rising standard of living. In fact, they were the 13 best years that we have ever known.
One of the great defects of high Government spending is that it leads to high borrowing, as the Chancellor knows, which leads to high interest rates, and that in turn leads to higher public spending. One of our great strictures on this Government concerns the amount of income that now has to go out each year purely on servicing the debt, purely on servicing the amount of money they have had to borrow for their policies over the past four years.
The total amount of debt held outside the public sector when we left office—the Prime Minister was talking about an inheritance—was some £3,000 million. One would have thought that that was sufficient. This year the estimate is some £8,000 million interest on borrowings alone. It is a rather serious thought that this year we are having to spend more on interest to finance borrowings than we are spending on education, on health or on defence.
If some Labour Members had taken some of our advice earlier—before they had to take it because the IMF was called in—and had spent rather less freely than they had of other people's money, the position would have been very different. They have a test of virtue which depends on how much they can spend of other people's money rather than their own. If they had taken our advice, we should have been spending very much less today and had to finance very much less money borrowed. We should have been able to have a very much lower rate of tax.
The second general proposition is that taxation kills incentive. People judge their standard of living by what they have got left in their own pockets and not by how much they have put into the Chancellor of the Exchequer's pocket. That seems to be accepted by almost everyone except Labour Governments. Wherever one goes, one finds it said that all levels of tax are too high. Now and then, even Harold Leverthe Chancellor of the Duchy of Lancaster says it. If he does not say it in this House, he says it on television: [column 1402]
“I must be frank and say that many of these taxes owe more to a judgment of an egalitarian kind than to an economic kind.”
He went on:
“My own view is that a correction is now overdue, and I think that we will soon see one.”
Of course, we did not. But unless one gets the rate of personal taxation down, there will be no incentive to get the extra production or productivity which it is the Prime Minister's objective to secure.
The third proposition is that too much regulation kills jobs. One can take an example from the bread industry, directly from pay policy. The industry wished to go against the 12-months rule on the ground that it would have got a very much smaller settlement. It was not allowed. The industry said that that would mean having a bigger settlement. It said that it would have to have redundancies. Eighteen months later it did.
The Prime Minister's objectives may be the same as ours, but he and his party are unwilling to bring in the requisite policies in order to carry them out. That is why we do not have very much growth in this country. That is why, under Socialism, we have a lower standard of living. That is why, under Socialism, we have had such a very rapid increase in unemployment, which the Prime Minister is unable to do anything about.
Let us compare our economy with the economies of some countries which have been infinitely more successful than we have. Let us look at the United States. An article in the Wall Street Journal of 10th July 1978 states:
“Since the current recovery began in March 1975, the US economy has created more than 10 million new jobs.”
What were we getting here in 1975? We were not talking about any recovery at all. In 1976, one of the worst years in our post-war economic history, the Chancellor in fact forecast a public sector borrowing requirement of some £12 billion, and had to go touting round the world for loans to see him through. He eventually had to apply to the IMF, and had to subject us, fortunately, to disciplines which he was unwilling himself to impose.
That is the kind of increase in jobs that we could have had here had we had a Government prepared to have less public spending, more in the private sector, [column 1403]more incentives and less regulation. But we shall never get that from this Government.
Let us look at the result in countries which are prepared to operate such a system. Let us look at the performance of all those countries which were represented recently at Bonn. Let us look at their increase in national income or gross domestic product and compare it with ours. We find that ours, in four years of Socialism, has gone up by only 0.1 per cent. So much for the Prime Minister saying that he wants growth. He is not short on objectives but he has been totally lacking in achievements. Other countries have achieved very much higher rates of growth in the same period and in the same world conditions, without the benefit of North Sea oil. Some of them, such as the United States, had a deteriorating oil problem, or were having to import all their fuels, as in the case of Japan.
In terms of manufacturing output, the Prime Minister has absolutely nothing to boast about. In the four years during which Socialism has been in charge, manufacturing output in the United Kingdom has fallen by 6.1 per cent.—the worst record of all the Bonn countries.
We accept that the Prime Minister is just as anxious to create jobs as we are. In fact, there have been four periods each of which has produced a million additional jobs. Most of them have come from the private sector. Many of them have come from small businesses—from the very sector which this Government have clobbered and have imposed additional taxes upon, even though they have now set out to try to undo a little of the damage which they did previously.
Those periods are a tribute to what private enterprise can do in creating additional jobs. With one exception, all of them were during periods of Conservative Government—from June 1952 to June 1956, from June 1959 to June 1962, from December 1962 to March 1966, and from September 1971 to September 1974. Each of them produced a million additional jobs, operating largely through the private sector, although in periods 3 and 4 some of them were through increase in central and local government, but not a high proportion. The figures are given in “Britain Means Business” , [column 1404]and they are there for all to see. They are not a high proportion. The jobs which create prosperity as well as creating work will tend to come from the private sector and will come from small businesses.
These are the principles upon which we operated when we were in power. They are the principles which produced the additional growth and which produced the increased standard of living that the Prime Minister, despite all his talk, is quite incapable of producing. He takes us to task for trying to cash in on a particular wage claim. May I remind him that we have not done that? It was he who did that during the February 1974 election campaign in his famous speech in Aberdare, when, against the background of a statutory incomes policy—and I reject a statutory incomes policy for the future—he said that he backed the miners all the way and that it was utter drivel for us to say that by fighting that claim we were fighting inflation. Those were his words then. Perhaps they can be placed before him once again.
In spite of the Prime Minister's words, if one compares the Labour and the Conservative records in the post-war period, one sees that time and again on almost every indicator and on almost every value the Conservatives' performance comes out streets ahead of Labour's for the benefit of the average person.
Let us consider, for example, the real take-home pay of the average industrial worker. I take the Prime Minister's definition: in terms of what it will buy. When the right hon. Gentleman says something about cash limits, let me point out to him that housewives have had to budget on cash limits all their lives. We know what it is about. The real take-home pay of the average industrial worker rose 60 per cent. in periods of Conservative Government and only 6 per cent. under Labour. The average industrial worker and his family have done 10 times better under us than they have ever done under Labour Governments.
For all that the Prime Minister boasts about what he has now done about inflation, I might point out that on the three-month basis it is currently above where it was at the time of the last General Election when the Chancellor of the Exchequer boasted that it was 8.4 per [column 1405]cent. Inflation has risen twice as fast under Labour as it has under the Conservatives. Unemployment has risen 12 times faster under Labour than under the Conservatives. Output has grown nearly twice as fast under the Conservatives as it has under Labour. Industrial and manufacturing output again has grown nearly twice as fast under Conservatives as under Labour.
These are the facts which the Prime Minister cannot get round. Despite all his euphoric speeches, he cannot argue with this performance. It has come about as a result of applying Conservative policies—the policies of a free market economy and a social market economy.
We contrast Labour's record of economic failure. It is its own condemnation. It is a record born of envy and hostility to wealth creation. The unemployment queues spell the despair of Socialism. The record of inflation tells its own story of Labour incompetence. The present level of interest rates condemns the fiscal and monetary judgments of the Chancellor of the Exchequer.
The realities prevent the Prime Minister believing in socialism.
Mr. John Parker (Dagenham)
Tell us what you mean by Socialism.
Mrs. Thatcher
If the hon. Member for Dagenham (Mr. Parker) has not heard the comparisons that I have made and recognised that under Labour Government after Labour Government all in total can put up the standard of living of the average industrial worker by only 6 per cent., compared with our 60 per cent., and if he does not regard that as failure, I do not know what he does regard as failure.
Mr. Parker
rose——
Mrs. Thatcher
No. I have given way to the hon. Member once. I shall not do so again.
Illusions or different political beliefs prevent Government supporters sitting below the Gangway from believing in a vigorous social market mixed economy. Perhaps one writer was correct in his assessment when, about the battle over Clause Four, he wrote:
“Productivity was never of any interest to the extremists. They would rather control [column 1406]men's lives in uniform misery according to their definition of the public good than allow them to flourish freely.”
Try as he may, the Prime Minister cannot shift the choice which the nation faces away from the central theme of liberty versus collectivism. Roy Jenkins, perhaps the best Chancellor of the Exchequer that the Labour Party has ever had, reminded us that where the State allocates three-fifths of the nation's resources, freedom of choice and the values of a plural society are in danger. That is what the State is allocating now.
For four years the nation's economic fortunes have been in unsure hands and in the shifting pattern of alliances which have provided the Treasury Bench with its support. The long drab period is, we hope, being brought to an end. A new beginning with a new Government and new opportunities cannot come too soon.