Speeches, Interviews & Other Statements

Complete list of 8,000+ Thatcher statements & texts of many of them

1968 May 1 We
Margaret Thatcher

HC S [Rising Prices]

Document type: Speeches, interviews, etc.
Document kind: House of Commons Speech
Venue: House of Commons
Source: Hansard HC [763/1216-27]
Journalist: -
Editorial comments: 2058-2130.
Importance ranking: Major
Word count: 3923
Themes: Conservative Party (history), Monetary policy, Privatized & state industries, Energy, Pay, Taxation, Trade, Labour Party & socialism, Transport
[column 1216]

Mrs. Margaret Thatcher (Finchley)

A number of hon. Members have referred to the fact that this has not been one of the most fully attended debates that we have had on this subject. The reason for that is that two main Committees are sitting upstairs—one fighting rising prices in the shape of the Transport Bill and the other fighting through the Finance Bill. Many hon. Members here would like to have taken part in those proceedings and many hon. Members on the Finance Bill Committee would undoubtedly like to be here, but the system we are operating does not allow us to take part in both.

Some hon. Members have, once again, gone back to the deficit which occurred [column 1217]in 1964 and the then economic situation. Some have criticised the figures we have used. I will try to answer their criticisms, and all the figures which I shall use will be those produced from Government sources. If one wants to fight the Government it is not necessary to produce special figures; their own are perfectly good enough. One has only to read them.

The argument has been that there was a deficit of over £700 million in 1964. The actual revised figure was £776 million. That is made up in two parts: one of the current account deficit and the other of the capital account deficit. The current account deficit was £402 million. I want to deal with that first, because, as many hon. Members know, the significant thing is the trading or current account deficit. The capital account deficit is represented by shares and investments overseas and, in fact, is not a deficit; it is represented by assets which regularly bring in a source of income to this nation, from which this Government benefit.

I will deal with the current account deficit and its history. Let us see how it compares, and how the whole record of the Tory Government compares, with Labour over those years.

It has been necessary to invoke the help of the Library. I am taking the figures from the United Kingdom Balance of Payments Summary 1967. I have gone back to an older one for the 1951 figures, which are sometimes compiled on a different basis. Every figure I am using has its source of origin in one Government Department or another. Let us look back over the whole period to try to get the position into perspective.

In 1951 the current balance deficit we inherited was £419 million, that is to say, £17 million greater than was inherited by hon. Members opposite. We dealt with it and I will show how in a moment.

In 1952 we turned that deficit into a balance of £163 million—a very rapid changeover during a very short time. During that period we stayed in credit with a balance of £145 million in 1953, a balance of £117 million in 1954; in 1955 we went into deficit to the tune of £155 million but we were back in credit in 1956 with £208 million. We were in credit in 1957, £233 million; in credit in [column 1218]1958, £347 million. These are substantial credits. We were again in credit in 1959 to the tune of £149 million; there was a deficit in 1960 of £258 million, but we were back in credit again within the year, and there was in 1961 a credit of £5 million. In 1962 there was a credit of £127 million; in 1963 a credit of £116 million; in 1964 a deficit of £402 million.

That was the record and since then under Labour a deficit in 1965 of £110 million; a deficit in 1966 of £59 million and—then the biggest of all time—a deficit in 1967 of £514 million.

There are one or two conclusions to be drawn from this. When we inherited a problem we used it as an opportunity and challenge, and not as a source of grumbling. We went from a deficit of £419 million to a balance of £163 million in one year. That is an improvement of £582 million in 12 months. If this Government had done that in 1964 we could have been back in balance very quickly by about 1966. But they did not; they have repeated deficits.

Note that we never, during our time in office, had two consecutive years in deficit on current account. One of the more difficult problems now is that, under a Labour Government, there have been three consecutive years in deficit on current account.

There is a third point, taking figures once again from Government sources, that the £402 million deficit which I have referred to was a deficit on paper because, if one looks at the increased value of stocks and work in progress, one finds that that more than equals the deficit. In 1964 the value of the physical increase in stocks and work in progress was £649 million. It had increased by £421 million over the preceding year. There was the deficit—in warehouses bulging with goods and raw materials. There is many a housewife who would say in time of rising prices or danger of rising prices “Stock is better than money” .

So it was only a paper deficit represented by goods in the warehouses and work in progress. When one looks at Government figures again, one finds that the value of those stocks went down in 1965 and in 1966. But, of course, if one imports a lot of stocks in one year, one does not need to import them the next year: they are used up, so the balance [column 1219]improves. In the following year, stocks again went down.

But there is one significant fact. Although our deficit was accounted for by bulging warehouses of raw materials and work in progress, that is not true of the greatest of all deficits which we have this year. The deficit this year on current account is £514 million and if one turns from that to the value of physical increase in stocks and work in progress, one finds that it is nothing like that. According to the Government's figures in the preliminary estimates of national income and balance of payments, the value of stocks and work in progress this year is £68 million. So the £514 million is a true deficit.

I turn now to the capital deficit, which was represented by assets overseas, for which this Government have had very many occasions to be thankful. The capital deficit was £374 million. A short time after, Harold Wilsonthe Prime Minister was boasting in New York of the nation's assets of £11,000 million, of which that capital deficit was a part. But even if one considers it from the worst angle, that that capital deficit was not represented by assets, it was more than covered, from the nation's viewpoint, by the Government dollar portfolio holdings, which came into the reserves later—cashed by this Government, never by us—in two lots, one of £316 million and the second of £160 million at the old value.

So let us look at Government figures—not mine—to see what the situation was. There were stocks in the warehouses to the tune of over £600 million. There were securities to cover any deficit, quite apart from the reserves. There were investments stacked high overseas, bringing this Government an annual income of £890 million a year. Looked at as a business—stocks full, collateral to meet any deficit, investment good and bringing in an income—this was a great opportunity for expansion, and it was a tragedy that it was not taken.

That is the kind of situation with which hon. Members were left. We could and would have dealt with it as we dealt with it in 1951 and we could have been back in balance by 1966 and expanding again—but not under this Government. [column 1220]

We were also challenged on some of the figures about which—

Mr. Hilton

I realise that the hon. Lady is trying to be sincere in the case, but should it not be stated, for the record, that, in 1951, when the Conservative Government were elected, the great change was that the Korean war finished and world prices turned in favour of this country as against what we had to face?

Mrs. Thatcher

Whatever happened, we dealt with it and this Government did not, as the hon. Gentleman knows. Also, in dealing with it, we built up a tremendous amount of overseas assets which the last Government could not during the 1945–51 period. I do not complain about that, but, during our period, we did build up those assets and this Government benefit from them every day that they are in office.

We were also challenged about the standards of living under the two Governments. Again, I will take not figures which I have extracted from any documents but figures which my hon. Friend the Member for Louth (Sir C. Osborne) extracted from J. Diamondthe Chief Secretary. My hon. Friend has had a knack for many years of extracting significant figures and this was one of them.

At the beginning of April my hon. Friend asked for the crucial figure in deciding the standard of living; that is, the figure of personal disposable income at constant prices—what the money left in one's pocket will buy after one has paid taxes and National Insurance contributions. It is the figure which Roy Jenkinsthe Chancellor of the Exchequer left out of his forecasts, probably because he dare not include it. Although the right hon. Gentleman left it out for future years, my hon. Friend was able to get the figures for past years. My hon. Friend

“… asked the Chancellor of the Exchequer what has been the average annual increase in personal disposable incomes at constant prices for the years 1952-64, inclusive” —

when we were in office—

“and 1965-67, inclusive …”

The Answer given by the Chief Secretary was that during our period in office, 1952-64, the

“… average annual increase in personal disposable income at constant prices … was 3¾ per cent. and from 1965-67 was just over 1½ per cent.” —[Official Report, 2nd April, 1968; Vol. 762, c. 158.]

[column 1221]

That Answer was given by the Chief Secretary and if any juggling of figures was done, he was responsible.

I come to other matters which have been raised in the debate. We have had almost two sides to the general argument. Hon. Gentlemen opposite have been saying that food prices have not risen as much as the retail prices index, while my hon. Friends have been saying that fuel prices, which are the other big component, have risen a great deal more. The significant factor is that food prices are in the hands of private enterprise—and those prices have not risen as much—while fuel prices are in the hands of the nationalised industries—and these prices have risen far more. This makes one thankful that the retail distribution trade has not been nationalised. If it had been we would all be paying far more for our food at the Co-op.

Had Barbara Castlethe right hon. Lady the Minister been speaking from this Front Bench, she would have made a great deal about the rising costs of fuel because she, like all hon. Members, would have been expressing anxiety about the effects of these rising prices on people who have less to spend, those who are ill and must stay at home and the elderly. If one must stay at home, one uses more fuel. In this position she would be urging me, if I were Minister, to have a special retail price index for the elderly, with pensions geared to it. I am sure that she is well appraised of this point. The fact is that fuel prices are continually rising more than other prices and that this is entirely due to the public sector policy.

Let us consider some of the separate industries and increases in prices that have occurred. First, coal. This increased in price in 1966 by £80 million in all. It is not possible to split up that sum, because that £80 million was designed to cover both present and future deficits of the National Coal Board.

What has happened since then? Only yesterday an increase in the price of coke was announced and we learn that it is to go up by 20s. a ton. The right hon. Lady said that this had been referred to the Prices and Incomes Board. I ask her to check that because no reference has been made to the matter having been referred. The only coke increases referred to the Board were those about [column 1222]gas coke, and those increases were referred and allowed. As far as I know, no price increases for coke made by the N.C.B. have been referred to the Board. [Hon. Members: “Answer.” ] I trust that the right hon. Lady will clear this matter up. [Hon. Members: “Answer.” ] Subject to her correction, that is the position. [Interruption.] I trust that Roy Hattersleythe Parliamentary Secretary will answer this point when he replies.

The Joint Parliamentary Secretary to the Ministry of Labour (Mr. Roy Hattersley)

indicated assent.

Mrs. Thatcher

The saving grace of the right hon. Lady's Department is that she has a marvellous Parliamentary Secretary who has done a lot of donkey work and who should have been promoted. I must occasionally say something nice about the hon. Gentleman, because he and I have argued the toss on prices and incomes Orders on many occasions. I suspect that the matter was never referred to the Prices and Incomes Board and that this is another example of a nationalised industry's prices not being subjected to the same disciplines as proposed private enterprise increases. It is especially important because not only does the increase fall on the consumer but it also falls on iron foundries, which are very big users of coke. This makes a direct increase in their prime costs. They have had to take increases in costs of coke in February, 1965, of 14s. 6d. a ton, in April, 1966, of 15s. a ton, and this one of 20s. a ton.

I am sorry that R. Gunterthe Minister of Power is not here. [Hon. Members: “Where is he?” ] In his reply to a letter from the ironfounders he did not say anything about this being referred to the Prices and Incomes Board. He said:

“I am sorry to have to disappoint you, but the Board's case—”
that is the National Coal Board—
“for the 20s. a ton increase on 1st May is so pressing that it would not be appropriate for me to suggest that the Board should reconsider the modifications you put forward.”

The right hon. Lady said that she thought it had been referred; therefore, she thought that it ought to have been referred. If now she finds it has not been referred, I ask her to tell her Parliamentary Secretary to let us know later in this debate whether she will now refer it to the Prices and Incomes Board. [column 1223]

For gas the average increase is 8.7 per cent. When I asked Richard Marshthe former Minister of Power the prices within the average he knew all the time, because this was in the Report published that afternoon, but he would not tell a full House from the Dispatch Box. Later it transpired that within the average there was as much as 13½ per cent. for Wales and 11 per cent. for the south-eastern area. These increases have yet to take their real effect. People will not feel the full effect until next winter. These are further increases yet to come into operation.

Everyone knows about electricity price increases. My bill is up. It came with a nice little apologetic note, but that does not alter the fact that it is up by 15 per cent., 3s. in the £. This was another increase which was not referred to the Prices and Incomes Board. It is another case of the public sector not being referred to the disciplines in the same manner as the private sector is. The right hon. Lady was a member of the Cabinet which agreed that that increase should not be referred.

An increase that was referred was that of the Electricity Generating Board's prices. When the Generating Board increase was referred the Prices and Incomes Board did not allow prices to go up by as much as the Generating Board wanted. The conclusion one could draw is that, had the electricity increase been referred, the Board would not allow it to go up by as much. Perhaps once again the Government were afraid to refer to the Board.

There have been other increases in the nationalised sector which have still to take effect. There are the increases in postal charges and telephone charges, which are to come on 1st October. There is quite a batch of increases stacked up to take effect in the autumn and at the onset of winter. It is interesting to note that when the Board examined those increases it uncovered an astonishing situation. It said:

“The Post Office have made proposals for certain tariff increases, but, as we have explained, these are largely based on a costing system which does not provide the appropriate data.”

How astonishing! You put up a case for increases, but you cannot support it [column 1224]with properly analysed figures. This happens to Ministers in any Department, but I hope that when R. Masonthe Postmaster-General saw that some one blew his top and sorted the industry out. It is absolutely scandalous that people should have gone to the Board without making a proper case and without having a system so that they could make a proper case for the increase they were asking for.

Those are some of the price increases which have come from the public sector, over which the Government have direct price control. I come for a short time to increases in transport costs. These partly arise from the Transport Bill, but also very much from the Budget. The increases imposed on road users in the last Budget were absolutely terrific. Perhaps I could give one or two figures. Commercial vehicle licence duty for the four-ton lorry—

Mr. J. J. Mendelson (Penistone)

Before the hon. Lady leaves the last batch of price increases, I want to tell her that she is producing a purely propaganda speech—[Hon. Members: “Oh.” ]—and she knows it. It was the last Conservative Administration which laid down that the electricity Boards must make ends meet on new investment and must charge the consumer the full price to make new investment possible. The hon. Lady is making a cheap propaganda case, and she knows it, even if other hon. Members opposite do not.

Mrs. Thatcher

Tell the housewife paying a 3s. in the £ increase that I am making a cheap propaganda speech.—[Interruption.]—The hon. Gentleman knows that one of the reasons why prices have gone up is that investment was too great for the demand—and the reason for that—and it is a problem with which the Minister is grappling now—is that the Electricity Council considered that it must take into account the forecasts of the National Plan. That was pure propaganda and not fact at all.

I have many figures about increased transport costs, but let me give quickly just the fuel tax increases under different Governments—[Interruption.]

Sir Robert Cary (Manchester, Withington)

On a point of order, Mr. Deputy Speaker. Can you give your protection [column 1225]to my hon. Friend against the continuous intervention of the hon. Gentleman opposite?

Mr. Deputy Speaker (Sir Eric Fletcher)

I must ask the hon. Member for Penistone (Mr. Mendelson) to restrain himself.

Mrs. Thatcher

That is very kind of you, Mr. Deputy Speaker, but I can cope with him.

The Labour Government of 1945 to 1951 increased petrol tax by 1s. 1½d. in those six years. In our 13 years in office we increased it by only 10½d. In the Labour Government's next four years it has gone up by 1s. 2d. If the tax had not gone up the price of petrol would have been down, because the basic price has fallen. It is one of those cases where when private industry manages to reduce prices the Government cancel out the reductions by slapping on a bigger tax. It is like the small cartoon in tonight's Evening News, which shows a grocer telling a lady,

“This is our old ‘2d. off’ brand that Mrs. Castle as Transport Minister helped to put 4d. on.”

There have been price increases after price increases which have been Government-induced. This led R. Gunterthe present Minister of Power to make one of his very good speeches when he was not Minister of Power but was what the First Secretary is now, but not quite. His speech to the Industrial Society is reported both in The Times and in the Daily Mail—perhaps I had better quote from The Times. The headline is “Standard of living ‘must fall’” , and he said:

“There is bound to be a drop in the standard, and if anybody in this country thinks he is going to have the same standard as in the past, we shall never get anywhere.”

That, of course, is directly reflected in our Motion. I had some sympathy with him when he came out in one of his flashes of engaging candour later on in his speech and said:

“It was time everybody forgot about election promises. ‘I would never have another election manifesto if I had my way’.”

Of course he would not, because the entire Socialist election manifesto was vote for them, and everything would come to those who voted for them. In fact, the situation has been quite different. [column 1226]

The problem of rising prices has been with us for a long time. I am the first to agree to that. We could not completely control rising prices. [Interruption.] Of course, we could not. The retail price index went up during our period of office, but the crucial figure was the one which my hon. Friend extracted from the First Secretary.

Several reports have been issued on how to deal with rising prices. There was in 1961 a report to the Council for European Economic Co-operation, which recommended several things which came into being in our time. The two last points are the ones to which I wish to direct the attention of the House, and I would advise the House to wait until I have finished the complete paragraph. The report recommended:

“a ‘wages policy’ that would give some guidance to the trade unions and collective business organisations in their wage bargaining. This recommendation is not supported by all the economists in the group, and the majority which is in favour emphasises that it does not support wage control. All in the group favour a policy for wages in the public sector of the economy.”

There we are, a voluntary incomes policy, which is the Conservative policy which got us back into balance when we were in difficulties.

The report also recommended:

“More competition, both domestic and foreign, in order to dilute the power of business to administer prices.”

That is the answer. The prices which hon. Members opposite have quoted as being held, or as not rising as much as others, have been prices which have been subject to competition. The prices which have risen most in the nationalised sector have been those which have never been subjected to the discipline of competition.

The nation has gone on a very big spending spree. It remembers that in the 18 months after the last devaluation in 1951, the cost of living rose by a very considerable amount, the largest increase of all, nearly 13 per cent.

We have had nearly all the Socialist formula before. We have had higher taxes before. This led to rising prices. The Socialist Government have taxed the people, raised the prices, pegged the wages and penalised the pace-makers. All that has not led to a solution. It has led to devaluation and the biggest trading deficit we have ever had. [column 1227]

I have said that no Government have yet solved the problem of how to keep down rising prices, but hon. Members will remember that the dialogue about rising prices used to be carried out in the context of three things. The question was how to have all three, full employment, stable prices, and a free society. For a long time it was thought that a small amount of inflation was the price one had to pay for the other two. But look at the position under this Government. We have not got full employment. In fact, we have 2 per cent. unemployment practically built into the bricks. We have not got stable prices, and we have not got a free society, but another dose of compulsion, and that is why we condemn the Government tonight.