The dramatic fall in the value of the pound is a serious matter. Everyone knows that Britain faced very real problems in 1974. But those problems were manageable. The experience of other countries has shown that clearly.
Everyone knows, as the Conservative Party has constantly warned, that we cannot spend our way out of inflation, borrow our way out of debt, subsidise our way into profitable jobs or nationalise our way out of industrial decay.
If today the flood waters are rising around the Government's chins, they have only themselves to blame.
Our foreign friends are right to be concerned about the discussions on the wage increases to follow the £6 limit: and they are equally right to fear the consequences of failure to reach any reasonable agreement.
If the coming wage-round can take place against expectations of increases of the order, not of 30 or 40 per cent produced by Labour's Social Contract, but of 3 per cent, the chances of reducing unemployment and inflation will be strengthened.
But nothing could be more dangerous than to think that our only illness is wage inflation, or that the only treatment we need is a direct policy to combat that inflation. [end p1]
An incomes policy will not solve our problems on its own. It must be accompanied by other measures. These are still lacking today.
Let me mention two problems which must be solved now if we are to restore confidence to Britain and rebuild her capacity to succeed.
Differentials—The need to retain skilled workpeople and good managers.
How much we take out in pay and wages is only one part of the problem.
The other is how to increase the effort we put in—how to obtain extra production in return for increased pay. This we shall not get unless the pay policy allows for fair differentials.
Industry depends so much on skilled engineers and craftsmen and good managers. We must have these if the rest of us are to prosper, for they are the key to flourishing industries.
Without skilled people, production will be held up and the unskilled will be out of work.
Without good management there will be problems of organisation and industrial relations.
Don't forget that a strike of a few highly skilled people who feel they are not paid enough compared with their less skilled fellows can throw a whole factory out of work with all that that means in misery and fear for the families of every employee. [end p2]
So any pay policy must allow room for these differentials. Otherwise we shall rob ourselves of the basis on which prosperity is built, and our skilled people and managers will find they can do better in other countries. Only this week it was reported that one third of the 90,000 people on the books of Professional and Executive Recruiting want to leave Britain.
Public Spending And Borrowing—Still On Disaster Course.
Everyone knows that neither families nor Governments can go on living beyond their means. Everyone is coming to realise that Government expenditure comes out of the taxpayer's pocket. But this Government is spending so much that the taxpayer cannot foot the bill. To make up the difference, the Government is borrowing enormous sums of money.
Last year the Denis HealeyChancellor admitted that he borrowed £1 in every £5 that he spent. This year he has said he will borrow even more. And just remember we are producing less than we were three years ago, yet the Socialist Government plans to spend twice as much as the Conservative Government was spending then.
But we can't spend money twice over. Money spent by Government in the public sector cannot then be used by industry to expand and to provide more jobs. If we are to provide people with secure jobs and prospects, we must reduce public expenditure in order to leave money and resources in industry upon whose future the jobs and standard of living of us all depends.
Unjustified Euphoria
The drama of the Government's talks with the TUC has so preoccupied the country that many people will relax in a state of euphoric relief when an agreement is reached. [end p3]
But we must not allow ourselves to be deceived into thinking that all our economic problems have been solved. Some of you may remember that the Chancellor's Budget Speech spoke of the way things are now improving. In my reply to him in the House of Commons, I warned that the country is like a patient suffering from two diseases at once—influenza and cancer.
The influenza of inflation, and the cancer of growing Government debt. Government Ministers are saying—and many will believe them—that the patient is recovering well from the influenza, and they are hoping that we can forget the cancer for the time being.
Yet we all know that the cancerous growth will surely destroy the patient unless the growth itself is tackled quickly.
The only real answers to our problems are to get the Government to live within the nation's means, to allow free enterprise to prosper and expand, and to ensure that the British people once again live in a country of opportunity, choice and endeavour.
These are the answers to Britain's problems that this Socialist Government has rejected and that the next Conservative Government wants an early opportunity to provide.