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Growth, Profits, Wages And Salaries

Volume 645: debated on Tuesday 25 July 1961

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I shall deal, first, with growth in the economy. The controversial matter of planning at once arises. I am not frightened of the word. One of the first things I did when appointed Chancellor was to ask for a plan of the programme for development and expenditure in the public sector for five years ahead. I referred to the problem as affecting the economy as a whole in my speech in the economic debate last February. I have thought about it a great deal since and discussed it with representatives of both sides of industry. In addition to plans in the public sector, including those of the various nationalised industries and plans for certain industries in the private sector, developments in the economy as a whole are studied by a number of bodies.

These include the Economic Planning Board, presided over by the Permanent Secretary to the Treasury, the National Production Advisory Council on Industry, over which I preside, and various other advisory councils. I think that the time has come for a better coordination of these various activities. I intend to discuss urgently with both sides of industry procedures for pulling together these various processes of consultation and forecasting with a view to better co-ordination of ideas and plans.

I stated some time ago, in February, that I thought that an annual increase of 3 per cent. in the gross national product was feasible, but only if we have a 6 per cent. annual expansion of exports. I want to discuss with both sides of industry the implications of this kind of target for the various sectors of the economy.

To suggest that British industry is generally inefficient gives a totally false picture. We have many go-ahead and progressive concerns whose performance matches that of similar ones anywhere else in the world. In addition, in the field of exports, bodies like the Western Hemisphere Export Council and the Export Council for Europe are doing excellent work. But in substantial areas of industry there is room for a greater readiness on the part of both sides for radical changes in outlook and methods. This will be assisted, in my view, by the reductions in tariffs which should come from current negotiations. Much more effort is still needed in the training of skilled labour. A determined attempt is needed to deal with restrictive practices which are out of date. A start was made with the Restrictive Trade Practices Act, dealing with one aspect, but there is much more to be done by both sides of industry.

Today, I want to deal in particular with one aspect of the drive towards lower costs. The wages and salaries bill for 1960–61 was about £1.000 million, or 8 per cent. higher than in 1959–60. Over the same period, incidentally, company profits fell by about £13 million. Personal incomes other than wages and salaries—rents, dividends, interest and income from self-employment—rose by about £450 million, or 6½ per cent. Gross dividends formed £161 million of this second figure—a 20 per cent. increase. Over the same period, national production in real terms rose by £650 million, or by about 3 per cent.

These are the figures: £1,450 million increase in personal income against £650 million increase in production. They do not make sense. Of course, one has to deduct tax and savings from the first figure to get the amount actually spent, but the second figure has to provide not only for increased personal consumption but also for increased public expenditure, increased private investment and exports. These figures reveal in the simplest form what is our present difficulty, and what it is all about. We are cashing in ahead of production, and, in the process, making ourselves uncompetitive.

Profit margins are now being squeezed to some extent, but in some cases they are still too high.

With regard to dividends, although it is true that gross they represent only 7 per cent, of the figure for wages and salaries, and net of tax even less, they have increased substantially. In present circumstances, I do not consider that a further general increase in them in the coming year is justified.