Pres. Your Excellencies. L & G.

Intro

If ref. to tape recorders

— where more than 2 people are gathered together—no such thing as a confidential communication.

In politics—always has feeling that confidences like diaries are intended for publication.

Both in business

you—to keep out of the red.

me—to keep Britain from going red.

Pink → British Empire—Persuade & convince

Red → Soviet Empire—much more difficult to shake off. [end p1] p2

You will have noticed recently—a certain profusion of statistics budgets

— and perhaps a note of euphoria

Rather like Children of Israel when just crossed the Red Sea—didn't know 40 years in the wilderness.

Are we through all our troubles are we out of the wood?

Wish I could say yes—we all live here—& most of us hope that our children will choose to live here as well. [end p2] Start of typescript

Let the facts tell their own story.

What really counts is how much the nation produces in goods and services.

While previous Labour Governments greatly slowed down the process of economic growth they did not stop it completely. That was left to the Wilson-Callaghan team in the years since 1974. [end p3]

Most similar countries have long since improved on their performance in 1973. Not so Britain. Indeed, here, output has declined to 8%; below that of 1973.

Consequently, although we have paid ourselves some 80%; more, the standard of living has fallen and a family on average earnings was £4 a week worse off in (February) this year than it was in March 1974.

We are paying more income tax than we did three years ago. £10 per week more for the average family. [end p4]

That puts into perspective the £1 a week of our own money we are due to receive back under the latest Mini-Budget.

Over taxation has reached from the Boardroom to the shop-floor.

Britain's inflation rate of 15%; is still twice as high as most of our competitors. The £10 Christmas pension bonus which we started in 1972 would need to be £21 this year to have the same buying power. [end p5]

We cheer because on Thursday the Denis HealeyChancellor took Keith Joseph 's advice of the previous Friday and stopped holding down the pound. Since then it has risen a few cents—to $1.85—but we remember that when he took over as Chancellor it stood at $2.30.

If the exchange rate was the principal factor in export success—which it is not—then with a drop like that our exports should be booming now. [end p6]

What is the Government's explanation for their dismal record? Can they truly blame world recession for their failures?

No—under similar conditions some of our competitors have forged ahead. In July of this year, the Chairman of the Federal Reserve Bank of the United States gave evidence to the House of Representatives on American economic performance, in the following terms: [end p7]

“Since the closing months of 1976, our Nation has experienced a vigorous and broadly based economic expansion. The gains in the industrial sector have been especially impressive; during the past eight months, the combined output of factories, mines, and power plants has risen at an annual rate of 9½%;. Activity in other sectors of the economy has also increased briskly.”

If only our record had approached anything like that. [end p8]

Will North Sea Oil solve our problems? Not alone.

Our main European and Japanese competitors have little oil but their industrial production buys them the energy they need.

The benefits brought by North Sea Oil to the Exchequer will not be sufficient to enable us to cut the income tax burden down to where we left it in 1973—a burden which we felt needed cutting further—not adding to. [end p9]

You will remember we left the standard rate of income tax at 30p and we taxed savings less heavily than now.

Even more important, North Sea Oil will do nothing by itself to check the process of industrial decline.

The danger is that good results from oil could cause us to be so complacent about our manufacturing performance that its decline could more than offset the improvement from oil. Every silver lining has a cloud. [end p10]

I believe we have already become too complacent about our poor industrial performance.

But surely there is little to be satisfied about the profitability of British industry, when the real rate of return on assets has sunk to a paltry 2%;. That's one reason why our industrial investment is so low. Section filmed by BBC begins. No end point is marked in the text.

Nor can we be complacent about productivity in British industry, when it takes 2½ times as many man hours to produce a ton of steel in Britain as it does in Germany or Italy and when the Japanese are five times more efficient than we are. [end p11]

Nor when British Steel turns a profit of over £2 per ton in 1973 into an estimated loss this year of between £20 and £30 a ton. Beginning of section checked against BBC Radio News Report 1800 2 November 1977

We can't be complacent about declining productivity in the pits. And that's why we wish that the miners' ballot had gone the other way because however you look at it, the fact is that any increase in wages unmatched by an increase in production will have to be met by increases in the price of coal and electricity.

And who pays the higher prices for those higher wages? Not the Government. The people. We always do. End of section checked against BBC Radio News Report 1800 2 November 1977. [end p12]

We can't be complacent at our share of world trade. Particularly at our failure to compete in producing and selling motor cars. In 1974 only one in four cars sold here came from overseas. Now that figure is nearer one in two; and most of them come from countries where wage rates are higher: but labour costs lower because of higher productivity.

While some of our people protested that higher productivity would mean higher unemployment, our competitors took the view that they needed higher productivity to stay in business—that way they would lower their costs, sell more and create extra jobs. [end p13]

Their producers got the custom of our consumers, our producers lost out. Their standard of living rose, ours declined.

The same kind of halting performance affects other parts of the economy. So that we have fallen from our position as one of the wealthier nations in Europe.

In the post war period we have been overtaken in income per head by Sweden, Canada, Australia, West Germany, France, Switzerland, Luxembourg, Austria, New Zealand, Denmark, Norway, Holland, Belgium, Japan and Ireland. [end p14]

If things go on as they are, others will pass us too—Italy, Spain, Israel, Taiwan, South Korea …   .

These facts demonstrate how deep seated our economic problems are. It will need more than the energy from North Sea Oil to get them right. It will take an explosion of energy and will power by the British people as whole.

But what is going to bring this about? [end p15]

In spite of increasing government activity, profits and personal incentives are still the essential driving forces of our commercial system. Economic debates these days tend to dwell on the effects of monetary and technical financial policies on the economy.

It would be better if they focussed more on the important area of private enterprise which creates most of the new wealth and finds most of the new jobs. They should enquire whether those firms and their people have enough incentive to expand their activities and embark on new ventures. [end p16]

We have spelt out our proposals in some detail in our recent pamphlet “The Right Approach to the Economy” . [end p17]

These are proposals that can work, given the chance.

The essence of Conservative economic strategy is less taxation, less interference, less government.

The essence of Socialism is more taxation, more interference, more government.

Experience tells us that to try to mix Socialism and real tax cuts is to attempt the art of the impossible. [end p18]

But some people may think that the Denis HealeyChancellor's approach is now right and that he can safely be left to continue down the right road, to the benefit of the nation. To believe that he could be expected to go far is to ignore his Socialism, and it is to forget his reluctant companions tugging at his left sleeve.

As one former Socialist MP (Woodrow Wyatt) wrote: “Productivity was never of any interest to the extremists. They would rather control men's lives in uniform misery, according to their definition of the public good, than allow them to flourish freely.” [end p19]

There you have it in a nutshell.

No Socialist could follow our way to prosperity without rejecting his own beliefs and without losing his comrades on the way.

But the Government relies on those comrades for its majority. That is why the Chancellor can never take many steps in the right direction. Manuscript addition by MT

Today we are no longer in the election politics of the pendulum, but of the ratchet. Next time the choice will be yours for the voting. [end p20]

Britain still in wilderness, Mrs Thatcher says

Britain was “no longer in the politics of the pendulum, but of the ratchet” , Mrs Thatcher said in London yesterday.

On the eve of the state opening of Parliament she said that to believe that the Labour Government could be safely left to continue down the road of conservative measures towards prosperity was to forget its socialism and its reliance on left-wingers for its majority. And, Mrs Thatcher stated, in her opening remarks at a luncheon given by the Institute for Public Relations, “My job is to stop Britain from going red.”

Her performance was also remarkable for what she did not say. She did not take up her colleagues' cry that Mr Healey, Chancellor of the exchequer, had started the rush for a give-away election; she did not mention the possibility of confrontation, let alone a referendum, regarding the miners' pay negotiations, and touched on the matter only in passing.

Her main theme was to remind everyone of the “facts” , demonstrating how deep-seated were Britain's economic problems. She asked: “Are we out of the wood year?” , and answered, indirectly, by comparing recent reactions to better news to the children of Israel after they had crossed the Red Sea. “They were so relieved they had not been submerged that they forgot they had got to face 40 years in the wilderness.”

Mrs Thatcher contended that it would need more than North Sea oil to overcome Britain's difficulties. “It will take an explosion of energy and will power by the British people as a whole” , she said. To bring that about would take Conservative-led incentives, which meant less taxation, less interference, and less government.

She was critical of over-concentration in economic discussions on monetary and technical matters, as if there were some combination that could put things right. It would be better, she said, for debaters to focus on the important area of private enterprise; they should inquire whether those firms and their people had enough incentive to expand their activities.

Earlier she suggested that one reason industrial investment was so low was the fall in the real rate of return on assets “to a paltry 2 per cent” . She commented: “If you do not get the return you will not make the investment” .

Mrs Thatcher's litany of Britain's difficulties was familiar enough: declining output, falling productivity, higher taxes. The fact that the average family is now paying £10 more a week in tax than it did three years ago “puts into perspective the £1 of our own money we are to receive back under the latest mini-Budget.”

Mrs Thatcher scoffed that it took a socialist government to cheer the fact that inflation was only 15 per cent. It meant that Mr Healey's £10 Christmas bonus for pensioners ought to be £21 to have the buying power of the £10 bonus given to pensioners by the Conservatives in 1972.

The opposition leader's most sharply expressed concern was over complacency towards North Sea oil. “The danger is that good results from oil could cause us to be so complacent about our manufacturing performance that its decline could more than offset the improvement from oil … every silver lining has a cloud.”