Now there are a lot of people about whom it behoves to be very cautious in accusing their political opponents of past or prospective U-turns. In acrobatics Harold Wilson, for all his nimbleness and skill, is simply no match for the breathtaking, thoroughgoing efficiency of the present Prime Minister [Heckler: "Judas!"] Judas was paid! Judas was paid! I am making a sacrifice!

The question is: can they now be prevented from taking back into their own hands the decision about their identity and their form of government which truly was theirs all along? I do not believe they can be prevented: for they are now, at a general election, provided with a clear, definite and practicable alternative, namely, a fundamental renegotiation directed to regain free access to world food markets and recover or retain the powers of Parliament, a renegotiation to be followed in any event by a specific submission of the outcome to the electorate, a renegotiation protected by an immediate moratorium or stop on all further integration of the UK into the Community. This alternative is offered, as such an alternative must be in our parliamentary democracy, by a political party capable of securing a majority in the House of Commons and sustaining a Government.

It is for me supremely that kind of question on which, if there be a conflict between the call of country and that of party, the call of country must come first. Curiously, it so happens that the question 'Who governs Britain?' which at the moment is being frivolously posed, might be taken, in real earnest, as the title of what I have to say. This is the first and last election at which the British people will be given the opportunity to decide whether their country is to remain a democratic nation, governed by the will of its own electorate expressed in its own Parliament, or whether it will become one province in a new European superstate under institutions which know nothing of the political rights and liberties that we have so long taken for granted.

The Government know perfectly well that, in order to cope with the rising inflation and disastrous trade balance, it is indispensable to budget for a severe increase in taxation and a further reduction in the rate of growth of public expenditure. They have the majority and the authority to do this now. They do not need an election in order to act in the national interest. Nor do they need an election to get the country back to full-time work. Neither the miners nor the other trade unions have broken the law or threatened to break it. There is nothing sacrosanct about stage 3 or the Government's interpretations of it. A settlement will have to be found in the mining industry – and in every other industry – which will get the necessary labour into the necessary jobs.

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What I have learned and what I fervently believe is that neither high and stable levels of employment nor prosperity nor anything that a nation can desire is to be obtained by debauching its currency; that the mere manufacture of additional money, the mere process of inflation, though it may create temporary euphoria, is no basis upon which, for any class in the community, security or prosperity can be built. It is in that belief and in the belief that it is demonstrated by history that I speak as I do.

Our present experience and our present predicament was foreseen and forecast in principle. It was exactly what we had seen happen before. It was exactly what had led us to renounce the very course of action upon which we subsequently entered. We are, therefore, obliged not to seek an escape by accusing external events, such as the movement of forces and prices in the outside world, for the crisis with which we have to deal. More important still, we are freed from the danger of supposing that either we or the country at large are the victims of the perversity of a group of our fellow citizens... It is salutary to be reminded that it is an impasse which was always implicit in the course of statutory control of prices and wages upon which we engaged. When we renounced that course we did not do so merely as a contrast to a voluntary prices and wages policy. The accent was not specially upon the word statutory or compulsory. We renounced it because our whole conception of the cause and, therefore, the cure of the scourge of inflation was such that the attempt to regulate individual prices and wages, either by compulsion or by agreement, was irrelevant. In a sense, we have the grim satisfaction of seeing the realisation and verification of what we ourselves predicted.

I make no apology for once again reminding the House, and particularly my right hon. and hon. Friends, of what was our view not so long ago on the policies which have led us to this stage. I do so in no spirit of criticism or of recrimination, but because I believe that there are practical and important deductions to be drawn from recalling the fact that when the Conservative Party was elected by a majority we told the country that we utterly rejected the philosophy of compulsory control of wages. We said that we had seen the Labour Government's statutory control of wages fail and that we did not intend to repeat it. We did not make those statements as a matter of mere theory. We did not make them, as it were, in the margin or idly. They arose not only from theory but from the observation, both in this country and elsewhere, that the attempt to combine Government policies which in themselves are inflationary with the endeavour to regulate and control prices and wages has invariably and inevitably led to an impasse and to irresolvable conflict between the demands of Government on the one hand and the realities, as the private citizen sees and knows them, on the other. We were speaking not merely from theory but from experience.

[T]o reduce the rate of inflation in an economy from something like 10 per cent. to any figure which we would dare to regard as tolerable, cannot but be accompanied by severe stresses, one of which will be an increase in unemployment. That does not derive from the method by which it is done. It derives from the fact that it is done.

In 1970 my right hon. Friend the Prime Minister, and all of us who sit on these benches on the Government side of the House, said to the country "We utterly reject the philosophy of compulsory wage control," or again—"Labour's compulsory wage control was a failure...and we will not repeat it." Why did we say those things so emphatically, over and over again, to the country in 1970? We said them on the basis of what we had argued, experienced, seen and watched over the preceding years. We said them out of a conviction, often stated, that the inevitable result of combining inflation with the attempt to control it by compulsory control of wages was bound to be the most damaging and irresolvable conflict between State and citizens. We said them because...we were convinced in those days that inflation was the result, overwhelmingly, almost exclusively, of actions and policies which were within the power and control of Government. It was because we were convinced that if Government, for their part, would so manage the finances of the nation, if they would so frame the policies within their control, within their hands, there would, indeed, be industrial conflicts, there would be collective bargaining, carried no doubt sometimes to the use of the strike weapon, and there would be the attempt, natural and inevitable, to reassess and reassess again the real relativities between the wages of one industry and another and those of one job and another, but we would not be bringing into the arena of direct conflict between Government and citizen every wage dispute, every bargain, every price and every wage that was fixed. We were convinced that responsibilities would lie where they ought to lie—the responsibility of management and the responsibility of trade union leadership could be exercised where they belonged—if Government would exercise the responsibility which is theirs.

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The wounds from which this country is bleeding today have not been inflicted by an external enemy. They are self-inflicted wounds; they are what we have done to ourselves... Over what, then, is it, that there is conflict between the unions and the State, so dangerous, so deep, that it threatens to create massive unemployment and a massive fall in the production of this country? It is the determination, incessantly repeated, of Her Majesty's Ministers that their interpretation of what can be extracted by logic from the interstices of the stage 3 price and pay code shall be the ne plus ultra, the law of the Medes and Persians, and that nothing beyond that shall be regarded as in any way reconcilable with the national interest and the national salvation. It is in pursuit of the Ministers' interpretation of statutory control of wages that we have been brought into this conflict, the conflict of which the consequences are not merely before us but are bringing anxiety to every family in the country.

It is deeply worrying that at a time when past budgetary policies have carried Britain deeper and deeper into inflation, and when the world is waiting to see whether we have the resolution to deal with inflation at its source, more and more symptoms appear that the Government has withdrawn into a world of make-believe of its own, in which disasters are transferred into successes, and responsibility and blame are transferred from where they belong on to synthetic obstacles and enemies.

[More than a year ago I] ventured to inquire of the Prime Minister in the House of Commons whether he had taken leave of his senses. In the circumstances it was a solicitous but not unreasonable inquiry. The Government had suddenly embarked upon a course on which their predecessors had shipwrecked; which in Opposition they had consistently opposed and denounced; on which at the general election they had promised not to embark; and which ministers had been unanimously and indignantly repudiating until a few weeks before... The rate of inflation has not been lower during the period of the statutory counter-inflation policy: it has been higher. So official apologists have had to resort to the last refuge of the disconcerted: to claim that things would have been even worse without the policy... The greater evil still of all statutory counter-inflation policies is the antagonism, at once futile and disastrous, which they inevitably set up between the state on one side and the various classes and interests in the community on the other side. The danger of this was frighteningly illuminated by the Prime Minister's outburst last week against the miners, who, whether or not they are wisely led by their trade unions, have neither done nor threatened to do anything which is against the law. Yet the accusation was brought against them that, because the House of Commons had approved a government White Paper and a code which, in terms of law, is binding (if it all) only upon the Price Commission and the Pay Board, therefore the miners are defying Parliament and the people's elected representatives and placing themselves beyond the pale of the constitution. To say this is to blur, indeed to deny, the very distinction on which constitutional liberty rests, the distinction between law and not-law. If possible, more breathtaking still was the Prime Minister's assertion that (in his own words) the responsibility of the Government "expressed in the price and pay code, is not the responsibility we sought; it was a responsibility which Parliament gave us because there is no other way of containing inflation in this country". One cannot but entertain fears for the mental and emotional stability to whom such language can appear rational.

They have a duty either to say to the country, "We propose to continue with inflation at its present level and to maintain or 'contain' it at that level, because otherwise there would be at least a temporary loss of growth and unemployment", or, alternatively, to say, "So great and intolerable are the consequences, direct and indirect, social, moral and economic, of on-going inflation at a cumulative rate of nearly 10 per cent. per annum, that we intend to bring that rate down steadily, consistently, perceptibly, and...we tell you that the price which we shall have to pay for that will be some reduction in growth and in employment." ... I am prepared to say, as I have done over and over again, that I believe inflation at 10 per cent. per annum cumulative to be an evil far more dangerous, far exceeding in its consequences the cost of the temporary dislocation which is involved in terminating it. I have said that time and again... We either go on at present with the present rate of inflation or else we deal with inflation and incur the temporary cost in terms of output and employment. In the real world there is no third choice. What the Government are doing with their counter-inflation policy is declining to take that decision in the open, declining to come forward and make clear which decision it is that they have taken, and using the counter-inflation policy as a means of pretending that a third course exists when they know that it does not.