Sitting of 7 July 1970

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

MEMBERS SWORN
The following Members took and subscribed the Oath:
Sydney Scholefield Allen, esquire, Q.C., Crewe.
Anthony Henry Fanshawe Royle, esquire, Richmond, Surrey.

PRIVATE BUSINESS

  WHITEHAVEN HARBOUR BILL
  [Queen's Consent, on behalf of the Crown, signified]
  Read the Third time, and passed.

  WILLIAMS & GLYN'S BANK BILL
  Read the Third time, and passed.
BOOTLE CORPORATION BILL [Lords]
  GLOUCESTER CORPORATION BILL [Lords]
  Read a Second time and committed.
PROVISIONAL ORDER BILLS
  ABERDEEN EXTENSION ORDER CONFIRMATION BILL
  Mr. Secretary Campbell presented a Bill to confirm a Provisional Order under Section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to Aberdeen Extension: And the same was ordered to be considered upon Monday next and to be printed. [Bill 10.]
  FORTH PORTS AUTHORITY ORDER CONFIRMATION BILL
  Mr. Secretary Campbell presented a Bill to confirm a Provisional Order under Section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to the Forth Ports Authority: And the same was ordered to be considered upon Monday next and to be printed. [Bill 8.]
  MALLAIG HARBOUR ORDER CONFIRMATION BILL
  Mr. Secretary Campbell presented a Bill to confirm a Provisional Order under Section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to Mallaig Harbour: And the same was ordered to be considered upon Monday next and to be printed. [Bill 9.]
ORAL ANSWERS TO QUESTIONS
  NATIONAL FINANCE

    Regional Employment Premiums
    Mr. Gregor Mackenzieasked the Chancellor of the Exchequer if he will make an early statement on the future of regional employment premiums.
    Mr. Bob Brownasked the Chancellor of the Exchequer what are his proposals regarding the regional employment premium.
    The Chief Secretary to the Treasury (Mr. Maurice Macmillan): My right hon. Friend will put before the House the Government's proposals for the future of the regional employment premium at the appropriate time.
    Mr. Mackenzie: Will the Chief Secretary bear in mind that there are about 55,000 jobs in the pipeline for Scotland at the present time, and many more for the North-East and Wales? The firms concerned based these decisions, presumably, on the factor of regional employment premiums. Will the hon. Gentleman be quite sure that they are given every possible encouragement still to go there and that his decisions will in no way take that incentive away from them?
    Mr. Macmillan: The Government have, I think, already made quite clear the great importance attached to promoting full employment in the less prosperous areas, and this is what we intend to continue to do.
    Mr. Bagier: Has the Chief Secretary taken notice of the effect that the withdrawal of the regional employment premium would have on such industries as the shipbuilding industry in the North-East as publicised by, for example, Swan Hunter, and will the Government not take this point into consideration before they withdraw the premium in accordance with the proposals from their Selsdon Park meeting?
    Mr. Macmillan: The Government have already made it quite clear that the undertakings given will be maintained, and certainly the considerations which the hon. Gentleman mentioned will be borne in mind.

    Budget
    Mr. Lomasasked the Chancellor of the Exchequer when he intends to introduce his first Budget.
    The Chancellor of the Exchequer (Mr. Iain Macleod): I must ask the hon. Gentleman to wait for an announcement in due course.
    Mr. Lomas: Is the right hon. Gentleman aware that the whole country is awaiting with interest the first Tory Budget? Are we to assume that, in spite of all the talk of economic crises and possible devaluation, it can wait for a considerable period of time, or is it that the Chancellor of the Exchequer has stopped believing what his own party leader said during the General Election?
    Mr. Macleod: If I might try to help the hon. Gentleman on that matter, the announcement in relation to the spring Budget is always made about five or six weeks in advance, as the House knows. If the hon. Gentleman is referring to what is called an autumn Budget, I have no intention of having an autumn Budget in the sense of a Budget Statement and a Finance Bill but, naturally, demand management is something that goes on the whole year.

    Selective Employment Tax
    Mr. Lomasasked the Chancellor of the Exchequer when he intends to introduce measures to implement his policy regarding selective employment tax and direct taxation; and what are his proposals on maintaining the revenue.
    Mr. Dalyellasked the Chancellor of the Exchequer if he will give his time-table for the phased abolition of selective employment tax.
    Mr. Eadieasked the Chancellor of the Exchequer what proposals he has for abolishing selective employment tax.
    Mr. Bob Brownasked the Chancellor of the Exchequer what are his proposals in regard to selective employment tax.
    Mr. Iain Macleod: The Government's pledge to abolish S.E.T. is firm and and arrangements to implement it will be laid before the House in due course. As regards direct taxation, I shall announce my detailed proposals at the appropriate time.
    Mr. Lomas: Does not the Chancellor agree that a reduction of, say, 6d. in direct tax and abolition of S.E.T. would amount to around £800 million? How can he take that out of revenue and maintain the social services at their present standard without imposing additional taxation? Has he value-added tax in mind?
    Mr. Macleod: There is no precise equation. There is a relationship between public expenditure and taxation proposals, as my right hon. Friend the Prime Minister made quite clear in his speech.
    Mr. Dalyell: However firm the decision, will the Chancellor reflect perhaps that selective employment tax is easily the cheapest tax to collect in terms of the Inland Revenue and reflect that any alternative tax might involve more, not fewer, civil servants to collect it?
    Mr. Macleod: That is a fair point. The only thing I can say in favour of S.E.T. is that it is relatively a cheap tax to collect.
    Sir T. Beamish: Does my right hon. Friend agree that the best way of maintaining the revenue is to get some growth

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    into the economy? Is he aware that in the last five years we have had the lowest growth rate in the whole of free Europe?
    Mr. Macleod: Yes, that is exactly right, but, with respect to my hon. and gallant Friend, I would not limit it only to growth. I think it is of first importance to encourage savings as well.
    Mr. Barnett: Will the Chancellor give a guarantee that he will not be replacing S.E.T. with an employment tax?
    Mr. Macleod: No. We have Questions later in relation to value-added tax. What we have said is that in any event the selective employment tax will go, but, in the words of the manifesto, it may be as part of a wide-ranging review of indirect taxation.
    Mr. Biffen: With reference to the second part of the Question asked by the hon. Member for Huddersfield, West (Mr. Lomas)—that of maintaining the revenue—does my right hon. Friend agree that a very prudent regard to economic management must lead him critically to examine the present size of the surplus and to consider whether the maintenance of this surplus is having a detrimental effect on the liquidity of the economy generally?
    Mr. Macleod: Yes, indeed, and that is a factor in the examinations which we are carrying out.
    Sir D. Walker-Smithasked the Chancellor of the Exchequer whether, prior to any general legislation in regard to selective employment tax, he will initiate immediate legislation for the repeal of section 51(9) of the Finance Act, 1969 which retrospectively reverses the decision of the Appellate Committee of the House of Lords in Secretary of State for Employment and Productivity versus C. Maurice and Company Limited, Bishop's Stortford, rejecting the Minister's appeal against the decision of the Court of Appeal in favour of the Company.
    The Financial Secretary to the Treasury (Mr. Patrick Jenkin): No, Sir. My right hon. Friend is reluctant to embark on a series of minor amendments to S.E.T. He has given a firm pledge to abolish the tax.
    Sir D. Walker-Smith: While appreciating the firm pledge, may I ask whether my
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    hon. Friend does not agree that anything which carries a degree of inequity cannot be called minor and should not be called minor in this House? Has he observed the words of the Master of the Rolls in the Court of Appeal pointing out that the law as it now stands confers an unfair advantage on the public sector over the private sector, and, in view of that, will my hon. Friend be good enough to reconsider his answer?
    Mr. Jenkin: I have some sympathy with my right hon. and learned Friend's point, but if we were to devote our attention to correcting all the unfairnesses and anomalies in the selective employment tax we might never have time to get round to abolishing it.
    Mr. Hugh Jenkins: Will the hon. Gentleman confirm that where it has already been decided to correct some inadequacies or mistakes in the application of the selective employment tax—for example, in relation to removing it from the theatre—and where that is currently being carried out, there is no intention of altering that decision and that such decisions already taken will continue?
    Mr. Jenkin: The hon. Gentleman may have that assurance.
    Mr. Kaufmanasked the Chancellor of the Exchequer by what date he intends to complete the abolition of selective employment tax; and what reduction he estimates this will bring about in the Index of Retail Prices.
    Mr. Patrick Jenkin: In reply to the first part of the Question, I would refer the hon. Member to the answer my right hon. Friend gave the hon. Member for Huddersfield, West (Mr. Lomas) earlier today.
    On the second part, it is estimated that S.E.T. represents about 1 per cent. on the retail price index.
    Mr. Kaufman: Does the Minister recall the Prime Minister's television statement earlier this year that selective employment tax will be abolished in the first Budget and his further statement on television last month:
    "I give you my word and I will keep my word"?
    Will the Minister confirm that the Prime Minister's second statement will govern action on his first statement?
    Mr. Jenkin: My right hon. Friend has made it clear that the selective employment tax will be abolished without undue delay.
    Mr. Taverne: Is it not clear from the second answer which the Financial Secretary gave that the selective employment tax has had less effect on the retail price index than have other forms of indirect taxation?
    Mr. Jenkin: It does not necessarily mean that it is a better tax.

    Overseas Debts
    Mr. Wingfield Digbyasked the Chancellor of the Exchequer what is the present overseas indebtedness of Her Majesty's Government, distinguishing between short-term and long-term borrowing; and what is the average rate of interest payable and the total annual liability for interest.
    Mr. Maurice Macmillan: At 31st March, 1970 short- and medium-term borrowing was £1,654 million. Long-term borrowing at 30th June was £2,233 million, including the Lend Lease and post-war loans. The total interest liability in recent months was running at a rate of about £150 million or about 4 per cent. These figures exclude overseas holdings of Government securities.
    Mr. Wingfield Digby: May I congratulate my hon. Friend on his appointment and ask him whether these figures denote a stronger economy than in October, 1964?
    Mr. Macmillan: I think it would be fair to say that they denote an exchange of deficit for a rather larger debt.

    Value-Added Tax
    Mr. Arthur Lewisasked the Chancellor of the Exchequer whether he will make a statement on the Government's policy regarding a value-added tax; and when he will implement this policy.
    Mr. Sillarsasked the Chancellor of the Exchequer if he will make a statement on his policy regarding a value-added tax.
    Mr. Iain Macleod: Not now, Sir.
    Mr. Arthur Lewis: Is the Chancellor aware that it has been reported in
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    reputable journals that if we go into the Common Market, whatever the terms, we shall have to have the value-added tax? As the leaders of both parties are committed to going into the Common Market, would it not appear that we shall have the value-added tax if we go in?
    Mr. Macleod: It is certainly true that the value-added tax is part of the taxation arrangements of the Common Market, but in the study I have been giving to it I have looked at it irrespective of the question of the Common Market. After all, nine different countries have introduced it. It is a tax of some complexity but of very great attractions indeed.
    Mr. Sillars: Is the Chancellor aware that in the Conservative Party's manifesto it is said that the party will possibly replace purchase tax with a value-added tax? Will he now tell us whether he will or will not introduce a value-added tax within the next 12 months?
    Mr. Macleod: We made that point entirely clear. Perhaps I could go over it for the hon. Member. The pledge to abolish S.E.T. is firm. We have said that we are also carrying out a review of taxation, and, although there are a number of possibilities, the one to which we have given most attention is the value-added tax. If we introduce a value-added tax, purchase tax will go, too.
    Mr. Milneasked the Chancellor of the Exchequer if he will make a statement on the proposals for a value-added tax in Great Britain arising from negotiations on entry into the European Economic Community.
    Mr. Patrick Jenkin: No, Sir.
    Mr. Milne: Is the hon. Gentleman aware that the secrecy about the value-added tax is bound to cause concern, not only in Britain but in Europe generally? It is time that the Government came clean on this matter. Or have they dismissed the idea of a value-added tax until they are coerced into it during the course of the negotiations on the Common Market?
    Mr. Jenkin: At the risk of boring the House again, I must impress upon hon. Members opposite that we do not intend to announce all our decisions within a

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    fortnight of the General Election. We have had too much instant government.
    Mr. Taverne: Will the hon. Gentleman convey his views on instant government to his right hon. Friend the Secretary of State for Education and Science?
    Mr. Milne: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of that reply, I give notice that I will raise the matter on the Adjournment at the earliest possible moment.
    Mr. Raphael Tuckasked the Chancellor of the Exchequer what estimate he has made of the number and cost of civil servants necessary to administer a value-added tax.
    Mr. Patrick Jenkin: This would depend entirely on the form and coverage of the tax.
    Mr. Tuck: As it is evident that a much larger number of civil servants would be required, and as the Conservative Party have always been caterwauling about reducing the number of civil servants, will the Chancellor look into this very carefully before considering a value-added tax?
    Mr. Jenkin: It is one of the factors to which we are giving the closest study.

    Income Tax (Exemptions)
    Mr. Iremongerasked the Chancellor of the Exchequer if he will introduce legislation to exempt from income tax the course and examination fees and cost of text books incurred by clerks articled to solicitors and chartered accountants.
    Mr. Patrick Jenkin: I have noted my hon. Friend's suggestion; but I see considerable difficulties in the way of making a special exception for articled clerks from the general rule that the cost of acquiring professional or technical qualifications does not rank for tax relief.
    Mr. Iremonger: Since these are students, why should these well-motivated and constructive students be penalised when the little "nut cases" who "bust up" the universities get subsidies?
    Mr. Jenkin: I am not sure that there is a parallel to be drawn between the two. There is a well-established tax rule that
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    the cost of acquiring professional qualifications cannot count as part of the expense of carrying on a profession. It would be difficult to make an exception to that rule.
    Mr. Barnett: Is not the expense "wholly and necessarily incurred" in the earning of an income? Should not the hon. Gentleman inform the Inland Revenue that it should allow it?
    Mr. Jenkin: On the contrary. I differ from the hon. Member with diffidence, but this is a matter of tax law which was decided in the courts last year. Such a claim as this is not allowable.

    Regional Development
    Mr. Maclennanasked the Chancellor of the Exchequer if he will take fiscal measures to promote regional development.
    Mr. Maurice Macmillan: My right hon. Friend will put forward his fiscal proposals in due course. Meanwhile I cannot commit him. But, as stated in the Queen's Speech, we attach the greatest importance to promoting full employment and an effective regional policy.
    Mr. Maclennan: Does the Chief Secretary accept that that Answer is as opaque as have been all other Answers by Ministers on regional development and that it will give rise to the gravest disquiet in industry in the development areas which is looking for some indication of Government policy? Does the hon. Gentleman accept that we cannot wait until a spring Budget next year to know where we stand in development areas?
    Mr. Macmillan: I am sorry to disappoint the hon. Member, but I think he must get used to the idea that instant government is not our policy.
    Dame Irene Ward: Will my hon. Friend point out to hon. Members opposite with reference to regional development that the result on Tyneside of their period of office has been a doubling of the rate of unemployment? Is it surprising that the people preferred the Conservative policy to the policy of hon. Members opposite?
    Mr. Macmillan: I am grateful to my hon. Friend for having made it unnecessary for me to point this out to the hon.

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    Member for Caithness and Sutherland (Mr. Maclennan).
    Mr. David Steel: Before he embarks on the Government policy of removing investment grants and replacing them with the old investment allowances, will the Chief Secretary consult firms which have moved into development areas and have been greatly attracted by the certainty of the investment grant system?
    Mr. Macmillan: That is entirely another matter on which there are further Questions on the Order Paper.

    Taxation
    Mr. Englishasked the Chancellor of the Exchequer what are the present proportions of revenue derived from direct and from indirect taxation; and how these proportions compare with those in the European Economic Community countries.
    Mr. Patrick Jenkin: As the Answer involves a number of figures, I will, with permission, circulate them in the OFFICIAL REPORT.
    Mr. English: Do the figures show that the proportions of direct taxation in the main Common Market countries are higher than here?
    Mr. Jenkin: What the figures will show is that the Common Market countries raise a very much higher proportion of their revenue by way of social security contributions. The level of direct taxes by themselves in Britain is higher than in any Common Market country.
    Following are the figures:
    The following information is based on the latest returns to OECD*:

    COMPOSITION OF TAXATION†, 1968

    As a percentage of total taxes

    Taxes on income

    Social security contributions

    Taxes on expenditure

    United Kingdom

    38·1

    14·7

    47·2

    Belgium

    30·9

    28·8

    40·3

    France

    17·8

    39·3

    42·9

    Germany

    30·3

    30·4

    39·3

    Italy

    22·3

    36·4

    41·3

    Netherlands

    34·9

    35·5

    29·6

    * Figures for Luxembourg are not available.

    † Excluding taxes on capital, but including social security contributions.

    Sir G. Nabarroasked the Chancellor of the Exchequer whether he will make a statement upon taxation policy.
    Mr. Maurice Macmillan: My right hon. Friend will announce his detailed proposals at the appropriate time.
    Sir G. Nabarro: When the appropriate time approaches, will my right hon. Friend have careful regard to the central position of savings and investment and bear in mind that the Save-as-You-Earn proposals, which have not been very satisfactory, although he was the author of them, are now largely negatived by the rate of inflation outstripping the tax-free gain of 40 per cent. over a period of seven years? Would he reinforce the savings attractiveness in his savings and taxation policy?
    Mr. Macmillan: My hon. Friend may rest assured that the position of savings is regarded as central to the whole problem, and my right hon. Friend will naturally pay great attention to my hon. Friend's words.
    Mr. Jay: Can the hon. Gentleman say whether any practical measures will be announced by the Chancellor before the Summer Recess?
    Mr. Macmillan: My right hon. Friend hopes to catch your eye, Mr. Speaker, and will doubtless make his own speech, but I have nothing further to add to what I have already said or to what he will say then.

    Development Areas (Public Expenditure)
    Mr. William Hamiltonasked the Chancellor of the Exchequer what plans he has for reducing public expenditure in the development areas.
    Mr. Maurice Macmillan: My right hon. Friend intends to see that public funds are used in the way that will contribute most effectively and economically to employment and long-term growth in the development areas.
    Mr. Hamilton: Is the Chief Secretary aware that that is a lot of meaningless mumbo-jumbo? Will he give a categorical assurance now that he does not intend to reduce public expenditure in the development areas, because we, particularly in Scotland, are very concerned

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    that the industrial development that has taken place in the last five or six years should continue? The degree of uncertainty that now exists is very damaging.
    Mr. Macmillan: My right hon. Friend the Chancellor will announce his detailed proposals on this, as on other matters, when he has completed his current review of public expenditure.
    Mr. Sheldon: Is it the Government's intention to reduce any of the more than £300 million at present being spent on regional development? Will the Chief Secretary answer "Yes" or "No"?
    Mr. Macmillan: I am sorry to disappoint the hon. Gentleman, but he will have to wait until my right hon. Friend has completed his review.
    Mr. Jay: Is the hon. Gentleman aware that the 40 per cent. investment grant in development areas has undoubtedly been a powerful incentive to industry to develop in those areas and that its removal or curtailment would be a serious blow to development areas?
    Mr. Macmillan: That is one of the reasons why I said that right hon. and hon. Members opposite must wait until my right hon. Friend has completed his survey. They will then learn what steps the Government intend to take. I cannot anticipate my right hon. Friend's decisions.
    Mr. Emery: Will my right hon. Friend bear in mind that, in the matter of decisions about expenditure for development areas, hon. Members on this side of the House will want to see very much better value for money from this Government than we had from the previous Government?
    Mr. Macmillan: I am grateful to my hon. Friend. That, indeed, is the whole point of our having a more careful study than the previous Government gave to these problems, in addition to its being with a view to seeing that the money spent leads to fuller employment.
    Mr. Roy Jenkins: Cannot the Chief Secretary give us a clear idea how long firms in development areas and those who might go to development areas or expand in development areas will have to remain in a state of complete uncertainty on this very important matter?
    Mr. Macmillan: The right hon. Gentleman must await the statement by my right hon. Friend.

    Conference of European Communities (Minister's Statement)
    Mr. Milneasked the Chancellor of the Exchequer what information was provided by his Department in regard to the state of the country's economy for inclusion in the statement made on behalf of Her Majesty's Government by the Chancellor of the Duchy of Lancaster at the Meeting of the Conference of European Communities at Luxembourg on 30th June, 1970 published as Command Paper No. 4401.
    Mr. Patrick Jenkin: All relevant information was made available to my right hon. Friend.
    Mr. Milne: Is the hon. Gentleman aware of the dilemma in which the Government have been placed by this decision, because in arguing at Luxembourg that our economy was on a sound and stable basis they were giving evidence which was contrary to the arguments of the Prime Minister during the election campaign that we were running into an economic crisis? Will the hon. Gentleman try to square those two statements?
    Mr. Jenkin: There is nothing to square. I hope that the hon. Gentleman shares fully our concern about the high rate of unemployment, about the rate at which inflation is going, and about the low rate of investment. These are matters for concern. My right hon. Friend's statement at Luxembourg was not debating our economy

    Gross Domestic Product
    Mr. Sheldonasked the Chancellor of the Exchequer what estimate he has made of the increase in gross domestic product during the current financial year.
    Mr. Barnettasked the Chancellor of the Exchequer what level of economic growth he expects to achieve in the current financial year; and if he will make a statement.
    Mr. Iain Macleod: The forecasts published by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) at the time of his Budget in April pointed to an increase in gross domestic product

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    between the first halves of 1970 and 1971 of about 3½ per cent. Progress has on the whole been disappointing, but I am not prepared to give a revised forecast at this stage.
    Mr. Sheldon: Before the Treasury grip gets a hold of the right hon. Gentleman, will he accept that it is only in the first few months that he has his options fully open to him and that it is the action that he will take in the next few months with regard to domestic credit expansion and the use of the regulator to stimulate demand that will determine the kind of Chancellor that he will be?
    Mr. Macleod: I understand and do not particularly dissent from that point; but, although at the moment we are not running up to the growth forecast of my predecessor, I think that it is too soon to conclude that output is stagnating. There are one or two more encouraging signs, and I do not think it right to take action yet to stimulate the economy.
    Mr. Barnett: Will the Chancellor accept that he could well be accused of extreme lack of sincerity in his many speeches on unemployment, for example, if he does not take action now to deal with the level of economic activity and to reduce the level of unemployment without waiting for any further Budget either in the autumn or next year?
    Mr. Macleod: It is a separate matter from the Budget. As I said in answer to the hon. Member for Huddersfield, West (Mr. Lomas), demand management, as no one knows better than the hon. Gentleman, is a matter not for one day in the year but for every day in the year. When I believe it right to give a stimulus to the economy, I will certainly do so.
    Mr. Bruce-Gardyne: Have we not had a good deal of evidence in the last five years of the deleterious effects of attempts to fine-tune the economy? Will my right hon. Friend resist the urging of right hon. and hon. Members opposite to pursue this policy, which has not produced great success in the past?
    Mr. Macleod: I said earlier—obviously I will expand on this, Mr. Speaker, if I succeed in catching your eye in this afternoon's debate—that there are some factors more encouraging than the growth factor taken in isolation. The growth
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    factor taken in isolation does not at the moment live up to my predecessor's expectations at the time of the Budget. However, the Budget is only two or three months behind us and I think that we should see rather more figures before we move on that.
    Mr. Bruce-Gardyneasked the Chancellor of the Exchequer what was the increase in gross domestic product at factor cost, and in unit labour costs in manufacturing, in the last six-month period for which figures are available, as compared with the preceding six months.
    Mr. Maurice Macmillan: Figures for unit labour costs in manufacturing are not available for six-month periods, but the most recent provisional estimates for the whole economy show that unit labour costs rose by about 4¼ per cent. between the six months to March and the preceding six-month period. The corresponding increase in the gross domestic product—at factor cost at constant prices—was about 1 per cent.
    Mr. Bruce-Gardyne: The Leader of the Opposition has said that the Conservative Government have inherited the strongest economy in living memory. Could my hon. Friend give us any idea of the scale of longevity required to recall a condition of such soaring inflation and stagnating output as the previous Government left behind them?
    Mr. Macmillan: My hon. Friend has somewhat taxed my political memory, but I should have said that it would mean going back 20 or 30 years. Certainly, the present trend in unit labour costs is extremly disturbing and, unless moderated, could have a serious effect on our competitive position.

    Balance of Payments
    Mr. Sheldonasked the Chancellor of the Exchequer what estimate he has now made of the balance of payments out-turn for 1970.
    Mr. Maurice Macmillan: My right hon. Friend does not propose to give such an estimate.
    Mr. Sheldon: Many hon. Members will have read the Queen's Speech with interest, where on the first occasion for a long time no mention is made of the

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    balance of payments. Will it be the Government's policy to make use of the strongest balance of payments surplus Britain has ever had? [HON. MEMBERS: "Oh."] Of course it is the strongest balance of payments surplus Britain has ever had. One needs only to look at the figures to see that. Will the Government make use of this balance of payments surplus to stimulate the growth of the economy?
    Mr. Macmillan: We are still in surplus, thanks largely to invisible earnings. The trend of visible trade has been downwards recently and the results of the last few months certainly demonstrate that we cannot afford any complacency.
    Mr. Barnettasked the Chancellor of the Exchequer if he will make a statement on the expected balance of payments out-turn in the current financial year.
    Mr. Maurice Macmillan: My right hon. Friend does not propose to give such an estimate.
    Mr. Barnett: Does the Chief Secretary accept that all the speeches made by the Tory Opposition in recent weeks and months on economic affairs would be a gigantic confidence trick if the Tory Government did not now propose to stimulate economic growth? If the Chief Secretary intends to do that, how does he propose to do it at the same time as reversing the balance of payments trends, as was clearly implied by the Prime Minister?
    Mr. Macmillan: This is an entirely separate question. My right hon. Friend the Chancellor does not propose to give an estimate of the future balance of payments, because such estimates have never been given.

    Public Expenditure
    Mr. Prenticeasked the Chancellor of the Exchequer whether he will continue the practice of issuing an annual White Paper setting out the Government's proposals for public expenditure over the next five years; and when he expects to issue a White Paper for the years 1970–71 onwards.
    Mr. Maurice Macmillan: We shall continue the series of White Papers begun
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    last year giving five-year projections of public expenditure; and we shall publish a White Paper in the autumn.
    Mr. Prentice: May I urge the right hon. Gentleman to bring forward the White Paper as early as possible in the autumn, as we on this side of the House will want an early opportunity to measure the danger to the social services and public services resulting from irresponsible Conservative promises about public expenditure.
    Mr. Macmillan: While in no way accepting the implications of the right hon. Gentleman's remarks, I certainly wish, as does my right hon. Friend, to have a White Paper as soon as possible, consistent with care and certainty.
    Mr. Albu: Do the Government intend to move for a Select Committee on Public Expenditure as recommended by the Select Committee on Procedure in the session before last?
    Mr. Macmillan: If the hon. Gentleman will put down a Question on that subject to the Leader of the House, I think that would be the appropriate way of dealing with the matter.

    Retail Prices
    Sir G. Nabarroasked the Chancellor of the Exchequer what steps he is taking to stabilise retail prices.
    Mr. Croninasked the Chancellor of the Exchequer what immediate steps he intends to take to control the rise in the cost of living.
    Mr. Iain Macleod: There is a serious wage-cost inflation which is pushing up the cost of living and threatening our competitiveness. Many price increases will flow from the substantial wage increases already secured. Our methods of reducing Government expenditure, reducing the burden of taxation, encouraging savings and increasing competition are set out in our manifesto and in the Gracious Speech.
    Sir G. Nabarro: In my right hon. Friend's scrutiny of these important matters will he have regard to the special and critically important position of the nationalised industries, especially the threat by the National Coal Board to raise all its prices by 10 per cent. shortly,

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    which will have a most damaging influence on the prices of steel and electricity and will give a vicious upward spiral to further inflation.
    Mr. Macleod: I will say something about that, if I may, in my speech later. On the general subject, it is a fact that during our years in office we had a vastly superior record on prices to that of hon. Members opposite, and we expect to do so again.
    Mr. John Fraser: Could the right hon. Gentleman confirm that as the Government have done little about recent price rises, the only price which will be cut by this Government will be the price of principle?
    Sir G. Nabarro: Flatulent stuff!

    Government-Borrowing Overseas
    Sir J. Langford-Holtasked the Chancellor of the Exchequer how much money in terms of sterling was borrowed from the United States of America and Canada, between 1945 and 1948; how much has been repaid since then and in what years; and what the amount repayable is today.
    Mr. Maurice Macmillan: The amount of long-term borrowing in these years from the United States and Canada was about £1,360 million. Drawings on some of the relevant credits were made over a longer period. Repayments are not related to drawings in particular years. The total repayments on these loans, including drawings made in later years, from 1951 to 30th June, 1970, have been about £470 million. The amount outstanding is currently about £1,890 million.
    Sir J. Langford-Holt: Showing, as it does, that we owe more today than we borrowed in the 1940s, does not this, with the Answer to Question No. 4, show that the Labour Party, so far from being the debt settlers, are the master borrowers of this age?
    Mr. Macmillan: That is, I think, a reasonable deduction, especially as the fact that this long-term debt is so much greater than it was when it was first incurred is the result of two devaluations totalling about £885 million additional in sterling terms.
    Mr. Barnett: Is it the Government's intention to repay this debt at a much faster rate than it has been repaid in the past?
    Mr. Macmillan: The Govenment's intention on the long-term debt is to continue with the methods which have been adopted before by previous Tory Governments and carried on since.

    Government Securities (Purchases and Sales)
    Mr. Bruce-Gardyneasked the Chancellor of the Exchequer what has been the value of net sales, or net purchases, of Government securities to or from the non-bank public since the Budget.
    Mr. Patrick Jenkin: It is not the practice to disclose details of recent official transactions in the gilt-edged market. The figures will be published in due course in the Bank of England Quarterly Bulletin and in Financial Statistics.
    Mr. Bruce-Gardyne: I am grateful to my hon. Friend for that reply. Could he say whether it is the Chancellor of the Exchequer's intention to adhere broadly to the targets for growth of money supply and domestic credit expansion outlined by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) in his last Budget Statement?
    Mr. Jenkin: Speaking very generally, the answer to my hon. Friend's Question is "Yes", but I ask him to await the statement which my right hon. Friend will make this afternoon if he catches Mr. Speaker's eye.

    Income Tax Forms
    Mr. Longdenasked the Chancellor of the Exchequer if he has studied Form 11 P (1970), addressed to potential income tax payers, and Form 11 P-1. which seeks in 12 pages to guide the taxpayer in answering the 40 questions in Form 11 P (1970); and if he will issue a simpler version.
    Mr. Patrick Jenkin: My right hon. Friend agrees that this form is complicated, but if we can simplify the tax system we may hope for a consequential simplification of the forms. In the meantime, if my hon. Friend has any

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    suggestions for simplifying the form, I will see that they are considered.
    Mr. Longden: I thank my hon. Friend for that reply, but will he expedite to the greatest possible extent the simplification of a system which has been described by the Chairman of the Law Commission as a disgrace to a civilised country?
    Mr. Jenkin: I give my hon. Friend that assurance, but I ask him not to underestimate the difficulties.

    Short-term Borrowing
    Mr. Emeryasked the Chancellor of the Exchequer what was the total of short-term borrowing for each year from 1964 to 1970; how much of this, for each year, has been repaid; and what is the total now outstanding.
    Mr. Maurice Macmillan: Table 13 of the June issue of Economic Trends gives details of short- and medium-term official borrowing undertaken since 1964 to meet the financing problem. The long-term Government debt, and medium-term loans since 1964—the U.S. Export-Import Bank military aircraft credits, and two German loans to offset troop costs—are excluded.
    Mr. Emery: Can my hon. Friend tell us what is at present outstanding on the short-term borrowing, and how much of that which has been borrowed since 1964 has been repaid?
    Mr. Macmillan: I think that my hon. Friend's justifiable curiosity will be satisfied after my right hon. Friend's speech.

    Programme for National Recovery
    Mr. Turtonasked the Chancellor of the Exchequer if he will make a statement upon the report of the Programme for National Recovery on the use of resources in Great Britain, which has been submitted to him.
    Mr. Maurice Macmillan: My right hon. Friend will be studying this interesting proposal and constructive suggestions from any other sources in considering the Government's policies on taxation and public expenditure.
    Mr. Turton: Will my hon. Friend pay particular attention to the striking evidence in that document that the low rate of industrial investment has been due
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    largely to the fact that the public sector has taken more than half of the gross domestic product?
    Mr. Macmillan: That is a point to which we shall be giving great attention.

    Public Corporations (Commercial Activities)
    Mr. David Stoddartasked the Chancellor of the Exchequer what is the policy of Her Majesty's Government with regard to the practice of public corporations acting as contractors for other organisations; and if he will make a statement.
    Mr. Patrick Jenkin: The nationalised industries are expected to act commercially.
    Mr. Stoddart: Will the Minister bear in mind that any change of policy in this respect could cause large-scale redundancies in certain nationalised industries?
    Mr. Jenkin: I have no doubt that the sponsoring Ministers for the various industries concerned have that point much in mind.

  HOUSING AND LOCAL GOVERNMENT

    Luton Airport
    Mrs. Shirley Williamsasked the Minister of Housing and Local Government whether he will delay a decision on the proposals for expanding Luton Airport now before him until the Roskill Commission has reported.
    Hon. Members: Where is the Minister?
    Mr. Speaker: Order. This is not the first time this has happened. We can come back to the Question at half-past three.
    Later—
    Mr. Speaker: Mrs. Shirley Williams.
    Mr. William Hamilton: On a point of order. What can you do, Mr. Speaker, to protect the interests of the House from the very grave dereliction of duty by a Minister in the Government, a dynamic, junior, rising Minister who, at the first opportunity, absents himself from questioning on a very important Question, No. 38, for when it was asked he was not in his seat? Would it be in order

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    for that Question to be asked now and for me to move a reduction in that Minister's salary?
    Mr. Speaker: The answer to the second part of that question is "No". The answer to the first part is that I am endeavouring to give the hon. Lady the Member for Hitchin (Mrs. Shirley Williams) a chance now to put the Question, which is according to common practice when a Minister is late.
    Mrs. Williams: Question No. 38.
    The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Paul Channon): May I, on my first appearance at the Box, apologise humbly to the House for my failure to be here to answer the Question put by the hon. Lady the Member for Hitchin (Mrs. Shirley Williams)? The failure was inexcusable and I assure the House that it will not happen again.
    The answer to the hon. Lady's Question is: No, Sir. These proposals are only for minor works which are said to be urgently needed.
    Mr. William Hamilton: You should not have come!
    Mrs. Shirley Williams: May I say, "Better late than never". I am not clear whether it was worth the Minister's coming. As three of the four sites proposed by the Roskill Commission would be close to Luton Airport, why are minor works worth undertaking in this situation?
    Mr. Channon: If major proposals were under consideration, they would clearly have to be looked at in view of this situation, but the current proposals are for the most minor developments, such as car parking space and additional standing space for aircraft and additional office space, which are all urgently needed for the convenience of people using the airport now.

  DEFENCE (MINISTERIAL STATEMENTS)
  Q.1. Mr. Gregor Mackenzieasked the Prime Minister which Minister will be responsible for answering Questions and replying to debates on defence in the House of Commons.
  The Prime Minister (Mr. Edward Heath): The Minister of State for Defence, assisted by the Under-Secretaries of State, as appropriate.
  Mr. Mackenzie: Will the Prime Minister accept that we on this side and, I suspect, many hon. Members opposite, regard the present arrangement as extremely unsatisfactory? Defence is one of the biggest spending Departments and one of the most controversial, yet the Secretary of State hides himself away in the House of Lords. Will the Prime Minister persuade his noble Friend to contest the first by-election available in an effort to come here, like the rest of us, on an elected basis?
  The Prime Minister: There are ample precedents for spending Departments being represented in the other House, and I have complete confidence in my hon. Friend to answer in this House.
  Mr. Biggs-Davison: As the constitution provides for a bicameral system of Parliamentary Government, is it not entirely appropriate that some important Cabinet Ministers should sit in the other place?
  The Prime Minister: Yes, Sir.

  WEST ABERDEENSHIRE
  Mr. Sillarsasked the Prime Minister if he will make an official visit to West Aberdeenshire.
  The Prime Minister: I have no immediate plans to do so, Sir.
  Mr. Sillars: Is the Prime Minister aware that his hon. and gallant Friend the Member for Aberdeenshire, West (Lt.-Col. Mitchell) said on television immediately after the Conservative victory at the election that the Tories would save the Argylls? Will he explain how he will set about saving the Argylls, and, before he answers, will the right hon. Gentleman take note of the election results in Scotland in which the Scottish people accorded the Labour Government's investment grant system higher priority than saving the Argylls?
  The Prime Minister: Our position as regards that regiment was made plain on 15th July, 1968, when we were in Opposition. We are now examining the rundown of units.
  Mr. Healey: But is it not a fact that the Conservatives gave the whole country the impression that they would preserve the Argylls as a regular battalion, but if they propose, as is widely rumoured in the Press, simply to attach the name to a scratch group of irregulars in a drill hall, will not this be regarded by the people of Britain as typical of the Government's attitude to all their election pledges?
  The Prime Minister: Perhaps the right hon. Gentleman had better await the statement.
  Mr. Ross: The right hon. Gentleman is being a little coy. He will be in West Aberdeenshire. If he stops off on his way either to or from Balmoral, will he tell the people of West Aberdeenshire that he still has an interest in Inverurie rather than in a lingering and prolonged tradition of military regiments from Inveraray?
  The Prime Minister: If the right hon. Gentleman, when Secretary of State, had paid more attention to both, he might, perhaps, have been more successful.

  MINISTERIAL SALARIES
  Mr. Arthur Lewisasked the Prime Minister whether he will increase his salary by £4,000 per annum and that of each of this Ministers by 36 per cent.
  The Prime Minister: No, Sir.
  Mr. Lewis: I thank the Prime Minister for that full and expected reply, but is he aware that his compatriots across the river have increased the salaries of their leading officials by these amounts, while the Chancellor of the Exchequer has today said that the Government will attack the wage and salary cost-inflation? Would it not be as well for him to attack the G.L.C. for having done what it has done?
  The Prime Minister: Local government salaries are a matter for the local authorities. If the hon. Gentleman wants to put down a Question about a specific salary, perhaps he will do so.

  CIVIL SERVANTS (VETTING)
  Mr. Liptonasked the Prime Minister whether civil servants responsible for
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  the compilation of immigration statistics are subject to positive vetting procedures.
  The Prime Minister: It has been the practice of successive Governments not to disclose details of the posts to which the positive vetting procedure applies.
  Mr. Lipton: Is the Prime Minister aware that the most serious charges are being made by the right hon. Member for Wolverhampton, South-West (Mr. Powell) [HON. MEMBERS: "Where is he?"] I have given him notice.
  Is not the Prime Minister aware that serious charges are being made by the right hon. Gentleman that enemies of this country have been infiltrated into Government Departments and have persistently and cruelly misled the people of this country by providing false immigration statistics? [HON. MEMBERS: "Reading."] Will the Prime Minister take any action either to substantiate or to disprove these very serious animadversions on the character and integrity of our Civil Service?
  The Prime Minister: If any complaints are made to me or my right hon. Friend the Home Secretary they will be investigated at once. No such complaints have been made. [HON. MEMBERS: "Oh."] The former Home Secretary made exactly the same statement, that he would of course have investigated them. He was quite right. This Administration has complete confidence in Her Majesty's Civil Service.
  Mr. Merlyn Rees: Is it not indefensible at an election time or any other time for a Privy Councillor and self-declared patriot to question the loyalty of civil servants? Should not the Prime Minister think of this matter as Prime Minister and not as leader of his party and have a security investigation straight away?
  The Prime Minister: There is no justification for any kind of security investigation into the Civil Service. No sort of complaint has been substantiated whatever. Every right hon. and hon. Gentleman must take responsibility for his own statements.
  Mr. Molloy: Is not the right hon. Gentleman aware that the entire Civil Service is awaiting his response to these questions this afternoon? [HON. MEMBERS: "Nonsense."] It is not a bit of use hon. Members shouting, "Nonsense".

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  I am sure that the Prime Minister knows better. Will he take advantage of this opportunity to condemn and repudiate what has been said, restore the confidence of loyal civil servants of this country and condemn the vile utterance that was made? The evidence which I sent him for examination—[HON. MEMBERS: "Speech."] This is very important. Will the right hon. Gentleman take advantage of this opportunity and clear the name of men and women whose good name has been foully soiled by a member of his party?
  The Prime Minister: I took the first opportunity of expressing complete confidence in the Civil Service when I opened the Civil Service College on the Friday after I took office, and I have done so again this afternoon.

  YACHT RACE (ATTENDANCE BY CIVIL SERVANTS)
  Mr. Liptonasked the Prime Minister how many civil servants, in addition to the deputy Press Secretary at No. 10 Downing Street, went in their official capacity to the Isle of Wight for the arrangement of Press facilities and other purposes in connection with the yacht race on 27th June last; and what cost to public funds was involved.
  The Prime Minister: The civil servants who were on the Isle of Wight, who did not include the deputy Press Secretary, were those responsible for security and communications arrangements which are normal practice when a Prime Minister is out of London.
  Mr. Lipton: How is it that The Times announced on that Saturday that an official spokesman of No. 10 Downing Street went to the Isle of Wight for the purpose of arranging Press facilities? Does not the Prime Minister agree that there should be a strict demarcation between his personal recreations, which we hope he will continue to enjoy, and his position as Prime Minister? There must be a line drawn, otherwise civil servants are dragged into all kinds of things of a non-governmental nature for which they are not really employed or responsible.
  Mr. Speaker: Order. Questions should be reasonably brief.
  The Prime Minister: Security and communications arrangements are normal. A strict line has been drawn. My Press office was asked to make arrangements to provide facilities for the Press. It in turn asked Fairey Marine, where my boat is moored, to provide them at Hamble, and asked the Island Sailing Club, which was responsible for the race, to provide them on the Isle of Wight, and it did so. There was no cost to public funds.

  REGIONAL PLANNING AND DEVELOPMENT
  Mr. Blenkinsopasked the Prime Minister (1) which Minister has responsibility for regional planning and development area policy;
  (2) which Minister has been given general responsibility for the campaign against pollution.
  The Prime Minister: My right hon. Friend the Minister of Housing and Local Government is responsible for regional strategy as a whole, and for the Regional Economic Planning Councils, while my right hon. Friend the Minister of Technology remains directly responsible for the industrial aspects of regional policy. Normal arrangements have been made to ensure the necessary inter-Departmental co-ordination both on regional matters and on pollution pending the review of Ministerial responsibilities in this field.
  Mr. Blenkinsop: Is not the Prime Minister aware of the deep and understandable anxiety about the matter in the regions? Is he satisfied that we shall now have a voice in the regions to withstand the pressure upon the Chancellor of the Exchequer for promised cuts in expenditure in development areas?
  The Prime Minister: It is because I recognise the deep concern in the regions about this that I am determined to get the machinery right.
  Mr. Michael Foot: Is the Prime Minister aware that his right hon. Friend the Minister of Housing and Local Government has taken his opposition to instant government so literally that he does not even turn up in the House at all?
  Sir H. Legge-Bourke: With regard to pollution, does not my right hon. Friend agree that what is important is that every Government Department should be conscious of the need to guard against it wherever possible?
  The Prime Minister: I agree.

  POST-APOLLO PROGRAMME (BRITISH PARTICIPATION)
  Mr. Dalyellasked the Prime Minister if, when he meets President Nixon, he will discuss the official United States proposal for British participation in the post-Apollo programme.
  The Prime Minister: The Government are now studying the United States Government's invitation to take part in the post-Apollo programme.
  Mr. Dalyell: Has any cost estimate come from the Americans?
  The Prime Minister: No estimates of cost have yet been put forward by the Americans. We have not yet been able to make them ourselves.

  ASIAN IMMIGRANTS
  Mr. Alexander W. Lyonasked the Prime Minister whether he will send a Minister to Kenya and Uganda to enter into consultations about the future quota for Asian immigrants from those countries.
  The Prime Minister: I have nothing to and to what my right hon. Friend the Home Secretary said in the debate last Friday.—[Vol. 803, c. 212.]
  Mr. Lyon: Is it not time that the Government did a great deal more about this problem, or were all those words about compassion during the election campaign simply words? Is it not about time that, in this field in particular, there were deeds to match the words?
  The Prime Minister: Yes, Sir. We all recognise the complexities of this problem and the very difficult human questions involved. I do not in any way rule out personal discussions between Ministers and members of the Governments of
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  the countries mentioned, but it may be that first any exchanges should take place through the normal channels.
  Mr. Richard: Can the Prime Minister help us a little about what his right hon. Friend the Home Secretary in fact said last Friday? I understand that the Home Secretary told us that Commonwealth immigrants were to be treated as aliens for the purpose of entry into this country. Would not it be an extraordinary position if these United Kingdom citizens—not merely Commonwealth citizens, but United Kingdom citizens—found themselves treated in exactly the same category as any aliens?
  The Prime Minister: My right hon. Friend also made it clear that he would go into this question with the Governments concerned, in particular about the United Kingdom citizens.
  Sir D. Walker-Smith: Will my right hon. Friend also see that representations are made to the East African Governments, urging them to take a more liberal and less discriminatory point of view in regard to these Asian citizens, who have a very real and significant contribution to make to the economy of those countries?
  The Prime Minister: Yes, Sir. My right hon. Friend the Home Secretary specifically mentioned that.
  Mr. John Fraser: Since the new Government are to make the law the same for Commonwealth citizens and aliens, will it be possible for Commonwealth citizens to make applications for work permits, which are given much more generously to aliens than to Commonwealth citizens? How soon can they apply for work permits where plenty of jobs are available?
  The Prime Minister: That is a separate question from that with which I was dealing, which is about Asian immigrants.
  Mr. Biggs-Davison: Is not the lack of compassion shown by the Governments concerned making us take very much less seriously their strictures upon the situation in Rhodesia, where the Asian community lives happily and shows no desire to come to the United Kingdom?
  The Prime Minister: That, too, is a separate question.

  SUPPLY OF ARMS TO SOUTH AFRICA
  Mr. Maclennanasked the Prime Minister what consultations he has had with Commonwealth Heads of Government regarding the supply of arms to South Africa.
  The Prime Minister: We are discussing this matter with those involved, including Commonwealth Governments.
  Mr. Maclennan: Is the Prime Minister aware that the speed with which he was prepared to discuss these matters with the Foreign Secretary of the Republic of South Africa compared most unfavourably with his open consultations with the Commonwealth? Is he aware that the Foreign Secretary in yesterday's debate indicated that he was prepared to communicate with Commonwealth Foreign Secretaries after the Government had reached a decision, that this is completely unsatisfactory, and that the decision must be made in the light of those representations?
  The Prime Minister: We are in discussion with the Commonwealth Governments about this. At this stage the discussions are confidential.
  Mr. Frank Allaun: Is the Prime Minister aware that if arms are supplied to South Africa there is great fear at present felt by African peoples further north that the arms will eventually be used against them? [HON. MEMBERS: "Submarines?"] Therefore, will the right hon. Gentleman consider the position of people in Angola, Mozambique and other parts of Africa who may become victims of arms supplied by this country?
  The Prime Minister: That is a factor which we take into consideration.

  QUESTIONS TO PRIME MINISTER
  Mr. Bruce-Gardyne: On a point of order. It may not have escaped your notice, Mr. Speaker, that this afternoon we have managed to deal with 11 Questions addressed to my right hon. Friend the Prime Minister, which is more than double the number regularly dealt with
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  by the Leader of the Opposition when he held my right hon. Friend's position. Would it be in order to congratulate my right hon. Friend on the expedition with which he has dealt with Questions?
  Mr. Speaker: That is not a point of order for me. The fact is that Questions and Answers have been commendably brief.

NORTHERN IRELAND
Mr. Stratton Mills Mr. Stratton Mills (by Private Notice) asked the Secretary of State for Foreign and Commonwealth Affairs, if he will make a statement on the visit yesterday of the Irish Republic's Foreign Minister Dr. Hillery to Belfast.
The Secretary of State for Foreign and Commonwealth Affairs (Sir Alec Douglas-Home): When he called on me on 29th June Dr. Hillery expressed the grave concern of the Government of the Republic of Ireland at the very difficult situation in Northern Ireland. It is natural that he should wish to keep himself informed, but I should have expected him to have consulted Her Majesty's Government in advance if he wished to make a visit. Not to have done so, particularly in present circumstances, is a serious diplomatic discourtesy. His visit has magnified the difficulties of those who are working so hard for peace and harmony in Northern Ireland. I am inviting Dr. Hillery, who is visiting the Chancellor of the Duchy tomorrow on other matters, to call on me.
Mr. Stratton Mills: Is my right hon. Friend aware that this rather ham-fisted action by Dr. Hillery is bound to raise the temperature and increase the tension at this difficult time? Is my right hon. Friend aware that I very much welcome the rebuke which he has today given from the Dispatch Box? I hope that in future Mr. Lynch and his Government will attempt to keep down tension at this difficult time in Northern Ireland.
Sir Alec Douglas-Home: Everybody should try to keep down the tension; that should be the object of all of us. This undoubtedly was an error of judgement.
Mr. McNamara: The words which the Foreign Secretary has just used rather

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than seeking to damp down tension will considerably magnify it. Would it not be better for him to take a more positive attitude towards the Prime Minister of Northern Ireland, rather than the negative attitude which the Prime Minister took yesterday, about the tripartite talks about the situation in the North? Would it not be better to persuade that right hon. Gentleman in Northern Ireland not to take part in certain inflammatory processions over the weekend?
Sir Alec Douglas-Home: Those are matters for my right hon. Friend the Home Secretary.
Mr. Fitt: With his vast geographic knowledge, would the Foreign Secretary recognise that the city of Belfast is in the island of Ireland and that every Irishman in that island claims the right to move anywhere at any time in the borders of his own country? Would he further agree that this visit was the direct result of events last weekend when it became clear that the Tory Government were acting in a biased way towards one section of the community, which naturally brought a reaction from fellow Irishmen and patriots in the Republic of Ireland?
Sir Alec Douglas-Home: I cannot accept the accusation of bias in any circumstances. The hon. Gentleman would do well to take the advice, which I am sure would be the advice of the whole House, that he should assist in reconciliation between the religious divisions in Northern Ireland.
Captain Orr: Could it be represented to Dr. Hillery when the talks take place that there are many people in Northern Ireland who want to see reasonable relationships between the North and the South and a return to the situation where both Governments consult together over things which are in their mutual interest, and that the kind of behaviour which we have now seen sets things back?
Sir Alec Douglas-Home: I am afraid, as I said, that this was an error of judgment, and it has had the effect of making the task of everybody engaged in reconcilliation more difficult, but I hope that this error of judgment will not recur.
Mr. John Mendelson: Would not the right hon. Gentleman agree that, after the sad events of August of the previous year, one of the positive elements in the situation was the good contacts between the Government in London and the Government in Dublin? Is it not important today to say for the record that, whatever may be felt about one particular move, the present Government want to continue with this policy?
Sir Alec Douglas-Home: Certainly.
Mr. McMaster: Would my right hon. Friend confirm that actions of this nature are not in the best interests of the minority in Northern Ireland, who may be deluded into believing that their own unconstitutional and terrorist activities will be supported by the Eire Government and that the United Kingdom Government will thereby be deluded into handing Ulster into the hands of traditional enemies, and that this is prolonging the bitterness and ill-feeling in Northern Ireland?
Sir Alec Douglas-Home: I hope that we need not talk in terms of traditional enemies and other language of this sort, which does nothing but inflame the situation. I hope that the Government of the Republic of Ireland will co-operate with Her Majesty's Government in this way in trying to calm things down in a situation which is extremely difficult. Anybody could so easily make the situation, difficult as it is, almost unhandleable unless he is careful about his language and actions.
Mr. Loughlin: The Foreign Secretary has repeatedly referred to reconciliation. Can he tell the House what evidence there is that the Orange Order wants any reconciliation of any kind?
Sir Alec Douglas-Home: I am concerned only with relationships between Governments. The matters which concern us in Northern Ireland are the matters with which the Home Secretary deals. He has made it very clear that the Government support the reforms which have been set in motion by the Government of Northern Ireland. In that respect I cannot say any more, but I hope that they go forward quickly. That is the desire of the Government.

LUCAS FACTORIES, BIRMINGHAM (DISPUTE)
Mrs. Castle Mrs. Castle (by Private Notice) asked the Secretary of State for Employment and Productivity if he will make a statement on the dispute at Lucas's Forman Road factories in view of yesterday's vote to continue the strike and the imminence of large scale lay-offs in the motor industry.
The Secretary of State for Employment and Productivity (Mr. Robert Carr): 650 members of the General and Municipal Workers' Union have been on unofficial strike since 18th June at two diecasting and plastics factories of the Lucas Group in Birmingham. As a result, 10,000 Lucas employees and several thousands at motor assembly firms have been laid off.
The strikers are claiming an increase of £9 a week. In negotiations before the strike the company had offered increases, according to grade, of up to £3 5s. to come into effect in stages by December. This offer in the company's judgment was in line with the increases already accepted for the majority of its other employees in the company's Birmingham factories, in the main members of the T.G.W.U. and the A.E.F.
Since the strike began, a series of discussions has taken place to try to find a basis for a resumption of work. There have been direct discussions between the company and the G.M.W.U. My Department has had talks with the two sides. Mr. Victor Feather has also kept in touch with the situation.
In addition, the Motor Vehicle Joint Council has held meetings which have brought together the major car assembly firms affected by the dispute and the unions, the position of whose members in the company's Birmingham factories could be affected by the terms of any settlement of the current dispute and whose members in the car industry have been affected by lay-offs.
In these discussions the company has indicated its willingness to negotiate following a return to work with a view to bringing forward the date of payment of the full increase. But it has insisted that any settlement for the employees on strike must be in line with the pay
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of its other employees and indeed negotiated jointly with the two other unions mainly concerned, the T.G.W.U. and the A.E.F.
Following these discussions, the G.M.W.U. has called meetings of the employees on strike and urged them, as it has throughout the dispute, to return to work. At the latest meeting yesterday this recommendation was rejected after a secret ballot by a narrow majority. Following this rejection, the company is today, at the suggestion of the Motor Vehicle Joint Council, meeting all three unions to consider any outstanding claims, including that of the strikers.
In view of the serious threat to employment and production, I very much hope that it will be possible through these negotiations today, which I am following closely, to secure a return to work.
Mrs. Castle: While welcoming the initiative taken by the Motor Vehicle Joint Council and wishing it every success, may I first ask the right hon. Gentleman under whose auspices the secret ballot was held yesterday and what was the difference between the vote and the ballot which was taken in the open meeting of the strikers? Secondly, will he agree that the most strenuous efforts have been made by the union leaders and by Mr. Victor Feather to secure a settlement? Is he satisfied that they have both used their best endeavours to persuade the men to return to work?
Mr. Carr: I would like to pay tribute to the initiative of the Motor Vehicle Joint Council and to the G.M.W.U. which has throughout used its best endeavours and also to the part which Mr. Victor Feather has played. As to the secret ballot, I cannot answer the right hon. Lady precisely. I understand that the ballot, which was rather an ad hoc arrangement, was generally regarded by those who participated as being fair and satisfactory. That secret ballot showed a majority of 13 against returning to work, the figures being 228 to 215. I do not know what the hand count showed except that it was obviously close and was what gave rise to the suggestion for a secret ballot.
Sir G. Nabarro: Would my right hon. Friend have regard to the fact that this particular strike, which went on right

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through the General Election and had its origin even before the election—[HON. MEMBERS: "No."] Yes. As this strike is one of a long series of strikes in the motor industry where disturbances have proliferated in recent years and where demands have been excessive, as is this £9 per week demand, what is my right hon. Friend proposing to do as a medium-term measure to apply himself to these perpetual disturbances and disruptions of production in our most important exporting industry?
Mr. Carr: As a matter of factual record, my hon. Friend is right in that the strike first started on Thursday, 4th June. There was a return to work on Monday, 15th June, but then, unfortunately, the workers came out on Thursday, 18th June, and have been out ever since. As to the general situation in the motor and associated industries, it is indeed extremely serious. We believe that the final revocation of any sort of a statutory incomes policy will do good in improving the atmosphere. We are also convinced, as we have made clear in the Gracious Speech, that a measure providing a more orderly framework for the conduct of collective bargaining is an absolutely essential long-term solution.
Mr. Edelman: Is the right hon. Gentleman aware that the deplorable relations in the motor industry by which piecemeal disputes can put tens of thousands of men out of work is now the subject of grave national concern? Is he aware that the piecemeal negotiations through "Little Neddies" and so on is no longer adequate? Will he now try to call a national conference of all the interests involved to produce some method by which there is an internal discipline within the labour movement in association with the employers and the Government to prevent this catastrophic state of affairs?
Mr. Carr: I fully agree with the hon. Gentleman in drawing attention to a very serious state of affairs. I have certainly not ruled out any suggestions, although I would rather not comment on them today. What I am most hoping for today is that the negotiations going on will lead to a solution of this dispute. The Motor Vehicle Joint Council may go some of the way at least to meet the sort of objective the hon. Member has in mind.
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Certainly its influence in this dispute has been to the good and we have been better off with it than we were without it.
Mr. John Page: Is my right hon. Friend aware of the great sense of relief throughout industry that he is now holding this responsible position? Would he agree with me that the present anarchistic situation in the motor industry would not have existed if the right hon. Lady the Member for Blackburn (Mrs. Castle) and the present Leader of the Opposition had not funked the issue of industrial relations legislation a year ago?
Mr. Carr: Compliments are always pleasant to any of us in the House, however undeserved. I hope that I shall live to deserve them. To solve, as we must solve, the problem of human relations in industry, we must keep away from statutory incomes control. We must also have an orderly framework for collective bargaining, because it is only through the development of independent collective bargaining that in a free society we can have order and participation and sound economic results.
Mr. Hattersley: If the more orderly framework to which the right hon. Gentleman refers includes a legally enforceable contract, against whom would he recommend action in this case—the union leadership, which does not want the strike, or individual men?
Mr. Carr: There will be plenty of time to debate these matters at great length. Let me assure the hon. Gentleman that I am much looking forward to those opportunities. We have made absolutely clear from the beginning that we believe that one of the most important things in the orderly conduct of collective agreements and their keeping is that corporate bodies—the company and the union—should feel fully committed to using their best endeavours to see that agreements entered into are maintained.
Mrs. Castle: Is the right hon. Gentleman really suggesting that in this case the corporate body concerned—the General and Municipal Workers Union—has in any way failed to use its best endeavours to get the men back to work? Does not the statement which he has just made totally jeopardise a peaceful solution of this dispute?
Mr. Carr: No. I have already publicly in the House paid tribute to the fact that the union on this occasion has used its best endeavours, as the same union did in the Pilkington dispute. There are, and always will be, in a free society occasions when there will be strikes, whatever best endeavours are used by employers or unions. This is part and parcel of life in a free society. However, I am sure that the right hon. Lady, of all people, will know from her experience that if management and unions always used their best endeavours there would be fewer strikes than we have been used to recently.

BILL PRESENTED
  HARBOURS (AMENDENT)
  Mr. John Peyton, supported by Mr. Secretary Campbell, Mr. Patrick Jenkin, and Mr. Michael Heseltine, presented a Bill (under Standing Order No. 84 (Procedure upon Bills whose main object is to create a charge upon the public revenue)) to repeal Section 13(1) of the Harbours Act 1964 and impose a limit on future loans under Section 11 of that Act: And the same was read the First time; and ordered to be read a Second time Tomorrow and to be printed. [Bill 6.]
ORDERS OF THE DAY

  DEBATE ON THE ADDRESS
  [FOURTH DAY]
  Order read for resuming adjourned debate on Question [2nd July]:
  That an humble Address be presented to Her Majesty, as follows:
  Most Gracious Sovereign,
  We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.—[Mr. Blaker.]
  Question again proposed.

  ECONOMIC AFFAIRS
  Mr. Speaker: Perhaps it would be convenient for the House if I announced that I have selected two Amendments in the name of the Leader of the Opposition and his right hon. Friends, namely, tomorrow's Amendment on education—
  But humbly regret the policy for the organisation of secondary education envisaged in the Gracious Speech, and foreshadowed by the withdrawal, without consultation, of Circular 10/65, and believe that it will reinforce the system of eleven-plus segregation and thus perpetuate a system which is educationally indefensible, socially unjust and economically wasteful.—
  and Thursday's Amendment on development areas and economic planning—
  But humbly regret the omission from the Gracious Speech of any proposals to maintain the previous Government's policies to strengthen the development and intermediate areas, to maintain and reinforce regional economic planning and to strengthen and modernise the basic industries on which employment in those areas depends.
  So far, 38 hon. and right hon. Members have indicated that they would wish to speak today. Among them are 21 hon. Members who wish to make their maiden speeches. I shall not be able to call them all and, while extending all possible courtesy to new Members, I must be fair to old Members and to the balance of debate. As yesterday, if hon. Members who wish to make maiden speeches will come to the Chair once the debate has begun, I may be able to let them know

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  the likelihood of their being called. I again appeal for brief speeches.
  3.55 p.m.
  The Chancellor of the Exchequer (Mr. Iain Macleod): It is, I think, the wish of the House that we should today debate economic problems. I am very glad of the opportunity to open the debate.
  Perhaps the House will forgive me if, before I turn to a new series of economic debates, I spend about 30 seconds in salute to people who are not with us today. Naturally, all politicians are delighted about every win for their party, and I was delighted that my hon. Friend the Member for Gloucester (Mrs. Oppenheim) won, but I think it right to say that Jack Diamond was a very remarkable parliamentarian and we shall miss his presence from these debates. Although he has only departed down the corridor, my noble Friend who used to sit for Flint, West, and who had a very sound judgment and an astringent wit, will I am sure be missed in our debate. I should like also to mention two more junior Members of the House. I think that Kenneth Baker made a very great impression on our discussions in a very short time. Jimmy Dickens used to lecture the Chancellor of the Exchequer and the Shadow Chancellor of the Exchequer with equal impartiality, and I have no doubt that if he had still been a Member he would have done exactly the same.
  One of the subjects which has been discussed a good deal already in this Parliament is the economy as we, the new Government, find it. Last week there was some discussion about words which other people used in the election. I would prefer to use the words which I used when I was interviewed on "News at Ten" and to let the House judge whether they are a fair summary of the situation as we see it now.
  I was being interviewed by Mr. George Ffitch. He asked whether Britain was
  "heading for a serious economic crisis".
  My reply was:
  "'Crisis' is a word I am reluctant to use about my country…".
  A little later Mr. Ffitch said:
  "Whether you use the word crisis or severe economic difficulty, are we heading for trouble?".
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  I said:
  "Trouble. Oh yes, of that I have little doubt, and I would have thought that if you take the view, for example, of somebody who isn't a Tory, Lord Kearton, who said much the same thing on television, very recently, I think few people doubt this".
  Finally, Mr. Ffitch returned to the question of an economic crisis, and I replied:
  "'Crisis' is a word that we discussed a moment ago and I said I'd prefer serious economic trouble; let's hold it if I may at that".
  Those are the words that I used—"serious economic trouble" facing whatever party had won the Election.
  There is no doubt that by far the most serious problem that we face, not just as a Government but as a country, is inflation. As the Prime Minister said on Thursday in this debate:
  "It is no comfort to this country to say that other countries are suffering from inflation. There may be a country here and there where the level is worse than it is in this country, but these countries have higher levels of growth than we have had and higher ratios of savings. No country is as vulnerable to inflation as we are or depends more on international trade."—[OFFICIAL REPORT, 2nd July, 1970; Vol. 803, c. 88.]
  We must not minimise the gravity of our sickness by proclaiming that others are also infected. The average rate of increase in wages over the past two decades was about 5 per cent. a year. It was lower—3 to 4 per cent.—in the early 1960s, and highest of all in 1951–52 following the boom in prices after the Korean War. But at present, contrary to past experience, we have the highest rate of wage increase for 20 years, although output is stagnating and unemployment remains high.
  Prices have also risen much more rapidly in the last two and a half years. A long-term look at this is, I think, instructive. Between 1958 and 1964 we had an annual rate of increase in this country in consumer prices of 2·2 per cent. Between 1964 and 1967 that rose to 3·7 per cent. I will come back to those figures. Then in each of the years 1968 and 1969 they rose by 5 per cent. In the three months to May 1970, the retail price index was 5½ per cent. higher than a year earlier.
  There is no single or simple answer. The facts that I have given to the House were, for the most part, known to my predecessor as Chancellor in the Budget

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  debate. It was a matter of wide and, I think, justified comment that he passed it over so lightly. But I at least, as Shadow Chancellor, said:
  "The Chancellor, in this most grave matter, has a duty not just of exhortation but of example. The Government are the biggest employers. He ought to proclaim that he will use his influence firmly and openly on the side of non-inflationary settlements."—[OFFICIAL REPORT, 15th April, 1970; Vol. 799, c. 1402.]
  I do not see how any responsible politician of any party can dissent from those words, and I repeat them now as Chancellor. A good example by the Government is followed. Far from such a policy being an attack on the public sector, it is the best protection that public employees have in preserving their position in relation to more militant claimants.
  I turn to a brighter part of the picture—the balance of payments—although we must see this in the context of our heavy external debts. As I undertook to do at Question Time, I should like to put the whole picture before the House.
  We have indeed achieved a very good result in our balance of payments in the last year, although we will be watching with care and some anxiety the next few months' figures in particular as they unroll. As the Leader of the Opposition told us on Thursday, we have had a surplus on current account running at £500 million a year. But the recent improvement, welcome indeed, is an improvement from an extremely grave situation. We still have very large debts to repay. We must still, over the years, rebuild our reserves to a level which begins to be commensurate with the needs of a world trading nation. We have a very large outflow of export credit to sustain, apart from the regular flow of overseas investment, and we have substantial long-term official debts to repay. We have worldwide opportunities to earn a big surplus. But it is imperative that we keep competitive in our costs, and our customers must have confidence that we can deliver the goods, and do so on time.
  This year sterling has been strong for most, although not all, of the time. There has been a surplus in the current balance of payments. Sterling area countries have been earning large seasonal surpluses and their sterling balances held in London have increased as a result.
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  We are now entering the seasonally less favourable second half of the year. The right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) warned in his Budget statement that there might be some temporary reversal of the flow of funds in the second half of this year. I accept that this may be so. After the large inflow earlier, it would not be surprising, because of these seasonal factors, if the reserves were seen to fall in some months between now and the end of the year, even though we continue, taking all the months together, to be comfortably in surplus on current account. If necessary, the normal central banking facilities as well as our reserves are available.
  I want to put this in the context of our external debts. My predecessor announced in his last Budget that short and medium term debts reached their peak at the end of 1968 at £3,363 million—almost exactly 8 billion dollars. By the end of March 1970 they had been reduced to £1,654 million. The House is aware that there has been further progress since, and on this occasion, because I think it right that the House should know at once where we stand at the beginning of the new Administration, I will give the up-to-date figures now.
  In the quarter just ended, the reduction of short and medium term debts was a further £193 million. There are, and will be for some time, pitfalls for both Government and Opposition in figures announced after a change of Government. For example, when my right hon. Friend the Prime Minister gave an indication not only of an increase in the reserves last week, but also of substantial payments, several hon. Members opposite almost burst with delight showing how marvellous was the economy that had been handed to us. A more accurate account appeared the next morning in the Times Business News which said:
  "Britain was able to pay off £63 million of international debts in June and still show a £10 million improvement in the official reserves at the end of the month…But it was only possible because of the heavy inflow of funds into Britain immediately after the Conservative victory in the General Election."
  The result is that at 30th June the total outstanding short and medium term official borrowing was £1,461 million of which £992 million is due to the I.M.F.
  I have given these figures now because everybody should know where we stand

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  today. In future, I propose to follow the practice of previous Conservative Governments, to which the right hon. Member for Birmingham, Stechford announced his somewhat belated conversion, in publishing the figures for outstanding drawings on central banking facilities quarterly in arrears.
  The total debt still to be paid is formidable. The weight of repayment of I.M.F. debt will begin to come on us from June, 1971. We shall, of course, see to it that our obligations are fully met. But the consequences of the heavy borrowings of recent years will be with us for a considerable time.
  We should also—this, again, came into the exchanges at Question Time today—note the position in relation to long term debt which we have to service twice a year in June and December. The Government, after the war, borrowed on behalf of this country, £1,545 million long term, mainly from the United States and Canada. Repayments totalling £550 million were made over the years since 1951. But the sterling total still outstanding is £1,910 million, or £365 million more than the original sum borrowed—because of two Labour devaluations in 1949 and 1967.
  The economy today shows two outstanding features. On the one hand, demand and activity are rather sluggish and unemployment is high compared with the post-war average. On the other hand, there is the strongly rising trend in wages and prices. This is a combination of stagnant production and cost inflation. As Shadow Chancellor, I christened it "stagflation". I cannot believe that even hon. Gentlemen opposite, however they wish to paint this picture, can be complacent about such a situation.
  During the early 'sixties, between 1959 and 1964, g.d.p. rose on average by about 3·8 per cent. a year. The average rate of increase during the years of Labour Government was 2·2 per cent. The difference between those figures comes to many thousands of millions of pounds of lost growth. But there is another point which I said I would return to, because almost the exact mirror opposite is shown in these years. In our five and a half years, compared with five and a half years of the Labour Government, our growth rate was 3·8 per cent.
  508
  and our price rise 2·2 per cent. Their growth rate was 2·2 per cent. and their price rise 3·7 per cent., almost the exact picture in reverse, and one does not need to look much further than that to see some of the difficulties that we are having.
  After devaluation, it was hoped that we would get both a satisfactory rate of growth and an improved balance of payments. We did have reasonably rapid growth in 1968, but the real improvement in the balance of payments came in 1969, and in that year output rose by only about 2 per cent. My predecessor in his Budget, after he had made his Budget proposals, foreshadowed a rate of increase in the economy of 3½ per cent. between the first halves of 1970 and 1971. So far, as I said at Question Time, we have not been living up to that estimate, but only a comparatively small part of the financial year has gone, and unemployment remains high.
  In trying to give a balanced picture I must tell the House that although that growth side so far is disappointing, there are some signs pointing the other way. Industrial production was rising at a reasonable rate in the four months to April and new export orders for engineering goods—a point which the Leader of the Opposition made—in January and April were well up on last year. I conclude, therefore, that although the recent performance of the economy has been disappointing, it would be premature at this moment to take action to stimulate demand.
  There has been a good deal of speculation about an autumn Budget, whatever that may mean, and I answered that at Question Time. Perhaps I could repeat my answer for those who were not here then. In the sense of a Budget statement backed by a Finance Bill, I do not intend, and never have intended, to bring forward an autumn Budget, but I must be free, of course, like any other Chancellor, to take such action as may seem necessary at the appropriate time, and clearly it is more likely, unless the indicators change, that one will wish to stimulate demand rather than restrain it. As the House knows, a whole armoury is available to Chancellors, and some measures can be put into effect overnight. No Chancellor has ever been content to leave his own Budget untouched for a year, much less the Budget of another

  509
  party, and I do not expect to be an exception to that rule.
  I turn briefly to monetary policy. The right hon. Gentleman in his Budget speech said that fiscal and monetary policies are more effective if each works in harmony with the other. It is no part of my quarrel with the previous Administration to question that blinding glimpse of the obvious, but the prospect before us still requires reasonably tight monetary conditions. In particular, this means that I must ask the banks and finance houses to carry on observing the guidance given to them by the Governor of the Bank of England both as to the level and the priorities of their lending. The situation continues to call for the co-operation of the banks and other institutions.
  Sir Harmar Nicholls: I agree with my right hon. Friend's general proposition, but will he bear in mind that for medium and small businesses the present squeeze combined with the levels of taxation may well bring bankruptcy queues which the country may not be able to afford?
  Mr. Macleod: I am well aware of the anxiety in that regard, which is why I phrased my remarks in the way that I did. I said earlier that demand management, which includes the management of monetary policy, is not a matter for one day in a year but for continuous operation.
  The House will want to know the present prospects for public expenditure and my broad strategy for managing that expenditure.
  Mr. Richard Marsh: On the basis of any of the figures which the right hon. Gentleman has quoted, can he say whether there was any justification for the scare about devaluation which the Prime Minister started?
  Mr. Macleod: Devaluation under Prime Ministers of the Socialist Party is a matter of fact. [HON. MEMBERS: "Answer."] It has happened every time, and a distinguished former Minister of the right hon. Gentleman's party was the first to raise this point.
  For this year and next year, 1971–72, the latest estimates show public expenditure running rather below the levels planned by the previous Administration.
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  That is to say that taking a balance of expenditure and taxation together they do not at present exert a net expansionary influence on the economy, but this balance is struck at a point where the absolute levels both of expenditure and of taxation are in my judgment much too high.
  For the period further ahead, running up to 1975, the estimates show public expenditure accelerating to regain the levels previously planned by the Opposition when they were the Government. If I were to permit this to happen I would be committing an annual rate of increase in public expenditure, and in particular a rate of increase in the public sector's direct demands on resources, well above any rate of increase which we have seen in the national output as a whole for many years past. We can, and we will improve on the economic performance of the past six years, but we must not at this stage pre-empt too large a proportion of the increase for the public sector. I have to tell the House that one could not sustain an increase in public expenditure at the rate suggested by the latest estimates without having to impose further taxation. I have no intention whatever of accepting such an outcome.
  The present prospect shows public expenditure in both the short-term and medium-term running at an unacceptably high level and threatening to increase at an unacceptably fast rate. It is against that prospect that I instituted, as my very first task, the radical and searching review of public expenditure mentioned by my right hon. Friend the Prime Minister in his speech last Thursday. That is the essential prerequisite to our plans for lower levels of taxation and higher levels of savings, and I shall lay the conclusions of that review before the House at an appropriate time in the autumn.
  There is one more subject to which I want to refer. We find ourselves faced with a situation in which yearly price increases are either already in prospect or known to be coming forward over a large part of the nationalised industries field. One does not inquire—I do not—how much former Ministers knew of this situation. I am certain that the electorate did not know about it. We said before the election that we should scrutinise very closely all proposed price increases

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  in the public sector and that these increases would be allowed only where there was a proved case for them. We intend to carry out that promise. It is most important for the economy generally that we should take a firm grip on prices in the public sector because of the contribution that a break in the wage-price spiral can make towards the stability of the economy as a whole.
  I do not intend to have what is popularly called a price freeze in the public sector. We do not believe in freezes of that sort. Nobody could be more conscious than a Chancellor of the Exchequer of the effect that deliberately holding down public sector prices can have both on the allocation of resources and on the need of the public sector to borrow from the National Loans Fund. On the other hand, we find it hard to accept that there is not considerable scope for absorbing high costs by increased efficiency rather than by the easier course of simply passing on higher costs through higher charges. So we regard a searching investigation of proposed price increases in the public sector as an essential complement to the thorough examination of Government expenditure on which we are engaged.
  I do not see how anybody, even those who wish to fight the Election all over again—taking together the good features and the bad—taking the balance of payments, but putting it in the setting of most formidable international debts, both long-term and medium-term; I do not see how anybody, looking at the level of unemployment—the worst since 1940; I do not see, above all, how anybody, studying the cost inflation from which we are suffering, could conceivably claim that it is a happy heritage that we have taken over. I could easily hammer this point much further. I could bring forward the league tables in which hon. Members opposite used to delight in opposition. But only the newest Members of this House would fail to be conscious of the fact that the last time a Government changed in this country the incoming Government, after starting responsibly, went on so fiercely to proclaim the enormity of the inheritance that they had that they brought a crisis upon themselves. Because they did that in 1964 is no excuse for my doing it now in 1970.
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  The Leader of the Opposition—then the Prime Minister—had, as an explanation but not an excuse, the size of his majority. With respect, he underestimated the strength of an incoming Government. He had a majority of four, and he secured 5½ years. In 1951 we had a majority of 16, and we secured 13 years. Our majority now is 30. The mathematics are agreeable and uncomplicated; indeed, in modern political times—which date from the time when the Liberal Party, although still a contender for seats in the House of Commons, stopped being a contender for power—for all those 40 years, an incoming Government have never lost the next Election. I thought that hon. Members opposite would like to reflect on that.
  In spite of the difficulties, which are very real—the worst inflation since we last took over in 1951—we are utterly confident that the methods we intend to apply to the economy are the ones which are needed. May I say, in one more digression into history, that in 1951 we made precise proposals about housing—the 300,000 houses. In his Election address the Leader of the Opposition said:
  "The Tory housing target is an electoral trick—a cruel deception of those who are waiting for a house. They know they cannot achieve it."
  But we did—and we have made undertakings this time that we shall fulfil again.
  In the opening main speech of this debate the Leader of the Opposition lectured us on the necessity for our keeping our electoral promises. Look who is talking!—the walking waste-paper basket himself, filled with lightly-given promises and pledges. But we take up precisely this challenge for this Parliament. We are very ready indeed, in this Parliament, to be judged by our achieving again our undertakings, and when the time comes we are very ready to be judged by the country against those undertakings.
  Carefully—indeed, almost pedantically, I read—and I intend now to nail the same colours to the same mast—the key sentences from our manifesto:
  "We will reduce taxation. We will simplify the tax system. We will concentrate on making progressive and substantial reductions in income tax and surtax. These reductions will be possible because we will cut out unnecessary Government spending and because we will

  513
  encourage savings. And as our national income rises, we will get a larger revenue with lower tax rates."
  The electorate has returned to this House a majority of Tory men and Tory women. They now expect Tory Measures, and they will get them. We have put forward our programme for the Parliament in the manifesto and for the first full session of that Parliament in the Gracious Speech. Yes, the promises are made and I repeat every one of them as Chancellor from this Box. We have put forward our manifesto. We are debating now the Gracious Speech. In principle and in substance, in concept and in detail, we will carry out every undertaking we have given.
  4.31 p.m.
  Mr. Roy Jenkins: I should like to begin by congratulating the right hon. Gentleman on his accession to the Chancellorship. He did so to me just over two years and seven months ago, and I warmly reciprocate the kind sentiments which he then expressed. This did not prevent him from launching into acerbity with a good deal of rapidity and consistency, and I may occasionally have to follow him in that respect. Before I do so, I should like to join with the right hon. Gentleman in paying tribute to a former right hon. Member of this House who taught us both a lesson in never launching into acerbity, and that was Jack Diamond, whom we are all very sorry to lose on this side of the House. I welcome what the right hon. Gentleman said.
  There was one difference between now and the occasion when he congratulated me two years and seven months ago. That is that I had to appear before the House approximately 18 hours after taking office. He has had 18 days of respite, but I do not notice that they have produced much in the way of detailed or precise formulation of policy.
  I thought, certainly when in the earlier part of the speech he was speaking as Chancellor, that it was a somewhat chastened right hon. Gentleman whom we saw before the House. In the later part of his speech, he tried to introduce a little Conservative Party conference fervour. I have not often heard a speech from a Chancellor before in which the part that he delivered with most con-
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  viction—and indeed it sounded to me almost the most original part of his speech—was a quotation from a Conservative Party manifesto.
  However, I do not necessarily criticise the right hon. Gentleman for not rushing into detailed formulation of policy. Faced as he is with problems, certainly, but with no approach to a crisis situation, he is wise to look around and consider the advice which he has been given before rushing into new measures. But it does follow from that that there is a sharp contradiction between the attitude which the Government are now taking and the views which right hon. Gentlemen put forward during the election campaign—and in two respects. I want to deal with one aspect first and with the other towards the end of my speech.
  The Chancellor, I thought, seemed almost to be dissociating himself from the Prime Minister rather early in the life of a Government, when he dismissed quotations of what this or that person had said about something or other in a most disparaging way. When I asked the Prime Minister last Thursday what had happened to his national emergency, he replied that he had been quoting from my right hon. Friend the Member for Coventry, East (Mr. Crossman). He was doing no such thing, and by saying that, I am absolutely sure inadvertently, he misled the House. My right hon. Friend never used that phrase or either of the words in it: nor was he ever alleged to have done so. The phrase was the Prime Minister's own. He was responsible for it, he made it up and used it himself, and he blazoned it forth during the election campaign—the phrase, "national emergency" and his talk about crisis—
  Mr. William Hamilton: Honest Government.
  Mr. Jenkins: We should have a clear statement from him now as to whether he believes that there is or is not a national emergency confronting this country. Well, I see that the right hon. Gentleman accepts that he was wrong in saying that he was quoting my right hon. Friend: he does not challenge that. He must also, therefore, accept that the phrase was his own, used and blazoned throughout the country—[Interruption.] I would not go so far as to say that—
  Mr. William Hamilton: Oh, I would.
  Mr. Jenkins: I do not believe that the right hon. Gentleman meant to mislead the House. I think that the Prime Minister inadvertently believed that he was quoting my right hon. Friend. He was not. He used the phrase himself, he blazoned it throughout the country, it is on the record and it is not good enough for a Prime Minister to leave this uncertainty as to whether or not he regards there as being a national emergency.
  The Prime Minister (Mr. Edward Heath): Will the right hon. Gentleman kindly state where I said that there was a national emergency?
  Mr. Jenkins: The Prime Minister used the pharase himself, I think I am right in saying, at Portsmouth, on the evening of 5th June. He used it—this is a very old trick—in an interrogative form. He said, "Are we heading for a national emergency?" The Prime Minister is very anxious to present himself as an honest Prime Minister and as the provider, as he calls it, of a "new style" of Government. It is not good enough to say, "I just used it in an interrogative form; I did not mean anything by it". If he wants to be clear and clean with the House and the country—is there or is there not a national emergency?
  The Prime Minister: Throughout the election campaign—I have all the quotations here— I asked the present Leader of the Opposition, in connection with the doctors' award, whether there was or was not a national emergency, because, on the 1966 decision, they refused to pay the doctors on the grounds that there was a national emergency. On this occasion, they also refused to pay the doctors and I asked the right hon. Gentleman constantly whether there was or was not a national emergency. The former Chancellor should be more careful about his choice of words.
  Mr. Jenkins: The Prime Minister knows that I am being complete careful and quoting precisely what he said. When he asked me to quote him, I gave him the place, the date and the quotation he asked for, as he knows quite well—
  The Minister of Public Building and Works (Mr. Julian Amery): What was it?
  Mr. Jenkins: I have just given it. It the right hon. Gentleman would listen he would know that I gave it about two minutes ago. If he cannot listen, I am not going to repeat everything for him. I gave the quotation, as the Prime Minister knows, and it is clear that the Prime Minister deliberately raised the scare-mongering phrases "national emergency" and "crisis". We knew that by raising it, asking it in an interrogative form, he would get the publicity he wanted, now he runs away from facing up to it. I will in a moment give another example of this sort of technique. There is not and never has recently been the trace of an emergency; right hon. Gentlemen knew that all the time and they know it now. Nor can the Prime Minister begin to claim that he thought there might be one before the election but discovered that there was not one when he came to office Consider what he said last Thursday:
  "No one outside the House, either at home or abroad, will be surprised, because the situation is as the economic indicators which have been published showed it to be."—[OFFICIAL REPORT, 2nd July, 1970; Vol. 803, c. 85.]
  Thus, the right hon. Gentleman cannot claim now—and cannot claim at any other time—that he has suddenly discovered things to be either better or worse than he expected. Nor, on his own statement, are there any alibis for the future. He knew the full position, so he said on Thursday, when he was still trumpeting his catalogue of election promises.
  Then there was the Prime Minister's unprecedented, totally unwarranted and deliberately scaremongering statement about the probability of another devaluation. [Interruption.] That was the least creditable of all the episodes in the election campaign. I do not find it any the more creditable—
  The Prime Minister: Read it.
  Mr. Jenkins: I do not find [HON. MEMBERS: "Read the quotation."] I will certainly do so, but my speech is bound to take longer. [HON. MEMBERS: "Read it."] The Prime Minister said:
  "The danger in complacency"—
  he had just accused us of complacency
  "now is, therefore, that it will mean a further four years of austerity which, in all probability, will lead, as happened in the aftermath of the 1966 freeze and squeeze, to a further devaluation".
  The Prime Minister: Hear, hear. [Interruption.]
  Mr. Jenkins: It is no good hon. Gentlemen opposite thinking that merely by cheering and counter-cheering loudly they can get away from awkward phrases. I used the phrase "the probability of devaluation" and I was asked to quote the whole passage in which that phrase appeared. I have done so and that shows that I was justified in quoting that phrase and it shows that that is what the right hon. Gentleman said.
  The Prime Minister: What the right hon. Gentleman has read out was the theme throughout the election; that it was the complacency of the present leader of the Labour Party which would lead to a further four years of indecision, which would then lead to devaluation, and that is right. [Interruption.]
  Mr. Jenkins: As I said before, it was unprecedented, unwarranted and deliberately scaremongering for the right hon. Gentleman to have used the word "devaluation".
  I do not find this incident any the more creditable in view of the most extraordinary couple of paragraphs which I read last week in the "Men and Matters" column of the Financial Times. That paper stated on 1st July:
  "It is worth noting"—
  referring to this document containing the devaluation statement—
  "that the whole matter was a mistake. What happened was that Tory Central Office decided that it ought to put out a reasoned and rather academic written statement about the economic situation to prove that it had an alternative strategy on inflation".
  I can see that that needed proving—and, of course, two days before polling day was a very natural time to choose for rather academic statements. I continue the quotation:
  "But it was thought to be of such purely technical interest, especially to the political and lobby correspondents who attended Mr. Heath's Press Conference, that it was simply handed out at the end, and Mr. Heath made no reference to it."
  We know how academically and technically the Tory Press treated the matter. "Devaluation with Labour: That's Heath's Warning" said a Daily Mail banner headline the next morning. I am sorry for the right hon. Gentleman that
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  Lord Rothermere should have been so insensitive as to treat his academic and technical essay in such a way. The fact of the matter is that there never was and never has been a question of a national emergency, and the right hon. Gentleman knows that perfectly well.
  The Prime Minister: As the former Chancellor of the Exchequer has made that allegation, perhaps I should clear it up. This statement was put out with my full authority after discussion with the Chancellor of the Exchequer that morning. We took full responsibility for it. It was a long statement and it is not our tradition to read out such long statements at Press conferences. It was given with full publicity and with our full authority.
  Mr. Jenkins: I think it is right to say that most of it was read out, but the small bit relating to devaluation was not. The right hon. Gentleman rightly takes full responsibility for it, but I still say that it was an unwarranted and discreditable statement. The balance of payments position is very strong, and unless measures to dissipitate it are taken, the position will, I believe, remain so. It is, of course, far stronger than the May trade figures taken on their own indicate—although even those, without any allowance for special factors, showed us in continuing surplus.
  The Chancellor of the Exchequer laid down a tight rule for himself at Brighton last October when he said:
  "I have always refused to comment on any one month, however splendid or disastrous it may be."
  He was, needless to say, speaking after a figure of particular splendour. However, he did not stick to his rule. On 15th June he said:
  "Today's trade figures explain why we are having an election now".
  That remark would make sense only if the May figures were the beginning of a steadily worsening trend or if the June, July, August and September figures were to be, on average, the same or less good than the May figures. If the right hon. Gentleman believes this, perhaps he will say so. We will see in the autumn. I believe that the reverse will be the case. And if I am right, then his remarks not only run directly counter to the rule he laid down, but are also, in themselves, quite unjustifiable. What he really meant

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  in October was, "I never comment on good figures under a Labour Government." No doubt in future, when the occasional, inevitable, bad months come along, he will then be able to remain silent and give a sort of spurious symmetry to his rule.
  Even with these occasional bad months, the underlying trend should, I believe, remain very good. Engineering order books, a crucial sector of our exports, have recently reached record levels, which suggests that we have so far preserved our competitive position abroad pretty successfully.
  The most pessimistic independent survey which I have seen recently—that in the Sunday Telegraph two days ago—foresaw a current surplus of £450 million for 1970 and £300 million for 1971. That is about as far off crisis as it is possible to imagine.
  On the contrary, it is by far the best inheritance that any new Government have received in the whole of the postwar period. We will judge by how the Conservative Government use it, both in the development of the economy and in the advancement of social justice.
  I come to the argument as to whether in some other way we are weaker this summer than in the summer of 1964. This, as I understand it, is based on the existence of the £1,450 million approximately—the new figures given by the right hon. Gentleman today—of short and medium-term, largely medium-term, debt. This must be seen, first, in relation to the improvement of almost exactly £2,000 million which we have now achieved in our reserve and debt position since the beginning of 1969; and, secondly, in relation to the difference between the stronger balance of payments performance and prospect of today and the staggering and mounting deficit of 1964.
  Let us apply a test which the Prime Minister himself laid down last Thursday, when he said:
  "I have found that the rest of the world knows the truth."—[OFFICIAL REPORT, 2nd July, 1970; Vol. 803, c. 77.]
  What is thought by the rest of the world, and particularly by those most concerned with this matter? On 4th June Dr. Emminger of the Bundesbank was quoted in The Times as saying that he
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  had no doubt that the £ was much stronger than in 1964–5. He said:
  "Fundamentally, the British economy has found a new equilibrium and British industry especially has become sufficiently competitive abroad."
  Dr. Ossola of the Bank of Italy said:
  "The pound is certainly stronger than five years ago because the British economy is certainly stronger."
  M. Schweitzer said a little earlier:
  "Britain's economic position has moved to a stronger and more stable basis. The I.M.F. inspection team, which visited London in early May, had reported a very clean bill of health."
  Mr. Peter Hordern: Can the right hon. Gentleman tell the House when the I.M.F. team visited the Government in 1964?
  Mr. Jenkins: I have no idea of the relevance of this question. [Interruption.] I was quoting the direct comparison made by two of the most prominent European central bankers about the strength now and the position in 1964. I was quoting what Mr. Schweitzer said about the visit of the I.M.F. inspection team, and I should have thought that the Prime Minister, who very much wanted us to argue the people abroad always know the truth, would be very glad to have these comments, if he had not already seen them.
  I therefore say to the Prime Minister, "By all means let us accept that people abroad know the truth and let us take due note of what they say." Every informed person abroad believes that as a result of the progress in the past 18 months our debts are now wholly manageable, and it will certainly not be in the interests of the country for the Government to propagate any contrary view. I am sure that the Chancellor of the Exchequer will take that very much to heart.
  There is one other aspect of this on which I found the Prime Minister's argument last Thursday a little surprising. Despite the remaining medium-term debt, our total net asset position abroad on public and private sector account combined is better than it was in 1964. "Ah," the Prime Minister says, "but you cannot count the private account against debt." As the Home Secretary once said, "That's a rum one." It is a

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  particularly rum one from the Conservative Party, and it is particularly appropriate to quote the Home Secretary, because he has been telling us, year in and year out, that it was unreasonable to count capital account deficits—that they did not really count, because they were building up Britain's assets abroad. The Prime Minister cannot have it both ways.
  There were other sources of weakness which the Prime Minister mentioned and, indeed, which the Chancellor of the Exchequer today strove to identify, and I want to mention one or two of them.
  The Chancellor of the Exchequer mentioned, and so did the Prime Minister, the level of unemployment and the pace of industrial activity. We would all like to see the level of unemployment go down—it is too high—but the key to doing this on a healthy basis that will stick is to get a better balance between the different regions. We will judge the Government's policies in this respect as it unfolds, but all the indications so far are that their regional policy will be a great deal less determined and effective than ours.
  What is the future of R.E.P. and investment grants with their significant differential in favour of development areas? And, more immediately, what is the future of Upper Clyde Shipbuilders, the yard at Jarrow, and of Cammell Laird? Is Government help there to be axed? It will not be much consolation to the workers who lose their jobs, or much help to the unemployment problem, to be told that this and similar help may be balanced in the long run by firms, if they make profits, being allowed to keep a little more in the long run. These points will be developed later this evening by my right hon. Friend the Member for Bristol, South-East (Mr. Benn), and during the debate on Thursday.
  On the general level of industrial activity there is certainly room for some pick-up, but the great question is: is it already in the pipeline or not? This is always a difficult question, and one on which the Chancellor of the Exchequer will have to use delicate judgment.
  The right hon. Gentleman will not forget that the Budget changes came into operation last weekend and will mean £200 million extra purchasing power from now on, with approximately £50
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  million of it, because of the backdating, in this week alone. He will also have seen the May retail sales figures which indicate, although they do not prove, because of monthly fluctuations, that consumption has already been picking up quite strongly. He will perhaps also have seen the Sunday Telegraph business forecast which was convinced two days ago that output was now rising close to the underlying productivity trend and, therefore, near to my Budget forecast. These tendencies could well accelerate in the next few months. He will have to take all this into account.
  The Chancellor made a lot of price inflation. I listened to him with attention on the subject this afternoon. He was against it, but most people are against sin. But he did not give us any precise idea of how he intended to deal with it, or any precise timetable of when results might be expected. I found that one of the most surprising parts of his speech was when he quoted his own speech—he does that, as we all do—on the second day of the Budget debate just under three months ago. I found that surprising, and had he not quoted it I should have done so myself. This was when he firmly told me to take an especially tough line as Chancellor of the Exchequer with wage and salary settlements in the public sector—
  Mr. Iain Macleod: Because this is so important, would the right hon. Gentleman use my actual words? [Interruption.] It is not an unreasonable request, with respect. What I said was that the Chancellor should use, and should be seen to use, his influence on the side of non-inflationary settlements. Does the right hon. Gentleman disagree with that?
  Mr. Jenkins: I will do better than the right hon. Gentleman. I will use his actual words, which he did not, for the very good reason that he did not have them in front of him. I have them because, as I have said, if he had not quoted them I should have done so. The right hon. Gentleman then said:
  "The Chancellor, in this most grave matter, has a duty not just of exhortation, but of example. The Government are the biggest employers. He ought to proclaim that he will use his influence firmly and openly on the side of non-inflationary settlements. That is a duty that will sometimes mean saying 'No' and meaning 'No'."—[OFFICIAL REPORT, 15th April, 1970; Vol. 799, c. 1402.]

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  In other words, what he meant then—it is certainly the natural meaning of what he said then—[Interruption] I am developing an argument to the House, and I propose to develop it in my own way without help from the other side. In other words, his view then was that the Government's battle against wage claims should be joined primarily on the public sector. His words could have had no other natural meaning.
  Since then there has been one, and only one, major test case in the public sector—doctors' pay. What the Labour Government agreed to is well know—30 per cent. for junior hospital doctors, 15 per cent. for the rest, and a reference of the remainder to the P.I.B. I think that that was a perfectly fair and generous settlement. If anything, it verged on the side of over-generosity. Yet the Chancellor—not of the Exchequer but of the Duchy of Lancaster—immediately became extremely excited when it was announced and denounced the decision as "wholly without justification". And the Prime Minister joined in within 24 hours. So, at the very first opportunity of a little vote-catching, the brave new tough public sector wages policy which the present Chancellor of the Exchequer had proclaimed on 15th April crumbled completely in the hands of the Conservative Party.
  What has happened since? It is fairly obvious from what we have read in the Press that the P.I.B. had prepared a draft report recommending a much smaller award than did Kindersley. That does not surprise me in the least. I thought that the Kindersley Report was unconvincing and logically inconsistent. So what do the Government intend now? Do they intend to pay the full 30 per cent., or will they find a compromise? Thirty per cent. would certainly be grossly inflationary, both in itself and in its repercussions.
  But, in a sense, the argument for paying less than that but more than we would have done, and more than the P.I.B. would have recommended, is even weaker. It could not even be defended on the ground, which I do not accept, that the Kindersley Report is sacrosanct, and it certainly could not be defended on the ground of being non-inflationary. The fact is that the Chancellor's policy, as stated in April, was completely undermined by the vote-hungriness of his
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  colleagues. He now has no policy here, and he wisely had nothing to say about the doctors in his speech this afternoon. If the Chancellor thinks that the doctors—one of the highest-paid groups in the public sector—can be given a very generous settlement and then he can go for an especially tough policy for other groups in the public sector, he is making a very big mistake. It will not work and should not work because it would be a thoroughly unfair policy.
  I come to my last major point. Where do we stand now on the Chancellor's proposal for, indeed promises of, tax cuts? I do not mean merely from a time point of view. What is the basis on which he intends to proceed? From what he said this afternoon it appeared that they were to be balanced by public expenditure cuts. It is quite clear that for the purposes of the election campaign the Prime Minister intended no such thing. In the long statement to which we have already referred, which he handed out on 17th June, he said when dealing with the alternative to what he regarded as the evils of Labour Government policy:
  "But there is a very real alternative which ought to be pursued immediately. That alternative is to break into the price/wage spiral by acting directly to reduce prices. This can be done by reducing those taxes which bear directly on prices and costs, such as the selective employment tax, and by taking a firm grip on public sector prices and charges such as coal, steel, gas, electricity, and transport charges and postal charges."
  That, he said, would "at a stroke" reduce costs and prices, increase production and reduce unemployment and he added that
  "it would mean accepting a reduced Exchequer surplus".
  I do not accept the assumptions of his argument. From the point of view of inflation itself, the general balance of the economy is, in my view, at least as important as direct impact on prices, and it is certainly crucial to the future of balance of payments. Moreover, if the public sector surplus is to be substantially reduced—and of course any artificial holding of nationalised industry prices would do this just as much as fiscal changes—what are to be the balancing items to maintain an effective monetary policy of which the Prime Minister certainly appeared to be an adherent on Thursday?

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  Is bank lending to be further restricted or are interest rates to be allowed if necessary to go higher in order to sell more gilt-edged to the public? This is what monetary policy involves, and I assure the Chancellor that he will have a most difficult task in squaring it with the expectations of the C.B.I. and the hon. Member for Peterborough (Sir Harmar Nicholls) that it will cure the liquidity problems of companies.
  But what is of primary interest here are not my assumptions but the assumptions of the Prime Minister and the Government. If these are that inflation should be attacked by tax reductions within the Budget surplus, why are we waiting? Why has it not been done, in the Prime Minister's phrase, "at a stroke"? If it is right to do it at all it must be right to do it now. There is no possible argument for waiting until the autumn or even next spring to attack prices in this way. Or is it the case that as recently as the Tuesday before the election the Prime Minister was selling a false prospectus and he and the Chancellor now know that it is a prospectus which cannot be carried out?
  If the proposition now is, what I understood it to be although it was put a little vaguely by the Chancellor this afternoon, that tax reductions can be made only to the extent, broadly speaking, that public expenditure is reduced, that of course is a totally different proposition. Reducing public expenditure is obviously an exercise which will take time and a lot of trouble as well. We shall want to examine very carefully where the cuts are to be made. Some of them, on housing subsidies, agricultural support, charges for various social services, if they were involved, would have exactly the opposite effect on the cost of living from the programme put forward by the Prime Minister on that Tuesday before the election. It would be a prospectus not merely abandoned but stood on its head. Other cuts could have a most damaging effect on the whole fabric of the social services. Others could be gravely injurious to the whole structure of regional policy.
  I am of course in favour of public expenditure discipline. We applied it very firmly during the past few years and kept consistently within our targets, but I am most emphatically not in favour of
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  indiscriminate targets. Nothing is more illusory than the crude view that one can maintain and advance tolerable conditions of civilised living in an advanced industrial society without high and rising levels of public expenditure.
  We shall therefore want to examine any Government proposals for cuts in the greatest detail, considering both their social and economic implications, and we shall want to see who is to suffer from the cuts and who is to benefit from the taxation remissions. There will of course be some remissions. Right hon. Gentlemen opposite are far too heavy with commitment to do otherwise, but I doubt if they will come up to expectations. I said at the beginning of May that what we would see if a Conservative Government were returned would be some reneging on promises, but just enough attempt to keep them to do considerable damage to the economy. I have no doubt that we will see the reneging. We are indeed already seeing it. I profoundly hope that we shall not have the damage to the economy as well.
  5.8 p.m.
  Mr. Carol Mather: It is with some trepidation that I rise to make my maiden speech following two such illustrious right hon. Gentlemen. Hon. Members will at once connect the name of Esher with that of Sir William Robson Brown, the former hon. Member for the constituency. He had friends on both sides of the House and served his full span of 20 years as a Member. He had his full share, as many other hon. Members here today have had, of personal success and personal misfortune. He liked to call himself a man of the people, and he was, indeed, a good constituency man. He looked after the interests of his constituents with great care. He was also a man of the people because he rose directly from the shop floor in the steel industry to the boardroom. Many people consider that enough for one lifetime and something of which one can be proud.
  Apart from that, however, he had a second career in this House in which much of his work was done behind the scenes. He was assiduous in fostering good industrial relations, for which he worked long before it became fashionable. He worked and campaigned successfully

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  for the rights of old-age pensioners and was also a great champion of the young. I am sure that his closest friends will testify to the fact that he was a generous and warm-hearted man who had a soft spot that was not hard to reach. He was a man with the common touch. He made his own way in the world and was proud of it and his type is becoming increasingly rare, so much more the pity.
  Much has changed in my constituency of Esher since the father of my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) represented it. Now we have every environmental problem of the age. Our rivers, which were once a source of pleasure, are now a menace when in full flood and our common lands, once a source of recreation, are now threatened by link roads and motorways. Our schools, of which we were once proud, are now inadequate following the population explosion. Even our peace of mind is disturbed by the latest menace—the insidious menace of aircraft noise. We have many problems of this sort, but we are proud to live in Esher and we would like to keep it as it is.
  The problems of the environment are among the greatest problems that we shall have to face in the coming years. There are great clashes ahead—we have seen some already in connection with the third London airport and the London ring roads—between economic requirements and ordinary human needs. This is like the meeting of the immovable object and the irresistible force. In this conundrum which we shall increasingly have to attempt to solve is enshrined the secret of the human race.
  Like my predecessor, this is my second career. My first career was in the Services, in which I served 22 years in war, in peace and in cold war, in many different places, and in many different capacities. Occasionally I hope to speak for that body of men who have no constituency where they live. Their constituency is the sands of the Gulf or the jungles of Malaysia, or even the streets of Belfast. But all hon. Members will agree that their true constituency is in the hearts and minds of those particular hon. Members who have their interests at heart.
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  The main industry in my constituency is the aircraft industry—the British Aircraft Corporation at Weybridge, which employs 7,000 people. I believe I am technically correct in regretting that the Gracious Speech makes no mention of the aircraft industry. In my constituency we are proud to have the foremost and finest airframe manufacturers in the world located in our midst. In a way, it is a bit of a love-hate complex, but once the aircraft are up in the air we wish they would go away.
  Looking at the present problems of the aircraft industry, we are in one of the periodic troughs which it reaches. Most of the existing projects are off the production line and the new projects have not yet started to come on to it. At the same time, our exports of aero-space materials have been rising in recent years, because of the initiatives 10–15 years ago. However, because of the lack of initiative in the past five years, plus many sad cancellations, no seed corn has been sown and there are no crops coming up in the aircraft industry. Any farmer knows that once the winter is past it is too late to put down any winter wheat and, if the spring is past, it is too late to put down spring seeds. That is the position in the aircraft industry today. There are no crops coming up. The men who are waiting to harvest these crops are being laid off because there is no work for them to do, because the land is barren.
  There is of course the Concorde. This is rather slow in germination. It is certainly not a money spinner, but it is essential if we are to keep in the aero-space race. There is also the BAC 3–11 and its associated Rolls-Royce aircraft engine, about which decisions are now long overdue. The fate of the aircraft industry, both on the airframe side and on the engine side, hangs on these decisions. I hope that they will not be long delayed.
  Without wishing to be controversial, when we resume our trade with South Africa dare anyone say that the sale of the Buccaneer, Nimrod and Harriers will not be a significant factor in getting the aircraft industry back on its feet again? The last five years have indeed been a sad story. There have been cancellations. The design teams have disintegrated. Technical skills have been dissipated.

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  Many people have gone to America through the brain drain. I believe that the aim of any Government towards the aircraft industry should be the export of aircraft and not the export of men.
  Finally, another problem in my constituency directly arising from the aircraft industry is the problem of aircraft noise. Many petitions have been signed. Much evidence has come forward from schools, from nursing homes, from the parents of young children, and from our own ears and eyes. Official statistics say that the noise is lessening, but we who live there know that it is getting worse, so there must be something wrong somewhere.
  We all know that aircraft must fly. We want our aircraft industry to prosper, but not to the absolute detriment of human condiitions. The book, "The Silent Spring", written by Miss Rachel Carson several years ago, put forward the theory that the bird population was doomed because of the increasing use of pesticides. Now we cannot even hear the birds, let alone killing them off. We cannot wait until the next generation of aircraft comes along so that we can make their engines more silent. A substantial and immediate alleviation is required. We hear much about collisions in the air and the dangers thereof. There can be collisions on the ground between people and between those who fail to realise that they are only human.
  5.16 p.m.
  Mr. D. Reed: I am delighted that I have succeeded in catching the eye of the Chair so that I can make my maiden speech in this debate, because it was on the subject of the economy, particularly the policies put forward by right hon. Members opposite for handling the economy, that my constituents voted. The fact that they returned me with a majority of close on 13,000 shows what they think about those policies.
  I was elected to represent Sedgefield in County Durham, a constituency which for 20 years was represented by Joe Slater, a gentleman who has gone to serve in another House, where his contribution will be just as great as the contribution he made here. Joe served this House well for 20 years. People here know him. He served the Government well during the time he was a Minister. Above all else, he served the electorate of Sedgefield
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  well, which is, I believe, why he was returned so many times.
  To me, the Sedgefield constituency is part of a very special area of Britain. It is part of the south-east corner of County Durham, part of the world which I believe is the power house of Britain. It has been so for most of this century. It was on Durham coal that Britain's industrial prosperity was built. The contribution that the Durham miners and their counterparts in other parts of the country made in two world wars was every bit as great as that made by any soldier, sailor or airman.
  My constituency, like that of the hon. Member for Esher (Mr. Mather), is changing. Sedgefield has seen great changes in recent years. At one time almost every member of the community looked to the mining industry for his livelihood. Now only one pit is operating. In the place of the pits, new industries, new housing estates and new industrial estates have sprung up. One of the largest chemical complexes in Europe lies within the boundaries of my constituency.
  In other parts there are new housing estates and new industrial estates which were built by far-sighted local authorities which were quick to see the demands of industry and to provide the facilities in advance of their being required.
  The influx of new industry into my constituency has shown a remarkable increase during the last five years. This is the result of the measures taken by the Labour Government in furtherance of their development area policies. I accept that not enough was done, because this level of spending on development areas did not go on long enough. This is why I am very concerned, on behalf of my constituents, about the attitude of the present Government towards the development areas.
  The Gracious Speech refers to stimulating long-term growth in the less prosperous areas. This is fine. We need long-term growth, so long as right hon. Gentlemen opposite do not forget that we also need short-term growth. Unemployment is a question of now—not when right hon. Gentlemen opposite graciously get round to considering the future of men who are out of work.
  During the election campaign the people in my constituency were given the impression that their future would be

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  taken care of on a great wave of industrial expansion which would happen when the Conservative Party took office. It is, therefore, somewhat strange that the first announcement following the election is that of a factory closure in the heart of my constituency. I refer to the closure of the Crane factory on the Aycliffe industrial estate which has thrown 150 of my constituents out of work. It is a factory which should be well known to the Prime Minister because he opened it in 1963 during his brief term of responsibility for regional development.
  What is even more strange, in view of the present Government's apparent concern for the development areas, is that this closure appears to have been brought about by their election victory. In the last two months there have been rumours that this factory might close. The factory had been doing sub-contract work and not its own job of making central heating equipment. Just before the recent election, a notice went up on the factory notice board stating that the shortage of orders might be improved following the result of the General Election. Yet within a fortnight of the result came the announcement that the factory was to be closed. I do not think that is an indication of industrial confidence in the policies of right hon. Gentlemen opposite.
  What concerns me is how many more firms are in a similar position. How many more firms are on the verge of profitability but are not fully committed to expanding in development areas and might pull out if the level of Government aid dropped?
  I spent three years working for the North-East Development Council, where I acted as a salesman for the North-East Region. I have some experience of making Government policy work. The policy which I believe the present Government will follow will be the introduction of investment allowances, as opposed to investment grants, as a means of attracting industry. We do not know yet; there has not been a clear statement, as far as I can see. But investment allowances work only if a firm is making a profit, and that is not likely during the early years after a move into a development area. Making a move is
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  an expensive business. Profit does not come overnight, and if a firm is not making a profit there is nothing against which it can offset the allowance.
  Investment allowances affect a company's profit figure as a whole. They go back to headquarters and are taken off the profit-and-loss account of the company as a whole. They are not directly related to the size and the nature of the development area factory. That is the second thing that is wrong with investment allowances.
  The third is that they encourage the establishment not of the lock, stock and barrel transfers of factories, which is what we want, but of branch production units which are the most vulnerable to closing down if a firm's order book should suffer a setback. This is what seems to have happened in the case of this recent closure in my constituency.
  If the proof of any policy is the effect that it actually has, I think that the current number of jobs in prospect for the Northern Region—something like 42,000 as a result of the Labour Government's direct investment grants—compares favourably with the period in which we had a system of investment allowances when the total number of jobs even in a record year reached only 15,000.
  Which is the better inducement? Which is the more positive way of attracting new industry? The answer is obvious. I make this plea to the Government: whatever their policy is to be on development areas, will they please make up their minds soon and make an announcement, for any further delay will undermine industrial confidence in the whole concept of development areas. What is more important, it means that the unemployed among my constituents will have to wait while the Government graciously decide their future.
  5.25 p.m.
  Mr. R. H. Turton: I am very luckly to have two hon. Members to congratulate on their maiden speeches. My hon. Friend the Member for Esher (Mr. Mather), I thought, showed great promise in the choice of his phrasing when, in Conservation Year, he dealt with environment and aircraft noise. I am certain that when he takes part in later debates, no longer bound by the rules of keeping away from controversy,

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  he will be an extremely valuable addition to this House, particularly as he told us that he intends to fight the cause of the Servicemen. I am sure that he will be a very valuable recruit to that cause.
  The hon. Member for Sedgefield (Mr. D. Reed), I though, was engagingly clever in skating around controversial issues with a non-controversial skill. I am sure that we shall welcome his contributions even more when he feels that he can use his controversy, as I am sure he will in the next four years, to its full capacity.
  Both hon. Members will have had a good object lesson in the use of controversial debating from the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) who is probably one of the best debaters on the other side of the House and who was in very good form this afternoon. I rather regret that he did not use more of his vigour in dealing with the problems of the economy instead of trying to have a post mortem on why he and his party lost the election. It is a mistake in this debate on the Gracious Speech always to go back. We ought to look at the problem which faces my right hon. Friends in the Government and to see how, for the nation's sake, they can be put right.
  The right hon. Gentleman engaged in some logic chopping whether we were facing problems or a crisis, or whether we were heading for a national emergency. This seems to me to be a battle of words. I am sure that all of us, whatever our party, are very concerned about the country's economic position. We have a stagnant rate of growth. We are at the bottom of the league table for the rate of growth in the last few years, compared with any other industrial nation. We have a very heavy toll of unemployment—far too heavy for the present day—with an inflationary spiral that was as high as 1s. 6½d. in the £ in March. This must cause discomfiture to people of all parties, and it certainly does to the nation as a whole.
  On the other side of the ledger, as the right hon. Member for Stechford said, there is a balance of payments surplus of £600 million. Naturally he takes pride in that accomplishment. But let us not overlook the lessons of history. May I remind the House that there is a normal world trade cycle. Taking the last 18
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  years between 1952 and 1969, one finds that there was a deficit in trading in nine years and a surplus in the other nine, and that, while we had those nine years one way and nine the other, in each year there was a substantial surplus on our invisible trading and, except for two years, a deficit on our visible trading.
  I readily admit that the measures taken by the last Government contributed to the surplus in the last year. The restriction on overseas investment and the import deposits scheme played their part. But they also weakened our international position and contributed to our lack of growth and to rising unemployment. Indeed, one could contemplate a situation of a highly protected economy resulting in an export boom and a balance of payments surplus but with high unemployment, an inflationary spiral and a completely stagnant economy.
  Today, therefore, we ought to look at the overall financial position. Here again, I come back to what the right hon. Member for Stechford said when he compared—inadequately, I thought—our position in 1964 with the position in 1970. On 30th September, 1964, our first and second line reserves stood at £2,224 million. At that time, we had drawn nothing from the International Monetary Fund, and we had borrowed from the central banks £59 million, so that our reserves were £2,165 million to cover what were then short-term trading debts of £765 million.
  Coming to our position at March, 1970, our first and second line reserves had fallen to £1,400 million, but our liabilities stood at £1,000 million to the International Monetary Fund and £654 million borrowed from the central banks. Thus, at the end of March, on the last figures we had before today—I shall come to those in a moment—our position was that liabilities were about £254 million more than our first and second line reserves. That is why many people, such as Lord Cromer and Lord Shawcross, were worried about the future of sterling and the future of our economy.
  The position today, as given by my right hon. Friend the Chancellor, is that the amount drawn from the I.M.F. has in the three months gone down by £8 million, and the liability to the central banks has fallen to £469 million. So even today our total liabilities stand at £1,461

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  million, which is more than our first and second line reserves. This is cause for great anxiety. The Government's first task must be to restore sufficient confidence and to correct the position.
  That correction will not take place without a radical change in our rate of growth and a sharp rise in the rate of industrial investment. There is no reason why Britain should not succeed in this, but, in order to succeed, three essentials must be achieved. The first is that the public sector's share of the gross domestic product should be reduced from the high figure of 51·25 per cent. at which it stood at the end of the Socialist Government's time. Second, the private sector must be made more profitable so that more profits may be invested in new capital resources. Third, new savings must be encouraged. One pound saved is the equivalent of £1 taken in taxation.
  I realise that many hon. Members wish to speak, and I shall concentrate only on the third essential and make a suggestion. In the United States loans to the State are allowed free of tax. I consider that we should follow that example. At present £1,800 million is raised annually by local authoritites for their capital account. Of this sum no less than £600 million is provided by direct borrowing, the remainder being supplied by the central Government out of tax revenue, partly by way of grant and partly by long-term loans.
  I ask the Chancellor to consider a scheme under which each ratepayer should be allowed to invest up to £2,000 free of tax, provided that the interest charged was no more than 5 per cent. In my view, the result would be to open a new field of savings. The advantage to the ratepayer would be that he would have a tax-free return of 5 per cent. on his money. But he would have far more than that: he would have a feeling a direct involvement in the capital programme of his local authority; he would feel that some part of the old people's hostels, the houses, the schools, the swimming pools, was there because he had invested his savings in it. The advantages to the local authority would be that it would obtain money at 5 per cent. instead of 8¾ per cent. Local authorities could plan their capital programmes guided not by direction from Whitehall but by the enthusiasm of their
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  ratepayers, which would be good for local government.
  In this way, it would be possible, I believe, to reduce taxation by about £1,500 million a year, with no deterioration in the services provided, leaving only £300 million to be raised annually by the local authorities in other ways. I believe that this is a practical proposition. It has worked in the United States, and I do not see why it should not work here.
  I am encouraged to believe that the Chancellor will cut down waste. Since 1964, public expenditure has increased by over £7,000 million, and even with that vast expenditure there is still considerable poverty among special classes in Britain. The time has come to see that our public expenditure is more narrowly directed to those in need and that our private sector is allowed to expand as a result of radical reductions in taxation.
  I should be the last to suggest that my right hon. Friend has an easy task, but it is a task which he will approach, as he showed this afternoon, with care and prudence, not trying the sort of instant Government to which we have lately been subject. I believe that the country is ashamed of its low place in the league table of growth. It is tired of our rising cost of living and the unnecessarily high rate of unemployment. I assure my right hon. Friend that he will have the country behind him if he takes the bold steps necessary to secure expansion of the economy without inflation.
  5.39 p.m.
  Mr. Robert Sheldon: These are very happy days for hon. Members on the back benches opposite, but it may well be that their expectations will not match the kind of fruit they may see over the next few months.
  Before I come to the recommendations which I should like to offer the Chancellor of the Exchequer, I should like to refer to the speech of my hon. Friend the Member for Sedgefield (Mr. D. Reed). I much enjoyed his speech and admired the way in which he paid tribute to his predecessor, who was much liked and respected during his time in the House.
  I believe that the first few months during which the Chancellor settles into his job are the crucial months that decide the whole manner of the approach which

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  he will discover suits him and the programme to which he is committed. After that period he finds not that the Treasury takes over—the matter is much more complicated than that—but that in his search for his policy, in his announcements at various stages, he is committed to narrower and narrower channels, and the room for manœuvre gets less and less, so that whereas now he has a large number of options he will find them closing upon him as day succeeds day and each policy statement succeeds another.
  Therefore, right at the outset I hope that he will carry on with his commitment to growth, which we found in the Queen's Speech in a manner reminiscent to many of us of the great aims and hopes that others have had. If he is to show himself a man worthy of the position which he accepted, he must accept also that the time for growth is now. He should not accept that because wage rates and inflation is high this is not the time to start stimulating demand, because next year he will find that the Treasury arguments have even greater force than they have now. The Treasury will then argue that with a year of inflation behind it is not the time to risk a second year of inflation, and such arguments will carry much weight.
  We must accept that the inflation this year—heavily overstated though I consider it to be—is very largely already decided, and that irrespective of what the Chancellor does about it he can have only a small effect upon it. If he restrains growth to keep inflation lower than he thinks it should be, he may well find that he succeeds neither in controlling inflation nor in maintaining the moderate rates of growth that may yet be possible this year. Rather should it be his policy to accept the inflation that we have already and at the same time to try to diminish the effect of the wage increases by obtaining a greater volume of production this year than perhaps might have been planned.
  If that attempt is made, at least there will be no contradiction, because we all know that the rises in wages are nothing to do with demand. It is not an excessive demand that is causing the wage rises. Rather is it the strength of workers in industry; rather is it the end of the long period of squeeze, freeze,
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  and so on; rather is it the end of the incomes policy.
  What the Chancellor needs to do is to say, "Look here, that element of cost increase is something that we cannot escape. It is inevitable. What we shall try to do is not to seek to stop that which is unstoppable, but to diminish its effect by producing rather more goods so that the increased wage costs can be spread out over a much greater volume of production." If those who think like me are right, that might have an effect not only this year but next year and the year after.
  I believe that the Chancellor has everything to play for. He can try to make his reputation in a way that the last Conservative Chancellor tried, though he failed, because he has one or two enormous advantages that that Chancellor did not have. His right hon. Friend tried to get a break-through at the same time as we were in an impossible position with our defence commitments particularly east of Suez, spending vast sums of money on things that had no relevance to our economic situation. What the present Chancellor should be considering is the much better situation in which he finds himself, where we are spending a much lower proportion of foreign exchange by Government and where we have had the benefits of devaluation, so that he can operate the economy in a way in which his predecessor could not operate it.
  Finally, the myth of the permanence of the £ at a fixed parity has been ended. I hope that a commitment to a fixed parity will not be one of those commitments into which he will enter now or at any time. If he accepts the new situation that he has inherited, with a strong balance of payments which enables him to operate in a rather different way from the previous Conservative Chancellor, much may be achieved and a reputation to which many Chancellors in the past 15 years have aspired may yet be grasped.
  I do not think that the effects of expansion in industry as a whole will lead to any big price rises this year. But the Chancellor, in looking at the way in which he could promote some forms of expansion, must consider first the level of domestic credit expansion. I believe that we have been unduly restrictive here; we have

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  been obeying a theory which is not perfectly adequate for our purpose. There could be some relaxation there, and possibly also the use of the purchase tax regulator.
  There is a commitment that the Chancellor must avoid. I am sorry if I seem to be lecturing the right hon. Gentleman, but he has a great opportunity and it is in the interests of us all on both sides of the House that he should grasp it well. If he does not, he will be condemned as yet one more Chancellor who failed to solve the crucial problems of this country. There is a commitment that he must avoid, and I must state my appreciation of there being no reference in the Queen's Speech to maintaining the strong £ or the balance of payments surplus at high levels. The Chancellor will be under increasing pressure over the next few months to make a commitment on this from which he will never be able to escape once he has made it. It has been the curse of previous Chancellors. All Chancellors will find themselves in difficulties at some stage, and there will be pressure upon them to come out and nail their colours to the mast on the strong £—a commitment on which they will never under any circumstances, however horrible, however unpleasant, go back. There will be pressure to say that they will never go back on their word in that respect.
  This is a matter which it is easier this time to get right at the beginning, because our balance of payments situation is strong, but the Chancellor must make a firm resolve never to make that kind of commitment. If he is committed to growth, he must be committed to growth in the way in which George Brown was committed to growth. That means that he will go for growth even if it means variations in the exchange rates, even though other objectives have to yield. It is only by being committed to growth as a first priority that he gives the commitment any meaning; it is otherwise pure piety.
  Unless the commitment to growth really means that, when the chips are down, when the balance of payments figures keep knocking at the door, when foreign exchange reserve figures are coming in every two hours, impelling decisions all the time, growth will be and
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  will remain the first priority, then growth will inevitably cease to be that priority and the consequence will be that in this most important respect the Chancellor of the Exchequer will have failed, and will have been seen to have failed.
  The other aspect of the Queen's Speech to which I wish to refer is the relationship between the Government and industry. The Queen's Speech talks of the need to avoid "unnecessary intervention" in industry [HON. MEMBERS: "Hear, hear".] Everybody will agree that anything which is unnecessary is unnecessary, and I will not quibble about that. I am asking simply what we consider to be necessary and what the Chancellor of the Exchequer and other Ministers consider to be necessary.
  Would they regard as unnecessary the subvention to shipbuilding? It is only when one gets down to cases that one can start discussing what is necessary and what unnecessary. We all know that the shipbuilding industry is far from being the ideal industry we should like it to be. We all know that if we are to keep it going, there will be many difficult decisions by which we shall have to give money to firms to which we do not want to give it in order to maintain an industry with an important present and an important future.
  Although we may try to rearrange and reorganise and to bring in new managements and other things of that kind, that kind of money will still be needed. If it is argued that money for many incompetent and many grossly inefficient firms is necessary, I am not sure what "unnecessary intervention" means, because if that is necessary, clearly, even more necessary is money for companies like Rolls-Royce. It is even more necessary to have some sort of incentive, whatever it may be called, to industrial modernisation and re-equipment, to investment in plant and machinery, and that is intervention.
  The Government also have to take a view on prices, and whether they take it through this or that body is not what matters very much. What is important is the actual involvement. We know that the United States Administration cannot avoid being involved in prices. It cannot avoid involving itself in the economy of the country, because, when we see the final results, it is clear that the people

  541
  vote for a party largely because they believe that party to be economically competent to give them the economic success which they assume that party's Government will have. [HON. MEMBERS: "Hear, hear."] Hon. Members may applaud that, but hon. Members opposite have largely been elected to provide economic success.
  But what happens if they do not? They will be voted out. But before they are voted out, before facing electoral annihilation any Government will take upon themselves the direct measures of involving themselves in the economy. It does not matter what they say in their manifestos or election speeches; before voting themselves out of office by not doing what the electorate wants them to do, being successful in running the economy, they will take even further measures than we have yet discussed. These are the facts of electoral life and that is what will happen.
  They are more likely to be successful the earlier they realise not only this but its implications. They say that they will leave it to industry and avoid unnecessary intervention, but what will they do if industry does not provide the answer, does not deliver the goods? They will not just sit back and say, "We are sorry, but it is not our fault; you have to blame Company A and Company B and Company C; these are the people who are responsible". It has become accepted by virtually the whole country that if Companies A, B and C are not doing what is right for economic prosperity, the blame is put on the Government. As the Government take the blame, they eventually take the action.
  This is what is happening. It happened under the previous Tory Administration. It happened as a direct result of Harold Macmillan's claiming credit for the country never having had it so good. That settled it. Once he had claimed credit for success, he had to accept blame for failure. Ever since we have seen an increase in the methods by which Government have tried to get control over aspects of the economy in order to achieve success.
  Mr. T. L. Iremonger: I am grateful to the hon. Gentleman for ceasing his flow for a moment. It is time that hon. Members stopped misquoting Mr. Macmillan. He never said anything
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  about the people never having had it so good. What he said was that many people had never had it so good, because he was asking whether we could keep it; he was not boasting.
  Mr. Sheldon: That was an irrelevant interruption. I am sorry that the hon. Gentleman found it necessary to say that. Whether Mr. Macmillan said those words or not is not all that important. What is important is that he won that election on the basis of the prosperity of that year.
  In order to obtain that kind of control over the economy, the Government will have to make use of the only instrument they have available. At the end of the day this is the officials in the Civil Service. The harsh things they say about civil servants when in opposition are converted to the nice things they say the moment they get into power. The important thing to realise is that these are the only people one can use. Of course one may bring in business men and industrialists, and they can be of great help, but they will not provide the kind of machinery or the implements that any Government will require. I have argued strongly over the years for a much greater two-way flow between the Civil Service and industry, but that has still a long way to go and we shall have to use the kind of civil servants we now have.
  Andrew Schonfield once referred to the English myth of the inevitable obtuseness of government officials. We must remember that this is not a view shared all over the world. It seems to be something peculiar to the Anglo-Saxon. This is not believed in France or Japan and many other countries. In Japan they had some of the highest growth rates in recent years and there industry was formed by the Government. As a result they have been able to exercise a much greater control over various measures because government has two crucial advantages.
  The first is that it is the only body that can take the overall view of industry and see what is happening, not to Company A or Company B but to the whole of industry. In a situation in which plans are made so much further ahead than they used to be made, it becomes increasingly important that these ten to 15-year projections do not conflict between firms. The only arbiter in deciding whether it is right that a multi-hundred

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  million £ project—and that is the kind of scale about which we are talking—should be run by Company A or Company B, must be Government. This is the way so many industries are moving, towards these great decisions requiring the planning of ten to 15 years ahead. Government have to be fundamentally involved and have to make their decision in the light of the available knowledge.
  The other reason why Government control will be increasingly important is simply that Government purchase so much of that which is produced in the country. Their rôle as a customer impels them to have some influence over the total economy within the country. These two aspects, long-term planning and Government's rôle as a customer, mean that there will be active intervention by Government for as long ahead as we can foresee. The important consequence of this, if it is true, is that active Government intervention will continue and that we must have what we do not now have—adequate parliamentary scrutiny. We must make sure that the moneys which Government is giving to industry come before some other body for that kind of scrutiny.
  It is not particularly necessary to detail the kind of scrutiny required. There have been suggestions how this can be done by impartial bodies of one kind or another. We are continuing the search unnecessarily if we fail to realise that here in Parliament we have the ideal body which can question the decisions of the executive, can send for witnesses and make sure, not necessarily that the decisions are right, but that they are argued, that the Government Department concerned has to present its case and argue its conclusions.
  I am sorry that the Chancellor has just left the Chamber because I was about to quote something he said. Perhaps the Minister of State might like to make a note. On 21st January this year he said:
  …one really should not make speeches when in opposition. Every time one is right it will be forgotten, and otherwise it will be lovingly disinterred at an appropriate future date."
  I do not want to disinter anything which I think will be a great embarrassment to the right hon. Gentleman because in the same debate he went on to say:
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  "…my vote will go along with those who wish to reform along something like the lines proposed by the Select Committee on Procedure."—[OFFICIAL REPORT, 21st January, 1970; Vol. 794, c. 538–552.]
  That was the debate on the White Paper on public expenditure and the Chancellor of the Exchequer went along with the scheme proposed by the Select Committee on Procedure.
  How much influence will the right hon. Gentleman now bring to bear upon the Government in setting up this Select Committee, which I believe will be one of the most important innovations of this Parliament? If we are to get that kind of dialogue, then the solution on the lines proposed by the Select Committee will be enormously valuable. Bearing in mind the cuts proposed by the Government, it will be even more important that backbenchers have their say, not upon the proposed package deal at the end of the day but in deciding whether the order of priorities is right. This House will clearly want to object to a number of aspects in any expenditure cuts and, equally, there will need to be proper examination of the details.
  Finally, a word about east of Suez expenditure and its effect upon our economic future. The one simple fact which I have tried to make throughout the past few years is that over the past ten to 15 years we have seen a fundamental change in our benefits and our costs in maintaining our relationship with the Commonwealth. If we look at the situation we can see that from a position when nearly half of our exports went to the Commonwealth the figure has declined in recent years to about 20 per cent. There has been a staggering fall in the benefits obtained from the Comonwealth. The graph shows the benefits falling steadily over the years. If on the same graph we draw a line showing the cost of maintaining that Commonwealth it will be seen that Government expenditure overseas has risen from £3 million in the inter-war years to £470 million. There are these two lines, one showing the benefit declining and the other the costs increasing.
  This is an absolute nonsense and we cannot operate on these lines. We have to renew the argument which we thought was won, finished and done with. If the Government try to resuscitate this argument the inexorable facts will bring them

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  to the same conclusion as that reached by the last Government. The great tragedy will be the vast expenditure involved and the delay in the understanding of our proper rôle in the world today.
  6.10 p.m.
  Mr. James Hill: May I take this occasion to congratulate you, Mr. Deputy-Speaker, on your appointment.
  It is with great pride that I rise to join this debate on economic affairs. I am proud to have been elected for Southampton, Test, but doubly honoured because it is the city of my birth. I believe it is the tradition during a maiden speech to refer to one's predecessor in a laudable manner. This presents no difficulties to me as I have found Mr. Richard Mitchell a good constituency Member, quiet, thoughtful, hard working and no doubt he will be sorely missed by his colleagues opposite.
  While during the election campaign eggs seemed to by flying as thick as confetti in some areas, Southampton, Test was remarkably calm. Only one egg was thrown at me and, luckily, that landed on two young Socialists nearby who were heckling me. I emphasise that my Labour and Liberal opponents conducted their very similar campaigns in an exemplary manner.
  The City of Southampton is a beautiful city, with over 300 acres of park and common land in its central areas, a progressive city waiting to burst into the 1970s with tremendous vigour. One decision which I am sure Mr. Speaker, as the Member for my sister constituency, will be delighted to hear—and I have only just been informed of it—is that Southampton City Council is proceeding with a bridge, to be called the Itchen Bridge, linking the southern ends of our two constituencies. It has long been needed. In due course, the council will be approaching the Minister of Transport for the necessary grant and loan sanction.
  One problem for this city of the future which will not he solved overnight is the outline transportation plan which we shall definitely need by the mid-1970s. We need roads to carry not only the normal volume of city traffic but over 1,000 container lorries per day which pour into our docks. Increasing development of the docks, with £14½ million being spent on a modernisation and con- 546
  tainerisation scheme, will mean increasing loads on our roads.
  A great bone of contention is planning blight—inadequate finance and high interest rates which fall very heavily on the city—and, worst of all, fringe blight.
  The situation is just as devastating for someone trying to sell a property in the shadow of a motorway as it is for the owner of a property right in the path of a motorway. Perhaps the Minister could be more generous with interest rates on the finances intended for purchasing property and land ahead of requirements so that the councils, too, can be generous in their decisions on whether to purchase in fringe blight areas.
  One cause for alarm in the City of Southampton is due to the city being an integral part of the study report for the South Hampshire plan. While awaiting the final outcome of the structure plan, which is not due for some years yet, there is an element of stagnation in the city centre. To quote but one example, there has not been an office development permit issued for any development in the city since office development permits were implemented in 1967. In addition, there is an extremely severe shortage of industrial development certificates.
  The South Hampshire plan, as most hon. Members will know, is a series of study reports interlocking with each other to produce a complex written report, very much like a huge jigsaw: there will be no complete planning picture until the last piece has been fitted. Then the diagramatic plan will be drawn. This means that very little can be done in the way of planning until the final result is available.
  This has caused a great deal of alarm in the building industry in South Hampshire. There will not be enough land for even the normal growth in the next five years. One main stumbling block to the plan is that, for many years, inadequate local finance has been available for sewerage and services. It became apparent during the period that I served on the committee of the South Hampshire plan that all members and officers of the committee realise that the local authorities will not have sufficient finance to participate fully in the plan. Therefore, a top priority for the Government will be to provide the necessary additional finance.

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  The right hon. Member for Huyton (Mr. Harold Wilson), said that he would attack the housing programme as if it were a military campaign. I fully approved of that at the time. Unfortunately, for some obscure reason, the guns were turned on his own ranks.
  I now wish to sound a note of alarm by quoting the latest figures released by the National Federation of Building Trade Employers. The building industry, which employs 7 per cent. of the working population, accounts for 20 per cent. of the unemployment. The shortage of building land in the private sector, the Land Commission, betterment levy, and selective employment tax, coupled with the difficulty of obtaining funds other than at an incredibly high interest rate, have dealt the building industry a fearsome blow, especially in the South.
  I have before me a cutting from the Southern Evening Echo dated 1st July announcing that one of our major building construction firms, H. Stevens and Company, a well-known and well-respected firm in Southampton, was to fall under the hammer of the Official Receiver's auctioneers this afternoon. This is but one of many firms in the Southampton area, including several which have been building council contracts. I am pleased that the Minister of Housing and Local Government is already moving in the right direction. I am confident that he sees the building industry as a sector requiring instant resuscitation and that the Chancellor of the Exchequer will look favourably on the building industry to the extent of allowing at least the same priority in borrowing at the banks as, say, the export industry and will ensure a rapid release from selective employment tax. Who in his right mind would have called the building industry a service trade?
  I am sure that no one would deny that most of our welfare and social problems stem from poor housing. For the young to be reared in substandard accommodation must, in a major way, be responsible for many forms of delinquency and the general increase in lawlessness. I plead with the Chancellor of the Exchequer to ensure that bank rates and mortgage rates are tied sufficiently together so that in the time element they move closer together.
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  As I believe that, in a maiden speech, one's interests should be stated, may I state my three loves. The first two will be housing and planning, due to my years as chairman of the Southampton housing Committee and being my profession. The third will be aviation due to my 11 years' service with the British Overseas Airways Corporation as an aircrew member during which time I flew out of Southampton on the Solent flying boats and also with the United Nations Organisation, with which I served a spell in Srinagar, Kashmir.
  My fear is that the aircraft industry will suffer a similar fate to that of the building industry. It has been staggering over the last few years. What glorious ideas have been condemned!—the TSR2 at Boscombe Down, the HS681, the P1154 and the Beagle. In Southampton we have had the taking-over of hovercraft by the Official Receiver. We have also had the attempted crushing of independent airlines. The TSR2 would have had a world market, the same as the Canberra. The P1154 would have had a world market, the same as the Hunter, which is still being exported. We must also remember how successful the Lightning was.
  Those are the things in which I am interested and in respect of which I hope I can be an asset to the House. I thank you, Sir, and the House for giving me the courtesy of your silence.
  6.20 p.m.
  Dr. John A. Cunningham: Mr. Speaker, may I begin by expressing my thanks and appreciation to my predecessor, Mr. J. B. Symonds, for the tremendous job that he did at Westminster during the last eleven years? He worked diligently for the constituency as a whole and on behalf of many individual constituents. Latterly, as many hon. Members know, he has been troubled by ill-health. I am sure that hon. Members on both sides will join me in wishing him well in his retirement. After 50 years in public service at all levels he thoroughly deserves it.
  Whitehaven is in the south and west of Cumberland and is quite diverse in nature. It covers an area of 350 sq. miles comprising agricultural land with small industrial communities based mainly on coal and iron-ore mining. It has,

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  for the last six years, been almost wholly a special development area. As its representative I shall be concerned principally with scrutinising the future regional policies of Her Majesty's Government. Indeed, as a special development area it has had preferential Government aid for six years. No one will suggest that in this time the many problems of areas like Millam, Cleator Moor, Whitehaven and Frizington have been solved, but whilst we had a Labour Government the foundations for progress were effectively laid.
  Many of the small industrial communities are still fighting for survival, lacking many of the basic facilities of some of the more prosperous areas of Britain. I want the Government to give a vigorous commitment to even greater assistance for areas like my constituency, because it is only through the policies of the central Government that the problems will be solved.
  Last year the northern region as a whole enjoyed the fastest rate of growth in public expenditure in Britain, but still the problems remain. So it is nonsense for hon. Gentlemen opposite to suggest that we will solve regional problems by reductions in public expenditure. This just is not possible.
  People might ask—I can understand this—why the regions have a right to preferential Government aid. One of the principal reasons for the present plight of various regions is that historically their natural assets—coal and steel—have been taken away in a major contribution to the last economic and industrial revolution. But—this is the important point—the money made at that time was never reinvested in the regions. There has been a total neglect for decades in terms of public and private investment.
  To add insult to injury, local people have been left surrounded by industrial waste and dereliction and they are now presented with the Bill for clearing up the mess. I suggest that the Government should give a commitment to providing the whole of the cost involved in the removal of industrial dereliction.
  I must also express grave concern at the apparent lack of interest instanced by the failure to provide a Minister of State for Regional Development. Apparently, there was indecision yesterday at Question Time concerning Government
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  control of industrial development certificates. We heard some equivocal replies this afternoon on investment grants. Hon. Members representing constituencies affected by regional development have pointed out that this has been one of the major reasons for new industries moving to the regions. It is obvious that the Government cannot appreciate this point, because they have virtually no representatives from the areas affected.
  I should also like to see a firm commitment to the continuation of the regional employment premium. This measure has enabled industries in the regions to reduce their costs and to become more competitive. Any Government which believes in the slogan "one nation", as we understand the present Government do, will give us these commitments to help solve the regional problems not only in terms of industrial development, but also in terms of education, housing, health and urban renewal.
  We ask not only for more industries and jobs, but also for a better share of the jobs which will provide higher incomes to families living in the regions. One of the major problems facing local authorities is that, because of low family incomes, there is no local impetus for the growth of amenities.
  I remind the House that Government policies between 1951 and 1964 had a remarkably similar effect—in the Northern Region, at any rate—to the policies employed there by William the Conqueror. At the end of 1964 Government spending on regional policies as a whole totalled approximately £19 million. In 1969 this had risen to £285 million, but still the problems remain and many more problems need to be tackled more vigorously.
  Can we believe, in view of this, that a commitment to reducing public expenditure will give us the results that we desire? To be more specific, we have not seen enlightened capitalism, about which we heard so much, rushing to help communities like Millam. They just do not want to know. It is only through a vigorous Government policy of inducements that we shall achieve industrial development in these areas.
  As a scientist, I am sure that the new technologies which are coming will exacerbate these problems in the regions. Many of the difficulties that we already

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  know will get worse. A more balanced economic development will not only aid regions like West Cumberland, but will also aid Britain as a whole. It is no accident that the community problems in the South-East and the West Midlands exist because people are afraid of overcrowding and of uncontrolled urban development. It is these very problems which, on the one hand, give the South-East a kind of pot-bellied economic affluence, whilst, on the other hand, the Northern Region in particular goes through a kind of economic Biafra. We shall be looking to this Government to reverse these policies.
  I believe, as has already been said this afternoon, that in a rapidly changing industrial democracy it will be essential for any Government to intervene in industrial development and to give a commitment to ensure that we have a more even development in future than we have enjoyed hitherto.
  I appreciate the traditional reception of a maiden speech from both sides of the House. I look forward in future to speaking on regional matters, on education, in which I have some experience, and also on science and technology.
  6.30 p.m.
  Sir Gerald Nabarro: It is rare for a Member of this House to rise and be afforded the opportunity of congratulating two immediately preceding speakers, both of whom were maiden speakers: first, my hon. Friend the Member for Southampton, Test (Mr. James Hill), and, second, the hon. Member for Whitehaven (Dr. Cunningham). On behalf of the whole House, I am privileged to congratulate both hon. Members on splendid maiden speeches—my hon. Friend upon the fluency when he delivered his speech; the obvious sincerity, the wealth of practical experience derived from aeronautics, from building and from property which have characterised his career during the last 30 years, and I recall with the greatest pleasure an occasion nearly four years ago now when I accompanied him on a public platform in the city of Southampton and we debated and talked of these important matters. To the hon. Member for Whitehaven, may I express the hope, as I do to my hon. Friend, that the House will listen to him on many future occasions,
  552
  not, I fear, in the silence with which he has been listened to today, though we shall all no doubt benefit by his long experience of scientific and technological matters.
  I am sorry that neither of the principal spokesmen on economic and financial affairs is now in his place, either my right hon. Friend the Chancellor of the Exchequer, or the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), the Shadow Chancellor, for I shall wish to come at once to a few comments which I wrote down verbatim of the right hon. Member for Stechford, including his comment that my right hon. and hon. Friends in the Conservative Party at the hustings were guilty of "trumpetting the catalogue of election promises".
  There are two election promises which I voiced loud and clear. They may be called trumpetting; I do not know, and I care not a jot. The overwhelming majority of the electors of Worcestershire, South take my view about these things, for they accorded me a majority larger than my wildest dreams.
  Mr. Norman Buchan: A bad dream.
  Sir G. Nabarro: It may be bad in Scotland with a slender majority in an archaic constituency, tiny in geographical size, for which the hon. Gentleman sits. His and several more with it will be amalgamated before the next General Election when we put an end to the boundaries fiddle. In Worcestershire, South the overwhelming majority of electors were concerned with two issues, and to these issues I address myself today; first excessive taxation and, second the dangers of rapid inflation.
  Never in a Queen's Speech in my time have a Government assuming office promised to reduce taxation. There is no precedent for it, and I was therefore delighted today to hear the Chancellor of the Exchequer say in unequivocal terms, on two occasions, first at Question Time and again during his splendid speech in opening today's debate, that the Conservative Party proposed to carry through at an early date precisely the taxation reforms and reductions that were referred to in its election manifesto, and my right hon. Friend went much further. Again in my experience I have never heard a

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  Chancellor of the Exchequer read his own party's election manifesto on taxation and say, "This is what I am going to do". He reaffirmed that today. There were a few jeers from hon. Gentlemen opposite, but they were somewhat dismayed to hear my right hon. Friend say it. I am delighted, because the reduction of taxation today is the essential precursor of economic and financial recovery. Without a reduction of taxation and reform of the preposterous taxation system under which we all suffer there can be no lasting recovery.
  The right hon. Member for Stechford went on to jibe at my right hon. Friend the Prime Minister's reference to devaluation, and he referred—I doubted whether it was in order from a parliamentary point of view, but the Chair did not interrupt the right hon. Gentleman, so I accepted it—to the Prime Minister's behaviour during the election as being discreditable. That was the word he used and which I wrote down; it was discreditable because my right hon. Friend talked of devaluation.
  I want to tell the House why my right hon. Friend and I talked about devaluation and the prospects of devaluation in the unhappy event of a Labour Government being again returned. I did so because of the banner headlines in the Sunday Express, 7th June, 1970, a paper of impeccable accuracy. In order to be certain that I was word-perfect I sent to the Library and caused them to copy the headlines. The Sunday Express of 7th June, 1970, said:
  "Election Bombshell—'Economy in Peril'."
  by Mr. Don Perry:
  "I can reveal that when Mr. Richard Crossman, the Social Security overlord, told the doctors he was slashing the Kindersley award, the reason he gave was that the Government had to consider the impact of the award 'in a period of extreme economic peril'."
  That speech was delivered to the doctors at Redditch, Worcestershire, a few hundred yards from the northern boundary of my constituency. It is not unnatural, therefore, that I should interpret "economic peril" as being a suggestion that in the event of a Labour Government securing a further term of office there was a possibility, an offside chance perhaps, that should the economic climate decline it might lead to devaluation. I said so, my right hon. Friend the Prime Minister
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  said so, and both of us were right to say so.
  There was nothing whatever of a discreditable character in either my right hon. Friend the Prime Minister or myself declaring that a Labour Government was the high road to a further devaluation of our currency—
  Mr. Eric S. Heffer: What about motor taxes?
  Sir G. Nabarro: I might talk about motor taxes in a moment. I love talking about motor taxes, but at the moment I am talking about devaluation, and the hon. Member for Liverpool, Walton (Mr. Heffer) should listen to the words of wisdom. Three times in his lifetime our nation has suffered the calamity of sterling being devalued—first in 1931 under a Labour Chancellor; second in 1949 under a Labour Chancellor; and third in 1967 under a Labour Chancellor. It has never happened under a Tory Chancellor. We manage our affairs rather better as Tories.
  Mr. Heffer: What about the social services?
  Sir G. Nabarro: I shall give way to the hon. Gentleman if he wishes to interrupt, but would he please refrain from bawling at me from a sedentary position?
  My right hon. Friend today was absolutely right in focusing the attention of the House upon the absolute need for honouring the obligation given to the electorate and clearing S.E.T. off the Statute Book, first, because it is a ridiculous and inequitable tax, and, second, because it is the most inflationary of all imposts. The abolition of S.E.T. will do more to stabilise prices than any other tax reform, and it is futile hon. Gentlemen opposite nodding their heads in dissent because they heard it said at Question Time today that it raised retail prices by only a small margin. What they all forget is the huge administrative cost of collecting it.
  Mr. Elystan Morgan: Does the hon. Gentleman accept that the cost of collecting S.E.T. is the lowest cost for the collection of any tax?
  Sir G. Nabarro: No, I do not, but I shall talk about that on the Finance Bill. The hon. Gentleman is utterly wrong. The lowest of all, properly

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  framed, is a value-added tax. [HON. MEMBERS: "No."] Yes. It is merely a form of general sales tax. The hon. Member who sneers at me should go away and study the value-added tax, which is a general sales tax in its purest form. He will then learn that it is far away the easiest and cheapest tax to collect. I shall not be deflected from my argument.
  When the hon. Member for Ashton-under-Lyne (Mr. Sheldon) launched into his 30-minutes speech, pontificating about growth in academic terms, he failed most scrupulously, as always, to define how he would achieve the growth. He never tells us that growth is dependent upon industrial investment in the private, repeat private, sector, and that industrial investment in the private, repeat private, sector rests wholly upon the aggregation of personal and corporate savings. [Interruption.] The hon. Member laughs and sneers. He may laugh because he finds these words funny. Let him go away and ponder on what I have said once again—that the aggregation of savings is the only financial sinew for investment in the private sector; the money should never come from anywhere else—only from savings.
  It is to savings that I wish to apply myself, because the word does not mean—as members of the Labour Party think it means—only National Savings Certificates. When the Tory Party came into office in 1951 personal savings were approximately £200 million a year. When the Tory Party went out in 1964 personal savings were approximately £2,100 million a year. They had multiplied ten-and-a-half times. That is the aggregation of personal savings. If we are to succeed in that policy in terms of the windy platitude delivered by the hon. Member for Ashton-under-Lyne—"a period of growth "—we have to get a comparable rate of increase in personal savings year by year, which means multiplying it in the lifetime of this Parliament by at least five or six times.
  I want to tell the Chancellor approximately how I suggest he should do this. First, by increasing greatly the present limit of National Savings Certificates permitted to be held. I shall deal with public savings first. He should increase
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  the maximum level permitted for National Savings Certificate which at present is at the ridiculously low level of £1,500. It should be £5,000. Second, he should raise the much too low level of save-as-you-earn contracts—at present £10 per month or £120 a year for a maximum of five years, or £600. I say that the maximum figure should be one that will yield approximately £50 a month—a maximum of £600 a year over a savings contract of ten years, or equal to £6,000. all interest-tax-free.
  Third, the Finance Act, 1956 allowed Maximum pensions for the self-employed at a tax-free investment of £750 a year. That limit should be lifted to £2,000 a year in order to adjust for the loss in value of money for the 14 years that have passed since 1956, and as further encouragement. That means amending the Finance Act of 1956.
  Fourth, the Chancellor should amend the pre-war Act which provides—and this is the greatest single pool of personal savings in Britain—that the tax relief on a life endowment policy is 3s. 6d. in the £, up to a maximum of one-sixth of personal income. That is hopelessly out of date.
  Sir Harry Legge-Bourke: Hear, hear.
  Sir G. Nabarro: I am glad to have the support of my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke). That Act was enacted 35 years ago, when money values were about one-third what they are now and taxation was about one-quarter of what it is now. To put that right and encourage the growth of life endowment policies, in my judgment, entails raising the maximum relief to 7s. 6d. in the £ up to a maximum of one-third of personal earned income annually, thus encouraging substantial investment by individual persons.
  Fifth—and I consider that this probably appeals only to hon. Members on this side of the House—the Chancellor should rectify the appalling injustice done by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in 1962, when he submitted to my blandishments for a reduction of surtax and raised the commencing level of surtax, on earned income only, to a figure of £5,000 but left what was called unearned income at a commencing level of £2,000. This

  557
  latter is not unearned income at all; it is invariably the income of a lifetime's savings and resultant investments.
  The last Chancellor has adjusted the commencing level from £2,000 to £2,500, and I was grateful for that crumb of comfort, but I want to see both earned and unearned income subject to surtax provisions about £6,000, thereby giving an added incentive of £3,500 of income—from £2,500 to £6,000—for those who are at present paying surtax on so-called unearned income.
  My sixth and final point concerns capital gains tax. That is probably the most expensive of all taxation to assess and collect. I have no personal animus against it, because it is so easily avoided. I avoid it whenever I want to. But the cost of collecting it is fabulous. I was privileged during the election campaign to deliver a speech to 700 journalists, bankers, merchant bankers, investment analysts and stockbrokers. The hon. Member for Renfrew, West (Mr. Buchan) sneers and coughs. One thing is certain; he would never address anybody on money. He does not know the difference between a threepenny stamp and a drum of oil. The conference that I was addressing was the Second Unit Trust and Money Management Conference on 9th June, 1970, at the London Hilton Hotel. I made the point—[Interruption.] It is a hotel in Park Lane, London, with accommodation for 700 people at conferences.
  Mr. Dick Douglas: I did not want to interject, but I am interested in the audience that was listening to the hon. Gentleman. If I could use his good offices to obtain an invitation I should be willing to speak to those people.
  Sir G. Nabarro: Perhaps so, but I do not suppose that they would ever invite the hon. Member. I responded to an invitation; I did not go there on any other basis. I delivered a speech on legislation and investment, and I had occasion to draw attention to the fact that the aggregate investment in unit savings, all of which is private and personal savings—and this is well known to my hon. Friend the Minister of State at the Treasury, due to his activities in the Wider Share Ownership Council—£1,500 million in unit trusts, is all subject to the
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  provision of capital gains tax. So, two or three times a year a dividend warrant is sent out to all small investors. For example, my daughter, aged 15, has a few unit trust units, I looked at her dividend warrant the other day and saw beneath the amount of the dividend was expressed the amount of capital gain on those units, which was expressed, believe me, to six places of decimals of one penny. [Interruption.] There is someone outside the House cheering that statement. I am glad to see the hon. Member moving on to the benches now. It may be funny to him, but the amount of work that capital gains duty involves for accountants, lawyers and business and professional men everywhere in calculating tiny sums of money in order to yield out of £14,400 million of tax revenue this year £150 million, or 1·03 per cent. for capital gain duty, is immense. That percentage is all it is worth. I say that the Tory Party would do well to sweep away this form of taxation.
  Those are my thoughts on taxation reductions. That is what the nation wants and I am sure that the nation will get it. I am equally sure that it will be very disagreeable for the Labour Party, because the Labour Party is eternally the party of increased and increasing taxation. The Tory Party is eternally the party of reduced and reducing taxation, and the Tory Party will honour its promises and secure a second term of office in the 'seventies with a much larger majority, on that account, than it has this time.
  Mr. Speaker: Order. I again remind the House that many hon. Gentlemen wish to speak. Reasonably brief speeches will help.
  6.52 p.m.
  Mr. Joel Barnett: Hon. Members will now understand why the hon. Member for Worcestershire, South (Sir G. Nabarro) got an invitation to the London Hilton. It is clear that they needed a comedian. Once again, in his own inimitable style, the hon. Gentleman told us how delighted he was with the tax cuts which are to be announced, he says, by the Chancellor. I wonder whether he will be quite as pleased when we have the compensating tax increases which the Chancellor did not deny when I put it to him today. I

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  said that there would be replacement of S.E.T. with an employment tax and that a value-added tax will be more inflationary, to say the least, than S.E.T.
  One recalls with interest what the hon. Gentleman used to say about the anomalies of the purchase tax system. One will be interested to see how he will react to the anomalies which will inevitably arise from a value-added tax with the sort of exemptions which were suggested when the present Government were in opposition. On his other proposals, an increase in the amounts allowed for National Savings Certificates, as he suggested, could have only one result—a switch by surtax payers from one form of savings to another. To talk about this increase in life insurance as a method of getting an enormous increase in savings, by increasing the proportion from one-sixth to one-third, is absurd. One has only to imagine a man on £3,000 a year suddenly deciding to spend £1,000 a year on life insurance premiums to get increased savings. He would not have much left to live on.
  As the Chancellor said, economic facts have not changed with the change of Government. Whether we have an economic crisis or not is not relevant now that the election is over and the Government have taken as much advantage as they can from the situation which they were able to exploit. The definition of the word "crisis" has now been changed by the Chancellor. He made somewhat heavy weather of it when he described it not as an economic crisis but as "serious economic trouble"—incidentally, not sufficiently serious to warrant any action now.
  I certainly accept the economic facts and I am not prepared to quibble about the fact that there is not a satisfactory rate of economic growth. The first quarter has certainly been bad. My right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) is probably right that we are now moving to perhaps the level of growth for the rest of the year that he forecast in the Budget—3 per cent.—but that is still far from satisfactory.
  I am equally satisfied, on another economic fact, that the level of unemployment is far too high and has been too high for far too long. I am equally satisfied on another economic fact that
  560
  investment is too low and has been too low for a very long time—[Laughter.]—for many years, including years when hon. Gentlemen were in government before that. I am equally satisfied that the present level of wage-price inflation is higher than it has ever been, but apart from this question of inflation, which is an international problem, all these other economic facts have been with us in varying degrees for many years.
  If this is a crisis in that sense, of course we have had a permanent crisis for a very long time. It is rather silly to labour the point about whether or not we have an economic crisis. It all depends for its importance on the success that the Government will have in handling economic growth. All politicians pay lip service to economic growth when they are in opposition and before they become Ministers. This has happened for a long time and no doubt will go on.
  Certainly, the present Chancellor was no exception. He will deserve the congratulations of the House and the country if he can achieve the levels of economic growth which are implied in every one of his speeches over recent years—[An HON. MEMBER: "Hear, hear."] The hon. Member says "Hear, hear," but in the past the major reason for the failure to achieve economic growth has been the priority given to the balance of payments, the need for debt repayments, the parity of the £ and short-sighted policies on investment.
  The omission from the Gracious Speech of every one of those items may be significant, but speeches during the election and before the election—for years in this House before that—certainly do not give one great hope that those priorities will be changed. Indeed, much greater emphasis was placed on every one of those items by the present Chancellor even than by my right hon. Friend.
  We heard again today of the enormous burden of debt repayments, with the clear implication of the need to repay them much faster. If that is not the implication, I should be glad to hear it from the Minister of State. But if it is, what effect will this have on economic growth? If there still is the same priority for the parity of the £ at all costs, again, what effect will this have on economic growth? If the Prime Minister is right

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  in what he was saying before and during the election, and only last week in the House, about the trend of balance of payments, which must be reversed, so that we get back to achieving something like a £700 million surplus, which he once referred to in this House, I am afraid that the Chancellor will not have much prospect of achieving the sort of economic growth on which alone his policy will succeed.
  Again, for years before the election, the Labour Government were criticised for the restrictions which were placed on capital outflow abroad through corporation tax and other fiscal measures. We were told about the need to increase that outflow. If they continue this, what will be the effect on balance of payments, and what, again, will its effects be on further economic growth?
  What would be the economic effects of the absurd policy of reversing everything that has gone on in recent years in the field of Defence, for example, by returning again to a military policy east of Suez, with the inevitable increases that that would mean in terms of costs across the exchanges?
  Neither the speeches made from the Government Front Bench nor the Gracious Speech lead one to hope that the Chancellor is likely to achieve the target he has set himself for higher economic growth. Indeed, I detect already the cautious hand of the Treasury being placed on the Chancellor. When he said earlier "It is premature to take action to stimulate demand", that remark came strange after all that we have heard from the right hon. Gentleman in recent weeks and months.
  I wish to make it clear that the Chancellor is, of course, right to wait and to give careful consideration before embarking on any tax reforms. Nobody expects him to come forward with tax reforms overnight. However, the right hon. Gentleman said that the economic position showed an unhappy situation and that everything that he and his hon. Friends had said about the economic position indicated that it was bad. I have agreed with him from the point of view of stagnation or "stagflation", as he called it, and on unemployment and investment. All these things are bad and we want to know why the right hon. Gentleman is not acting immediately on these issues.
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  The Chancellor need not wait to introduce a Budget next April to deal with these sort of matters. He could deal with them now. Why is he not doing so? If we do not have an economic crisis but serious economic troubles—and I agree that we have them—why is he not using the regulator? Why does he not, for example, relax hire purchase and relax domestic credit expansion? What is he waiting for—or has he already succumbed, as I fear, to the hand of the Treasury?
  Is he accepting what was said in the Green Paper "The Task Ahead" about the underlying potential of productivity being between 3 per cent. and 3½ per cent. and is he therefore restricted to that? If he does not accept that, why is he not making a start to achieve the higher level of growth about which he has spoken so much?
  The longer the right hon. Gentleman waits the more he must inevitably lose—the thousands of millions of £s that we have lost in recent years—in terms of lost economic growth. If he delays, he will be faced with a situation of further heartbreak for months longer of people unemployed, particularly in the development areas. My hon. Friend the Member for Whitehaven (Dr. John A. Cunningham) and my hon. Friend the Member for Sedgefield (Mr. D. Reed) spoke graphically on this subject in their maiden speeches.
  The right hon. Gentleman has made many fine speeches about the level of unemployment in recent years and I have always listened to him with great respect. However, if the tears he was then shedding were not crocodile tears, then he should take the action that is open to him now to deal with these matters.
  Apart from these actions, which I believe he could take now, there are two further policies he could follow, relating, first, to wages and prices, and, secondly, to investment. On wages and prices, my advice is that he should ignore the enormous amount of advice that he is getting, ranging from the O.E.C.D. to the Economist, and particularly the latter. It is easy to rehearse the statistics about the level of wage and price inflation that we have had and are experiencing now. It is less easy to show precisely how to deal with it.

  563
  We saw an example of this in the Chancellor's speech today. I was happy to hear that he will not try to implement legislation on wages and prices. At best, legislation on wages in recent years has held wages down by perhaps 1 per cent. and I am doubtful even of that.
  It seems that the right hon. Gentleman will try to persuade the public sector to hold back its wages, though I do not know what sort of actions he has in mind. If, for example, he is proposing to tell the miners that they cannot have a wage increase and Lord Robens that he cannot have any price increases, then the effect of that on the economy would not be likely to be happy. I should have thought that the chance of any miracle occurring for success in the sphere of prices and incomes is remote. The most that the right hon. Gentleman might achieve is a small effect. He should accept with pleasure the offer made by Vic Feather to co-operate in voluntary wage restraint. This the only way of achieving even a modest degree of success on this issue.
  Be that as it may, I hope that the right hon. Gentleman will take urgent action on industrial investment, because it here that we have fallen down for many years. When we talk of what Governments can do in this sphere, we are speaking of action on the margin, because, in the main, companies will invest because they think a profit will result; and anything else we do can have only a marginal effect, though an important one.
  A genuine argument can be adduced about investment grants and investment allowances. Some companies prefer one to the other. But as my hon. Friend the Member for Sedgefield pointed out, in the development areas new companies often do not make large profits, if they make a profit at all, in the early years, so that investment allowances are of no use to them. The last available official report on the incentive effect of investment allowances did not lead one to conclude that they were a useful method of providing incentive. A number of people with whom I have spoken in industry say that the last thing they want is big changes in this whole sphere of investment allowances and grants.
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  I agree that the larger companies were not happy about the switch from using the Inland Revenue in dealing with allowances to the Board of Trade and there were many administrative problems. However, the change has now been completed and is working more smoothly. If we are now to have a period of perhaps six months of great uncertainty, that could have a disastrous effect on the level of industrial investment for some time.
  We can no doubt in the future have a debate about investment allowances or investment grants, but for now the important thing is to have an investment allowance which is reasonable, in terms of incentive effect on the margin, and which does something about cash flow. The worst of all worlds would be to have uncertainty, and I hope that the Chancellor will take an early opportunity—I trust that he will do this before we rise for the Summer Recess—to put those concerned out of their feeling of uncertainty and let them know precisely what sort of investment policy the Government propose to pursue.
  A kite has recently been flown about scrapping grants, with the idea of announcing a certain date for their abandonment, resulting in an immediate rush to buy new plant. If the Government intend to deal with their policies properly and definitely, they must agree that to implement this idea would mean government by gimmick and would represent hardly a satisfactory way of dealing with the problem.
  Regular variations in rate, to which my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) has referred from time to time, may remind companies of the incentives which they frequently forget, but to cancel all incentive grants in the hope of getting a big rush to replace equipment would seem a crazy way of setting about obtaining increased investment.
  To begin with, the manufacturers of machine tools could not cope with it in the few months that would be available, and there would be an enormous flood of imports of machine tools. We are getting enough being imported now, when one thinks of the incompetence of many of the machine tool manufacturers in this country.

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  Whatever happens later to the level of investment, I accept there may well be an argument for a smaller level of investment allowance later. In the United States they have had as little as 7 per cent. tax allowance and it has worked in some ways quite satisfactorily. Certainly, when it was taken off there was a tremendous outcry. But if we took it off here very quickly there would be a grave problem of cash flow unless the Chancellor intends, with all his other tax cuts, to cut corporation tax as well.
  If that is his intention, it is worth while knowing what he has in mind but, for the present, I should have thought that one of the things he could do very quickly, in view of the surplus available from the cautious Budget we had, would be to bring forward the date of payment of investment grant. That would put money into the hands of the companies which have invested in the past and which are more likely to invest for the future—companies of the type that need these funds. I hope that the right hon. Gentleman will think very seriously about bringing forward that date.
  In the past, Governments of all parties have nut private industrial investment very high in their speeches but low in actual priorities, because it does not bring dividends quickly enough in the election cycle. It is part of the price we have paid over many years for democracy, but the level of investment has been too low, and largely for that reason: because Governments of all kinds have wanted to do other things first.
  If the Government mean what they say, and wish to be judged by actions and not by words, this is the ideal area in which action is vitally needed. Our hopes of obtaining investment-led growth should not be disappointed if we are to believe all the Chancellor's speeches, but I very much regret to say that from his speech today, and certainly from the Gracious Speech, it looks as though our hopes are likely to be dashed.
  7.12 p.m.
  Mrs. Elaine Kellett: I crave the indulgence of the House for any sins of omission or commission in this my first speech here. First, I pay tribute to my predecessor, Stanley Henig, who served here for four years. Among his
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  other interests, he was particularly devoted to the cause of comprehensive education.
  As a Lancashire woman, I am particularly proud to have the honour to represent the ancient and historic city of Lancaster, set, as it is, in delightful and very well farmed countryside in the Lune valley. In addition to its own attractions—the ancient castle and the lovely priory—it is close to the Lake District and to Morecambe, and now, with the motorway, it is very close to London in terms of time. I commend it to all hon. Members who want a thoroughly restful holiday away from the stress and strain and the excessively hot pavements of London.
  I wish to refer particularly to that passage in the Gracious Speech which speaks of the need for
  "…a steadily growing national income…"
  in order to improve the social services. I refer particularly to the needs of the elderly. I believe that the direction of our services for the elderly needs to be altered steadily away from the provision of residential homes to the extension of community care and the expansion of voluntary services. If this were done it would, in many cases, enable people to live happily in their own homes for perhaps ten or 15 years longer than they now can before moving towards the end of their lives into residential homes.
  Some needs—for example, the provision of sheltered housing—must be met mainly by the local authority, although many other voluntary associations, such as the Abbeyfield Homes and Help the Aged, are here making a valuable and steadily increasing contribution. But some needs can best be met by voluntary organisations or by co-operation between local authorities and voluntary organisations, especially as, since the National Assistance Act, 1948 (Amendment) Act of 1962, local authorities can now give financial aid to such organisations. We need many more day centres, more meals on wheels, more home helps. Most of all, we need more information about what is needed, and who needs it.
  One of the biggest problems facing local authorities and voluntary organisations trying to help the elderly is lack of knowledge of the extent of the problem or the whereabouts of those who desperately need help. Far too often, and particularly in the biggest cities, it is only when

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  an old person has become a case for hospital treatment that the need comes to the notice of those who are able to help, and by then it is all too often too late. It is an almost incredible fact that the latest national statistics available on the whereabouts of the elderly are contained in the 1961 census returns, and no one, not even the local authority welfare services or the Ministry computer knows the size of the problem. Such knowledge as we have is hopelessly fragmented.
  In 1965, a limited sample survey was undertaken into the financial and other circumstances of retirement pensioners, but only 9,000 pensioners were actually interviewed. From this sample it is estimated that 360,000 people would like, but are not at the moment getting, the meals on wheels service, and that 350,000 people would like, but have not got home helps. A frightening article in the November-December issue of the Royal Society of Health Journal estimated that 30 per cent. of older citizens suffer from malnutrition. In the past month, in my constituency, where there is much happy co-operation, I am glad to say, between town and gown, a group of students from the university did a sample survey which highlighted the difficult situation in which many elderly people live today.
  This is not merely a question of cash. Many people, particularly men who lose their wives in the late sixties or seventies, resort to the frying-pan, and cease to have balanced meals even when they can afford them. I should be the last person to wish to compel any elderly persons to disclose their whereabouts, or even their need, to anyone against their wishes, because I am passionately opposed to prying into other people's lives. I know many old people, especially in the north, are very proud of their independence and do not wish for help from anyone. On the other hand, there are very many people who simply do not know of the help that is available to them while, conversely, many who wish to help simply cannot locate those in need. There should be some simple means whereby all elderly people who wish it can be put in touch with the services that are available to them.
  The need is urgent—very urgent. The old people's welfare committee in one Lancashire town has compiled a register
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  of all elderly people in need of or wanting visits, help or meals on wheels. This has been done with the unofficial help of the local office of the Ministry of Health and Social Security, and I am sure that many more local offices would be more than happy to co-operate in this sort of thing with the full consent of every individual concerned if they were officially allowed to do so.
  It would be a simple matter for my right hon. Friend the Secretary of State for Social Services to ask all his local offices to co-operate with the local welfare organisations or, indeed, with the accredited local voluntary services, in obtaining the whereabouts of anyone wishing any of the services which either the local authority or the voluntary organisations can supply. This could be done by means of a prepaid postcard given to all new pensioners—including, of course, the over-80s when, in the very near future they get their pensions—and to all pensioners when there is a general review of pensions. There is no shortage of people willing to help if only they know who needs help and what to do for them. Accurate information, nationally and locally, is the first and vital essential in enabling us to organise our resources and to ensure a happy old age for those who have so richly earned it by their past labour.
  I thank the House for its gracious, kind and quiet reception of this speech.
  7.21 p.m.
  Mr. Gerald Kaufman: It is with singular trepidation that I ask the indulgence of the House this evening because for the past five-and-a-half years it has been my lot to earn my livelihood in this Palace and I am particularly conscious of the high standards expected of an hon. Member. Like the hon. Member for Lancaster (Mrs. Kellett), the compassion and eloquence of whose speech I greatly admired and envied, I have sought election to this House for many years. Therefore the fact that I have now achieved it is for me a signal and great honour.
  It will be understood when I say that that great honour conferred on me also involved for me a sense of loss because, since 1964, I have worked in this building in the Press Gallery premises which enabled me to share a friendship and camaraderie unique in journalism. In

  569
  experiencing that loss I have a consciousness of having gained something through fellowship and friendship of people whose services to this House and services to Parliament are as great as those of anyone else who works in this building.
  I come here as the representative of the Ardwick Division and I succeed in that representation Alderman Leslie Lever, who gave the citizens of Ardwick fine service in this House for 20 years. In the House of Commons Leslie Lever was a familiar character, greeted with affection on both sides of the House. That was in this House, but in Manchester Leslie Lever is something very much more. In Manchester, and particularly in Ardwick, he is a legend. Go down any street in the Ardwick constituency and one will hear a dozen affectionate stories of the way in which he discharged his political duties. Go down any street in the Ardwick division and one will hear about other activities given less publicity, activities on behalf of the very many people who came to him with their problems, people to whom he gave very great service. Few hon. Members, I think it true to say, have been so deeply loved in their constituencies as Leslie Lever has been. He no longer has a place in this House, but he has a permanent place in the hearts of those he served for 20 years.
  The Ardwick division which I come here to represent is in my view one of the most interesting constituencies in Britain. It is a hard-working constituency. Historically it has been a railway constituency and today it is intersected and bisected from one end to the other by inter-city railway lines. Perhaps hon. Members may not know that it is a constituency of considerable architectural distinction. It is very richly endowed with places of worship for many denominations and people of many religions. The places of worship range from the elegance of the early Victorian Anglican Church of Holy Trinity, Platt Lane—one of only three churches in this country built of terra cotta—to the modern Roman Catholic St. Roberts, Longsight, which has just been opened by the Bishop of Salford, which is striking in its modernity but very moving in its religious atmosphere.
  Ardwick provides not only spiritual sustenance but bodily sustenance to those
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  who visit and live in it. It has a number of restaurants of national standard. Among those is an oriental restaurant, the Manzil, described in the Good Food Guide as the best in the provinces. It contains Belle Vue, the most popular amusement centre in the north of England. It contains Manchester Grammar School. But the constituency also has some of the worst housing conditions in the whole country. I am sorry to say that if there were a Top Twenty list of constituencies of England with housing most unfit to live in, Ardwick would qualify in that top twenty.
  The 1966 census showed that in Ardwick 21 per cent. of the homes had no hot water tap, 31 per cent. had no fixed bath and 46 per cent. had only an outside water closet, while only 41 per cent. had exclusive use of a water tap, a fixed bath and an outside water closet. These are cold statistics. For the human reality behind them I shall describe what life is like there today, 7th July, 1970, for one family in Great Nelson Street, West Gorton, Manchester. This family's home consists downstairs of a front room and kitchenette, and upstairs of two bedrooms. It has an outside lavatory in a tumbledown decrepit backyard and, almost needless to say, it has no bathroom.
  In the back bedroom sleep the householder and his wife. In the front bedroom in six narrow beds seven children sleep, six boys and a girl, whose ages range from 14 to 2½. Also in that bedroom sleeps those children's grandmother who lives in another part of Great Nelson Street in a house which is unfit to sleep in. Downstairs in the front room there is a bed settee used for sleeping in by the householder's sister-in-law and her husband who also live in another part of Great Nelson Street and whose home is unfit to sleep in. This house provides daytime accommodation for nine people and sleeping accommodation for 12. But overcrowding is only one of the problems of this house in Great Nelson Street. It is not simply damp, but so riddled with water that it is sodden. One of the ceilings sags alarmingly and paper hangs in strips from the walls and peels from the ceilings of the various rooms.
  The housewife is a house-proud woman. Not long ago she spent £30 on buying a

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  new carpet and that carpet is already ruined. Last year she went to some expense decorating the front bedroom. It is impossible to believe that it was done this century. The colour scheme now consists of huge, livid, virulent blotches on the walls and it looks like a room in a plague house. In a sense it is a plague house for it has suffered in recent weeks from infestations of rats and cockroaches. In the narrow back alley behind the house are piled quantities of garbage. When the local authority sent dustmen to see whether this could be taken away, its appearance and nature turned their stomachs.
  In 1870 such living conditions would have been unacceptable; in 1970 they are an abomination. Yet the lady who lives in this house has no idea when she will be rehoused. I have been in touch with Manchester Corporation and have asked when it hopes to rehouse her, but I have had no reply at all. I regret to say that under its present control Manchester's rehousing programme has been painfully slow and inadequate. There is little prospect of many thousands of my constituents having a decent home for a long time to come. In the first five months of this year in the great city of Manchester only 344 new homes were completed. We note with great attention and concern the passage in the Gracious Speech which says
  "My Ministers will pursue a vigorous housing policy with the principal aim of improving the position of the homeless and the badly housed."
  We trust that this will compel Manchester Corporation greatly to improve its performance and to provide decent homes for my constituents, but we also wait with apprehension the effect of another passage in the Gracious Speech:
  "housing subsidies will be refashioned so as to give more help to those in greatest need."
  In Manchester those who have been lucky enough to be rehoused are having to pay rents which are already far too high and which many of them cannot afford. A further increase is already scheduled for this autumn. It was postponed from earlier this year, for reasons which it would be inappropriate to mention in a maiden speech.
  Earlier today the Chancellor of the Exchequer spoke about the need to con-
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  tain price rises. I suggest to him that there are two ways in which he can deal with a particular price rise. The first is by taking his hands right off the housing subsidies, because the record Labour housing subsidies have still not stopped Manchester Corporation and other corporations from increasing their rents. The second is by continuing the legislation regarding the control of increases in rent which the Labour Government brought in and which is now under threat.
  The Ardwick constituency has many other problems and many other interests in addition to those to which I have referred. There is the wider question of amenity to which the Rusholme and Fallowfield Civic Society has directed its attention. There is the grave menace of strife in Ireland, which is of the greatest concern to many thousands of my constituents who were either born in Ireland or who have relatives in Ireland. In future debates I hope to have an opportunity of discussing these other important matters.
  But today, on the first occasion on which I have the honour of addressing the House, I thought it right to address myself to the problem which has overriding importance in the minds of thousands of those who sent me here to represent them—the problem of how to live decent lives in decent homes in decent conditions for themselves and their families.
  7.31 p.m.
  Mr. John Hall: It is one of the more delightful traditions of the House that it affords me on this occasion the opportunity of paying a compliment to two maiden speakers. It is one of the very rare occasions when I can venture to speak with the approval of the whole House and say that we compliment them both very highly on the quality and the content of their speeches.
  My hon. Friend the Member for Lancaster (Mrs. Kellett) is no stranger to me. Indeed, on previous occasions I have appeared on the same platform as herself, which probably accounts for the fact that she has been rather longer in getting to this place than would otherwise have been the case. Now that she is here we welcome her very much. I know that the whole House listened

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  with great attention to what she said about the serious and difficult problems of the elderly. We look forward to hearing her on this and on other subjects in the future.
  The hon. Member for Manchester, Ardwick (Mr. Kaufman) spoke with a fluency which I confess that I envy. I am sure that the whole House will wish me to congratulate him both on his fluency and on what he had to say about the problems which affect his constituency. The hon. Gentleman highlighted, as he was right to do, the failure of the previous housing policy. I hope that under the present Government we shall be able to do very much more to solve some of the problems that affect his constituency.
  I rarely like referring to past speeches of my own. I never find them of such a quality that I necessarily want to recall them. However, I may be forgiven on this occasion, when we have been in effect putting past and present balance sheets before the country, if I refer to a speech that I made on 4th November, 1964 in a debate on the Gracious Speech and on a day when, as today, we were discussing economic affairs.
  On that occasion I had the privilege of winding up the debate from the Opposition Front Bench. We were discussing then, as we discussed again in 1966, and as we discussed during the recent General Election, the question of the deficit that was supposed to have been left by the 1964 Tory Administration. I said that over the months that were to follow in 1964 and 1965 the rate of imports would fall and the rate of exports would rise and that without the Government doing anything to remedy affairs the situation to a very large extent would put itself right.
  Hon. Members on both sides will remember that the deficit was made up, roughly speaking, of two parts, half of which was on capital account and half on current account. I remember that my statement was received with great scepticism by the Government Front Bench. In fact, by the early part of 1965 the current account was in balance.
  I thought it worth while bringing that to mind, particularly as quite recently a memorandum has been issued by the Economic Research Council which
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  stresses that the Labour Government, over the last five and a half years were concentrating on tackling what the Council describes as a non-problem. I do not want the present Government to fall into the same error. The memorandum points out—it is worth while bearing this in mind—that, if Government transactions are excluded, the private sector overseas trade, including invisibles, always remains in long-term equilibrium, although it may, as it does, oscillate narrowly between surplus and deficit over a period; in other words, it follows closely the cyclical rhythm of world trade from which it is impossible for British trade to isolate itself.
  The real problem which this memorandum underlines is that the Government have persistently spent overseas more than the private sector has earned. It is to this aspect of the problem that I hope that the present Government will direct attention.
  As a number of speakers still wish to speak, I shall cut out much of my speech.
  The immediate problem which the Government have to face is that of slowing down the rate of inflation. Several speakers have already referred to this problem. It is a very difficult problem—one which presents difficulty to any Government. The most recent forecasts of cost increases which are likely to take place in 1970 and 1971 estimate a rise in labour costs per unit in 1970 of 61 per cent. and a 3 per cent. rise in cost per unit on import prices. That gives a combined estimated cost per unit increase of 6½ per cent. I believe that this is probably an under-estimate rather than an overestimate.
  The hon. Member for Ashton-under-Lyme (Mr. Sheldon), in his interesting if rather long speech, pointed out that the increases in wages which we have been facing recently are likely to remain with us. This is a problem we shall face, not only during this year, but next year as well. It is unrealistic to believe that we can tackle this by any form of wage or price control, whether voluntary or compulsory. We have tried this in various ways in the past and, except for very short periods, it has not worked.
  The methods used over recent years—using monetary policy, using credit restrictions, using forced loans in the

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  shape of import deposits, which have the double effect of reducing liquidity and reducing imports—do not work either. In the very short term they might have to be applied, in the same way as a tourniquet is applied to stop bleeding, but if a tourniquet is kept on for too long, lasting and irreparable damage is done. If restrictions of this type are kept on for too long, long-term damage is done to industrial expansion. Judging from the speeches to which we have been listening, this is something which hon. Members opposite do not want. The emphasis throughout the speeches made by hon. Members opposite has been on growth—not that they are in a very good position to lecture us on growth when they have not been able to achieve the modest rate of growth which they set themselves for their period of five years.
  Mr. Heffer: Have not those hon. Members who have spoken this afternoon and who have called for growth been making that call for the last four and a half years?
  Mr. Hall: I agree. I would be the first to acknowledge that hon. Members who had spoken this afternoon had been in a sense out of tune with their Front Bench over the whole period of time and have been advocating policies to a very large extent which their Front Bench has not followed. Perhaps if those hon. Members had changed places during that period of five and a half years the results would have been different—they might have been worse; I do not know. I readily agree that those hon. Members have advocated growth. From the tone of their remarks it seems as though we were being lectured on a subject about which we know rather more and have been more effective than hon. Members opposite.
  It is true that one of the ways in which it is suggested that we shall be able to carry out the programme which has been put before the country and which was pledged again by the Chancellor of the Exchequer in his speech is by examining very critically and reducing Government expenditure, where it can properly be reduced. I merely want to utter a word of warning about this because although it is a necessary and desirable target at which to aim, it will be a little more difficult to achieve than perhaps any of
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  us believe on either side of the House. It will be difficult even to contain Government expenditure where it is, much less reduce it. This has to be borne in mind when we are looking at the problem.
  I wish to come quickly to one or two other points. The first is the contribution that we can make to tackling inflation by the encouragement of saving. This is not an original thought. Several hon. Members have mentioned it. But it must be emphasised the whole time. One of the problems from which we suffer today is that fewer people wish to save because they do not trust the £. They do not believe that money which they put away today will have anything like the same value when they take it out some years later and use it. There is this fear of continuing inflation which drives people to turn their cash into goods of some kind or another.
  We have to restore in the minds of the people as a whole the confidence in the value of our currency. To do that there are two things which must be done in order to give an incentive to saving. We have got to have the kind of saving which enables people to put money away out of tax-free income. In other words, they should be able to put away so much a year out of a gross income which does not bear tax. This would be by far the best encouragement to savings. The amount that could be saved in this way would, of course, have to be limited, perhaps severely, but it would enable people in all tax brackets to put away a certain amount of money which they would have to hold for a certain period of years but which could be saved free of tax.
  Secondly, there would have to be in such a scheme a built-in hedge against inflation so that when savers drew out their money some premium would be paid to help meet the inflation that is inevitable, whatever system one adopts, over a period of years. We have always lived in a period of inflation, but over the years it has been a very slow rate and it has been possible to absorb it. It is that rate of inflation which must be hedged against in any scheme of this kind.
  I am not proposing to put before the House the many methods which could be adopted. My right hon. Friend the Member for Thirsk and Malton (Mr. Turton) mentioned one method. My hon. Friend the Member for Worcestershire, South

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  (Sir G. Nabarro) mentioned a number of methods in the course of his interesting, if provocative, speech. There are any number of methods by which saving can be encouraged, but one of the first matters to which the Chancellor should turn his attention is the necessity to get saving. Not only does it reduce pressure on consumer spending but it also provides funds for industrial expansion.
  There is an absolute necessity to increase industrial expansion. I agree with the hon. Member for Ashton-under-Lyne that we must go for growth, even if it means sacrificing some cherished objectives in order to achieve that growth. I am sure that whatever may be the short-term difficulties, in the end to go for growth is right.
  I should have liked to dilate at length upon a number of tax proposals, but I do not propose to do so. I need only refer the Chancellor of the Exchequer to a speech that I made in the Budget on 15th April, 1970, when I listed a number of changes which I should like to see in the tax system, and I directed those remarks at the next Chancellor of the Exchequer who, I was sure, would be my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod). Indeed, my prophecy turned out to be accurate. Therefore, I am certain that he will read my speech with great attention, and I look forward with interest to see most if not all of those suggestions that I made on that occasion implemented at the next available opportunity, either in the autumn or spring Budget.
  There are two points, however, to which I wish to draw particular attention. One is the impact of National Insurance contributions. I am opposed to this form of taxation. It is a poll tax which bears heavily on the people who can lead afford to pay it, and the sooner we find ways of raising the necessary money for this service by methods other than National Insurance, perhaps through some form of negative income tax, the better for the country.
  The second point I wish to stress is the regional employment premium. We have heard several speakers, including maiden speakers, on the subject of regional development. I do not dissent from the need to help the under-developed areas wherever this is necessary and is likely
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  to be effective. However, I do not think that the regional employment premium is effective. It goes largely to firms already in the areas, which do not use it for the purpose for which it is intended but use it as an additional form of revenue. It is largely unproductive and does not do the job that it is intended to do. It would be far better to use that kind of money for improving the services and amenities in the areas, such as the docks, railways and roads, which can attract industry and people to those areas. I recognise that the regional employment premium has to continue for a few more years yet, but it should be ended as soon as the Act comes to an end and it should not be restarted.
  I listened to the Chancellor of the Exchequer with great attention because I regarded his speech as an important introduction to the first period of office of our new Government. His speech convinced me, as I feel it must have convinced the whole House, that we intend to implement to the full the promises that we made in our manifesto and in our speeches during the election. As my hon. Friend the Member for Worcestershire, South said, it is the first time that a Chancellor of the Exchequer has quoted the promises made in his party's manifesto, on which the election was fought, and has stood by them. It is a very rash man, or else a very honest man, who is prepared to do that at the outset of a new Parliament, and that makes me feel certain that not only is my right hon. Friend determined to carry out the pledges, but, as in the case of previous Conservative Administrations, will do so, and do so successfully.
  7.47 p.m.
  Mr. Austen Albu: Mr. Deputy Speaker, as this is the first occasion on which I have spoken since you were elected to your new office, may I congratulate you on your appointment.
  May I also join in congratulating the two previous maiden speakers, who made two of the most interesting and well informed speeches that I have ever heard. The hon. Lady the Member for Lancaster (Mrs. Kellett) made a compassionate and informed speech, and my hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman), with perhaps rather more experience in this place, though not actually in the Chamber, made a speech

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  which astonished the House with its extreme polish as well as its compassion. We look forward to hearing both hon. Members on many occasions in the future.
  The last time the party opposite was in office the right hon. Member for Barnet (Mr. Maudling), now the Home Secretary, expanded home demand at a rapid rate and achieved a considerably higher rate of growth. In fact, it was those years which gave rise to the average rate of growth which the Chancellor of the Exchequer quoted this afternoon, but he achieved this at the cost of a very severe balance of payments deficit. It was not just that one deficit. It was the third of a series of deficits which were occurring every two or three years, of which that was the worst.
  The present Government came into office promising economic growth. My hon. Friends the Members for Heywood and Royton (Mr. Barnett) and Ashton-under-Lyne (Mr. Sheldon) have supported this idea. I also support the idea of economic growth. Indeed, I have always done so, but if, as my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) said this afternoon, inflation is a sin and that he is against it, growth is a virtue and we are all for it. Unfortunately, nobody in this country knows how to resist inflation or how to get growth. It is no good pretending that we know how to get it, because it has eluded everybody since the end of the war, except at the cost of a severe balance of payments crisis.
  The Chancellor of the Exchequer and his party have come into office having made a good many promises, promises which, as the hon. Gentleman the Member for Wycombe said, were strongly confirmed by the right hon. Gentleman this afternoon, promises about the reduction of taxation, including the abolition of £600 million worth of selective employment tax, and reduction of income tax, and about the lowering of prices. It is impossible to forecast the way events will go over the next four or five years, but it may be that, at the end of that period, those things will have been done, but if the Chancellor should try—and, even worse, if he should succeed—to do both of them immediately, he will create a raging boom in home demand.
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  Perhaps I may interject here a comment on what the right hon. Gentleman said about the nationalised industries. I hope that there will be no going back on the increasing rationality of the financing of the nationalised industries. I am in favour of subsidising the social services provided by those industries, which was done by the Labour Government, but I am not in favour of using them as a back-door way of inflating the economy, which would be extremely dangerous and lead to irrational results. The Chancellor said, back-tracking somewhat on what was said during the election, I thought, that what would happen was that proposed price increases would be severely examined, or words to that effect. As I remember it—I have had some experience in this matter—they were severely examined during the past five or six years, and recently they were referred to the Prices and Incomes Board. Perhaps the Minister of State will tell us whether, in future, price increases will be referred to the Prices and Incomes Board, or, if not, who else will severely examine any proposed increases?
  If a raging boom in home demand were created, to the current cost inflation, which seems likely to be parallelled by a substantial rise in consumer expenditure this year—the first figures are beginning to show—there would be added a severe demand inflation, and this would lead fairly quickly to another balance of payments crisis. This could be cured only by rapidly reducing home demand again and by making exports much more competitive. There are, perhaps, only two ways of doing that: one is deflation of a kind which we have not seen since the end of the war, and the other is a further devaluation.
  I take seriously the present inflationary trends. It is true that they are going on in every modern industrial country, but I agree that, with what the Chancellor said, ours is more serious. For example, Germany, as she apparently intends, can afford to deflate somewhat from its present level of economic activity and not significantly reduce its great rate of economic growth, whereas ours would be reduced pretty well to zero.
  It seems to me that we are witnessing in all the industrial countries of the world, and particularly in the West, almost a sea-change in personal economic

  581
  behaviour. This is partly the result of the substantial social changes which have taken place in this century, and since the war in particular, which have raised the level of aspiration of the masses of the people so that they think that they are now entitled, as indeed they are, to have the goods which only a few people had before. But the levels of their expectation and their expenditure are continually titivated by advertising and such media as commercial television, for which the party opposite was responsible, which, I believe, is a quite substantial factor in increasing the rate of inflation. However, once people begin to realise that this is taking place, a sort of vicious circle is set up and, as the hon. Member for Wycombe said, people then try to run ahead of inflation, trying to keep their incomes rising that much faster. This creates substantial new problems for economic management.
  If the Government have truly set their face against any form of prices and incomes policy, voluntary or otherwise, it seems to me that they will be powerless to avoid, sooner or later, either severe deflation or a further devaluation. At the time of the election, I made clear that I stood for a return, and believed that we should have to return, to a voluntary prices and incomes policy. I welcomed the suggestions made in this regard by Mr. Vic Feather of the T.U.C.
  Mr. John Hall: Does the hon. Gentleman think that the previous one worked?
  Mr. Albu: The previous one was never tried. What happened was that, as an alternative to devaluation, we tried to hold down wage increases by statutory means, first by the delaying period and then by the actual freeze. I think that that was a mistake and it failed. Mr. George Brown, with whom I was working at the time, never took the view that it was right to have a statutory policy, and he always understood that such changes of habit and long traditional behaviour would take quite a long time. If we had gone about it more slowly and devalued a little earlier, in three or four years we might have found ourselves in a situation in which both sides of industry understood much better what we were trying to achieve and how inflation could be avoided.
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  Inflation can be of no advantage to the manual workers represented by the trade unions to which my hon. Friends and I belong. We can see that the white-collar workers all the way up the scale will always be able to maintain their differentials, especially, it seems, with a Conservative Government in office. I refer anyone interested in this question to what was said some years ago in a book on wages written by my noble Friend Baroness Wootton.
  If inflation goes on, it will not only produce an extremely unfair distribution of incomes but, in the end, very little will be left over for the social services in which we on this side at least believe. We shall create—I believe that we are beginning to create it—a very selfish society. Without going into the actual words and the question whether Mr. Macmillan really used the expression, "Never had it so good" and so on, I believe that this selfish society had been encouraged in one way or another—commercial television is playing its part, and betting shops may have been another influence—by what was done during the last years of the previous Tory Administration.
  Moreover, inflation, if it goes on too fast, has serious social and political consequences as well as bad economic consequences. It creates a psychology of insecurity and leads to movements of political irrationality. It is exactly movements of this sort which play into the hands of the right hon. Gentleman the Member for Wolverhampton, South-West (Mr. Powell). His speeches during the election campaign were examples of just that sort of paranoid demagogy, with appeals to irrational fears, references to unnamed traitors in Government, and invisible enemies organising our destruction. That is the kind of paranoid demagogy which feeds on insecurity. We have seen it all before, and we know that it cannot reap any reward save at times of deep crisis.
  If there were a runaway inflation, this could lead to just that sort of crisis. Therefore, apart from the economic advantages of restraining inflation, we all have a social and political interest in developing more rational ways of distributing our national output and stopping the present acceleration of costs.

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  It would be much easier to achieve the control of inflation and to keep costs down if we had a higher rate of growth. In this country, with our present relatively stagnant working population, this means a higher rate of productivity. However, I do not find it easy to see a solution. I have been interested in these matters ever since I came into the House. Before I was in Government, I was more interested in micro-economic matters than ever I was in macro-economic matters, and I still believe that the solution probably lies in the micro-economic field. There are some deep structural causes in this country today preventing us from achieving a higher rate of productivity and, therefore, higher growth.
  It may be that the Government will be lucky and will reap the benefits of the many measures taken by the Labour Government to improve the competitiveness of British industry and its productivity. I hope that it is not the Government's intention to destroy the I.R.C., a body which has already made a substantial contribution towards this improvement. I was sorry to see it being put in chains, even if only temporarily, and I hope that the chains will be taken away fairly soon. I have so far seen no other policies proposed by the present Government by which they could achieve the necessary improvement in the competitiveness of the individual firm.
  On the other hand, the Government may not succeed, our costs may again become uncompetitive, and our personal consumption at home, public and private, may be too high. In that case, I agree with my hon. Friends in saying that we must not be tied too rigidly to the current rate of exchange. The only alternative to another devaluation in these circumstances would be utter stagnation. Meanwhile, I hope that the Chancellor and the Government will continue and intensify the discussions within the international financial organisations to develop a more flexible exchange rate system. I wonder whether the Minister could tell us whether the story published in The Times Business News today is true, that the Americans are now much more interested in this and are putting forward proposals for such changes. I do not know whether the Minister of State heard what I said, but I would like an answer to the question. I know that he has not been in office
  584
  very long, but I am asking him a serious question, whether the Government intend to pursue more actively discussions in the international financial organisations to develop more flexible exchange rate systems, and whether the story in today's Press is true that the Americans have put forward further proposals on those lines.
  It is always possible that the right hon. Gentleman and his Friends may wish to revalue. If so, that will no doubt be because of the substantial changes in the competitiveness of British industry brought about by the Labour Government. But whether the Government devalue or revalue we must never again be committed to a rigidly fixed rate of exchange, which is one of the greatest inhibitors of economic growth.
  At the same time I would also issue a warning that although devaluation may sometimes be necessary it is very far from painless. Its purpose is to increase the proportion of our gross national product that goes to exports and lower the proportion consumed at home. Devaluation partly does this automatically, by raising home prices, but it must be accompanied by other deflationary measures at home, so by all means I hope that we shall be able to avoid it. It is not a pleasant, painless or easy policy. It is the last resort, but it is a better resort than utter stagnation. In general I believe that international monetary world needs more flexible methods of changing its rates of exchange. Liquidity is an important matter, but I have always thought, and still feel, that flexible exchange rates are even more important than increased international liquidity.
  I was glad, and not surprised, to detect a more cautious approach by the Chancellor than we might have expected from some of his election speeches. I do not agree with those people who attack the Treasury. The interesting thing is that there is very little real difference between the outside commentators' and the Treasury's forecasts. They are matters of fractional fine tuning and nobody is capable of really judging what is right.
  The truth is that when it comes to the real issue, how to get a higher rate of growth without getting into balance of payments difficulties, no one has the answer so far. We shall be watching the

  585
  right hon. Gentleman and his colleagues on this matter. I am sure that there is no short or rapid cut to higher economic growth, but if the right hon. Gentleman can find any new ones no one will be more pleased than I shall.
  8.3 p.m.
  Mr. Peter Hordern: I am very happy to follow the hon. Member for Edmonton (Mr. Albu). I could not say that he is always a prophet of joy, but I thought his speech most interesting. I was inclined to feel rather as though I had been invited to a temperance party and then been told that the lemonade was off. I hope that he will forgive me, but he did not exactly fill me with joy in his talk about the prospects for growth. He seemed to find a link between inflation and advertising which I have not seen established in any study of the question of inflation. I should like to return to some of his remarks about the I.R.C. and the exchange rates during my speech.
  The House and the country should be grateful to the Leader of the Opposition for holding the election when he did. We were able to fight a campaign in glorious summer weather and to fight it on one central theme of the then Prime Minister's own choosing. That was an invitation to have five more years of the same—the same Government, the same record and the same Prime Minister—an invitation issued in a summer garden at Downing Street. All we missed then was the music of Delius. We were invited to take them all at face value, and the people did just that and rejected them all in the most decisive way.
  I do not believe that things can ever be the same again, not just for the opinion polls, for whom I feel no sense of distress that they should have been proved wrong, but for all the so-called opinion-formers and for the media. The Leader of the Opposition was in love with them and they were in love with him. Nothing was too trivial for their attention, no gimmick too small for him to provide. It was like one of those perfect little courts in miniature, of one of those principalities of 18th-century Germany whose brilliance was matched only by its fatuity. Now the music has stopped, the courtiers are packing their bags, the party is over and the dawn has broken.
  The sun, we hope, is up on a new scene altogether, where instant decisions and
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  instant opinions do not have to be provided to catch the evening papers, where serious issues do not have to be mixed up with the trivial for the covenience of a television programme. There is a chance now that serious issues will be properly considered and that people will feel that Britain has a serious rôle to play. If the election means anything, it is that people want to take that chance.
  The Government are now taking a look at the books. We have been promised action and not words. I hope that that does not mean that we shall be carrying out our business in total silence. I hope above all that the Leader of the Opposition will not be allowed to get away with that nonsense about my right hon. Friend's taking over the strongest economic position in living memory. The very reverse is the truth. I am not talking about stagnant production, high unemployment and faltering investment, to which my right hon. Friend the Chancellor referred. Everybody knows about them. They are what people expect of a Labour Government. What they want to know, and are entitled to know, is what short-term debts the Labour Government left behind. That is the test.
  The truth is that we are not in surplus, that there is no surplus in anything but the most limited and formal sense of the word. We have heard today that the short- and medium-term indebtedness is £1,461 million. What is not generally known is that we have to start repaying that debt as soon as next June; we need to start repaying the International Monetary Fund, to whom we owe over £990 million, next June. So far from this being the most favourable position, the truth is that the figures demonstrate the worst deficit in any real sense of the term, the worst short-term indebtedness, this country has shown within living memory. Never in English history has so much been owed by so few to so many. Therefore, I trust that we shall not all accept the rôle of Trappist Monks, on this issue, at least.
  The difficulty is that my right hon. Friends—both the Prime Minister and the Chancellor—are taking over at a time when things are not only difficult at home but becoming increasingly difficult abroad. I was much encouraged to read in The Times today, as was the hon. Member for Edmonton, about a United States

  587
  initiative for widening currency margins to 3 per cent. either side of parity. The Times also reported that the United States was interested in pursuing a policy of temporary floating rates. It said that the West Germans were enthusiastic about such a policy of floating rates—indeed, they have floated the Mark themselves for a period—but that the French were hostile. I do not know why the French should be so hostile. They have devalued so many times that their currency is best described as a falling peg.
  The problem of the dollar is a major one. It is the most important international monetary issue that concerns us at present. Therefore, we should welcome this first move towards free currency movements. I hope that my right hon. Friend will support it when the time comes at the International Monetary Fund meeting in September. This is a very useful initiative.
  As everybody knows, however, the situation at home is most depressing. We have had riproaring inflation; we have had stagnant production and investment is both relatively and absolutely low. The figures for investment in the first quarter of this year were lower than in the preceding two quarters, and in its survey the other day the Financial Times showed that fewer firms were planning to increase their capital commitments. The facts are that, as a proportion of the gross national product, the United Kingdom invests only 17·4 per cent. compared with nearly 25 per cent. in West Germany and more than 33 per cent. in Japan.
  So we appear to be in an ugly, non-growth situation, higher prices chasing higher costs, high unemployment and low investment. There seem in these circumstances to be two courses which we can pursue. The first is roughly more of the same medicine in the hope that other countries will inflate faster than us. This is a pretty dismal prospect, because we are up against severe competition. The Financial Times today mentioned that West Germany was about to have a very thorough deflationary policy when its prices had risen by 6 per cent., and on the same day it was reporting that prices in the United Kingdom had risen by 8 per cent. We are up against competition
  588
  if we are in a race to keep down prices by deflation, and I see no great joy in that score.
  The alternative policy is to try forcibly to break the cycle of costs and prices and wages rising all the time, and this is the course which we must pursue. I am not a member of what I would term the boom and bust brigade, that is to say, those who advocate pumping money into the economy, and I do not think that industry would follow it anyway. I believe that industry, however many pounds passed, is not likely to be easily led astray, and I do not think that it would follow the form of encouragement if it were simply applied by pumping money into the economy—we have had too many false starts.
  It is my belief that in practice we have had a consensus of opinion ever since the war, for 25 years, of the rôle of the State compared with that of industry and that of the individual. There have been differences in emphasis, of course, in the degree of influence which Governments have taken on expenditure, but the process has been continuing under Governments of both political complexions. We must have a substantial reduction in Government expenditure, if we are to gain the growth in the economy which all of us wish to see, and there are no prizes for suggesting what those reductions should be.
  We have referred during the months past to the abolition of investment cash grants and I sincerely hope that we shall be able to make substantial savings in what is essentially a rather wasteful form of investment incentive. But I do not believe that the mere change of the system of investment cash grants to one of allowances, or even of reducing it and at the same time reducing the level of corporation tax, would necessarily, or of itself, do enough to provide the incentives which we need for growth. We have to consider the debilitating effect of corporation tax, which has been raised over the last two years from 35 per cent. to 45 per cent., and the effect of the credit squeeze on companies both large and small.
  Companies have literally been forced into the arms of the Government, and I am not referring only to companies like Cammell Laird but to some of the most prestigious names, such as Rolls-Royce. Some of those companies have so far got

  589
  themselves into the pockets of the Government that in a real sense they have put themselves above the market altogether. The market could not satisfy demands of companies of the kind of Rolls-Royce for the projects which they have in mind, the market, that is, as at present constituted.
  Mr. Anthony Wedgwood Benn: I am listening to the hon. Gentleman with great interest. Is he suggesting that with the new Government's policy of tax reduction it will be possible for Rolls-Royce to manage without any launching aid for its major projects?
  Mr. Hordern: I was not suggesting that. If the right hon. Gentleman will allow me to proceed with my speech, he will grasp the suggestion which I shall make.
  It is not only a question of prestigious companies like Rolls-Royce or the central companies in the aircraft industry, but the Government have a finger in every pie, in computers, in micro-circuitry and in nuclear development besides the aircraft industry. It is time that we had a rational look at all this expenditure en masse.
  I do not believe that anybody is doing this job. I am not referring to the public expenditure programmes and their rolling forward for five years at a time, but there is nobody who has to my knowledge ever made any rational analysis of what is the best field to pursue in scientific or in technological development, given the whole basis of expansion, expansion in facilities and expenditure, both in this country and abroad—what is the best field to pursue, whether it is with our European partners or in isolation.
  As the right hon. Member for Bristol, South-East (Mr. Benn) knows only too well, the level of research expenditure in the United States exceeds £20,000 million a year, while the level of research and development in this country is about £1,000 million a year. By the nature of things, it is bound to be the case that in some fields at any rate expenditure of this kind will have a larger effect than we can try to obtain ourselves by spreading our expenditure over every aspect.
  The argument is not that with which the right hon. Gentleman always concerns
  590
  himself—whether the private sector or the State can best make this expenditure. With or without our European partners, there is no chance, if we try to cover the whole field, of covering every aspect of it. In this respect, therefore, the argument which the Labour Party always puts about the State undertaking these affairs is not realistic, because it fails on the first test, which is simply whether there is enough money to be able to pursue all these objectives in any case.
  It is a sensible policy to continue to encourage European co-operation and to see what developments are being encouraged, particularly in the United States, and to try to form some rational policy about which developments we should encourage and which not. Having done so, let us proceed as quickly as we may with cutting down State agencies such as the I.R.C.
  I was very glad to see that at Question Time yesterday it was said that no further commitments were to be made by the I.R.C. without consultation. My right hon. Friend the Prime Minister was absolutely right when, at a Press conference as recently as 11th June, he said:
  "What is left to firms? Only to go to the Government cap in hand and get large subsidies. Then the Government puts directors on the board. Then of course the boards have to refer back to the department in Whitehall for all their decisions. Then the Government gets control of the industry. This is Socialism in practice, and this is what we are so deeply opposed to. You cannot have healthy enterprise, a free competitive enterprise, under a Socialist Government."
  If those remarks mean anything, they mean the abolition of the I.R.C.
  I look forward to a rational basis for the investigations of the whole of public expenditure. I look forward to the reduction in taxation which we have been promised today on the basis of our election manifesto, a reduction in taxation for both companies and individuals.
  I have referred to the subject of negative income tax on several occasions in these economic debates. I urge once again that the Government enter into an open inquiry, or at least set up a special commission, to study the merits of a negative income tax.
  As a party that believes in subsidies going to those who stand in real need

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  surely this is one way of achieving that aim. I have hope that we shall do all we can to encourage the development of overseas investment and of overseas investment in the United Kingdom. Invisibles have been our salvation and we ought to do all we can to encourage the earnings from services and invisibles generally. The best incentive of all is a high return on capital. For years we have not questioned the rôle of the State. We have accepted an ever-diminishing rôle for the individual. What we hope for from the Government is that we shall get a higher return for effort expended. Let us break this cycle of pessimism and despair and let energy and confidence flood in once again.
  8.21 p.m.
  Mr. David Marquand: At this stage in the evening, when one of my hon. Friends still wishes to speak, I am obliged to be as brief as possible and I hope that the hon. Member for Horsham (Mr. Hordern) will forgive me if I do not comment on his remarks. One aspect of the Gracious Speech discussed earlier this afternoon, but not very much recently, is the paragraph dealing with regional development policy. My constituency, although not in a development area, is in an intermediate area. I am sorry to have to tell the Financial Secretary that in my constituency, heavily dependent on coal mining, the advent to power of a Conservative Government has been greeted with a great deal of alarm and despondency in view of what people fear may be the effect of Conservative policy on the mining industry.
  Since the hon. Gentleman happens to be the Government spokesman at present—and I congratulate him in personal terms on his accession to office—I should like to ask one question about a statement which he made in the House three years ago when he was on the Opposition Front Bench. In a debate on the Finance Bill the hon. Gentleman said that it was the policy of the Conservative Party to abolish the fuel oil tax. This was, he said, a tax which should be abolished sooner or later and sooner rather than later. Can he say whether this is still his policy and the policy of the Treasury Bench which he now adorns? The abolition of the fuel oil tax would lead
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  to the virtual disruption overnight of the mining industry in my constituency. It is of the greatest importance that we should have a categoric pledge from the new Government that in that regard, at any rate, the promise they made before the Election will not be carried out.
  Secondly, I should like to probe some of the Government's intentions over grants and financial assistance to intermediate areas such as my constituency. I appreciate the desirability of not having instant government and of the new Government taking their time before making up their mind. That is reasonable, but the fact is that local authorities in my constituency are embarking on plans based on the assumption that the financial assistance to intermediate areas undertaken by the last Government will continue. It is clearly extremely detrimental to the interests of my constituents and the whole of the Erewash Valley intermediate area if we are to be left in a state of uncertainty whether this financial assistance will continue under the present Government.
  Earlier this week we had an assurance from the Minister of Technology that it would continue to be the case that in intermediate areas there would be no need to have industrial development certificates. That was the only statement we have had about the Government's intentions over intermediate areas. It is of the utmost importance that we should know soon whether they intend to continue financial aid to bring new industry into areas such as my constituency. I should like a firm statement from the Financial Secretary on that point, this evening if possible. If that is not possible, let us be sure that we have a statement before the Summer Recess.
  Having dealt with those points of particular concern to my constituency I should like to refer briefly to what appears to be the underlying strategy of the Government over public expenditure. I strongly endorse a point made earlier by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). The Chancellor of the Exchequer, when in opposition, committed himself to accepting the need for very much more effective scrutiny by this House through a reformed committee system of public expenditure projections, both in White Papers and in the detailed projections of spending

  593
  departments. This was recommended by the Select Committee on Procedure in the last Session.
  I urge the new Government as soon as possible to set up a committee such as was proposed by the Select Committee. Again this is an area in which we could legitimately expect action by the Summer Recess. If we could get the committee structure, accepted by the Chancellor when in opposition, into operation by the autumn, we could then have the White Paper which will set out the Government's intentions on public expenditure subjected to committee scrutiny. We could set in motion the whole process which the Conservative Party accepted when in opposition and which I hope they will now agree will contribute to more efficient government as well as to more effective Parliamentary scrutiny.
  The Financial Secretary to the Treasury (Mr. Patrick Jenkin): It might be helpful to the hon. Member and the House to know that my right hon. Friend the Leader of the House will be adverting to this very question when he winds up this debate the day after tomorrow.
  Mr. Marquand: This is extremely good news—one of the few areas in which I can applaud, I hope, what the new Government intend to do. I cannot applaud the assumptions which underlay the speech of the Chancellor this afternoon and which underlay the Gracious Speech with regard to policy decisions on public expenditure. It seems that this is a fundamental contradiction in the policies of the new Government. I believe that they will soon discover that their hope of achieving a higher rate of growth and escaping from the problems that beset us will be falsified by their inability to carry out their promises on public expenditure.
  The Chancellor of the Exchequer is now engaged in the review of public expenditure which normally takes place at this time of the year. He told us today that the latest estimates showed that the levels of public expenditure at the end of the five-year period into the early 1970s were higher than those expected by the last Government. Presumably that means higher than those foreshadowed in the White Paper published
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  last January by my right hon. Friends. That does not surprise me. Public expenditure—and the Government will discover this—is bound inexorably to increase at a more rapid rate than the rate set out in that White Paper simply because of the pressure of demand in the country for higher standards and because of the change in the structure of the population without improving standards in the public sector. Simply in order to stay in the same place it is necessary for the public sector to run faster. This is an inescapable fact about the society in which we live.
  It is easy to make "phoney" cuts in public expenditure which are nothing more than bookkeeping transactions. But real cuts in public expenditure which have an effect on the use of resources cannot possibly be undertaken without lowering already inadequate standards. There is no escape from this because the structure of our population is such that over the next decade the proportion of the population over retirement age and the proportion of the population below working age will increase. These are people who make exceptional demands on the public sector. For that reason alone, demands on the public sector are bound to increase and simply to stay in the same place it will be necessary to spend more money on it. If the Government are to make genuine as opposed to "phoney" cuts in public expenditure, if they are to make cuts in public expenditure which mean a reduction in the use of resources in the public sector, they can do it only by lowering the standards in the public sector.
  We know that, by some quaint convention, if charges are made in the social services, in education or in the Health Service they can be presented as a cut in public expenditure. But in fact they are nothing of the kind. Imposing extra charges in the social services is a "phoney" cut in public expenditure. They are simply a new form of taxation, not a cut in public expenditure in the real sense. Real cuts in public expenditure can mean only a reduction in inadequate standards.
  The areas of the public expenditure programme for 1972–73 and 1973–74 which are expanding most rapidly are the areas in which the Conservative Party are pledged to improve standards and to

  595
  spend more money. One of the most rapidly growing areas of public expenditure revealed in the White Paper published by my right hon. Friends is roads and public lighting. Will the Government make real cuts in this field in 1973–74? Another of the most rapidly growing public expenditure areas is law and order on which the Conservative Party, at one time at any rate, wished to campaign in the General Election. Will the Government cut provision for law and order in the mid-1970s?
  Education and health and welfare are enormously large and rapidly growing items of public expenditure. In the debate on the White Paper last January, the Conservative Party spokesman committed his party to an increase in expenditure on education in the mid-1970s over and above what was laid down in the Labour Government's White Paper. Will the Government turn their back on that commitment and cut expenditure on education? Will they cut provision for health and welfare in the mid-1970s? Will that be their way out of the dilemma? I do not believe so. I do not believe that they can cut that provision. I believe, for similar reasons to those advanced in another connection by my hon. Friend the Member for Heywood and Royton (Mr. Barnett), that political factors, apart from anything else, will force them to abandon the hope of cutting public expenditure in these areas. But these are the areas where real cuts in resources using public expenditure can be made.
  I think that back benchers opposite, who are at the moment in a heady and enthusiastic frame of mind, will be sadly disillusioned when in 1972 and 1973 they find that their Government have not been able to carry out this commitment, because no Government in a democracy can carry out such a commitment without provoking severe social unrest.
  There has been a lot of talk in the debate about inflation—this was one of the main themes in the election campaign—and the need for more rapid growth. The assumption by the Conservative Party that cutting down on public expenditure will in some way lead to more growth is not only incorrect—
  Mr. J. Bruce-Gardyne rose—
  Mr. Marquand: If the hon. Gentleman will allow me to develop my argument he will be able to say whether he agrees or not when I have finished.
  Any fool can produce a sudden spurt in the rate of growth. It would be the easiest thing in the world to do that and land ourselves back in the kind of crises through which we have been in the past. We need long-term sustainable growth—we all know that—but it is not given to man to achieve that aim in a modern society without some form of incomes restraint, incomes policy, call it what you will. This is a harsh fact of life in our mixed society—
  Mr. Bruce-Gardyne rose—
  Mr. Marquand: It will be better, because of the time factor, if I do not give way.
  It is not possible for any Government to get the co-operation of the work people involved without maintaining the social services and, indeed, improving them. To try to cut down the inadequate levels which prevail in social services, which the Government will be forced to do if they wish to carry out their pledge to cut down public expenditure, would destroy the hope of getting any kind of co-operation from the trade unions and work people in any form of incomes policy. That, sooner or later, will consign us back to the impasse we have reached so many times in the past. For that reason also, I believe and predict that the Government will be unable to carry out their pledge to cut public expenditure. If they attempt to do so, they will find themselves in a disastrous crisis.
  8.39 p.m.
  Mr. Michael Shaw: I will not follow the hon. Member for Ashfield (Mr. Marquand) in detail as time is getting on, but in certain respects I regard his attitude on the cutting of public expenditure as a policy of despair. It seemed to indicate that all Government or all public expenditure was sacrosanct. Frankly, I cannot accept that.
  I accept that there are pressures for increased expenditure, because of the ageing population and other factors mentioned by the hon. Gentleman. But this merely adds to my view about the necessity for pursuing an expansionist

  597
  programme. I, too, believe that we should try to get better growth into the economy so that, without increasing rates of taxation, but out of increased revenue from the expanding economy, we can meet these enlarged needs for the ageing population and other social services.
  It is essential that we should move forward as quickly as possible to a period of expansion. I believe that it is ideal that we had a June election. It gives the Government plenty of time to assess the books and to find a solution to some of the problems which face them so that by the autumn they will be ready to come up with the first of what I trust will be many constructive proposals for getting the country moving again.
  What struck me as the most noticeable feature to be found everywhere on the day after the election was the feeling that a great cloud had been blown away and that a shadow had gone from the land. This feeling was epitomised by what happened to me when I was clearing away the mumbo-jumbo from my car in front of my hotel. A young man came across, wrung me by the hand and congratulated me, and told me that the previous week he had applied for emigration papers but now, because of the result, which he freely confessed he had not expected, he was writing to ask for his application to be withdrawn.
  I believe that that epitomised the new optimism which everybody felt at the fact that there had been a change of Government. There is a new hope and new confidence, but one thing that is certain is that the problems still remain. All that has changed is the Government, but I believe that this feeling gives us an opportunity which should not be under-estimated—an opportunity to cash in on the confidence that rests in the new Administration. I believe that this is the big lesson which ought to be learned from the results of the 1964 election. Never have a Government come into office with more good will than did the 1964 Government, and never was good will dissipated more quickly than by the Socialist Administration.
  At the time an experiment was being conducted by the present Home Secretary to try to break out of the stop—go cycle with a period of expansion. We shall
  598
  never know whether that experiment would have been successful—[An HON. MEMBER: "An expensive experiment."]—It was not an expensive experiment. In fact, it was criticised from the benches opposite before the 1964 election on the ground that my right hon. Friend was not carrying out a sufficiently large experiment, and it was only after the election, and because of the smallness of the majority and the realisation that there would have to be another election, that the difficulties were then exaggerated for purely political purposes.
  The fact is that until the results of the 1964 election became known the rest of the world was watching that experiment with perfect confidence. The present Home Secretary had made arrangements to support the £, and the point which must be emphasised is that it was not until confidence in the new Government had gone, and the then Prime Minister, now the Leader of the Opposition, confessed in a moment of unwonted candour that a new lack of confidence situation had arisen that the experiment began to fail.
  Whatever happens in Government, one of the most important factors is that of continuing confidence. Economic affairs are perhaps a most important single item for Government, because it is on this that all else depends. In addition to the need for continuing confidence in the Government, there is a need for various forms of incentive. People must be able to feel that not too much of what they earn by extra effort is taken away from them. There is a need for them to feel that if they take risks in business their reward for being successful is worthwhile. This need for incentives is vital in a private enterprise society.
  Finally, there is a need for expansion. A healthy economy is an expanding economy. An expanding economy may not always be a healthy economy, but if there is a healthy economy it is an expanding one. Having identified those three things—confidence, incentives and expansion—I go on to say that it is not usually possible to isolate them; they go together.
  That fact is not always realised. It certainly was not realised by the former Government. I agree that they poured far more money into the development areas than we did when we were in

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  office, but the harsh fact remains that in both Scarborough and Whitby, in my constituency, which is in a development area, the unemployment situation last winter was worse than it had been for many years. The answer is that people will not move into development areas—people will not build new factories, or put money into buildings which have been erected for them—just because they are given grants. Grants may help, but the basic question that determines whether firms go to development areas is the question whether they wish to expand; whether they see, at the end of the expenditure of new capital, the equipping of their factory and their training of labour, a profitable market for the goods that they will manufacture.
  Whatever regional policy we pursue it is essential to see that it overlays a strong expansionist policy throughout the rest of the economy. Only when the rest of the economy is expanding, and when people are seeking new places to set up factories, are the efforts made to attract industries into regions effective. If people are not on the move and firms are not expanding it is very much more difficult to attract them into the regions.
  A point was made about the regional employment premiums and about how much of that money is wasted. Curiously enough, I believe that it has not been wasted, because the essential fact of regional employment premiums is that they provide a continuing incentive to keep open factories in development areas, as distinct from keeping factories going outside development area. The policy of regional employment premiums is essentially a defensive policy, designed to cover a period of long stagnant trading conditions. I agree that the premium would no longer be necessary—indeed, it would be wasteful—in a strong and expanding economy, and with market conditions in which people were not continually having to decide whether to close this factory or the other.
  I want to deal with certain aspects of the incentive side of my argument. Because of the time factor I will restrict my remarks to the question of incentives for smaller companies. It is vital for the trading health of the country that a healthy, vigorous and growing private company situation should exist.
  600
  I am glad that, at long last, the anomalies regarding directors' remuneration have been swept away, but there are other distortions still acting to the detriment of the smaller private company. For example, I still do not like the new onus of proof in the matter of adequate distribution which now rests on the company rather than on the Inland Revenue. Second—this is particularly hard on private companies—the cost of dividends paid to shareholders is far too heavy, with not only corporation tax but the withholding tax having to be paid. If there is to be reduction in corporation taxation, I would prefer it initially—the overall effect would be the same—on the withholding tax from dividends.
  Incidentally, the difference between the remuneration paid to director-shareholders and the dividends paid to other shareholders is at present far too great. It is unfair and undesirable. In the case of directors' remuneration, where the shareholders can be made directors or given some other official capacity, they get the benefit of earned income relief and the very wide differential with regard to the starting of surtax and their remuneration is allowed for corporation tax. In the old days, the differences were not nearly so great.
  I have given the example before of a private company in which the directors, because they also held shares—this was not an isolated case by any means before the war—used to take modest salaries and take the rest along with the other shareholders by a high rate of dividend. That arrangement is no longer possible, because of the artificial differences which have been created by the tax situation. The difference between income on investments and income by way of remuneration has in many ways gone too far, and I should like to see it reduced.
  I am glad that the Gracious Speech referred to company law, which can also provide better information and make companies more efficient. While there is a strong case for sharpening the disclosure requirements in certain cases, I believe, as I said in our debates on the Companies Act, 1967, that there is a case for saying, particularly with regard to the small unquoted company, that the work required in preparing a declaration is out of all proportion to what may be required by the shareholders. In these

  601
  cases there are good grounds for reconsideration to see whether in those companies we do not ask for more information than is necessary.
  I am amazed how much my own constituency is affected by the Gracious Speech. The changes proposed in agriculture will, I hope, substantially improve the incomes of the farming community. I am glad that, already, we have made a move towards assisting the over-80s. Many people retire to my constituency, and I have been appalled by the amount of loneliness and hidden poverty that there is among many of those old retired people—on the face of it, still well-to-do. Only when one looks into their personal circumstances does one realise the loneliness and hardship they endure and how beneficial this legislation will be.
  I am one of the few hon. Members who sincerely regrets the sentence in the Gracious Speech dealing with the Boundary Commissions, because if changes are made in accordance with the original proposals, my lovely constituency will be cut in half, and I shall be sorry to lose either half.
  I look forward, as a result of the Gracious Speech in general, to a year of constructive and well-considered Government. I do not believe that we can do more than make a start in this first year, but I am convinced that during the lifetime of this Parliament the Government will make a profound difference to the attitudes and prospects of everybody in this country.
  8.56 p.m.
  Mr. Eric S. Heffer: In the few minutes available to me, I shall comment briefly on the speech of the right hon. Gentleman the Chancellor of the Exchequer and fire a few shots across the bows of the Government on the question of industrial relations, a topic which, although not strictly within the terms of the debate, must be considered in relation to the Gracious Speech in general.
  As always, I found the speech of the right hon. Gentleman extremely interesting and accomplished. However, he failed to provide any constructive policy whatever. Indeed, I was amazed by his remarks. Here we have a new Government with what is said to be a great burst of enthusiasm which, we are informed,
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  will prove how the economy can be got moving at a faster rate. Against that background, I was amazed to hear the Chancellor say that while demand and activity was sluggish, unemployment was high, wages and prices were rising and so on, "It is premature to take action to stimulate demand". After telling us what was wrong, I expected the punch line—of how the Government would solve these problems—but it was sadly missing.
  I have heard all this before. It is a record which in the past I have heard playing. I thought that this new Government would show us what should be done. Instead, we find the dead hand of the Treasury already, like an iron fist, clamped on to the occupants of the Treasury Bench, even before they are able to get any policies off the ground. Is this the sort of Government we are to have?
  I suppose that what has happened is inevitable. We had numerous election pledges, but they do not add up to anything. As my right hon. Friend the Leader of the Opposition said, we will wait and see precisely what is to happen. I have a feeling that when hon. Gentlemen opposite realise that there are no miracles to come from this supposedly young and enthusiastic Government—young and enthusiastic not in age but supposedly in effort—there will be a furious row. Hon. Gentlemen opposite will turn on their Front Bench and the scenes in this House will be nothing short of amazing. At least my hon. Friends and I will enjoy them.
  We are told that hon. Gentlemen opposite are loyal to the Government, but some of them are not all that loyal. Indeed, some of those who have not been here during the last few days have probably been at home sharpening their knives ready for the batte when it comes.
  The Government's policy on industrial relations is outlined in the Gracious Speech, in their election documents, and in "Fair Deal at Work". Before I go any further, let me say that the Government would be most wise to forget some of their proposals, because those proposals will not work and, in any case, are a recipe for industrial chaos. Let us look at one or two of these proposals in depth.

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  First, we have the proposed 60-day cooling-off period. We have heard of that one before. It was in a White Paper, certain aspects of which made some of us not very happy. The 60-day cooling-off period operates at present in the United States of America. It is part of the Taft-Hartley Act. The only possible reason that hon. Members opposite could argue for this cooling-off period would be that it stopped strikes or, when strikes were threatened, had the effect of making certain that they were brought to an early conclusion.
  The experience in the United States proves that the cooling-off period does nothing of the sort; that its effect is very much the opposite. In the United States they have more strikes than we have here, and certainly more per thousand days lost than we have. If hon. Members opposite do not believe me, let them read Professor Turner's book, "Is Britain really Strike-Prone?". They will see there the various statistics, and the conclusions that Professor Turner draws from the situation in the United States of America.
  In America they have had, of course, 60-day cooling-off periods which have been successful, but in very special circumstances. That has been when they have had what is known as a sort of Presidential seizure of the control of a particular industry at a particular moment when it appeared as though the economy of the country was threatened. The occasions when the Government there have taken over industries in those circumstances have been very rare.
  That is not what is proposed by hon. Members opposite. They want instead the straightforward Taft-Hartley line. I warn them that our trade union movement did not accept certain ideas contained in "In Place of Strife", and it will not accept this proposal for the 60-day cooling-off period. We shall fight—I might as well tell them that now. We shall fight that Bill, if it is brought in, line by line. The Government can put the Guillotine on it, but they might as well face the fact that they will get a real opposition.
  Another proposal is that of the secret ballot. A secret ballot has already been mentioned today—a secret ballot in
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  which the majority of the workers voted in favour of a strike. Hon. Members opposite think that this is a marvellous idea, but let them think again. In the first place, it is an interference with the rules of a trade union to decide that that union shall or shall not have a secret ballot. Secondly, if there is a secret ballot in which the majority decide that there shall be a strike, how do we call it off? Do we say at the end of a period, "The workers must now vote to see whether they will call off the strike"? If so, where does that put the trade union negotiators—the responsible leaders of whom hon. Members opposite always talk? If they thought seriously about it for five minutes hon. Members opposite would see that the secret ballot proposal can mean in some cases the prolongation of a strike, not bringing a strike to an end at an early moment.
  I am absolutely confused about the phrase concerning contracts being legally binding. In "Fair Deal at Work" the Government say that we shall have legally binding contracts agreed by the trade unions and the employers. During the election campaign speeches were made which seemed to suggest that only one side would have to agree. I take it that would be the employer's side. Is that the position? Everyone in this House would like to know precisely the Government's policy on this question. They are having talks with the Trades Union Congress. I wish them the best of luck, but if the Trades Union Congress was not prepared to accept the proposals of "In Place of Strife", why should it have a change of heart now that there is a Conservative Government? Why should it see a blinding light from Heaven and believe that it is all right under the Conservatives but would not be all right under a Labour Government? It should be clearly understood that these things will not be allowed to happen.
  I am very perturbed that we have had no detailed proposals from the Chancellor this afternoon in relation to the building industry. Hon. Members on both sides of the House know that what I am saying now is not new. I probably upset those on my own Front Bench on this question as much as I upset Front Bench Members opposite. I shall ask questions about what is being done for the building industry until the Government start doing

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  something about it. The industry and building workers are in a chronic position. Highly skilled workers in the industry are unemployed. They should be building homes which are needed by the people. I want them to be put to work, and at the earliest possible moment. I thought we were to have detailed proposals from the Government on this, but all we had was "It is premature to take action to stimulate demand." It is not premature to take action to stimulate demand in the building industry. I should like to know when we are to have a reduction of unemployment in that industry and the development of building homes which are required.
  What are the Government to do about the future of Cammell Laird's? Cammell Laird's got into an unholy mess under private enterprise and the Government had to bail it out. Certain things were done through the I.R.C. I heard an hon. Member say that it was time we abolished the I.R.C. It is a jolly good thing that the I.R.C. was in existence and could safeguard the job of workers at Cammell Laird's. Many of them work and live in my constituency. Are their jobs to be guaranteed and are the Government to give them support although they abandon this position? I am deeply concerned about the future of those workers on Merseyside.
  9.9 p.m.
  Mr. Anthony Wedgwood Benn: Mr. Deputy-Speaker, I want first to congratulate you on your appointment and to say to the Chancellor of the Exchequer how graceful it was of him to begin his speech by referring to those warriors who had spoken in these debates in past years and who had now left the House.
  I add my congratulations to no fewer than six newcomer maiden speakers who have spoken in this debate. If the Chancellor had heard the whole debate—he has heard a lot of it—he would know, and if he reads the rest of it he will find, that much of what has been said today from both sides has constituted an appeal for a greater amount of intervention by government in the affairs of the community. His hon. Friend the Member for Lancaster (Mrs. Kellett) spoke about the problems of the elderly. Two others from his own side—the hon. Members for Esher (Mr. Mather) and Southampton, Test (Mr. James Hill)—spoke about the need for
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  substantial government support for the aircraft industry.
  Two maiden speakers on this side of the House—my hon. Friends the Members for Sedgefield (Mr. D. Reed) and Whitehaven (Dr. John Cunningham)—drew attention to the value of the development area policies. My hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) spoke very movingly about the social problems in his own constituency.
  If a debate on economics begins to give a Member the feel of the House, there certainly was not exactly a majority for the sort of tax cuts and cuts in public expenditure which the Chancellor has promised us in the autumn. My experience as a candidate—this is said not in the heat of an election and during my ordinary Parliamentary work; I am sure that it is true of many hon. Members—is that the consequences of industrial change are such that there is growing pressure for more Government help, assistance or support of one kind and another.
  The debate opened with a very interesting exchange in which my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) disposed entirely of the idea that there was an economic crisis and that this was the reason the Conservative Party won the election. The Chancellor read out some words which he had used on the B.B.C., very skilfully prepared no doubt to protect himself from this charge after the election. He left the Prime Minister completely out on a limb in speaking about a national emergency and the probability of devaluation. Indeed, the Chancellor himself, having coined the phrase "stagflation", which he evidently likes, announced that this horse was one that he intended to run himself, at any rate for some months ahead. There was in the debate today the beginning of the awakening by the public to the fact that the campaign upon which the election was won, at any rate as concerns economic policy, did not stand close examination.
  I turn to another aspect of the Gracious Speech, this time in respect of industrial policy, and deal with some of the consequences which might flow from the words used in the Speech about that. I cannot do this without congratulating the Minister of Technology and the Minister of State, Treasury, who is to wind

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  up the debate, and all the other Ministers who will be operating in the industrial sphere.
  We have a new Government; we have new Ministers; we have a new House. The only thing that is the same are the problems. It is to the problems that I want to direct the attention of the House. The task of maintaining a surplus, of securing growth, of achieving full employment, of combining this with stable prices, and of maintaining the necessary level of social spending, is a very difficult task which no Government of either party have consistently been able to achieve in any period of their stewardship since the war. My hon. Friend the Member for Liverpool, Walton (Mr. Heffer) spoke as if it were simply the dead hand of the Treasury. If it were as simple as that, somebody would have moved the Treasury, or those whose dead hands it was that were preventing these problems from being solved, into the morgue.
  It is more than a question of economic management. It is a question of industrial performance against some stiff competition from other countries. It is in this area of the Gracious Speech that I come to the words which had a ringing tone and which remind one of an election manifesto—
  "liberating industry from unnecessary intervention by Government "
  and
  "vigorous competition is the best safeguard for the consumer".
  If I may go back—I hope that it is not considered unfair—to the literature provided during the election campaign—the words I read are these:
  "The Conservative Party believes wholeheartedly in free enterprise and in the market economy".
  Any Conservative candidate elected on that slogan will have now to turn his mind to the problems which will confront the Government when they try to apply the principles of the market economy. If I do justice to the Government's argument—we had it many times when they were in opposition—it was that if only the Government could get off the backs of industry, reduce taxation and diminish the connections between Government and industry, this marvellous price mechanism would produce the desired result. The right hon. Member
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  for Leeds, North-East (Sir K. Joseph), who was widely tipped to become Minister of Technology but who, no doubt, partly because of his speeches, had to be diverted elsewhere, described it as civilised capitalism in which competition converted business men into public servants. Let us apply this to one or two of the problems which will confront the Government.
  I turn, first of all, to the development areas. There is to be a debate on this subject on Thursday and I do not want to pre-empt speeches which will be made then, except to say that the problems of the development areas are a classic example of non-intervention and the forces of competition. It is exactly because competition knocked out the older industries in the development areas that we have a problem there at all. It would be quite ludicrous for anyone seriously to suggest that the remedy for the development areas is for the Government to get off their backs. The truth is that if the problems had been anticipated rather earlier than they were, this very difficult problem of persistent unemployment in the development areas might have been averted.
  Mr. Dan Jones: And the intermediate areas.
  Mr. Benn: And the intermediate areas. However, I do not wish to anticipate the full debate on this subject. I am coming on to the aspects of development area policy which will need to be announced by the Government. We were told that the I.D.C. policy was to be reviewed. Our analysis of this is that about 300,000 jobs were created by the application of the I.D.C. policy in the development areas from 1965 to 1969. If a review of the I.D.C. policy does lead to a weakening of their application, the problems of unemployment in the development areas will become a great deal worse. If the policy of the advance factories—not referred to in the Gracious Speech and, I think I am right in saying, not referred to in the manifesto either—were to be abandoned, for it is a form of intervention, the opportunities for new job creation in the development areas would diminish, too.
  Indeed, if the Chancellor, who has announced that he is looking for substantial savings in public expenditure by the

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  autumn, were to decide to reduce the £300 million spent on development area policy to anything like the level at which it was left by the previous Conservative Government, of £34 million—about one-tenth of the level which it had reached under us—he would be striking a blow at the principle, which also received mention in the Gracious Speech, of maintaining full employment. [Interruption.] The right hon. Gentleman, in his opening speech, said that there would have to be severe pruning of public expenditure, and we shall want to see whether this makes any difference to development area expenditure.
  Mr. Patrick Jenkin: I am sorry that the right hon. Gentleman still indulges in that wholly false comparison in the figures that he quoted. He left out of account the tax reliefs which were operating before 1964 in the development areas.
  Mr. Benn: The figure is still enormously greater. I say this to the right hon. Gentleman: if he says that the support given to the development areas does not count as public expenditure, why does he put in the manifesto the statement that the Labour Government were spending large amounts with very little regard to the practical effect? Why have leaders of the Conservative Party been round the development areas describing investment grants in a way in which they were not described when they took the form of investment allowances? It is true—we have debated this in the last few months—that the problem of unemployment in the development areas is not solved. But, far from being a case of a reduction in Government assistance, this may well be a case for the greater strengthening of the effort.
  I underline what was said by my hon. Friend the Member for Sedgefield about the importance of confidence in respect of development area incentives, and this point was taken up by the hon. Member for Scarborough and Whitby (Mr. Michael Shaw), who made the fair point that unless the general expansion were combined with the development area incentives, we could not get the full benefit of them. But if, at the very moment when expansion is beginning—albeit slowly, but beginning,—confidence is shaken in the development area discrimination incentives, all the good work
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  done in building up these policies over the years can be destroyed overnight. I hope that the Government will have this consideration of speed very much in mind when they consider the review of regional policy announced yesterday by the Minister of Technology. From our side, we shall watch with vigilance and, if there is any reduction in the support, we shall be the first to draw it to the attention of the House.
  I turn to another aspect of Government relations with industry, to which little reference has been made today but which is of great importance. I refer to the type of intervention necessary when one is dealing with an older industry affected by technical change. I could give many examples, but I shall confine myself to two. I take, first, the coal mining industry, an industry which has experienced a rapid rundown because of the competition of new fuels, and, in part, because successive Governments have decided to make a special point of the development of nuclear power. The discovery of North Sea gas also has played some part in it.
  The problems of the coal industry, which affect many tens, if not hundreds, of thousands of miners and their families, are the product of the market economy to which the Government have declared their adherence. It is a matter of essential national policy that, where an industry like the coal industry is badly hit by technical change, the Government should assume responsibility for softening the effect on the people concerned.
  In the first day of the debate on the Address, my right hon. Friend the Leader of the Opposition asked the Prime Minister whether the Coal Industry Bill would be presented to the House in the present Session. It was referred to again by my right hon. Friend the Member for Birmingham, Stechford today. It was a Bill presented by the previous Government, not opposed in the House, which would provide for support after next March for the social costs and to carry redundancy payments forward. I hope that we shall have a clear statement from the Government about that Bill before very long.
  Sir G. Nabarro: The Bill to which the right hon. Gentleman refers was presented to the House at the end of March this year. It had a Second Reading on 9th April.There were seven weeks

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  between 9th April and 29th May. It was an agreed Measure. It could have been taken through by the previous Government in 48 hours. Why was it not taken through if it were so important?
  Mr. Benn: The problem was simply one of getting it through the Committees of the House. If the hon. Gentleman says that it was a wholly non-controversial Measure, why do his Front Bench have difficulty in announcing their support for it? I am seeking only a reaffirmation from the Conservative Party, now in power, that the Coal Bill will come forward as an agreed Measure. I make no more of it than that, except that I cite it as an example of intervention.
  Exactly the same applies to the shipbuilding industry. My hon. Friend the Member for Walton, referred to Cammell Laird. I could refer to Palmers Yard at Jarrow on the ship-repairing side. My right hon. Friend the Member for Stechford referred to Upper Clyde Shipbuilders. Here is an industry which certainly did not run into difficulties because of Government intervention. Practically nothing was done for the shipbuilding industry until the Geddes Report was published in 1966. Here is an industry in which it is possible, by good management and industrial reorganisation—this has been proved to be so—to achieve an improved performance in export markets and a general strengthening at home. It could not have been done without Government support. If one takes the crude view that, whenever an old industry runs into difficulty, the best thing to do is to cut one's losses, that is to leave out of account that the Government have a creative part to play in cases of that kind.
  It is not really a question of Government intervening in industry in those two cases. What actually happens—and the Minister of Technology will discover this if he has not already done so—is that industrial problems intervene in Government, that the Minister finds himself confronted with a changed situation. The latest is ship-repairing, where the question which he has to decide is whether he will brush it aside and say, "Let competition play its part", or whether he intends to play a creative part.
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  It is not only with old industries that intervention of this kind is necessary. The Minister of Technology has some very difficult decisions awaiting him on the aircraft industry side, because without Government intervention we should have no aircraft industry in this country to speak of. The reason is very well known. The aircraft industry of every country in the world is sustained either by its defence spending or direct or indirect support from foreign governments. What the Government have to decide here is which criteria they should apply in trying to make sense of these very difficult decisions.
  The hon. Member for Horsham (Mr. Hordern) said that what is required is a rational central decision about which areas we should move into. I beg him not to follow that line. The truth is that Government should support in the aircraft industry only those projects with a reasonable prospect of winning a share of the world market, and should not themselves pre-empt a decision as to what industry should do. Some of the least successful examples of Government intervention have been those which flowed exactly from the principle the hon. Gentleman stated, that Government should decide what should be done and then tell industry to get on with it.
  Mr. Hordern: If the right hon. Gentleman reads my remarks in HANSARD he will see that I was not confining them to the aircraft industry. I was referring to total Government expenditure over the whole field, whether support for the consumer industry, micro-circuitry or nuclear energy—the whole thing.
  Mr. Benn: My arguments apply over the whole field. The question of a nuclear merchant ship has come up. A very careful study has been made of this. A statement was made by the Joint Parliamentary Secretary to the Ministry of Technology, the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), the other day, with which I entirely agreed, that to build a nuclear merchant ship as a conscious act of policy when there is no reason to believe that it would be economic does not make sense of intervention.
  The point which I am making is that whether we are dealing with the older or the newer industries Government can be

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  effective in working with industries only if they are working either on the basis of old skills which can be preserved and put to better use or on the basis of support for a project that is likely to succeed. There was certainly no interest on our part in providing money that might have been available from other sources. One of the things which gave me greatest pleasure occurred when we were asked to support a very big computer-leasing project. It came to us because no other source of finance was available. When we examined it and said that we would support it, immediately the resources from the City became available to take on that responsibility, because the City knew that the idea had been properly vetted by us.
  It is certainly no part of the object of intervention that Government should assume responsibility for financing the whole of development. But I would say to the House—and this is what makes nonsense of the phrase "liberating industry from unnecessary intervention"—that it is impossible for a modem industrial society to adjust to the changes made necessary by technical change unless it has some instruments available to assist with restructuring, as has occurred in the motor industry or the electrical industry, to bring about a partnership between the public and private sector, as is occurring in atomic energy, or to deal with some of those extremely difficult issues which involve major foreign investment.
  It is exactly here that I.R.C. has a rôle to play. I am very sceptical about the idea of bringing businessmen in to run Governent Departments, as if that were somehow the right way of handling the matter. The truth is that the skills of the industrialists are best applied in dealing with the problems of industry. What we have succeeded in doing through the advisory committees, and even more through the Shipbuilding Industry Board or the I.R.C., is to get the very best advantage out of the industrial skill available to us in handling those industrial negotiations that are an essential part of the Government relationship with industry. It would be a great mistake to suppose that the answer lies in bringing in industrialists to do the work of civil servants, just as it would be wrong, for the reasons I have given, for civil servants to be pre-empting decisions
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  which ought properly to be taken in industry.
  I move to one or two other areas in which Government intervention, if that is the word that we have to use, is necessary. I am thinking particularly of economic planning. This, I know, is a matter of some controversy between the parties. Writing about the Japanese economy, the Economist had this to say:
  "the ultimate responsibility for industrial planning, for deciding in which new direcshould try to go, and for fostering and protecting business as it moves in these directions lies with the government".
  —that is, the Japanese Government.
  In a remarkable article about the operations of the Japanese economy, the economy of one of our major industrial competitors, the Scientific American in a recent edition made it clear that one of the reasons for the success of the Japanese economy was the very close relationship between industry and government in Japan. It would be very foolish if the Tory Party, which has often argued that trade unions should abandon the cloth cap image and the idea that there is a permanent and irrevocable hostility between the two sides of industry, were to foster the idea that there is an absolutely ineradicable hostility between management and government in economic planning. All the evidence—and this comes from all the work, starting at N.E.D.C. right to the level of co-operation in industry itself—suggests that the problems of running a modern economy are so complex that it is essential to provide the basis of a genuine partnership between the two sides of industry and Government.
  There is a marked contrast between the words of the Gracious Speech and its attitude towards relations between the Government and industry, or even the attitude to competition, and the attitude which comes from certain modern management experts who write and lecture on these subjects. I was struck by one in the Financial Times a couple of months ago, 12th March to be exact. The head of Professional Development and Education Operation in General Electric in the United States, speaking about the modern approach to management, said that
  "the old criteria, based on the assumption that hard work must reap its own reward, or that American society thrived on competition, would be replaced by new ethics and new

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  management able to deal with the conflict and fully aware of the social and political factors."
  Reading the words of the Gracious Speech, one is constantly struck by the fact that it is still based on the old idea that the less the Government have to do with industry the better, and that any linkage is undesirable. In practice, this cannot be done and this Administration, like any other Administration facing its responsibilities, is bound to look again at the attitude which it expressed in its manifesto.
  For example, it is inconceivable today that the trade union movement should be left entirely in the position of being the people with whom one dealt about industrial disputes instead of about the whole range of industrial policy. The rôle of the Government in stimulating exports, either through the work of the Board of Trade or through technological agreements in which the C.B.I. and the Government work closely together, is an exercise in partnership. The rôle of the Government in monitoring and supervising international companies, now so big and powerful that they tower over national Governments, involves a degree of intervention which hitherto has never been thought necessary by any party in this House. Relations between individuals and industry on the environment, which constitutes a major re-statement by human beings of what they require from industry in terms of a cleaner environment and less congestion, is another example. All these things involve a participation by Government in industrial policy-making that is well beyond anything alluded to in the Gracious Speech. The Government, as a customer, as a supervisor, as a manager of research, have an enormous rôle to play in shaping the development of industry and we shall watch with great interest to see how the Government interpret the phrase in the Gracious Speech.
  May I conclude by saying that if we are to make sense of the period of industrial and technical change which is going on far more rapidly than at any other time in our history, the Government will have to do better than to use the old language of Adam Smith and will have to try to build up a partnership with management, with trade unions and with science, to provide the basis for growth
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  not only in the development areas but in the economy as a whole. Even if they dismiss my arguments, they will in the end be judged by the public according to whether they are capable of achieving that partnership.
  9.35 p.m.
  The Minister of State, Treasury (Mr. Terence Higgins): May I first express my personal thanks to the right hon. Member for Bristol, South-East (Mr. Benn) for the congratulations which he was kind enough to extend to me. I believe it is true that economic turning points are of two kinds, those which can only be discerned over a long lapse of time by careful statistical analysis and, on the other hand, those which even at the time can be seen to reflect a fundamental change in policy. It is perhaps true to say that the debate marks a turning point of the second kind.
  It is not surprising that the House has perhaps found some difficulty in its change of rôles and that there has been a natural tendency for hon. and right hon. Gentlemen opposite sometimes to make the kind of speeches that they have been making in government in recent years. This is something which we must understand for the moment. Certainly the right hon. Gentleman's speech was very similar to many which we have heard him make in recent times, and we must appreciate that it reflects very plainly a fundamental difference in approach between the two sides of the House, with which I shall seek to deal in a few moments.
  First, it is my pleasant task to join with the right hon. Gentleman in extending our congratulations to no less than six hon. Members who have made their maiden speeches today. They all spoke with enviable fluency, they all expressed deep concern for the impact which economic policy inevitably has upon their constituencies. The hon. Member for Sedgefield (Mr. D. Reed) and the hon. Member for Whitehaven (Dr. John A. Cunningham) stressed the importance of regional policy about which we are deeply concerned. My hon. Friend the Member for Esher (Mr. Mather) stressed the impact of economic policy on the environment as it was reflected through social costs in the problem of aircraft noise. The hon. Member for Southampton, Test

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  (Mr. James Hill) stressed the need for concern about social problems, and my hon. Friend the Member for Lancaster (Mrs. Kellett), in an admirable speech, stressed the concern which we ought to have for the elderly. The hon. Member for Manchester, Ardwick (Mr. Kaufman) was concerned equally about housing problems.
  It is right and proper that these points should be stressed, because they reflect the fact that the solution of these problems must depend fundamentally upon our economic performance. The whole question of economic policy is therefore central to all the social and environmental problems which they raised. It is therefore important that we should concentrate on the central problem, and that is what I would like to do in my remarks tonight, although I should add that there are hon. Members opposite, particularly the hon. Member for Heywood and Royton (Mr. Barnett), the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and the hon. Member for Liverpool, Walton (Mr. Heffer), who continue to make exactly the same speeches as they have made for the last five years. I hope that they will continue to do so, because I think, with respect, that they make a major contribution to the thought about what is the right policy. It is true to say that the essential economic policy with which we ought to concern ourselves is that of achieving our basic economic objectives. The right hon. Member for Bristol, South-East raised a number of issues which more fairly fall to be answered in the debate on Thursday when we shall discuss the Opposition's Amendment. This is a continuing debate and I want to preoccupy myself with some of the points which the right hon. Gentleman raised, particularly the point of economic strategy.
  The debate opened today with the crucial question of analysis of the economic situation in which we find ourselves. There is a fundamental difference between the two sides of the House. The other day the Leader of the Opposition quoted his own remarks and maintained that my right hon. Friend the Prime Minister found himself in the strongest position economically that any Prime Minister in living memory has taken over. However, my right hon. Friend the Chancellor of the Exchequer was
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  right in pointing out that we have inherited some very serious economic problems. If we are properly to appraise the present situation, we must look at all the economic indicators and not select one or two, as right hon. and hon. Members opposite have tended to do.
  Our economic objectives must be, first, to achieve a high rate of economic growth; secondly, to maintain a high level of employment; thirdly, to control inflation while maintaining free collective bargaining; and, finally, to achieve a satisfactory balance of payments. Taking all these objectives, it is surely true to say that we have grave cause for concern.
  Let us look at the matter in historical context. We pointed out following devaluation that there was considerable procrastination before effective measures were taken to back it up. Earlier today, the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) said that he had had to take over after only 18 hours as against 18 days; but nothing effective was done to back up devaluation for a very considerable time, and in some ways we are still suffering from the consequences.
  Speaking in the debate on the Address last year, my right hon. Friend the Prime Minister compared the then Chancellor of the Exchequer to a juggler who had five plates in the air, representing the objectives which I mentioned a few moments ago. He pointed out that the Labour Government's performance on all of them was extremely poor. They had achieved an effective improvement in the balance of payments one year in three. There were over ½ million people out of work for 25 out of 26 months. Prices were up 23 per cent. Free collective bargaining had been jeopardised as a result of their prices and incomes policy. Economic growth was half what it had been for the corresponding four years when we were in office.
  However, since then there have been fundamental changes, and I want to look at the present picture. Since the last Queen's Speech we have suffered fundamentally from what has been described as the wages and prices explosion. We have a strong balance of payments, and we fully recognise the advantage of it. But the other economic indicators must be taken into account. The right hon. Member for Stechford today was

  619
  inclined to gloss over the other questions with which we must inevitably be concerned and with which the electorate clearly was deeply concerned during the recent campaign. The right hon. Gentleman rather skated over the fact that the level of unemployment is the highest for 30 years, with all that that means in human unhappiness and wasted resources. It is not enough for him to say, "The level is too high, but we should not be seriously concerned about it". That is indeed a serious matter which it is important to tackle.
  Secondly, I believe that it is right and proper that we should be concerned about economic growth, because we have found that between the second half of 1968 and the second half of 1969 G.D.P. in real terms has risen by only 2 per cent. My right hon. Friend the Chancellor of the Exchequer pointed out that this compares unfavourably with the previous rate of economic growth, so that certainly we ought to be deeply concerned about it. It is our intention to improve that situation by adopting positive policies, with which I shall deal in a few moments.
  Another point which we must stress strongly is that, for reasons which we spelt out in the debates on the Budget this year, the average rate of increase of wages and prices has been over 5 per cent., with a further rise in the first five months of this year of over 3½ per cent. Clearly we cannot regard this situation as satisfactory. It must inevitably give grave cause for concern.
  This is to look at the picture at a moment of time. This is, so to speak, to take a still photograph of the situation. If we are truly to appraise the situation, we must look at it dynamically. What is worrying at present is the rapid rate of increase of wages and prices which clearly follow from the previous Administration's policies.
  I thought it rather extraordinary in many ways that the former Chancellor of the Exchequer should seek now to attack the proposals which we are making when it was a matter for comment during the Budget debates that he had failed to make any serious analysis of the change in our economic structure which appeared to have been brought about by the Government's policies so that we were suffering from severe cost inflation. This re-
  620
  fleeted what I can only call a complacent attitude by the right hon. Gentleman during his period in office. We on this side of the House cannot regard that as a matter which can be left unanalysed.
  In the debates on the Budget we sought to analyse precisely what had happened. I referred then to the basic problem which seemed to have arisen because there had been some change in the structure of the economy on the relationship between unemployment on the one hand and prices and wages on the other. I described it at that time as a disappearing Phillips curve, a curve which in the past has shown what this relationship is. That being so, we need to look carefully at the situation and we ought to put forward proposals related to the dynamic situation in which we find ourselves. But I do not believe for a moment that we can look at this situation now and say that it ought not to give us cause for concern. Therefore, we put forward proposals which are clearly referred to in the Gracious Speech.
  I fully endorse what was pointed out by my right hon. Friend: that fiscal and monetary measures must march hand-inhand. My right hon. Friend referred to the previous Government's statement as a blinding glimpse of the obvious. [Interruption.] The hon. Gentleman says that this is obvious, but it was not obvious to the previous Administration for a considerable period. Indeed, I am sure that many of our problems are a direct result of the previous Administration having failed to get that blinding glimpse of the obvious early enough, despite the fact that we brought it to their attention on many occasions.
  We must bring together those two aspects of policy, but we must also pay particular attention, as my right hon. Friend the Chancellor said, to the situation in the public sector. This is not a question which can be looked at in such a way as to say that we must discriminate. We have made it clear that the Government have a responsibility in this area, and I find it extraordinary that both before the election and subsequently right hon. and hon. Gentlemen opposite seemed to be implying at times that the Government do not have responsibility for what happens in the public sector. We are sure that we have a responsibility there, and we are determined to discharge it. If we take these three aspects of policy together, I believe that they present

  621
  serious proposals which we can put forward to help us to achieve the objectives which I stated earlier.
  The next matter to which I come is that during the course of the campaign some reference was made by many right hon. and hon. Gentlemen opposite to the fact that it was impossible effectively both to cut taxation and to maintain the level of public expenditure. Many of them were inclined to say that the sums which we were putting forward were not going to add up. In this respect it is important to look at the situation which arose between 1951 and 1964. During that period we cut tax rates by £2,000 million, and at the same time we more than doubled public expenditure. What we have done before in this respect I have no doubt we can do again. Unfortunately, we have to do it again because during the period of the previous Administration tax rates went up by about £3,000 million, and it was perhaps significant that the right hon. Member for Stechford did not seek to deal with the question of the level of taxation. We on this side of the House believe that this again is a matter about which we ought to be concerned. We are convinced that by the adoption of positive policies it will be possible for us to do again what we did before.
  It is a triad of policies that we need to pursue in this respect. First, we are convinced—and this reflects the difference between the two sides of the House—that if we are to get the economy going again the first priority must be to reduce direct taxation and to restore incentives to the people of this country. This is so both for individual and for companies. If we do this, I am sure that we shall achieve the rate of economic growth which hon. Gentlemen on both sides of the House, and particularly perhaps those on the third row above the Front Bench opposite, have asked us to do. It is essential that we should do this, and in order to give us sufficient headroom in this respect it is important that we should carry out the review of public expenditure which my right hon. Friend the Chancellor of the Exchequer has already initiated. This is the first plank on the platform.
  Second, we are convinced, as we were between 1951 and 1964, that it is essential to encourage savings. Many of my
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  hon. Friends have stressed the importance of savings for finance for investment in the private sector. We are convinced that it is important to do this because, as has been said many times in the House, if one can put forward positive proposals and create a climate which will encourage saving, this is a voluntary postponement of consumption, and it releases real resources for investment. The policy of the previous Government all along the line was to increase taxation rather than encourage savings. The figures over the years demonstrate this very clearly, and it is likely that the reductions in direct taxation will also help us achieve our objective. Finally, as we have pointed out, if we are to achieve our objectives it is vital to attain a more rapid rate of economic growth.
  As was clearly reflected in the speech of the right hon. Member for Bristol, South-East there is a fundamental gulf in policy between the two sides of the House. The party opposite has a policy of higher and higher taxation and more and more Government intervention, with the Government taking more and more resources into their own hands and deciding which individuals or industries should be given a hand-out, as against our policy of reducing the level of direct taxation—
  Mr. Benn: How fundamental is the divide? Will the Government do anything to help the shipbuilding industry, the development areas, the aircraft industry or other industries whose problems are brought to the Government because of rapid changes?
  Mr. Higgins: We have made our regional policy quite clear. It was clear from the right hon. Gentleman's speech that he was dealing with the Amendment that will be debated next Thursday. It is right that individual items should be dealt with by my right hon. Friend when he replies to that debate. But there is a tremendous gulf between the two sides. We do not accept the criterion that the right hon. Gentleman is now suddenly putting forward that we must be concerned with historical trends and the question whether projects make a profit.
  The classic case of intervention by the right hon. Gentleman was the case of the Beagle aircraft, when he backed his commercial judgment against the judgment

  623
  of the market, with the result that a substantial sum of public money was wasted. That was because he believed that he knew better than the market. We debated this matter at length. This is a clear case of the kind of operation that the right hon. Gentleman seeks to put before us as something we should support. We do not believe that this is the right approach. We fully accept the need for a regional policy, and we always have done. My right hon. Friend the Prime Minister has continually stressed his commitment to it.
  Mr. Benn: Without the Government's rÔle in the cases of Shorts, Harland and Wolff there would have been a major tragedy in Northern Ireland. Is that the sort of Government intervention that the hon. Gentleman would oppose?
  Mr. Higgins: That is a detailed point, which should be dealt with in the subsequent debate. The right hon. Gentleman has been speaking to his Amendment. On the overall point, we have no doubt that the continual increase in taxation that the party opposite promoted for the last five years, combined with its interventionism, has resulted in the overall economic position of the country suffering. We have no doubt about that. We fully recognise the need for the Government to intervene in the overall management of the economy. The crucial thing is that we should set a framework within which private enterprise can operate, invest and contribute to the growth of the economy.
  I fully appreciate that this is the difference between the two sides of the House. As my right hon. Friend said in opening the debate, we are prepared to be judged on the results. There is an ever-greater tendency on the part of hon. Members opposite to expect us to announce our policies immediately. A few days ago the Leader of the Opposition seemed to imply that we would implement our entire manifesto proposals almost instantaneously; indeed, not only instantaneously but simultaneously. The fact is that this will carry us through the life of a Parliament. We are convinced that the difference in principle between the two sides will be clearly reflected in our economic performance, in terms of unemployment, the cost of living and economic growth.
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  On that basis, in the light of the proposals put forward in the Queen's Speech, and on the basis that my right hon. Friend adopted in putting forward specific extracts from our manifesto as firm commitments, I have no doubt that when the time comes for us to be judged on our performance we shall find a radical improvement in the level of achievement experienced under the last Administration.
  Debate adjourned.—[Mr. Hawkins.]
  Debate to be resumed Tomorrow.

  THE FUTURE DEVELOPMENT OF THE HIGHLANDS AND ISLANDS
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hawkins.]
  10.0 p.m.
  Mr. Robert Maclennan: I am very glad of the opportunity in this first Adjournment debate of the new Parliament to raise the problems of the regional development of a part of Scotland which seems susceptible to damage if its particular problems are not understood and acted upon by a Government genuinely committed to regional development. It is, of course, widely understood that the development of the Highlands of Scotland depends upon national policies pursued by the Government for the country as a whole and upon a general level of prosperity. Therefore, I should like to refer to what has already been said by the incoming Government in the last week about regional policy.
  The Gracious Speech confirms the commitment to promoting an effective regional development policy, but, regrettably, when Ministers have been asked to explain their thinking on this, they have been unable to do so. When questioned directly, they have evaded the issue. This afternoon, I asked the Chief Secretary whether the Government proposed to use fiscal means to promote regional development. One might have thought that the Government had already made up their minds in view of the many assertions during the election about the imminent ending of the selective employment tax—a matter of particular importance and interest in the Highlands and Islands. But we were fobbed off with

  625
  a promise that the Government's intentions would be revealed in due course.
  We were also told, however—perhaps more significantly—by the Chancellor that he did not intend to introduce an autumn Budget, but he retained the right to concern himself on a continuing basis with demand management. He made it plain that there was no intention to alter taxation except in this respect. In other words, the Government have already ratted on their promise to remove selective employment tax at the first opportunity.
  I use that strong language because, during the Finance Bill debates last year, I asked what the then Opposition meant by "removing selective employment tax at the earliest opportunity". I said that it was an open-ended commitment which would allow them to do little or nothing, or something, on any date they chose. The present Chancellor rebuked me then and said that he intended to remove it at once—as soon as his party came to office. This apparently is not to be done. Any changes in taxation in the autumn have simply to be for managing demand and not to relieve those parts of the country, such as the Highlands, which have felt the burden of the effects of the tax. This is an astonishing reversal of policy and of promises made by Conservative candidates in six constituencies in the Highlands during the election campaign.
  That is not the only method of affecting the level of economic activity in the Highlands. We have had further evidence of the Government's lack of preparedness to take office, and this evidence has come in Answers to Questions in the last week.
  One naturally does not expect an incoming Government to unfold all their policies within a week of taking office. However, hon. Gentlemen opposite made a number of commitments, promises and firm assertions of policy in the years before attaining office. It is right, therefore, for us to tax them not only for having failed to bring forward coherent policies during their admittedly short period in office but for apparently being prepared to throw into the melting pot the whole issue of regional development.
  Yesterday I asked the Minister of Technology to give his view about the issue of industrial development certifi-
  626
  cates. I asked whether the Government intended to operate I.D.Cs as restrictively as the previous Labour Government. I asked whether there was
  "any intention to alter the criteria to ease up on the issue of development certificates in the already highly industrialised parts of the country?"
  The right hon. Gentleman gave this astonishing reply:
  "Industrial development certificates will continue to be freely available in the development and intermediate areas. Elsewhere, applications will be judged on their merits, taking account of the nature of the project and the needs and resources of the area concerned".—[OFFICIAL REPORT, 6th July, 1970; Vol. 803, c. 303.]
  If I read that Answer aright, it represents a sharp difference in emphasis from that of the Labour Government, who operated the I.D.C. policy most restrictively, so that any firm which required more than 10,000 sq. ft. of factory space found it virtually impossible to expand in already highly industrialised parts of the country.
  This new commitment by the Minister of Technology allows an altogether wider set of considerations to apply. While I welcome the presence of the Under-Secretary on the Front Bench opposite, I trust that he appreciates that this new state of affairs will be viewed with some alarm in Scotland.
  The hon. Gentleman might care to refer to the Report of the Select Committee on Scottish Affairs, a Committee of which he was a member. He will recall the considerable importance that was placed by every member of that Committee, including himself, on the strict refusal of I.D.C.s to firms seeking to expand or set up in industrialised parts of the country, and he will realise that this has been a concomitant part of the general economic policy.
  Again, that is not the only other general consideration which gives rise to concern about the future regional policy of the Government. Yesterday I asked the Minister of Technology about the future of industrial development grants and his Answer likewise gives rise to anxiety. He reaffirmed that his Department was considering the whole question of the working of the present system. We knew that it was under review, and evidence of that fact was given to the Select Committee of which I have spoken.

  627
  The right hon. Gentleman added that if there were anxieties on the part of particular firms, they might be cleared up if they wrote to him seeking clarification.
  I hope that the hon. Member for Ayr (Mr. Younger), who has responsibility for development in Scotland, will draw to his right hon. Friend's attention, before this review is complete, the attitude of the C.B.I. in Scotland to the importance of continuing industrial development grants. I hope that he will point out to his right hon. Friend that there is virtual unanimity in Scotland that this is a more attractive way of assisting developing industry than what has been put forward as an alternative.
  That is particularly true of the Highlands, where industry, for the most part, when it comes in, is not established industry returning large profits upon which taxation reliefs can be beneficial. Most of the companies which come in, as the hon. Gentleman well knows, are small and find it quite difficult to get themselves established, and are in need of cash grants which will enable them to carry through their early years of operation. Frankly, the abolition of this grant would be extremely damaging to the Highland economy as, I believe, to the economy of Scotland as a whole. I hope that the hon. Gentleman will fulfil his function of a Scottish Minister by passing on what I believe is the consensus of Scotch opinion on the matter.
  But I think it right not to confine my remarks in a short debate to general considerations of regional policy—alarming as are some of the attitudes that have been expressed on the opposite benches to this question—but also to turn to the more specific question of the future of the Highlands and Islands Development Board—a body which the present Government took no delight in seeing set up, and which they opposed in the difficult early years of its operation, a body whose powers the Conservative Party sought to have curtailed before they were established, a body whose early operations were derided and scorned by members of the present Government on the grounds of financial incompetence, a body, confidence in which the Government sought to undermine from its earliest years, but a body which is now established in Scotland, and which, from its fourth Annual
  628
  Report, which was published this last month, can be seen to have transformed both the economy of the Highland area and indeed, the attitude of the people living in the Highlands to the prospects and possibilities of development.
  What has happened in the Highlands in the course of the last four years is that the people who are living there are no longer prepared to accept that the Highlands shall be the sporting playground of the rich. The friends of the hon. Gentleman who sit with him on the Treasury Bench, who have accustomed themselves to taking their holidays in the Highlands, will no longer be allowed to stand in the way of development in the North—
  Mr. Hector Monro: Really!
  Mr. Maclennan: The hon. Gentleman may say "Really", but it just shows how little in touch he is. I speak with some experience of the problems, and I know that he represents a Border constituency, whose problems may be quite different, for all I know.
  What is quite plain is that the Highlands and Islands Development Board is now established as a body with wide powers, and that it has made an important impact on the economy of the Highlands. It is important that these powers be backed up by a Secretary of State for Scotland who is willing to ensure not only that the Board has the financial powers but has backing in the use of its compulsory powers to acquire land, to interest itself directly in the establishment of appropriate industries, to follow up the initiative it has shown in considering the feasibility of directly setting up industries itself, as it has done in the case of the Shetland woollen industry, and in ensuring that the range of tools which it has for the job is always apt.
  Much has been done, even in the course of the last four years, to adapt the Board to its tasks. I was fortunate in being able to pilot through Parliament a Bill to extend the range of its powers to enable it to have an equity shareholding in operations within the Highlands. But it may well be that the range of powers which the Board at present enjoys are inadequate to the immense task it has. I know that the Board has been pressing

  629
  the Secretary of State to raise the limit on that sum of money which it can directly and of its own volition invest in enterprises in the Highlands from the present increased limit of £50,000 to a limit of £100,000. I hope that that is a proposal which the Secretary of State will look upon with some favour, because it is increasingly apparent that the kind of industry with which the Highland Board is having to deal includes industries which may require sums of that order to get them established. Like any other public authority its activities will be scrutinised by this House most carefully both through the Public Accounts Committee and through the normal parliamentary processes.
  I also draw the attention of the hon. Gentleman to the recommendation of the Select Committee on Scottish Affairs of which he was a member and to which he assented when in Opposition, in Chapter IV, paragraph 27 of its Report, in which the Committee says:
  "The Secretary of State maintained that the problems of the Highlands and Islands are unique …. We agree; and we think that the Board must have special powers to deal with them. We have some doubts whether the present 'edge' is in practice sufficient, and recommend that the question of increasing it should be further studied."
  This, as the hon. Gentleman will remember, was a reference to the special grants powers of the Highlands and Islands Development Board at present limited to £10,000 per project. It would be appropriate to ask that in replying tonight the hon. Gentleman should give some consideration to this point of view of the fact that he has already considered it, although not in a Ministerial capacity.
  Apart from those two principal matters affecting the level of assistance which the Highlands and Islands Development Board is able to give to industry, there are a number of questions relating both to the personnel of the Board and to the management of the Board to which I think the incoming Government should pay some attention, and quite urgently. First, it is well known that the terms of contract of certain members of the Board will expire this autumn and there is a question of who their successors will be. That is something to be decided by the Secretary of State. I hope that he will bear in mind that his choice of personnel
  630
  to be members of the Board will be subjected to close scrutiny. It is vitally important that he should choose people of the highest calibre with knowledge of the problems of the Highlands area and with radical views, prepared to stand up to the vested interests in the Highlands which in the past have shown themselves hostile to development. Those interests are still very much alive, as we have seen in opposition to the developments which have taken place at Invergordon. It is important that independent-minded people of radical persuasion should be at the head of the Board.
  Another question which perhaps is of equal importance is more a matter for Board management and one on which it is important that the Board should be given some guidance at an early date. It concerns the assistance which the Board gives to smaller enterprises. It is not, of course, only the large schemes of the Invergordon type which will provide the anchor for the population in the Highlands which has been so successfully maintained at roughly the present level throughout the latter part of the 'sixties.
  It is important that we utilise and develop our resources based upon local talents and initiatives and that we give help, not only to those who are able to raise finance through normal commercial channels—through ordinary banks and merchant banks—but also to those who, through their talents and their interest in remaining in the Highland area, have something to offer to the communities in which it is very difficult indeed to establish factories and major manufacturing industries. These are the people who are truly Highland people and who require assistance of a very special kind which the Board is eminently qualified to give them and for whom I think it must do perhaps a little more than it has been doing in the past.
  With regard to the Board's overall strategy for the development of the Highlands, I have no doubt that the Board's general view that it is correct to have three major centres of industrial expansion—in Lochaber, on the Moray Firth, and in Caithness in what is called the Wick-Thurso access—is a broadly correct strategy, provided that it is not interpreted too narrowly and provided, for example, that the Moray Firth area is

  631
  extended to include the eastern part of Sutherland in my constituency.
  When in opposition, the right hon. Member for Moray and Nairn (Mr. Gordon Campbell) gave some verbal support to the notion that a bridge should be built across the Dornoch Firth. This seems to me to be one matter of high priority which the new Government would do well to examine with a real sense of urgency, because it relates directly to the question of the expansion of the Moray Firth area and the development of that area industrially into Sutherland.
  I appreciate that the Under-Secretary cannot be expected tonight to answer all the points which I have raised, nor indeed to spell out in detail the view and attitude of the Government to Highland development. What I think it is fair to ask him is for an assertion that he at least will regard it as a major part of his duty as the Minister responsible for development in Scotland not to neglect the very special needs of that geographical half of Scotland in which a quarter-million people live—the Highlands and Islands.
  10.23 p.m.
  The Under-Secretary of State for Scotland (Mr. George Younger): May I first congratulate the hon. Member for Caithness and Sutherland (Mr. Maclennan) on being successful in getting this debate so early in the life of this Parliament. I thank him particularly for his welcome to myself on my first appearance at the Dispatch Box in my new appointment. I greatly appreciate the fact that the hon. Gentleman has raised the important matter of the development of the Highlands and Islands at this stage. I am grateful to him for raising the various points that he did in his speech, and those which I do not manage to answer directly in the very few minutes which have been left to me tonight I will try to answer by writing to the hon. Gentleman later.
  Before I cover some of the points raised by the hon. Gentleman, I want to refer to the general remarks he made on the subject of regional policy. The hon. Gentleman displayed remarkable skill in the old and famous art of making bricks without straw, because, having received in the Gracious Speech a very clear and firm statement of commitment by the
  632
  new Government to a vigorous regional policy, the hon. Gentleman proceeded to explain to us why he thought that it was neither clear nor vigorous, and to damn it before he had even heard what was in it.
  I therefore ask the hon. Gentleman to be a little more patient in future. After all, this is only the second day on which we have had Questions in this Parliament and only the fourth day of debate on the Gracious Speech. It was perhaps a little much to expect even a new Conservative Government to have done all the things that are required to be done to put regional policy right and to have abolished S.E.T. by the second day of Questions. The hon. Gentleman need have no cause for worry that this Government are as committed as any Government to a vigorous and effective regional policy. Indeed, we have been concerned in previous years that, in spite of the money that has been spent on regional policy, Scotland has been recording net losses of jobs rather than gains, which is what we would all like to see.
  In the few minutes left to me may I move to the specific question of the Highlands and Islands Development Board. I accept what the hon. Gentleman said, that my new responsibility in connection with this Board is a most important part of the functions which I shall carry out and a most vital part of the general regional development policy affecting Scotland. I can assure him and, indeed, the Highlands and Islands Development Board that they will get every encouragement and support to do an even better job in the future for the Highlands than they have done in the past. I hope that he and they will accept this as a declaration of support to the Board from me and from my right hon. Friend the new Secretary of State.
  The hon. Gentleman mentioned the question of the powers of the Board to support industries. He mentioned also the interesting remarks made in the Report of the Select Committee upon which he and I both sat, concerning the powers of the Board in connection with existing industrial enterprises. I can tell him that these consultations with the Board are in a fairly advanced stage following the suggestions made by the Select Committee and others, and I am hopeful that before long we shall reach

  633
  agreement with the Board for such changes as may be agreed between us for improving the facilities which they can offer for incoming industry.
  I am glad that we have had this early opportunity of a debate, and perhaps the hon. Gentleman was only too right in saying that I would have wished in a strange way that it would have been a little later in this Parliament that we had this debate, because I would then have been able to give a much fuller reply than I can give tonight.
  One of the first things that we must consider is the membership of the Board itself. As the hon. Gentleman pointed out, the contracts of most of the members of the Board begin to run out at the end of August and we hope to make consultations as quickly as possible to establish what the future form of the Board and its personnel will be. I have no doubt that in these five years the Board has been able to catch the imagination of the Highlands and Islands and that it is now well-established as an effective organisation for Highland development. The new Board must retain and develop this image, and in considering appointments which will have to be made shortly our intention is to have a Board with as much experience and ability as possible in the different facets of the Board's work—industrial development, agriculture and fishing, tourism, etc. As I have said, we intend to support the Board effectively so that it can work even better in the future.
  The second question we have to consider is the revision of the terms and arrangements under which the Board
  634
  may give assistance to incoming industry. I mentioned that a moment ago. I have also had the opportunity in the past week to have a very short and informal meeting with the Chairman of the Board, and I am glad to say that I have succeeded in arranging provisionally to make my first official visit to meet the Board as a whole in Inverness on 30th July. I hope that on that occasion I shall receive the fullest views possible from all the Board members about their work and the needs which they feel they have in order to improve their work in the future. I hope that this will be a useful meeting in which I and the Board will be able to exchange views on what can be done most usefully to improve their work in the years to come.
  The hon. Gentleman mentioned on several occasions the need for the recommendations of the Select Committee to be taken into account. I shall certainly take an opportunity at my meeting with the full Board to discuss particularly with them both the recommendations of the Select Committee and the discussions which the Select Committee had with the Chairman of the Board when it gave evidence to the Committee some time ago. I am sure that this at least is something useful which can come out of the long labours which the hon. Gentleman and I—
  The Question having been proposed at Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at half-past Ten o'clock.

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  MONOPOLIES POLICY (MINISTERIAL RESPONSIBILITY)
  MONOPOLIES POLICY (MINISTERIAL RESPONSIBILITY)
  EUROPEAN ECONOMIC COMMUNITY (NEGOTIATIONS)
  EUROPEAN ECONOMIC COMMUNITY (NEGOTIATIONS)
  NATIONAL ECONOMIC DEVELOPMENT COUNCIL
  NATIONAL ECONOMIC DEVELOPMENT COUNCIL
  HOME OFFICE STAFF (SECURITY INQUIRY)
  HOME OFFICE STAFF (SECURITY INQUIRY)
  AUTISTIC CHILDREN
  AUTISTIC CHILDREN
  MINISTERIAL AND DEPARTMENTAL STRUCTURE
  MINISTERIAL AND DEPARTMENTAL STRUCTURE
  MEMBERS' LETTERS TO DEPARTMENTS
  MEMBERS' LETTERS TO DEPARTMENTS
DEFENCE
  Northern Ireland
  Northern Ireland
EDUCATION AND SCIENCE
  Married Female Undergraduates (Grants)
  Married Female Undergraduates (Grants)
  Narborough County Primary School, Leicestershire
  Narborough County Primary School, Leicestershire
  Royal Commission on the Universities
  Royal Commission on the Universities
SOCIAL SERVICES
  Four-Wheeled Invalid Carriages
  Four-Wheeled Invalid Carriages
  Seebohm Committee's Report
  Seebohm Committee's Report
  Mental Patients, South-West England
  Mental Patients, South-West England
EMPLOYMENT AND PRODUCTIVITY
  Mersey Cattle Wharf, Birkenhead (Closure)
  Mersey Cattle Wharf, Birkenhead (Closure)
BOARD OF TRADE
  Air Safety
  Air Safety
  Linesman/Mediator Air Traffic Control System
  Linesman/Mediator Air Traffic Control System
  Aircraft (Operators' Certificates)
  Aircraft (Operators' Certificates)
  North London Airport Complex
  North London Airport Complex
  Air Operators' Staff and Facilities (Code of Practice)
  Air Operators' Staff and Facilities (Code of Practice)
  Civil Aviation Flying Unit
  Civil Aviation Flying Unit
  Aviation (Flight Operations Inspectorate)
  Aviation (Flight Operations Inspectorate)
  Civil Aircraft (Pilots)
  Civil Aircraft (Pilots)
  Air Terrorism and Hi-jacking of Aircraft
  Air Terrorism and Hi-jacking of Aircraft
  Civil Aviation (West Midlands Advisory Committee)
  Civil Aviation (West Midlands Advisory Committee)
  Airports (Runway Categories)
  Airports (Runway Categories)
  Trans World Airlines (Meals)
  Trans World Airlines (Meals)
  British European Airways (Far East Flights)
  British European Airways (Far East Flights)
WALES
  Hearing Aids
  Hearing Aids
TRANSPORT
  Railway Crossings
  Railway Crossings
  Euston-Stranraer Boat Train Service
  Euston-Stranraer Boat Train Service

Preamble
The House met at half past two of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Lichfield):
The LORD CHANCELLOR on the Woolsack.
Several Lords—Took the Oath.
Certain Lords—Affirmed.

GRIMSBY CORPORATION BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

WALES RURAL DEVELOPMENT BOARD ORDER
2.36 p.m.
THE MINISTER OF STATE, DEPARTMENT OF HEALTH AND SOCIAL SECURITY (LORD ABERDARE): My Lords, with the permission of the House. I should like to make a Statement about the future of the Wales Rural Development Board. A draft Order for the establishment of this Board at present stands referred to a Select Committee of this House. The Select Committee was due to begin its consideration of the draft Order to-day, and for that reason I thought it only courteous to inform the House of the Government's intentions at the earliest possible opportunity.
As your Lordships will know, the Secretary of State for Wales announced yesterday in another place that the Government have decided not to proceed with the proposal to establish a Rural Development Board in Wales. We believe that it would be wrong to ignore the force and strength of local feeling on this matter. We believe, moreover, that a Board could make no effective contribution to the problems of its area if it lacked essential support. Accordingly, it is the Government's intention to withdraw the draft Order which is now before the House. The Government fully
38
recognise that mid-Wales needs help. We are formulating our policies to provide this help; but we are clear that it will have to take a different form from that proposed by the previous Administration.
BARONESS PHILLIPS: My Lords, I should like to thank the noble Lord, Lord Aberdare, for making this Statement and to congratulate him on becoming the spokesman in your Lordships' House for Wales. I wish I could have congratulated him in happier circumstances and that the first Statement he made as spokesman for Wales had been of a more constructive and positive character.
I notice that the Statement says that "it would be wrong to ignore the force and strength of local feeling on this matter". Are the Government in fact going to direct their attention to more than one group in the community? I notice, too, that the Government say they, "fully recognise that mid-Wales needs help". This, I am sure, all your Lordships will endorse. May I ask the Minister when the plans to provide this help will be brought before the House?
LORD OGMORE: My Lords, I, too, should like to congratulate the noble Lord on his appointment and on the fact that he is to speak for Wales from the Government Benches. I am sure that his appointment will give a great deal of satisfaction in Wales, where the noble Lord is highly regarded. May I say that I heartily welcome the fact that the noble Lord's first Statement in this House should have set forth the abandonment of this ridiculous Rural Development Board. May I ask the noble Lord, now that he has started, to continue the good work? When the Government are considering the other measures mentioned in the Statement, will he give high priority to communications in mid-Wales, particularly to road, rail and air transport?
LORD ABERDARE: My Lords, I am very grateful to the noble Baroness and to the noble Lord for their kind congratulations. All three of us, in different parts of this House, have been engaged previously on the affairs of Wales, and I know that we shall all do our best to follow what we consider to be best for Wales. So far as the remarks of the noble Baroness are concerned, I

39
can assure her that we certainly shall have constructive proposals for Wales. My right honourable friend the Secretary of State is busy looking into the whole of the matter and into what policies can be devised for helping to solve the problems in South Wales. But I so much agree with the noble Lord, Lord Ogmore, that in this particular instance the Board was ill-conceived. The people who objected most strongly to it were the farming community in mid-Wales, whom it particularly affected. It was against them that the compulsory powers, and the powers of not allowing individuals to sell their land, were directed. I can only assure the noble Baroness that we shall have constructive proposals coming before the House in due course.

WILTSHIRE COUNTY COUNCIL BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
FALMOUTH CONTAINER TERMINAL BILL [H.L.]
Read 2a and referred to the Examiners.

CONSUMER PROTECTION (AMENDMENT) BILL [H.L.]
LORD DERWENT: My Lords, I beg leave to introduce a Bill to amend the Consumer Protection Act 1961 in relation to the enforcement of the provisions set out in Section 2 thereof. I beg to move that this Bill be read a first time.
Moved, That the Bill be now read 1a.—(Lord Derwent.)
On Question, Bill read 1a, and to be printed.

SUNDAY ENTERTAINMENTS (AMENDMENT) BILL [H.L.]
LORD STRABOLGI: My Lords, I beg leave to introduce a Bill to amend the Sunday Entertainments Act 1932, and to move that the Bill be read a first time.
Moved, That the Bill be now read 1a.—(Lord Strabolgi.)
On Question, Bill read 1a, and to be printed.

COMMITTEE OF SELECTION
THE CHAIRMAN OF COMMITTEES (THE EARL OF LISTOWEL): My Lords, I beg to move the Motion which stands in my name on the Order Paper.
Moved, That a Committee be appointed to select and propose to the House the names of the five Lords to form a Select Committee for the consideration of each opposed Private Bill; and that the Lords following, with the Lord Chancellor and the Chairman of Committees, be named of the Committee:

M. Salisbury,

M. Willingdon,

E. St. Aldwyn,

E. Swinton,

L. Amulree,

L. Beswick,

L. Chorley,

L. Ogmore,

L. Silkin,

L. Strang:

That the Committee have leave to report from time to time.—(The Earl of Listowel.)
On Question, Motion agreed to.

LEAVE OF ABSENCE
EARL ST. ALDWYN: My Lords, on behalf of my noble friend Lord Jellicoe, I beg to move the Motion standing in his name on the Order Paper.
Moved, That a Select Committee be appointed for the general supervision of arrangements relating to leave of absence, and that the Lords following, with the Chairman of Committees, be named of the Committee:

E. St. Aldwyn,

L. Amulree,

L. Beswick:

That the Committee have leave to report from time to time.—(Earl St. Aldwyn.)
On Question, Motion agreed to.

ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH
2.43 p.m.
Debate resumed on the Motion moved on Thursday last by Lord O'Neill of the Maine—namely, That an humble Address be presented to Her Majesty as follows:—
"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."
LORD SHACKLETON: My Lords, the first three days of our debate on the humble Address are to be devoted to home affairs, and while we have agreed that to-day we should pay particular attention to economic matters we cannot separate them from the whole state of the nation. I propose, therefore, to range rather more widely than just on economics.
I think we shall all agree that the most tragic aspect of our national affairs to-day is the situation in Northern Ireland. Following the speeches of the Home Secretary and Mr. Callaghan, there is little that I can add beyond expressing a deep sense of horror and anxiety at recent events. I strongly support the words in the gracious Speech where tribute is paid to our Armed Forces. I appreciate that allegations have been made about the conduct of our troops, and no doubt those allegations will be properly investigated, but I am bound to say that I do not believe that in a similar situation in any other part of the world the forces of law and order would have behaved with the responsibility and the restraint that the British Forces have in Northern Ireland. Some of the things that they are accused of, deplorable though they may be, are pretty small when one thinks of what has happened in other countries in such circumstances. This does not surprise me, for, as your Lordships know, I had some knowledge at first hand of the conduct of our troops in Aden, and I paid tribute to their restraint on that occasion. It is not for us to-day to concentrate on Northern
42
Ireland, although no doubt there will be some noble Lords who will wish to discuss the situation further on Thursday, when I understand that the noble and learned Lord who sits on the Woolsack is to wind up.
My Lords, in this debate it is not my intention simply to fight the General Election all over again, but inevitably, in judging the Government and their intentions as expressed in the gracious Speech, or, indeed, as not expressed in the gracious Speech, we shall have to pay some regard to the promises made by the Conservative Party which now forms the Government. It would, I agree, not be reasonable to expect the new Government to have worked out in detail the policies that they will follow, though judging from some of their propaganda they have blueprints for nearly everything. Mr. Heath has told us that he does not believe in instant Government, though he has certainly not funked instant promises, some of which I can only describe as pretty irresponsible. No doubt noble Lords and the Government hope that some will be forgotten: indeed, in the interests of the county I hope that some will be forgotten, though it would be too much to expect us not to point it out.
It is my intention to examine this new style of Government of which we have heard so much. May I start off by referring to the state of the economy? The balance of payments is strong, and will remain strong provided sensible policies are followed. There is no more talk of crisis or devaluation, now that the Tories are in Government. Yet there is no doubt that the Prime Minister, who was, not surprisingly, rather coy about this subject in another place when he was pressed upon it, brought the confidence factor right to the fore during the Election campaign. I have heard no more pathetic excuse than that he was quoting from something that Mr. Crossman was alleged to have said to the doctors. I do not want to waste more time on that. It is part of the new style that we should prefer to forget.
The Government enter office in an extremely strong position so far as the balance of payments is concerned. The contrast with 1964 is striking indeed, although here again Mr. Heath seems to have got muddled over private investment abroad when it suited him one way and not the, other way. It will be for the new

43
Government, however, to make good use of the breathing space that the present situation gives them, and we all urge them most strongly to do so. On the other hand, the previous Government, and, in particular, my right honourable friends Mr. Jenkins, Mrs. Castle and the former Prime Minister, never ceased to warn in Parliament and in the country of the dangers and difficulties that still surround us and that certainly face the new Government.
This is not to suggest that there is not scope for some measure of reflation, or indeed the reallocation of resources by tax cuts, fresh industrial investment or (and I hope the Conservatives will not forget this) the expansion of vital national services, whether they be education, housing or the other social services. It is all a matter of priorities. Although little enough credit was given them for this, the previous Government sought to control public expenditure in ways which were at times exceedingly painful to Ministers and unpopular in the country. They were certainly unpopular with many supporters of the Government, and unpopular in the services for which Ministers were responsible.
The new Government have taken over a much more sophisticated economic planning machine, and Parliament has been made fully aware over a period of years of the future with an assumed allocation of resources based on certain moderate assumptions as to the rate of economic growth and the extrapolation forward of existing policies. The new Government will already be aware that, despite some of their earlier assumptions, there is little scope for fresh public expenditure programmes unless major cuts are made elsewhere. What we want to know is where the economies are to come from in order to pay the election bill to which the promises of the Party opposite have committed them.
Here I should like to address some remarks particularly to the noble Earl, the Lord Privy Seal. As I have already said, if we are to have the misfortune of the Government of this country being taken over by the Party opposite, there is no one I should prefer to see fill the place of the Minister in charge of the Civil Service Department than the noble Earl, Lord Jellicoe. While no doubt the
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responsibilities for the main machinery of government will rest with the Prime Minister, the skill and knowledge on these subjects rests in his Department. I make no Party point, but it is a point I particularly wish to make, when I say that the noble Earl has in his Department one of the ablest, most brilliant and imaginative group of civil servants to be found anywhere in the world, and I should like to pay my tribute to them. I have no doubt they will serve the noble Earl well, and I hope that he will realise the precious nature of the responsibilities he has taken on in this area.
We shall no doubt have another opportunity to debate the progress with which the new Government will, I hope, carry on the fulfilment of the proposals in the Fulton Report. No one wishes to bring the Civil Service into politics, but I am bound to take exception to some of the things that have been said in the course of the Election campaign about the Civil Service and its numbers. Great play was made by the Conservatives on the increase in the size of the Civil Service in the period of the Labour Government. I should like to give noble Lords, who no doubt believed some of this propaganda—all this "bowler hat" stuff—some of the facts, so that they can see how misleading it was.
It is true that the size of the non-industrial Civil Service went up by something over 60,000 in the days of the Labour Government. It is also worth noting that the total increase went up by something like 30,000 in the last four to five years of the previous Conservative Government, and nobody could say that those were years of dynamic expansion of Government activity. But that is only half the story. If we also take into account industrial civil servants, the net increase during the period of Labour Government of all civil servants was little more than 30,000. It may be a surprise to noble Lords opposite to hear that the total size of the Civil Service, as a percentage of the total population, was almost exactly the same as in 1960 and in 1964. So much for their propaganda on that subject.
The truth of the matter is that, as with public expenditure, the Labour Government over the past two or three years firmly controlled the expansion of the non-industrial Civil Service, and we were working towards a system of manpower

45
planning which I hope and I am sure the noble Earl will foster. These civil servants were not just sitting around twiddling their thumbs. One of the curious illusions among some members of the Conservative Party is that civil servants just sit around doing nothing. They were needed for a number of vital activities of particular service to the community. While I welcome the Prime Minister's Statement that he will not cut the numbers of the Civil Service without cutting out some of their tasks, I, and no doubt they, will be interested to know the tasks which are to be cut and how it is to be done without either undermining their morale or efficiency, or destroying some activity of vital importance to the community. As the former Minister in this field, I am exceedingly aware—and I am sure the noble Earl will be, and probably is already—of the dangers of ill-advised action.
There has been a lot of easy talk about hiving off. Some of the biggest steps towards the hiving off of central Government activities were taken by the previous Government, notably in the Post Office and the proposals with regard to some of the research activities in the field of civil aviation—those were all in train. While I have no doubt that the increasing search for efficiency though training and the introduction of modern methods fostered again by the noble Earl, Lord Jellicoe, will pay off in the future, it is worth noting that in the shape of the Civil Service Department we have provided him and the Government with a most powerful instrument for orderly change and the pursuit of efficiency. I hope he will not be led off too smartly by some of the interesting, if somewhat immature, thinking that emanated from the Conservative Central Office, and from his own Parliamentary Secretary.
It is naïve in the extreme to believe that importing more and more business men into government is going to contribute a great deal. The last Government made better use of business men from all walks of life than any previous Government, but I doubt whether they will be able to teach the noble Earl's advisers much about organisation and modern management methods, whether it is programme budgeting, management by objectives or decision making—whatever the latest cant phrases are. As the Daily Telegraph
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pointed out, if we have this number of able business men around, would it not be better, under this free and liberated Government, if they went on trying to improve efficiency in the private sector of industry? The Industrial Reorganisation Corporation, in their last report, said that there were too many sleeping giants and industrial coffins in the British industrial scene. That was not the last Government speaking; it was Sir Joseph Lockwood and the noble Lord, Lord Stokes. Many of these business men have a job to do in improving efficiency in the private sector of the economy. None the less, the best of luck to them!
We still want to know—and I do not expect the noble Earl, the Lord Privy Seal, to answer this point to-day—where his economies are coming from, because I suspect that it is within his Department that some of the dirtier and more difficult work is going to have to be done. It would be nice if this Conservative Central Office, blue-printed, computerised Conservative Government could give us some indication of what they have been thinking about in these years.
Provided the Government do not alter too much the Government machine—and all new Governments are apt to try to do this—I have no doubt that their activities will continue to get more efficient. But we still want to probe into where the economies are coming from to pay for the promised tax cuts. Is it in the social services—for example, in the Health Services? There is hardly any mention from the Government of the Health Service; there is no mention of the need to expand, particularly in the field of mental health—a matter in which I know the noble Lord, Lord Aberdare, and others, will be interested. Will the cuts come in the Department of Employment and Productivity? Because there has been expansion there—the previous Government were planning a big expansion in the employment services, getting away from the old concept of the labour exchange and towards a proper employment service. Or are the economies to come from squeezing the education services and the local authorities?
One of the areas where the Conservatives have made, and are still making, quite a bit of play is the high level of unemployment. I have no doubt that the level is too high and that here again

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some measure of reflation will help. But they totally misconceive the situation—and this is one of the factors that worry me about the new Government—if they think of it in these terms. It is essentially a regional problem, as no doubt they themselves will shortly be arguing, and it is in this area that their past performance and present intentions, so far as they have declared them, cause the most concern, notwithstanding the somewhat dramatic efforts of the noble and learned Lord who now sits on the Woolsack when he was Minister with special responsibility for the North-East of England. I must be careful not to trip the noble and learned Lord on the Woolsack because it is not very easy to spring to one's feet and interrupt from the Woolsack, although I do not doubt that the noble and learned Lord will not restrain himself indefinitely.
It is noteworthy that our concern about Conservative policy is particularly shared in the development areas, where the whole of the Government's gains in the Election, despite unemployment, were negligible. We should like to know what the Government are going to do about investment grants and regional employment premiums. At one time they told us that they intended to cut them and substitute investment allowances. Or is that not so? We do not know; and I am quite certain that none of the noble Lords opposite knows either. On I.D.C.s, judging from an answer the Minister of Technology gave in another place they are carrying on with the previous Government's policy, but they are none the less considering altering the criteria. This matter is vital to the life of the development areas. If the Government are really concerned with unemployment—and they made something of this issue in the Election campaign—and intend to do something about it, it is here, urgently, that we want their policies spelt out.
We should like to know, too, what their policy is with regard to the rundown of some of the older industries, particularly coal mining. One of the most striking achievements of the last few years has been the way in which the coal-mining industry has been run down, with adjustment of the responsibility and effectiveness of both management and unions, in a very difficult situation. It
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is really an example of how to tackle an older industry. It has been made possible only by relatively generous redundancy and pension payments. Do the Conservatives intend to continue with the Coal Mining Industry Bill? If we are to have a satisfactory national policy the Government will need to pursue energetic industrial programmes to strengthen employment in the regions, and to tackle the older industries in the way the Labour Government did. Unless they do this, long-term unemployment and dereliction will be inevitable for many of our citizens who live in the affected areas. A prosperous Southern England and Midlands does not make a prosperous nation.
The gracious Speech talks about "liberating industry from unnecessary Government intervention". What do the Government mean in this connection with regard to the Clyde, Cammell Laird? What is this "liberation"? For some of these industries it will be the liberation of death, unless the Government in fact re-think such of their policies as they have already revealed to us.
The Party opposite, and the path that is followed, are no doubt like the path to Hell, full of good intentions. We suspect, however, that they are too sluggish or half-hearted to get to either Hell or Heaven. They really must recognise that an essential concomitant of economic progress is a just society. They will now no doubt point out that they are giving old-age pensions to the over-eighties. Well, it is for them to judge the priorities in this matter. But why, then, do they not adopt the national superannuation proposals which were already before Parliament?
We know that they have accepted two items in the proposals—constant attendance allowance for the more seriously disabled, and improvements for certain younger widows—and we welcome that. But they have not accepted the grand scheme—and it was a grand scheme. Furthermore, it was one which I should not have thought inconsistent with Conservative philosophy; I should have thought it not inconsistent at least with the views of some noble Lords I know opposite. Why did they not adopt this scheme, in which everybody would contribute throughout his life to a pension

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related to his earnings, which was protected against inflation, and enabled participation in increased living standards? Why is this now to be completely dropped?
So far as we know, the Government say they are going to rely mainly on an improved flat-rate scheme, perhaps with some slight improvements here and there, and on occupational pensions schemes. My Lords, good as many of the occupational schemes are, half the working population still have no occupational pension scheme. And many of the schemes which do exist, even some quite good ones, are tied to continuation of employment with the same firm. Yet the retention of pension rights earned throughout an individual's life is, in my view, fundamental to individual freedom. And the gracious Speech refers to the concern of the Government for individual freedom. It is equally essential (and the noble Earl, Lord Bessborough, will appreciate this point) to ensure that pensions can be either frozen or transferred, but are not lost, if we are to meet the challenges of advancing technology—if people are going to change their jobs. This is fundamental to economic progress as well as to individual freedom. If we are to raise productivity and achieve satisfactory industrial relations, it is just as important as any expansion of the employment service, which we shall not now see, or of the re-training into which we are promised an inquiry.
What is the new style so far? Nothing, so far as I can see, is particularly encouraging as to method, as to promise, or as to intention. We were promised a new style of Government. Perhaps the most worrying aspect of the Government's new style is their way of approaching the method of reforming industrial relations. I would urge noble Lords opposite, including all noble Lords on the Front Bench to read (there may be some who have not yet read it) or re-read the Donovan Report. The Government told us that they have their proposals all ready and will introduce them in the First Session of Parliament. Is this undertaking to be honoured? I, for one, shall not quarrel if the Government have second thoughts and admit that they have been misguided in this matter. Whatever the previous Government may have managed, or have failed to manage, in regard to
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industrial relations, the Tories' plans are a recipe for disaster. I say that absolutely seriously to noble Lords opposite. We shall seek to pursue this subject further, particularly to-morrow.
I am bound to say that this is one of the most crucial areas, involving management and trade unions; involving trust and understanding; involving a realisation that in every industrial dispute, however misguided one may think a particular view may be—and I have had quite a lot of experience of negotiating where I have thought the other side misguided in wage negotiations—the fact is that by the time a settlement is reached one always lands there is: at least a valid point of view. It is not by bringing penalties of the kind that the Conservatives will product:—bringing the matter into the field of the law—that we shall succeed in developing a sense of trust, both in Government and in management. I acknowledge the difficulties of the problem, but I beg the Government to be very careful.
My Lords, it is against this background that we have to look at one of the more important claims of the Party opposite; namely that they were going to deal with inflation. I find it very difficult to take this seriously, because one of their special Election gimmicks concerned the subject of doctors' pay increases. Again—and I hope noble Lords on the Front Bench opposite will not object to my giving them a list of reading which they must do if they are going to do their jobs properly—I wonder how many Conservatives have in fact read the original Pilkington Royal Commission Report. Secondly, I am astonished that they were more concerned to use, as instance of economic peril—a warning to frighten the electorate—the then Government's decision to get a second opinion from the National Board for Prices and Incomes on the total amount of payment to the higher paid doctors, and that they preferred to make use of this, and to say that they would have paid it, than they were to consider the consequences.
I really do ask noble Lords opposite whether they have any proposals on prices and incomes. Taking this narrow subject of the doctors, what would the Government do about the senior civil servants? They also had a pay award which was staged. The Judges are falling behind; even the Field Marshal:; are getting a bit

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restive. Have the Government thought about this? At a moment when we are having to negotiate with workers whose pay is £13 to £14 a week, they make it clear that they would have paid the lot. This of course shows that they had not thought about it. We now know that, following the change of Government, and despite the fact that a large number of the doctors were not in support of their leadership, they have now said, "It is fine. So long as the Government will reconstitute Kindersley we are happy." My Lords, the Labour Government did not abolish Kindersley. Why are the doctors now content with this? The truth of the matter is that there is no substitute in this area for proper machinery, and I beg the noble Lord to salvage that part of Mrs. Castle's Bill on the Commission for Industry and Manpower which related to the special panel for recommending pay for the higher paid members of the public services.
What are the Government going to attempt in this area of prices and incomes policy? Is there to be any impartial machinery? No one should minimise the difficulties, but we were making progress: we had a Bill before Parliament. Do the Government intend to set up some impartial machinery, or is there to be a completely uncontrolled incomes and wages rise, with prices booming as well? This was one of their first obligations, but there is not a sign of any action; and time is passing. Have we to wait until the autumn for this? Are they going to do anything about prices? They say that they are going to reduce the burden of taxation. Whatever they do, I hope they will not put any more work on the already overworked Inland Revenue Department.
My Lords, we are promised a new style of government. We suspect that it will be a unique collection of broken pledges. The Opposition were warned of the seriousness of the economic problems facing this country, notwithstanding the strength of our balance of payments. And what are we now going to have? So far as we know, we are to have a return to the 11-plus in the most reactionary areas. The majority of Conservative councils have already moved to comprehensive legislation. We have a hint of an 80 m.p.h. speed limit, which
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obviously ranks rather high with noble Lords opposite.
Most striking of all, and most irrelevant of all, we are to have commercial radio. What on earth is this going to contribute to the country? What proposal could be more frivolous at the moment, or less becoming to some noble Lords who sit on the Benches opposite? I will not embarrass noble Lords whose opposition to this type of thing I know from the past. What will it do? It will lead to the demise of some local newspapers. Is this another example of Tory freedom? No doubt a number of new companies are being formed—I would not accuse any noble Lords on the Front Bench opposite, although I know that one noble Lord in the past was interested in commercial radio. What is this, as an example of modern style of government, going to do for the country?
My Lords, I deeply regret that these are the only fruits that so far have come out of Tory Government. I shall say nothing to-day on defence and foreign affairs, because on Thursday we shall debate the proposals, such as they may emerge. But I am deeply concerned, not merely about the cost but, from what we have heard, about the damage that some of these proposals may do to Commonwealth relations, which are sufficiently strained at the moment, and we shall probe the Government further on this aspect.
I think it is as well that the new Government are taking a little time to think, but we shall expect their thinking to be better than it seems to have been so far. We have been promised a new style of government. We hope that it will not be just the predictable kind of old-style Toryism—a manner of government which so far is already creating uncertainty, is socially divisible and makes a nonsense of the noble concept of "one nation", about which we have heard from the Prime Minister. My Lords, I can promise noble Lords opposite, consistently with what I said on Thursday last, that we shall look with seriousness at their proposals, but I can also promise them a determined Opposition such as has not been encountered before in your Lordships' House.
3.18 p.m.
THE LORD PRIVY SEAL (EARL JELLICOE): My Lords, the noble Lord,

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Lord Shackleton, has favoured us with the comprehensive, comfortable and, on the whole, pleasant and good-humoured speech that one would expect from him. I must confess, however, that there were elements in that speech of what I would term "instant Opposition" and I also thought that at times the noble Lord—if he will forgive me for saying so—tended to take us in a slightly patronising sort of way down rather parochial paths. I shall be answering one or two of the specific questions which the noble Lord put to us, and my noble friend Lord Bessborough will be answering some others when he winds up the debate. But I must confess that in general, listening to the amiable speech of the noble Lord, Lord Shackleton, he almost convinced me, although not quite, that he had almost convinced himself that the last Government had been a smashing success. I do not propose to bandy words with noble Lords opposite as to whether we have inherited the strongest economic position in living memory, or a serious position, or a very serious position, or a crisis. I would prefer to let the facts speak for themselves.
SEVERAL NOBLE LORDS: What are they?
ERAL JELLICOE: I am rather surprised, at the start of what I had intended to be an impartial and good-tempered speech, that the noble Lord, too, is tempted into instant opposition. I would prefer to let the facts speak for themselves; and there are three dominant features which stand out when one surveys the economic scene at the present time. First, while the balance of payments and the position of sterling are strong, there are elements of very real potential difficulty. Secondly, we have gone through a period of only modest economic growth in the domestic economy associated with a very high rate indeed of unemployment by any post-war standards. Thirdly, we are at the same time—and this is the important element—witnessing a very rapid advance indeed in wages and prices, an unhealthy and unusual development in view of the absence of excess demand in the economy as a whole.
Before I deal—and at the start of this long four-day debate I shall necessarily deal in rather general terms—with the strategy which the Government propose
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to pursue, I should like to assess, as calmly and dispassionately as I can, the significance of these three features. As regards the balance of payments, we can all, and we do, welcome unreservedly the much improved situation of 1969. It was certainly absolutely essential that such an improvement should come, after the unhappy performance of 1967 and 1968. The turn-around is an achievement of which the whole country can be proud, and I should like, at the outset of this debate and at the outset of this Parliament, to pay my tribute to the work of all those who have contributed to this improvement, and not least to those so-called "invisible" exporters—some of them quite visible in your Lordships' House from time to time—who have played such a splendid part in supporting the achievement of our manufacturing exporters. Visible and invisible alike, they can be pretty certain that it will be one of the major concerns of the new Administration to lend all possible support and encouragement to the work they do. In saying that, I should like to pay my tribute to one noble Lord, the noble Lord, Lord Brown, who, I know, in his long period at the Board of Trade, has had these particular interests very much at heart. But we do no service either to their efforts or to the long-term solution of our problems by avoiding reservations which I feel bound to express about the balance-of-payments position and the outlook for the future.
The improvement we have seen owes a great deal to devaluation, for which we have been paying a large price in a number of spheres. There are other elements in the situation to-day—and I am purposely using measured words—which are less than comforting. It can hardly be regarded as entirely comforting that the volume of our export of goods has shown little sign of increase since the third quarter of last year, while at the same time the volume of imports has shown a marked increase. In the latest three months, from March to May, imports by volume were over 3 per cent. higher than in the previous three months, and over 4 per cent. higher than a year earlier, Moreover, the prospect for growth in world trade, vital to our exports, seems to be one of less rapid expansion during the remainder of 1970 than we have been accustomed to in recent months. Thus, even without the longer

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term threat to our position which must inevitably arise if we have too rapid an inflation in our internal costs—and I will come to that point in a moment—there could certainly be no ground for complacency about our overall situation. And I would not claim for one moment that the last Administration were expressing a tone of complacency, except at times on the hustings.
This is all the more obvious when one turns to consider the very heavy burden of debt repayment which this Government have inherited and which still remains to be discharged. Once again we can all unreservedly welcome the news that the former Chancellor gave in his Budget speech last April, that our short and medium term debts have been scaled down by roughly a half from the forbidding peak of nearly £3,400 million which had been reached at their height at the end of 1968. But the hard fact remains that, even with the further repayments which have taken place since then, a massive total of around £1,500 million sterling of such debt still hangs over us and must be dealt with in the next few years. This is a formidable commitment, with formidable implications for the balance-of-payments position in the future. It means that in our overseas accounts for some time to come we as a nation will have to run very hard indeed just to stand still.
When we turn to the situation in our home economy, we find a position which I think almost everyone would agree is not only unique but also disturbing, a situation in which a very rapid advance in wages and prices, faster in many respects than anything we have experienced for the last twenty years, is combined with a relatively slow rate of economic expansion and with a high level, by historical standards, of unemployment. The past 18 months have been a period of sluggish economic growth. I should not necessarily wish to suggest that the recent improvement in the balance of payments was gained at the cost of a severe setback in the level of economic activity, but it is nevertheless true that there has been a marked slowing up in the rate of growth in recent months and recent years. Following an advance in total output of about 3½ per cent. in 1968, the rate of growth fell to under 2 per cent. in the year up to the second half
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of 1969. And, moreover, the recently published Estimates of national income and expenditure indicate that, far from continuing the recovery evident in the second half of last year, the advance of the economy was again checked in the first quarter of this year, and indeed it seems that total output has fallen in the first quarter. My Lords, I would not wish to lay undue emphasis on the statistics for a single quarter in sketching the background of our economic position to-day. But it would certainly seem—and I put this as impartially as I can—that the judgment made by the former Chancellor in his Budget Speech last April, that output in the latter half of this year should pick up and grow in time with capacity, from such indicators as we have at present, has not, at least as yet, been sustained by events.
I said at the outset of these remarks—and I make no apology for their rather pedestrian aspect; I believe that the backdrop of our economic position is important—that the third dominant feature of the situation we have inherited is the rapid upward movement of costs and prices. In 1968 and 1969 retail prices in this country increased at an average annual rate of over 5 per cent., and the latest figures for May indicate an increase of 5½ per cent. as compared with May of last year. This year alone prices have risen by over 3½ per cent. in the first five months. Rates of increase of this magnitude sustained over such a long period are, to put it mildly, unusual. There is in fact no parallel at all for this in recent years. The above average rate of increase in 1968 and 1969 is admittedly partly a reflection of the effects of devaluation and the associated measures of indirect taxation which were aimed at restraining personal consumption. But I do not believe that these factors now are any longer really significant. Nor, in view of the current level of activity, can the continuing rapid pace of inflation be attributed to an excessive pressure of demand. It is basically associated with a rapid increase of wages, though an increase in seasonal food prices has admittedly played some part in this.
These, then, are the key problems in the economic field to which the new Administration must turn their attention—a serious bout of inflation, which could in time threaten the hard-won improvement in the balance of payments, coupled

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with sluggish production. Our objectives, therefore, as was made clear in the gracious Speech, must be to strengthen the economy and to curb that inflation. Success in achieving one of these goals will make it easier to realise the others: for a rampant inflation may reduce that confidence in the prospects for the economy which is needed to secure a higher rate of investment—just what we have lacked in this country, year after year after year—and a more rapid growth in productivity and the standard of living will, on the other hand, make it easier to check rising prices.
There is now mounting a considerable body of evidence of the scale of the wage push (to use that rather technical term) over the past year. In the first quarter of 1970 the average rate of settlements becoming effective was 9½ per cent. more than half as much again as in the corresponding period of last year; and the average for April and May exceeded that of the first quarter. For their part, earnings—and here of course we find a reflection of wage drift on top of the increase in basic wages—were almost 10 per cent. higher in April, 1970, than in April, 1969.
My Lords, in these last five and a half wasted years of Opposition I have had some slight first-hand experience of industry. From that experience I should like to state categorically that the inflationary spiral represented by the cold and rather dull statistics which I have just related are a threat to our whole exporting effort. It threatens to erode the standard of living of our people and our ability to pay our way as a nation in the world. The Government are under no illusions at all about the difficulties which they are likely to face in dealing with the current trend of incomes and prices. Experience demonstrates that the classic type of inflationary pressure arising from excessive demand will yield to orthodox fiscal instruments. But if we are trying impartially to see the economic position we are in at the present time, the point which we must recognise is that our present inflation is not of that type. Although the pressure of demand is higher in manufacturing industry than one might expect from the general level of activity, demand as a whole in this country appears to be running well below capacity.
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As I have already said, the pressures are coming from the wages front. There is no doubt that the trade unions are becoming a great deal more militant in their demands, and with real incomes in this country rising so slowly, despite substantial rises in money incomes, it is little wonder that the unions have felt compelled to take action to protect the interests of their members. Nevertheless, it is clearly vital for the country as a whole that we should try to seek a more reasonable relationship between the growth of money incomes and the growth of productivity. The effects of the present inflationary spiral would eventually be felt, and be bound to be expressed in an impact on our balance-of-payments situation.
Of course, I am well aware, as are noble Lords opposite, that inflation is not confined to this country or to any one country, but it would be foolish to rely on the continuation of similar movements abroad. If other countries have a greater degree of success in bringing their price movements under control than we have—and we are not alone in the concern which we feel, as anybody reading the Financial Times this morning will realise from the action taken by the Federal German Government—then the repercussions on our balance of payments are bound to follow the same old dreary consequences of squeeze and freeze and deferred expectations with which we have all become too familiar. I will reject the easy temptation of saying "in the last five-and-a-half years"; we in this country have all become far too familiar with this in the last two decades. In any event, the faster rate of advance in productivity hitherto enjoyed by our competitors means—and this is most serious—that in order to maintain our cost position in the world to-day either our rate of increase in money incomes will have to be lower than that of our main competitors, or the rate of increase in our productivity will have to be accelerated. There is no escape from one of those two conclusions. That, I hope, will sink home in this country.
The sad fact remains that looking at this matter semi-historically—I make no apology for doing so at the outset of this Parliament and of a long debate—unit costs in the United Kingdom in the

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period since 1963 have shown an increase of 20 per cent., which is appreciably more than in any other industrialised country in the West of which I am aware. This phenomenon, that our unit labour costs are increasing faster than those of our competitors, has not been confined to the period since 1963; it goes back into the 1950s, as the noble Lord, Lord Robens, has reminded us in a series of articles which are appearing in The Times at the present moment. I certainly should like to express my endorsement of the conclusion which that noble Lord has drawn; namely, that the basic solution lies in the direction of stepping up our productivity growth which, as he puts it,
"can be raised to much greater heights than most people realise or are prepared to admit".
LORD SHACKLETON: My Lords, I am listening with great interest, but I interrupt the noble Earl because I am slightly mystified by one or two things he has said. I entirely agree that a rise in productivity is vital, and in fact there have been some encouraging signs lately of increased productivity. I am referring to productivity and not production. But in view of the noble Earl's remarks, which I do not directly dispute, I am mystified that the fact remains that our export prices, according to the latest Treasury statistical returns, are still as competitive as they were immediately after devaluation. It is important to hold them at that. But the noble Earl gave rather a worse picture in comparison with other countries.
EARL JELLICOE: My Lords, I do not wish to get into a detailed statistical argument with the noble Lord. All I would suggest is that in our export prices there is usually a time lag before the effect of wage increases works fully through; and what concerns me is the fact that this spiral, which is going up, is mounting even more rapidly than it was last year. I think that that is the danger, and it is the danger above all to which I was wishing to draw your Lordships' attention.
LORD CITRINE: My Lords, before the noble Earl leaves that point, would he give us the source of his information as to unit costs?
EARL JELLICOE: My Lords, I must confess that it was derived from Her Majesty's Treasury.
LORD CITRINE: The point is that I do not believe that such data exists.
EARL JELLICOE: Well, perhaps Her Majesty's Treasury, the noble Lord, Lord Shackleton, myself and the noble Lord can go into that matter together and try to get to the bottom of it.
LORD BESWICK: My Lords, the noble Earl made a statement which intrigued us. He said that since 1963 unit costs had gone up more rapidly in this country than in any other country of which he knew in the Western world. That is contrary to what we understand. I am sure the noble Earl did not take a handout at the Treasury. Would he give us the figures on which he bases that statement?
EARL JELLICOE: My Lords, I do not want to back-track in this particular debate. I am quite prepared to, but I really think that this is a matter of statistical argument and I do not wish to weary your Lordships with it.
Casting forward, what I believe we need to do is to create a climate and secure a framework in this country in which enterprise can really flourish. That brings me, in conclusion—I have purposely not wished to speak too long to-day—to the policies which we wish to pursue in Government. I should like to preface my remarks in two ways: first. I shall be speaking here in the general terms which I believe to be appropriate to the start of a new term, with a new head boy and a new body of prefects; secondly, it has been no part of our case against the former Administration that the situation with which we have been confronted on entering power has been one of immediate crisis. The situation is one of very great difficulty indeed in the economy, and it has been no part of our own prospectus, and it is no part of our prospectus, that we have some magic overnight answer to this country's undoubted economic problems. My right honourable friend the Prime Minister has made it clear on a great many occasions since he took office that the style of this Government is to be one of careful thought, followed by considered and deliberate action What we promise is a

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properly thought out programme of economic reform—not stitched together from gimmick to gimmick—matching deep-seated problems with the strategic remedies which they require.
No one can doubt that the key problem to-day is the problem of inflation. One of the first priorities of this Government—indeed of any Government faced with the situation which I have tried, perhaps very boringly but I have done by best, to describe impartially—must therefore be to bring that inflation within bounds. It will not be easy. It can be accomplished neither by a stroke of a pen in the humble Address nor, indeed, by any single act of policy. But your Lordships can rest assured that we shall take whatever action we judge to be needed to achieve this vital end. In particular, we accept that the Government itself, as the biggest employer in the country, has a duty not only to exhort others to virtue but to set a sensible example in handling its own affairs.
Yet what I want to emphasise perhaps most of all to-day is that no short-term policy, however right or necessary, can succeed unless it forms part of the right long-term strategy. As I see it, the basic task before this incoming Administration—in the economic field at least—is to recreate an economic climate in which people are willing to save and to invest; a climate which restores to us all confidence in the future, which draws out all that effort and enterprise of which we know our people to be capable and which can help to bring about a real and fruitful co-operation between Government, companies and people in facing up to our problems. That is the heart of the economic policies which have been spelled out, time and time again, by Conservative spokesmen during the recent Election campaign, and it is embodied in the Conservative Manifesto on which we fought and, to the surprise of some noble Lords—I think they are still a little surprised—won that Election.
In the same way, it is this strategy which forms the heart of the Queen's Speech which we are debating to-day, and I should like to summarise it in these words. First and foremost, I would declare and reaffirm our intention radically to reform and reduce the burden of taxation in the lifetime of this Parliament.
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I believe that such reforms and such reductions are essential if we are to release that energy and the spirit of enterprise and initiative which is still latent in the British people. But such changes entail consequences. As the Prime Minister has made clear in another place, the necessary review of public expenditure has already been set in train, and the results will be laid before Parliament in due course. Secondly, we propose to introduce in this Session of the new Parliament—and here I am giving a direct answer to the direct question posed by the noble Lord, Lord Shackleton—a major Bill to establish in this country what already exists in almost all other modern industrialised societies: a fair and up-to-date framework for industrial relations, together with a code of good practice as a guide to all those concerned with these matters in industry, whether on the management or on the union side of the fence.
The main lines of these proposals have been clearly set out in our Election Manifesto, and I do not myself—but I speak here subject to correction by noble Lords, many of them opposite, who have far greater expertise in these fields than I should ever be able to claim—believe that they are nearly as unpopular with the bulk of the trade union movement as some trade union leaders would have us believe. They will, in any event—and I should like to emphasise this—be the subject of the fullest possible discussion and consultation with the representatives of management and unions, and we shall welcome all constructive suggestions in achieving our aims.
Thirdly, the Queen's Speech sets out our plans for a whole range of Government policies to provide a new framework of incentive to British enterprise. For agriculture we propose changes in the system of financial support which we believe are vital if the industry is to have a proper chance to flourish and expand. For industry generally we have stated our intention to review and extend the facilities for industrial training and retraining and for management education; no less important, to free firms from unnecessary interference and intervention from Government and the agencies of Government; and to introduce more effective policies for the the economic and social development of

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the less prosperous regions, in particular by increasing their economic attractions and improving their amenities and their infrastructure. Taken together, I believe that these and the other policies which we shall develop and lay before your Lordships will go far to help to create the new economic climate of which I have spoken and which I believe it is absolutely necessary that we should create in this country.
My Lords, may I just say, in conclusion, that I believe our first task in order of priorities must be to try to take the virulence out of the inflation which at the present time is gripping and could, if allowed to go unchecked, bedevil our economy. Beyond that, I believe that our task—and indeed I believe it should be the task of any Government in this country—must be to secure for this country what we have failed to secure for the last two decades, and that is swifter and sustained economic growth. I would only remind your Lordships that among the major countries cited in a recent O.E.C.D. Report Britain for the last decade has had much the lowest rate of growth of any industrialised country in the world—and I can say that on this occasion without fear of challenge. It has been a mere 2¾ per cent. per annum against 4 per cent. for the United States, over 4½ per cent. for Germany, over 5½ per cent. for both France and Italy, and over 11 per cent. for the front runner, Japan.
LORD LEATHERLAND: My Lords, I wonder whether the noble Lord would permit me to ask him a question on that point. The noble Lord talks about a 4½ per cent. growth in the United States, but has that not been accompanied by 4½ million unemployed in the United States?
EARL JELLICOE: At times I think it has, yes.
LORD LEATHERLAND: At the present time?
EARL JELLICOE: My Lords, the trouble is that our miserable 2¾ per cent. growth has been accompanied by the highest historic rate of unemployment that we have known in the last two decades.
LORD LEATHERLAND: What is wrong with the United States?
EARL JELLICOE: My Lords, to secure a higher rate of sustained growth must be the aim of any Administration in this country to-day. Without it, as a nation, we cannot do any of the tasks which are crying out for action in the 1970s. We cannot modernise our basic infrastructure. We cannot remove those blots on the industrial landscape left by two industrial revolutions. We cannot do what we should do to preserve and enhance our environment. We cannot deal once and for all with the shame of seedy towns and miserable housing conditions. We cannot remove all those pockets of poverty which stand out like warts on the face of our society. We cannot do any, let alone all, of the tasks in which I believe all political Parties in this country have a common purpose. But, my Lords, more than that, we cannot exert that influence in the world—by and large, that influence for moderation and common sense and civilised dealing—which it is within our potential to exert. We cannot play our full part in contributing to security or in helping to close that ever threatening gap between the richer and the poorer nations.
Finally, I believe that further dangers lurk in the path of this nation unless we can somehow find that clue to sustained growth—the clue which seems to elude us alone among all the industrialised nations of the West. Only ten years ago this country, apart from two exceptions—little Luxembourg and, I think, Sweden—had the enviable distinction of having the highest national income per head in Western Europe. But now we have been overtaken by our closest neighbours. I believe that that is a fact—and it is a sad fact—which has not yet fully sunk into the consciousness of the British people. However, my Lords (and this is a deep conviction which I am now expressing), I believe that unless we can reverse this trend, the truth of what is happening will in fact soon dawn upon the people of this country. I also believe that the realisation, when it comes, of our continued poor national performance could in the long term breed profound discontent in this country, and with it very serious consequences indeed to the

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health of our society as we know it to-day.
For far too long this country has been in the grip of a vicious circle of high taxation, inflation, restriction and consequent frustration. The new Government's prime task, as I see it, is to break out of that circle and to try to establish in its place—and, Heaven knows! this is going to be difficult—a more "virtuous circle" in which, by reducing taxation and releasing the forces of economic vigour, we can generate the resources for faster growth and social advance. It is the aim of this Administration, in the economic as in other spheres, to help to get this country firing properly in all its cylinders. Whatever our political differences in your Lordships' house, I am sure that that, at least, is an aim which will commend itself to all parts of your Lordships' House.
3.53 p.m.
LORD BYERS: My Lords, I am sure that the noble Earl, Lord Jellicoe, will not accuse those of us on these Benches of instant opposition—permanent perhaps, but not instant. I was glad to hear from him that there is no immediate crisis. If I may say so, that is a different message from the one that came from that quarter in the last three days of the General Election. What the noble Earl has done for me is to confirm the economic case and analysis which we consistently put forward throughout the Election. We shall look forward to examining the policies which are brought before the House by the Government, to see how far they can deal with the situation as the noble Earl has described it. I think we have made some progress, at least, by getting a proper intelligent analysis of what really is wrong with the economy.
During the course of the Election it became clear that the phrase "the national economy" was being used in far too many different senses to permit a reasonable discussion, and we tried to get discussion going during the Election because it is vital that there should be a proper understanding of it. To Mr. Wilson, "the national economy" meant the balance of payments, but the balance of payments was only one feature of the economy, as the noble Earl has quite rightly said to-day. Mr. Richard Crossman, who always tells the truth in the most embarrassing way, let it be
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known that the economy was not really strong enough to find the money for the full award to the doctors. I think he was probably right, if one is talking about the strength of the economy in that sense. To Mr. Heath, the trade figures which were published towards the end of the Election implied an economic emergency and the suggestion of a possibility of devaluation, which to my mind has by no means been borne out by what the noble Earl, Lord Jellicoe, has told us to-day. That implication had a very damaging effect on the two Parties who were opposing the Conservatives at the Election.
I do not want to make this into a Party political speech. As we saw it—and this has been confirmed by the noble Earl—the truth was that the balance of payments was in substantial surplus, but economic growth was virtually nonexistent, and wage increases, largely unrelated to productivity, were bound to increase costs which might well price us out of a number of export markets, thus making an attack on the balance of payments and eroding it over a period of months. That was the analysis which we made and we brought forward solutions in order to deal with the situation.
I believe that the whole key here is: how do you get economic growth? It is not merely a matter of the last eighteen months; it is not a matter of the last decade. Relative to other countries, this is something which has been going on since 1951. In that year we were number two in the growth league of the industrialised countries, and the United States was at the top. In 1969 we were second from the bottom, Italy being at the bottom—she was at the bottom in 1951—and the United States was still at the top. This problem has been with us throughout the last 20 years and we have to get to grips with it.
The second misunderstanding of the position of the economy has been repeated by both the Government and the Opposition on numerous occasions, and it is exemplified by the way in which this week's debates have been arranged—today, economics; to-morrow, industrial relations. In his analysis, the noble Earl, Lord Jellicoe, gave the lie to this, because we must understand that half the battle for economic growth and greater productivity rests with the ability to solve the problems of industrial relations.
LORD BROWN: My Lords, may I interrupt the noble Lord? The noble Earl, Lord Jellicoe, and the noble Lord, Lord Byers, have both commented on our relative increase in production without making any reference to a fact which is very seldom mentioned; that is, that the countries with which they are comparing us all have large residues of population left in agriculture and are importing labour on a wide scale, whereas we are able to do nothing. The failure to refer to that fact puts this country's efforts in a much worse light than it should be.
LORD BYERS: My Lords, I do not agree with the noble Lord. That is one point of special pleading, but it is no use trying to hide this problem. We are not geting economic growth. Any number of statistics can be used—and the noble Lord has a first-class record in industrial relations for geting people to increase productivity. What I do not want to go out from this House is a statement from him implying that we are quite satisfied and smug and complacent about the economic growth that we are achieving.
LORD BROWN: Nor do I.
LORD BYERS: If we want to import more labour, why do we not do so? We are keeping people out at the moment. The point I want to make is that the questions of economic growth and industrial relations are so interdependent that we really must look at them together. That is why, as noble Lords know, we have consistently put forward from these Benches a comprehensive policy on the economy which is aimed at achieving economic growth, partly by better industrial relations and partly by a fair wage system.
I do not want to minimise fiscal policies and confidence which industry can have—investment policies and so on—but to my mind it is absolute folly to think that you can improve industrial relations by legislation aimed against the unions. That is not the way to get better industrial relations in this country. We shall study with great interest the proposals which the Government bring forward, and they will be bitterly opposed if they merely take the form of legislation to take people to court if there are industrial strikes. We have to provide a system in which there are incentives to get efficiency and productivity, disincentives to strike, and incentives to management
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for more meaningful capital investment.
EARL JELLICOE: My Lords, I hesitate to interrupt the noble Lord, Lord Byers, because with a great deal of what he is saying I agree. But I credit him with having read our proposals on industrial relations and, if he has done so, he must realise that it is a travesty to say that they are merely a question of taking people to court because of a breach of an industrial contract. The noble Lord must realise that.
LORD BYERS: I did not say that, my Lords. I said that if they are they will be bitterly opposed. But let us hope that they are not. This is a warning shot across the bows; because I do not believe that that is the way to handle industrial relations.
I believe that if we are to try to check inflation, and to get some sort of price stability, there are certain things that have to be done; and some of them are fairly revolutionary. So far as inflation is concerned, I am sure we have to get rid of nation-wide trade union bargains which are unrelated to productivity. This ought to be done by subjecting these nation-wide agreements to the approval of the Restrictive Trade Practices Court, just as other, much less dangerous, restrictive trade practices are to-day. It is quite a simple thing to do, and I believe that it would have a very big effect on the inflationary situation in this country. Wage bargains must surely be struck, not at a national level, but at plant level, where productivity and merit can really be assessed.
Secondly, there is the need for a revolutionary improvement in communications within companies and organisations, by the creation in all firms over a certain size of statutory works councils or committees on which all sections of workers and management can be represented, and where wage negotiations can be carried on with all unions at once, as they did in the SOGAT dispute—the newspaper strike in Fleet Street—to avoid the bedevilment of leapfrogging. This is something that should be done, and it should be accompanied by much more information to the workers. There is no reason why a great deal more information should not be given. But if such a scheme is to work then it will need a

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great deal of training of management, and of workers and staff, in the practices of negotiation, in the practices of communication and so on. This, I believe, could be a tremendously fruitful field in which we could operate.
Thirdly, people must be given an incentive to work hard for high earnings, and an incentive not to strike. I do not believe that this can be left to the good will of the employers, although in my own view self-interest itself should dictate that this is the line which it follows. The proposals will have to be either mandatory or achieved by tax incentives; and I believe we should look at the experience of France, Germany and Yugoslavia to find suitable forms of profit-sharing and share-ownership schemes to help those engaged in the enterprise to have a financial stake in its profitability. If they have a stake in its profitability, they have an interest in making the enterprise profitable.
I was remarkably interested the other day, when I went over to attend a board meeting (I am not a member of the board, but I attended the meeting) in France and met the workers' representatives who sit on the board. A decision had been made to double the capacity of the plant. The company has a compulsory profit-sharing scheme, and the workers' representatives on the board brought a message from the workers to say that they were glad indeed that the plant was to be expanded and that they did not mind putting off their share of the profits for two to three years: they were glad to be in an industry which was forward-looking and going ahead. The attitude to work in this plant is absolutely different from that in an identical plant in this country.
The number of days lost by strikes in France is much smaller than in this country at the present time, and I believe that there is a lot to be learnt. I am not suggesting that we should just adopt the French system: what I am saying is that we must find ways of associating people with the profitability of enterprise, so that they can be taken into the confidence of those running the enterprise to make it profitable. I believe that these are the ways in which we shall secure long-term growth in the economy, by tackling the very basis upon which people work in industry.
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Immediately, I hope the Government will have a look at some of the other proposals which we in the Liberal Party have put forward for a number of years. In my view, there s a strong case for telling the nationalised industries to look to the market for capital which they may need for expansion, instead of to the Government. I believe that there is a case for looking again at tolls for the road programme, and for having a revolving fund such as was suggested almost 40 years ago. You can get money for expansion if you have a guaranteed income coming in.
Then a great deal more must be done to reallocate resources of manpower by imaginative re-training schemes. The emphasis must be on re-training, and I am glad to see that mentioned in the gracious Speech. I believe that our re-training facilities at the moment handle about 20,000 people. This is ludicrous for a population of our size, and with an unemployment problem such as we have at present. What we want is to have about a quarter of a million people being re-trained and encouraged to go to the growth industries, the export industries, the industries where they can make a great contribution.
I think we have to ensure less protection for industries, by selective tariff cuts and by revising our import policy—for instance, coal imports. I can see no reason why we should be keeping coal imports out at the present time. I believe that we need to strengthen anti-monopoly measures if we are to keep down prices. We must also try to get the whole idea of devaluation as a weapon out of our armoury. I hope that the Government will examine the proposals, which were put forward in the Election and which have been put forward by us before, to have not a fixed exchange rate but a floating exchange rate. This is working in one or two parts of the world, and it is something which I believe the Treasury ought to study.
I am surprised that we have had no reference at all to the effect which an American recession might have on the economy of this country, and I hope that at some time a considered statement may be made as to where we stand in relation to what the Government believe is going to happen in the United States. Many decisions on such things as capital raising,

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capital investment, and all the rest of it, depend very largely on industry's having confidence in the Government's policy. That is why I hope that it will not be too long before we get a comprehensive view of what the Government are going to do and what advice they will give to industry about reflation, capital investment and so on. We shall not be a Party of instant opposition: we shall indeed be critical, but it will at all times be constructive criticism.
4.7 p.m.
THE EARL OF DUDLEY: My Lords, this is an awe-inspiring place, and it is a frightening experience to speak here for the first time, especially when the thought of it has robbed one of sleep. So I hope noble Lords will be indulgent if I speak slowly on a complicated subject. My Lords, the economy of this country must get air-borne. It must cease resembling the jumbo jet—grounded un-profitably by a strike of air crews. As noble Lords have heard, Britain has a balance-of-payments surplus after devaluation, but monetary restraint and financial stringency have led to a stagnant economy and to excessive unemployment. If the Government were to follow the traditional policy, they would now reflate, unemployment would decline and the economy would get some uplift; but home demand would rise still further, imports would grow and the trade balance would deteriorate, calling for corrective action again from the Government. Jumbo would soon be back on the runway, with a thump!
My Lords, I have read with interest the Study of the Economic Research Council, and while I agree with most of it I do not agree with their views about the helplessness of Government when faced with the trade cycle. On the contrary, to break out of this familiar cycle the Government must make it their first priority to protect our trade surplus and to repay our external debts. Here, my Lords, I must take issue with the noble Earl the Lord Privy Seal, because I believe that our debts are still very much higher than he indicated. I think the Lord Privy Seal, in his figure of £1,600 million, was referring to drawings from the I.M.F. and to short-term debts owed to the Central Banks of the United
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States and other countries, and was excluding the original North American loan borrowed in 1945–46 in dollars—and because it was borrowed in dollars it still stands, after two devaluations, at £1,600 million. Whatever the figures are, there is a substantial sum to repay within, in my opinion, five to seven years—and it will not be £1,500 million but nearer £2,000 million. It is clear that the Government must ensure a substantial surplus on external account: in my opinion at least £300 million to £400 million per annum. To have less conscience about repaying our debts to the United States and to other countries than about selling arms to South Africa or finding subsidies from borrowed money for underdeveloped countries is the economics of the Mad Hatter's tea party, a throw back to the Boston tea party.
After twenty-five years of "boom or bust", the nation is tired of playing Sisyphus. Since 1967 we have rolled the rock about half way up the hill and we must ensure that it does not once again come crashing down on our heads. To prevent this the Government must be careful about how much money is released to personal income through reduced taxation. I agree with the Minister that tax reductions can be made and I expect them to be matched by a growth in personal savings. From 1951 to 1964 personal savings rose by an annual average of 17·4 per cent. In current monetary terms this means £400 million per annum, balancing the amount we require on external account and equivalent to over one shilling off income tax in any year. There is the precedent; but to repeat it would require vigorous promotion. I pay tribute to the late Lord Mackintosh of Halifax for his outstanding achievement when faced with the same problem.
To pay our way we must have increased productivity. I must remind noble Lords that increased productivity comes only marginally from extra effort or extra hours' working; it comes in the main from the amount of money invested per capita of working population. It is totally illogical to look for increased investment in industry—and especially in labour-intensive industries—in the present industrial climate of trade disputes and strikes. This is an international problem as well as a national one, but we are

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here to-day considering our economy. I look to the Government to negotiate, I look to the managements and unions to co-operate, and I look to the Government and the T.U.C. to work together to reduce unofficial strikes and stoppages. I am sure that a great deal can be achieved by good will and negotiations. But if this hope is not fulfilled, and if we are to have action before peace, let us have it soon and get it behind us. It is not reasonable for the economy that we should live in this state of flux. Industrial peace is essential if we are to increase productivity in the private sector.
The productive capacity of manufacturing industry has been almost static since 1961—an intolerable situation in the light of our need for an expanding economy. To correct the situation will cost money. I estimate that an additional £500 million annually must be channelled into investment in the private sector. That represents an increase of 15 per cent. over the present level of capital formation in the sector, excluding dwellings. It is also necessary that we do something for the people in regard to rising prices. Here I should like to suggest that we reduce corporation tax by 9 per cent., from 45 per cent. to 36 per cent. That would give industry room to manæuvre and would cost about £340 million per annum. To offset that, it would be possible to cut the investment grant from 20 per cent. to 10 per cent., which would save from £300 million to £350 million. I believe that a substantial reduction in corporation tax will enable us to bring prices quickly under control and also help the market in rights issues. That would be more helpful to industry in planning for growth than the higher rate of investment grant.
My Lords, I have spoken in this debate because of the anxiety with which I view the problems which face the country and the Government. For a quarter of a century, half the span of my lifetime, I have seen the people of this country turn from one Party to another in dismay according to their disappointment over the past or expectations for the future. As a supporter of the Government, I should like to believe that on this occasion the people's hopes will not again remain unfulfilled.
4.17 p.m.
LORD ROBBINS: My Lords, I imagine that from all quarters of the House there would be the wish that I should congratulate the noble Earl, Lord Dudley, on the lucidity and the robust intrepidity with which he faced the excruciating ordeal of a first speech in your Lordships' House. If those anxious small hours of the morning to which he alluded were due to any apprehensions on that score I can assure him that they were unnecessary. He has given us ample food for thought, and I am sure that your Lordships will all join with me in hoping that we shall soon hear from him again.
My Lords, I must begin my observations with an apology to noble Lords in general and to those coming immediately after me on the list—and particularly to the noble Lord, Lord Balogh—for having to leave this place on a humble public duty, fixed many months ago, where I have to preside and where cancellation of that duty would be impossible. I am deeply grateful to the Government Whips for giving me this opportunity at this early stage in the debate for my few brief observations.
The subject of to-day's debate raises questions relating both to the past and to the future, both to what has happened and to what may happen. As regards the past, as a Cross-Bencher I profoundly desire to avoid Party recriminations, I do not think that such recriminations help much in understanding the difficult problems with which we are faced. But I do believe that there have been errors in the pas t on both sides, and I think that there is some purpose to be served in attempting to draw some lessons therefrom. I have three such lessons particularly in mind. Thus the first: if we go back to the years before the late Administration took over, I think it is clear from that experience that, if there is any danger to the balance of payments, to make a dash for freedom in the hope that an increased production will take you over the hump is very dangerous indeed. I do not question the good will of the policies of that period, but, equally, I do not doubt that these policies did leave an extremely difficult problem to those who inherited them. Perhaps it was talked about too much, but that is another story.

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My second point is that if you inherit a balance of payments problem, if you do not intend to devalue you must make sure that your internal policies are sufficiently tough to restore the position at the old rate of exchange. I still think that in 1964 there was no need to devalue, and I respect the motives which led to the decision at that time to retain the old parity. But I also think that until 1966, when it was certainly getting very late, the policies adopted were very inadequate for that purpose. In 1966 things were different. I think the policies then adopted might have been adequate had it not been for considerable external bad luck and eventually the shipping strike—one of the very few strikes in my lifetime which can be said to have done really serious damage to the economy.
Thirdly, once you have decided to devalue, as we did in 1967, you cannot afford to delay for more than a few days or weeks the stiffening of fiscal and monetary policy which is necessary if the devalued exchange is not itself to be an aggravating factor. This especially, my Lords, if you tell the public that the money in its pocket has not lost any power to purchase. I think that the delay from December of that year until the normal Budget time, the delay of appropriate tax policies, was a mistake; still more the failure at once to impose strict control on the supply of money. After that, however, not perhaps without some tactful prodding from the authorities at the I.M.F., the correct medicine was administered; and I think Mr. Jenkins and his colleagues in the late Government might indeed claim considerable credit for vindicating expectations emanating from elementary economic theory. We are not out of the wood yet, my Lords, not by any means; but certainly some progress has been made.
Turning from the lessons of the past to the prospects of the future, I see two sets of problems; connected perhaps, but sufficiently distinct to be capable of disentanglement; problems of general financial policy and problems of immediate action. As regards general policy, I have little doubt that some of the measures of recent years have left the tax system in a terrible mess—S.E.T., capital gains tax, corporation profits tax. Frankly, my Lords, S.E.T. is a monstrosity with its absurd discriminations. Only a mind
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insulated from reality by a very amiable disposition to excessive intellectual acrobatics could have thought of it. I hasten to add that I hope that the Chancellor in one of his more Messianic moods will not try to remedy things by simple repeal; releasing some hundreds of millions of pounds of additional purchasing power. Better, I suggest, for the time being to turn it into an overall payroll tax, without exceptions and capable of rapid adjustment up and down to meet the needs of the changing situation. Better, at any rate, until we know what we have to do if we succeed in getting into the Common Market.
To the capital gains tax, my Lords, I have no objection whatever in principle; but while it remains without an index number provision then in times of inflation it is, inter alia, an annual capital levy, with all the disincentive to saving and prudence which that sort of tax implies. You put your money into equities; the price level rises 10 per cent., and the price level of equities may rise 10 per cent. or it may not. But if it does then, to and behold! you are taxed—although the real value of your capital has remained constant. Why Mr. Callaghan, who is a humane and honourable man, should have countenanced such an anomaly in his measure passes my comprehension.
As to the corporation profits tax, perhaps the least said the better. I learned my public finance from a great teacher of economics, not popular on this side of the House, the late Hugh Dalton. He taught me that taxes on company profits, as distinct from taxes on individual incomes, were both inequitable and uneconomic. I think it was a great pity that, at a time when in other parts of the world people were getting tired of this sort of thing, we should have landed ourselves with this thoroughly reactionary measure which will take years and years to unscramble.
Then, my Lords, beyond all the troubles created by particular measures there is the general problem of the very considerable disincentive created by the excessive weight of marginal taxation of incomes. I know that the existence of such a disincentive effect is disputed—and I do not need to be reminded that some of the finest work in the world is completely uninfluenced by pecuniary

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considerations. But I know, too, that the impulses of many ordinary men and women are so influenced, and I think that it is wisdom to legislate for a community of middling motivation rather than for a community of Franciscan idealists. We should all agree, surely, that a marginal tax rate of 20s. in the pound would have a dampening effect upon effort. Why should the dampening effect cease if it. is 19s. or 18s. 6d.? I suggest that something ought to be done about this; and in my judgment it would be a good thing if it were laid down that rates should be such that no man should be penalised by the loss of more than, let us say, 50 per cent. of his income. But all such changes of general policy need time and prudence.
Meanwhile, the present situation, if not immediately catastrophic (and I agree with noble Lords on the Opposition Benches that it is not yet catastrophic), is—and here I agree with the noble Earl, Lord Jellicoe—sufficiently disturbing. In recent months the income inflation in this country has been at the rate of something in the neighbourhood of 10 per cent., against a growth rate which just recently has not been very much above zero. This situation simply must not continue. And it is no use trying to shrug it off by saying that other countries also are inflating. I doubt very much whether many are inflating so much against so small a growth rate, and if they are not then it is only a matter of time—it may be some time; I hope it is—before we have further external difficulties. But even if we are all going up at the same rate, the fact of absolute, as distinct from relative, inflation would still be incompatible with distributive justice and economic stability.
As regards distributive justice, inflation means that all with fixed incomes are penalised: pensioners, owners of Government and fixed-interest bearing securities, all whose salaries or wages are adjusted only at long intervals. I know it is sometimes said that this can all be put right by more frequent adjusting. Very well. But, if that is said, let us not forget that the adjustment, to be just, must be continuous; and if the adjustment is continuous, the inflation loses all its stimulus. If all incomes and prices go up together, the net effect is just like adding noughts to all the figures in the
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account books, or altering the accounting from, shall we say, Arabic to Roman numerals. As to stability—I say it without exaggeration—if this sort of thing gathers momentum, I do not see how it can be stopped without shocks to expectations which may have very serious consequences. Our whole system is getting geared up to ion-stop inflation—witness the present level of interest rates. Do we really think that eliminating this is something that can be done without trouble?
What then are we to do? I should have thought that another wage freeze was not "on", at any rate for the time being. A large section of opinion, some of which I respect, still clings to the idea of a permanent incomes policy—P.I.B. for ever. I confess to doubts about this. Of course there must be a public incomes policy, otherwise the Government, as employer, is not discharging its duty in that respect. If the Government is not willing occasionally to say, "Thus far shalt thou go and no farther", what are we to expect of employers in the private sector? I submit that we have seen the disadvantages of this quite often recently.
But elsewhere, outside the public sector, throughout the rest of the economy, it is not at all clear to me that long-run success is to be expected from this sort of policy. Indeed, my fear is that the remedy may prove as bad as the disease. I doubt very much—I say it with trepidation—whether in recent years the P.I.B. did very much to restrain inflation. I would go further and say that I suspect that the setting of norms, so-called, may in fact have made things worse and prompted claims that might otherwise have been more moderate. This may be the reason why the so-called Phillips point seems to have shifted upwards. Anyway, it is clear to me that, as a permanent long-run policy, control of prices and incomes from the centre can work effectively only with much more interference with individual liberty, and much more control from the centre than the majority of this people are as yet prepared to put up with. I find it a significant circumstance that the resistance to this idea comes quite as much from the majority of moderate and helpful trade union leaders as from any who might be farther to the Left.

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Whatever emergency measures may be forced upon us—and we are moving in very unknown waters at the moment—in my judgment the time has come to return fundamentally to the original conception of stabilisation policy. Agreed that the Government has a duty to provide against deflation and mass unemployment. We all agree about that. But it should also be agreed that it has no duty to provide the money to finance inflation. It must not be committed to a full employment policy, whatever the demands on the gross national product may be in the shape of claims for increased incomes. That way lies eventual hyper-inflation.
The Government should be prepared to say to all concerned, "We undertake, either by fiscal means or by monetary means "—and I am an eclectic in this respect—" to endeavour to maintain such a volume of aggregate demand as will sustain reasonably high employment at income rates rising with productivity; but, beyond that, we are not prepared to provide the money. This is the point at which you, individuals and organisations with dispersed initiative, must choose. It is not for us—the Government—to be forced into steps which lower the value of money and penalise all with fixed incomes".
Some may say that this is an impossible conception for a modern democratic community. I agree that so far since the war there has been very little on these lines, under any Government, at any rate in this country. But consider the alternatives: either total control of incomes, leading to a good deal of control of almost everything, or continuing inflation and all that that implies. My Lords, I suggest that we have to talk this out in a grown-up way, and I have yet to be convinced that among this people, if such talk takes place, reason and persuasion have not some chance in the end.
Meanwhile, in conclusion, may I venture to express the hope that the Chancellor will eschew the siren voices suggesting yet a further stimulus to aggregate demand while incomes are still rising faster than productivity. It may be that the income inflation has gone so far that a total and immediate application of the brakes would be unwise. There are grave
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international liquidity problems hovering around. But let no one think that in our present position the utmost prudence is not necessary when contemplating this kind of stimulus. It is often said—it is a commonplace of uninformed discussion—that if only production is stimulated enough, nothing more is needed. In my opinion, my Lords, this is just wishful thinking. I agree, of course, that if production could be so increased as to bridge the gap between a 10 per cent. increase of incomes and, say, a one per cent. rate of growth, this would be all right. But does any serious-minded person think that that is immediately possible? How agreeable it would be for us all if things were as simple as that!
4.40 p.m.
LORD BALOGH: My Lords, I should like to join the noble Lord, Lord Robbins, in congratulating the noble Earl, Lord Dudley, on his remarkable maiden speech. I hope to hear him often in the future, because I shall on those occasions perhaps contradict him, which I will not do to-day. I should like also to congratulate the noble Earl, Lord Jellicoe, on his appointment, and to assure him that his first tutorial went reasonably well. I want to reflect on Lord Robbins's—I almost said Professor Robbins's—speech by saying that it was agreeable to see that he wanted to abolish roughly £2,500 million worth of taxation and have no inflation. Perhaps the noble Earl, Lord Bessborough, who is to wind up the debate, will explain how that is to be done, because of course it is part and parcel of the Tory Manifesto.
My noble friend and Leader admirably conformed to the commands of etiquette, so I thought that I need not waste any time on those but proceed to the matters in hand. Before I do so, however, I should like to say—and this is not a matter of etiquette—how impressed I was with the economic sentiments expressed by the noble Lord, Lord O'Neill of the Maine. It was the late Lord Keynes who said that politicians are inspired by the scribblings of defunct economists. I, for one, have not had that experience. It is hard facts that make politicians move, and economists follow at some considerable distance afterwards. The hard facts of Ulster have softened the noble Lord, Lord O'Neill, to State intervention. He

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has been taught the hard way. I hope, for our own sake—but I must confess that I do not trust—that the education of the new Ministers will be more expeditious and perhaps less painful.
I intend to deal first of all with the events of the past which brought us to to this gracious Speech, and to go on to the problems which we are facing in the future. I have no complaint to make about the line which the noble Earl, Lord Jellicoe, took during the Election. As one would expect he sailed under his true colours: the flag of laissez-faire, the Jolly Roger, skull and crossbones and all. That was honest. One might disagree with him and one may think that the tactics employed by some of his comrades were loss honest; but he openly declared himself. His diagnosis of our problems is not dissimilar to mine, though I differ with his appreciation of the present and, of course, of the period to come.
But what should one think of those Members of your Lordships' House who skulk on the Cross-Benches, only to dart out from the ivory tower to deliver themselves of crassly partisan political nonsense, shyly wrapped in the white garments of a neutral vestal virgin? There is something distasteful in the spectacle. Take, for instance, the noble Earl, Lord Cromer. He must be congratulated on having achieved the remarkable feat of producing a violently politically slanted rhetorical—or should I say theatrical?—and literary intervention which for a long time to come will be a teaching aid, a text to facilitate both essay writing and examination setting, by containing in the most compressed form possible mistakes, confusions and fallacies to which this admittedly complicated and complex problem can lend itself.
The noble Earl confused stocks, such as total British capital and debts abroad, with flows. He attributed special merits to invisible earnings, though they are still much less than half of visible exports; he assigned to visibles a Socialist blemish (I did not know that we had socialised the export trade), while lauding invisibles as the true mark of respectable private profit-making. I think that some industrialists on the opposite Benches, if they could understand at all what the noble Earl was driving at, might perhaps take a different line. He further con-
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founded the so-called net adverse balance with the total liquidity balance; and confused the gross liquidity balance with the net change of the net liquidity balance. If I were a better logician, I could certainly find some more pearls, statistical mistakes and analytical fallacies. The noble Earl, for instance, seems to believe that private "hot" money is less unstable than money borrowed from central banks, an error of judgment which Montagu Norman, or his old friend Schacht, would not have committed. I am very sorry to see that the noble Earl, Lord Jellicoe, who otherwise is a most sensible man, has fallen for the same mistake. I think, on the whole, that the noble Earl, Lord Cromer, would be well advised if it: is the truth he is after, to change his statistical clerk.
There is, however, perhaps just a small chance that the noble Earl was not after pure knowledge. We have it on the high authority of the political editor of The Times that Lord Cromer, in his acute sensibility, was weighed down with the problem of the propriety of attacking a Government that he had served, fortunately only for 18 months. I seem to remember no such reticence, and at any rate one might regard the period of quiescence, if any, as a sort of preparation for an alibi of impartiality.
However that may be, he did not seem to have been so coy in broadcasting his views in the middle of the Election campaign when he could inflict the maximum possible damage on the Government. His intervention, indeed, might be likened, both in the authenticity of its contents and in its aim and its effect, to the so-called Zinoviev Letter—though the noble Earl is not at all like Zinoviev. This Election might well be called in the future the "Cromer Election"—which should give him some satisfaction at having carved out a niche of immortality not given to many.
As he was the Governor abetting Mr. Maudling in unloosening the tremendous upsurging demand in 1963–64 of which the noble Lord, Lord Robbins, spoke, and which led to the maximum deficit for which we had to borrow so much; as he was the Governor who staunchly opposed every single device for limiting that deficit under the Labour Government, except of course unemployment at home; as he was so staunchly opposed

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to devaluation, which had become necessary as a result of the inflation he engendered, it is indeed fitting that his commemoration should take this form. It is to be hoped, however, that after this contretemps Labour Chancellors will adopt and generalise the very sensible policy of the present Prime Minister, of removing, if not sacking, all important civil servants in his entourage.
There is another case—that of the noble Lord, Lord Kindersley. We had ample proof of his economic erudition on the occasion of his evidence to the Tribunal on the bank rate leak. His recent contribution to economics, which played an equally important role in the Election, might well be called a concoction of bad methodology, fallacious or misleading statistics, and bamboozling assertions, confounded with an incomprehensible delight in giving advice which must inevitably lead to a further twist in the inflationary spiral, the cure of which is the first economic priority in the gracious Speech. But, of course, such of his Committee members as knew anything about this affair are almost directly interested in the maximum possible increase in the salaries of the doctors because their own income is dependent on it. Their anticipation of an unchecked further inflation, implied in the award, will haunt this Government, so eager in cutting Government expenditure and in keeping down public prices and charges. As the Business News section of The Times has shown, the proof that the doctors' pay lagged behind was based on assertion rather than analysis. Only the actuaries' salary structure could be compared to that of the doctors, and it was not possible to make a comparison because of the different structure of their profession.
Both the solicitors and university teachers, as we have seen in the Press in the past few days, have already used the Kindersley Report to ask, like Oliver Twist, for more. Altogether, their conclusions are based on an erroneous interpretation of the Pilkington Report, which itself has been made obsolete by the previous general report of the Review Body, and they choose completely to ignore that. Their assertion that the load on doctors has increased is not true. On the other hand, the shortage
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of doctors has been due to the lamentable Willink Report, and the steps which the last Tory Government took in following it and limiting admissions to medical schools.
So far as emigration is concerned, there is not a shred of evidence adduced to prove that the older, higher paid doctors are migrating. Moreover, apart from a very limited number of famous specialists, who can get professorships and thus quickly establish a good practice, the workaday consultant, without any publications to his credit, would find it exceedingly difficult to transfer at equal advantage to the United States, and far less advantageous to go to Australia or New Zealand. So far as the younger ones are concerned, their interest is as much, if not more, in having more hope of a consultant position which depends on there being more consultancies, rather than on higher pay. The Review Body, even though they based their calculations on probable life earnings, completely ignored this possibility.
On any account even the concessions made by the late Government were excessive, and very likely to push the vicious inflationary spiral into a further gyration. What the present Government will do, I shudder to think. Nothing shows more crassly the need for a unified treatment of income—price problems in both the private and public sectors, and not only in the public sector, as this lamentable lapse. The attitude of instant opposition violently expressed by the friends of the noble Lord opposite will indeed haunt them and damage the country.
My Lords, having dealt with an important if not very attractive aspect of the past, I now turn to the central problem of the future. The noble Lord, the Leader of the Opposition in this House, has pursued a number of topics of great importance, such as regional policy, and policy with respect to the Civil Service, on which he speaks with unparalleled authority, and I am not going to follow him. He has left me, therefore, to concentrate on one single, essential point. The main problem now, as it was yesterday, and the days before yesterday, back to 1921 or, in a sense, 1885, is the tendency of British costs and prices to exceed foreign ones. This induced periodic crises, some four in the inter-war period and eight

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since the war. Consequently, the monetary and fiscal brake had to be jammed on, investment fell and consumption stagnated, unemployment rose, yet inflation continued.
When the noble Earl, Lord Jellicoe, speaks on high unemployment may I remind him that a Professor Paish—a close adviser to the Tory Shadow Cabinet—thought that 5 per cent. would be needed to attain stability of the sort which the noble Lord, Lord Robbins, advocates. I agree with Lord Jellicoe that the problem of inflation is very serious, but I do not think he has brought a shred of evidence to this House that they have mastered it, or that they know where they are going.
The noble Earl, Lord Jellicoe, picked his figures rather carefully—not explaining, for instance, the upsurge in 1964, how it was done, and at what cost—but the post-war performance has been far better than the inter-war misery or even the record of the oppulent, tasteless and pretentious Edwardian period. It was wholly insufficient to satisfy the growing expectations of the people of this country such as were recently expressed on television, especially in the Tory political television contributions. When the noble Earl, Lord Jellicoe, declares that by setting free industry, commerce and finance we shall get over our difficulties, I can only reply that history does not bear him out. I am delighted to hear that the noble Lord, Lord Robbins, agrees with me with regard to how a dash for freedom might be a dash into the abyss. I do not agree with these new Whiggish laissez-faire attitudes which the Tory Party have found themselves in since 1950. I back Joe Chamberlain, not Asquith, in this matter. We had Free Trade, we had laissez-faire untrammelled by the Welfare State. The consequences were there for all to see.
The rate of increase in the first decade of this century was one half of 1 per cent., a fifth of the figure quoted by the noble Earl. The rate of increase in the inter-war period was rniniscule—far less than was attained after the war. Under this new régime, which noble Lords opposite wish to introduce, Britain had lost its lead in the old industries and was never able to create a single new industry. The latter grew up after Protection was introduced and the Bank of England undertook the sort of intervention which the
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much-maligned I.R.C. is undertaking now. The I.R.C. undertook it in very much more timid fashion than Montagu Norman Where is the company for industry? Where are all the holding companies which intervened and rationalised the shipping industry before the war? The Bank of England did it. I must confess I had never in my life dreamt that I should extol in earnest, to a Government which governs the country in 1970, the late Montagu Norman as an example of Socialist intervention.
Now it is possible that the Labour Government made mistakes. I will not say that I have not made mistakes—certainly I have made mistakes, and everybody does so. The greatest mistake was that we abandoned the prices and incomes policy. The sort of measure which noble Lords opposite are advocating now will not lead to the benefits which we all wish to share. We all wish to have a better life; we all wish to have more resources. It may be we wish to distribute them a little differently, but the basic aim of more: resources is shared by the two great Parties, I think even by the Liberals—though I must say that when I heard the noble Lord, Lord Byers, I found that he does not want to live in this century but to go back to the last century. The sort of measures now advocated will do nothing to further a solution of our problems Strikes are the result, not the consequence, of the basic problem of the failure to maintain our competitiveness.
It is possible to imagine the deep calling to the deep: Ministers whispering to the industrialists so that they will not be heard on the other side of the negotiating table, saying that they should not grant wage increases, even though the granting of wage increases is individually and personally more profitable to the management than to have a strike. It may be it will be so. I very much doubt it. I doubt whether they will be successful without causing deep recession. In this respect, two facts speak very clearly. You only have to look—of course you must be outward looking. Just look at the poor man Nixon, transfixed on the dilemma between inflation and unemployment, having 5½ or 6 million unemployed five months before an election.
The root of our trouble lies in the fact that we no longer live in a competitive world. A Maudling dash will not lead

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to an improvement in the matter; it will lead to a crisis. We live in a world of market power where wage claims do not depend on current demand for labour. This obviously is unknown to even the most admirable and most admired upholders of neo-classical economics in your Lordships' House. Wages do not depend on current demand because they themselves create the additional demand needed to sustain wage concessions through price increases. The structure of industry has changed. Neither fiscal manipulations nor monetary tricks will lead us to salvation. Both can stop inflation only if unemployment, stagnation and the fall of productive investment—the one thing which the noble Earl. Lord Dudley, deplored—are produced on a large scale. The bankruptcy of the largest railway in America, the threatened bankruptcy of the biggest conglomerates and some of the air-space industry, the leaders in American industrial development, provide the last warning to reverse engines, to keep institutions intact which can, if need be, intervene.
I would never have believed that the present Government would adopt measures which would have been regarded in the 1920s as retrograde. The lack of economic literacy is exemplified also by the Prime Minister's promise to reduce taxation at some future date, which was again reiterated in this House. He apparently ignores the elementary connection between expectation and action. If people expect a tough Budget they roar to the shops; and the reverse is a redoubled backlash afterwards.
If we take it that the Industrial Relations Bill will cause untold mischief on the Labour front, with redoubled pressures for higher wages before it comes into being, one begins to perceive the most splendid recipe for a continued loss of value of the pound which will, after a pause, due to foreign inflation—I do not agree with the noble Earl about his analysis of the present position of the country, but I do agree with him in the analysis of the medial short-term if these policies are going to be followed—force us to devalue or, worse still in those circumstances, to float. Floating in an idyllic pool of languid waters is one thing: floating down towards a bottomless Niagara is another. If price increases due to depreciation are answered by wage
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demands, an endless plunge will follow. Here, again, the character of the Election fight will impede sensible action.
Looking back on the past six years a proud accomplishment can be perceived on both the economic and social fronts. It was the cost, that is, income induced inflation and not the least our inability to deal with top salaries, and the restriction on expansion which had to be applied, which were at the bottom of our difficulties. I have, as I have said often before in this House, the greatest sympathy with the trade union leaders. They are under hard pressure. They cannot possibly be asked to lead the movement towards restraint until much more positive earnest is given by the Government and management that the increase in productivity will be accelerated and that equity will be enforced. They have, however, never realised that industrial action alone can never increase the share of wages in the national income. Only price control and taxation can, and the extension of social services. For this failure they will pay. I only hope that they will learn. The next Labour Government will willy-nilly have to combine stability and expansion. They were engaged in a rearguard action when rising prices and scares about sterling got the better of them. Now, however, we have taken a road which leads to the slippery slope at the end of which lies the Gadara Sea of economic chaos.
5.7 p.m.
LORD BOOTHBY: My Lords, I should like to join with those who have tendered congratulations to the noble Earl, Lord Dudley, on his admirable maiden speech, delivered so fluently and without a single note. I disagreed with about half of what he said, but that does not make his speech any less effective. I think it is time that the voice of a genuine expansionist was heard in this Chamber. It will come as an antidote to the dismal dirge to which we have just listened from the noble Lord, Lord Balogh. I have not heard any real plea for genuine expansion yet from either side of the House, except from the Leader, the noble Earl, Lord Jellicoe; and from him in rather mild terms.
I am an unrepentent expansionist, and I intend to strike a breezy note, if I may, this afternoon because I think it will

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buck us all up a bit; and it is time we bucked up because we really are feeling too doleful about the national economy. The Chancellor of the Exchequer is—let us face it—faced with a new phenomenon. It is one that did not happen before the war. It is a wage-cost inflation accompanied simultaneously by a recession. The same problem is faced in the United States, where economic growth is even more stagnant than it is in this country. It is not, as the noble Earl, Lord Jellicoe, said, a demand inflation; it is a wage-cost inflation, and as such requires completely different treatment. There is in fact only one way out and I think we are all basically agreed about this: increased overall production and increased productivity. That is the answer to a wage-cost inflation.
We cannot do it without increased investment in industry. This involves a steady flow of capital into industry under the stimulus of confidence and anticipated profits. This doss not exist at the present moment in this country. The truth is that an attempt to cure a wage-cost inflation by drastic deflation is like trying to cure a sore thumb by cutting off your arm. It does not do any good at all. Basically this is a crisis of liquidity, both international and domestic. Hence the present astronomical interest rates on both sides of the Atlantic. This is the primary cause of the rise in the cost of living and the consequent wage explosion, because the cost of money is the basic factor in cost itself; and the high cost of money is therefore the basic cause of steadily rising prices. These exorbitant interest rates simply aggravate the inflation, and they hit hardest the small business man and, of course, everybody living on fixed incomes.
To a great extent the problem is an international one, and I am rather surprised that this aspect has not been touched on a little more so far in the debate. I suggest that the Chancellor should take the lead in due course in calling an international economic conference to consider ways and means of increasing industrial investment and productivity on both sides of the Atlantic, of making more international liquidity available, of reducing interest rates—again on both sides of the Atlantic—and thus encouraging economic growth throughout the Free World, which is at
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present on test against the Communist world and not doing very well.
It is also highly desirable that exchange rates should be made more flexible. The theoretical price paid at Bretton Woods for fixed exchange rates and a fixed price for gold was adequate liquid reserves for tire Free World as a whole, and they were not provided. In fact international liquidity has fallen to about one third of what it was at the time of the Bretton Woods Agreement. I do not go so far as the noble Lord, Lord Crowther, and Sir Ralph Hawtrey when they ask that the pound should be allowed to float altogether, although formidable arguments could be adduced in favour of this course. I do say that it is intolerable that no changes can be made in exchange rates to meet existing conditions without a political crisis in the: country concerned. It is only right that exchange rates should take some of the pressures which are bound to arise from time to time in international trade, and therefore I think Her Majesty's Government should welcome the initiative taken this morning by the United States Government to widen the margin to 3 per cent., which would do a great deal to take the strain off the internal economies of all countries suffering from a trade deficit.
I know it is argued that it is hoped one day to have a European monetary union with fixed exchanges. That may come one day, but it will not come in the immediate future. It is a long business which would involve, I agree, fixed exchanges and perhaps ultimately a common currency; but in the meantime I think we should pay great heed and attention to the proposals of the United States of America for a wider margin and more flexible exchange rates, which would do a lot to facilitate international trade and take pressure off various countries, including our own.
On the question of gold, about which I have already bored your Lordships enough, I would say only this: we must have an international measuring rod of value. The Free World will not accept the dollar as such, and rightly; and therefore, in the words of Mr. Schweizer himself, the pre-eminent role of gold in the international monetary system is still assured. The price of gold is clearly a subject for discussion at an international

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conference, as also is the future of the International Monetary Fund. Surely we should aim at developing the International Monetary Fund into a world hank for central banks, with similar powers of credit creation and contraction. This was the remedy advocated by my noble friend the late Lord Monckton of Brenchley when he was chairman of the Midland Bank several years ago. Nothing has been done about it; no steps have been taken in that direction; but it is obviously desirable that the I.M.F. should be developed into a much more flexible instrument, and it might become, as Lord Monckton said, a central bank for central banks, able to expand and contract credit to them, as they do to their customers.
Meanwhile, my Lords, what can Mr. Macleod do? He can do a lot. In my speech on the Second Reading of the Finance Bill I said that the Chancellor could not cut taxation without comparable reductions in public expenditure and/ or alternative taxes. I was wrong. Mr. Jenkins over-insured to an extent that I had not realised and there is a bigger Budget surplus than I then thought. It is of course highly desirable that public expenditure should be cut and we must all hope that it will be, but it will take time. What Mr. Macleod can do now is to have a look first of all at the machine he has to work. I hope that he will not set up any more mammoth investigations and inquiries. As the Economist said last week, the history of British economic Reports by Royal Commissions and the like is pathetic. Their recommendations are usually turned down, and certainly disregarded. Take, for example, the Royal Commission on the Taxation of Profits and Incomes. It sat for 4½ years. It came down firmly against the capital gains tax and the corporation profits tax. Yet we have them both. That was the result of the Royal Commission on the Taxation of Profits and Incomes.
The Chancellor can also reflate the economy, I think without risk, to the tune of at least £400 million by increasing the money supply. He can do that now, and it would at least help to get the ship off the ground. I do not know whether he is going to have an Autumn Budget—probably not; but if not, he can
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use the regulator to make some cuts in indirect taxation which would at least have a good psychological effect. What is most important is that the Chancellor should show himself determined to make a start in no great length of time on tax reductions over a wide field, and of these I would give priority to S.E.T., which has been mentioned in this debate; to the corporation tax, a reduction of which I think would do more than any other single thing to stimulate investment in industry in this country; and the capital gains tax. About that I would only say that the distinction drawn at present between short-term profits and long-term profits on capital gains brings little to the Revenue and imposes an untold burden of extra and unnecessary work upon thousands of people. There should be no such distinction. It should be abolished. All the taxes that I have mentioned are inflationary in themselves, as indeed is the petrol tax. All are also a strong disincentive to the investment of risk capital, and that is what we want to avoid.
My Lords, I hope—and I am nearing my conclusion—that the Chancellor will also give consideration to the enormous burden of taxation which as a result of corporation tax is being levied on companies earning money for this country overseas. In effect, it amounts to double taxation, and this is a matter which demands the urgent consideration of the Chancellor. We used to have overseas trade corporations which alleviated this burden. Whether or not they should be revived is a matter for the Treasury and the Chancellor to decide, but something should be done to relieve companies of the burden of taxation on overseas earnings. Some years ago the noble Lord, Lord Robbins, said that we had a system of progressive taxation on earned incomes which amounted to a discrimination against enterprise and ability such as had not existed for any long time in any large-scale civilised community. But, my Lords, it has got far worse since Lord Robbins said that.
At this moment Mr. Macleod has one priceless asset—confidence—but for how long? That is the question that really arises in this debate this afternoon. He is still up against the Treasury mandarins—that perpetual bane on our public life which I have attacked without cessation for 45 years. In my opinion they have

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never been right, except when Keynes was there, and he was not there very long. Mr. Macleod is still up against them, with what I still regard—and I am going to say it, although the noble Earl, Lord Dudley, would not approve of it—as their first obsession, the balance of payments, and then with debt repayment at all costs, in the largest possible amounts, and as quickly as possible. Mr. Jenkins was essentially their man: he was a Treasury man. Mr. Harold Lever was not. Mr. Lever was therefore ejected from the Treasury, and that was why the Labour Party lost the Election. If the Chancellor lets the mandarins get hold of him again he will lose the confidence of the business community and with it any chance of economic recovery, and we shall remain in square one. What he has to do, as I have said, is to get the economy off the ground as quickly as possible.
A long lime ago I told another place that when I became Parliamentary Private Secretary to the Chancellor of the Exchequer in the year 1926 a high Treasury official came to me and said, "Young man, I want to give you a piece of advice. There is only one man who has ever made the Treasury do what it did not want to do, and that was Lloyd George; and let: me give you another piece of advice: there will never be another." Well, my Lords, let Mr. Macleod be another Lloyd George at the Treasury. Let him go flat out for economic growth. If he does, he will make Mr. Carr's forthcoming negotiations with the T.U.C. and the C.B.I. far easier. Let him bear in mind the wise words of Walter Lippmann, "A society cannot stand still. If it loses the momentum of its own progress it will deteriorate and decline, lacking purpose and confidence in itself." In conclusion, I should like only to echo the words of the noble Lord, Lord O'Neill of the Maine, the Mover of this Motion, "We have had our fill of doctrinaire caution. Let us now move on to a period of pragmatic boldness."
5.22 p.m.
LORD DRUMALBYN: My Lords, it is with the greatest pleasure that I follow; he noble Lord, Lord Boothby. He seems to be right back to his old form—it must be the General Election. It certainly seems to have breathed fresh life into him, and he has been breathing fresh
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life into us this afternoon. I am sure that we are all very grateful to him.
I should like to say how very much I agree with the terrnas of the gracious Speech in setting the priorities from the very start: strengthening the economy; curbing the inflation rising production and a steadily growing national income. These must be the main objectives. And the means will be reforming and reducing the burden of taxation—not all at once: reformation must take some time. But I agree with the noble Lord, Lord Boothby, that one cannot wait too long before doing something, by
"providing new incentives to saving and liberating industry from unnecessary intervention by government"—
that is from without, and I would add also from within, by establishing
"a framework of law within which improved industrial relations can develop and a code of practice will be prepared laying down standards for good management and trade union practice".
I shall revert to that in a minute or so.
So many speeches have been made wholly endorsing the view that taxation stimulates and speeds inflation that I hardly need add to what has been said. Some taxes, like S.E.T., are bound to be recovered in prices. Others, like income tax, work insidiously because the wage and salary earner expects at least to maintain his net purchasing power after tax, and therefore wages and salaries will always rise more than prices and by doing so will increase prices still further. Inflation makes estate duties and surtax work unfairly unless adjusted annually to take account of inflation. I need mention only one figure. We have to remember that £40,000 to-day purchases about the same as £20,000 in 1946. Yet the estate duty is four times the amount at £40,000 that it is at £20,000. That is what inflation does, and there has been very little corrective action indeed.
The object of the reform of taxation must be to encourage effort and initiative; to prevent taxation from itself stimulating inflation, and to remove discouragement to saving. Does it not seem morally wrong, as well as highly inexpedient, that the Slate should stand to gain by inflation? It is inexpedient because the State has the duty to prevent, or at least to contain, the fall in the value of the currency and the erosion of money in the

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pockets of the people. It is morally wrong because inflation affects most those unable, or no longer able, to protect themselves by increasing their earnings. As to savings, higher growth, as has been said, depends on investment, leading in turn to increased productivity and better working conditions. Higher investment best comes from higher savings, more money for research, improved education and training at all levels, leading always to increased productivity. It is a hard doctrine, but Government should reward success, not hand out assistance indiscriminately. It is essential that we should rely mainly on a system of allowances in place of generalised grants and premiums to industry, except where there are overriding considerations of national security.
The Government in the gracious Speech welcome competition. I very much welcome the declaration of a belief in competition as the best safeguard for the consumer. Government intervention, if not strictly necessary, weakens and distorts competition. We all realise that Government intervention is in certain circumstances necessary. It is necessary to curb economic power and its abuse. So we have the Monopolies Commission and the Restrictive Practices Commission.
But, of course, Government intervention is not the only kind of intervention, and I referred to intervention also from within. There is nothing more debilitating than the constant anxiety that industry's plans will be disrupted by strikes. It is sterile to dispute who is to blame. What is needed is a determined and united effort to establish a sensible and workable system for improving industrial relations. After all, we are all, or nearly all, on the same side: on the same side in desiring higher growth, with the blessings in terms of social progress that it brings. But competition implies teams of management and employees, working together yet competing with each other. If it is right, as we all believe, that the State should curb the abuse of economic power and undesirable combinations on the part of companies, why is it not right to empower the State to curb such abuse by others, notably trade unions or sectors of trade unions? Surely any abuse of economic power must be against the interests of the nation.
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But I believe also very strongly that it is far better to rely on a system of self-discipline, although if self-discipline is not forthcoming or does not work the public must be protected by law. I believe that we should look to the trade unions to maintain discipline in their own ranks. Strong leadership will be respected there as elsewhere. But nobody should be judge in his own cause. Must there not therefore be some body to decide what is fair and right, not only in settling a dispute which cannot be settled between the parties but in relating the settlement to the public interest? It is not right that those who are in a position to exercise economic power should be allowed to do so at the expense of the nation.
I believe that the nation has been feeling its way towards a system of presenting an objective analysis of claims. The Prices and Incomes Board have done good work and they have come in for a good deal of criticism. As the noble Lord, Lord Robbins, said, they have not in all cases been very effective, and certainly not in their latter days. I do not think this is their fault. To some extent they were the wrong body, given the wrong job. At present there is no way of ensuring that an objective analysis will be accepted by the Parties as objective and implemented, except in certain fields. What is needed, surely, is a body whose decisions will be accepted and implemented by prior agreement. Arbitration does not really meet the need, because it relates only to a particular case and does not take into account the wider issues. By the same token I doubt whether any body appointed by the Government under statutory powers would do so.
Basic to any solution is a recognition of common interest. Given that, then a body composed of equal numbers of employers and trade union representatives, with some representation of the consumer interest—a tripartite body—should be capable of settling disputes with due regard to the public interest. Naturally, those who consider a particular dispute should not include anyone directly interested in that dispute; and of course it would be for both sides in the dispute to accept and implement the ruling. This would be a proper system of self-discipline, a tripartite system of self-discipline. I believe that it could be accommodated within the framework of the Conservative

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proposals, which I hope will be brought forward quickly. I put this forward in the strong belief that internal discipline and co-operation are always to be preferred to external discipline and antagonism. The aim of "one nation" may be elusive, but it is surely the right aim.
LORD BROWN: My Lords, may I interrupt the noble Lord before he leaves that subject? He has made an interesting suggestion. But are the people who sit on this tripartite body in his view to be representatives, or are they to be appointed?
LORD DRUMALBYN: My Lords, certainly hey would be representatives of the unions and industry. How they are to be elected, I do not know. Obviously, the consumer representatives would have to be appointed.
My Lords, in the lifetime of this Parliament we shall have to make the most momentous decision made in Great Britain since the year 1707. Let us all hope that this decision will not be taken on a Party basis. In the negotiations, given the will to agree, given a common strong desire on the part of all concerned in the negotiations, agreement will be reached. It will then be for Parliament to decide whether the best agreement that can be reached is good enough and is in the long-term interests of our people. But this naturally imposes an interregnum. In the meantime let us not be inhibited in any way from action. Let there be no period of lack of animation. The better trim we are in, the better placed we shall be to face the problems we shall undoubtedly have to face if and when we join the E.E.C.
We have so many ugly problems to face. It is true that as a result, partly of devaluation, partly of the export efforts of industry, aided by Government (I am glad to see the noble Lord, Lord Brown, in his place on the Opposition Front Bench), we have at present a substantial surplus on our balance of trade in goods and services. But the steep rise in costs and the low rate of growth (actually negative—I suppose one could say "shrinkage"—in the early part of the year) could very soon erode this surplus; and unemployment is much too high. I have mentioned these four points because they are the main economic
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indicators to which the E.E.C. have decided to have regard in their progress towards economic and monetary union by 1978, and in only one of them is this country well placed at the moment. There are many problems, many thorns in this particular bed of roses. And roses are not for ever: they wither and fade, whoever governs the country.
But there is a strong feeling of hope, and indeed of relief, in the country. One felt that in the speech of the noble Lord, Lord Boothby, despite himself, perhaps, even though he is not in his place at the moment. We are making a new start, and if that hope is matched by self-confidence and a common determination always to have regard to the interests of the nation as well as to one's individual or collective interests, that hope can be realised.
5.36 p.m.
LORD HIRSHFIELD: My Lords, my concern as we begin this new Parliament is not simply with the immediate programme of legislation which has been outlined in the gracious Speech. Of course that is important, and it is appropriate that we discuss it fully. But I believe we have an equally important duty to look beyond the next year or so to the kinds of economic and social problems which are likely to face us over the lifetime of this Parliament, and to discuss the sort of priorities which they will demand. For these reasons I want to look at three issues where I believe there is a need for a longer-term view than the Government seem willing to undertake.
The first issue that I shall deal with is inflation. One of the main themes of the new Government's Election campaign was the suggestion that what we now face is essentially "cost-push"—inflation caused through continuous pressures on industrial costs—mainly through the taxation policies of the last Administration. It was emphasised that what is required basically to cure our problems is a reduction in the burden of industrial taxation. It is against that background that selective employment tax and direct taxes are supposed to be the first candidates for abolition and reduction respectively. I believe that I have remarked before in your Lordships' House that I am among those who remain unconvinced of the justification for S.E.T. except as a

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device for raising more revenue. But until we know precisely what alternatives this Government will adopt to counterbalance the revenue lost through the abolition of S.E.T. it is hardly possible to form considered judgment.
Obviously, it is an over-simplification merely to condemn roundly the overall tax burden without examining alternative measures designed to counter inflation. In the first place, the burden of taxation as a percentage of corporate income has fallen, not risen, over the past two decades. According to figures prepared by the Treasury at the end of last year and reproduced in the 1970 T.U.C. Economic Review, it is apparent that the contribution of taxation on profits to the Exchequer has fallen over a period of many years.
What has undoubtedly increased industry's unit costs more than taxation has been the slow rate of economic growth over the past decade and the large margin of surplus capacity which has been a regular feature of Britain's industrial scene. On this point the new Government show promise, at least at this very early stage. They have said on repeated occasions that they want to achieve a faster rate of economic growth, both as a means towards higher levels of prosperity and as a way of tackling inflation at its roots. I support that view. In my opinion we must have faster economic growth if we are successfully to tackle inflation. And now, armed with the strongest balance-of-payments position for at least three decades, through the courage of the last Government and the fortitude of the British people, we have the chance.
But there must be realism on the subject. The new Government must face up to two particular needs for a successful growth policy. First, they must be prepared to exercise imagination in their attitude towards the balance of payments. Without a willingness to contemplate, in the long term, a move towards a more flexible exchange rate policy we may never hope to solve our balance-of-payments problems. And, equally, without a sustained drive over the next ten years, with Government planning and finance, to back the programme to reduce our imports, we cannot hope for an end to our external economic problems. It is
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certainly not the time for the Government to withdraw from the industrial scene, especially in the area of the import-substitution industries.
The other aspect which cannot be ignored is how total spending in the economy is to be related to total resources. Despite what was said in the course of the recent Election campaign by Members opposite and their friends in another place, I cannot believe that the Government believe that the answer to inflation and the balance-of-payments problem lies simply in restricting public investment and public expenditure. Presumably they do recognise that an incomes policy in some form is essential. But in what form?
I should like to make some suggestions on the point since I think it is time for us to be as positive and constructive as we can on this subject. First, we must recognise that there can be no chance of a successful incomes policy if the trade unions and the Government become locked in combat over the Government's industrial relations proposals. The Government must accept that fact. If they go ahead with their earlier proclaimed industrial relations policy they will be making the greatest single contribution of any Government since the end of the Second World War to the intensification of industrial unrest—and of inflation.
Secondly, it is very evident that the essential precondition for the acceptance of an incomes policy is a successful price policy. We must have even stronger consumer protection machinery, for example. And we might well look again at the proposal for a National Consumer Board. That could provide some evidence of the Government's intention to have an effective prices policy. What we must not do is to fall back on vague hopes that competition alone can solve our problems and constitute a successful way of stabilising prices. It is no cure, as the 1964 Resale Price Maintenance Act showed. I hope, therefore, that the Government will think again about that sentence in the gracious Speech which indicated that in the Government's view "competition is the best safeguard for the consumer".
Thirdly, we need an incomes policy which applies effectively, and is seen to apply effectively, to all forms of income. No other sort of policy is likely to be acceptable. I hope, therefore, that before

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the new Government make any changes in the rent control field (to take just one example) it will recognise that unless control of this kind exists there is very little hope for any incomes policy in the wider sense. These, I believe, must be the basic constituent elements of a successful policy of economic growth and of a successful attack on inflation. And until I see any evidence to the contrary I will not believe that the new Government, or, indeed, any other Government, can achieve success without accepting this approach.
The second major issue that I should like to raise is employment policy. Part of the answer to existing unemployment lies in securing a faster rate of economic growth. We cannot hope to bring down the numbers of unemployed until we have a higher level of growth in the development areas as well as over the country as a whole. But I hope that in its enthusiasm for faster expansion the new Government will not be led into believing that this is the only aspect of the unemployment problem which we shall face in the 1970s. What we also have to recognise—and this I want to stress with all the force I can—is that over the next ten years we shall face new threats to our employment levels from hitherto unforeseen developments. In America there are great fears already of the consequences of the American withdrawal from Vietnam. Where will the surplus manpower go? Various authoritative estimates have suggested that during the 1960s one in ten of America's labour force was employed in the space programme and in the Vietnam campaign and that it is only these two programmes which have saved American manpower from the full force of industrial technology and redundancy.
Now, with an Administration committed to major planning reductions in both those spheres, what will happen to the level of unemployment in America? Machinery has undermined more and more jobs in America, not just in manufacturing but in the services and commercial sectors as well. More and more office jobs, not just of a routine nature but involving highly skilled men, which we once thought would never be computerised, now no longer require manpower. The same can be said of manufacturing industry. For instance, here in Britain in 1938 tinplate production was spread over 300 mills with a labour
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force of 27,000, producing 20 million boxes of tinplate a year. During the last 17 or 18 years tinplate production in Great Britain has been concentrated into three mills only with a labour force of 3,000, and producing 30 million boxes of tinplate a year. There will be fewer jobs for people because there will be more jobs for machines. This is not speculating on future possibilities; it is describing present facts.
As we begin the new decade we must, I believe, be more aware of and more concerned about the spread of automation. And I stress this for two reasons: first, because the whole process is bound to intensify—automation will automate itself—and jobs will become mechanised at a faster rate than ever before; secondly, because in my view there are no signs that either the Government or any other sector of the community are sufficiently aware of these dangerous prospects, or ready with policies which could cope adequately with them. We have industrial training boards, we have a small and inadequate number of Government training centres and we have a Central Training Council. But none, I believe, is able to cope with the scale of the problem we row face, which is to mobilise industrial opinion to face the challenge of change—relocation, retraining, how to use greater leisure—on a vast scale. And I feel strongly that what is required, as a matter of urgency, is for the Government the trade unions and the C.B.I., to come together in a full-scale conference which would have, among other things, the aim of establishing a new Centre for Employment Studies. Both "these initiatives would serve a vital function of focusing industrial opinion on a tremendous issue, and both could serve as initiating bodies for more research and more understanding than exists at present. I hope, therefore, that the Government will take note of these proposals. As it is written in the Book of Isaiah,
"Come now, let us reason together."
The third and final long-term issue which I should like to raise concerns what I believe will be the most serious issue of all in economic policy in the years ahead. This is our ability to combat the challenge of inequality which now confronts us. Along with other advanced

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nations we face the problem of how workers should have a greater share in the ownership of capital, and this was the theme of a remarkable paper produced a year ago by Professor Rodney Crossley, a Professor of Industrial Relations at Leeds University. In an excellent account of that paper in the recently published book, Challenge of Change, by Sir Trevor Evans, it is recorded that:
"There has been too much concentration in the past on how to increase wealth and not enough attention on how to share it more equitably. The neglect of the problem of distribution of wealth has gone too far."
If the Western democracies believe that ownership should imply effective control, and if we are right in thinking that property ownership will become relatively more important in the next few decades, there is need for a new kind of institution in the capital market which will promote the ownership of assets by employees, and be strong enough, in terms of the control of investable funds and company voting rights, to ensure that they are administered in the interests of employees.
Automation may well turn out to be labour-saving, in the strict sense of the economist as compared with popular usage, which means that it may be so much more profitable to use capital in place of labour that the input of capital into production will actually rise. The share of labour in a rising national income will fall, and unless employees acquire claims on the increased property income there is clearly a grave risk of alienation and aggravated conflict between the propertied and employed classes in advanced capitalist societies.
Had I not already occupied a little too much of your Lordships' time I should have said something upon the passage in the gracious Speech which refers to "new incentives to saving". I hope that there will be another and early opportunity in your Lordships' House to debate that subject. I shall strongly support a scheme which gives more incentive to the individual to invest part of his savings for the long term in the future prosperity of British industry—in equity shares, including unit trusts—as a hedge against future inflation. The Trustee Investments Act 1961 authorised, and seemed to encourage, trustees to
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invest up to half the funds under their control in equities on certain conditions. It is high time that individuals also were more encouraged to invest in that way.
5.53 p.m.
LORD WOOLLEY: My Lords, I trust that your Lordships will bear with me if for a few minutes I depart from the theme of the general economy, on which we have heard so many excellent speeches, including the very eloquent and fluent speech from the noble Earl, Lord Dudley, and turn to the part of the gracious Speech which refers to agriculture and the Government's intention to
"start discussions with a view to encouraging agricultural expansion by changes in the present system of financial support."
I am sure that everyone in your Lordships' House, and indeed throughout the agricultural industry, will welcome at least one part of that statement; that is, the intention to encourage agricultural expansion. I am equally sure that everyone will wish the new Minister, Mr. Prior, every success in his arduous task. He has all the qualities of vigour, enthusiasm and ability that one would expect in a man who has reached so high a position at so early an age, and I know he will be well served by competent officials whose wise counsel, grounded in hard experience, will be available to him.
May I for a moment, in the same vein, wish every success to the new Front Bench agricultural spokesman in this House, the noble Earl, Lord St. Aldwyn, who has a lot of experience in the problems of agriculture, both practical and political, and whom many of us remember as a former Parliamentary Secretary in the Ministry of Agriculture. At the same time, I should like to express appreciation for the thorough, painstaking and competent work done by the noble Lord, Lord Nugent of Guildford, as Front Bench spokesman on agriculture for the Opposition in the last Parliament.
The intention to encourage expansion follows the general line of successive Governments going back to 1939, and if one considers the past 25 years since the war, it reveals a remarkable performance of increasing production and productivity by an industry that not so very many years ago was widely, though mistakenly,

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regarded as being way behind in its outlook and attitude. Not only has British agriculture doubled the physical quantity of its production in the past 25 years; it has done it with a steadily decreasing manpower which now stands, I believe, at 433,000, a reduction of 56 per cent. compared with 1946. That is double the output with a reduction of 56 per cent. in the labour force, and from an acreage which, as we know, is being, and has been, remorselessly and continually eaten into for other purposes.
Time does not allow for a thorough examination in the course of a speech in your Lordships' House of all the factors involved, but I should like to mention two or three without seeking to develop them. The first fundamental factor, I suggest, was that the 1947 Agriculture Act explicitly recognised for the first time and made statutory provision for the development of agriculture as a matter of national interest and importance, as well as recognising the social needs and entitlements of the rural community. The second is that the Annual Review imposed a statutory obligation upon Governments to study with representatives of the industry the whole situation as it unfolded through the years.
It is often rather mistakenly assumed that every February there is simply a price review. But the Annual Review is much more than merely a price review. It is a review of all the conditions and circumstances and prospects affecting the agricultural industry at that point of time, and the actual price determinations come only at the end of a very thorough-going, prolonged and comprehensive review which I think is a model for industry. The third and, perhaps, most important factor is that the basic economic stability provided by guaranteed prices, and the stimulus to good farming through production grants, have provided confidence and inspiration to farmers and the security which has engendered the financial credit without which this great second agricultural revolution of modern limes could not have been carried through.
So we stand now at a point where the standard of farming in general is so superior to that of the depressed inter-war years as to be scarcely recognisable, and I am sure that many noble Lords must feel, as I do, a great deal of satisfaction
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and pleasure in seeing the vast change for the better that has taken place in the fanning landscape as one travels through the countryside. I do not for a moment suggest that everything is good in a perfect agricultural world; it is not, and of course it never will be. Undoubtedly there is a great need to strive continually to improve, and there is merit in taking action to secure a steadier market price through more effective machinery than now exists for preventing the harmful effects of dumping, particularly dumping subsidised by the Governments of exporting countries. Incidentally, that is one of the methods of the Common Market countries in relation to off-loading their surpluses to outside countries.
Clearly, there needs to be a reasonable balance between the amount of the producer's return which he receives from the market, and what he receives by way of Government payments to make up the deficiency between the realised market price and the predetermined price guarantees fixed at such a level as are estimated to produce in the various commodities what is considered to be in the national interest, and to give a fair return to the producer.
For years, work towards that end has been going on and a great deal has been achieved, and of course the proposals set out in the Conservative Party's Manifesto are not new. I will quote just one or two figures to illustrate the effectiveness of the steps that have been taken to try to reduce the percentage of the total return which comes from the Treasury, as against that part which comes from the market. In the year 1961–62, the total value of output was just over £1,600 million, and the total cost of Exchequer support in that year was £343 million. That is, I believe, about 21 per cent. Seven years later, in the year 1968–69, the total value of output was approximately £2,000 million, while the total cost of Exchequer support had gone down from £343 million to £265 million, and the percentage from 21 to 13.
I mention these figures to dispel what may be a wrong assumption in many people's minds: that the cost of Exchequer support is mounting and is insupportable, and is something which is quite intolerable which has to be radically altered. Perhaps there is a tendency to

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exaggerate the significance of what agriculture receives from the Treasury, and what this means in ratio terms to the whole food picture. In terms of the total food expenditure by consumers in the United Kingdom, the subsidy is about 4 per cent. of the total expenditure on food; that is, some £280 million out of a total of £6,500 million. I submit, my Lords, that the all-round benefits which have flowed as a result of this system should not lightly be thrown away. I have referred earlier to the technical progress made by the industry. It is no exaggeration to say that British farming to-day is certainly as technically efficient as any in the world. In terms of productivity growth, it is one of the highest of our home industries. The growth in productivity per man in recent years has been about 7 per cent. per annum in agriculture, compared with under 3 per cent. per annum in the economy as a whole. All this reflects back directly in terms of value for money to the British public.
A good deal is heard about comparative food prices in this country and abroad. I can only say that in 1965 I arranged for a very simple survey to be done by asking a lady member of the National Farmers' Union economics staff who was attending an international conference in Rome to purchase three baskets with an identical food content, such as a British housewife would buy, and to purchase them in shops of similar quality, in similar areas, so far as she could, in Rome, Paris and London. The result of that little experiment was that the French basket cost half as much again and the Italian basket twice as much as the London basket. I do not believe that these ratios have altered all that much in the intervening years.
There is no question that the consumers get good value for money; and there is at the same time a case for seeking to lift the level of market prices, but I submit that temperance is all important in this matter, and that it would be unrealistic and undesirable for a country which in any foreseeable future cannot be other than a big food importer, however much we may expand home production, to manipulate consumer prices artificially to levels which may be economically
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acceptable in countries which are virtually self-sufficient in food. The social and economic implications of unduly high, artificially-created food prices could not in my view be other than bad for the country, and could indeed well turn out to be a mirage so far as producers are concerned.
I submit, my Lords, that what the farming industry needs, and needs quickly, is not more verbal mirages in the financial desert which has been created by a failure in certain areas of the Governmental complex for a good many years past to recognise that no industry can with impunity be squeezed too hard too long. The noble Lord, Lord Boothby, was perhaps a little more explicit when he referred to "Treasury mandarins", but at any rate I will simply content myself with "certain areas of the Governmental complex". This is not something which is related to the lifetime of one Government alone: this has been going on during certainly the whole of this past decade, and indeed started back in the 1950s. This pressure has been too hard; it has been too great, and too long sustained.
My Lords, I trust that your Lordships will not consider it culpably immodest for me as a farmer to say that I believe the farming community—and here I am including landowners and workers as well as farmers—to have done and to be doing a great job of work for the country. May I ask, with respect, that our new Government will take immediate steps, associated with the consultations with the industry referred to in the gracious Speech, to increase the cash flow to producers? Costs continue to escalate, and despite the most strenuous and in some quarters unpopular efforts by the National Farmers' Union to get prices of the major requisites pegged, there has been a big increase in costs even since the last Review four months ago. Without going into detail, it is already clear that increases in prices of feedstuffs, fertilisers, machinery and transport, to name but four out of a long list, have raised the costs of the industry by many millions of pounds—costs which have been aggravated by drought conditions. With dubious harvest prospects as a result of the prolonged drought in many areas, the cash liquidity position of producers demands immediate and urgent attention.

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The Government recognise and the industry recognises the import-saving potential in home agriculture—the import-saving potential to which the noble Lord, Lord Hirsfield, referred in his speech. Unfortunately, the industry has considerable doubts as to whether anything more than specious words can be expected. Now is the opportunity for this new Administration, with a young and vigorous Minister of Agriculture, to show that it means to carry out without delay what it said in the Conservative Party Election Manifesto:
"We will provide new opportunities for the farming community to increase production, improve their incomes and make a further massive contribution through import saving to the balance of payments".
There is urgent need for a financial transfusion to energise and invigorate the depressed morale of the farming community. I am sorry to have to say that, but it is true and I think many of your Lordships know it to be true. Your Lordships know that these demonstrations which we have seen in recent months are not just spurious, foolish manifestations: they are a manifestation of the frustrations, the pent up frustrations and desperate frustrations, of men who have been over-hard pressed. I know many of those men—many hundreds of them—and I know that they would not be so foolish or so undignified as to take part in such demonstrations unless they had real, solid cause to do so. Therefore, my Lords, there is urgent need for a financial transfusion, and an early one, to energise and invigorate this depressed morale; and the Government have a great opportunity to change the whole climate and attitude for the better. I beg of them to cut through the usual tangle of political prevarication and to take immediate and tangible financial action.
6.9 p.m.
LORD ROBERTHALL: My Lords, I am sure that my noble friend Lord Woolley will not take it amiss if I do not follow him in his remarks. He would be a bold man who would take up something of which my noble friend has had a lifetime of experience. I should like to come back to the general economic situation; and a good start, I think, is with the question of what the present Government have inherited, which has already been mentioned. There are the two extreme positions. There is the view
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of Mr. Wilson, who said they had inherited the strongest economic position of any Prime Minister for a very long time; and there is the alternative view that we are approaching another disaster. I thought that the noble Earl the Leader of the House put the matter very well when he was referring to this aspect. There is a certain amount of truth in both views, according to the time period which we are thinking about. In the short term, as both opening speakers said, we ha\e the fact that the balance-of-payments position is very strong and is likely to remain favourable at least for some time. There is therefore no urgency on that front.
There is also a point to which a number of noble Lords referred with some gloom but which I think is, at least from the point of view of the Chancellor of the Exchequer, a favourable aspect; that is, that there is some slack in the economy. After most recent Elections, the economy has been overheated and the balance of payments has been in difficulties. I think that is true of almost all the Elections that I can remember since, perhaps, 1951 where there was some slack. I think that the last Chancellor of the Exchequer, Mr. Jenkins, deserves a great deal of credit for this. No doubt he hoped that he would himself be the inheritor of his good works. But they are, from this point of view, good works.
By previous standards of demand management, unemployment is high and economic growth has been rather slow. It does not look as if we are going this year to meet the target of 4 per cent. expansion which was laid down by the last Chancellor of the Exchequer. I think that prices have risen faster than was expected in the Treasury forecast and that investment has been rather more sluggish. So there is a case for some easing up. But I hope that the Chancellor of the Exchequer will not be in too much of a hurry to take advantage of this. A certain amount of slack in the economy is a very precious thing to have, because it gives some freedom of manæuvre. From this point of view I think that the incoming Government are extremely wise to do what one understands from their speeches they intend to do; that is, not to be in any great hurry to go in for "instant government" or "one hundred days" but to get the

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feel of the economy. When you have some room for manæuvre you ought to take a little time to think of what manæuvres you should go in for. But, if anything, I think there is some room for easing monetary policy. Industry now is very short of liquidity. It has been very good for industry to have this shortage for some time; it has put the finance directors of firms into the position of strength in which they should have been for a long time. If you were to ask a director what the finance director did he would say, "We go to him for money". Now he goes to them. But I think it has been overdone, and I believe that some of the sluggishness on the investment field arises from that.
My Lords, coming now to the weaknesses of the position, I think there are two very obvious ones, both continuing medium to long term. First, there is the short-term debt referred to in his speech by the noble Earl, Lord Jellicoe. In the years 1964 to 1968 we incurred a very substantial amount of short-term debt. In very round figures, I think it was something like £3,000 million. That has come down to something like £1,500 million. But of that figure only about half is a real repayment due to our own surplus; the rest is a reflux of short-term money which could easily go out again if there were any doubts about the basic strength of sterling—which, as I am going to say shortly, I think will arise mainly on the cost side.
The second weakness is that of inflation and of industrial relations generally. Both of these are really by-products of the policy of full employment which has been pursued so successfully in the postwar period. Full employment was a sort of wonder drug which has transformed the country and transformed the position of the working people in the country. Anyone who remembers the pre-war situation will realise this. I think that nobody wants—or very few people do—to go back to anything like that situation. But, like wonder drugs, full employment has had side-effects and, as with wonder drugs, we are now struggling with the problem of how to cope with these side-effects. The fact is that we have not learned how to deal with them.
I will not go into the question of industrial relations generally. No doubt we
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shall be coming back to that. The gracious Speech announced that the Government intend to go on with legislation of that kind; they certainly have a mandate for doing so. It is a very difficult subject; one on which we had the very sincere and moving speech of Lord Hirshfield.
My Lords, I should like to close with a few words about inflation. It was said in the gracious Speech:
" … My Government's first concern will be to strengthen the economy and curb the inflation."
I must confess that I have some sympathy with what the noble Lord, Lord Shackleton, said on that point, when he remarked that there was not very much content in the policies so far announced by the incoming Government for dealing with inflation. A number of noble Lords have also referred to it, and there was the eloquent speech by Lord Robbins on the evils of it. One could go on at some length into the evils of inflation: it is a most wicked and inequitable way of re-distributing wealth. Just to give one point, it upsets all calculations about the future.
We must all agree that the present rate of inflation is a very serious problem indeed. After the devaluation of 1949 we went on with the new exchange rates for 18 years. I think that that was rather too long and that 16 years would have been better. I think that he would be a very bold man who would suppose that on present form we have even as long as 16 years before the next devaluation.
What can we do about it? First, I would say that I think it is quite mistaken to suppose, as the noble Lord, Lord Boothby, supposed, that we can just grow our way out of inflation by stimulating demand and production. The rate of growth, although we should all like to increase it very much, is something that alters rather slowly by a great deal of hard work and structural changes, whereas cost inflation can take place at a very great speed and overnight. When you say that you can expand production and that will check inflation, you are, in terms of speed, matching the rate of the hare and the tortoise without much chance of having the happy ending to that old story.
My Lords, it seems to me that there are three possible solutions. First, we can put up with it and move over to what

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is often called a South American economy, though not all South American Governments practise it. I feel that in those circumstances there is no doubt that the rate would accelerate, simply because each year we should get used to it. I feel sure that the country does not want that type of solution and that it would be a very damaging one. The other solutions come down, in very simple terms, to unemployment or some form of incomes policy—at least, with our present state of knowledge no one has got any further than suggesting these.
I took the noble Lord, Lord Robbins, to be saying in his speech that we should have to do it by the unemployment route. What he said was that we should not make more money available than would support the desired level of employment at the desired level of prices. In the last twelve months we have seen that what, by postwar standards, is a very high level of unemployment has been accompanied by a very rapid increase in costs. No one would deny that there must be some level of unemployment that will give price stability, but we do not know how near to zero that is. After a good deal of experience in this field I have come to the conclusion that no Government are going to adopt this route, because they would be convinced that as soon as there was an Election that would be the end of them.
Bad though the side effects are, the advantages of a full-employment policy are so great that I simply do not think it would be practicable to go back to the pursuit of price stability using the level of activity as a regulator. I do not think there is any close connection between the level of unemployment and the rate of price rises. So we come back to some form of incomes policy. Although on a great many questions I do not agree with the noble Lord, Lord Balogh (I did not agree with what I thought were his very immoderate remarks about another Member of your Lordships' House), I think that on this point we are rather close together, in that my own view is that some form of incomes policy offers the best hope. The last Government believed in it; the previous Conservative Administration really introduced it, under Mr. Selwyn Lloyd who was the father of many of the policies subsequently adopted.
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Why is everyone against it? Because, they say, it will not work; and there is no doubt that, except for rather short periods, it has not worked in the past. But I think that this may be because we have not been determined to give it a chance. We have let inflation get stronger and stronger, and everyone has become more and more used to it; and we seem on the whole to be afraid of having any struggle for price stability. Yet we all say that price stability is something worth having; and if it is worth having, what does it matter if we have a certain amount of inconvenience or disturbance? If things are easy, we should have them already, in the same way as if the solutions to any economic problems were easy you would not need an expert to provide them: you would adopt them straight away. I agreed with what was said by the noble Lord, Lord Robbins, that in the public sector the Government will have to stick to their guns.
There are, of course, great difficulties, and what went wrong in the case of Mr. Selwyn Lloyd was that he started off with the nurses, where there was an obvious case of injustice and there was a good deal of public sympathy for them. I am not sure that the last Government did not make a mistake in starting off with the seamen, so causing a great deal of difficulty with the balance; of payments. But it seems to me that, at any rate, there are solutions to these problems of differentials, these problems of the people who have fallen behind. There will be substantial difficulties and some injustices in the early stage; but, as I say, if we really think that inflation is an evil—as I do, and as so many of the noble Lords who have spoken this afternoon obviously do—and if we really think that unemployment is not the way to deal with it, what have we left? I hope, therfore, that the incoming Government will have another look at their policy in this particular respect.
6.28 p.m.
LORD HANKEY: My Lords I should like, if I may, to make a totally non-political contribution to this debate. I listened with very great interest to what the noble Lord, Lord Roberthall said about incomes policies, because all that aspect of our policy really came from a Report, produced for O.E.E.C. in about 1960, on The Problem of Rising Prices.

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Even to-day it must be one of the most authoritative works on the subject, and the noble Lord, Lord Roberthall, played a leading part in producing that remarkable document. It is interesting to hear his comments in the light of subsequent experience, and I hope to say something about it shortly.
My Lords, I warmly agree with what was said in the Queen's Speech about the need to control inflation. I agree with all the consequences, outlined by the noble Lord, Lord Robbins, which we must, unfortunately, expect if we do not succeed in controlling it. But I want to raise a still small voice of doubt about the methods which are currently being used. I look at the situation as we have seen it over these years, and I see that year after year the Chancellor of the Exchequer—whoever he may be: I am not aiming at either one Front Bench or the other Front Bench—budgets for a healthy surplus. He says that this will reduce demand by so much, and so what we have is more and more taxes. Unfortunately, these are very discouraging to industry and to the economy generally, especially to those who otherwise would be building factories to provide employment.
I think myself that this is one of the explanations of the very low rate of real investment which we have in this country. If we take the O.E.C.D. statistics, the United Kingdom comes very near the bottom of the list, both in the amount per head and in the percentage of the gross national product which is used for real investment. If this situation continues, we simply cannot expect our industry to keep up to date; and unless we keep industry up to date, we cannot expect to keep up our rate of exports. I believe that for years this has been discouraging to our balance of payments and has impinged on our whole economy. Therefore I warmly agree with everything that has been said on the subject of investment. We all, on both sides of the House, agree about this: everybody has said it over and over again. But this is a cumulative factor, and now that we have a new set of brains to deal with this problem (and I am not making comparisons) I really think that we ought to have another look at it.
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The management of demand by the imposition of extra taxes, like S.E.T., which has been attacked a good deal in this debate, tends I believe to push up prices and is a starting point for more rounds of wage demands essentially unrelated to productivity. Those wage demands are related to rises of price and not to rises of productivity. This is exactly where we get off on the wrong foot, and I believe that it is a major factor in cost inflation. Of course this is not the whole story. There are many other factors which affect demand. In this connection, I should like to say a word about the credit machine. By credit machine I do not just mean the banking system: I mean the credit machine in the widest sense, including the hire-purchase houses and all other forms in which credit is created. I do not want to go on record as underestimating the immense contribution which our banks make to our economy. They are most efficient, highly effective, and play an immense part in our economy. But I think that the operation of the credit machine as a whole can easily undo what the Government are trying to do.
I should like to tell an actual story from my own experience in 1964 and 1965, when I was head of the British delegation to O.E.C.D. In the late autumn of 1964 I was constantly receiving instructions to explain to the Council that the Government had taken measures, which would certainly be effective, to reduce demand in the economy by about £250 million; and later more measures were taken, and the figure was revised to £600 million. When the middle of 1965 came it transpired that during that period credit had been expanded by about £1,120 million. Thus the credit machine not only had undone what the Government had done but had gone about a similar distance in the other direction. After that, all sorts of measures were taken to try to control the situation, and I am sure that many of them were effective. I mention this because, if the Government are going to consider relaxing controls, I am sure that this is an item where they have to be pretty careful what they do. This shows that some sort of watch has to be kept on the extent to which effective demand is expanded by the creation of credit.
I want to raise another question. I am sure that a considerable part of the

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improvement in our balance of payments has been caused by an inflow of capital, both long and short term. I should like to ask the Government to consider once more whether they can be quite sure that when this capital comes into the country it does not increase purchasing power in such a way as to assist or start off inflationary pressures. I do not want to imply that this is an easy question: it is not; because the effect which an inflow of funds of this sort has on the internal economy depends partly on the operation of the Exchange Equalisation Fund, and it depends also on the management of the public debt, on the gilt-edged market, on the issue of Treasury Bills and on other factors. It is an extremely complicated question.
Nor do I want to imply that this question has not been studied before. It has been exhaustively studied. But what I want to say is that the amount of capital which is swinging about the world at the present time is getting so large and increasing so rapidly that perhaps the time has come for another look at this subject, to see whether all the factors operate as they used to do ten years ago. I do not know whether this is really so, but I believe it would be worth while to have another careful inquiry, to see what are now the possible effects of an inflow of capital, long and short term, on the inflationary trends in our economy.
I believe that it is vital to check the rise of prices because, sooner or later, we are liable to price ourselves out of international markets, and this obviously can only lead to another crisis in our balance of payments. Even if some other countries are experiencing similar trends, I believe that it is particularly important to keep our slate clean at the present time, when we are hoping to join the Common Market. It may be asked: does this mean that I believe in the Prices and Incomes Board? I am rather doubtful whether the exact system which we have had hitherto can usefully continue. It has become increasingly unpopular and I wonder whether we should not have another very close look at it.
The fact is that since the Report on Rising Prices which I have mentioned was written it has become clear that price and wage controls can be effective only when there is no inflation, or not very much inflation. If there is too
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much inflation, I just do not believe that these controls can be made effective. They may be effective in a sort of grey area, where we are neither in the black nor in the red, but the sector within which this effectiveness operates may be really a very narrow one. I believe that if the inflationary trends can be brought under control, it may be worth having another look at this and that it might be possible by this means to have a growth rate in the British economy which would be marginally above what it would otherwise be safe to contemplate.
I greatly welcome the intention expressed in the gracious Speech
"to establish a framework of law within which improved industrial relations can develop".
I believe that this is an essential factor. If the law does not demand good faith in the execution of works contracts, then I contend that no trade union leader, however good he is—and we have some exceptionally good cries—and no industrialist, however broad his mind—and we have many broad-minded industrialists—can really hope to control the situation and demand good faith. I believe that the time has come when we must recognise that expressions of good will, and the hope that all men will behave like brothers, are just a waste of time. I believe that the time has come to put the law right and that this ought now to be done.
I believe that under our present law the British have, unfortunately, shown themselves somewhat incompetent to operate the great integrated industries like shipbuilding and the motor vehicles industry, on which a large part of our industrial progress and our prosperity must still depend. More especially they are essential for the maintenance of our exports and the standard of living of our workpeople. So long as the law does not demand good faith, then we are at the mercy of any bunch of demagogues and trouble-makers, and many of our industries seem to be full of them. You cannot run an efficient motor industry when the brakes are on strike one week and the electrics are on strike another week; then it is the radiators; after that the men who deliver the trucks, and then the men who bore the cylinders. You cannot expect any industrialist to run an efficient industry in those conditions.

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Not only does this ruin our exports to a disproportionate degree, especially when it affects railways, docks and shipping (and a significant reference has been made to the shipping strike with which I warmly agree), but it is an important factor in causing cost-inflation. When the troublemakers and the demagogues in some particular workshop get busy and insist on a rise of rates which puts all the other rates out of gear, how can you expect even the best trade union leaders to persuade the men to carry out an agreement for the period for which it was made, and to go on working contentedly? It simply is not "on": no trade union leader could do it; nor could any industrialist expect his workpeople to do it.
So we have got ourselves into the situation where something has to be done about this. I have been on the Continent while the Election has been going on, and I must say that I was struck by the amount of advertising by the Japanese motor car industry all over Germany, Belgium and France. It really is striking. I can assure your Lordships that it is the same in Sweden. I hear that it is the same in Australia, though I have not been there. I believe that it is complete folly to ignore these signs and portents, and that we ought to be thinking very seriously about keeping our share of the market.
There is another point. I have some very old German friends, and one of them is a good industrialist. I was rather astonished when he said to me that he was now rather afraid of the British entering the Common Market, because, he said, our dreadful trade union practices might spread to Germany and upset their prosperity. Our disease (it is known as "the English disease") is thought to be quite catching. They have had trouble over there, in spite of the system which they have adopted.
LORD SEGAL: If the noble Lord will forgive me for interrupting, is he aware that the term "English disease" is usually applied to German measles?
LORD HANKEY: That is certainly a good point.
I should like to mention something else in this connection. German trade union law provides that every board of directors
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shall have a representative of the workpeople on the board. I asked my friend how he thought this law worked, and he gave the same answer as a number of other friends of mine in Germany had given. He said: "At first we did not like it. It is often embarrassing both to the workpeople who take on the job and to management. But, by and large, it has been immensely successful. It has led to a much better understanding by management of the problems of labour, and it has led to one influential person, at least, on the side of organised labour having a really good knowledge of the problems of management." He said: "In my factory, whenever we get into serious labour trouble the first thing I always do is to get hold of the trade union representative and sit down and have a long, quiet talk with him." I said: "Is he always a very good person, or do you get demagogues elected? Or what sort of person?" "Oh," he said, "in my experience, the workpeople have always elected a most intelligent and responsible person." And he added, "It really is an excellent system." I wish to record that, my Lords, because when we are thinking of improving industrial relations I believe that there is a kernel there of something which could be useful in this country.
So I wish the Government well in tackling this problem energetically and soon. I do not think that we should be hypnotised by the question of penalties. I know how difficult it is, but I do not believe that it is the centre of the problem. I hope that we can get away from the basic traditional idea of British law, that trade unions are a sort of conspiracy who ought in effect to be excused while they do their job. That really is a complete travesty of the truth. I hope that when the new trade union law is drafted the Government will see that we get away from the dreadful' habit that we in London have of drafting legislation purely by reference. I hope that the new law will make it clear in a preamble, or in some early clause, that trade unions are really the essential constituents of organised labour, with an important role to play in ensuring a fair deal for labour and in helping to ensure that industrial progress continues at a regular rate, without humps and bumps damaging to the individual; and that, to attain these objectives, their duty is to negotiate with, and, for that matter, co-operate with,

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management and with those who control the economy, and especially with the Government. We are all in this together. I think it should be the duty, and made within the power of organised labour, to ensure the execution of the agreements which it concludes. Anything less seems to me to be a travesty of what is really required.
I should like to conclude my contribution to this somewhat gloomy debate by saying that I believe in the genius of the British people. We have really quite a high coefficient of genius here, and it is our one great asset. I think that we have to find means of allowing that genius to operate; to train our people to use their genius; to give them every encouragement and to prevent the execution of that genius from being trammelled, obstructed and prevented at every turn by idiots and objectors. I am against the abominable "No"-man, whether he is in the Civil Service, in management or on the shop floor. I believe that we suffer too much from abominable "No"-men, and we should not put up with them any longer. It should be the duty of the Government and both sides of industry to ensure a rising standard of living for our people and to see that the future of our country is not endangered by irresponsible and selfish elements on either side of industry; and to that end our legislation should be radically amended.
6.48 p.m.
THE EARL OF CROMER: My Lords, my intervention will be brief. The noble Lord, Lord Beswick, with his customary courtesy, advised me that he would have some critical remarks to make to-day which would probably be of interest to me. It is true that this courtesy lost some of its lustre when I discovered that the noble Lord was himself going to wind up and therefore I was deprived of the right to reply. But Lord Beswick did make this move in my direction. Lord Balogh's personal and vindictive attack was accompanied by no such courtesy, and I have no intention of attempting to reply on the same level at which the attack was made. I believe that this kind of personal attack is not worthy of, nor in the traditions of, your Lordships' House. It seemed to me additionally undesirable and disagreeable that, however greatly the noble Lord may
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dislike my doings, be should pass such personal contempt on the many distinguished public servants and others who sit on these Cross-Benches.
LORD SHACKLETON: My Lords, may I interrupt the noble Earl? I am informed that my noble friend, Lord Balogh, did seek to inform the noble Earl, and wrote to him. The noble Earl did not receive it. I am not sure whether he has also told my noble friend, Lord Balogh, that he was about to reply to him.
THE EARL OF CROMER: My Lords, I have received no communication from the noble Lord, Lord Balogh, and I have just explained to the House that I am not going to reply.
LORD SHACKLETON: My Lords, if I may say so to the noble Earl, I would never accuse him of skulking, but I think that as a. "non-reply" it did amount to something.
THE ERAL OF CROMER: My Lords, you must forgive me for my lack of familiarity with the practices of this House, if that is the case.
The substance of Lord Balogh's remarks, and those of other noble Lords—and this is not a reply directed to the noble Lord, Lord Balogh—is that we have been deceiving ourselves on the financial position of the nation. I do not say that we have deliberately been doing so, but the effect has been that the public have been led to believe that the financial position was better at the end of March, 1970, than it was in October, 1964. It is the tenor of my remarks throughout that this is not so. I have no wish or desire to recapitulate the figures again, and I do not think your Lordships would welcome my attempting to do so. We have been maintaining a standard of living by borrowing abroad and spending capital, and this has to change. Also we have to try to catch up on the growth in the standard of living which has been enjoyed by the bulk of the Western European countries. We are not—and I wholly agree with everything that has been said on the subject—on the way to a crisis. I do not think that this is the case at all. Indeed, the gracious Speech gives every reason for believing that the new Government have the right priorities to achieve prosperity so that we can start

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to retrieve again our national financial sovereignty. Our efforts to achieve this will not be enhanced by our continuing to deceive ourselves.
6.53 p.m.
LORD BESWICK: My Lords, I begin by offering my congratulations to the noble Earl, Lord Dudley, on a maiden speech of exceptional clarity and vigour. Had he been here, I should have said to him how much I look forward to hearing the next occasion when he will speak uninhibited by his concept of non-controversy. I want also to add my congratulations to those so readily and warmly offered to the noble Lord, Lord O'Neill of the Maine, and the noble Baroness, Lady Brooke of Ystradfellte, who initiated this debate which we are now continuing. I thought that they were speeches of complete integrity, and they added to our knowledge of their respective characters in a wholly delightful way.
For myself, I noted with especial approbation Lord O'Neill's dismissal of the Goldwater philosophy, and I thought that the way he dismissed this was Wholly admirable. I want to call attention particularly to his rejection of the premise:
" … that the only successful appeal to the voter is one based on simple self-interest."—[OFFICIAL REPORT, 2/7/70, col. 14.]
I have been sufficiently long in public life, and have spent time enough in the company of those canvassing votes on the doorsteps to know that some appeal to self-interest is, and must be, inevitable. Yet of this I am utterly convinced, that if the vaunted freedom of Western civilisation is to survive, then we must reject an undiluted appeal to individual self-interest.
Yet the most depressing feature of this Election is that it was won by a persistent appeal to selfishness, or selfishness coupled with crude fear. That there are generous spirits among the Conservative ranks I have the evidence before me to prove, but it was the Leader of the Conservative Party who boasted that his insistent appeal to the housewives' purse was paying off in terms of votes. The noble Earl, Lord Jellicoe, made a wholly admirable speech. He said that he approached this matter of the national economy in terms of impartiality. I am
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not surprised that he did this. He succeeded, but I am bound to say to him that if the fair-minded approach that he displayed to-day had been followed by the Leader of his Party he would not to-day be sitting on that side of the House. Of course the purchasing power of the pound note is of enormous importance, but it was the primitive appeal to self-interest, projected with such relish by the people of Lime Grove, with no reference at all to related facts and background, that makes me wonder about the quality of the Government now in power.
The only States in the world apparently without problems of price and income control are, as the noble Lord, Lord Boothby, said, Communist States. No doubt if we had a closed economy, totalitarian rule and a complete absence of individual liberty, then we too could solve to-morrow the undoubted difficulties which beset us in common with every other country of the Western World. The noble Earl, Lord Jellicoe, spoke of the unparalleled rise in prices. It is paralleled in every country in the Western World, and most of the figures suggest that in the citadel of capitalism, the United States, in the past year or two both unit costs and prices have risen more there than they have in this country.
I agree with the noble Lord, Lord Byers, and share with him the disappointment, not that these things were not argued out before the electorate—because they were, in my experience, in the little village halls around the country—but that they were not argued on the television, where the trivia, the minute and the sensational were seized upon. It was there that the problems to which the noble Lord referred, and which ought to have been discussed, were ignored. But not a word was said by the Leader of the Conservative Party in the appearances he made on television about an alternative prices and incomes policy and how within a democratic society we were to tackle this problem. Nothing so far to-day, nothing in the gracious Speech, nothing, that is, save that the Government,
"believe that vigorous competition is the best safeguard of the consumer."
Vigorous competition? Back to the free-for-all? I put it to the noble Earl, Lord Bessborough, who is to reply—a noble

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Earl who is as well versed as any of us in the technologies of the modern world—whether he really believes that a free-for-all in a contemporary economy could be effective or even feasible in guaranteeing a fair deal for the consumer?
One would have reasonably expected, with the emphasis that the Conservatives put upon the question of prices, that absolute top priority would be given to solutions of this problem. But nothing of the sort. I put this specific question to the noble Earl, Lord Bessborough. Does he really believe that his Government can stabilise prices at their present level? If so, what measures are to be used to this end? It is fascinating to contemplate the issues to which the incoming Administration have given priority. When they took over from us in 1951 their first priority was a concession to the brewers. This time one, if not the first, announcement to the Press was about arms to South Africa. Their second announced priority was to allow the more bigoted local authorities to determine the future of a child at the age of 11. But that is not going to increase the potential of our people. They have also announced that they will bring down the cost of living by reducing taxation, and much interest has been shown to-day in this possibility.
This is a wholly admirable proposition until one examines it further. In much the same way one might be tempted to welcome an announcement from "on high" that we were henceforth to have continual sunshine, till on reflection we realise that rainfall also has its uses. If it proved possible to reduce the administrative costs of Government without in any way reducing its efficiency, then of course we all should be genuinely pleased. I, for one, believe that there are certain areas in which genuine economies could be effected. But the total monetary result of such economies would be minimal. We all know that significant cuts can be made only if policy is changed. But such policy changes must mean, as my noble friend Lord Shackleton said, either that a service is reduced, or that the cost is shifted from one person to another.
In one sector of the economy, policy changes have been announced, and the noble Lord, Lord Woolley, has referred to them. Very considerable reductions
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in taxation could follow if the principles of the 1947 Agriculture Act are dropped and, instead of subsidies designed to keep food prices down, we move over to import levies, deliberately designed to put prices up. Much thought was given to the levy system by the previous Administration. In the case of one commodity, eggs, where demand was just about matched by home supply, we decided to phase out subsidies. But that approach is very different from the approach of noble Lords opposite, as I understand it; and their approach is different from the temperate approach which the noble Lord, Lord Woolley, asked for. As I have said, by this new agricultural policy large sums of taxpayers' money could be "saved"—though I put the word in inverted Commas for it is not a genuine saving at all. The money will still be paid—and by those same housewives who were "conned" by Mr. Heath on television. And, let us remember, some of the families who will be paying for this new policy will be those whom Mr. Jenkins took out of the tax-paying bracket altogether.
There is another area in which the Government may be tempted to make economies, but if they fall to that temptation it will be tantamount to eating our seed-corn. I refer to the area within which the previous Government had given carefully judged financial support to particular projects calculated to benefit our economic position. I want to ask the noble Earl who is to reply about only two projects, and two for which he has special responsibility. And may I pause to say, sincerely, that I am delighted to see him allotted to his particular post at the Ministry of Technology. No one appointment gives me greater pleasure than that of the noble Earl, Lord Bess-borough. If at any time he wearies of welldoing in the world of aircraft, I hope he will re-read a speech which he made on April 15.
I ask him first about the new Government's intentions regarding the BAC 311. A decision about this aircraft will be, in a real, wide, deep sense, a decision about the aircraft industry in this country as a whole. Britain, with its crucial balance-of-payments problem, needs a British aircraft industry. Anyone who is at all minded to doubt this should reflect on the significance of the import a month

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ago of two foreign aircraft for British Overseas Airways Corporation. If British European Airways have to buy abroad for their next generation of aircraft, the consequences could be even more significant and more far-reaching for our economy. The noble Earl and others pressed me for an answer about the BAC 311 in the April debate. At that time, as he will know, the question of which engine to put into the aircraft had not been settled. It has now been settled. The new development of the RB 211, the—50A, is now a definite proposal. It may be unreasonable to expect a definite decision this evening, but B.E.A. requirement is now even more urgent, and B.A.C. cannot be expected to continue their expensive research unless prospects are clarified. What is the present position therefore, I ask the noble Earl? Can he say today definitely when a decision will be announced?
The second project about which I have given the noble Earl notice concerns the Concorde. Newspaper speculation suggests that this admittedly expensive project is being considered as a sacrifice in order to make good the electioneering pledge of economies. There was a case which I myself made at some length, years ago, for not starting on the Concorde. There was undoubtedly a case for reviewing the credibility of the whole undertaking six years ago. But now, with the flight testing programme at its present stage, it would be a criminal waste of money and manpower to abandon the Concorde on the excuse of an alleged new financial crisis. If the operational economics are shown to be unacceptable, then of course that must be taken into account. But I ask the noble Earl to give us an assurance that the decision, if any is taken, will be on the economic merits of the aircraft, and not because of any question of the national financial position.
This possibility about the parlous state of the economy which the Government inherited of course brings me to the noble Earl, Lord Cromer. I am sorry if he thinks I was discourteous in speaking at the end of the debate and therefore not giving him the right of reply. What he really wishes, apparently, is two innings to my one. He has had his innings. I am now replying to him, and
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he should be prepared to take what I am going to say to him. I pay the noble Earl the tribute that, until the final few days of the Election campaign, he was, in my view, the most effective propagandist on the Tory side. But what I cannot understand is why, with this eminence in the Tory hierarchy, he sits on the Cross Benches. Why does he purport to be above the Party struggle? Sitting on those Benches implies a degree of objectivity which I fail to discern in what the noble Earl says and writes.
Look, for example, at the terms and the tone of his article in The Times of June 8. In his attempt to prove that the new Government's burden is greater than in 1964, he starts off by saying that at the beginning of October, 1964, the United Kingdom short-term borrowings were rather less than 200 million dollars. Of course they were. But will he deny that, given the situation in October, 1964, with a balance-of-payments deficit of nearly £800 million, with British industry seriously under-capitalised, with public expenditure exceeding public revenue by no less than £1,000 million and with the exchange rate of sterling further handicapping British exporters, short-term borrowings on a big scale would have been necessary under any Chancellor, Labour or Tory, by the end of the year?
THE EARL OF CROMER: My Lords, that is a very sweeping statement. We are talking about the period immediately before the Election in 1964. Some financing was required, as I have mentioned, of the deficit which was seen to be arising at that time. Of course, the deficit was not what some political leaders tried to make it out to be. But there was some short-term financing, which I have mentioned.
LORD BESWICK: My Lords, there was some short-term financing and it amounted to the figure which the noble Earl gave. I am saying to the noble Earl that, with those trends in our economy which were developing in October, 1964, it would have been necessary for any Chancellor of the Exchequer, Tory or Labour, to have borrowed further sums of money on the short-term in the following year.
The noble Earl may say, as indeed he does in his article, that the borrowing

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went on, even after devaluation. One of the most charming and illuminating sentences in his article reads:
"Fortunately wind and tide in the world changed at that point and the substantial repayments of our debt made possible …".
But what were these winds and tides which changed? They were largely the speculation of international financiers on the possibility of a change in the exchange rate of the French franc and the German mark. He knows that. Of course they were; and when the French franc was devalued and when the German mark was revalued, the winds dropped, as he said. But to say that it was the Labour Government that was responsible for these winds and tides is surely going quite contrary to the facts of the situation.
THE EARL OF CROMER: My Lords, if I may intervene, I would say that I have not so far bestowed on any political Party the powers of the Almighty in regard to wind and tide. I have not suggested that the Labour Party were responsible for the change of wind and tide, as the noble Lord has just said. But there was a change of sentiment which came about which was largely a reaction from the very serious lack of confidence in sterling which occurred, strangely enough, after devaluation, and there was a large outflow of funds at that time.
LORD BALOGH: I think that—
SEVERAL NOBLE LORDS: Order!
LORD BESWICK: My Lords, in this article the noble Earl implies that the fact that we were able to repay some of that debt is due to the fortunate circumstance of a change in the winds and tides of the world. That is what he said, and I am saying that those same winds and tides were responsible for much of the short-term borrowing which we had to undertake at that time.
I want to ask the noble Earl one other question, and I will give way if he will answer it. He says in another paragraph:
"As is now common knowledge, the so-called invisible earnings have for many years enabled the private sector as a whole to show every year (except 1964) a massive overall surplus on the balance of payments."
He then goes on:
"Continually and rapidly rising Government expenditure abroad has in many years turned this into a deficit."
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That is quite true; I accept that. But the way he says it is absolutely misleading. I am not quite sure why he puts emphasis on the private sector in this way. We are living in a mixed economy. The private exporter of, say, motor cars is dependent upon publicly produced gas, electricity or coal. His products go to the ports along public roads; his labour force is largely educated at State schools, and kept physically fit by the public health service.
But, leaving aside the provocative terms in which the noble Earl couches his proposition, what he says is true, but it is not the whole truth. I put forward exactly the same proposition myself on behalf of the Government, in an interesting debate which we had on invisible exports on the report of the Committee on Britain's Invisible Earnings. But why did he not give the actual figures and the dates, and the full facts? Expenditure overseas actually rose from £61 million in 1952 to £433 million in 1964 when his Tory friends left office. That was the increase in overseas expenditure that he was really criticising, and more than half of that was on military account. Why does he not put that in the article if he wants to give a char picture of the situation?
The question I now want to put to the noble Earl, if I may, is this: does he or does he not agree with the action taken by the Labour Government to curb that rising expenditure, action which had already arrested the growth and would have led to a decline as the military base commitments were ended? In other words, does he accept the financial consequences of the Conservative policy East of Suez, or does he accept the wisdom of the Labour Government in reducing those commitments overseas?
THE EARL OF CROMER: My Lords, the noble Lord asked me why I did not spell out the table. It is a very long and fairly straightforward table, and his argument about Government expenditure using up more than the private sector is earning in foreign exchange is one which I have propounded for a very long time—since long: before the Labour Party came into power, I still maintain that it is a fact of life that the private sector actually earns foreign exchange. Of course it is dependent on roads, docks and national industries, but it is the private sector and the accounts

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are set out in that particular way. So one has to differentiate somewhere. The fundamental question which the noble Lord asked me is whether I agree that the Labour Government did right in trying to reduce the level of Government expenditure. Certainly I believe that that is right, because I have been consistent on this line for a very long time. In 1967 and 1968 the results were rather good, but the results in 1969 were very unhappy, according to my figures. The total Government expenditure overseas from 1957 I have as £182 million, which has risen to over £800 million in 1969. And this was a trend despite the efforts which the Government made—it was still running the wrong way.
LORD BESWICK: My Lords, I quite accept from the noble Earl, in this House, after the Election, that he has been making this point since before the days of the last Labour Government. What I want to know is why he did not say that in the article at a time when he was inviting the people to come to a conclusion as to the responsibility of the Labour Government.
The noble Earl made great play, as indeed did the noble Earl, Lord Jellicoe, about the amount of debt still outstanding and that it represented wholly a liability. But a large part of this was due to a withdrawal of overseas Government and private deposits, which in that sense means not an increase but a transference of debt, speaking in national terms. Moreover, in further part, estimated variously but usually put at £900 million, this was an outflow of long-term capital, the investment of which the Conservative Party had long been pressing. They were encouraging investment overseas. There may be a difference of view as to whether capital outflows of that kind should have been greater or less in the circumstances, but to say that Britain is worse off by that amount is again contrary to plain fact.
My Lords, practically every statistic in the noble Earl's article, or at any rate the use to which they have been put, could be challenged. But there is one sense in which the headline to the article can be said to be true.
THE SECRETARY OF STATE FOR DEFENCE (LORD CARRINGTON): My
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Lords, I do not want to interrupt the noble Lord but would it not have been better if he had written an article in response to the noble Earl rather than to reply to it now?
LORD BESWICK: My Lords, I tell the noble Lord what I think would have been better. I think it would have been better had we had that debate on the financial situation before the Election, so that the noble Earl could have put his point of view and it could have been tested in debate instead of preserving it until that crucial time in The Times newspaper.
I was about to say that practically every statistic in the noble Earl's article could be challenged, but I said there was one sense in which it could be said to be true. In one sense our burden is greater than in 1964. It is a sense in which I am reminded of a moving story told by the late King George VI. He spoke of how a worker in the fields had been commiserated with for the heavy burden which he had been seen carrying over the hill. "Not so", replied the worker, "that was not a burden, it was my brother."
Since 1964 we have assumed, deliberately and voluntarily, and against the advice of the noble Earl, I gather, when he occupied another position, a heavier burden on behalf of the old and the young, the sick, and those who are made redundant in industry. We accepted that burden—
THE EARL OF CROMER: My Lords, may I suggest to the noble Lord that it is wholly improper to make any reference to what the noble Lord may have heard that I proffered as official advice at a time when I was serving the Government. Any official advice which I tendered at any time was given on a basis of confidentiality. I would suggest to the noble Lord that he should keep off this particular line. I am very surprised that the Leader of the noble Lord's Party has also seen occasion to forget that a degree of confidentiality normally goes with public service.
LORD BESWICK: My Lords, I think that the noble Lord has a point, and I would not myself have made that remark had the information I acquired been acquired in any confidential manner. I am quoting, or paraphrasing from

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Hansard in another place, as he will know. I was saying that we accepted that burden because we believed that it was compassion allied with competence that would give us a truly civilised society. Competence and compassion: and I do not believe that we can get maximum competence in a society unless we have compassion. It is because the present Administration won this Election by an appeal to self-interest rather than compassion that I think the electorate will greatly regret what they have so recently done.
7.21 p.m.
THE MINISTER OF STATE, MINISTRY OF TECHNOLOGY (THE EARL OF BESSBOROUGH): My Lords, we have had an interesting debate on the general economic situation. It has been particularly interesting towards the end; a curious ending to the debate, almost a private debate between the noble Lord, Lord Beswick, and the noble Earl, Lord Cromer. I think most of my noble friends hesitated to join in and wondered whether perhaps they should leave the Chamber. However, I should like to thank the noble Lord, Lord Beswick, for the kind remarks he made about my new responsibilities. I know that in the noble Lord, Lord Beswick, we have someone in this House who is very familiar with the aviation questions with which I shall be mainly concerned at the Ministry of Technology. I shall be answering his questions on the subject of the BAC 311 and the Concorde to the best of my ability later in my remarks.
I should like to join with other noble Lords in congratulating the noble Earl, Lord Dudley. I am sorry that he is not present to receive these congratulations, because he made an interesting and very impressive speech without notes. We knew his father well in this House, and it is good that the noble Earl should be sitting in his father's place. We all hope that he will often address us in such sturdy and, downright terms. I am sure that all of us will study his suggestion regarding the reduction of corporation tax and its relation to investment grants, to which I shall be referring later. I shall read that part of his remarks very carefully, as also those of the noble Lord, Lord Robbins, on corporation profits tax. These, too, were most illuminating.
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The general situation has been well described by my noble friend Lord Jellicoe. We must all agree that this country is to-day facing one of the most serious inflationary problems since the war. The noble Lord, Lord Robbins, and the noble Lord, Lord Hankey, both made important contributions on this subject. It is clear that this problem is the more serious for Britain because of our poor growth in productivity, our inadequate reserves and substantial overseas debts, the chaotic state of our industrial relations and the fact that we are suffering from the backlash of the collapse of the incomes policy.
My right honourable friend in another place and my noble friends in your Lordships' House have also stressed the downward trend in the surplus on the balance of payments. We all agree that there may be good months and poor months but that it is the trend that matters. I should also stress the burden of the interest payments on our overseas debts, amounting last March to a figure of £1,650 million. I will not recapitulate all that my right honourable friends have said, but will only re-emphasise that the increase in the value of our investments overseas was entirely due to the more rapid growth of the economies of countries overseas where those investments were placed; and I should also add that with half a million men, women and young people out of work no one can say that the situation here is healthy.
Nor is it healthy that the number of strikes in the first lour months of the year is 60 per cent. up on the same period last year. No one can deny that industrial output is stagnating; that the industrial production index for April actually fell, and that manufacturing investment is static. It is regrettable, too, that great firms have been unable to finance their expansion out of their own resources and have had to go to the Government in order to borrow, at the same time seeing their profits seized by taxation. Also, we are suffering from the worst bout of inflation that we have known for twenty years, with a consequent reduction in the standard of living. I can only repeat that we shall reduce the burden of taxation and that the Government will announce the action to be taker in this respect as soon as the necessary examination of Government expenditure has been completed; that is to say, in the autumn.

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There has been much discussion as to whether there is a national emergency and crisis. Like other noble Lords, I can only say that it was Mr. Crossman himself who told the doctors at the be ginning of the election campaign that this was a time—
LORD SHEPHERD: My Lords, I think the noble Earl should be fair. This was alleged, and Mr. Crossman denied it. I think the noble Earl should recognise that fact.
THE EARL OF BESSBOROUGH: My Lords, all I can say is that Mr. Crossman said it at the outset, which was a great pity.
LORD BESWICK: My Lords, would the noble Earl be prepared to give us the occasion on which my right honourable friend made this statement?
THE EARL OF BESSBOROUGH: Yes, I am sure I can, afterwards.
LORD BESWICK: Now.
THE EARL OF BESSBOROUGH: My Lords, it was clearly reported that Mr. Crossman said this to the doctors. If I am wrong, I stand corrected. This was reported. The present Government's general view has already been made plain by my right honourable friends, and by my noble friend Lord Jellicoe this afternoon. There is, we believe, no immediate crisis, but there are risks. I was leading up to this point. I thought I had better contrast it with the original statement by another person.
LORD BESWICK: Would the noble Earl be good enough to say whether he is still standing by his original statement that Mr. Crossman said that we were faced with an economic crisis or an economic emergency?
LORD BYERS: My Lords, does the noble Earl not recognise that what happened was that it was reported by those who saw Mr. Crossman, and Mr. Cross-man contradicted it, which made it more circumstantial.
THE EARL OF BESSBOROUGH: My Lords, I am very glad to be put right by noble Lords, especially by the noble Lord on the Liberal Benches. I should like to emphasise that we do not think
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that there is an immediate crisis but that there are risks inherent in current trends which could, in the absence of appropriate corrective policies, cause us to slide back once more into the all too familiar balance-of-payments crisis. There is undoubtedly the risk that present inflationary trends may continue at the current rate, and that as a result our costs position will deteriorate vis-à-vis our main competitors. This, I repeat, is only a potential threat, and we are urgently considering what action is necessary. Whether it is realised depends, of course, not only on our success in controlling our internal costs, but also on the success of our competitors in moderating the advance of their prices.
Secondly, there is the risk that if the present inflationary trend continues for long it may become very much more difficult to alter expectations about the future course of prices and hence to introduce effective policies to slow down the rate of price increases. These dangers on the prices front are, to my mind, the most serious. There are, of course, other elements which give cause for concern in the situation which we have inherited. Output actually fell in the first quarter, unemployment is high, and manufacturing investment has been static. There are more expansionary elements in the situation, to which many have alluded in the course of this debate, and a balanced view most certainly should take them into account. But indications such as I have listed point to an economy which requires to be strengthened, and that is what I believe our policies will do. I should now like to say a word about the nationalised industries which are the special responsibility of the Ministry of Technology.
LORD SHEPHERD: My Lords, may I intervene, merely to ask for a little information which has not been available during the debate? As the Minister is from the Ministry of Technology and is particularly aware of this, and as it is particularly important in relation to the balance of payments, can he give an indication as to the size of the order book of our export industries, particularly of the machine tool industry?
THE EARL OF BESSBOROUGH: My Lords, I have not got those figures before me this evening, but I will certainly send them to the noble Lord.
LORD SHEPHERD: My Lords, would the noble Earl not agree that they are infinitely higher than they were last year?
THE EARL OF BESSBOROUGH: They are certainly, my Lords.
LORD SHEPHERD: I thank the noble Earl.
THE EARL OF BESSBOROUGH: My Lords, in regard to the nationalised industries I would say this. Manufacturing industry, and indeed the community as a whole, must rely heavily upon the successful and efficient conduct of these sectors of the economy. They are the necessary foundation of future economic progress. In saying this, I do not simply have in mind their size, vast though it is, with net assets now valued at something of the order of £14,000 million. This represents an annual investment comparable to that for the whole of manufacturing industry, and employing 8 per cent. of our labour force. Rather I have in mind their strategic importance in providing basic supplies and services like energy, transport and communications. These lie at the heart of any modern economy. Gains in efficiency here benefit everyone; they are passed on to become gains in the efficiency of the whole of British industry, to increase the prosperity of consumers and reduce the cost of exports. I am glad that noble Lords opposite accept those remarks.
All the more important, therefore, to be sure that these crucial industries are both encouraged and helped to operate at maximum efficiency. I am sure all noble Lords will agree with this, even though we do not necessarily agree on the means of securing these objectives. Indeed, as noble Lords know, we on this side of the House are totally opposed to the further nationalisation of British industry. We are determined progressively to reduce he involvement of the State in the nationalised industries, for example in the steel industry, so as to improve their competitiveness. An increasing use of private capital would help to reduce the burden on the taxpayer, get better investment decisions and, I believe, ensure more effective use of total resources. And of course we will prevent the waste of £76 million on the nationalisation of the ports.
With so much at stake we propose to approach these matters with great care.
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I am well aware that there is no easy formula that will give massive increases in efficiency. We shall be considering issues like the degree of Government involvement in the industries, and the introduction of some private capital both to reduce calls on the taxpayer and as an added stimulus to efficiency. We shall consider the possibility of introducing a more effective accountability system in the business sense and what should be done about unprofitable or borderline activities. When we have completed studies into these issues, and not until then, we shall make our proposals to Parliament.
In regard to nationalised industries' prices, on which the noble Lord, Lord Beswick, spoke particularly, my right honourable friend the Chancellor of the Exchequer has, I believe, told honourable Members in another place that we in this country find ourselves faced with a situation in which early price increases are either already in prospect or known to be coming forward over a large part of the nationalised industries field. We said before the Election that we would scrutinise closely all proposed price increases in the public sector, and that those increases would be allowed only where there was a proved case for them. We intend to carry out that promise.
It is most important for the economy generally that we should take a firm grip on prices in the public sector because of the contribution which a break in the wage-price spiral can make towards the stability of the economy as a whole. That does not mean that we intend to have a price freeze in the public sector. We do not believe in freezes of this sort. Nobody could be more conscious than a Chancellor of the Exchequer of the effect which a deliberate holding down of public sector prices can have on the allocation of resources on nationalised industries and their need to borrow from the National Loans Fund. On the other hand, we find it hard to accept that there is not considerable scope for absorbing higher costs by increased efficiency rather than by the easier course of simply passing on higher costs through higher charges. We on this side of the House regard a searching investigation into proposed prices increases in the public sector as an essential complement to the thorough

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examination of Government expenditure on which we are engaged.
I was asked by the noble Lord, Lord Shackleton, about the Coal Bill. This Bill was introduced by the Labour Government shortly before the Dissolution of the last Parliament. I should point out that it had an unopposed Second Reading. The main point of the Bill was to extend the existing powers to support the coal industry when present powers expire in March, 1971. All I feel that I can say this afternoon is that the Government recognise the importance of this matter, which is under active consideration, and that decisions will be taken in good time before the expiry of the present powers. I might add that if our consideration of the need for the Bill is completed in time we shall try to make a statement before the House rises.
In regard to investment in industry, I was extremely interested in the remarks of the noble Lord, Lord Boothby, who made certainly the most lively and enjoyable speech in the debate, and it greatly cheered us all. He talked about investment in industry. A high level of economic growth and prosperity requires a rising productive potential, or, as he would say, expansionism, and capital investment by manufacturing industry is a key factor in achieving this. I welcome the rise in the absolute level of investment in recent years as a basis for further, wider expansion. Historically, investment has moved in cycles and in the recent past there has been a period of upswing which may now be reaching a peak. Here there are certainly signs of a slackening of growth.
Manufacturing investment at constant prices rose by 10 per cent. between 1968 and 1969 to reach its highest level ever recorded for a calendar year—although I should add that as a ratio of the gross domestic product it was lower than at the peak level in 1961. Investment in 1970 is, I believe, likely to be higher than in 1969. Manufacturers' latest forecasts of their intended expenditure in 1970, provided to the Ministry of Technology in May, indicated an underlying increase of about 7 to 8 per cent. over 1969. However, the recent run of figures of actual expenditure show that investment in the three quarters up to the first
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quarter of 1970 had been on a plateau. This suggests that the rate of increase between 1969 and 1970 will be rather below that indicated by the May inquiry. The Confederation of British Industry believe that the rate of growth of investment between 1969 and 1970, based on the results of the latest Industrial Trends Survey taken in June, will be about 4 per cent. I do not think it is possible at this stage to estimate the rate of growth precisely, since, in particular, it is not clear what effect financial pressures may have had on investment during the March quarter when tax payments were greatest. Ambitious investment plans are based on confidence in the future prospects, both for sales and for the rate of return to investors. The Government believe that their policies will provide a climate of confidence necessary for high and well-placed investment by industry.
My Lords, if you will bear with me for a moment, I should like to say just a word about Government intervention in industry. In regard to this, the gracious Speech has made clear our intention to free industry from unnecessary intervention. We are not opposed to all forms of Government intervention or assistance to industry. We recognise that there are certain industries with which, for one reason or another, the Government cannot fail to be closely concerned. But we believe that under the last Government intervention went too far; and Government moved too often into the field where decisions are best left to industry and the market.
LORD SHEPHERD: My Lords, could the noble Earl give us an explanation of that, or an illustration?
THE EARL OF BESSBOROUGH: My Lords, I do not think noble Lords would like me, at this stage in the proceedings, to go into detail, but there are many examples from the I.R.C. The noble Lord, Lord Delacourt-Smith, could give the noble Lord, as he is sitting next to him, a great many examples.
LORD DELACOURT-SMITH: My Lords, the noble Earl was kind enough to refer to me, but it was not I who talked about these measures being unnecessary, it was the noble Earl. What my noble friend is seeking is some examples of unnecessary interventions; one, two, or three will suffice.
LORD SHEPHERD: Just one will do.
LORD DELACOURT-SMITH: That will not detain the House too long.
THE EARL OF BESSBOROUGH: My Lords, I am grateful to the noble Lord for asking that question, but I am afraid that I must disappoint him this evening. I will certainly write to the noble Lord if he would like specific examples. I am not going to commit myself this evening on this point as to particular industries where intervention would do damage to a particular firm, or it might do general harm, and I am not going to discuss the position of individual firms in this House to-day. We are now reviewing the various policies of Government intervention.
LORD SHACKLETON: My Lords, I asked the noble Earl these very points in my opening speech about six hours ago. Surely the noble Earl could have produced one example. If not, we shall have to press the Government very hard on this point.
THE EARL OF BESSBOROUGH: My Lords, I was going to say that we were reviewing the future of the Industrial Reorganisation Corporation and of financial assistance to industry generally. I cannot anticipate the results of these reviews; each policy will be considered on its merits. But I am confident that the outcome in total will be a significant reduction in the extent of Government intervention, and a greater freedom for industry to make its own decisions.
I shall not burden your Lordships with the remarks which I was proposing to make on industrial policy for the regions, because I do not think any noble Lord has raised it, but I should perhaps reply to the noble Lord, Lord Shackleton, on the question of investment grants, which was also referred to by the noble Earl, Lord Dudley. The present position is that grants are available to manufacturing, extractive and construction industries for investment in plant and machinery, and to purchasers of ships, computers, and hovercraft. The basic rate of grant is 20 per cent. of the capital expenditure incurred. A higher rate of 40 per cent. is payable on plant and machinery in development areas. The cost of the scheme is running at about £600 million a year, of which about £110
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million represents the extra 20 per cent. grant paid in development areas. Grants are not available for plant and machinery in the service industries, which receive instead a 30 per cent. initial allowance against taxation.
We—the Government—do not oppose the principle of financial incentives to investment, or of special incentives in favour of the development areas. Both principles were embodied in the system of investment allowances and selective cash grants for development areas administered by the previous Conservative Government. None the less, there has been growing concern that the present system of investment grants may not be the most effective way of dealing with the problem.
In Opposition we were critical of the cost of the scheme. We question whether, at £600 million a year, it gives the taxpayer value for money. We doubt also the advantages seen by the previous Government in the automatic nature of the investment grants. Of course, grants can help the new firm which has not started to make profits in a way investment allowances could not. I agree about that; but, on the other hand, investment allowances did not put money into less profitable firms who otherwise might have gone out of business. Of course, the higher rate of grant will attract to development areas some firms who can make a real contribution to the employment problems of the regions, but at the same time millions of pounds are being given at the higher rate to firms who either would have invested in the development areas anyway or who, by investing in capital intensive schemes, nuke little contribution to employment in the areas, and may even reduce it.
Nor have criticisms of the scheme been confined to the Conservative Party, as noble Lords opposite: know. Opinion in industry is, to say the least, divided on what system of incentives is most acceptable. There was sufficient doubt in the previous Government's mind to prompt a major review of the effectiveness of investment grants, and against this background it is natural that we should wish to study the matter further and fully. Our Election Manifesto stated a preference for a return to a system of incentives based on the tax system, which

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would mean that benefit would go only to firms making a profit and who are, therefore, prima facie, viable. This remains our view, but until the study is complete we shall not reach a decision. I cannot at this early stage say when the study will be complete. I should make the point that the changes will not, of course, be retrospective.
My Lords, a brief word on industrial relations. In the last two years there has been a serious increase in the number of strikes and of days lost through strikes. The Government have therefore made the reform of industrial relations an essential part of their programme. The Government have committed themselves to introduce during this Session legislation which will provide a new framework for the conduct of industrial relations. Within this framework these relations can be developed and improved over the next decade. At this late hour I will not go further into that subject.
LORD BYERS: My Lords, may I ask the noble Earl, before he leaves that point, whether it would be possible to produce a White Paper, or a Green Paper, in advance of legislation so that the House can study it properly before we come to the Bill?
THE EARL OF BESSBOROUGH: My Lords, I will certainly consult my right honourable friends about that suggestion.
I come now to industrial training, which was mentioned by the noble Lord, Lord Byers, Lord Shackleton and Lord Hirshfield. This is a matter to which we propose to give a high priority. I recognise that a good deal of progress has been made, in both the quality and the quantity of industrial training, through the operation of the training boards and the expansion of Government training centres. But the scale of the effort is still inadequate. We continue to be plagued by shortages of skilled labour in many parts of the country. At the same time, more needs to be done in devising forms of re-training which will help to re-absorb the unemployed into productive employment. There is a good deal more that I could say on this subject, but I think that noble Lords are all conscious of the essential points in regard to training and re-training.
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I should like to say a word to the noble Lord, Lord Woolley, who made a most distinguished speech, to which I listened with very great interest because I knew that he was a former President of the N.F.U. I should like to associate myself with what he said about my noble and right honourable friends who are going to speak on these matters in your Lordships' House and in another place. Our agricultural industry can clearly make a further major contribution, through import saving, to the balance of payments. This will be of great importance to the nation's economy, whether we are in the European Economic Community or out. But additional resources will be needed if the confidence of the industry is to be restored, as I myself, as a farmer, know. We are pledged to provide for a marked expansion in farm output. We have placed much emphasis on the need to make changes in the present support arrangements, and the need is to proceed to a replacement of the deficiency payments system by one of levies on imports, as the noble Lord knows.
Of course this will all take time, and there will be full discussions with all concerned, both at home with the industry and abroad with our suppliers. These discussions will commence at the earliest possible moment, but in the meanwhile the present arrangements will continue. I greatly appreciated the remarks made by the noble Lord, Lord Woolley, which I am certain will be carefully studied by my right honourable friends, as I am certain also will be the views of the noble Lord, Lord Beswick.
I should now like to answer—I am afraid that it must be fairly briefly—the questions of the noble Lord, Lord Beswick, regarding the BAC 311 and the Concorde. There is not really very much more that I can say about the Concorde which the noble Lord does not know already. The Concorde is of course the greatest civil project ever tackled by the aircraft industry. Results so far have been encouraging, and the development is proceeding as planned. In regard to the BAC 311, both the B.A.C. and Rolls Royce have asked for Government financial aid for this aircraft. B.E.A. are very interested in it and we shall, of course,

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take full account of their views. I appreciate the great importance of this project, and it has a very high priority. I agree about its urgency, but very large sums of money are involved—over £125 million of Government aid towards a total launching cost for the aircraft and the engine of around £200 million. The Government will have to assess the proposals very care fully in relation to other pressing claims on the Exchequer. A decision will be announced as soon as possible. Your Lordships will be aware that Hawker Siddeley Aviation are already participating with French and German contractors in the A300B airbus aircraft, which is also aimed at the large—
LORD BESWICK: My Lords, I am sorry to interrupt, but I wonder whether the noble Earl has made a mistake about the support needed for the engine. His figure of £200 million seems to me very high. I thought the figure was something in the order of £50 million to £70 million. I wonder whether the noble Earl could have another look at that. Further, can he not give us some indication as to when a decision can be expected?
THE EARL OF BESSBOROUGH: My Lords, it will be one of the earlier decisions. As to the figure, that is the figure that I have been given. But, as I said, your Lordships are aware that there is this other project, the airbus, in which the British aircraft industry is also in terested, which is also aimed at the large market which it is thought will exist in the later 1970s for this type of aircraft.
I have not been able to cover all the points and I hope that noble Lords will be indulgent towards me, speaking from this Box for the first time on economic questions in general. I also hope that noble Lords will forgive me if I have omitted to say what I might have said or should nave said, but it is impossible in so wide-ranging a debate of this kind to cover all the points. I particularly apologise to the noble Lord, Lord Drumalbyn, for not being able to hear the whole of his speech; but I probably know the sort of line which he took, and I hope that it was that line.
Briefly, I would sum up the subject in this way. While it is true that we have a present surplus on the balance of payments and sterling is relatively strong, we
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have also inherited a record rate of price increases, record inflation, a record level of taxation, a record level of unemployment, a record number of strikes—I regret to say all this—a record level of interest and mortgage rates, and of course devaluation which the noble Lord, Lord Robbins, considers; might have been avoided. All in all, this is not a happy inheritance and it will undoubtedly take us some time to reverse these trends and resolve the problems which arise out of them. It will take time, but we are determined to resolve them. We are determined to restore economic growth, cut taxation and put a check on rising prices. We shall stimulate savings and control Government spending. We intend to reform industrial relations and make a new drive to tackle the problems of housing and care for the needy, on which a start has already been made with the over-eighties. It is a formidable programme but we are determined to succeed.
LORD SHACKLETON: My Lords, I wonder whether, before my noble friend, Lord Shepherd, moves the adjournment of the debate, I may ask the Leader of the House to give consideration to one or two problems which have arisen during the last hour, particularly during the private debate between my noble friend Lord Beswick and the noble Earl, Lord Cromer, which drew attention to the fact that once again—and this is the first active day of this Parliament—your Lordships are never quite clear on the rules for attendance.
For instance, the noble Earl who made his maiden speech has not been present, so far as I know, during the winding-up. This causes embarrassment. One hesitates to criticise him, because he may not know the custom or your Lordships' House. But this again is a matter to which I would ask the Leader of the House to direct his attention and perhaps consider. The same applies to the Mover and Seconder of Motions. The noble Lord, Lord O'Neill of the Maine, who moved the humble Address, has faithfully been here all day, but the noble Baroness has not. There may be a good reason for this, but it puts the House in some slight difficulty.
This leads me to a further difficulty which arose when the noble Earl, Lord Cromer, rose—quite in accordance with the custom of your Lordships' House—though his name was not on the list. Very

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often a noble Lord joins in, especially if he has been referred to and wishes to deal with a certain point. Again, it is not possible for your Lordships to be present all the time, and neither I nor the Lord Privy Seal have been able to be here all the time. But there were some acrid comments made at some stage to-day (I make no reflection on the noble Earl, Lord Cromer; and I am trying to arrive at peaceful solutions), and although my noble friend Lord Balogh had written to the noble Earl, Lord Cromer, to inform him that he was going to make those remarks, the noble Earl, Lord Cromer, categorically denied that he received that letter. The custom of your Lordships' House is that we believe one another. I entirely believe that my noble friend wrote, and it may be that when the letter was delivered it went into the wrong pocket. However, whatever happened, it was unfortunate, again, that because this was, so to speak, an unscheduled speech my noble friend Lord Balogh was not here to defend himself on this particular point.
I would only say to the noble Earl who leads the House (and I say this not to add to his difficulties; he will find that these issues do arise from time to time) that he might like to give consideration to these matters, and it may be that some further guidance should be given to the House, including guidance on the question of, for instance, warning noble Lords. If people are taking part in a debate and it is a passing remark, it is reasonable to expect them to be present, but this is not always possible, and the noble Earl might like to give a little thought to that.
EARL JELLICOE: My Lords, I am grateful to the noble Lord, my predecessor, for the remarks he has just made, and indeed for the habitual benevolence of the tone in which he has couched them. I personally greatly enjoyed that tricorn of a discussion between my noble friend Lord Cromer, the noble Lord, Lord Beswick, and the noble Lord, Lord Balogh, although at times, like other noble Lords, I thought perhaps we needed a third House of Parliament in which this could have been
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conducted. By the same token I must in candour confess that I personally regretted the rather high content of personal acerbity which the noble Lord, Lord Balogh, imparted into some of his remarks. I equally regret that, somehow, the communication between him and my noble friend went astray.
I am sure the House as a whole would wish to regard that particular passage of arms, or that fault of communication, as over; and I shall, of course, be very happy to consider the suggestions which the noble Lord, Lord Shackleton, has put to me. I am sure that we can work out something to the advantage of the House; and if further guidance on these matters is required, I shall be very glad, in consultation with him, to choose a suitable moment for making the position clear.
LORD SHEPHERD: My Lords, I beg to move that this debate be now adjourned until to-morrow.
Moved, That the debate be adjourned until to-morrow.—(Lord Shepherd.)
On Question, Motion agreed to, and debate adjourned accordingly.

WALES RURAL DEVELOPMENT BOARD ORDER 1969
Draft Order, laid before the House on December 9 last and reported from the Special Orders Committee on Wednesday, April 15 last, withdrawn.
WHITEHAVEN HARBOUR BILL
Brought from the Commons; read 1aand (pursuant to the Resolutions of May 20 last) pro forma read 2a and committed to the Committee on Unopposed Bills.

WILLIAMS AND GLYN'S BANK BILL
Brought from the Commons; read 1a, and referred to the Examiners.
House adjourned at two minutes past eight o'clock.