Commons Sitting of 26 July 1955

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

  BRITISH TRANSPORT COMMISSION BILL
  (Queen's Consent, on behalf of the Crown and the Duchy of Cornwall, signified.)
  Bill read the Third time and passed.

  CORN EXCHANGE BILL [Lords]
  As amended, considered.
  Standing Order 205 (Notice of Third Reading) suspended; Bill to be read the Third time forthwith.—[The Chairman of Ways and Means.]
  Bill accordingly read the Third time and passed, with Amendments.

  LONDON COUNTY COUNCIL (LOANS) BILL
  As amended, considered; to be read the Third time.

  MILFORD DOCKS BILL [Lords]
  As amended, considered.
  Standing Order 205 (Notice of Third Reading) suspended.—[The Chairman of Ways and Means.]
  (Queen's Consent, on behalf of the Crown, signified) Bill read the Third time and passed, with Amendments.

  NORTH WALES HYDRO-ELECTRIC POWER BILL [Lords]
  As amended, considered.
  Standing Orders 204 (Notice of Amendments on Consideration of Bill, or on Third Reading) and 205 (Notice of Third Reading) suspended.—[The Chairman of Ways and Means.]
  A verbal Amendment made to the Bill: (Queen's Consent, on behalf of the Crown, signified) Bill read the Third time and passed, with Amendments.

ORAL ANSWERS TO QUESTIONS
  HOUSING

    Local Authority Allocations
    Mr. Lewisasked the Minister of Housing and Local Government why he refused the request of the municipal associations that local authority housing should be freed from quota allocation, similarly to houses built by private enterprise.
    Lieut.-Colonel Liptonasked the Minister of Housing and Local Government what restrictions he still imposes on the building of houses by local authorities.
    Mr. Gibsonasked the Minister of Housing and Local Government whether he will give as much freedom to local housing authorities as has been given to private builders to build as many houses for letting as they think they are able, subject only to the condition that they are built to the standard of construction and fittings suggested by the Central Housing Advisory Committee.
    The Minister of Housing and Local Government (Mr. Duncan Sandys): The issue of allocations is an informal arrangement, introduced in 1947, to facilitate forward planning by local authorities. Local authorities are required by law to obtain sanction for loans and approval of houses for subsidy. I am not satisfied that it would be desirable to dispense with these procedures.
    Mr. Lewis: Yes, but in view of the fact that private builders are not subject to the inhibitions experienced by local authorities, and in view of the fact that the municipal associations have made this request to the right hon. Gentleman, can he now state a satisfactory reason why he should not grant the request?
    Mr. Sandys: I cannot automatically agree to approve any request that is made to me by an association.
    Lieut.-Colonel Lipton: But has the right hon. Gentleman at least realised the folly and injustice of allowing private building to proceed, without any restriction whatever, to the detriment of local

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    authority building? Will he at least tell us what is his view about that and secure some equality of treatment between private builders and local authorities?
    Mr. Sandys: There is nothing like equality of treatment. In fact, the ratio is about two-to-one in favour of the local authorities.
    Mr. Gibson: Does not the Minister realise the growing difficulties of large local housing authorities in finding accommodation for those on their urgent lists? In view of that fact, will he not have a look at the possibility of releasing the local authorities from some of the restrictions which are imposed upon them at present, so long as the houses conform in their design with the plans suggested by the Central Housing Advisory Committee? Surely that would be sufficient?
    Mr. Sandys: As I have explained in my answer, the only restrictions that are imposed by law are the requirements that local authorities have to obtain sanction for loans and approval of houses for subsidy. All this business of allocations is only an advance warning so that they may know some time ahead how many houses they may expect to have approved for loan sanction and for subsidy in the future. It is for convenience.
    Mr. Mitchison: Is not the effect of the right hon. Gentleman's handling of these authorisations that the number of council houses is going down and the number of private houses is going up? In view of that, will not the right hon. Gentleman give these authorisations much more freely, or without any restriction at all, where they are reasonably required?
    Mr. Sandys: The fact is that during the first five months of this year local and public authorities have built 88,000 houses, which is more than were built in any comparable period under the Labour Government.
    Mr. Sparksasked the Minister of Housing and Local Government why the number of local authority and housing association houses under construction and in tenders approved is steadily falling.
    Mr. Sandys: This is due to a variety of factors.
    Mr. Sparks: Would the right hon. Gentleman give the House an assurance
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    that the number of new houses to be developed and completed by local authorities in the coming year will not fall below 300,000?
    Mr. Sandys: It never got to more than 200,000 under the Labour Government.
    Mr. Mitchison: Is the Chancellor one of the factors and, if so, what are the others?
    Mr. Sandys: Among them are the rate of approval of tenders, the rate of construction, number of allocations, the speed of completions and the weather.
    Mr. MacCollasked the Minister of Housing and Local Government if he will give an assurance that he will sanction all applications for increases in house-building made by local authorities affected by the Requisitioned Houses and Housing Amendment Act, 1955.
    Mr. Sandys: This is, of course, one of the factors which will be taken into account when considering applications.
    Mr. MacColl: When the Minister is considering these applications, will he make certain that no local authority is compelled to use for rehousing licensees new building which ought to be used for slum clearance and other purposes, and will he make sure that local authorities clearly understand his undertaking when the Bill was being considered that this would not happen?
    Mr. Sandys: The hon. Gentleman, who took an active part in the debates on the Requisitioned Houses and Housing Amendment Bill, must know as well as I do that the Act provides a number of methods. It does not rely primarily upon new construction for winding up requisitioning. It provides various other methods, including the leasing or purchase of requisitioned houses, which are likely to play a much bigger part than the provision of new construction for this purpose.

    Slum Clearance
    Sir I. Fraserasked the Minister of Housing and Local Government whether he will make a statement on the progress of slum clearance.
    Mr. Sandys: I will make a statement to the House after the Recess, by which

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    time I hope to have received the slum clearance programmes of local authorities.
    Sir I. Fraser: Will my right hon. Friend have in mind, in the public interest and in the interest of persons who want houses, that the total amount of building, including slum clearance, local authority building and private building, should not be increased, because, if it is, it will clearly raise prices and create a demand which cannot be met?
    Mr. Sandys: No Government has ever accepted the view that the number of houses which it was desirable to build is altogether unlimited. The Labour Government fixed a firm ceiling of 200,000. We find that under private enterprise conditions it is possible to manage about 50 per cent. more than under Socialism.
    Mr. Mitchison: Is it not a fact that the number of council houses is still falling steadily, and in view of the urgent need that these council houses represent, is the Minister not going to take any action about it?
    Mr. E. Fletcher: Would the Minister say whether it is intended to hold up progress on slum clearance as a result of the Chancellor's appeal yesterday to local authorities to cut back their capital expenditure as much as they can?
    Mr. Sandys: Not at all.
    Mr. Blenkinsopasked the Minister of Housing and Local Government what proposals he has received during the last 12 months from the Newcastle-upon-Tyne City Council for slum clearance under Parts II and III of the Housing Act, 1936.
    Mr. Sandys: I have not yet received from the city council its complete proposals for slum clearance. It has, however, submitted a compulsory purchase order covering 226 dwellings in five clearance areas, and this is now being considered.
    Mr. Blenkinsop: What is the right hon. Gentleman's date-line for submission of the major slum clearance proposals, and has it been affected by the statement of the Chancellor of the Exchequer yesterday?
    Mr. Sandys: The answer to the first part of that supplementary question is, "31st August," and to the second part, "No."
    Mr. P. Robertsasked the Minister of Housing and Local Government whether he will instruct those councils which do not submit their slum clearance proposals under the Housing Repairs and Rents Act, 1954, by 31st August, 1955, being the appointed date, that they must complete these returns by, at the latest, 31st September, 1955, in order to ensure that there is no delay in dealing with this problem.
    Mr. Sandys: No, Sir. I hope this will not be necessary.
    Mr. Roberts: May I ask my right hon. Friend two questions? First, will he bear in mind that some councils—I am referring particularly to the Sheffield Council —may not have their schemes ready by August, and as they have taken over a year to consider these, will he see that there is no delay in this matter? Secondly, is the Minister aware that the statement he has made today will give a great deal of satisfaction in the country, namely, that the slum clearance programme of Her Majesty's Government will not in any way be affected by the statement made by the Chancellor yesterday?
    Mr. Sandys: I am as anxious as my hon. Friend to give this information about the slum clearance proposals of all local authorities, but I do not think it would hurry them up to fix a later date, thus making them feel that they need not submit their schemes by the end of August. I am proposing to send out a reminder to all local authorities who have not yet submitted their proposals.
    Mr. Mitchisonasked the Minister of Housing and Local Government whether he will publish as an appendix to the housing returns or otherwise as soon as possible after the 30th August, 1955, the estimated number of unfit houses stated by each housing authority in their proposals under Section 1 of the Housing Repairs and Rents Act, 1954.
    Mr. Sandys: Yes, Sir.
    Mr. Mitchisonasked the Minister of Housing and Local Government how he intends to publicise, nationally and

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    locally, the proposals of housing authorities under Section 1 of the Housing Repairs and Rents Act, 1954.
    Mr. Sandys: A copy of the approved proposals will be deposited for inspection at the council's offices.
    Mr. Mitchison: Will they be deposited soon after they have been received?
    Mr. Sandys: As soon as they have been approved.

    Repairs and Rents Act
    Mr. E. Fletcherasked the Minister of Housing and Local Government to what extent the Housing Repairs and Rents Act has resulted in repairs being done to houses that would otherwise have fallen into disrepair.
    The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. W. F. Deedes): It is impossible to measure this statistically; but there is growing evidence that more work of repair and improvement is being carried out as a result of the 1954 Act.
    Mr. Fletcher: Is the Minister aware that this Act has very largely failed in its purpose of being a real attempt to deal with these derelict houses, and is it not time that the Government gave more power to local authorities to deal with them?
    Mr. Deedes: I do not accept that for a moment. It might well be said that progress could be quicker, but the results are not at all unsatisfactory.

    Rothwell
    Mr. Mitchisonasked the Minister of Housing and Local Government whether he is aware that, for the reasons which have been given to him by letter, there is an urgent need for the authorisation of further council house building in Roth-well, Northamptonshire; and whether he will now authorise additional houses there.
    Mr. Sandys: I am satisfied that some increase in this council's housing allocation is justified, and I have asked my regional officer to discuss the matter with them.

    Newcastle-under-Lyme
    Mr. Swinglerasked the Minister of Housing and Local Government if he will now reconsider the housing allocations
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    to the borough and rural district of Newcastle-under-Lyme, with a view to increasing them.
    Mr. Sandys: I will be pleased to look again at the programmes of these two authorities, but I cannot in advance undertake to increase them.

    Whiston
    Mr. H. Wilsonasked the Minister of Housing and Local Government how many additional houses he proposes to authorise the Whiston Rural District Council to build in the years 1956 to 1960 to enable them to meet his requirement of rehousing the residents of the M.A.P. estate at Knowsley.
    Mr. Sandys: I cannot at present say how many houses the Whiston Rural District Council will require over the next five years. But the need to rehouse families now living in temporary hutments will, of course, be taken into account.
    Mr. Wilson: Is the right hon. Gentleman not aware that already houses on this estate are being left vacant, as part of this crazy plan for rehousing this particular estate, on the assumption that the right hon. Gentleman is going to allow enough houses to be built for rehousing purposes in addition to the normal needs of the Whiston Rural District Council? Is he further aware that in Whiston all normal council house building has already come to a full stop, and yet it has its own programme and its rehousing programme to do as well?
    Mr. Sandys: The right hon. Gentleman asked quite a number of questions. It is, I think, desirable that these hutted camps should be brought to an end, and that does involve a certain additional strain. But one of the factors which will affect the progress of this scheme is the rate at which the council is able to advance in making provision for a substantial new sewerage system which will be required.
    Mr. Wilson: But is the right hon. Gentleman aware that this is not a hutted camp, that the dwellings are brick-built, and, in the second place, that the local authority has stopped its building? Since he does not know the answers to my question, will he either go or send an emissary

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    to this area to discover the facts at first hand and then see that something is done about it?
    Mr. Sandys: I will look into it.

    Applicants
    Lieut.-Colonel Liptonasked the Minister of Housing and Local Government whether he will publish in the quarterly housing summaries the number of applicants on the housing lists of local authorities.
    Mr. Sandys: No, Sir.
    Lieut.-Colonel Lipton: Is the Minister too ashamed or too afraid to publish these figures, which have been increasing steadily since 1951, and is he not aware that, as a result of his wretched policy during the last year or two, we shall have more and more people waiting for less and less houses?
    Mr. Sandys: The information derived from these lists gives an erroneous picture of the effective total demand, and also of its distribution between the various local authorities.
    Mr. Mitchison: What steps is the right hon. Gentleman taking to get, and to present to the House, a correct picture?
    Mr. Sandys: The reply I gave to the hon. and gallant Member was an exact quotation from one given by the right hon. Gentleman the Member for Ebbw Vale (Mr. Bevan), and I have not been able to improve on it.
    Lieut.-Colonel Lipton: Owing to the unsatisfactory nature of that reply, I beg to give notice that I shall raise the matter on the Adjournment.
    Mr. Sorensenasked the Minister of Housing and Local Government to what extent he has a statistical and other assessment of the present extent of the approximate number of persons and families living in overcrowded and also in slum conditions, who are living in rest-houses and who are on local authority housing lists but who cannot expect to be rehoused within their local authority area because building sites are not now available; and if he will request local authorities to assist in the compiling and provision of such information.
    Mr. Sandys: It is desirable that local authorities should maintain a full record
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    of housing applications made to them. But it would be difficult to compile statistics nationally on a comparable basis.
    Mr. Sorensen: Can the right hon. Gentleman say why it is impossible to collect from local authorities statistics which they have, or should have, so that we might have some conception of the national burden still remaining, particularly in regard to the unfortunate people who are in rest-houses and similar places and never know when they are going to be rehoused?
    Mr. Sandys: The Question covered all people who are on housing lists in general. As I explained earlier, the basis on which local authorities compile housing lists and the conditions which they lay down vary so enormously from district to district that to mass all the figures together into a single national global total would be most misleading.
    Mr. Sorensen: Most unsatisfactory.

    Cardiff
    Mr. G. Thomasasked the Minister of Housing and Local Government why there has been a substantial reduction in the number of council houses completed in Cardiff during the past two months.
    Mr. Sandys: The recent decline in the number of completions is, I understand, no more than a temporary fluctuation.
    Mr. Thomas: Is the Minister aware that statements have been issued that we are now getting houses at exactly 50 per cent. of the rate at which we were getting them, and that it looks as though there has been a serious fall in the number of houses made available at Cardiff? What is he going to do about it?
    Lieut.-Colonel Lipton: Nothing at all.
    Mr. Sandys: If the hon. Gentleman is suggesting that this is due to the restriction of allocations, he is quite incorrect. Only a small proportion of the houses allocated to the council this year has as yet been put out to tender.

    Leeds
    Miss Baconasked the Minister of Housing and Local Government how many houses the Leeds City Council applied to build in their 1955 programme; how many he is allowing them

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    to build; and if, in view of the large number of persons on the Leeds City housing list and the great number of houses that require demolition, he will enlarge his allocation.
    Mr. Sandys: It is not customary to publish figures of housing allocations. In this case, the council has only recently received a substantial additional allocation.
    Miss Bacon: Is the right hon. Gentleman aware that the council originally asked for 3,000 houses in this year's scheme, that his Ministry cut that figure to 2,000, and that only after months of protracted negotiation has the figure been raised to 2,500? Is he further aware that on the waiting list for council houses in Leeds there are no fewer than 26,500 families, and that in addition to these there are 22,500 houses earmarked for demolition? In view of this, why was not Leeds allowed to build its original allocation?
    Mr. Sandys: I have no doubt that those figures will be read with interest in the Leeds newspapers. What is more relevant is that the allocations already given to Leeds should be sufficient to provide the council with as large a programme as it is able to cope with at present. I would add that the council has an abnormally large number of houses approved but not started.

    New Town Tenants (Middlesex Families)
    Mrs. Butlerasked the Minister of Housing and Local Government how many of the 4,000 families from Middlesex who have been housed in new towns around London since 6th May, 1953, were selected under the industrial selection scheme as contained in his Department's circular No. 29/53 and his further circular letter dated 10th September, 1953.
    Mr. Sandys: About 400.
    Mrs. Butler: Is the Minister aware that a very high proportion of the families going to new towns outside this industrial selection scheme do not appear to be on the housing waiting list of any local authority, and as this scheme was introduced to enable families on the waiting lists of local authorities to work and live in the new towns, and the
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    numbers just given are very small compared with the total number, is the Minister satisfied that this scheme is working so as to benefit the families in the greatest housing need?
    Mr. Sandys: I am satisfied that it is making a worth-while contribution. In this connection it should be remembered that every family which moves out of London to a new town or elsewhere releases a house or removes a family from a housing list.

    Ex-Service Men, Wales
    Mr. Gowerasked the Minister of Housing and Local Government the nature of the response from Welsh local authorities to his circular on the special needs of serving members of Her Majesty' Forces for inclusion in housing lists; and if he will make a statement.
    Mr. Sandys: The circular was sent to 168 authorities in Wales. One hundred and seventeen have so far replied. Of these, 73 assured me that they were already applying the principles of the circular. Twenty-six stated that, whilst they had not done so hitherto, they would in future bring their practice into conformity with my recommendations. Two authorities are reconsidering their practice, and 11 gave replies which are partially satisfactory. The number of negative replies was five.
    Mr. Gower: Does my right hon. Friend think it might be beneficial if he indicated to authorities who are reluctant to do anything for fear of penalising the people on their housing lists that any help which they gave to Service men would be reflected in sympathetic treatment of their applications?
    Mr. Sandys: I do not see why special treatment should be given to the sinner that repenteth.

    Subsidies and Loans
    Mr. Blackburnasked the Minister of Housing and Local Government if he will state for each year, from 1950 onwards, the amounts paid to local authorities in housing subsidies and the amounts paid to the Government by local authorities in interest on housing loans.
    Mr. Deedes: On the first part of the Question I would refer the hon. Member to the Annual Appropriation Accounts,

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    Class V.2. With regard to the second part of the Question, he will find the information in the Annual Reports of the Public Works Loan Board.
    Mr. Blackburn: Would it have been a great difficulty for the Minister to tabulate the figures so that it would be possible to compare them? Does not the amount being paid by local authorities in interest far exceed the amount they are receiving in housing subsidies, and will not the amount be increased owing to the new rate of interest for loans from the Public Works Loan Board? If it is necessary to restrict local government expenditure, does he not agree that it could be done in other ways than by increasing the rate of interest, which imposes a further burden on the rates?
    Mr. Deedes: To supply the hon. Gentleman with the answers which he wanted would have entailed a rather voluminous reply. There are two sources, and perhaps he will consult them to ascertain whether he is satisfied with what they provide.

    Removal Expenses
    Mr. Sorensenasked the Minister of Housing and Local Government what powers he has conferred on local authorities financially to assist tenants of council houses or prefabricated bungalows when tenants are required by a local authority to move to other dwellings.
    Mr. Sandys: Under the Housing Act, 1936, local authorities have power to assist such tenants by paying for removal expenses or by allowing rent rebates.
    Mr. Sorensen: Is the Minister aware that in many cases this is not done? Has he taken any steps to recommend that, where obvious hardship is imposed on tenants who have no desire, or are compelled, to leave their present houses for other accommodation, local authorities should make a reasonable contribution towards their expenses?
    Mr. Sandys: I should have thought that the powers were very well known to local authorities, because they have existed since 1936, but I will examine the matter again and see whether any reminder is needed.

    Sites, Manchester
    Mr. W. Griffithsasked the Minister of Housing and Local Government whether he is aware of the growing concern in Manchester about the scarcity of suitable sites for the corporation's house-building programme; and whether he will reconsider those sites previously rejected by his Department.
    Mr. Sandys: I have arranged to visit Manchester in September to discuss this and other problems with the city corporation.
    Mr. Griffiths: Is the Minister aware that his reply will give great satisfaction in Manchester? Can he give an assurance that he is not without an open mind so far as reconsidering, for example, the site of Lymm?
    Mr. Sandys: I go there with a receptive mind on all questions.

  LOCAL GOVERNMENT

    Stevenage By-pass
    Mr. Maddanasked the Minister of Housing and Local Government what action he is taking as a result of representations from the Stevenage Development Corporation to co-ordinate the building of the new town houses and factories with the construction of the Stevenage by-pass which is an integral part of the new town plan.
    Mr. Sandys: My right hon. Friend the Minister of Transport and Civil Aviation is being kept fully informed of the programme of development at Stevenage and of the importance attached by residents and local authorities to the construction of the by-pass as soon as practicable.
    Mr. Maddan: Does the Minister agree that he has a very special responsibility in this matter since, by building a new town without the by-pass which was on the original plan, he has, in fact, created a danger black spot on the Great North Road?
    Mr. Sandys: I have a very special responsibility for quite a lot of things. I have fully accepted the necessity for this by-pass, but, like most of the road construction problems, it is largely a matter of priorities. As far as the black spot is concerned, my hon. Friend knows that

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    various road safety measures have already been taken or are being taken. These include the construction of a subway for cyclists and pedestrians under the Great North Road, and also the installation of traffic lights and controls.

    Education Committee Meetings (Press Admission)
    Dr. D. Johnsonasked the Minister of Housing and Local Government whether, in view of the importance of the plans for educational developments at the present juncture, he will introduce legislation to the effect that meetings of all education committees of local councils should be statutorily open to the Press and public whether they are, in fact, education authorities within the meaning of the Act or not.
    Mr. Deedes: No, Sir. My right hon. Friend is not satisfied, on the information before him, that there is a sufficient case for altering the law in this field.
    Dr. Johnson: Is my right hon. Friend aware that the education committee of the Carlisle City Council has recently decided to exclude the Press, thus breaking a precedent that has existed since the inception of that committee and adding to the number which conduct their affairs in secret at this important time?
    Mr. Deedes: If my hon. Friend will send me the details, I will look into the matter but, broadly speaking, the local authorities are not behaving unreasonably over this. It is a very controversial question.

    Private Street Works (Loans)
    Mr. Swinglerasked the Minister of Housing and Local Government how many local authorities have applied for loan sanction in connection with private street works in the last 12 months; what was the total sum involved; and in how many cases sanction was refused.
    Mr. Deedes: A total of 299 loans for private street works was sanctioned in the 12 months ended 30th June, 1955, involving a total sum of £1,579,325. No application was refused in that period.

    Synthetic Detergents
    Mr. Doddsasked the Minister of Housing and Local Government, in view of the recommendation by the Committee on Synthetic Detergents of the need
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    for manufacturers to stress on containers the advisability of thoroughly rinsing the hands in fresh water after using water with the washing products in order to reduce the possibility of skin irritation and dermatitis to persons who are particularly sensitive, what steps he has taken to see that this precaution is carried out by manufacturers.
    Mr. Deedes: The Interim Report containing this opinion was put on sale and well publicised. I have no doubt that the manufacturers of washing products have noted the Committee's views.
    Mr. Dodds: Does the Minister not appreciate the particular danger to married men who, by compulsion or of their own free will, do the washing up, as an investigation has shown most are prone to the using of too liberal quantities of de-fatting detergents, with harmful effects? Cannot he therefore take some action to persuade manufacturers to put the warning on the packets?
    Mr. Deedes: The Interim Report which has been published by the Committee was not unreassuring on this point. It did not specify married men, but if the hon. Gentleman awaits the final report later this year, he may find out what he wants to know.

    Rating and Valuation
    Mr. Proctorasked the Minister of Housing and Local Government if he will recommend the appointment of a Royal Commission on Rating and Valuation, the terms of reference to include the submission of an early interim report on the derating of industry.
    Mr. Sandys: No, Sir.
    Mr. Proctor: Does the Minister realise that there is general support for the abolition of derating in the country and that hon. Members on his own side of the House have recently expressed themselves in favour of it? Also, has he taken into account the change of opinion on this matter, and will he do something about it?
    Mr. Sandys: The appointment of a Royal Commission is not always the best way of expediting the consideration of a proposal.
    Mr. Mitchison: Is the right hon. Gentleman for or against the continued derating of industry?
    Mr. Sandys: That is quite a different point.
    Mr. Proctorasked the Minister of Housing and Local Government what action he proposes to take and when to implement his undertaking of 6th December, 1954, regarding the revaluation of business premises and other properties.
    Mr. Sandys: I would refer the hon. Member to the recent statements I made in the debates on the Rating and Valuation (Miscellaneous Provisions) Bill, of which I am sending him copies.
    Mr. Proctor: Does the right hon. Gentleman realise that the statements which he made were far from explicit and that in them he has not answered or anticipated the question I am now putting to him? Does he realise that he promised to consider, and if necessary take, action as soon as the forthcoming valuation could be fully measured? Does he think he will be able fully to measure it before rates are collected on the basis of the new valuation?
    Mr. Sandys: Not before the new valuation comes into effect. I have made the position clear. I think the hon. Gentleman had better re-read the statements which I shall send him.
    Mr. Sparksasked the Minister of Housing and Local Government if the loss to local authorities from the derating of industrial hereditaments forms an element in the computation of the Exchequer equalisation grant.
    Mr. Deedes: Yes, in the sense that a county or county borough which, because of derating or for any other reason, has a rateable value per head below the national average has its financial resources brought up to the average.
    Mr. Sparks: Is not the answer really "No"? Is not the hon. Gentleman confusing the issue completely, because local authorities whose rate average is above the national average get no Exchequer equalisation grant and, therefore, cannot receive any compensation for losses on derating?
    Mr. Deedes: The hon. Gentleman knows quite well how the Exchequer equalisation grants work. If he studies the system, he will agree that the answer should be "Yes."

    Departmental Envelopes (Economy Labels)
    Mr. Knox Cunninghamasked the Minister of Housing and Local Government to what extent it is the practice of his Department when envelopes are in use for the first time to send them out with economy labels containing the recipient's name and address affixed thereto; and whether in the interests of economy he will take steps to stop such a practice.
    Mr. Deedes: Economy labels are not put on envelopes sent out for the first time except to utilise otherwise unusable stocks.

    Water Supplies, Dursley
    Mr. Kershawasked the Minister of Housing and Local Government whether he is aware of the unsatisfactory water supply in the Ashmead Green area of Dursley rural district; and whether he will make a statement.
    Mr. Deedes: A water scheme, including a new main to Ashmead Green, has been submitted by Dursley Rural District Council and will be investigated locally when my right hon. Friend has certain information which the council has promised to send him soon.

    Cribbs Causeway Development (Planning Appeal)
    Captain Corfieldasked the Minister of Housing and Local Government by what date he anticipates that it will be possible to come to a decision in regard to the planning appeal concerning the proposed Cribbs Causeway development.
    Mr. Sandys: A letter was sent to the parties yesterday conveying my decision on this appeal. I am sending a copy to my hon. and gallant Friend.

    Interest Rates
    Mr. A. Robertsasked the Minister of Housing and Local Government what reply he has sent to local authorities in answer to their protestations against his decision to increase the rates of interest to local authorities.
    Mr. Sandys: I would refer the hon. Member to the answer given by the Chancellor of the Exchequer on 19th July.
    Mr. Roberts: In view of the statement made by the Chancellor yesterday, does the Minister intend to increase or decrease the interest rates in the near future?
    Mr. Sandys: That does not rest with me.

    Town and Country Planning Act (Part VI Claims)
    Mr. R. Bellasked the Minister of Housing and Local Government what further progress has been made since 24th June, 1955, in the payment of claims under Part VI of the Town and Country Planning Act, 1947, arising in respect of private sales of land.
    Mr. Deedes: I am informed by the Central Land Board that, in the period from 24th June to 21st July, it had made a further 957 payments amounting to £1,003,834 in respect of private sales.
    Mr. Bell: How many are outstanding?
    Mr. Deedes: I cannot say without notice, but I will let my hon. Friend know in due course.

    Outfall Sewers, London (Rating)
    Mr. Hastingsasked the Minister of Housing and Local Government what steps he is taking to implement his undertaking regarding the rating of the northern and southern outfall sewers in the Greater London area.
    Mr. Sandys: It was unfortunately found that the inclusion in the Bill of the proposed amendments to implement the undertaking would turn it into a hybrid Bill, and this would involve a lengthy procedure for which time is not available. It is, however, still the Government's view that the overground parts of these sewers should continue to be rated, and I am considering how best that result might be served.
    Mr. Hastings: While I thank the Minister for what he has said, would it not be possible to implement the agreement without making the Bill a hybrid one, by not mentioning London at all but simply stating the size of the sewer?
    Mr. Sandys: The hon. Member will know that the difficulty was initiated by one of his party colleagues. We have taken the best possible advice, but we are not satisfied that, without stretching the constitution, it would be possible to deal with the matter other than by means of a hybrid Bill.
    Mr. Mitchison: Is the right hon. Gentleman aware that one of his colleagues in another place declined to move Amendments which had been tabled to give effect to the undertaking? As it was a perfectly clear and specific undertaking and now requires legislation to implement it, will he undertake to introduce the necessary regulation as soon after the Recess as possible?
    Mr. Sandys: It is no good criticising the Government for not moving an Amendment in another place. In fact, I do not think it is proper for us to discuss that subject here. However, as I have already indicated, the difficulty was initiated by a member of the hon. and learned Gentleman's party.
    Mr. Mitchison: On a point of order, Mr. Speaker. Am I not entitled to refer to Government statements in another place?
    Mr. Speaker: That is right, but the matter cannot be debated at great length.
    Mr. Mitchison: May I have an answer from the right hon. Gentleman to my last question?
    Mr. Sandys: I was on the point of answering the second part of the hon. and learned Gentleman's question when he interrupted me. I have stated clearly that we still adhere to the view that the undertaking we gave was a correct one, and that it is proper, right and fair that the overground parts of the sewers should be rated. A Parliamentary difficulty has arisen, and I am examining the matter to determine how best we can ensure that the undertaking is in one form or another honoured.

    Reorganisation
    Mr. Sorensenasked the Minister of Housing and Local Government what further action he intends to take to secure joint consideration by adjacent local authorities in the Greater London area

    981
    and elsewhere in respect of any proposals for the revision of local government.
    Mr. Sandys: Full opportunity will be given for all concerned to consider such proposals before the introduction of any legislation.
    Mr. Sorensen: Can the Minister give any idea of when that is likely to happen? Increasing difficulties about the future are arising for local authorities, and if he could give some idea of when that is likely to happen, it would certainly help local authorities a great deal.
    Mr. Sandys: They will have plenty of warning.
    Mr. Sorensen: That is not very helpful.

  NATIONAL SERVICE

    Agricultural Workers
    Sir I. Fraserasked the Minister of Labour whether he will make a statement on future policy for the deferment from National Service of farm workers.
    Mr. Collinsasked the Minister of Labour whether, in view of the difficulties occasioned to agriculture by the continued drift of farm workers from the land, he will continue the deferment of call-up of farm workers beyond the period of the harvest.
    The Parliamentary Secretary to the Ministry of Labour and National Service (Mr. Harold Watkinson): I would refer to the replies my right hon. and learned Friend gave to Questions by the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) on 14th July.
    Sir I. Fraser: Will the Government keep under continuous consideration the question whether agricultural workers could not do their National Service, in the public interest, in their own interest and in the interest of farming, in some manner which would keep them near to their farm work, especially having regard to the great change which is taking place in military and strategic considerations?
    Mr. Watkinson: My hon. Friend was kind enough to write to the Minister about this, and I know that he is very carefully bearing that point in mind.
    Mr. Collins: Is the Minister aware that there will be no opportunity for us again to press him on this subject until after the harvest? Could he not therefore be somewhat more positive in his answers to this very important question?
    Mr. Watkinson: I am sure the hon. Gentleman knows about the harvest suspension which has already been announced in the House. This matter was the subject of representations by the National Farmers' Union and is now under consideration.
    Mr. Vane: Will my hon. Friend not overlook the suggestion that, even if he cannot relieve the existing 6,500 farm workers who are called up of their full-time National Service, he will see if it is not possible to relieve them of their fortnight's training in the following three years? This affects their agricultural duties considerably and is out of all proportion to the military benefit.
    Mr. Watkinson: That is a different point, but I will bear it in mind.
    Lieut.-Colonel Lipton: Can the Parliamentary Secretary say what is holding up these negotiations to which the Minister referred in his answer to my Question of 14th July? Why are these negotiations with the National Farmers' Union taking so long? Is the National Farmers' Union opposed to the exemption of farm workers?
    Mr. Watkinson: There are a great many different views to take into account —for example, the views of the National Union of Agricultural Workers.

    Personal Case
    Mr. Doddsasked the Minister of Labour if he will make a statement following his investigations into the case of Malcolm Harris; what happened at his medical board; and why he was instructed to report to the Royal Air Force on 11th July last.
    Mr. Watkinson: Further inquiries into this case have led me to the conclusion that Mr. Harris must have been wearing his steel corset when he attended the medical board. My right hon. and learned Friend's previous reply was based on the statement adhered to by the medical examiners that he was not wearing it

    983
    when he appeared before them; no mention of it was made by Mr. Harris in recording his medical history nor did the consultant who saw him record it. Mr. Harris was instructed to report to the Royal Air Force on 11th July because he satisfied the minimum medical requirements and had been accepted for that Service. As my right hon. and learned Friend has already informed the hon. Member, such notice was cancelled and arrangements are being made for Mr. Harris's re-examination by another board as soon as possible and he will advise the hon. Member of the outcome of that examination.
    Mr. Dodds: But is it not a deplorable state of affairs that doctors at a medical examination ask a man to take off his corset with steel supports and that is not put on record at the medical examination? In view of the fact that it is not contested that the man was attending for treatment at hospital three times a week, is it not deplorable that a man in such a condition should be detailed for one of Her Majesty's Armed Services?
    Mr. Watkinson: I do not at all agree with the hon. Member. I think that there is here quite a genuine misunderstanding. [HON. MEMBERS: "Oh."] If I may, I will explain why. It is a perfectly logical and reasonable point. So far as I can find out, Mr. Harris was wearing his corset when he was seen by one of the members of the staff of my Ministry who merely recorded the initial details. He wore a white coat and may quite well have been mistaken for a doctor.
    Lieut.-Colonel Lipton: I suppose he examined the doctors.

  EMPLOYMENT

    Manpower
    Mr. Fernyhoughasked the Minister of Labour the estimated shortage of manpower in the major exporting industries.
    Mr. Watkinson: In the manufacturing industries which produce the bulk of exports from the United Kingdom there were, in the first half of June, approximately 190,000 vacancies outstanding at the employment exchanges and 87,000 registered unemployed. The latter may not be in the same occupations or areas
    984
    as the notified demands, and it is therefore not possible to make a firm estimate of the actual shortage of manpower.
    Mr. Fernyhough: In view of the statement the Chancellor made yesterday and the necessity for us to expand our export trade very drastically and quickly, does not the hon. Gentleman think that the time has now come when the Government should consider reducing the period of National Service and thus enable some of these strong, vigorous young men, many of whom are wasting their time, to render service to the nation in the best interests of the nation? They would be better for it.
    Mr. Watkinson: That has nothing at all to do with this Question.
    Mr. Fernyhoughasked the Minister of Labour the estimated overall shortage of manpower in British industry at the present time.
    Mr. Watkinson: Precise estimates of this kind cannot be made. In the first half of June there were approximately 443,000 outstanding vacancies and 211,000 registered unemployed. Some additional labour is also becoming available through the continuous increase in the working population.
    Mr. Fernyhough: Is there not something wrong with this country when we are bearing a period of conscription longer than that borne by any other Western nation, and bearing it at a time when our economic position is very unsound? Does the Parliamentary Secretary not therefore agree that the time has come when the Government should seriously consider reducing the period of National Service and once more enable the men to render a service which would be in the best interests of the nation?
    Mr. Watkinson: On the subject of the Question, more than 250,000 people joined the working population last year and I am very glad to say that in addition they all produced more.

    Fishing Industry
    Mr. Edward Evansasked the Minister of Labour how many persons are engaged as fishermen in the United Kingdom; and to what extent this number shows a diminution during the last five years.
    Mr. Watkinson: As the reply includes a table of figures, I will, if I may, circulate it in the OFFICIAL REPORT.
    Mr. Evans: Can the Parliamentary Secretary say in what category of the fishing industry there is a falling off in numbers? Is it in the far-distant waters, or middle waters?
    Mr. Watkinson: The only figures I had intended to send to the hon. Member were the total of those regularly employed and those occasionally employed. They have decreased slightly in the last three years, but not to any material extent.
    Following is the reply:

    GREAT BRITAIN

    ESTIMATED NUMBERS OF FISHERMEN EMPLOYED IN SEA FISHING

    —

    Regularly employed

    Occasionally employed

    1952

    …

    …

    28,063

    5,437

    1953

    …

    …

    27,414

    5,357

    1954

    …

    …

    26,244

    3,594

    Figures in precisely comparable form are not available for earlier years, but such figures as are available suggest that there was little change in the numbers between 1950 and 1952.
    Mr. Edward Evansasked the Minister of Labour whether he is aware of the anxiety of the fishing industry on the manning of fishing vessels; and what plans he has to stimulate recruiting of manpower for the industry.
    Mr. Watkinson: I am aware that there has been some difficulty this year at Lowestoft, in particular. Any steps that the industry may take to improve its arrangements for the recruitment and training of young persons would assist my officers in placing young men in this work.
    Mr. Evans: Can the Parliamentary Secretary publicise the fact that the fishing industry provides a very fine career for young men and that the rate of promotion, certainly in certain aspects of the fishing industry, is very rapid and remunerative?
    Mr. Watkinson: I entirely agree with what the hon. Gentleman has said, and I hope that his Question will do something to publicise the industry.

    Agricultural Workers
    Lieut.-Commander Maydonasked the Minister of Labour how many requests for agricultural labour were registered at employment exchanges in the county of Somerset at 1st July, 1955; and how many such requests were satisfied by the employment exchanges in Somerset during the preceding six months.
    Mr. Watkinson: On 29th June, when the last count was taken, there were 66 vacancies for agricultural workers registered at employment exchanges in Somerset. One hundred and twenty-seven agricultural vacancies were filled during the preceding six months.
    Lieut.-Commander Maydon: Can my hon. Friend tell me whether these figures are characteristic of the picture throughout all rural areas in the country? Can he say whether these figures give some impetus to reconsidering the rules and methods for granting deferment to agricultural workers?
    Mr. Watkinson: I think that what my hon. and gallant Friend would like to know is that we have recently held a meeting in this connection on the harvest prospects in his own county of Somerset. I am advised that it was agreed at that meeting, in which all sides of the industry took part, that there was no general shortage of agricultural workers in the county and that no difficulty was likely to be experienced in the harvest period.

    Coal Miners (Recruitment)
    Mr. Swinglerasked the Minister of Labour, in view of the coal shortage, what special steps are being taken by his Department to recruit more men for the mines.
    Mr. Watkinson: Local offices of the Ministry of Labour throughout the country give special and continuing attention to finding suitable men for employment in the coal mines and this is re-enforced at the present time by a special publicity campaign run jointly with the National Coal Board; in addition, all men who register for National Service are reminded that call-up is deferred in all cases where men are satisfactorily employed underground in coal mines.
    Mr. Swingler: Is the hon. Gentleman aware that his Department gives the

    987
    impression of complacency in this matter? In view of the nation's urgent need for coal, and the wide open opportunities to get more coal, especially in the coalfields in North Staffordshire, where there are hundreds of vacancies, surely his Department should carry out some sort of investigation to discover the reason it has failed to get the men to get the coal?
    Mr. Watkinson: We think it more important to get on with the job of trying to recruit more miners; we are more concerned with that.
    Captain Waterhouse: If the hon. Gentleman is not able to get British recruits, will he not reopen negotiations with the miners' union in order to get permission to import some foreign recruits, possibly Italian?
    Mr. Lindgren: Before taking that action, will the Minister carry out a propaganda recruiting campaign in the public schools of this country?
    Mr. Watkinson: We are carrying out the largest recruiting campaign that we have even undertaken.

  JUNIOR MINISTERS (SALARIES)
  Mr. Hurdasked the Prime Minister if he will now make a statement on the emoluments of junior Ministers.
  The Prime Minister (Sir Anthony Eden): I regret that it will not be possible to make a statement on this matter before the Recess.
  Mr. Hurd: Will my right hon. Friend keep in mind that junior Ministers have no trade union to argue their case for them and must rely on the Cabinet to see that they have fair treatment and are not asked to make undue sacrifice in the public service? This is a matter of some urgency.
  The Prime Minister: I have not forgotten the matter and I agree that it is a matter of some urgency, but there have been other matters of some urgency lately, too. I am sorry that it has not been possible to reach a conclusion before.
  Mr. Shinwell: Has the Prime Minister noticed that the cost of living has gone
  988
  up three points in the last week or two and is that not a consideration which appeals to him in this respect?

  NATIONAL SERVICE
  Mr. Allaunasked the Prime Minister whether, as a result of the decisions reached at the Geneva Conference and in order to assist the relaxation of world tension, he will bring forward proposals for reducing the period of National Service.
  The Prime Minister: I have no statement to make on this subject at present.
  Mr. Allaun: Does the Prime Minister appreciate that meanwhile the lives of hundreds of thousands of youngsters are being upset and disturbed by the knowledge that at 18 they will have to leave their homes, their jobs and their sweethearts to serve for two years? Would not the ideal way of transforming the fair promise of Geneva into positive achievement be by means of a cut in the call-up?
  The Prime Minister: I should have thought that the chief concern of the younger generation would be to hope that they would not have to take part in another world conflict. That is certainly the chief concern of the House, and it comes before anything else. What the hon. Gentleman asked me is whether I had any statement to make at the moment, and the answer is that I have not.
  Mr. Shinwell: Although there is considerable controversy in many quarters about this matter of the period of service, about which I make no comment at the moment, may I ask the right hon. Gentleman whether during the Recess he will take the opportunity to consult the N.A.T.O. Powers in order to ascertain whether collectively it would be possible to reduce the period of National Service, both here and elsewhere?
  The Prime Minister: I think that the right hon. Gentleman, who has wide experience, will know that there are other questions besides what the N.A.T.O. Powers are doing. They have to be considered. Other burdens which we bear, and which all N.A.T.O. Powers do not bear in this connection, have to be taken into account, and, I can assure the right

  989
  hon. Gentleman, are taken into account in our consideration of this matter.
  Mr. G. Thomasasked the Prime Minister whether, in view of the easing of tension in foreign affairs, he will now announce a target date for the complete abolition of military conscription.
  The Prime Minister: No, Sir.
  Mr. Thomas: Would the Prime Minister explain why the optimism of Sunday has disappeared and there is not even a target date for the reduction in the period of conscription? Will the Prime Minister bear in mind that, as long as the Army is committed in Europe, it is likely that we shall have conscription?
  The Prime Minister: I think that if the Army had not been committed in Europe we should not have got on as well as we have in international affairs.
  Mr. Strachey: While appreciating that, may I ask whether the Prime Minister would agree that there may now be a case, strictly on defence grounds and in order to maximise our deterrent to war, for re-examining the period of National Service and ultimately, perhaps, its extinction?
  The Prime Minister: The Question asked for a target date for the complete abolition of military conscription, and I am sorry that I cannot provide it.
  Dame Irene Ward: Is my right hon. Friend aware that National Service men prefer his policy to that of right hon. and hon. Gentlemen opposite?

  NUCLEAR WEAPON TESTS
  Mr. G. Thomasasked the Prime Minister with which foreign Power he has now reached agreement for the British hydrogen bomb to be exploded on their territory; and whether he will make a statement.
  The Prime Minister: I have no statement to make.
  Mr. Thomas: In view of the fact, as everyone knows, that no one would be foolish enough to want to test this bomb on our soil, can the Prime Minister hold out a hope that he will get a foreign Power to agree that this hydrogen bomb shall be tested within their domain?
  The Prime Minister: The hon. Gentleman's ingenious hypothesis will not draw any response from me on this topic.

  COMMON LAND LAW (ROYAL COMMISSION)
  Mr. Neaveasked the Prime Minister whether he will arrange for a review of the law relating to common land in view of the widespread desire for a review of this kind.
  The Prime Minister: Her Majesty's Government are aware that the present law relating to common land in England and Wales needs to be reviewed. I have recommended to The Queen and Her Majesty has been graciously pleased to approve that a Royal Commission should be appointed to undertake a comprehensive review of the present law. I will announce at a later date the names of the chairman and members, together with the terms of reference.
  Mr. Emrys Hughes: Can the Prime Minister say why there is not a similar reference to Scotland?
  The Prime Minister: I understand that in Scotland—for reasons which it would not be for me to comment on—there is no common land.
  Mr. Nicholson: Can my right hon. Friend say whether the use of common land will come under the purview of this Commission? Is he aware that in Surrey there is great uncertainty about the requirements of the Defence Departments and that the whole situation regarding common land is in a state of chaos?
  The Prime Minister: Yes, Sir. There was a debate on this topic a little while ago and a Resolution asking for some investigation was passed unanimously by the House. After looking into it, we thought that this was a matter which deserved a Royal Commission to investigate it,
  Mr. T. Williams: Will the topic of a time-limit for the Commission be discussed, or will it sit for years and years?
  The Prime Minister: I should not have thought that was in the category of topics. I hope not.
  Sir L. Ropner: Would the Prime Minister give an assurance that he will

  991
  carefully consider the appointment to the Royal Commission of a member of the Forestry Commission?
  The Prime Minister: Yes, Sir, I know that the Forestry Commission is intimately concerned in the matter.
  Mr. H. Morrison: Can the Prime Minister say whether the object of the Royal Commission is to consider what steps may be taken to preserve and protect common land, or will its purpose be to consider how far the common land can be enclosed?
  The Prime Minister: Oh, no. There are a whole series of problems about this, as the right hon. Gentleman knows. There are a number of organisations, including the Commons, Open Spaces and Footpaths Preservation Society, the National Farmers' Union from their angle, and others, who have asked for an inquiry. The purpose would be that the inquiry should tabulate the position as it is—it varies greatly—and make recommendations on the subject. There will certainly be no kind of commitment by the Government or this House until we have the result of the work of the Royal Commission.
  Mr. Watkins: Is it the intention to appoint someone from Wales to the Royal Commission?
  The Prime Minister: I will bear that in mind.

BILLS PRESENTED
  VALIDATION OF ELECTIONS (No. 2)
  Bill to validate the election to the House of Commons of Christopher John Holland-Martin, Esquire, notwithstanding his holding the office of local Director of the Bank of New Zealand, and to indemnify him from any penal consequences which he may have incurred by sitting and voting as a member of that House, presented by The Prime Minister; supported by Mr. Crookshank, The Attorney-General, and Mr. Henry Brooke; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 39.]
  CLEAN AIR
  Bill to make provision for abating the pollution of the air, presented by Mr. Sandys; supported by Mr. James Stuart, Mr. Geoffrey Lloyd, and Mr. Deedes; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 40.]
BUSINESS OF THE HOUSE
Proceedings on Government Business exempted, at this day's Sitting, from the provisions of Standing Order No. 1 (Sittings of the House).—[The Prime Minister.]

ECONOMIC SITUATION
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Buchan-Hepburn.]
3.30 p.m.
Mr. Hugh Gaitskell: I am very glad that the Government agreed that we should have a full economic debate this afternoon, and I am grateful to the Scottish Members, and particularly to those on this side of the House, because this was the equivalent of a Supply Day—that is, Opposition time—in which they were to launch their criticisms of the Government's record on Scottish education. I particularly appreciate their agreement to withdraw for the time being.
However, I must say that I do not consider that this difficulty should have arisen. It would not have arisen if the Chancellor had made his statement earlier. I do not know why he delayed it so long. The Press were expecting that he would take some further action, and, certainly, he was repeatedly questioned from this side of the House as to what measures he was going to take to deal with an obviously worsening economic situation. Had the right hon. Gentleman been ready to say even a week earlier what he said yesterday, I am sure that the business could have been rearranged so as to satisfy our Scottish colleagues.
There are three questions about this matter which we have to ask ourselves. First, is the economic situation so serious that action is necessary, and, if so, secondly, why has it become so serious, and, thirdly, are the measures which the Government are proposing to adopt the right ones to deal with the situation?
Mr. Ellis Smith: And other questions.
Mr. Gaitskell: I am sure that my hon. Friend will have other questions to put as well.
Those seem to me to be the three central questions to which we should address ourselves. We on this side of the House certainly do not deny the seriousness of the economic situation. Indeed, we have made repeated efforts to convince the Government that the situation was not as good as they appeared to
994
think it was. It was not we who played down the seriousness of the deficit in our balance of payments. It was not we who minimised the fall in the gold reserves. It was not we who preferred to turn a blind eye to the steady rise in the cost of living. It was not we who brushed aside the rise in Stock Exchange prices. On all these counts we have repeatedly explained to the Government why we think there is in this country a too inflationary situation, and why we think that that situation has arisen.
It is, on the other hand, for the Chancellor to explain his remarkable double change of front. In February last, the right hon. Gentleman came to the House and made a statement almost, if not quite, as serious as the one he made yesterday. But within six weeks—at the time of the Budget—he was speaking about "the liberation of the human spirit." He was boasting that "the situation had been brought under control," and, of course, when, during the Election period, I ventured to draw attention to what seemed to me to be coming financial difficulties, the right hon. Gentleman described me as being very alarmist.
I think that the right hon. Gentleman owes it to the House to explain exactly what has happened since the Budget to cause him to change his mind. Why is it that the situation which was apparently so favourable then has now become so bad? I do not think that there is very much doubt about the nature of the problem. Our balance of trade figures are bad, and our foreign exchange situation is weak. The figures for the balance of trade for the first half of this year have now been given and show a deficit as between exports and imports in the first half of the year alone of £455 million, which contrasts with a deficit of £340 million in the second half of 1954 and a deficit of £275 million in the first half of 1954. Therefore, we have an increase in our trade deficit for these six months alone of somewhere round £200 million greater than it was in the corresponding period last year.
We do not, of course, yet know what are the figures of the whole of the balance of payments. We do not get these until September, but I think it a fair deduction from the trade figures to say that in the first half of this year we must have been in balance of payments deficit. That

995
is serious because, of course, the first half of the year is a very much easier one than the second half during which we have to meet the interest on the Canadian and American loans. There are other reasons, too, why the second half is usually less favourable.
The Chancellor has been making much play with the fact that these figures for the first half of 1955 were affected by the dock strike. Of course, no one would deny that the trade figures are bound to have been so affected, but I really must ask the right hon. Gentleman not to try to give the impression that the dock strike is the cause of our difficulties. He really should not seek an alibi in this way because, whatever he may say about the export figures, I am sure he will not deny that the rise in the total value of imports in the first six months of the year was no less than 14 per cent. compared with the previous year; and I do not think that even he would claim that even if there had been no dock strike our exports could possibly have risen to anything like the same extent.
The figures as affected by the dock strike show an increase in exports of only 3½ per cent, for the first six months of the year. One must also observe that the rise in imports, of which I have spoken, is clearly no fortuitous or temporary affair. Among the increases especially noticeable has been the increase in raw materials for industry, particularly steel and other metal goods, as well as, of course, in coal and oil. This does not suggest, I think, that it is just a matter of stocking up temporarily so that we can allow imports to decline a little later.
During the course of the Election, I also ventured to say that I thought we were heading for a deficit for the year of at least £100 million. At that time I was again accused of being alarmist, of being full of woe and catastrophe. But I: would ask the Chancellor—because I think that we are entitled to know his views on this—whether he really contests that estimate. Does he really think that as things are we can escape a deficit of that order?
With regard to the gold and dollar position—to the situation of the sterling area—we have not, as yet, had anything like the same degree of information. That information, I know, cannot be available
996
until a little later. Perhaps we shall have more opportunity for discussing that problem in greater detail in the autumn, but, as far as the gold figures go, they are not reassuring. They declined from June, 1954, to March of this year by £125 million. There was a very slight rise in April, almost wholly due to defence aid. There was no change in May, and there was a further small fall in June. The Chancellor has warned us of a much larger fall in July.
I do not know whether the right hon. Gentleman can say how big he expects the decline to be, but, according to the Press, it will be rather serious. I imagine that it will be something of the order of the decline which took place in February. Not only that; in these last few months we have heard a good deal about the import of capital from the United States. There have been reports of United States business men buying shares in British industry. I would like to ask the Chancellor how far he thinks we have been sustained during this period by the import of capital, either on that account or because of the high interest rates resulting from his policy of last February in attracting funds from elsewhere, or, at any rate, preventing funds from going abroad. That is the gloomy and depressing picture which faces us as we go away for the Summer Recess.
I now turn to the second question. What is the cause of this situation? I have always said that we should not pass judgment upon a Government simply in the light of events. We must bear in mind what the causes of those events were, and how far the Government can fairly be said to have been responsible for those causes. So I ask the Chancellor: are we faced with this crisis—if "crisis" is the right word—because there has been an American slump? I should certainly admit that that would be beyond the control of the Government. The answer is "No." American industry is booming. One cannot say that an inflationary position exists there, but one can say that they are certainly on a prosperity wave of no small dimensions.
Is it, then, that the terms of trade have moved sharply against us as, unhappily, they did in 1951—as I remember only too well? One cannot say that the terms of trade have moved to any significant

997
extent against us, though there was a small movement earlier in the year. Taking into account the rise in export prices in the last quarter, I think I am right in saying that, as compared with the average of 1954, whereas import prices have risen by about 3 per cent., export prices have risen by 2 per cent. One therefore cannot make out any case that the difficulties with which we are now confronted have much to do with changing terms of trade.
Is it, then, that the rest of the sterling area has been over-importing; that there is an inflationary situation there? Again, I do not think that one can make much of a case out of that. One could have argued, earlier in the year, that in 1954 Australia was over-importing, but I have seen no evidence recently to suggest that anything has happened such as happened in 1949, for instance, when the combination of a minor American recession, plus over-buying in the rest of the sterling area, were largely responsible for the devaluation of the £.
Finally, is it that there has been a sudden increase in the burden of defence which we have to carry?—which, of course, creates difficulties for any Government. The answer, again, is "No." On the contrary, the defence programme is levelling off, and this year, for the first time for two or three years, we do not have to contemplate taking any additional burden upon ourselves by reason of defence.
The plain fact of the matter is that the real causes of the present situation are three in number. First, it is the result of a doctrinaire application of what is called Conservative freedom in a situation of brim-full employment; secondly, It is the result of a policy of blatant electioneering by the present Government and, thirdly, it is due to bad and incompetent administration.
Let me elaborate those three charges. I do not think that it can be denied that one reason for the increase in the volume of imports, which has been quite substantial, was the relaxation of restrictions upon dollar imports made by the Government in 1954. As the Chancellor knows, there has been a substantial increase here, and I think that in removing those restrictions the Chancellor went a great deal too fast. Again, I do not think it can be denied that the situation with
998
which we are now confronted in the building industry is the result of applying a free-for-all policy, which resulted in council house building going to the bottom of the queue and local councils being unable to obtain enough labour to complete their own programmes—and, incidentally, being cut down by the Ministry of Housing and Local Government—which has subsequently resulted in the need to restrain building activity even further. I shall return to this subject a little later.
I do not think that anybody can deny that we now have what we have been calling for years a wage-price spiral, that is to say, a situation where wages are chasing prices, and prices chasing wages. I venture to say that that is the result of a complete failure, or the absence of any attempt on the part of the Government, to deal with the problem. Not only that; they have encouraged this wage-price spiral by their flagrant refusal to do anything about limiting dividends. Combined with the beneficient gifts which the Chancellor has handed back to the companies, that has resulted in an amazing Stock Exchange boom which has affected the whole economy; has led to a considerable increase in luxury expenditure, and will inevitably lead, directly and indirectly, to demands for higher wages and higher salaries—to claims for better chances for themselves by various sections of the community.
As my fourth illustration of how Conservative freedom works I would point to the extraordinary situation into which we have got upon the convertibility of the £ sterling. I shall refer to that in greater detail later, but it is unquestionably one of the causes of the situation with which we are now confronted.
As to the charge of blatant electioneering, I hardly think it is necessary to give very many of the facts here; we are all so familiar with them. In his Budget statement the Chancellor made a lot of estimates of what he thought the situation would be. When I say "estimates" I do not mean that he gave any figures—he is not in the habit of giving us figures in these matters—but he said that he thought investment would increase by at least as much as last year. He even said that consumption would not rise so rapidly, and he referred to the scope for increased production being as least as

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great as it was in the past. If his estimates were right I am bound to ask why it is necessary to change the policy so soon after the Budget. Does he really believe that if the statement which he made yesterday had been made in the course of the Election campaign it would not have very seriously affected the result of the Election?
The plain man will draw one conclusion from all this. In February the Chancellor was worried about the economic situation and adopted certain measures which we have discussed upon earlier occasions, but at the time of the Budget, shortly after the decision to have an Election was announced, the Chancellor had changed his mind and had decided that, after all, it was possible to give away about £150 million a year—most of it to companies and wealthy individuals, though some crumbs were given to other people. People will deduce that he did this solely to give an impression of abounding prosperity. This, of course, enabled him and his friends to boast about over-full employment, though they did not call it that. They were able to boast that everybody was having a wonderful time, and nothing was then said about what was to come afterwards: about the dangerous situation of our balance of payments, or about the rise in the price of coal, which was to be announced a little later on—the decision on which was deliberately held back. These are serious charges, and I must tell the Chancellor that we take an extremely poor view of an Administration which deliberately deceives the electorate in the way that he has done.
I turn to the third charge, of incompetence—and by this I mean that even the Government's own policies have been carried out thoroughly badly by the right hon. Gentleman and his friends. I give as an illustration, first, the extraordinary muddle into which we have got upon convertibility, and the rumours which had finally to be scotched yesterday. It is well known that these rumours have existed for some time, rumours that there was going to be a floating rate for the £, with the result that a lot of people apparently started to sell sterling, and created additional difficulties.
Why did the rumours start? Apparently they started because the Chancellor said
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something at a meeting of the O.E.E.C. in Paris. He appears to have said, according to his own account of the matter, that he was opposed to fixed rates of exchange in the event of convertibility.
The Chancellor of the Exchequer (Mr. R. A. Butler): I have no knowledge of such a statement, so I shall be obliged if the right hon. Gentleman will quote the exact words.
Mr. Gaitskell: The Chancellor made some reference to this, I must remind him, in reply to a supplementary question by my right hon. Friend the Member for Battersea, North (Mr. Jay), I think a week ago, and he did throw some further light upon it. He can easily satisfy us all if he tells us exactly what happened in Paris.
Mr. Butler: The right hon. Gentleman was in process of saying that I made a statement in Paris. I am not conscious of having made any such statement. As we are all desirous of obtaining the truth, and as I am President of the European nations, I think I have every right to ask the right hon. Gentleman to quote verbatim the statement I made, if he says I made it.
Mr. Gaitskell: The right hon. Gentleman has promoted himself a little fast. He is not yet President of the European nations. He is only Chairman of the O.E.E.C.
Mr. Butler: I am perfectly modest. I do not wish to be proud. I must apologise if I described myself wrongly. The right hon. Gentleman knows that we were talking in terms of the O.E.E.C.; but I have a responsibility to the other European nations as well as to Britain. Therefore, if I have made the statement it is very important that it should be brought out.
Mr. Gaitskell: The Chancellor must be aware that in the "Economist," the "Financial Times" and other papers it is said that at a meeting of the O.E.E.C. he did, in fact, indicate—[Interruption.] I am not criticising him for the substance of what he said. The substance of what he said, apparently, is that we did not want to have fixed rates of exchange. What I am saying is, in face of these rumours, of which he is perfectly well aware—[An HON. MEMBER: "There were no rumours."] If somebody says

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that there were no rumours I must ask him to turn to the Chancellor's own statement about this. [HON. MEMBERS: "Read it."] Very well, I will read the statement. The statement which the right hon. Gentleman made yesterday said:
"Our foreign exchange position is also being currently affected by many rumours, here and abroad, about our intentions. This has led to sales of sterling, which will adversely affect our reserves in July. My general policy has been to allow rumours to be answered by events as they unfold. But these rumours have reached such unreasonable proportions that I cannot allow them to remain unanswered."
Then he went on—quite rightly in my view—
"I want, therefore, to make it clear that Her Majesty's Government regard the period in front of us as being one of hard work and consolidation to strengthen the home front before we make any further forward move on the exchange front."—[OFFICIAL REPORT, 25th July, 1955; Vol. 544, c. 826.]
What I am complaining about is that the Chancellor, although pressed from this side only a week before, declined to refute these very rumours which, I repeat, according to the Press, were started as the result of something that he said in Paris. The Chancellor—
Mr. Butler: It is one matter to say that there are rumours, which I acknowledge there were and which we all regret, whichever side of the House we are on. We all wish to defend sterling. It is quite another thing to lay a charge at my door and say that those rumours are due to me because of a statement I made in Paris.
Hon. Members: Withdraw.
Mr. Gaitskell: If the Chancellor says that he made no statement, then, of course, it is very satisfactory. I only wish that he had said this earlier.
I want also to draw the attention of the House to something else. We cannot, after all, avoid reading these things. There was an article recently—[HON. MEMBERS: "Read it."] If hon. Members want it, we can quote it later in the debate. I have not bothered to bring it along. [HON. MEMBERS: "Oh."] No. I am not prepared to quote it now, because I did not want to waste too much time. I will ask my right hon. Friend who will wind up the debate to quote it. [Laughter.] I should have thought that the Chancellor would be
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interested in a leading article in the "Financial Times" which is, after all, a serious paper on these matters. He has probably read it himself.
The article speaks of the two voices on convertibility, of the Treasury on the one side and of "the authorities" on the other, by which I think is meant the Bank of England. The two voices are that the Treasury speaks of convertibility as something remote which we are not going to reach for a very long time and about which we must be very cautious, while, at the same time, the authorities speak of convertibility as something that is just round the corner and which we have very nearly approached already. I could easily, of course, have read out the leader, but I do not think it is worth while doing that.
I ask the Chancellor to make a reply on that point. If, in fact, the Bank of England is speaking in the City with a different voice from that of the Treasury, that is a very bad thing. If it is speaking about convertibility as something to be achieved immediately, it is responsible to some extent for the difficulties in which we are now.
I turn to the use which the Government have made of their monetary policy, which is the chief if not the sole weapon on which the Chancellor relies. One would have supposed that he would take rather more care about the way in which the monetary policy has been operated, but we find in the statement which he made yesterday that he said:
"The monetary measures taken in February have been by their nature slow in their effect on home demand."—[OFFICIAL REPORT, 25th July, 1955; Vol. 544, c. 826.]
It is five months since the increase in the Bank Rate. Does the Chancellor really think that anybody supposed when he was boasting about this wonderful flexible instrument which would come into operation so easily—this little automatic affair where you just turned a knob and you got the economy right again—did he lead anybody to think, in February, that it would take more than five months before any significant consequences were to be felt? The truth of the matter is either that he has been deceived or is deceiving himself about the effectiveness of this instrument, or that he has deliberately refrained from using it as sharply and as fiercely as the situation demands.

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I would have thought that almost everybody realised that the effectiveness of the Bank Rate turned very largely on how quickly and how definitely it affected the level of bank advances. Indeed, the Chancellor admitted yesterday that that was the point in the economy and in the financial system on which he wanted to operate.
What has happened to bank advances since February? From February to mid-April they increased by £68 million, from April to May by another £36 million, and from May to the end of June by a further £83 million. In fact, bank advances in these last five months when we have had this monetary policy operating, have risen by the astonishing figure of £184 million. They are, in fact, now very nearly £300 million above the level they were on 1st January, 1955. How anybody can say, in the face of those figures, that this monetary policy has been operating effectively I really do not know.
Now, at last the Chancellor comes along and asks for direct intervention. He appeals—and not only appeals—to the banks. He writes to the Governor of the Bank of England a pretty stiff letter and asks him to convey his desires to the banks. He now comes out at last with the request to the banks, put in very strong terms, that they should actually reduce the level of their advances.
Why has this been left for five months? Why has the Chancellor delayed all this time before taking direct action in order to see that his own policy worked? It really is incomprehensible to me that he has left this for so long. It may be that he assumed that the banks would do this on their own and without a request from him, but if that is so how is it that they did not do so? Have they been failing to carry out the Government's policy? I think that we are entitled to an answer to this question. Did he think that the banks would cut advances on their own? If so, why have they not done so? If he did not think they would cut down advances on their own, why did he not make a direct request a long time ago?
I turn to the third question, namely, the measures which we are now considering. I would ask, first of all, that the Chancellor should reinforce his purely negative statement on the question of convertibility
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—which, in my opinion, was as good as far as it went—by saying a good deal more. We now have, as I think he would agree, a position where pounds owned by non-residents of the sterling area can, in fact, be converted at the transferable sterling rate—that is to say, at a slight discount. The consequence is, therefore, that any country in the transferable account area—which covers almost the whole of the world except the dollar countries and the sterling area—can finance its own dollar imports by converting sterling into dollars in London.
There is an obviously grave danger in this situation if dollars generally become scarce once more. And as I think that there are some signs of this—the Chancellor should say whether he envisages a continuance of the present situation. Since he has now said that we are not to take any further steps forward does he think it possible to hold the present situation? He is faced, of course, with a serious dilemma owing to the relaxation of controls which he has operated. He was losing quite a lot of gold through the so-called shunting operations. He is now losing quite a lot of gold through his own policy of supporting the rate for transferable sterling.
The Chancellor indicates dissent. In that case, what were the reasons for the loss of gold last month, which he has already announced to us? If he shakes his head it only shows how necessary it is that we should have a clearer statement—which has also been asked for by the Press—on the whole situation as far as convertibility is concerned. I hope that he will indicate what he now understands by further steps towards convertibility. I have always supposed that this meant not merely the unifying of the two rates which exist at present—the transferable and the official rate—but also involved the removal of restrictions on dollar imports both here and in the rest of the sterling area. I think that the Chancellor has given that impression in previous statements that he has made.
If that is so, I must ask—is he really satisfied? Does he really think that we can afford to relax these dollar import controls without seriously affecting our own competitive position in the sterling area export markets? In those circumstances, it means that other members of the sterling area will be free to buy dollar

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goods which they are not at present free to buy, and there will be some switching of demand from British to dollar goods. I confess that my main reason for raising all these matters is that we do want further light thrown upon them.
I must mention here one other matter which, I think, is rather serious. I notice from the "Economist" that the Government have now decided to sell another 15 million dollars worth of our dollar securities. I referred to this in a Question in the House some time ago. These securities, of course, are those which were requisitioned during the war. They have been held by the Government, and on them the Government have made a very substantial capital appreciation. Personally, I welcome that. I welcome the fact that these securities now represent about 2,000 million dollars. If my figure is anything like correct that is extremely significant, because, in effect, it means that our reserves are a great deal larger than one suppose by merely looking at the figures of the gold and dollar reserves which are published.
I think that the Chancellor should now very seriously consider whether the time has not come to publish, and to admit openly the existence of these securities—to publish their amount—because, obviously, in so far as this does become known it is bound to improve confidence in our ability to weather any temporary difficulties in our balance of payments. But he can only do that, let me say to him, if he refrains from this policy of selling dollar securities to other people.
I notice here, again, that the "Economist" says:
"Clearly, the Government now takes the view that the right place for a mixed bag of American industrial equities, prior charge stocks and utilities is the private investment portfolios of British residents."
Is that, in fact, the Government's view? If the Chancellor does intend to sell to private individuals 2,000 million dollars worth of securities now held by the British Government that is a very serious matter. I hope that he will not do so, and that he will make the position quite plain because, obviously, if he sells the securities they are no longer available as a potential reserve in the hands of the Government.
My third point on this relates to overseas expenditure. The Chancellor
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referred to his decision, his intention of cutting down overseas Government expenditure. I think that we are entitled to ask what he has in mind there? What overseas expenditure does he think can be cut? As he knows perfectly well, we are at present faced with the prospect of having to increase our overseas Government expenditure by reason of the need to pay for our own troops in Germany so long as they are there. I have no wish, of course, to go into matters of foreign affairs, but I think that the previous Minister of Defence told us that the increased cost of that in a full year would be about £70 million. If that is so, it is a little odd that the Chancellor should come here and express the hope of actually cutting back overseas expenditure. I hope we shall hear more about that.
I turn now to the general home restrictions which the right hon. Gentleman has announced. His argument is that we are consuming to much—that we are exporting too little and consuming too much of what we produce. He therefore proposes, by his credit policy and by these other means, to cut down spending at home. But surely the crucial question would be this. Can he cut down spending at home by these general measures, in which his party believes, in such a way as simply to divert some of our products to exports, or in such a way as to reduce our imports directly? Or will these general measures of credit restriction and the cutting back of investment in effect not merely divert in other directions what is being produced but lead to a reduction in the level of production as well?
That, I think, is the most vital issue that we have to consider. It is still our view that if the Chancellor relies solely on that policy of general credit restriction it is inevitable that the effect of the measures he has announced will be a general damping down of activity. This is borne out by the fact that most of the financial commentators are now pointing out that if the monetary policy is to work properly it must fall upon the import of industrial materials, but I do not see how it can do that if industry is to continue to produce at the same rate as it has been producing in recent months.

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Again, I think that the right hon. Gentleman should make plain whether he really believes that the level of production and employment is now too high; whether it is to be cut back because it involves an increase in imports which we cannot sustain. If he takes that view I should not deny that these general measures of credit restriction may well be effective, but if he is hoping to hold the level of unemployment at 1 per cent. and to maintain brimful employment how is this to be done by general credit restriction?
I turn to the subject of investment, which played a large part in the statement. The Chancellor's attitude to investment is rather curious. When he made his first statement on 24th February I asked, in a supplementary question, what the effect of the rise in the Bank Rate would be upon the level of investment, and the Chancellor replied:
"Finally, in regard to investment, I am very glad to say that, as a result of the measures in the last Budget, there are distinct signs of marked improvement not only in factory building but also in machine tools and in industrial investment generally."—[OFFICIAL REPORT, 24th February, 1955; Vol. 537, c. 1455.]
A few days later he said:
"… I should be very sorry if any steps that we have taken affected the long-term investment, which is now showing signs of improvement."—[OFFICIAL REPORT, 1st March, 1955; Vol. 537, c. 1871.]
When he came to the Budget he said:
"There is no reason why the recent increase in interest rates should discourage sound long-term investment… We are looking, then, for a real increase in investment in manufacturing industry this year."—[OFFICIAL REPORT, 19th April, 1955; Vol. 540, c. 54.]
Even as late as 16th June he said:
"… although I do not regard the figure of bank advances as yet satisfactory, … we have at least maintained a very considerable degree of investment.… I believe we are managing not only to maintain full employment but also to keep up a high degree of investment."—[OFFICIAL REPORT, 16th June, 1955; Vol. 542, c. 789.]
The Chancellor should explain whether his views have altered on this. Does he still want to maintain such a high level of investment? If so, how can he reconcile this with the statement which he made yesterday? If one thing is clear about the statement it is that the brunt of the cuts which are imposed in it will fall not
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on consumption but on investment. Let me be clear about this: it means, in effect, that the future is to pay for the mistakes of the present. I therefore hope that we shall hear more about this from the Chancellor. The right hon. Gentleman may, of course, take the view that investment is too high. I do not know how he can sustain that argument when the level of investment in plant and machinery in 1954 was only just superior to that of 1951, three years before.
There is another consequence of the increase in interest rates and the restriction of credit to which attention must be drawn. If we try to control the economy through credit restriction it is inevitable that the people who suffer most in industry are the small men. The smaller businesses are bound to have to rely a great deal more on bank credit than do the larger, well-established businesses, with large reserves, can afford, if they so desire, to disregard the Chancellor's wishes and to disregard the banks, for they do not depend on the banks to the same extent and can proceed with their investment plans. The smaller men are in a very different position. I have already heard of a number of cases, both in my constituency and outside, where smaller business men are already complaining bitterly because they are being cut back sharply in the amount which they can borrow from the banks.
I want, next, to ask what sort of priorities the Chancellor has in mind. He spoke of maintaining, or continuing to allow an increase in, investment for export production, but he said nothing, for instance, about investment in agriculture. Does he propose that that should be cut back. He said nothing about investment in industries or firms which are producing products which compete with imports. Is that to be cut back? Is not the Chancellor able to give us a more precise indication, and, therefore, give it to the banks as well, of what should be cut and what should not be cut?
I will ask a number of specific questions. A few days ago the Minister of Fuel and Power announced a big programme of increased oil consumption. He told us that the oil companies were to provide an extra 6 million tons of fuel oil in the course of the next five years. To produce that fuel oil, presumably they

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will have to have increased refinery capacity. Is that refinery programme to be affected by the investment cut?
The Government were very pleased to announce a number of other programmes before the General Election and we should like some information about them. For instance, there is the £1,200 million development plan for the railways, of which £800 million was to be borrowed. Are we to assume that that is unchanged and that it will go ahead or are the railways to be cut back in their expenditure as well? We are particularly interested in this question, because, in announcing the programme, on 3rd February, the Chancellor said:
"I am proud that this Government have so strengthened the economy of the country that we can go ahead on the right road and the right rail for Britain."—[OFFICIAL REPORT, 3rd February, 1955; Vol. 536, c. 1305.]
It is not only a question of railways; there is also the question of the roads. The Minister of Transport came to the House the day before that, on 2nd February, and announced with great pride a tremendous programme of road construction—£27 million in 1955–56 and £120 million in the following three years, with £85 million for great motorways. Is that to be scrapped or curtailed?
This, we know, was a part of the build up for the General Election. We shall be interested to know whether, now the Election is over, the Chancellor of the Exchequer intends to continue it. It is the same story with electricity and gas. In 1954, the Minister of Fuel and Power announced investment in the years up to 1960 of no less than £1,440 million for electricity and £366 million for gas. He said that these programmes had been carefully examined by the Departments and discussed with the boards concerned, and that he was satisfied that they were on the right lines. Are they to be sacrificed?
Incidentally, I should like to ask the Chancellor whether the boards of the nationalised industries were consulted before he made the announcement yesterday. According to the Press they do not seem to have heard anything about it until he made his statement.
I turn to other forms of investment of a social character. The Minister of Education has been to the House and
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has announced from time to time bold plans for the expansion of school building. In Circular 283 he raised the limit on projects by local authorities. He said there was to be a vast programme of rural school building, playing fields and further education. Is Circular 283 affected by this or not? The Minister of Education announced only a few days ago that £9 million a year was to be spent on building for technical education. Is this to be maintained or not?
We have some feeling that the right hon. Gentleman's predecessor was perhaps rather unreasonably sacrificed to the cuts which were imposed upon her by the Treasury. Now we are becoming very anxious about the present Minister of Education. It looks to me as though he may well go the way of his predecessor. Perhaps the Chancellor can put him out of his misery and announce that these projects at least are, as I hope, to be spared.
Then the Minister of Health came to the House—all before the General Election, of course—and said that there was to be a programme of £17½ million on hospitals. Is there to be any change in that programme or is it to be maintained?
Finally, I come to housing. Council housing, of course, has already been cut back; today, there are 40,000 fewer council houses under construction than there were a year ago. I understand that the Minister of Housing and Local Government has stated that the slum clearance programme will not be affected, but can we be told whether the programme to deal with overcrowding is to be affected by these cuts? Are we to be given no idea of what the local authority housing programme is to be? We are entitled to an explanation. The House is going into recess for three months, and I know we are all very much concerned about the need to increase rather than to diminish local authority building.
Other building of certain kinds is, of course, affected. Already, the building societies are having to restrict loans. They are unable to lend as much as before because the rise in interest rates has prevented them from obtaining as much money from the public as before. The small man who goes to a building society and wants to buy a house is now finding increasing difficulties. I understand that

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in some cases a deposit of 33 per cent. is asked for and that in other cases loans have been refused altogether. We should like to know whether local authorities are to be free to continue lending under the Small Dwellings Acquisition Acts on exactly the same terms as before.
It seems we now have this situation: we have council houses cut back, council houses likely to be cut back still further, and we have small houses built as a result of loans from building societies now being cut back somewhat, while, at the same time, the really big man who does not have to go to a building society and who has the money in reserve can build as he likes without any control whatever.
We have, in fact, exactly the opposite priorities to those which existed when we were in power, when we put council houses first, small houses for private ownership next, and kept back and under control the large private building, which is now completely free.
The only point at which consumption is affected by these changes is hire purchase. I do not know whether the Chancellor thinks that the rule about the deposits for cars will have much effect. It was extraordinary that he did not earlier increase the size of the deposit here because everyone knows that the normal arrangement when one buys a car on hire purchase is that one has to put down 25 per cent. deposit. Now the Chancellor has raised it to 33½ per cent., but I very much doubt whether this will have much effect.
Is not it an absurd situation that we have imposed hire-purchase restrictions on the purchase of cars but are allowing all the time the initial allowance to continue, so that, on the one hand, a man can borrow from the Treasury through the initial allowance while, on the other hand, if he is a small man who cannot get initial allowances, he is being cut down in this way.
As for the rest, it is the same story as before. Young married couples will find it more difficult to buy the amenities that they want—refrigerators, vacuum cleaners, radios and television sets—while, at the same time, nothing whatever is being done to discourage luxury expenditure. There has been no whisper of dividend limitations. The Stock Exchange,
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since the Election, has gone on even faster with its boom, and in the period from the middle of March until last weekThursday—when rumours of this statement came about, the rise in share prices was no less than 27 per cent. That is a colossal increase in four months, and it has meant huge capital gains and a great increase in luxury spending. One is bound to ask whether what is now happening will make any difference. So far as one can see, there has not been even now any real impact on the Stock Exchange.
I have no desire to paint too gloomy a picture of the outlook in front of us. We have certain things in our favour. The tailing-off of armaments and the defence programme is one of them. If the terms of trade do not turn against us perhaps things are not so bad, but we are at the moment in fairly serious difficulties, and it is our contention that these difficulties, in contrast with the earlier difficulties which we faced after the war, are essentially of the Government's own making.
The Government have, in fact, allowed inflation here when there has not been inflation elsewhere. They have done so for electoral reasons. That is the main reason. The measures they have taken to deal with the situation are, unfortunately, bound far more to reduce productivity in the future because of the cuts in investment, and they are also, in our opinion, unfair as between different sections of the community.
There is no reason to expect that there will be any fall in prices. We have not only had the rise in coal prices just now, but we have had a further rise in steel prices, which seems to me wholly unjustified in view of the enormous profits being made in the steel industry.
Fundamentally, I believe that this country could be prosperous through higher production and because of the easing of the defence burden, but we shall not achieve this sustained prosperity unless we can enjoy full employment without inflation. We believe that the Government's policy of freedom on the one side to industry and the removal of all controls—the policy of free for all and the devil take the hindmost—is essentially the cause of the inflationary situation with which we are confronted. We believe, secondly, that the Government's indifference to fair distribution makes it

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impossible to tackle the problem of inflation as it should be tackled. We believe that this is the main cause of the present situation. We believe that the events of the last year have shown how right our judgments of these matters have been, and we believe that the future, unfortunately, will make this even clearer.
4.26 p.m.
The Chancellor of the Exchequer (Mr. R. A. Butler): I think that there was only one word used by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) in his speech which needs an immediate answer, and that was the word "crisis." I think that he, the House and the country would be wrong to regard the situation which we are facing as one of crisis at all.
The position is as described by me yesterday, that there is undoubtedly a degree of inflation, otherwise I should not have made the statement I did, that there is the necessity to adjust the expansion of home demand and home consumption, that there is a distinct necessity to put more into exports, and that everyone, as I said. must save rather than spend more.
I think that the evidence today, from the reception of the statement which I made yesterday, is that the Government have, in fact, found about the right balance in the measures we propose—[Interruption.] At any rate, I can say that the result on the market, which is, I think, important to all of us in the country, has been distinctly favourable as a result of the first impressions.
I shall not take great, violent, or bitter exception to any of the remarks made by the right hon. Gentleman. He said what he had to say at great length, with a little more of his undoubted ability as an economist peeping up over his rising ability as a politician. Therefore, we were more interested than we have been on other occasions, because this is a debate in which we are considering the economic situation, and many of the points made by the right hon. Gentleman deserve an answer, which I shall attempt to give this afternoon.
The right hon. Gentleman was a little more excitable yesterday in reference to the Election speeches. It is true that he touched on that subject today, with due moderation, and I think that it might be valuable to remind the House of what I
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said in answer to his supplementary question yesterday and what I said in the final sound broadcast of the Election about the outlook for the future, because he ventured to taunt me by saying that we tried to run the Election without warning the country of the dangers.
This is what I said in the final sound broadcast of the Election:
"We do not claim that all is settled and stable. Indeed, we realise that there are many difficulties ahead. What we do claim, and our record proves it, is that when things go wrong we can act promptly and effectively to put them right,"
unlike the record of the last Socialist Administration,
"and when things are going well we seize our opportunities to the full."
I went on to say:
"Our policy is a combination of strictness and encouragement. We have had to keep a firm grip on borrowing and hire purchase."
That is still precisely the policy which I am continuing now.
Mr. Harold Wilson: Since the right hon. Gentleman has given us some quotations, and as I am sure he does not want to mislead the House, would he read the sentence which precedes the part which he has just read, and also read the part from his broadcast about our reserves now being adequately maintained?
Mr. Butler: The right hon. Gentleman and the House can read the whole of my broadcast. I have a copy here which, if I did not consider economy, I should have circulated in the OFFICIAL REPORT.
I would remind the House that the major issue which is before the country today was set out fairly and squarely in the Conservative Party Election manifesto in the following terms—and I contrast this warning with the contents of the Labour Party Election Manifesto which had nothing whatever on this subject. Our warning contained these words, in page 15:
"Any country pursuing a policy of economic expansion and full employment faces a constant danger of inflation. The risk is that home demand may take away from the export trade and swell the import bill. Here sound monetary and fiscal policies are powerful weapons. We propose to continue with their flexible use."
That is precisely what we are doing now. Therefore, not only did we warn the country, but some of the language

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used in our Election manifesto corresponds almost exactly with the language which I used yesterday. In view of this additional phrase, "a general readiness to save as well as to spend," it is not altogether surprising that the language and temperament of that document should be the same as my speech yesterday because I had a considerable amount to do with writing the document.
Mr. H. Wilson Mr. H. Wilson rose—
Mr. Butler: I now wish to deal with the economic situation as outlined by the right hon. Member for Leeds, South. First, I want to consider the effect of the measures of 24th February and to examine how, immediately, they had a distinct effect and were then put back by causes very largely beyond our control, as is seen from the trade figures.
Let us take the trade figures for, for example, the first quarter, the second quarter and April-May of 1954, when the figures for excess of imports over total exports were respectively £40 million, £52 million and £47 million a month. The reason why we introduced the measures of 24th February was that we saw that the excess in the first quarter of 1955 was too great; it turned out to be £77 million a month. In the second quarter it was £74 million. However, the important figure is that we have managed, by a combination of monetary and other disciplines, to reduce the gap in April-May to £49 million, which was almost exactly the equivalent of the figure for the previous year.
That and the total of the reserves for the two months in question were two indications that our policy was having an effect. It was not until we got the June trade figures with the remarkable excess of imports over total exports of no less than £129 million, that we recognised that it was largely due to the dock strike that those exports had not been sent abroad. What happened—the House will remember that not all the dockers were on strike—was that a great many of the imports were taken off the ships but most of the exports were not sent out.
While I have no desire at all to treat these strikes as in any way an alibi for the fundamental difficulties in our economy, to which I have made reference, I must say that the immediate effect of
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the dock strike in particular was disastrous for our trade figures and undoubtedly had a serious effect on our general situation.
If the right hon. or hon. Gentlemen opposite try to claim that the industrial unrest and the strikes really have not set us back—I am convinced that they have been a cause—I would remind them of the non-official coal strike which itself cost us at least a million tons of coal, which, of course, had to be made up by imports, and has added to the very great difficulty that we are now suffering in our balance of payments in relation to the coal situation.
Mr. Gaitskell: If the Chancellor is saying that the figures for June are due to the dock strike and other strikes and that, otherwise, everything is all right, why is it necessary to take further action now? Obviously, if it was simply a temporary matter due to the strikes, we should have our exports booming right away, without any further restrictions.
Mr. Butler: I said I had no wish to make an alibi of these strikes, and I said there were fundamental causes and difficulties to which I have already made some allusion, namely, that we have been consuming too much at home. I may make allusion to other difficulties later.
However, I think it is right to bring out some of the obvious difficulties created by industrial unrest, if only to show that it will be advisable in the future, if we can, to avoid such industrial unrest, and if, on all sides, a sense of moderation is shown and the better spirit which has been created is generated throughout the country. I am not criticising any particular section of the community. I am only saying that the country must realise that we cannot afford these disputes and cannot afford to hold up our export trade in any way.
The right hon. Gentleman went on to ask whether the forecasts that I had made in the Budget, for example, about the economy, were true or not. Fortunately, the figures of production have been almost better than I forecast in the Budget. The figures for April and May, for example, show industrial production already about 4 or 5 per cent. above last year's level, and that indicates that what I forecast in the Budget, and, indeed, what I forecast last year, has, broadly, come true on the production front.

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One of our main difficulties, however, derives from the fact that this very increased production and our enlarged prosperity are causing us as an island country so far to increase our imports of raw materials and, to a certain extent, our imports of food that we are having difficulty with our balance of payments situation. Therefore, some of the very difficulties to which I was referring come from the prosperity and the full employment that we have been enjoying.
When hon. Members opposite refer to the desirability of retaining full employment, they have hon. Members on this side of the House entirely with them. We are all desirous of retaining full employment, but if we are to retain full employment with rising production and increased imports, it is absolutely essential to keep down our costs and make ourselves competitive with others. That is one reason why we cannot tolerate any signs of inflation, why I had to make my statement yesterday, and why I hope to control not only capital expenditure but also consumer expenditure.
The right hon. Gentleman addressed to me a direct question about demand. The retail trade figures show that sales of goods other than food by large retailers in the period February-May were about 9 per cent. higher than in the same four months of 1954. The figures also show —this confirms the general line that I took in my Budget—that that is a slightly smaller increase than in the fourth quarter of last year, when the increase was as high as 11 per cent. over the corresponding period of the previous year, but it still indicates that consumer demand is very buoyant, and that is another reason why I have had to take my present action. It does not do away with the prognostication that I made in my last Budget statement.
The right hon. Gentleman referred to bank advances and deposits and the position of credit policy. Bank deposits have fallen by more than £200 million, or more than 3 per cent. The position about bank advances is broadly as stated by the right hon. Gentleman, though the figure is just a little under what he said. Frankly, the position about bank advances is quite unsatisfactory, and if it had been allowed to go on we could not have said that we were satisfied that
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credit policy was doing the work we want it to do in curbing inflation.
The reason for bank advances being considerable was partly that banks, in the period in which I asked them originally to start the credit squeeze, were financing in particular the gas and electricity undertakings, and that has clouded and befogged the whole of their operation in the first instalment of the credit squeeze. Now that the authorities have arranged for the nationalised undertakings to go on to the market for the money they want and not to depend so much on bank advances, I am hoping that we shall get a direct result from the credit squeeze and that a distinct source of embarrassment to the banks in operating the squeeze will have been removed. That will be an improvement.
I now come to the second reason. I can only give my opinion, because I am very much obliged to the banks for carrying out the odious task which I asked them to undertake and would like them to feel that it is in response to Government requests that they are performing this task. The reason is that on this occasion, in 1955, the credit squeeze has been operating at a time of almost unrivalled buoyancy in the British economy, an expansive surge such as we have not seen for years, an expansion which is most desirable in most ways and which has brought a great deal of improvement to the lot of many people, and not only to the rich, as the right hon. Gentleman made out. It has resulted in improved living standards and improved houses and conditions for many of our fellow citizens.
But this surge has been so considerable, backed by confidence in Her Majesty's Administration, that it has been a different economic proposition to operate a credit squeeze against a tide flowing at that pace than it was in 1952. When some newspapers and some hon. and right hon. Members opposite shuffle off these economic difficulties by criticising my policy or saying, as the right hon. Gentleman said, that it is due to incompetent administration, I assure him that I can take it, because I am more modest than he is.
We are going through a period of distinct experimentation in the use of some of these weapons. I am convinced

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that having got out of the way the advances to the nationalised sector, and with the new directive, to which the right hon. Gentleman was kind tnough to refer as being stiff, which I have sent to the Bank of England, the credit squeeze will now operate to the general advantage of the economy. That is the broad outline of the economic position in which we find ourselves, and now I will refer, as shortly as I can, to some of the other questions put by the right hon. Gentleman. With extraordinary prescience, I had foreseen most of what he was going to say.
Mr. H. Wilson Mr. H. Wilson rose—
Mr. Butler: The right hon. Gentleman is to address the House later. We should be very sorry if he were to spoil his speech by fragmentation.
Mr. Wilson: The right hon. Gentleman said that he had some prescience about what my right hon. Friend would put to him. Will he recall, also, that in answering some questions which were put to him yesterday, he said that he would make a note of them and would answer them in the course of his speech? Will he ensure that this is done?
Mr. Butler: I have a folder which is marked with the name of the right hon. Gentleman. It is not quite so fat as the others, but it includes the answers to his questions.
The first important question which we have to answer, to which the right hon. Member for Leeds, South referred and which is a matter of great importance to the country, is whether we should deal with our economic troubles by cutting imports. It is a simple question, but a very difficult one to answer. The Government are quite determined that if we were at present to indulge in a policy of cutting our imports, the retaliation which would be involved against our export trade would be so severe that we should lose all the advantage of the advance that we have made in the last three and a half years. We have, therefore, got to rely on credit policy.
In passing, I will refer to one of the questions of the right hon. Member for Huyton (Mr. H. Wilson). He asked me about dollar imports and dollar import policy. Broadly, the position about
1020
dollar import policy is that we have now freed from licensing about half of the dollar imports which we bring into this country. I also think that the right hon. Gentleman had in mind purchases which are allowed not so much for our own consumption but for merchanting abroad. In answer to the right hon. Gentleman, I should like to say that we see two great advantages in the policy that we have assumed at the moment towards dollar discrimination. One is that we think it right that our merchants and traders in cotton, wheat and other things should be able to buy in the cheapest markets, in the interests not only of our country, but of world trade. That is especially so for the sake of our relations with Canada. We must not think of dollar trade in relation only to the United States of America.
The second important reason is that when we allow goods in for merchanting abroad, that results in a distinct improvement in our balance of payments, it improves the entrepot trade that we retain as a nation, and is in the general interests of the broad free trade and payments policy which this Government are pursuing. I therefore believe that our policy in relation to the dollar, carried as far as we have done it up to date, is sensible and sound.
I would further say that it is hardly likely that we should obtain a response from the U.S.A. in freer trade policies and greater opportunities for our goods if we were to go back on this policy at the present time. I should like here to welcome the advance that has been made under the initiative of President Eisenhower in the legislation recently passed through Congress on the Trade Act, which, I think, will be of some benefit to us in the future.
The right hon. Gentleman asked me a question about the increased cost of interest on, for example, the sterling balances. He will remember that a substantial proportion of these sterling balances is held in the form of Government stocks, the interest costs of which are not affected by changes in current rates. Accordingly, I have some difficulty in making an estimate, but the best estimate of the additional interest costs resulting from the changes in the rates between 31st December last and the present time is that they are now running

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at the rate of about £30 million per year. These are the answers to the points which the right hon. Gentleman asked me to answer in the course of my speech.
I now come to the right hon. Gentleman's remarks about credit policy. I have not received, as I expected might be the case, a very great deal of criticism of my letter to the banks. I think that this is the right way to handle one's relationship with the Bank of England and with the banks. I believe that the letter will be effective, provided that we associate with the letter some indication that it is not only the private sector which is to be held back at present in the interests of curbing inflation, but that we have some regard to the public sector. That is precisely what I am coming to in the latter part of my remarks in answer to the right hon. Gentleman's observations. First, however, I must deal with two points raised by the right hon. Gentleman—namely, investment and the question of the future of our exchange policy, both of which are very intricate questions indeed.
On the subject of investment, I want to make quite clear that we want the same spirit of moderation and balance as I tried to show in my opening remarks. It is quite true that we want investment to continue, and I do not withdraw a single one of my earlier remarks in any of my speeches on this subject.
In fact, expenditure by private manufacturing industry on new factory building rose by about £25 million between 1953 and 1954, an increase of about 25 per cent. or one quarter; and there is every indication that this rise is continuing. Approvals of new factory building in the first quarter of this year amounted to 23,835,000 square feet, or an increase of 65 per cent. on the first quarter of last year. This indicates that together with the growth of orders for new machine tools, the House as a whole, in backing the investment allowance two Budgets ago, has achieved what it wanted: that is, a marked advance.
All I ask now is that hon. and right hon. Gentlemen opposite should remember the problem which faced them in the time of Sir Stafford Cripps, which is exactly the same as the problem now: namely, the impact on one particular sector of our economy—that is, the metal-using sector. It is vital that in that
1022
sector it should be remembered that we depend upon it not only for the export trade, but also for our defence programme, for our industrial programme and also for so many of those delightful gadgets—television sets and everything else—which are of such importance to the housewife and in the home. It is because there is such a pressure upon this sector that I have had to take the measures that I have taken about hire purchase, so as to be quite sure that the export section of this sector is not prejudiced and that the defence section can continue; because both defence and exports are more important to our economy than the private user or any other element.
At the same time, all I want to do about investment is to control the rate. I do not wish to destroy investment itself. It may be a criticism of my policy that we were too keen to keep a degree of investment growing in the earlier times after 24th February and were not stricter, as we have had to be in the last few days. I say that on purpose in order to indicate that investment is still a vital feature of our policy.
Now, I come to the right hon. Gentleman's question about the future of exchange policy. I think I have disposed, in answer to his speech, of any idea that I made any particular statement at the O.E.E.C. meeting in Paris.
Mr. Gaitskell: Will the Chancellor allow me? Hon. Members opposite asked me for a quotation, but, unfortunately, I had not got the quotation ready at hand. I have it now and will read it. It is from a leading article in "The Economist" of 23rd July, and this is what the article says:
"Nevertheless, it seems that the floating rate part of the British proposals "—
that is, the British proposals in E.P.U.—
"was never taken as seriously on the Continent as the convertibility part until Mr. Butler surprised his colleagues at the June meeting of the Council of the Organisation for European Economic Co-operation by insisting on the door being left open for fluctuating exchange rates in Europe's future currency arrangements. The result was to convince some speculators and traders that a depreciation of sterling was in the immediate wind, and there was something of a small scale run on sterling until the official denials had succeeded, as they have not always done, in allaying the rumours."
Mr. Butler: I have no exception to take to that statement, which seems to me to

1023
be absolutely correct, but it does not mean that I made a particular statement in Paris, because I did no such thing.
Mr. Gaitskell: With great respect, surely that is exactly what it does say? It says:
"… Mr. Butler surprised his colleagues at the June meeting of the Council of the Organisation for European Economic Co-operation by insisting on the door being left open for fluctuating exchange rates in Europe's future currency arrangements."
That is exactly what I said the Chancellor had said.
Mr. Butler: I made no statement to that effect. All that was arranged, by agreement between the nations of Europe which are members of O.E.E.C., was that we should make provision—and perhaps this will explain to the right hon. Gentleman and to the House what happened—for some successor mechanism to the European Payments Union. The E.P.U. has been a particularly successful form of mechanism for making payments between European nations.
When I reached Paris immediately after the Election, I found some anxiety lest the E.P.U., which had done so much good, not only for payments and trade, with the liberalisation code attached, but also for European solidarity in the political field, should be disbanded if one or more European currencies went convertible. We had an extremely difficult task in trying to plan some future system of European payments, and indeed of consolidation, in the event of having some currencies which were floating and others which were fixed. That is a technical problem. It is impossible, as the right hon. Gentleman recognises, to have a payments system with monthly payments if some currencies are floating and others are fixed.
Therefore, with considerable ingenuity, and under the lead of the Dutch Government, to whom both I and the House will be very much indebted, a scheme of clearing—a new form of payments—has been invented, the settlement of which will, I hope, be made at the end of this month, thereby, I hope, bringing to an end all the rumours. At the same time, we have made great progress in Paris by making possible the setting up of a European Fund for giving credits in the event of one or more currencies going convertible.
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I should like to remind the House that it is important to get the emphasis clear, and not to place the responsibility for the rumours on a statement by me, which is not correct. It is important to place the responsibility where it lies, namely, upon the need to envisage the possibility of convertibility of European currencies other than our own. Ours is by no means the only currency which might one day go convertible. It is possible that the Deutsche mark, the guilder and the Belgian franc and other currencies may go.
Therefore, in Paris—I was surprised at the time that neither the House of Commons nor the British Press took very much interest in this matter—we were involved in a very difficult act of statesmanship in not disrupting Europe and in trying eventually to have a piece of mechanism ready in the event of one or more currencies going convertible.
Mr. Douglas Jay: Although that is true, does the Chancellor deny what he said in the House a week ago—that rumours did arise out of these discussions which he had, and that these rumours have been harmful to sterling? That is what we are saying.
Mr. Butler: Yes. That enables me to say something else. I do not deny that, and I very much regret it.
What we are paying for in these rumours is the fact that we in the British Government have always been determined to go ahead with what is called the collective approach towards a system of freer trade and payments. This collective approach to such a system involves not only the Commonwealth, with which we have had frequent conferences, but also European nations, and in framing such a system of clearing as an alternative to the new payments union, it was natural that reference should be made to margins and to rates.
Indeed, it is not surprising that the International Monetary Fund has already recognised that some movement on either side of a declared parity is desirable and permissible without calling into question that parity. I regret that rumours should have arisen which damaged sterling in the midst of an exercise the motives of which were quite above board and in the interests of Europe as a whole.
The right hon. Gentleman asked me for a statement about our position towards

1025
convertibility. I have taken a most consistent line on this, and it is that certain conditions must be fulfilled. They are, first, that we should have a strong internal position, and that we are attempting to remedy with the further measures I announced yesterday; second, that we should have a degree of credit available, and that I think would be quite easy to arrange in the event of convertibility, in view of our position in the International Monetary Fund; and, third, that there should be a wider trade policy, particularly between the dollar and non-dollar worlds. The reason for that is that there should be a basic pattern, so that our exchange policy can ride safely on a basic pattern of trade. I have always said that, and I have never departed from this line, and I see no reason to doubt that that is the general policy of the Government.
I should like to add that there is no doubt about the policy of the Government in relation to the exchange value of the £ sterling, and I can give this policy in one sentence. It has been, and will continue to be, the maintenance of an exchange parity of 2·80 dollars to the £, either in existing circumstances or when sterling is convertible. In the long run, this must depend upon our efforts. Nothing can replace these.
I have stated our attitude to convertibility and to the exchange value of the pound sterling, and have stated the classical view of the International Monetary Fund that some movement on either side of the declared parity is desirable and permissible without calling that parity into question. I think that statement will indicate our basic approach to the situation, and I think I have answered the questions put to me on that matter by the right hon. Gentleman.
The right hon. Gentleman next asked me some questions—and I think this will interest the House—about the programmes, both the social programmes and the nationalised industries' programmes. He wanted to know about oil, the railways and the roads. In general, I can say that my statement does not affect any programme already announced, unless a nationalised industry or a local authority can with reason and without doing any harm slow it up, so that we shall not be trying to do too much.
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Certainly, the coal mines must have their full investment because that is our major economic problem at the present time. Secondly, we must press ahead with nuclear power, for civil purposes especially, and, thirdly, with oil, if only to supplement our coal resources which are not sufficient to keep pace with our rising industrial production.
Mr. Aneurin Bevan: Before the Chancellor leaves the subject of the coal mines, since he has said that we must maintain our investment in coal, and I think everybody would agree about that, may I ask whether he is also instructing the Minister of Housing and Local Government that there must be no interference with new houses for miners in the coal-mining areas?
Mr. Butler: The right hon. Gentleman has asked me a question on the social side, but I am stating the nationalised side, and I shall come to housing and other matters he mentioned later.
The railway modernisation programme must also go on.
Mr. Gaitskell: I take it that the Chancellor means the whole programme of £1,200 million on the railways and £150 million on the roads?
Mr. Butler: Yes, I am coming to roads. The railway modernisation programme must go on. It would be bad not only for the future of the railways but for morale in the ranks of the railway men if there were to be any check on modernisation of the railways, which cannot do anything but good to our economy at the present time.
On the subject of the roads, all I can at present permit to go on is the programme which has been already announced, a fairly considerable programme—
Mr. James Callaghan: Oh, no.
Mr. Butler:—announced by the Minister of Transport and Civil Aviation himself. That will mean a review again in the autumn, or whenever I consider the economy can bear the strain of an extra road programme, of what I regard as being inevitable and very desirable additions to the programme; but I must for the time being ask my right hon. Friend, as he realises, to stick to the programme

1027
already announced. It will itself develop, but that is all we can manage in conjunction with housing and various other needs at the present time.
The nationalised industries themselves have undertaken to defer, for periods varying from three to twelve months, certain projects. This is a sign of the response we have had from the nationalised industries. In the case of the gas industry these include certain extensions to carbonisation plants, underground gas storage, and extensions to plant for handling coal and coke. Four of the boards expect to reduce working capital needs by £1 million in the next six months by reducing stocks of appliances and fittings. Three boards will apply internally some superannuation moneys which would normally be invested externally.
That shows the co-operation there is with the boards. In general I should like to say that the statements in the Press, that the nationalised industries were not consulted before my statement was made, are wrong, and I understand that the nationalised industries are today issuing statements to that effect. We have had full contact with the nationalised industries, and in the case of the Gas Council they indicated where certain econmies can be made.
The electricity industry, I understand, is prepared to defer certain projects mainly in relation to distribution, because generation can be held up only with danger to the regularity of the supply to industry. That, I think, we all know from our experience of the industry. The industry will also reduce working capital needs by economies in stocks, appliances, etc., and by applying to internal needs certain superannuation moneys which would otherwise be invested outside the industry. The Central Electricity Authority has already announced that, as a general contribution towards meeting our economic needs, it will make provision, in raising charges, for financing part of its capital expenditure without borrowing. So the House will see that a definite response is being made by the nationalised industries.
I come now to the position of the local authorities, and to answer in detail some of the points made by the right hon. Gentleman. First, he asked about existing programmes. I should like to make this
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statement. We have not withdrawn authorisations already given to local authorities or cut down specific programmes which have already been announced. Among these are the recently stated programmes for school building. I include also in this statement, in reply to the right hon. Gentleman's question, hospital building. My appeal to local authorities for restraint covers these and all other capital developments, but we do not intend to create uncertainty or to run the risk of delaying essential work, as we might do if we embarked on rearrangements of those programmes.
In the case of housing the right hon. Gentleman was correct in his statement about the extent of local authority building. The Minister of Housing and Local Government has answered Questions on the subject today and has explained why, for a variety of reasons, which are many, the expenditure of local authorities on house building has been reduced, as can be seen from figures published in the Monthly Digest of Statistics, which I have here for all to read.
The Government would like to make plain that we cannot do everything at once. We have encouraged the development of private building, and we are adhering to the target of 300,000 houses a year, which is 50 per cent. above the target which right hon. Gentlemen opposite aimed at. What has happened in housing is that the target was very considerably exceeded, so that under the brilliant administration of the present Foreign Secretary when he was Minister of Housing and Local Government the number of houses built rose to approximately 350,000 a year and more. What I think will happen—only we cannot exactly foresee it at the moment—is that housing will adjust itself, come nearer to the general target as announced by the Government prior to the General Election before last.
Mr. Gaitskell: I am sorry to interrupt the right hon. Gentleman again but we really must try to get this clear. Where exactly do the local authorities stand as far as their housing is concerned? Is the total figure still to be 300,000? If so, is there any change in the distribution of the total between houses built by local authorities and those built privately? That is the first question. The second question is this. Can we take it that all

1029
the plans of local authorities for other sorts of building, which have been authorised, will go on, and that there is no question of cutting those back at all? Are we to assume that local authority building which is part of a longer programme already announced will go ahead and that the only cuts to be imposed will be those on any further suggestions the local authorities may have to make?
Mr. Butler: Authorisations are to go on. There is a certain give and take, which I have agreed with my right hon. Friend, about other needs, and the whole housing question is being handled with the utmost humanity.
The attitude for the future is as I have described it, namely, we shall be aiming at the target of 300,000. I cannot enter into the domain of the Minister of Housing and Local Government by defining exactly what the expenditure is likely to be on private or local authority building, but the right hon. Gentleman will find it on page 69 of the Monthly Digest of Statistics for this month. [Interruption.] I am interested from the financial angle, and from the point of view of controlling the problem of inflation, in the question of the total number of houses built. I cannot interfere any further with the administration of my right hon. Friend—in the details of his administration.
Mr. Gaitskell: We are going into Recess in two days' time, and it is no use telling us that we can ask the Minister of Housing and Local Government about this matter. We cannot. We have no chance. If the Chancellor himself cannot answer these questions, will whoever is to reply to the debate answer them? Are the local authorities' housing programmes to be cut down further when they come up for authorisation next year? By how much will they be cut?
Mr. Butler: We have envisaged the general target which I have described as being reached, and we shall have to take consideration of private house building and the building by the local authorities. Therefore, I cannot at this stage say exactly what our policy will be. The intention is that housing should make a general contribution to the target which I have in mind, namely, of not trying to do too much at once. We are likely, because of the great success of our policies in the past, to build, I think, that number of 300,000 in the immediate
1030
future. Therefore, I do not think the right hon. Gentleman need have anxieties on that score. His anxiety should be more on economic matters.
As for the rest of local authority capital expenditure, my policy will be reinforced by a stricter attitude by the Departments concerned towards the approval of specific projects and towards the approval of applications for loan sanctions. That is essential in the present situation, and the local authorities are well aware of it, because I took the trouble to explain it at their conference at Folkestone earlier this year, and to say why it was essential that local authorities at the present time should help to meet our needs in the same way as the nationalised industries are doing.
It remains for me only to deal with the question of hire purchase.
Mr. E. Shinwell: I am surprised that the right hon. Gentleman, speaking of the subject of the restraint of capital investment, has made no reference at all to the possibility of some restraint being exercised over capital investment in defence. There is a great deal of expenditure at the present time, which no doubt could be remedied, on Service works and buildings of all kinds. Has the right hon. Gentleman thought of some restraint of that kind?
Mr. Butler: Yes, Sir. I am obliged to the right hon. Gentleman. I included in my original statement, which I have here, a statement that we shall deal with Government expenditure with particular regard to overseas expenditure. The right hon. Gentleman may take it for granted that the considerable success which we have had in keeping our defence programme within bounds will be maintained and intensified, and that any examples of waste will be ruthlessly dealt with by the Treasury.
Furthermore, the right hon. Gentleman can take it that in our overseas expenditure we have had already a considerable saving arising out of Korea, and I am hoping that, as a result of examinations which are proceeding, we may be able to examine closely and if possible limit some of the liability arising out of the new German costs which are likely to fall. Furthermore, I have the collaboration of all my colleagues who are engaged in important duties overseas to see that they

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limit to the greatest possible extent, consistent with foreign policy and with our national safety, our obligations overseas, because they have a double impact, both on our Budget and on our balance of payments.
Mr. Shinwell: May I press the Chancellor upon this very important point? This is a very important matter on which I think we ought to have further information. I do not intend to intervene in the debate, I only want certain points elucidated. Nobody wants to impinge on the safety of the country and its security, but will the Chancellor address himself not only to the overseas defence expenditure but to defence expenditure in the United Kingdom and the provision of material that may never be required? All I ask is that he should examine the matter much more closely than apparently has yet been done.
Mr. Butler: I can give the right hon. Gentleman that undertaking because, as I have said, we have already had considerable good results in pruning the defence programme. If the right hon. Gentleman can give me any special advice I shall be only too glad to have him as an ally in this connection.
Miss Alice Bacon: The right hon. Gentleman had reached the point in his speech at which he was about to leave the subject of local authority spending. I hope that before he leaves that subject he can be a little more specific about the school building programme, which as yet he has not mentioned.
Mr. Butler: I simply said that, for the reasons which I gave, we are leaving the programmes already announced to develop, and that means that the statements already made by the Minister of Education stand as announced by him. Knowing education perhaps even as well as the hon. Lady, I know how determined all educationists are—including myself in a previous incarnation—to seek more money, and I warn them that if they want more money they will have to wait. The programme remains as announced.
My hon. Friend the Economic Secretary to the Treasury will possibly answer more fully points of detail with regard to hire purchase. I simply conclude by summarising the position as I see it. As I
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said in my opening remarks, there is no question of a crisis. The British economy is fundamentally sound. We have made a great surge forward. Our exports have increased and what is wrong is that, owing to our prosperity, we have simply taken in so many imports that the rise in our exports is not sufficient to meet them.
We have a very difficult task in combining social needs with strict finance. In the old days, finance was very strict and we had high unemployment. At present, certain countries whose finances are very strict have high unemployment. It is not the aim of Her Majesty's Government so to conduct our financial policy that we cause a large section of our workpeople to become unemployed. We, therefore, have, on all sides of the House, the same aim, namely, a social democracy, fully employed.
This is a particularly difficult problem in our island economy. It is not difficult in other countries, because they have not the same proportion of raw materials or food to import that we have. We are perpetually coming up against this problem in the history of our island economy. It will need more co-operation and understanding than we have had hitherto in our country, more realisation of our increased wage costs, and more realisation that our costs do not compare favourably with those of Germany or America at present, if we are to survive our present difficulties.
The right hon. Member for Leeds, South said that inflation was not widespread, but I must warn him that several countries in Europe are facing a problem similar to ours. I have discussed it with their Finance Ministers. There is nothing here particularly that can be attributed to gross maladministration by the present Government or lack of foresight. We are dealing with one of the classical British difficulties of combining increasing prosperity and production and over-full employment—with unfilled vacancies double the number of unemployed and running to a figure of half a million—with a position of balance of payments difficulty.
My view is that the attack on inflation started in February and continued now—of which we gave warning during the Election and of which I spoke in all the major cities where I addressed meetings—will be carried on. At the same time, our

1033
exchange policy, despite the rumours and the difficulties of carrying with us the nations of Europe and the Commonwealth, will be carried on inflexibly and with the same determination and executive strength that we have shown hitherto. If we do this, we shall obtain a synthesis between full employment and a general advance in the economy. It is because we have an opportunity of debating this matter in the House that I am convinced that I shall have the support of the House in trying to get things better for the country as a whole.
5.16 p.m.
Mr. Roy Jenkins: The Chancellor's speech, although somewhat more sombre in tone and even vaguer in phraseology than many of his previous efforts, had one thing in common with almost every other major speech that he has made in the House since he became Chancellor. It was that he asked us to accept his assurance that the measures which he has taken have struck just about the right balance.
It would be easier for us to accept that assurance if he had not used almost precisely that phrase in, for instance, his Budget speech three months ago. It is really disingenuous and detracts from his speech to try to reconcile everything that he said at the time of his Budget speech with what he is saying at present, because it is quite impossible to reconcile these two approaches on the part of the Chancellor.
We should consider precisely what the Chancellor did almost exactly three months ago in his Budget. He gave away £135 million in extremely regressive taxation concessions. In other words, he increased the demand in the country three months ago deliberately, as an act of Government policy, at an annual rate of £135 million. In view of what is now happening, can the Chancellor think of any single argument, other than that of electioneering convenience, for the step which he took in his Budget? I shall be very willing to give way if he can.
Mr. R. A. Butler: I am not ashamed of anything in the Budget. I think it was a very good Budget. The weight of taxation in this country militates against our advance as an industrial nation. If there is a surplus and an opportunity of relieving taxation on industry as well as
1034
on persons, it is a very good thing for our economy. Moreover, in view of the difficulties which I foresaw, I deliberately held back half of the surplus, which was a wise move.
Mr. Jenkins: I agree that it would have been still worse if the Chancellor had gone twice as far, but that is not a good recommendation of the Budget. All that the right hon. Gentleman says is that as a general principle, when circumstances are right, we would like to reduce taxation. So would we all. What we are disputing is that in April the circumstances were right for a reduction of taxation which led to an increase in demand in the country. It is impossible, on the Chancellor's own presentation of the position, to accept that view.
What did the Chancellor tell us? He said that the trade figures were bad in the first quarter of the year. He took certain measures in February and then in March he found the worst trade figures of the lot. In April he introduced his give-away Budget, and in early May, before the effect of the Budget came home, there was an improvement. But as soon as the effect of the Budget began to make itself felt, the position became worse, and we are now in the situation in which we find ourselves.
It is not possible now for the Chancellor to expect us, if we are to take him seriously, to accept that he was right in what he did at that time. He was severely criticised by several hon. Members from this side of the House, and particularly by Mr. Crosland, the then Member for Gloucestershire, South, who is no longer with us. The Chancellor, replying to the Budget debate, used these words:
"This debate is indeed a contrast in the philosophies of the two sides of the Committee. The hon. Member for Gloucestershire, South referred, perfectly honourably"—
one of the Chancellor's happy, patronising little remarks—
"to his belief in a return to austerity. We believe "—
that is, the Chancellor and his hon. Friends opposite—
"that with the improvements which we have introduced, we must have an expanding economy, which depends upon the vigour and the discipline of a free people."
Where are we to have an expanding economy at the present time? Is it to

1035
be in the nationalised sector or, after what the Chancellor has said, is it to be in the field of local government finance? Is it to be in the private sector if the restrictive requests that the Chancellor has put out are to be effective? There is a sharp contrast between what the Chancellor was saying before the Election and what he is saying now. No doubt the right hon. Gentleman would say that it was governed by this phrase:
"…the vigour and discipline of a free people."—[OFFICIAL REPORT. 22nd April, 1955; Vol. 540, c. 578.]
We have got used to these peculiarities of speech by the Chancellor, but that is a very typical phrase of the right hon. Gentleman, vague, almost meaningless, and slightly sententious. It fits in perfectly with the Chancellor's style. We have considerable affection for it, but at the same time it has certain dangers.
I should like to turn for a short time to a very important point which has already been discussed, the question of the extent to which the run on sterling in the past month or so is the responsibility of the Chancellor. If I may say so with respect, I do not think he really disposed satisfactorily of that question at all. What are we told? We were told, first, by the Chancellor himself yesterday:
"Our foreign exchange position is also being currently affected by many rumours, here and abroad, about our intentions. This has led to sales of sterling which will adversely affect Our reserves in July."—[OFFICIAL REPORT, 25th July, 1955; Vol. 544, c. 826.]
That, obviously, is common ground: there is no question about it.
But there is the question about where the responsibility for the rumours lie. We had the "Financial Times" saying this morning, in its leading article:
"The adverse rumour that has weakened sterling is that Britain intends to effect a covert devaluation of the pound by widening the dealing margins. The rumour arose out of the negotiations for the removal of E.P.U. where such a policy was, in fact, discussed."
That is very similar to the "Economist" quotation, but a little more recent. I imagine, from the Chancellor's attitude to the "Economist" quotation, that he would not deny this statement of the position which appeared in the "Financial Times."
But he cannot go on from there and say that this was something which was
1036
quite inevitable, that this was bound to be discussed and that everybody was doing it. I am, for instance, quite unaware that there were other countries in Europe which were pressing for, or even discussing, floating rates for their currencies. Did the Germans press for a floating rate for the Deutschmark? Did the Dutch? Did the French? I do not believe for a moment this argument that everyone was discussing floating rates. The difficulty in the E.P.U. negotiations largely arose from the fact that even a month ago the Chancellor was hankering after early convertibility for sterling, not committing himself to it, but hankering after it, and discussing it on the basis of wider floating rates.
Mr. Beresford Craddock Mr. Beresford Craddock (Spelthorne) rose—
Mr. Jenkins: I am discussing very closely what the Chancellor did. I do not think it would be very interesting to hear the hon. Member's views on that.
That is the position, and that was how the discussion on the £ arose. The run, when it came, was not against the German mark or the Belgian franc, but against sterling because it was sterling that was discussed, and it was the Chancellor who raised the issue, which was an extremely damaging issue for this country. The Chancellor admits—and I do not doubt that his motives in all this were perfectly good, but it is results, not motives, which count—that we have lost a great deal of gold during July. He gave very disturbing hints about how much we had lost. Was it 50 million dollars? Was it 80 million dollars? I do not think that these figures are unreasonable in view of the amount of gold—
Mr. Cyril Osborne: But not as much as the Labour Government lost in 1951, before they went out of power.
Mr. Jenkins: I do not want to be diverted from my argument by considerations put forward by the hon. Gentleman, but the Chancellor knows quite well that both in 1951 and in 1949 the position was radically different from that of today in the sense that we were then facing difficulties originating outside this country. In 1949 the trouble started with the American recession and collapse of the sterling area dollar earnings. In 1951 it started with the inflated world prices which put our import costs up by 30 per cent.

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Why we are so critical of the Chancellor is that the present situation is due to internal matters. There is nothing outside this country to explain why we have this trouble at present. It has all been created in the United Kingdom, largely as a direct result of the Chancellor's own policy, particularly in the. Budget two months ago, and particularly also, as I think, in the unfortunate results of his trip to Paris a month ago.
Mr. R. A. Butler: As the hon. Gentleman is criticising my policy, perhaps he would listen to this. There has been no change in the general attitude of Her Majesty's Government on the subject of the collective approach to freer trade and payments since the last Government came in to office. We discussed this matter with the Commonwealth Finance Ministers and Prime Ministers. We then conveyed our views to Europe, and the same plan has been before the Commonwealth and Europe for introduction at some possible date when circumstances permit, but a long time ahead. There has been no particular change in the circumstances, and the fact that certain rumours arose should not be laid at my door. If there is responsibility it should be laid at the door of the Commonwealth as a whole and the European nations that discussed it with us.
Mr. Jenkins: I think the Chancellor will agree that there is a difference. This year, E.P.U. has been negotiated for another year on an entirely different basis. If nothing new were to happen, why not negotiate on the old basis, as has been the case for many years?
Mr. Beresford Craddock Mr. Beresford Craddock rose—
Mr. Jenkins: The Chancellor has put a point to me, and I think it better for me to apply myself to that point.
In the matter of the even division of responsibility between this country and other countries, surely the Chancellor will not deny that it was the position of sterling which was in question. It has been the future of sterling in regard to convertibility and with floating exchange rates which has given rise to the trouble and caused the run against our currency.
Mr. Beresford Craddock: May I interrupt the hon. Gentleman, because his facts are not correct? On Saturday, 11th
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June, it was reported in the Press that my right hon. Friend at Paris the previous day, Friday, 10th June, had said that convertibility of the £ was a long way off.
Mr. Jenkins: The right hon. Gentleman always says a great number of things, both in this House and when he is abroad. The fact remains that, whether or not that was reported in a particular organ of the Press on a particular day, the impression which got about in Paris was not one of a strong anti-convertibility position. However, I have made the point I wanted to make.
The Chancellor's motives may have been of the best, but his visit to Paris has been an extremely expensive one for the gold reserves of the United Kingdom. The right hon. Gentleman could travel the world in oriental splendour and it would still be more economical for us than that he should travel in the reasonable modesty in which no doubt he does and make these dangerous and unfortunate statements.
Mr. R. A. Butler: I must make it clear that I am not aware that there is extant any speech or text by myself. The hon. Gentleman is continually referring to statements. I do not know what he means.
Mr. Gaitskell: If my hon. Friend will allow me, there was no statement, of course, because the meeting was a private one. None the less, the whole of the Press, here and on the Continent of Europe, evidently came to the conclusion that this statement had been made. What is more, the Chancellor's own statement this afternoon, made very belatedly—he might have made it during my speech—shows that he knows of this impression that we were going in for convertibility at a floating rate.
Mr. Beresford Craddock: My right hon. Friend denied that on 10th June.
Mr. Jenkins: My right hon. Friend has made it clear that we are not talking about statements, but about plans and impressions which are given. If these things are talked about in large meetings like those of O.E.E.C. they inevitably get out. However, after great pressure the Chancellor virtually made a fairly satisfactory statement about convertibility this afternoon.

1039
I want to press the right hon. Gentleman on one further point mentioned by my right hon. Friend, and that is the attitude of the Bank of England on this matter. I am sure that the Chancellor cannot deny, though I do not expect he would be prepared to admit, that it is well known that in the past few months there has been a Treasury policy on the one hand and a Bank of England policy on the other hand. That is a very undesirable thing. The Bank of England have been making it clear—not by statements, because that is not the way the Bank operates—that early convertibility is not merely desirable but inevitable because the existing restrictions are impracticable to maintain.
Sir Robert Boothby: Is the hon. Gentleman now seriously maintaining that all the trouble that some of us had to get the Bank of England nationalised was of no avail?
Mr. Jenkins: The Chancellor should exercise some of the power he has, and which Sir Stafford Cripps exercised when he described the Bank as his creature. A little more disciplne from the Chancellor towards the Bank would be highly desirable.
There is one other major point and it is one of the gravest of our charges against the Chancellor this afternoon. It is that, despite what he said in his closing words, the right hon. Gentleman has made this country an island of inflation in a stable world. The "Economist" brought this out clearly in its article last week.
"It is not true,"
it said,
"that we live in an inflationary world. What we live in is an inflationary country."
The Chancellor is responsible for a situation in which, over a period of years, we have been consistently inflating faster than any other major country in the world.
That this is undeniable is brought out clearly by the relationship between our home prices and our import prices. Since 1951, our prices at home have gone up by 14 or 15 per cent. During that period import prices went down by about the same amount. If we compare the period of the Labour Government, either a fairly stable period, 1948 to 1950, or a period of fairly rapid price increase, 1950 to
1040
1951, the relationship will be found to be quite different. Between 1948 and 1950 retail prices went up by 5½ per cent. and import prices went up by 15 per cent. In 1951, retail prices at home went up by 8 per cent. and import prices by 33 per cent.
What the Chancellor has done—and this is the root cause of his difficulties and the root cause of the great danger which faces what the Chancellor always now calls our island economy—is to have produced an inflation in our home price level entirely out of line with what has been happening in the rest of the world. Confronted with this difficulty, continuing over a period, what has the Chancellor done? First, he produces a grossly inflationary Budget and he justifies the regressive tax concessions given in that Budget largely on the ground that they would act as a great stimulus to investment.
Then when, as is inevitable, three months later there has been a slight increase in investment, what does he do? And let us make no mistake about it, only for a short time has there been an adequate level of investment in this country. When his policy brings the country not to disaster but to considerable difficulties, even though we are sailing in a very calm international sea, what does he do?
So far as consumption is concerned, he only takes another swing in the dark at hire purchase. The Chancellor is obsessed with hire purchase. The President of the Board of Trade moves so admirably slowly that we still have no adequate statistical information and, therefore, the Chancellor takes a swing in the dark at hire purchase, at which he has already taken two other swings in the dark in the past year. Apart from that, in a rather vague way, he allows the whole weight of the burden to fall upon investment.
Therefore, if his measures are to be successful in getting us back to any sort of position of balance, we shall achieve it with the economy tilted more against investment and more in favour of consumption than was envisaged at the time of the Budget. So we shall be facing again difficulties with which we were faced three years ago and of which nobody can be more aware than the Chancellor because he has talked of them

1041
constantly—the difficulties of stimulating investment, of getting a level of industrial investment comparable with that which has been taking place in our main competitor countries. We begin a repetition of a dismal story.
In many ways I have considerable admiration for the right hon. Gentleman, but I am not sure that he has not been Chancellor for too long. Perhaps in the first six months or so of office the right hon. Gentleman showed real courage—more courage—than he has been prepared to show in recent years. It earned him unpopularity. After one dose of that, he has since become the great, successful Chancellor, the Chancellor of the continuing boom. Whatever he has done about the future of the country, he has invested so much political capital in his own success, that he is very loth—
Mr. Osborne: Cheap and nasty.
Mr. Jenkins:—to turn round and admit that a great part of his policies have been a failure, and that he has to start again at the beginning. I am not sure that in order to start on this difficult road again we do not need a new Chancellor of the Exchequer.
5.40 p.m.
Sir Henry d'Avigdor-Goldsmid: In asking for the indulgence of the House that is customarily given to a maiden speech, I am very conscious of the fact that there are a large number of hon. Members who are much better qualified than myself to speak on the important topic we are debating this afternoon, so I shall be brief.
I hope I shall not be considered controversial if I refer to a point made by the right hon. Member for Leeds, South (Mr. Gaitskell), because I am quite sure he would not wish to mislead the House. He referred to the sale of dollar investments by the Bank of England to British investors as representing a loss of foreign exchange earnings to this country. That is not, in fact, the case. British investors purchasing such securities must lodge them with what is known as an authorised depository. That authorised depository is a financial institution which is, to a certain extent, controlled by the Bank of England.
The authorised depository keeps control of those securities. The coupons or
1042
dividends are, of course, automatically credited to the exchange control again and there is no loss of dollars there. Alternatively, should there be an emergency, it would be very much within the power of the Bank of England to requisition those securities, exactly as was done in 1939. I mention that point because I feel that the right hon. Member would not wish to give a misleading impression to the House.
We find ourselves in a dynamic and expanding economy in which we have to keep our place and we can never manage that by methods of restriction and curtailment. Therefore, we must adapt ourselves to the world as we find it if we are to keep our place in it. Our shortage today is a shortage of capital. That is not very surprising. Before the war, we had a cushion of overseas investments to protect us from the difficulties in which we might find ourselves from time to time in our overseas payments situation. Those overseas investments are entirely lost. I do not think we would have it otherwise.
When, in the war, we prepared to sacrifice our lives and—what was perhaps even more difficult—to order others to sacrifice their lives, we would not have thought such action proper if, at the same time, action had been taken to safeguard our investments. I think we would have felt quite convinced that the human sacrifice could not be justified unless the sacrifice of financial advancement was made first.
We therefore found ourselves, after the war, at the centre of a trading empire without sufficient means to maintain our position. It is not surprising that, from time to time, we have these difficulties in the balance of payments; but it shows the strength of our recovery that they become increasingly lighter. Each so-called crisis has been less lethal and each has shown our powers of recuperation in a stronger light. In our dual rôle as traders and manufacturers and also as bankers to the sterling area, it is essential that we should recover from these crises as soon as possible and by the quickest means. Our position after the war was a little like that of the traveller in Jules Vernes' book, "Round the World in Eighty Days," who, in order to complete his passage across the Atlantic when the ship he had chartered ran out of fuel, chopped down the superstructure and

1043
burned it in the furnace so that the ship could proceed. That was our position in 1945. We came out of the war with only our battle honours and our resolution.
In those circumstances, we had to make great concessions to the future in order to obtain the loans and finance we needed to try to set ourselves on our legs. We are paying for those loans today, but our economy is fundamentally expansionist and enterprising. In my constituency, Walsall, which is known as the town of a hundred trades, I am daily astonished by the variety of human ingenuity put to manufacturing purposes in that great Midlands centre and the enormous adaptability of manufacturers there. These are great assets. We would be untrue to ourselves if we attempted to introduce an economy which did not give full rein to them. But we have a dual rôle. We have also to act as bankers to the sterling area and retain the confidence of our overseas clients.
Probably all of us expect a slight difference in behaviour between our bank manager and ourselves. We expect to see him perhaps a degree better dressed, a degree more staid in his manners, and perhaps a little less likely to go to the "local." In the same way we, acting as bankers to the sterling area, must keep the confidence of our depositors. How-can we best manage that? At present, we have three enormous assets. Our first asset, which is one which must appeal to all interested in investment, is that we have a stable system of Government. Secondly, we have a people intensely patriotic, enterprising and ready to accept the call of its leaders. Thirdly, we are lucky today to have a financial leader to give us just what we want, whose words are words which are listened to not only in this country but all over the world.
I speak as one having business with people in many other countries, but this is an opinion not simply learned from them—although they are people in dozens of other countries. It is also the view of my constituents in Walsall. We have as Chancellor a man whom we can trust entirely. That is the great asset which this country enjoys in the world at the moment and which is recognised by the fact that the Chancellor is Chairman of O.E.E.C.
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The combination of these advantages and a dynamic drive will enable us undoubtedly to survive this minor upset. The dynamic approach to our difficulties is the one which will get us out of them. I am quite certain that our balance of payments difficulties will very soon be turned by the influx of foreign investment. We are short of capital and we would welcome foreign investment in this country. Today, we offer better prospects for the investor than any other country in the Western world, a stable system, a prudent Chancellor and an industrious population.
I hope that I have not trespassed on the indulgence of the House.
5.48 p.m.
Mr. F. Blackburn: It is a great pleasure for me to offer congratulations to the hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) on getting over perhaps the most important hurdle in the early days of membership of this House.
It is always rather a strain when one has to make a maiden speech, but I think everyone will agree that the hon. Member has distinguished himself at his first attempt at addressing the House. The hon. Baronet comes here having already made a considerable reputation outside, and with a distinguished war record. I understand that he has been the High Sheriff of Kent and leader of the Conservative Party on Kent County Council. So far as the last part goes, I can only commiserate with him, but there will be hon. Members on his own side of the House who will wish to congratulate him.
It takes some courage to select an economic debate to make a maiden speech, because it is most difficult, in such a debate, to be non-controversial. Nevertheless, I think that everyone will agree that the hon. Member chose a subject with which he was very conversant. It is quite evident that he is an expert in these matters. He managed to be practically non-controversial and I should like to convey to him the congratulations of the House and say that we hope that we shall be able to hear him on many occasions in our future economic debates.
Having said that, I hope to be allowed to be a little more controversial than the hon. Member was. Exactly two months ago today the people registered their votes

1045
in a General Election. It is clear from the statement which the Chancellor made yesterday, and his speech of this afternoon, that our assessment of the reasons for that Election were correct: that the Government feared a worsening of the economic situation and decided to cash In before things got worse.
The public was told at that Election, "If you elect the Labour Party, you will be electing a party which will impose controls." The Chancellor of the Exchequer came to the House yesterday and said that he was going to impose controls, but only in a half-hearted sort of way, not sufficiently definite to have the necessary effect. The Conservative Party has been bedevilled because, a few years ago, the right hon. Member for Woodford (Sir W. Churchill) coined the phrase, "Set the people free." Ever since then the Conservative Party has been bedevilled by that phrase.
We are told that Conservative freedom works. It is obvious from what the Chancellor said yesterday and today that Conservative freedom has worked very badly. The right hon. Gentleman said that in the Press today there was a fairly good reception of his statement of yesterday. He does not seem to be in great favour with the "Manchester Guardian," for instance, which says:
"It is a pity that the Chancellor had to put the brakes on the runaway boom in this crude and sudden fashion. But he left himself no choice but to return to the obsolete medicine of direct controls."
I will not argue with that point now.
"Having raised the bank rate too late (as it now turns out) and made it ineffective by a soft Budget and a soft heart for the prices of Government securities he is now faced with almost an emergency. Apart from the elections Mr. Butler has had none of his famous luck this year. And just now his record looks rather less brilliant than it did."
That is the financial editor of the "Manchester Guardian." The newspaper's first leader tells us:
"If anyone is to be blamed, then Mr. Butler is clearly the guilty party. In his Budget last April he took a calculated risk, and one about which many people felt misgivings."
Some of us felt more misgivings than did the "Manchester Guardian."
"The effect of his tax concessions was to throw the whole burden of restraining the boom on to monetary policy."
The trouble with the Chancellor is that when he came to the House in February
1046
he tried to rely entirely on monetary policy, and I am rather tired of hearing about the flexibility of policy under a Conservative Administration.
In February, the Chancellor of the Exchequer relied almost entirely on an increase in the Bank Rate and certain hire-purchase measures. He was told at that time that the increased Bank Rate would not achieve the effect he desired, that it was a non-discriminatory tax and, of course, he was putting on the banks the job of deciding where capital investment should go. Taking for granted that his decision in February was right, and that it was right to come to the House and explain the economic position, he could not be right when, in his Budget, as my hon. Friend the Member for Stechford (Mr. Roy Jenkins) has pointed out, he pursued an entirely different policy. It was a soft Budget.
If it was right in February to come to the House with the intention of restricting consumption, the right hon. Gentleman was entirely wrong in April to produce a Budget that would surely have the effect of increasing consumption. Yesterday, the Chancellor of the Exchequer referred to home consumption, pointing out that we are absorbing too much of our production at home, and said:
"For the time being our primary aim must be to reduce home demand in order to leave room for the extra exports we need."—[OFFICIAL REPORT, 25th July, 1955; Vol. 544, c. 827.]
We quite agree with the Chancellor of the Exchequer, but there is no difference between that and his statement on 24th February, when he said:
"What is needed—and what the Government now propose—are steps to moderate excessive internal demand.…"—[OFFICIAL REPORT, 24th February, 1955; Vol. 537, c. 1453.]
It is obvious that the steps which the Chancellor took in February have failed. It is obvious that he produced a Budget which was merely an attempt at electioneering, that he introduced politics into the financial affairs of this country. Now he is saying exactly what he said in February and we have no proof, of course, that he will be any more successful than he was then.
If we are to reduce home consumption, if the Government are to be consistent—and there has been no consistency about

1047
the Government's economic policy since they came to office in 1951—and it is really intended to reduce internal consumption, are we to expect the Government to bring proposals to delay the putting into effect of the Independent Television Authority? After all, the whole effect of the Authority will be to increase internal consumption. Advertisers will not spend their money merely because they want to produce an alternative programme for the people. They will do it because they will expect to get increased returns from increased sales.
There is no consistency in the Government's policy which, on the one hand, wants to reduce consumption and, on the other, brings in legislation and schemes that must increase consumption. Yesterday, the Chancellor was beginning to try to put some blame for the position on the strikes which have taken place. There has been a slight change in his attitude and remarks today. Naturally, any strike or industrial upset is bound to have some effect on the economic situation. But we also must agree that the strikes and upsets are, in the main, a direct result of the Chancellor's policy. If the right hon. Gentleman is attributing a great deal to the effect of the strikes, may we not expect, now that the strikes are over, that there will be a great upsurge in exports, and that the accumulated stocks will have a beneficial effect on the balance of payments? But the Chancellor seemed to have no idea that that would take place.
The Chancellor must be struck by this fact, but it is significant that in his speeches we seldom hear the right hon. Gentleman refer to the Stock Exchange, or to dividend restraint, or profits, or anything of that kind. It is true that if he is pressed, the right hon. Gentleman will say that he is against unrestrained dividends —just as the clergyman is against sin—but he seldom makes any definite reference to that. He never suggests any action which he might take to deal with the matter.
There has been a runaway boom on the Stock Exchange which has had a psychological effect on the workers. I have here a quotation from the "Sunday Express" of 12th June. As we know, equity share values have risen by 60 per cent. since the beginning of last year, and Mr. Frederick Ellis wrote in that newspaper:
1048
"The Stock Exchange, a vital link in the nation's money machine, is becoming a casino … the less you know about investment the more you will make. Just stick a pin in the back page of the 'Financial Times'—and buy."
Mr. Osborne: Just let the hon. Member try it.
Mr. Blackburn: Mr. Ellis goes on:
"Bad news is almost a signal for a fresh market surge. The trade gap widens—up go share prices. Gold drains away in months we should be storing it up. It makes no difference. Do not blame the Stock Exchange for this … the blame lies with the Government for allowing inflation to rear ahead unchecked.… In Mayfair you cannot go to a party without being asked by bejewelled women. 'Shall I buy So-and-So?' Everybody's doing it. Every day the boom is stoked up, as profits of the companies go up and up. So do the dividends. Not a day goes by without a big combine making more, paying out more … Do you wonder that workmen with £10 a week and less stick up their hands to strike for more wages?"
Of course, the first part may be a little exaggerated, but the principle is there. There is this runaway boom on the Stock Exchange and it is something which the Chancellor entirely ignores. He entirely ignores the increased dividends and share bonuses which are being paid. Both yesterday and today he made no reference whatever to that part of the economy.
Referring to foreign exchange, the Chancellor said yesterday:
"Our foreign exchange position is also being currently affected by many rumours, here and abroad, about our intentions."—[OFFICIAL REPORT, 25th July, 1955; Vol. 544, col. 826.]
One thing which the Conservative Government have not had to put up with, but which the Labour Government had to endure, is people denigrating this country abroad. Part of the trouble in which the Chancellor finds himself regarding foreign exchange is of his own making. At far too early a stage he began talking about the possibility of convertibility. He put his own terms on convertibility, but once having raised the idea, there has, of course, been speculation all over the world ever since as to when convertibility would take place.
I wish now to refer to the question of credit restriction and capital investment. About credit restriction, as "The Times" said this morning, the Chancellor is proceeding entirely by exhortation. He has said that firms should endeavour to slow down investment. He has not taken effective action, nor has he any policy on

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the subject. He has exhorted them to do certain things. In the matter of credit restrictions and capital investment the Government are in a dilemma. As the Chancellor stated, it is important that we should have the maximum amount of capital investment. I would say that there we should even go to the danger limit, because capital investment is vitally important to our future economy.
We are not quite clear what is the Government's policy. In the Economic Surveys for the past few years we find the Chancellor complaining that private industry is not investing sufficiently in industry and, therefore, in his Budget he gave incentives to encourage that course of action. Last February, the Chancellor was rather pleased with the result of his incentives. He said:
"Finally, in regard to investment, I am very glad to say that, as a result of the measures in the last Budget, there are distinct signs of marked improvement not only in factory building but also in machine tools and in industrial investment generally." —[OFFICIAL REPORT, 24th February, 1955; Vol. 537, c. 1455.]
In February, the Chancellor was delighted that there is an increase in capital investment, but in July it has to be cut down. First, we are told that there is not sufficient capital investment, and incentives are given, and then when the incentives begin to work, capital investment is cut down. I agree that the Chancellor is in a dilemma. Yesterday, he said that there were certain kinds of expenditure which should be dealt with:
"They are the expenditure of the Government itself, of local authorities and of the nationalised industries; credit restriction; and hire purchase."—[OFFICIAL REPORT, 25th July, 1955; Vol. 544, c. 827.]
I am not clear about this Government expenditure. When the Chancellor spoke yesterday I thought that Government expenditure was definitely to be cut down, but today I am not quite sure what the Government propose to do. I made a note of what the right hon. Gentleman said this afternoon. He said, "My statement does not affect any programme already announced." What is it to affect? I take it that the situation which we have to face is with us now. If it is only a future programme which is to be affected, the present situation will not be dealt with.
Yesterday, regarding capital expenditure by the Government, the Chancellor said:
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"… the Government, while restricting to the minimum all its expenditure, both current and capital, will pay special attention to its overseas expenditure."—[OFFICIAL REPORT, 25th July, 1955; Vol. 544, c. 827.]
We get far too many of these indefinite statements, such as, "will pay special attention." If there is a difficult economic position, we want something a little stronger than that.
I understand from what the Chancellor said this afternoon that the road programme which has already been announced will not be interfered with. That must bring some comfort to a great many people who have been pressing for a much more extensive programme than we have at the present time. I am not quite clear what is the intention of the Government with regard to local authority expenditure. They said that they would not withdraw authorisations or cut down programmes which have already been announced. I take it that the authorisations for 1955–56 have already been made by the Ministry of Housing and Local Government, and what the Chancellor has had to say about that can, therefore, have no effect whatever.
Can the Chancellor say whether there will be any control at all over the private sector of the housing industry? There is not a great deal of point, in any case, in cutting down local authority expenditure if, at the same time, we are to allow increased expenditure upon private building. I am also not clear about the position as it affects education. Certain programmes and expenditures have been announced, but I should like to know the exact position. We have had so many indefinite statements from the Government—and especially from the Chancellor —that we ought to have a more definite one from the Economic Secretary tonight.
What the Chancellor has said about restriction upon capital investment seems to amount to the fact that he hopes that both the nationalised industries and the private sector of industry will restrain their capital investment for a time. Does he really think that such a mild way of dealing with the matter will meet the present difficulties? It certainly did not meet the difficulties in February. The Chancellor himself admitted yesterday that the action which he took then has been very slow in its effect. The Government are wobbling, as they did in February and then in April. They are

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not taking effective action, but are trying to live up to the speech of the right hon. Member for Woodford, who said, "Set the people free" without knowing exactly how to set them free. The Government are against controls, and are afraid to use them with effect. In fact, the Government do not know what they are doing.
6.13 p.m.
Mr. J. Grimond: I take it that for the time being the question of convertibility can be left aside. I regret that, although I know that some people look forward to a continual state of seige. It is worth mentioning, however, that we are apt to attach too much importance to some of the movements of funds in and out of the country. They come, in the first place, with the intention of leaving us again, and they are not very significant in our financial discussions.
The Chancellor's speech once again contained a good many rather pulpit-like phrases, which seemed to be removed from reality. I think, if I heard him rightly, he said that he could not tolerate any signs of inflation—but signs of inflation here are like daisies in June. We know that retail prices have risen much faster than they have in Germany or America. The cost-of-living index is up, and foreign contracts are being lost because our prices are not competitive. Although it would be foolish to exaggerate the degree of inflation it is undoubtedly going on all the time, and it is undoubtedly the most serious thing that we have to face.
Then, when the Chancellor dealt with the question why his raising of the Bank Rate had not been effective in reducing this inflation he drew attention to the fact that the gas industry had been able to borrow about £70 million from the banks, in defiance of his policy. He seemed to regard that as the act of some rather ill-disposed god, quite outside his control. But the method of financing the nationalised industries has been designed by the Government. These industries can borrow at cheap rates of interest, with a Government guarantee. If the Government want to stop nationalised industries from getting money cheaply, or from getting it from the banks in this way, they must examine once again the way in which these industries are financed.
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But this cannot be the complete answer to the question why the raising of the Bank Rate has been so ineffective. The banks have been selling securities, and one would have thought that the natural effect would have been to force them to reduce their advances very much more quickly that they have done. Unless there is a hidden widow's cruse, which does not appear in the banks' accounts, it seems mysterious that they are able to go on making these advances, even when the Bank Rate is as high as it is.
The Chancellor said that it was very difficult for him to exercise restraint when the country was so prosperous and there was an upsurging and booming economy. I suggest that the truer explanation would be that when the Conservative Government first came to power people really thought that they might take tough measures against inflation and stop it, but they have now become more and more convinced that inflation will be a more or less permanent state. It is quite obvious that the buying upon the Stock Exchange is not against the yields on securities, but a hedge against inflation. The stock markets have made up their minds that the only hedge is to go on buying equities, and that no Government will stop inflation. That is one of the reasons why the yield on equities is almost down to the yield on gilt-edged securities.
Sir R. Boothby: Does the hon. Gentleman agree with the theory advanced by the hon. Member for Stalybridge and Hyde (Mr. Blackburn), that one has only to get a Stock Exchange list and stick a pin in it and one cannot fail to profit by it?
Mr. Grimond: I do not subscribe to that theory, but I say that it would have been far wiser to invest in Imperial Chemical Industries ordinary shares eight years ago than in Government stock.
Mr. Blackburn: Since I have been referred to, I should like to make it quite clear—and the hon. Member for Aberdeenshire, East (Sir R. Boothby) knows this—that it was not my view; I was quoting from an article from a newspaper.
Sir R. Boothby: With approval
Mr. Grimond: I find it difficult enough to make my own speech, without having a discussion going on all round me.

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I approach our present difficulties from the standpoint of the Chancellor, in that I want a freer economy—the kind of expanding economy of which the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) spoke. I take it that the criticisms voiced from the Opposition Front Bench were made from the standpoint of Socialism, and that their remedy would be to return to controls, decrease international trade and go back again to a state of affairs which, depending as we do so much upon exports and our position as a great banking centre, we could not tolerate.
Even approaching the problem from the Chancellor's standpoint, however, the economic situation is at least alarming. There is no reason to suppose that we are going the way of France, but there is great danger in this continual inflation, which goes on under Government after Government, year in and year out. What is the Chancellor going to do about it? He will not cut housing; we shall have another 300,000 houses built this year. Since the war there has been a great demand for housing, but by this time I should have thought that it was coming near to being met. There is a strong case for continuing slum clearance, but if it is true that inflation is a danger there is a great deal to be said for re-examining the number of new houses to be built other than in replacement of slums.
Everything the Chancellor said yesterday led one to the conclusion that he would put up the interest rate, but he never came to that conclusion. Instead, he is to curtail hire purchase. We know that he is doing that because it is a fairly easy way of striking at consumption. The only trouble is, as has been said by the hon. Member for Stechford (Mr. Roy Jenkins), that there are no statistics to tell us how important hire purchase is, although it is probably fairly important. However we know that the most important aspect of hire purchase concerns the buying of cars, and upon that the new rules will make very little difference. I understood that the Government were against discrimination, and I can see no reason why a woman who wants to buy a vacuum cleaner should receive worse terms than a woman who want to buy a sofa. It is a type of discrimination from which I thought we were getting free. [An HON. MEMBER: "A vacuum cleaner is not a
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luxury."] I entirely agree with the hon. Member. It is not a luxury.
Coming back to my argument, I suggest that we might look at the situation in places like Germany, Holland and Luxembourg, all of which have achieved a more stable economy than ours and have not restricted hire purchase; although there is a Bill to deal with it coming into the German Parliament.
The Chancellor of the Exchequer stressed the strikes, but the difficulties in our economic situation were beginning before the strikes took place. We are not by any means the only nation in the world to have strikes. America has continual strikes and threats of strikes. Although we lost 1½ million working days last year through strikes, there have been at least four years since the war when we lost 2 million working days. The situation is worse this year, but the country is not ridden by strikes nor is the increase absolutely disastrous. On the other hand, it must be remembered that the effect of the strikes will continue. When people ask, "Why have the figures of trade not now improved now that the strikes are over?" the answer is that the strikes may have lost us some markets for all time. That is the most serious aspect of these strikes. Their evil effects may be felt in export markets for many years.
Like the hon. Member for Stalybridge and Hyde I am a little interested in what the cuts in investment will amount to. I take the view that the country is not over-investment in industry or agriculture, although it may be desirable to review how that money is distributed. On the other hand, the Chancellor attached great importance yesterday to certain cuts in investments, yet today the only cuts mentioned were in pursuance of a voluntary agreement with the gas industry and, I think, a voluntary agreement with the Central Electricity Authority. I am not certain whether that is the whole of his proposals. If not, it will be interesting to hear, in the winding-up speech, what else is proposed. I am interested to note that the roads programme is not to be cut. I do not think that anyone regards it as adequate as it stands. It is not to be cut, but it is serious that no expansion can be looked for.
We should review the method of financing nationalised industries. A great deal

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of capital must be provided for them but the method of providing it is unsatisfactory. No reasons have been given to the House why so much is to be spent on electricity, or gas and or railways. If it comes to running down these industries, as we are having to do with the railways, the fact that they have gigantic fixed charges on their shoulders makes the process very difficult.
If the Chancellor is to rely on the interest rates he will find that the method acts very slowly because so much expenditure is now made by public authorities. If he is to rely on that as his chief weapon he must make up his mind that the time has come when he should review the whole question of public finance. It is difficult to cut public expenditure, but a way must be found to do it. It is extremely difficult to control the whole field of local authority expenditure and central Government expenditure when there is continual pressure, not least from Members of the House, that more expenditure should be found for deserving purposes. But if we are to reach the sort of economy that I, and I am sure the Chancellor, hope for, an expanding and free economy, we must make it possible for interest rates to play their part in it. I do not believe it is easy to exercise control over them when public expenditure stands at. such a high level.
It is a valid criticism of the Chancellor that he acts too slowly, when much of the economy is insulated from what he does by previous commitments and public commitments. When the tempo and the atmosphere are, as the Chancellor recognizes, inflationary, when he has to step in, he should do so much earlier than he has done. I am sure that it is not a good thing to allow campaigns to run on in the Press, with all the uncertainties that they cause in trade and industry. They give the impression that the Chancellor has been forced reluctantly to come here and make a statement.
If the right hon. Gentleman has to deal with problems of this character he must take very sharp action, and must not be afraid to keep interest rates high. That is ultimately in the interests of everyone. In particular, it is the poorer people and people on pensions and fixed incomes who suffer most from inflation in the long run. The Chancellor should not be afraid to
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take monetary action early when the economy seems to be getting out of hand.
6.28 p.m.
Mr. Godfrey Nicholson: I wonder what sort of impact this debate will make on the country tomorrow? I believe that all the high-falutin' economic stuff we are talking today will pass right over the heads of the average elector. I am not sure that a good deal has not passed over the heads of some hon. Members. A lot of it has passed over my head.
The ordinary elector and his wife do not understand words like inflation, terms of trade, balance of payments, Bank Rate, credit policy, and so on. They are simply and solely interested in the cost of living and in prices. They are absolutely right, because everything turns on those matters. The hon. Member for Orkney and Shetland (Mr. Grimond) spoke about the plight of pensioners living in an economy where the cost of living is continually rising. Then there is the wage-price spiral which, if ignored, will price us out of world markets. I wonder whether my average constituent, when reading the account of this debate, will think we are paying the slightest attention to that spiral.
Periodically under the present Government and under the previous Government the Retail Prices Index has risen, but we appear to outside eyes to shrug our shoulders, and use the fact only as a stick to beat the other side in our political fights. Nevertheless, we are all agreed in our heart of hearts that the battle for economic stability is the only battle that matters today. It is the only thing that should concern us, yet we seem to treat it as though it were indecent or improper to mention it.
Are we not in danger of losing touch with the troops who have to fight the battle, namely, the people of this country? On the all-important economic front we have lost touch with the people. If the issues are explained to the people they will follow and support the Government, no matter to what political party they belong—I do not mean "follow" in the electoral sense but give them their support—in any heroic steps they have to take. I do not believe that this is the last of the heroic steps. We have got to explain to the people why the battle is all-important, what the issues are, and

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what it all depends upon, and why upon victory depends our survival as a nation.
I do not pretend to be altogether clear myself, nor do I know whether I speak for any other hon. Members, but how much relative importance should be paid to the main enemies? Is Government expenditure and taxation the main enemy? Is overfull employment the main enemy, or is it merely a symptom? Is too lax a credit policy the main, or only a minor, enemy? How many hon. Members can explain to their constituents why the money income of the country is going up more rapidly than is its real wealth? However deeply we may feel about these things, I believe that we are completely missing the target if we do not carry the people with us. The ordinary man and his wife are concerned with the prices that affect their weekly budget and standard of living. They do not understand what we have been talking about today.
I want to say to my right hon. Friend that unless and until politicians—hon. Members of this House—can explain to our people in simple terms what this is all about, and what the Government are trying to do—explain it, not in terms which the "Economist" or the "Financial Times" can understand and comment upon, but in terms which my constituents can understand and comment on—we shall drift further and further from those whom we represent, and we shall lose the battle.
My constituents sent me here—and this is probably true of every hon. Member—mainly so that I could help to conduct the battle against the rising cost of living. As far as they can see, we are just ignoring that and, as one hon. Member has said, taking it as an act of a rather malevolent god. We have to close the gap between ourselves and the people. Things must be analysed simply so that the people can understand the factors and on what the result of the battle depends. Until that is done I very much fear that we are beating the air.
6.33 p.m.
Mrs. Barbara Castle: I am very glad to note the post-Election repentance of the hon. Member for Farnham (Mr. Nicholson). I would point out, however, that ever since the Election. when we have asked any questions about
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the cost of living and the growing menace to our whole economic situation of prices getting completely out of control, we have had one persistent reply from the Chancellor. It has been vary simple. He has said in so many words "The country seems to find our policy eminently satisfactory, as demonstrated by the Election."
In his opening remarks this afternoon the Chancellor was generous enough to congratulate my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) on his "rising ability" as a politician. I must say that that was a tribute from a master, which my right hon. Friend ought to appreciate, because the Chancellor has been graduating so boldly lately from the pure realms of economic orthodoxy to the muddy waters of political expediency that he is now getting to the point of openly vindicating his economic policy in this House by purely electoral arguments of the kind which I have mentioned. In our last discussion on economic questions —our last attack on the rising cost of living—he again said, "I think that everyone is very well satisfied, as the country illustrated during the Election."
Therefore, we have to begin by asking on what policy the Government fought the Election and what the country was, therefore, expecting them to do, because that would explain to a very large extent how the country is now behaving. I have in my hand an article called
"The Voters' Choice, in the Popular Record."
It was distributed by the Conservative Party regardless of expense throughout the length and breadth of the land during the Election campaign. There is a beautiful photograph of the Prime Minister on the front. It says:
"The Voters' Choice. With the Conservatives peace and plenty. With the Socialists controls and crisis."
It goes on:
"Peace—and prosperity. What more does any one want? They are not easy to achieve. Yet the Conservative Government has secured both. You can expect a new Conservative Government to do as well."
It then goes on to list the achievements to the credit of the previous Administration, and which it said are to be continued. They read:
"Record employment. Record high wages. Record spending and saving."

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The House should note that—"Record spending." Then:
"Record housing. Record factory and school building. New road and rail plans, a new hospitals plan and massive investments in an Atoms for Peace programme which will benefit us all."
We are told that if only we vote Conservative all this will continue.
My first comment is that the two headings ought now to be reversed—"With the Conservatives, controls and crisis," for the significant thing which, I think, has emerged from the Chancellor's statement today, the most outstanding fact, is that the purely monetary policy upon which he has relied has broken down and that he himself—a Chancellor elected on a programme to discredit controls and to continue Conservative fredom—has resorted to direct and physical controls in order to adjust a situation which his policy has brought about. The direct controls which he is operating, however, are only on the public sector and on working-class amenities. It is quite nonsense to say that we now have a policy of purely monetary controls. What the Chancellor is saying is: "Direct controls are not necessary for the private sector but, in addition to the operation of the Bank Rate, the credit restriction policy and the higher interest rates which will hold everyone in check, I shall apply direct restrictions and controls over the public sector, which is most vital to the needs of the mass of ordinary people."
I shall give him a very simple example from Hornsey, the borough in which I live. It is a middle-class borough. It is not one of the most desperate so far as conditions of life are concerned, but it has an acute housing shortage arising from a lack of sites and still has 1,800 people on its housing list. In the last few months, in Southwood Lane—quite near to where I live—there has been erected a block of fourteen private houses, each having four bedrooms, two bathrooms and a garage. They are selling for £7,995—practically £8,000.
Mr. Ellis Smith: Two bathrooms?
Mrs. Castle: Yes—two bathrooms. four bedrooms and a garage.
There they are, on a site which the Labour members of the local council
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fought for as being appropriate for municipal development, and on which thirty or forty council flats could have been built. That bit of private luxury development is part of that liberation policy of which the Chancellor has boasted as bringing such prosperity and better standards to the people.
What is the Chancellor doing to check that kind of private development whereby fourteen families who can afford £8,000, which they made in the spree of inflation which the Chancellor has encouraged, can obtain these luxury houses? There is to be no direct control over it, yet 1,800 people who desperately need council flats are told by the Chancellor, "It is not enough to have a credit restriction policy to check local authority housing and I shall step in and refuse loan sanction for council housing schemes."
In other words, this is the restoration of building licensing, but on the public sector only. Building licensing on the private sector has been abolished and is not to be restored. This means, in effect, that when the Conservative Party says that it believes in freedom from controls, it believes in freedom only for the luxury section of the economy. I am sorry that the Chancellor has left the Chamber in the middle of my speech. I wanted to ask him a specific question about housing with which he did not deal in his speech. I hope it will be dealt with in the Government's reply.
What about housing improvement schemes in areas such as Hornsey, where it is extremely difficult to get sites for development—particularly where they have a Tory council which always gives the best sites to private development of the luxury kind? It is vital that the councils should get ahead with the improvement of existing property. Hornsey council has a programme for improving 370 pre-war council houses. It is a pretty good indication of what some pre-war council houses were like under a Tory Administration that these improvements consist of installing a bathroom and a proper kitchen. Some of these pre-war council houses were actually built without a bathroom.
This is a question of giving 370 modest families one bath—not of installing two bathrooms in each of 14 £8,000 houses. The total programme of the 370 houses is to cost £140,000 spread over a number

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of years at a rate of about £30,000 a year. So far the consent to such schemes has been automatic. Is it to continue to be automatic? A good deal of improvement work of this kind is being done throughout the country. Much of it consists of installing bathrooms and kitchens, the basic amenities for a civilised standard of life. I want the Government to tell us whether this scheme is to be slashed under the controls which they propose.
The hon. Member for Farnham—and I am sorry that he is about to leave the chamber; my speech seems to be causing hon. Members to leave—was right when he said that people were worried about the cost of living and that we had lost touch. How right he is about people's feelings on this question. When we have asked the Government for their cost-of-living policy they have had a very simple answer; they have turned round and jeered at us and said, "Why should we worry? The electorate did not."
I will be honest with the House: it is true that the cost-of-living issue did not bite very deeply during the Genera] Election. It was not a great vote-catcher at that time. The simple reason is that the Government boasted in their Election material that wages had been allowed to follow prices in an upward spiral. Here is another extract from their propaganda:
"Record high earnings, record spending."
That was the boast of the Government in May, yet in February they had already foreseen the inflationary crisis and its effects on the country.
When the Chancellor said that the country was quite satisfied he was rebuked by the "Observer" for being "amazingly smug and complacent." On 19th June the "Observer," after the last economic discussion in the House, asked,
"How long must the pretence that all is well be kept up? There is the major problem of creeping inflation which is getting, if anything, worse rather than better."
It is all very well for the Government to say, "The country did not mind in the Election, why should we?" Of course the worker does not mind prices rising if his wages rise automatically. One of the boasts made by my Conservative opponent in the Election was that wages had risen even more than prices, and that workers should therefore vote for the Tory Party, because, even though prices
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went up, wages would go up at least as much.
In other words, that was an open invitation to the people of this country not to worry their heads about a cost-of-living policy because there would be as much a free-for-all in wages as there was in prices. That is an open invitation to inflation. It won votes. It was a promise that nothing would be done about inflation because, while prices would continue to rise, nobody need worry, for wages would rise, too. That was the most irresponsible piece of electioneering which any party has ever produced.
Of course it cannot last. We knew it could not last and said so at the Election —and were called Jeremiahs for saying that it could not last. Now the Treasury Bulletin for Industry, in its latest edition, has told us what we all knew weeks ago—that although world trade in manufactures is expanding, the British share of that expanding world trade is not keeping pace with the share of the United States, Germany and Japan. Why is that? The Treasury Bulletin gives the answer quite simply:
"In recent years, it appears that in manufacturing labour costs have risen faster here than in the United States and in Germany."
Of course, the spiral has to be broken somewhere; it cannot go on. Yet the Government refuse to state their cost-of-living policy either in the constituencies or in the House, because they dare not state their policy. Their policy is to break that spiral at the expense of wages under the threat of unemployment which will come when our export markets are jeopardised. That is the policy. It has always been quite clear.
The Chancellor has said that costs must come down, and the Treasury Bulletin has said that the level of our costs is crucial. The Chancellor has talked about "hard work and consolidation." Consolidation of what? Wages? Are we to consolidate wages without having a prices policy? Having delighted in the fact that so many workers were such good Conservatives that they voted for a free market economy and an unrestricted upward spiral in wages in pursuit of that free market policy, how can the Government now turn round to them and talk of consolidating wages? How can we turn to the workers and say, "You must exercise

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restraint," when all they are doing is to practise good Conservative economics—and, after all, that is how the Government won the last Election.
It is therefore not surprising that we face this inflationary situation; it has been deliberately encouraged by the Government, and it is the policy on which they won the Election. Perhaps the workers read the "Economist" and perhaps they read this week's issue and the very illuminating article "Profits without Prophecy" which pointed out that
"the rise in trading profits reported in the second quarter of this year … is the steepest proportionate rise that the figures had shown for over two years."
The article goes on to say that the investor
"can reasonably take courage from the fact that there were fewer obvious signs of timidity in recent dividend decisions."
When restraint is exercised in dividends it is timidity, but when restraint is exercised in wages it is responsibility. The article concludes, that from the investor's point of view
"It has been sunshine all the way and there are lots of investors, cocking their weather eye, who expect it to continue."
On the other hand, it is nonsense to suggest that the workers have been doing fabulously well, for in the middle of the Election the "News Chronicle," in its City columns, printed some interesting figures. Oscar Hobson produced some very useful material which some of us were able to use in the Election. He pointed out that,
"Whatever the politicians may say, the cost of living has in these two years been rising more steeply here than in most other countries … In several of the countries, notably in Germany, France and the United States, real wages have been rising faster than here, but the stability of the cost of living in those countries suggests that productivity has been increasing more rapidly. There is a rather ominous 'spiral' look about the step for step advance in our cost of living and wages rates."
Who started this wages-prices spiral? It is the old argument of which came first, the chicken or the egg. I was in the House in March, 1952, when the present Chancellor of the Exchequer laid the egg of higher prices which hatched into the chicken of higher wage demands. He cut the food subsidies by £160 million and offset that by a mere £80 million in concessions.
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What we know as an historical fact is that from their coming into office in 1951 the Government have been unfolding an economic policy of deliberately stimulating price increases. They were able to buy off the political consequences of that until recently by allowing wages to follow prices. But they knew that there was a ceiling beyond which they could not go and they planned to call in aid the external effects and the economic crises which must follow and to say to the worker, "Do not blame us; it is not our fault. Export markets are difficult. We have competitors in Germany, Japan and the United States. The wage increase you ask for cannot be given because costs have gone up. The choice is either a wage increase or unemployment." When we get to that point, an attempt will be made to break this spiral at the expense of the wage standards of the workers of this country.
Mr. Nicholson: May I drive a little sense into the hon. Lady's head? This is not a question of party politics; it affects us all. Does she not remember that under her own Government in 1945–51 prices went up? Does she boast of the fact that wage rates did not increase pari passu with prices? The world did not begin with the Butler egg in 1952.
Mrs. Castle: It is, I think, now all an established part of the exchanges between both sides of the House that in 1951 our domestic prices went up in obedience to an upsurge in world prices. Up till then we had been more successful in keeping prices steady than any other major industrial country. Then we got the backwash of the Korean war. When the Conservative Government came in, instead of world prices rising because of the stockpiling that was going on through fear of a world war, stockpiling was falling off, and that led to a slump in prices. What happened was that world prices were going down and ours were going up. They were going up because it was a deliberate act of Government policy to stimulate them. They always believed that prices were too low and not too high. I suggest that it is time that we had a cost-of-living policy. I agree with the hon. Member for Farnham that this cannot go on.
At whose expense is this spiral to be broken? I suggest that it is quite in-

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tolerable to break it at the expense of wage rates.
Mr. Osborne: Who is doing that?
Mrs. Castle: The Government are saying that costs must come down.
Mr. Osborne: Who said that?
Mrs. Castle: The Chancellor said it this afternoon.
Mr. Osborne: Not wages.
Mrs. Castle: I want to know then how he proposes to bring down costs, and I say that the only way, unless we have a price policy, is by breaking the wage levels through unemployment. I suggest to the Chancellor and to the Government quite seriously that we are getting to the stage in the House when every time there is a wage demand in any important basic industry in our country or a price increase by a nationalised industry it is subjected to the most careful scrutiny by this House, just as the recent price increase of coal was subjected to scrutiny only last week in this House.
When coal or any one of our nationalised industries is concerned, we are in a position to examine price increases with scrupulous care, to see whether they are justified, whether economies can be made, and whether a shilling can be knocked off the proposed price increase. For the whole of the private sector, however, the Government have a different policy, and the private sector is free to do what it likes. One of the consequences is that we have remained in this general inflationary atmosphere, that when price increases are made there need be no public accountability to anyone.
I was glad to find myself the other day in company with the "Daily Express" on this issue. Immediately following the announced increase in the price of coal, we had the iron and steel companies of this country announcing a 5 per cent. increase in the price of steel. Everyone shrugged his shoulders and said, "The price of coal has gone up, so the price of steel must go up; everything must go up." How do we know that that increase was justified?
Mr. Robson Brown: As the hon. Lady knows perfectly well, there is an Iron and Steel Board appointed by the
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House, with full responsibility and accountability to us and the nation for the price of steel. No single steel company or section of the steel industry can increase its prices without submitting its costs to the Board, which decides the selling price. So she should withdraw that remark.
Mrs. Castle: I am aware that the Iron and Steel Board is responsible for fixing the maximum prices of steel, but there has been no public scrutiny on the Floor of this House to justify the decision of the Iron and Steel Board. We have not had any examination here of the price of steel, yet steel enters into every single item of production which we have been talking about today, including the capital goods which we need to export.
I agree with the "Daily Express," which said only the other day:
"The steel companies are the latest to contribute to this continuing process of inflation. They are putting up their prices by £2 a ton.… the steel firms put the blame on coal. They say that they must pass on the extra costs of their supplies. Why should they do anything of the sort? Anyone would think that the steel firms were barely making ends meet. In fact their earnings, since they were returned to private hands, have been tremendous. So far this year 20 iron and steel companies have shown profits of nearly £83 million between them. How much more do they expect to make before they pay the extra coal bill themselves? Industry has a public duty to absorb price increases when it is prospering."
I say that it should be the duty of the House to have a price policy, instead of following this steady inflationary drive to the point at which there will be unemployment to enforce wage reductions. That is the inevitable consequence of the policy of the inflationary drive which the Government have intensified.
I suggest that it is time that we took this question of rising prices seriously and that every single price rise should be subjected to the same scrutiny and examination as was the recent increase in the price of coal. We ought to decide, as one of the measures to deal with this problem, that no company should be allowed from now on to increase its prices without the approval of the Board of Trade and proper examination and scrutiny.
The Government won the Election on a lie. They won it on a policy which means economic disaster for this country. The simple policy, "Do not bother about

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prices because wages will always follow suit" will mean economic disaster for every one of us, and the only way to break that spiral is to have a price policy.
7.0 p.m.
Mr. Hugh Fraser: It gives me considerable pleasure to follow the hon. Lady the Member for Blackburn (Mrs. Castle) because to accuse us of having won the Election on a lie is fantastic when we compare the records of this Government and the Labour Government. The Election was won on promise and performance—the promise we were able to fulfil and the performance which hon. Members opposite put up.
The hon. Lady put forward two suggestions in her speech. The first was that it is in the interests of this Government and of the so-called capitalist class to induce mass unemployment in this country. I should have thought that by now she would have read and learned enough to know that that is an out-dated myth.
Mrs. Castle: If I may correct the hon. Member, I said that that was the inevitable consequence of the Government's policy. How are we to break the spiral if we do not have a price policy? The only alternative is to enforce wage reductions and, with full employment, that cannot be done.
Mr. Fraser: The hon. Lady said that the question of a rise in the price of coal was fully reviewed by this House. That is precisely incorrect. One of the things which is coming out more and more clearly, and came out of the speech of the Chancellor this afternoon, is that this House is an extremely ungainly body with which to control the nationalised industries. It is clear that when we come to a critical period the House has to be, so to speak, the economic board—to use the German comparison—set above the executive board. If that is the function of this House in relation to nationalised industries, I can imagine no assembly more ill-fitted for the task of being a board of directors when the main object of about 300 of the members of the board is to get rid of the other 300.
One of the things we have to face, and the sooner it is faced the better, is control of the expenditure of the nationalised in-
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dustries. The suggestion of the hon. Lady that the same machine, which could not discuss the question of coal prices except in the most superficial and political fashion, should control the price structure of the country is one of the most fantastic suggestions ever put forward. In economic matters this House is often the fifth wheel of the coach. The sooner we recognise that, the better it will be.
The matter I should like to speak about this evening is the question of the amount of money to be devoted to the capital investment programme for what one might call the energy industries—coal, gas, hydro-electricity and atomic power, which are under nationalised control. Over the next five years the programme in the public sector for making energy will amount to no less than £2,000 million. Also, during those five years, we will use foreign exchange either for imported coal, imported oil or of coal not exported to the extent of at least £100 million a year. It is vital that, somehow, we should effect economies in this part of the capital programme.
I believe it absolutely essential that we should continue the development which my right hon. Friend has discussed this afternoon and that we should pursue the dynamic economy we are pursuing. That is proven by the fact that this year we have increased production by more than 5 per cent. over last year. At the same time, as my right hon. Friend pointed out, the very prosperity and advance of the economy makes an additional strain. That strain in energy supply will be eventually at atomic power. It could be met tomorrow if the coal mines could produce 240 million tons of coal, but as that does not seem possible we must consider this vast expenditure as one item of a group of nationalised industries and see whether economies can be made.
This afternoon the Chancellor pleased many hon. Members on this side of the House and I know that he pleased the hon. Member for Orkney and Shetland (Mr. Grimond) by saying that in future nationalised industries will have to go to the market to get their money in the normal way. I hope that when the Financial Secretary winds up the debate he will explain in slightly more detail what that will mean, because I think it vital that the same control as exists for the free part of the economy should

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be made to apply as far as possible to the nationalised sector.
That expenditure can affect our economy in two ways. First, it can drain away from the export market those vital goods which the Chancellor described as the metallurgical section into home industry. Secondly, unless we see that the best possible use is made of raw materials, it will increase dollar and other expenditure which we have to pay for imported fuel. This matter should be examined to see whether something can be done about it. I believe there could be saving in capital expenditure, some saving of pressure on exports, and some saving on foreign exchange by the better use of fuel.
One of the first things we should consider is the amount of money being spent today by hydro-electricity boards. I believe that at this stage, when we are pressed on our investment side, it is not intelligent to invest such large sums of money on the peak programme for producing electricity. We are investing on 11 per cent. load factor stations such as the new Welsh stations, which will cost about £20 million. I believe that there are cheaper ways of doing it. When we are under pressure from abroad for exports and under inflationary pressure at home, that programme should be looked at.
Also, in the fuel and power industries we should have a look at what could be done in the way of substitution or employment of unused capacity. Today, there is unused capacity in the oil refining industry of this country, and also in electrical generating.
No less than 4,500 kilowatts of electricity-producing machines are in private hands, that is to say, outside the Central Electricity Authority. We must remember that the Authority will be spending £1,000 million and more over the next five years and that this power, in private hands and in factories, when it is not fully used, should be put into the supply available from the Authority so as to reduce the need to build more peak stations.
More could be done by furthering investment in the gas industry as opposed to the electricity industry. Capital investment in gas produces the same output in thermal units for roughly a third of the amount in electricity investment. Through the catalytic oil process we have means of meeting demand on a larger scale than
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before. I believe there is investment possible in that direction, whilst we could cut down on other investments.
It is possible to look at the issue of the better use of coal and oil. I shall not repeat remarks about coal conservation made by my hon. Friend the Member for Kidderminster (Mr. Nabarro), but I must confess that I am far more in agreement with those remarks than with the remarks of other people. I think there could be heavy coal saving with a comparatively smaller capital investment than we are now called upon to make in creating new capacity.
Her Majesty's Government, by increasing the price of coal and letting coal find a proper market price, have done far more towards coal conservation than any activity of voluntary bodies such as N.I.F.E. As the Chancellor said this afternoon, the question of oil should be considered. Our oil policy should be such as to make the maximum use of oil resources available at the lowest cost to us.
As every hon. Member knows, there is plenty of coal in the ground and there is plenty of crude oil. The problem is that there are shortages of certain refined types of oil—mainly diesel oil and fuel oil—which, unfortunately, owing to the structure of the world's oil trade, tend to be dollar imports. Hon. Members will know that this year alone we have imported diesel oil from the United States to the extent of about 50 million gallons. This tendency will, of course, grow.
If one forecasts the present rate of growth of our oil imports and looks ahead to the year 1960, there will by then have been a considerable increase in this sector. At that moment, it appears likely that the diesel oil which we shall then have to import will be in the neighbourhood of 9 million tons as opposed to 5 million tons today, and of fuel oil 20 million tons as opposed to 4 million tons today. How can steps be taken to see that this country, by a heavier refinery throughput programme and by a better use of oil, reduces the cost of these fuels? I believe that it can be done and that this could make a considerable saving in both our dollar and our sterling imports during this period.
The truth of the matter is that all over the world the thing which is in surplus

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from the oil refineries is motor spirit. There has been a revolution in oil refining. The world's demand for oil is not in the form of motor spirit, as it was before the war. It is now in the form of fuel oil and diesel oil. What we must do is somehow reduce our costs of this imported oil by absorbing a sufficiency of motor spirit, or what are called the top elements from the crude oil when cracked, to make certain that the total throughput of crude oil through our refineries is increased, thus reducing costs.
There are various ways of doing that. One method, of course, is to reduce taxation on petrol. This would mean an increase in the throughput of crude oil, but that is probably fiscally impractical. There are other methods which can be undertaken, such as by seeing that the diesel engine, which is wasteful of raw materials, more expensive to build and wasteful of man hours, is slowly replaced by more light scale petrol engines.
The third method, which, I believe, is the most practical one, is for the trade unions, the Government and the oil companies to agree that the safety factor in the type of oil that is used in energy producing plants should be lowered to enable the top elements from crude oil—that is, the motor spirit equivalents—to be mixed in with the lower basic fuel oils to form a new fuel, which is perfectly possible, with which to fire boilers for steam raising and other purposes. This method has been used. I believe that some petroleum companies are actually heating their boilers by using motor spirit, which must seem amusing to us when we think of paying 4s. 6d. a gallon to our garages for it. We must think out these things, because during the next few years these imports will swell and will be a dollar drain of unbearable magnitude.
Further, we must see that the best use is made of oil, in precisely the same way as we must see that the best use is made of coal. Oil has many facets and uses. In some engines, like the diesel electric engine, it is nine times more efficient than coal. Used for steam raising, it is only one and a half times as efficient. Used for gas, it is nearly twice as efficient, and for certain steel processes it is four times as efficient. Surely, we must see that in those sectors where the Government are responsible and where the oil
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companies and industry can be encouraged, oil is used for the best purposes.
Another direction in which, I believe, economy can be effected is by the Government deciding whether sufficient coal will ever be available. At the moment, dual-firing systems are being installed beneath C.E.B. boilers. This installation puts up the cost per kilowatt installed by about £10. Surely, we have come now to the point at which we can decide whether coal will ever be available in sufficient quantity. And I regret to say that, as things are, it is too late to hope for very much in that direction. But the moment for decision has arrived.
I would say to the Government that with the progress we have made, with the expansion we are making, with the pressure on resources and especially on investment, the fuel and energy producing industries should be looked at to see whether economies cannot be made to save our capital investment and to improve our exports. At the same time, we should investigate even more closely whether at home we cannot make better use of coal and of oil itself. If these things were done, I believe that over the next five years we could make a considerable reduction in the capital investment programme and improve exports. I believe also that we could save abroad the pounds and dollars that we can ill afford to lose or pay.
7.16 p.m.
Mr. Austen Albu: The hon. Member for Stafford and Stone (Mr. H. Fraser) has made one of the first practical contributions to the debate that we have had for some time. By "practical" I mean detailed proposals of the kind of thing that the Government might do. But the hon. Member is in the wrong party, for the proposals that he made are proposals for planning and for discrimination in investment and in imports, which are methods that the Government refuse to adopt. The Chancellor of the Exchequer persists in his doctrinaire policy of using only fiscal methods to deal with what is agreed on both sides of the House to be a seriously inflationary situation.
I was very interested in some of the things that the hon. Member was saying, particularly about the use of oil. Although some of the more technical

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details that he was discussing are not particularly original, they certainly need full consideration. There is one thing that I have wondered about oil refining. The hon. Member was quite right in saying that there has been a change in many countries in the use of oil and petroleum, so that much more fuel oil and diesel oil but much less motor spirit is now used.
That is not, however, the case in the United States. I have never quite understood why it is not possible for us to exchange our surplus motor spirit, which is inevitably produced in the course of refining, for the United States' surplus of the lower fractions. However, that is a matter that the Government might look into with the oil companies. The whole situation of oil drilling and refining is so complicated that, unless one is mixed up in it, it is difficult to understand.
The method of not using discrimination regarding investment has led to the necessity for the Chancellor of the Exchequer to use almost a blanket control to try to deflate the economy. We have warned him of this right from the beginning of the year. When all his gaudy announcements were made and bribes were given to the electors—the proposals for more hospitals, roads, railways and nuclear energy, more investment in the mines and in electricity, and so on—some of us asked the Chancellor whether any estimate had been made of the yearly cost of this investment, together with that of other forms of investment, particularly in private industry, so that he could see whether it was possible for the economy to carry them or whether they were merely window dressing.
The Chancellor said at the time that it was impossible to give the figures, but I am very glad that the Treasury is now requesting private industry to provide figures of its proposed investment and the level of its stocks over the next year or so. This will make planning a very great deal easier for the Chancellor, but it is a little late now, after making all these gaudy promises to the electors about what was to take place.
There has been some discussion about the cuts in investment. It is rather like the Government's attitude to defence. There are to be no cuts, but the total programme is apparently to be stretched out.
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This, of course, is a reduction in investment, just as there was a reduction in the defence programme at the time. No playing around with words will alter the fact that it is a reduction in the programme. The total figures remain, but the amount to be spent each year falls and the rate of investment falls. I should have thought it was fairly obvious that there is to be a reduction in investment.
There was some discussion between the two sides of the House on whether the investment cuts should be made in the private or public industries, but I think that is quite beside the point. The point is where we should now encourage investment to take place or should discourage it, whether in public or private industry, because we want investment where it will do most good, particularly from the point of view of exports and the balance of payments in general. A panic action to damp down on all investment now could have nothing but disastrous results on the economy as a whole.
I want to look at two places where, I think, the Government might find methods either of saving foreign currency or helping the balance of payments by increasing exports. Let us look, first, at the motor industry. At the beginning of the year, the motor industry announced very substantial plans of expansion, and if we take these together with the component and raw materials industries which go with the motor industry, it would mean a very heavy investment indeed. I do not know what it is per annum, but I think it is probably in the region of £100 million per year at present. The home demand for cars has been rising and home sales have been rising faster than export sales.
The Chancellor is increasing the initial deposit on hire purchase, but I do not know what proportion of the total cars sold are sold on hire purchase, though I think that the proportion has been rising. We are aware that a large part of our home market car sales are for business purposes, and it seems ludicrous that a business man should continue to receive the 40 per cent. depreciation allowance if he buys a car every year. I suggest that it is time that we dropped the initial allowances for motor cars, and also put a limit on the capital value on which depreciation on ears for business purposes is allowed.

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The Government might also call the leaders of the motor industry together and discuss their plans with them, because the industry is not only absorbing capital equipment on a very large scale, including machine tools—the machine tool industry is able to supply what the motor industry wants, but has a very poor export record —but the motor industry is also largely responsible for the increase in steel imports, which is very serious indeed. In the first five months of this year, the monthly average of steel imports was 146,000 tons, compared with 82,000 tons in 1954, when the figure had been rising; and it is still rising. Of these total imports, sheet steel represented 34,000 tons monthly, compared with only 13,000 tons monthly in 1954, and, in addition. there is an extra 10,000 tons of tinplate monthly.
I reckon that the cost of importing steel is now getting on for £100 million a year. Of course, we all realise that there is a limit to the reduction that we can make in imports of raw materials for industry, although I believe that we might well consider whether the rate of expansion is not greater than the economy can bear.
There is still great scope for reduction of imports in agriculture, particularly in feeding stuffs. In the last year or two, we have been importing more and more feeding stuffs from abroad, and less and less have been grown at home. When the importers and compounders in this country were given freedom, it was hoped that they would be able to buy cheaply in world markets, but that has not turned out to be the case.
Anyone who has read the interesting article by Mr. Lloyd, in "The Times," will have realised that the farmers are fattening their cattle on a cost-plus basis. They are guaranteed average prices for their cattle which are based on costs, but the costs are the costs of feeding stuffs which they are free to buy from abroad to any extent they like. It does not pay them, or pays them very little, to go in for growing their own feeding stuffs, and this is very largely owing to the Government's policy, which policy has also had the effect that less and less grass has been grown for drying last year, because, in 1952, the Government wrecked the grass drying industry.
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The value of the imports of wheat and coarse grains has risen from a monthly average in 1954 of £10 million, for the first five months, to £17½ million in 1955, and imports of oilseed and cake have risen from £1,569,000 monthly to £3,148,000. Here is another increase of nearly £100 million a year in imports which is very adversely affecting the balance of payments. These feeding stuffs imports account for nearly one-third of the rise in imports of food, beverages and tobacco, which have gone up by nearly £30 million per month in the first quarter of this year.
The Chancellor might also look at the very rapid growth in large-scale office building which may not be quite so necessary now as it appeared to be to the present Minister of Education when, as Minister of Works. he announced his policy two years ago. Unless the Chancellor wants to slow down the whole tempo of the advance which we have been making in industrial expansion and production, and particularly in industrial change which is so important, he will have to use discrimination in the controls which he is now using and, in particular, decide which investment we want to encourage and which should be discouraged.
I suppose that, in addition to all the other things which some of my hon. and right hon. Friends have mentioned, the present controls and restrictions will mean a cut in the programme of scientific and technical education which we heard about only last week. This is a very important form of investment for Britain at present. If we have to have reductions in investment of this type, then the sort of situation in which we now find ourselves is likely to continue for the rest of our lives.
7.27 p.m.
Sir John Barlow: I do not intend to follow the hon. Member for Edmonton (Mr. Albu) in close detail, but in view of his remarks about the cost of imports of feeding stuffs for agriculture, and especially for feeding cattle, I will say that if he tries to feed steers or heifers with imported feed at present prices, I do not think he will make much out of it; on the other hand, he will probably suffer substantial losses.
In regard to his remarks about the motor car trade and the initial allow-

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ances, I would suggest that it might help matters and might release more high-class cars for sale abroad if cars run on a firm's account had the name of the firm printed on them in large letters, in the same way as lorries have. Then we should know exactly which cars were being run on firms' accounts and which were not, and it might be a very good thing indeed.
I should like to congratulate the Chancellor on the way in which he has tackled and faced this problem about which he has talked to us today. There was a similar problem, though it was not quite so acute, when he spoke to us on 24th February, and he dealt with it on lines similar to those on which he has spoken today. He restricted advances and hire purchase, and he increased the Bank Rate. He made it clear at that time that some action was necessary. He also made it clear that if that action which he took then was insufficient to meet changing needs he would have no hesitation in making further changes later. As soon as it became clear that more changes were necessary he came to the House and did what I and most of us consider is necessary.
In reading in the OFFICIAL REPORT his remarks in February, when he made his statement, I am interested to see that apparently there is a misprint in HANSARD, in Vol. 537, c. 1453, where it is stated that the Bank Rate was to be increased "by" 4½ per cent. I cannot think that that was right at that time, and it is rather surprising that that small error has crept in.
I think, however, that possibly the changes which the Chancellor has just announced may not be quite sufficient. We all know that credit and confidence in finance and international finance are very delicate indeed. If we overdo what is necessary we may destroy valuable confidence, which it is most difficult to restore. We know that in response to his suggestion in February the banks imposed a credit squeeze.
It was interesting to see that the Chairman of the Clearing Banks Association, about a month ago, wrote to "The Times" and appealed to would-be borrowers to reduce their requirements. He indicated that if they did not do so the banks would have to do it for them. I would ask the Chancellor whether he
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knew of that letter before it was written, and if the recognised method of conveying such information from the clearing banks to the public is the centre page of "The Times" and of "The Times" alone. One would have thought it might have been better to have conveyed that information through a much wider Press, or, indeed, in a totally different way. As far as I can remember, that was the first time there has been a letter of that kind, and I wonder whether it was sent with the Chancellor's knowledge.
It seems to me that in a matter of this kind it is advisable to be constructive so far as possible. For that reason I should like to make a very few suggestions, and I hope that some of them may be of use. Yesterday the Chancellor laid great emphasis on the fact that the banks should reduce their advances to the public. Having read the letter which was published in HANSARD today, it would seem to me that he wrote in
general terms to the banks. I cannot think he wishes to reduce all credits and all advances.
For example, if he reduces agricultural advances substantially it will mean that agricultural production will diminish. If a farmer wishes to buy a farm and to get a substantial advance for that, it may be a good thing to refuse it. If he wishes to increase or to maintain his present advance for production, then it would be inadvisable to reduce it. In the same way, manufacturers and other people who are exporting goods should be allowed to maintain or increase their advances, otherwise exports are bound to diminish, and that would be very serious for this country.
I suggest to the Chancellor that he should elaborate the letter which he wrote yesterday so that there may be no misunderstandings among the banks. We know only too well how misunderstandings can arise and have arisen among the very small circle of people concerned in financial matters. This is so important that I feel that the Chancellor should leave no ambiguity about his intentions.
My right hon. Friend has asked industry generally to postpone and curtail capital expenditure. I feel that industry generally will readily agree to do that, knowing the necessity at the present time, but in doing that the Government have, I feel, a very great responsibility to see

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that their side makes an equal contribution. It is useless to stop works which have already been started. That, indeed, would be a very serious waste. but all new projects should be most carefully vetted, especially local government expenditure, over which the Bank Rate has very little control indeed. The Bank Rate has much less influence on local government expenditure than on normal industry. I think the Government should curtail both their revenue and their capital expenditure. I feel sure that some reduction is possible in both ways.
The Chancellor has laid great emphasis on the reduction of credits and advances by the banks. There are many other sources of advances at the present time as well as the banks—the finance houses, large insurance companies, and others. Does the Chancellor propose to write in a general way a similar letter to them and ask them to adopt the same policy? Indeed, it would be in the national interest for him to do so, and I hope that those different institutions will adopt a similar policy to that which the Chancellor has asked the banks to pursue.
I think we all agree that in making these reductions in advances we must be most careful to see that they do not reduce the production of industry in any way. It is of the utmost importance that industry shall increase its production and increase its efficiency in production, and I hope that the Chancellor, both directly and indirectly, will do his best to see that there is in the national interest a complete removal of restrictive practices in industry and labour which are in any way prejudicial to the public interest. I would add there are some restrictive practices which exist to protect the national interest, and one has to be very careful in differentiating between those which help the national economy and those which are destructive of the national economy.
Yesterday, when the Chancellor made his statement, and finished without any serious reference to the Bank Rate, I was rather disappointed. It would seem that the Bank Rate is not as effective as it used to be in the old days. I think that that may be due to the heavy taxation which exists, so that many people say, "What does it matter if we pay another 1 per cent. for our overdraft if the Government absorb about half the loss in
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taxation?" That is very unfortunate, and if the weapon of the Bank Rate has been blunted I would suggest that it should be used even more ruthlessly to be effective. For that reason I should like to see the Bank Rate raised by 1 per cent. on Thursday.
I am delighted to see that the Chancellor has not tried to plan imports. That would have been a very retrograde step indeed. At the same time, we wish to see imports kept at a reasonable minimum. Coming from Lancashire and representing a cotton area, as I do, I should like to see a reduction in the imports of grey cotton cloth for retention in this country, cloth which could perfectly well be made in this country, knowing as I do that many of these imports are subsidised by the country of origin.
In conclusion, I urge the Chancellor to be even tougher than he has been. He has made one effort to remedy this difficulty. It was insufficient, and it will be infinitely better to be tough now than to run the risk of an autumn Budget, which would be very unfortunate for the country's industry. I urge the Chancellor to continue to be bold and courageous and to stop this inflation forthwith.
7.41 p.m.
Miss Alice Bacon: Like the hon. Member for Middleton and Prestwich (Sir J. Barlow), I should like to see the Chancellor get tougher. The trouble is that the Chancellor is tough with the wrong people. That has been the basis of our case today. In the very few minutes that I shall detain the House I do not intend to enter into the economic arguments that have been made from both sides. Rather do I want, very shortly, to pinpoint two or three of the ways in which the Chancellor's announcement of yesterday will strike at our homes and our families blows which were certainly not expected, at least certainly not by the ordinary people who voted for Members opposite in the General Election.
I was interested to hear the hon. Member for Farnham (Mr. Nicholson) say that we ought to get closer to our constituents and to put their point of view in simple terms. I agree with him. He thought that the cost of living was the most urgent problem for many people. That is true, but I represent one of our great cities, and the problem which I believe is even greater than the cost of

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living is that of housing. The hon. Member for Orkney and Shetland (Mr. Grimond), who represents the Liberal Party, hoped that the Chancellor would restrict still further the number of houses being built. He said that we had got over most of our housing problems. It is only those of us who represent the big cities who realise how immense is the problem of housing. Like my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and other hon. Members, I represent the City of Leeds. Since the redistribution of Parliamentary boundaries, I have represented the centre of the city and the whole of the ring around the centre. There we have a very great problem.
As I said at Question Time today, we have 26,500 families on our waiting list and 22,500 houses in urgent need of demolition. I would be failing my constituents if I did not enlarge a little on what has been said today about housing. The Chancellor of the Exchequer was rather vague about the number of points today. He was altogether vague about local authority spending, particularly vague about house building and even more vague about school building. On house building he said that it was the intention of the Government to leave the ceiling at 300,000 houses. When we attempted to question him about the proportion that would be built by private builders for sale and the proportion to let, he got out of that by saying that it was something which could only be left to his right hon. Friend the Minister of Housing and Local Government.
Surely the Chancellor of the Exchequer is not saying that the policy which that right hon. Gentleman has been following for the last few months and which, I understand, will be even more strongly followed in the next few months is merely the policy of the Minister of Housing and Local Government. Surely it is the policy of Her Majesty's Government. Surely there is some liaison between the Ministry of Housing and Local Government and the Treasury. I believe that that policy of curtailing the number of houses to let in favour of houses for sale has something to do with the amount of subsidy paid for council houses to let.
It is elementary that if we are to pursue the policy of having a total ceiling for the number of houses to be built,
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with no ceiling whatsoever on private building, as time goes on there will be fewer and fewer houses built to let. It is that which is very much worrying us after the announcement made yesterday, because we cannot help but feel that the policy of asking local authorities to go easy on their works will lead to the building of fewer and fewer houses.
Viscount Hinchingbrooke: So long as the houses are built, does it very much matter? When they are built for sale, the chances are that the person who buys them comes from a rented house and automatically releases more houses to let.
Miss Bacon: The noble Lord is mistaken. If he will come with me when I hold my interviews on Saturday afternoons, he will realise how mistaken he is. I know perfectly well that the 22,500 houses in Leeds that need demolition do not contain many people who would want one of these luxury houses for sale, although I would grant the noble Lord that some people sometimes take desperate remedies.
I had a case of a man—a case with which I am now dealing—who was so desperate for a house that he paid £400 and did not realise that it was on the demolition list. So bad is the house that, although he still owes £400, he has written to me to see whether he can get the house condemned, so that he can get into a council house, knowing that he will get no compensation for the demolished house and will still have to repay £400. That is one of the problems which confronts us, and I appeal to the Chancellor not to take any action whatever which will mean a further cutting down of the allocation to local authorities of houses to let.
Further, there is, of course, the cut in the capital building programmes of local authorities, apart from housing. I want to ask the Government whether there will be any restriction on other building by private bodies. At the moment there is no restriction whatever on either private building, or other forms of building. Is there to be some further restriction on private building, other than housing, in the same way as local authorities will be asked to curtail their capital building programmes?
I want to refer to the school building programme. During his speech today I

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asked the Chancellor to say something specific about this, but all I got was that schemes which are already being approved will continue. We did not get an assurance about future schemes. What will happen over the next few years? A great many right hon. and hon. Gentlemen opposite paid a great deal of lip-service at the General Election to education. The Prime Minister mentioned education in his television performance. He devoted five minutes to it—a considerable amount of time—in the speech in the debate on the Address.
My hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater) and I were at Scarborough at Easter, a few weeks before the General Election, when the Minister of Education told 3,000 teachers how he was to provide more and more places in the coming year. Not only did he make a speech—and, when all is said and done, 3,000 teachers comprise a very important body before a General Election—but he also took the precaution of having a leaflet printed and a copy put on every seat in the hall, so that the teachers could take away with them details of the number of schools to be built over the next five years. I want to know what is to happen to that programme. Three weeks ago, on 7th July, I asked the Minister of Education a Question about overlarge classes—classes with over 40 pupils in them. I was told that in January, 1951, the number of classes with over 40 children in them was 35,103. By 1954, the number had risen to 43,751, an increase of 8,648.
Under these circumstances, are local authorities to be told to make cuts in their programmes next year? We had cuts imposed in the school programme by this Government in 1951. The first thing that the Government did was to issue Circular 245. During the six months before the General Election we had plans for more school buildings, but, since the General Election, we have come back to the bogey of cuts in the education service; and I hope that the Government spokesman tonight will be much more specific about our school building programme than was the right hon. Gentleman today.
It is true that we have had Circular 283, and the Chancellor said that it must continue. But that Circular was designed to
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clear away some of the older schools in the rural areas. In addition to trying to revise the conditions of classes, we need more schools to replace old schools in the towns as well as in the rural areas. Those interested in education had hoped, also, that we should be able to go on with some of the other requirements envisaged in the 1944 Education Act.
I wish to say a word about hire purchase. One of the good things in the post-war years has been the fact that ordinary working women have been able to take advantage of electrical appliances which were once considered to be luxuries. Only those who live among working people know the difference which it makes on washing days when the woman of the house can use an electric washing machine instead of having to do a big weekly wash in the old-fashioned way. I was sorry to see that electric washing machines are among the items chosen by the Chancellor to bear an increase in the amount of deposit under hire purchase. Though he may retain all the other things, at least I ask the right hon. Gentleman to exempt washing machines and let women have a little more rest on their weekly wash day.
I think it clear from this debate, and the case which has been advanced by hon. Members on this side of the House, that in April we had a bogus Budget. The party opposite won the General Election on a bogus programme. Indeed, I would go so far as to say today this country is controlled by a bogus Government.
7.54 p.m.
Mr. Cyril Osborne: I hope that the hon. Member for Leeds, South-East (Miss Bacon) will forgive me if I do not follow the argument which she has been advancing about housing. I sympathise with what she has said about the importance of housing in our family life. Those of us who do not represent constituencies in big cities do not perhaps see the problem quite so vividly as those who represent great concentrations of the population. I entirely agree with the hon. Lady that that is probably the most important of the human problems which face us.
I should like, however, to return to what we are supposed to be discussing. We seem to have got away from the problem which we are supposed to be

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debating tonight. Yesterday, the Chancellor set the problem in simple terms, when he said:
"But one thing is clear. We are at present absorbing too much of our production at home. Our success in increasing production and our very prosperity require increased imports which, in turn, must be paid for by increased exports. Sufficient extra exports, however, are not yet forthcoming."—[OFFICIAL REPORT, 25th July, 1955; Vol. 455, c. 826.]
That is the problem which we all should be discussing—and not talking about who won the Election or whether the Government are bogus or this, that and the other. The hon. Lady will have to put up with us for the next four years. In four years' time she can start electioneering again, but in the meantime, let us face the problem confronting the country.
Miss Bacon Miss Bacon rose —
Mr. Osborne: No, I do not wish to give way—
Miss Bacon: But the hon. Gentleman has started electioneering now.
Mr. Osborne: The problem before us is, how are we to increase our exports? If we do not increase them, we shall, as a nation, be living beyond our income and that, of course, cannot last.
Before I deal briefly with the problem, I should like to say three things to the Chancellor. I was glad of what he said at the beginning and at the end of his speech. Speaking with all the authority which, as Chancellor, he possesses, he said that the nation is not facing an economic crisis. He said that at the beginning of his speech and at the end. He said that today there was no situation similar to the economic crises which we faced in 1947, 1949 and 1951.
The second statement that will help the nation and our economy was the emphatic denial by the right hon. Gentleman of the rumours spread from Paris about the possibility of convertibility. That should help to strengthen sterling. Thirdly, the Chancellor said—it is a thing upon which we should all agree—that we must have industrial peace. We must keep down strikes and secure industrial peace if we are to have lower production costs and greater output. I am sure that those are three most important statements which will be supported by hon. Members on both sides of the House.
Mr. R. Moss Mr. R. Moss (Meriden) rose —
Mr. Osborne: No, I do not wish to give way; I have been in the Chamber all day—
Mr. Moss: So have I.
Mr. Osborne:—and I wish to make my own statements in the short time allotted to me.
As I see it, the problem arises from a condition of full employment with inflation. A former Member of this House who represented Gloucestershire, South wrote an essay in the new series of Fabian essays in which he said—I am speaking from memory—that the Western democracies have had such a bitter experience of unemployment that they never intend to have unemployment again under any circumstances. Speaking for his party—and, I think, for the whole of Western politics—he said that we would rather have creeping inflation than a return to unemployment.
That is quite true, and I think it a fair judgment, but—and this is the point—if we are to have the full employment which we are determined to maintain, we have to find some way of curbing the inflation which seems to go with it. If we do not do that, ultimately we shall price ourselves out of the export markets and be unable to sell the very goods by which we are to pay for the foodstuffs which we must import and for the raw materials we need in order to keep our people fully employed. That is the problem which faces us, no matter which party is in Government.
Because of that, I wish to ask my right hon. Friend a number of questions which have nothing at all to do with party politics. First, if the national productivity remains at the same level as it is today, how much must home consumption be reduced in order that we may pay our way? What sacrifice in our standards of life must we endure if we are to get the necessary exports and if, on the other hand, we are not to expand our total productivity?
The Chancellor spoke about our having too much fat on the home front. I want to know by how much that home front fat will have to be reduced if total productivity is not increased. Secondly, I should like to know, if the present rate of home consumption remains the same—which we all want it to do, because none of us wants to see a cut in our standard

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of living—by how much national productivity must increase in order to meet the necessary exports which the Chancellor says that we require. What sort of hurdle has both sides of industry to overcome if we are to break even?
Lastly—and I think that this is the heart of the matter—is the Chancellor sure that the United Kingdom can sell its products abroad and that our comparable costs from industry to industry are sufficiently low to enable us to sell abroad that extra production which he says is required?
I will give the House three examples of the difficulties that I am sure we shall have to face. Hon. Members may know that in recent years this country has enjoyed almost a protected market for motor cars in Sweden. During the last six months the imports of cars into Sweden have considerably increased, but during the same period the imports of British cars into Sweden have dropped by more than half, whereas imports of German cars have more than doubled.
The explanation which I was given for this state of affairs is that German cars are cheaper and better. The priorities which we enjoyed in that market have gone for ever. Supposing that under the restricted credit facilities we stopped the selling of cars on the home market and made them available for export to Sweden and to other countries, is the Chancellor sure that our costs are so reasonable compared with world costs that we could sell those extra cars? It is no use depriving the Englishman of his motor car in order to export it if there is no importer to buy it. The whole crux of the matter is our comparative costs.
Then there is the case of shipbuilding and ship repairing. In recent months the Blue Star Line and the Shaw Savill Line have both ordered a number of large vessels from German yards. They have done it for two reasons. The first is, I agree, that the Germans can give quicker delivery and can quote a firmer price. Our quotations are much more uncertain and our delivery dates are much longer. Even if we denied ourselves the pleasure or re-equipping our own mercantile fleet, we could not sell to third parties in competition with the Germans. It is said that productivity in the German yards is much higher than in ours, and I should like
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to know what can and is being done to make our yards more competitive
My third example is that of the textile industry. I am sorry that the right hon. Member for Huyton (Mr. H. Wilson) has left the Chamber because on a number of occasions recently he has raised the question of Lancashire's troubles in connection with the importation into this country of Indian grey cloth, Japanese textiles, and, to a smaller degree, Hong Kong gloves. It is not a question of quality but of price. The difference between our price and theirs has been enormous. If, by restricting credit facilities, the purchase of home-made textiles is reduced, thereby making a greater amount available for export, is the Chancellor sure that we shall find a market for them?
It is no use denying production to the home market and making it available to foreign markets if we price ourselves out of those markets. The question of comparative costs is one of paramount importance. That is where the problem of inflation comes in. As a nation, we have said that we will not have unemployment and that, to that end, we are prepared to put up with a minimum amount of inflation. The problem now is how we are to control that inflation so that it does not make it impossible for us to sell our goods abroad. This has nothing whatever to do with party politics. It is a basic economic fact, and if the right hon. Member for Huyton sat on this side of the House instead of on the other he would still have to face the fact, and would find it just as difficult of solution as does my right hon. Friend at the moment.
I propose to make three suggestions as to how this inflationary position could be controlled without going into deflation which would bring about unemployment, something to which, I am sure, no hon. Member would agree. The problem is how we are to induce greater production in this country, and, as the late Sir Stafford Cripps so often said in this House, a more efficient and lower-cost production. How are we going to make the economic machine work more efficiently?
First, I think that high direct taxation such as we endure today, plus inflation, is the greatest disincentive both to workers and management in regard to

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greater production. I have heard men at all levels in industry say, "One might as well play for nothing as work for nothing." There is no doubt that the greatest deterrent to increased productivity is a high rate of direct taxation, and the sooner the Chancellor faces that fact and brings down taxation the sooner we shall get over our problems. The purchasing power of the £ today is about one-third of what it was twenty years ago. The Surtax rate today starts at £2,000 as it did twenty years ago, so that, taking into account the fall in the purchasing power of money, the Surtax rate now starts at about £700. As I say, something must be done about direct taxation.
Secondly, the Government must look at the question of the distribution of manpower. Quite recently we discussed in the House two important industries—agriculture and mining. The complaint was made that manpower was leaving those industries. The coal mining industry complains that it cannot get men to work in the pits. We who represent agricultural constituencies know that men are leaving agriculture.
Where are they going? It is extraordinary that with a total civil employment figure of 22,800,000, some 2,700,000 are employed in the distributive trades, over 4 million in finance and the professions and 1,300,000 as civil servants. I believe that we have far too many men employed in non-productive jobs in this country, and I am sure that if something could be done about that it would help the position.
Mr. Moss: The hon. Member has not mentioned the Armed Forces.
Mr. Osborne: The Armed Forces are not an enormous factor in this matter. They number about 850,000 as compared with the 8 million I have mentioned, and they are not so vital in this consideration.
My third suggestion is that we have allowed a wrong sense of values to develop in relation to home demand. There has been a great outcry—and we shall have another when the cold weather comes—about the cost of coal, which has risen by 12s. 8d. a ton. Industrialists have said that it is scandalous, but I am not so sure. The domestic consumer, who takes over 30 million tons a year, is bound to complain. The total additional cost of the domestic consumption
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of coal this year will be just under £20 million. As Members of the House of Commons, irrespective of which side of the House we sit on, we have a task in front of us—to teach our people to spend their money more wisely.
Mr. William Ross: Whitehall men know best.
Mr. Osborne: Hon. Members must judge for themselves.
There is no justification for the consumer of coal crying out that he cannot afford to pay this extra £20 million a year, which is a mere nothing when compared with last year's expenditure of £864 million on alcohol; £855 million on tobacco, and £187 million upon entertainment. Our values are completely wrong, and it is no use denying it. We fritter away our income upon things which do not matter and boggle at the cost of things which we should be prepared to pay for.
If my right hon. Friend is to control inflation, which is the one thing that is really necessary, he must somehow reduce direct taxation and encourage men to work—for men work only if they are paid to do so. Secondly, he must somehow see that more manpower goes into productive industries, and that the men in those industries are adequately rewarded for what they do. Lastly, I want him to set us all upon an educational campaign to teach our people to spend the money they receive a great deal more wisely than they do today.
8.13 p.m.
Mr. Wilfred Fienburgh: I hope that the hon. Member for Louth (Mr. Osborne) will forgive me if I do not follow his remarks in detail, because I find myself extremely intrigued by the delicate question of the Chancellor of the Exchequer's sense of balance. If the average equilibrist at a fairground had the Chancellor's sense of balance he would have broken his neck a very long time ago. The danger is that the Chancellor's lack of sense of balance will break the neck of our economy.
It is only five months ago that the right hon. Gentleman blandly assured us that he thought he had balanced things just right. Through five months he has slid, lurched, teetered and finally come to rest delicately poised upon one toe again, and he still assures us that he has got things

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balanced just right. Even though, in the intervening five months, the supports upon which he based his policy have crumbled underneath him and the premises upon which he calculated it have proved to be ill-founded, he has succeeded in finding a new sense of balance somewhere else. If the world were to come to an end tomorrow—if this globe were to fragment into a million pieces—somewhere outside the outer stars, hurling towards infinity would be the Chancellor, with his parasol of platitudes saying, "I have just about balanced things nicely."
I now want to discuss his sense of balance in relation to housing. I know that the hon. Member for Louth chided my hon. Friend the Member for Leeds, South-East (Miss Bacon) for discussing housing.
Mr. Osborne: No. The hon. Member must be fair. I begged the hon. Lady's pardon for not following her, and agreed that those who represented the big cities had the problem a great deal more in front of them than we in the rural areas.
Mr. Fienburgh: I forgive the hon. Member.
Mr. Osborne: The hon. Member should forgive himself.
Mr. Fienburgh: I want to discuss the question of the Chancellor's sense of balance in relation to housing. A significant thing happened a short time ago. To achieve this balance he announced that he was imposing certain restrictions upon hire purchase, which had the effect of denying people who were moving into new houses the opportunity of buying furniture to fill them. There was a disbalance between houses being built and the furniture going into them. It was necessary for a balance to be achieved between furniture and housing, and the Chancellor has achieved that balance, but he has done it in the wrong way. He has adopted the restrictive way. Instead of enabling people to buy furniture upon hire purchase and putting that furniture into the houses which have been built, he has reduced the number of houses being built to fit the smaller amount of furniture which people can purchase.
This is ridiculous. It is almost an echo of the situation in the 1930s. He has
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denied people the opportunity of buying furniture while, all over North London, there are unemployed furniture workers. This economic paradox was thought to be one of the miserable monstrosities of the 1930s, but to achieve his balance the Chancellor has managed to perpetrate one of the grosser injustices of that period, in a smaller sphere.
The Chancellor, with what I thought was nothing less than chicanery, this afternoon avoided a question put by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell). My right hon. Friend asked him to give some indication of the balance between the public provision of houses to let and the private provision of houses to sell. The Chancellor said, "That has nothing to do with me; you must ask next door. You have come to the wrong shop." Has it escaped his attention that, as Chancellor of the Exchequer, he is responsible for finding the finance which pays for the subsidies which enable publicly provided houses to be let at reasonable rents?
He has a duty to answer that question. He avoided it, and I hope that whoever winds up the debate for the Government will answer it, because it matters deeply to people like my right hon. Friend the Member for Leeds, South and myself, who represent massive urban constituencies. There may be some parts of the country, in rural areas, where the wealthier sections of the population have a valid choice between buying a house by putting down a deposit and going to a building society, and trying to get a house through the local authority, but there is no such choice in the major industrial centres. There is no alternative in my constituency, Islington, between buying a house and having it provided by the local authority.
We have to build upwards; we cannot spread. The only way we can house our massive list is by building upwards into the sky of London, in flats. There is no opportunity for people to buy houses in north London. Even if they have the wherewithal to pay the deposit and take up a mortgage with a building society there is no valid choice in the matter. The Chancellor is striking a balance in connection with housing which will weigh most heavily against the good people of the towns and cities, who are absolutely

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unable, for physical or financial reasons, to buy houses in which to live.
I now want to discuss the Chancellor's delicate balance in connection with the question of consumption and investment. He implied that he wished to reduce both these things. Again, he felt that he just about hit the right balance between the two. In effect, he has done nothing to reduce consumption. All the weight of the measures he announced this afternoon will fall upon investment. There will be a reduction in consumption on the part of people who would have bought things on hire purchase and will now not be able to do so, but, while the Stock Exchange boom continues and dividends remain unlimited, whatever reduction in consumption is effected on the part of the lower income groups will be more than absorbed by the increased luxury spending of people enjoying the benefits of the Stock Exchange boom and the higher dividends which are being paid. Therefore, there will be no reduction on consumption. There will be an anti-social transfer of consumption from one section of the community to another. Anything which happens to meet these economic difficulties will almost inevitably fall upon the investment field.
There is a by-product to this transfer of consumption. It will remove from the Chancellor any remaining moral authority he had to demand savings, any degree of wage restraint, and any quiescence on the part of trade unions in putting forward wage demands. The transfer of consumption to the higher from the lower incomes or, to put it bluntly, from those who bought on H.P. to those who pay cash down, removes any moral authority the Chancellor had over the broad masses of the people to restrain their demands in the jungle economy and jungle social order which the Chancellor seems to be doing his best to create.
In this generation we have to reduce our consumption. That is not possible on a class basis. It is not possible to do that selectively, by saying that only one section of the community shall do it. We have to reduce our consumption in this generation if we are to hand on any viable industrial heritage to coming generations. We are living on the forced restriction of consumption which was endured by working people in the inter-
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war and pre-war years when so much of our industrial capital was created. We are enjoying the benefit of it now but, in the kind of social and economic world which the Chancellor of the Exchequer is trying and succeeding in creating, we are not replacing that stock of wealth and not creating that industrial heritage which —and this is important—will feed a growing population in an increasingly competitive world.
It is nonsense for the Chancellor to point to the investment figures of the last few months and to boast that they have increased. They had just about picked up from the catastrophic decline that they suffered in the first year or so of this Government's administration. We were just about getting back to the level of investment which this country enjoyed under the Labour Government. We were just beginning to pick up some of the backlog, but even all that is insufficient for the future of the country if we are to compete with nations like Germany, Japan and the United States. They have an enormous weight of industrial investment. We must jack-up our rate of investment considerably. As a consequence, we must accept reduction of consumption on an egalitarian basis. Otherwise, we betray our duty to our constituents of today and, what is much more important, we betray the trust we hold for the generations of tomorrow.
Even if I accepted that a general reduction of investment was necessary, the complaint I would make against the Chancellor would be that the method he has chosen is very unselective. He has chosen the instrument of the Bank Rate. The Bank Rate should, on his argument, go up again on Thursday. If it does not, we shall have the first slow beginnings of a change in the Chancellor's policy from general financial control to some form of more direct control. His original thesis was the use of the Bank Rate, which he described as a flexible weapon, but it was not selective. It is now five months since the last increase in the Bank Rate, and we are still waiting for its results. Unless the Chancellor follows through with a further increase in the Bank Rate he will be discarding the weapon which he thought was so effective. He will be leaving, on his own assessment of the position, the decision to reduce investment in the hands of

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bank managers and bank boards of directors who will, in different parts of the country, apply different criteria; and, what is more, leaving investment to the strength of the reserves of different companies and industries.
It may well be that reduction of investment will fall upon certain firms who are doing good work in the export field, but who have not very large reserves. The brewers have very large financial resources and do not need to go to the banks for their expansion. Under the Chancellor's method they will be able to continue their investment. That is a completely crazy situation. I am not making a speech in memory of my good friend Jimmy Hudson, who is no longer in this House, but am attacking a state of affairs in which it is possible for an exporting industry to be denied finance for expansion while, for example, the brewing industry, or the lollipop industry, or any other industry creating material for home consumption alone, is able, almost by the accident of the strength of its own financial reserves, to carry on with its investment programme unchecked. That is very stupid.
Perhaps the Chancellor will be interested in a word of advice. I do not suppose he is, for a minute. If he wishes to decrease investment—I do not accept the case for this, but I accept the case for decreasing some investments in order to increase others—the Chancellor should look again at the initial allowances and try to devise some means, as my right hon. Friend the Member for Leeds, South suggested a few Budgets ago, of selective, discriminatory initial allowances which would enable at least some form of guidance and direction to be given in the field of investment.
One interesting point arises out of the Chancellor's speech and out of speech after speech from the Government benches. Many hon. Gentlemen there have asked for a selective approach to the problem of investment. We heard a speech from an hon. Member who wanted something quite complicated to be done about investment in the oil industry, another from an hon. Gentleman who wanted investment in agriculture to be maintained while investment in other fields was allowed to run down. Government supporters are demanding a selective investment policy which, by
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definition, is impossible under the broad, slashing, bashing instrument which the Chancellor chooses to use. But the Chancellor has been able in one sector of the economy to be selective, and that is in the field of publicly-owned industries. That is a point which those who have advocated public ownership throughout the years have always made.
Disregarding all the arguments about working conditions, workers' control and discussing simply the pure technique of trying to manipulate the complex economy of modern days, I suggest that the Government's hand is strong in proportion to the amount of direct control they have over industry. That has been proved this afternoon by the Chancellor of the Exchequer. Indeed, it had been proved previously, because two years ago the great complaint of the Chancellor was that industry wanted investment. Then, he wanted more investment more rapidly. He could not get private industry to invest until he provided it with lashings of bribes in previous Budgets.
All the time the record of the public industries was immaculate in this respect, because they were able to respond more directly to the will of a Government presumably ruling in the interests of the community as a whole. Investment in the public sector of industry rose more quickly, more steadily, more firmly than in the private sector. The case was proved there. Now, when the Chancellor—I think wrongly—feels that investments should be reduced, the only field in which he can have a really direct and selective approach to the problem is, once again, in the sphere of public industries.
The trouble, of course, is that in preserving his political equipoise during the last year or so the Chancellor has altogether lost his economic balance. He is no longer in control at all. He may pretend that he is walking a tight rope which he himself has erected with miraculous skill across the economy. He is doing nothing of the sort, but is stepping blindfold into impredictable conditions, because he himself has put the blindfold upon us. He himself has been instrumental in dismantling so much of the effective control which he must now in his heart of hearts wish he had retained over the economy.
I am not worrying about the Chancellor —I hope that he succeeds as a politician.

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What does worry me is the fate of the generations who, ten, fifteen or twenty years from now, will have to try to feed 55 million people from what is left of an industrial heritage after five years of Government by the party opposite.
8.31 p.m.
Mr. A. C. M. Spearman: The hon. Member for Islington, North (Mr. Fienburgh) is exceedingly eloquent, but I thought that he was carried away by his own words when he attempted to see a similarity between the conditions of 1931 and those of today. In 1931, as we all know, there was mass unemployment and a glut of goods which we had not the money to buy. Now there is what the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) described as over-brimful employment and an excessive demand.
Mr. Fienburgh: I am sure that the hon. Member would not wish to misinterpret me. I said that, in one tiny sector of industry, we have repeated the paradox of the 'thirties, of people wanting to put furniture into their homes while there are furniture workers unemployed. The hon. Member can ask his hon. Friend the Member for Wycombe (Mr. John Hall), who, I am sure, will repeat what I said.
Mr. Spearman: The difference, perhaps, is that there are now great opportunities, which were not present in 1931, for all those men to get other jobs, but there might not be the same ease in getting the materials.
I think that the Chancellor's policies in the last two years might be summed up as policies of maintaining a high rate of purchasing power and, therefore, of demand for goods; providing incentives for greater production and investment by tax concessions; and getting rid of controls—liberalising the economy. I do not think that there will be any dispute between the two sides of the House about that rough summary. Where we would disagree is as to whether those were good or bad policies. I think that, up to the present, we on this side of the House can claim that the evidence shows them to have been good policies.
After all, the last two years have been the most prosperous in our economic history. In 1953–54 the real national income increased by about 5 per cent., which is
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far greater than has, I think, occurred since our recovery after the fall of the Socialist Government in 1931. I believe that today, with certain admitted exceptions, there is in industry throughout the country a greater sense of enterprise than has been present for a very long time. It may well be that we have to face difficult conditions for the next few months, but I should say that the economy is in a far more robust condition to face those conditions than it was four years ago.
Most of us would agree that there is some degree of inflation in our economy, and I have been trying to assess just how big it is. Obviously, that is very difficult for those of us who have not access to official figures. I have made out a sort of balance sheet, and if my figures are entirely wrong my hon. Friend will no doubt tell me when he is winding up the debate. I have made this case. The increase in our resources this year, owing to increases in production and variations in the terms of trade, is of the order of £500 million. The increase in the money income, including undistributed profits, is about £1,000 million. I do not suppose that we can expect an increase in savings of more than £200 million. That leaves an increased money income of £800 million against resources of £500 million.
On those figures we appear to be overspending to the degree of £300-£400 million. Up to now we have had before us two choices. One is a policy of having easy profits and excess demand for labour, with many more vacancies than applicants for jobs. I think I can describe that as excess demand for labour. Consequently, there has been no unemployment. The crux of that is in the increase in the cost of living. The other choice is to restrict demand, thereby curtailing profits and eliminating the excess demand for labour. That means some measure of unemployment. Broadly speaking, we have had those two choices and have chosen the first.
The degree to which we can afford that choice depends upon the degree of inflation in other countries. Inflation here may be inconvenient but it is not disastrous, provided that other countries are inflating as much. We have to face the fact that both in America and in Germany prices lately have been much more stable than they have been in this country. We have to face the fact that

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we are living not in an inflationary world but in an inflationary sterling area.
Are the remedies which the Chancellor now prescribes sufficient to deal with this situation? He must remember, and surely does remember, that they are now pulling against the stream. In 1952 import prices were falling and demand was falling, as shown by the greater savings. Excessive stocks were held by manufacturers and have been released. At that time, therefore, the monetary measures were much easier of effect than they are today. If I may give this analogy, it is no indication of the effect of a brake being applied to a car going downhill if it is based on the experience of applying the brake to the car going uphill.
One thing is quite clear: whenever there is a big boom, inevitably there is a serious slump. I do not think that today we are in those conditions, but I think we are in some danger of getting into them. There is a French saying which, in view of my pronunciation, I would rather translate: it is sometimes wise to retreat in order to jump further. That should be our policy today.
What are to be the Chancellor's actions? I think he has roughly three choices: physical controls, fiscal policy, and monetary measures. The "Economist" of 16th July said that the thing
"we must not do is to revert to controls, for if the last few months have shown anything at all it is that controls could not make anything better at once and that they would certainly make them worse later on."
I support that view as strongly as I can. If imports are controlled—and I realise that in an extreme emergency that might have to happen—it can only be, like a violent drug, of use for a short time but makes conditions much worse afterwards. If imports are controlled, then supplies of raw materials will have to be allocated.
No Government, and certainly not the Socialist Government, have ever been able to devise a way of allocating controls according to real priorities. It had to be done on past records of use. That meant that vigorous, enterprising firms were penalised whereas sluggards snapped up all the raw materials they could get because they knew that there might be a shortage. I think it was for that reason that we required so much greater stocks
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under the Socialist Government than under my right hon. Friend's regime. Therefore, I hope that at all costs the Chancellor will avoid reversing the liberalising policy of the Government, and will not revert to controls.
Then we come to the fiscal method. It would be a serious and drastic matter to reimpose further taxes to cut demand. I hope that the Chancellor will not find that necessary. I would say to him that if there is real danger of such a crisis that he would have to use controls, I hope that he will not hesitate to use the fiscal method straight away.
Finally, there are the monetary methods which the Chancellor has been adopting. I do not share the view that because they have not done everything which we might want at once they have failed. On the contrary, I feel that conditions would be very different today but for the firm action taken by the Chancellor. I think that the monetary methods and all reasonable applications of them take a longish time to work.
I would say to the Chancellor that I believe that a sharp increase in the Bank Rate, really dear money for a short time, is far more effective for his purpose and less expensive and less dislocating for the country than moderately high rates for a long time.
Of course, there will be objections made to dearer money than we have now got. One is that it will hurt. Good medicine is often disagreeable, and very often it does not do good until it gives a little pain. If the banks reduce their advances then certainly demand will be cut. If demand is cut then profits will be curtailed. What hon. Members opposite do not always seem to realise is that, if profits are curtailed, there will be some degree of unemployment, because only when profits are very high is it worth while for industrialists to maintain employment at very high rates. As soon as their profits start falling, they would not want a good deal of labour which they now retain.
Mr. Arthur Moyle: I should like the hon. Gentleman to make clear one point. Is he suggesting that part of the good medicine which he advocates is a dose of unemployment?
Mr. Spearman: No. That is the point which I am coming to, because I realise very fully that talking about unemploy-

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ment is political dynamite, and one can very easily be misrepresented. Therefore, I want to spend a minute or two saying quite clearly what I have in mind.
I think that I realise as much as most of us here that mass unemployment in the inter-war years was perhaps the greatest cause of suffering and poverty that we have ever undergone. At that time, I think that we were right to be very frightened indeed of any increase in unemployment, because unemployment in those days was a sort of avalanche which we could not control, and once it started it could suddenly become very big.
I think that we must realise the fact that today that is not the case. Unemployment of that sort is not a bogey today, and I believe that we can control it. I do not believe that there will ever be mass unemployment again in this country, except for one reason alone, and that is a balance of payments crisis which would prevent us from getting raw materials. Provided that we can get raw materials we can always control the unemployment figures.
Naturally it is enormously beneficial to have absolutely full employment because of the improvement in the condition of the workers and because of the improvement it encourages in technique and labour-saving devices and so on, but I think an undue apprehension and fear of a small amount of unemployment might be just a way to bring about mass unemployment if we make a bogey of it. Then we may fall into really serious balance of payment difficulties. When unemployment is enormously below the 3 per cent. which Lord Beveridge said was the best we could hope to attain, I do not think we have any cause for alarm about unemployment. Therefore, in answer to the hon. Member, I say that I think that nothing could be worse for us than mass unemployment, but that that is a fear that is not well-founded.
Mr. Moyle: Except for 3 per cent.
Mr. Spearman: I am not saying that we want 3 per cent. unemployment but Lord Beveridge said that that was about the lowest we could hope to achieve. It may be better to have a little more unemployment than we have today if those workers unemployed are unemployed for only a short time rather than to run into a balance of payments crisis
1102
in which we might fail to get raw materials and have more unemployment.
Mr. Ellis Smith: Who wants to be unemployed for a short time?
Mr. Spearman: Of course no one wants to be unemployed at all and our job is to keep employment as high as we can, but not to be so frightened of unemployment which we can control.
Mr. Sydney Silverman (Nelson and Colne): I quite follow the point made by the hon. Member. I take it, therefore, that he would have no objection whatever to paying the unemployed full wages?
Mr. Spearman: I would certainly agree that very high unemployment assistance is infinitely better.
The other objection which may well be made, and which I believe has been made, to raising money rates now is that it would cause a scare abroad, that foreign opinion would panic and think things were worse than they are. I have consulted those in a much better position to judge that than I am and have confirmed my view that that is the very opposite of the truth. I believe that what foreign opinion is frightened of is that action too little and too late might be taken, and that we should both relieve foreign opinion and fortify confidence abroad by the Chancellor showing that he was going to take strong action and doing so at once.
8.49 p.m.
Mr. J. Idwal Jones: I was rather surprised to hear the hon. Member for Scarborough and Whitby (Mr. Spearman) say that 3 per cent. unemployment was tolerable—
Mr. Spearman Mr. Spearman indicated dissent.
Mr. Jones: Of course, there is nothing which can create unemployment more than the fact of some people being unemployed.
Mr. Spearman: May I correct the hon. Member?
Mr. Jones: Yesterday, the Chancellor of the Exchequer said
"The monetary measures taken in February have been by their nature slow in their effect on home demand."—[OFFICIAL REPORT, 25th July. 1955:Vol. 544. c. 826.]
The main monetary measure was that of raising the Bank Rate. It has been asked

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on the benches opposite, "Why is it that the Bank Rate has not been effective in the last few months?" The explanation is a very simple one. When the currency of this country was on the Gold Standard the Bank Rate was more or less effective, but now we have a fluid currency no one in the country is able to predict what the effect of the increase will be. I was surprised to hear the hon. Member saying that it might be a good thing or might be just the opposite. No one can prophesy what the effect would be.
As everyone would agree, a far more effective method than the Bank Rate for dealing with this is through budgetary policy, and by budgeting for a surplus. What amazes me about the last Budget is that there was a substantial Budget surplus, which could have been used for a deflationary purpose, but it was actually thrown away to big industry.
The Economic Secretary to the Treasury (Sir Edward Boyle): Only rather less than half of the Budget surplus was given away.
Mr. Jones: That is very substantial. While the last Budget had a deflationary effect on one sector of the economy, it had a very inflationary effect on another sector in which there was already inflation. I refer, of course, to the boom on the Stock Exchange and the gift of reliefs to industry, which eventually will find their way to the recipients of dividends and will increase inflationary pressure in that respect.
Yesterday, the Chancellor told us—and we have heard it from the benches opposite tonight:
"We are at present absorbing too much of our production at home."—[OFFICIAL REPORT. 25th July, 1955; Vol. 544, c. 826.]
The Government answer to that has been to check hire purchase. I am not speaking on the merits or demerits of hire purchase, but I want to say most emphatically that this is class legislation.
Sir Frederick Messer:That is a fact.
Mr. Jones: After all, people who have the cash to put down can get what they require from home production. People who have money to buy washing machines can buy them, and people who have money to buy cars will buy them.
1104
The time has arrived when people who produce these things can claim the right to have them when they require them. To change the metaphor, people who build have the right to inhabit; people who plant have a right to eat, and those who produce motor cars and washing machines have the right to a share of them. It is a question of controls. It has been suggested tonight that controls would be a bad thing, but this type of legislation is only control in another form—
Sir F. Messer: And for another set of people.
Mr. Jones: —and for another set of people. I leave the point at that.
Another feature is the checking of investment. The Chancellor said that in the private sector he would appeal to people to restrain from initiating new investments. One of my hon. Friends has just said that people will be able to make beer, lollipops and all the rest. Private enterprise will not restrain itself in investment if money and private gain are involved. That is the argument for controlled investment, and in that respect I suggest that the Government and hon. Members can a leaf out of what the Labour Government did after the war.
When we come to Government expenditure, I was very much alarmed by the fact that when the Bank Rate was raised one of its effects would be upon local government expenditure. Now, to make this more effective still. we are told by the Chancellor that the Departments are to stiffen up as well in regard to local government. One of the fields to be affected will be that of education, and I am well versed in this particular subject. I have been in the teaching profession for the last thirty-five years, and I want to say quite clearly that never have I felt the result of economy in education more seriously than I have felt it since 1951. It is not right that we should have this further cut in the realm of education.
There is one point I would make about the nationalised industries. There is a suggestion that long-term policy is to be restricted. Sooner or later, if we restrict long-term policy in the mining industry, we shall have a debate here similar to that which we had a few days

1105
ago. There will be a shortage of coal, and the blame will be placed on the shoulders of the miners, of the National Coal Board and on the lack of fuel economy, but not on the shoulders of those responsible, namely, those responsible for our financial policy at the present time.
The Government should take the nation into its confidence. I suggest that we on these benches took the nation into our confidence at the last Election. We told the electorate that the period ahead would be a period of sacrifice, and we were asked questions sponsored by Conservative headquarters on what would be the nature of these sacrifices, because it was thought that we should lost votes thereby. We said that we were fully conscious of the fact that the years ahead would be difficult. We did not promise prosperity in the immediate future, but planned for prosperity in the years to come.
We emerged from the last war a bankrupt State. Our investments had gone, our shipping had gone, our insurance had gone, and, in that hour of difficulty in 1945, we saw a new economy—a planned economy, with imagination—growing in a most difficult period. I am of the opinion that when the historian comes to record that period, it will be said that that was one of the most miraculous achievements of modern times. I would ask the Government to take a leaf out of the policy adopted by the Labour Government in that period, and to plan forcefully, thoughtfully and with imagination, and thereby lead this country back to prosperity.
8.58 p.m.
Mr. Harold Wilson: This debate has been enlivened by one maiden speech, that of the hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) who, we understand, is a bullion broker by profession. I hope that, now that the hon. Gentleman has emerged from his maiden speech, he will on a future occasion initiate the House into the mysteries of bullion broking.
I think that the hon. Member's speech was, for the greater part, uncontroversial, but he did say one thing which some hon. Members opposite would find controversial, because he used the same argument as my hon. Friend the Member for Wrexham (Mr. Idwal Jones) used a
1106
moment ago, when he said that we came out of the war in 1945 bankrupt. I think the hon. Gentleman's own phrase was that we came back from the war in 1945 as a nation with only our war honours, and our resolution. I was, therefore, surprised when some hon. Gentlemen opposite queried the remarks of my hon. Friend when he reminded the House of the fact that we were bankrupt in 1945, a point which was first made by the right hon. Gentleman the Member for Woodford (Sir W. Churchill).
Despite a somewhat end-of-term atmosphere the debate has been extremely grave throughout. We have been enjoined by the Chancellor not to use the word crisis about the present economic situation. He told us that he is to pursue his policy inflexibly, and, on other occasions, he has emphasised the need for flexibility. Obviously, his policy from now on is to be a policy of inflexible flexibility. One of our big problems in trying to assess the economic situation, particularly, as my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) said, we do not have all the figures necessary for the purpose, is that as a nation we suffer from a Chancellor of the Exchequer who is an economic schizophrenic. He comes to the House one day in one mood and on another day in another. One day he is the gloomy Chancellor, and on another day he says we are living under blue skies, and so on. Sometimes he is the Chancellor of Tory freedom, the Chancellor of the Election Budget, the Chancellor of the Election broadcast.
Today, the Chancellor was at pains to suggest he had not been over-optimistic during the General Election, and he read out a quotation from his Election broadcast which seems to have impressed him so much. I think he fell below his usual standards when he employed such selective quoting from his broadcast. Hon. Members will remember that I sought to interrupt him, to get him to read out the sentence which immediately preceded the passage he read in his quotation. He did not, and he spent about ten minutes explaining why he could not. I sought to interrupt him again, and he did not give way. The "previous sentence" I wanted him to read consisted of only five words. It would not have taken him long to read. This was the sentence in that famous broadcast:
"Well. we've restored national solvency."

1107
That was a very different tone from the tone of his statement yesterday, or even of the passage which followed almost immediately after the one he quoted in his selective quotation from his broadcast. He was referring to the action he had taken. and he said:
"We are beginning to see the first effects. Our trade figures are better; and we are once again holding the position of our reserves."
That is what he said in that broadcast. That was the sort of mood the right hon. Gentleman was in from the date the Election was announced up to and including 16th June.
There is no doubt what he said in his Budget speech:
"It became clear by February that we needed to take action to moderate the growth of imports and to encourage exports. And from the result, all I can say is, thank goodness that we took action in time… But the situation has been brought under control, as, for example, is shown by the movement of the reserves since then and the latest rates for sterling."—[OFFICIAL REPORT, 19th April. 1955; Vol. 540, c. 39–40.]
As recently as 16th June, when he was still in a sort of Election atmosphere, the right hon. Gentleman used very similar words:
"… the situation has been moving not unexpectedly and more or less as I forecast in the Budget statement… Credit policy has been taking effect, and the external position, in so far as we can judge it to date, has been beginning to show some response to the measures we had taken."—[OFFICIAL REPORT. 16th June, 1955; Vol. 542, c. 793.]
That was the position as recently as 16th June, but, on the other hand, we have the gloomy Chancellor, the Chancellor of 24th February, when the Tory freedom bubble burst. Yesterday, also, the right hon. Gentleman had to admit by implication, though not clearly in so many words, that the measures he took on 24th February had not done the trick. It is, perhaps, a little unfair to remind him that we warned him about that in February, that in February we said he might, from raising the Bank Rate and from the other measures he was taking, reap some benefit in the form of the inflow of capital, of hot money. I remember writing an article in February, long before the Election was announced, saying that the Chancellor might, as a result of his measures, get in lust enough hot money to conceal the true situation, perhaps for a few weeks, long enough to let him go in for a snap
1108
summer Election with his solvency record unimpaired.
That, of course, is what happened. In the best sense of the phrase—I am not accusing the right hon. Gentleman of the worst sense—the right hon. Gentleman, on 24th February, pulled a confidence trick, a stunt purposely to restore confidence amongst international dealers in sterling, and he did temporarily restore confidence, but only for a few weeks. Now that confidence is lost again. All of us at the time warned the right hon. Gentleman that the real test was not the short run financial movement, but the movement of our basic figures of exports and imports. I want to say to the Chancellor of the Exchequer again, as I tried to say in a supplementary question yesterday, that it is no good blaming all this on the strikes. We have only to look at the figures for the first four months of the year. Exports for the first four months of the year, before the strike, were up by 10 per cent. on the first four months of 1954, but imports were up by 20 per cent. compared with the first four months of 1954 and there was already an alarming gap between exports and imports before the strike started. Indeed, taking these four months compared with the same period in 1954, the gap had worsened by £33 million a month. So we cannot blame it on the strikes.
What is the position after six months, the first half of the year, including, of course, the period of the strikes? Between the first half of 1954 and the first half of 1955 exports rose by £48 million, but imports rose by £229 million, a widening of the gap, as my right hon. Friend the Member for Leeds, South said, of more than £180 million. In value terms, exports rose by 3½ per cent. and imports by 14 per cent.; in volume terms, exports rose by 5 per cent. and imports by 10 per cent.
If we look at the import figures and see what groups have been increasing in the first half of this year, we find that imports of manufactured goods have risen by about £90 million. That includes some of the steel imports being used in the motor car industry, about which there has been a lot of discussion this afternoon. Imports of food increased by £86 million, despite a fall of about £23 million in dairy products and sugar. A large part

1109
of that must be explained, as my hon. Friend the Member for Edmonton (Mr. Albu) pointed out, by this Tory freedom in the matter of importing dollar coarse grains which could be quite easily produced in this country, or bought in the sterling area. Basic materials have risen by £17 million and, as the Chancellor reminded us, coal imports were £2½ million in the first half of last year, compared with £331 million in the first half of this year.
So the figures for the first six months of this year do not fill us with any of the rosy optimism that at times—and I will be fair to the Chancellor, only at times—he has exuded. But what about the prospects for exports for the next two months? Is it really true, as the Chancellor tried to suggest to us this afternoon, that, broadly speaking, it was only imports which were maintained and only exports which were affected by the strikes? Is it true that over the next two months we shall catch up with exports, except in those cases he mentioned where we have lost the markets for good, and clear the backlog? If that be so, it must have affected the figures for the first four months of the year, because in January we were still reflecting the backlog, or the after-effects, of the strikes of last autumn. If that sort of mechanism does work and the Chancellor is right, the figures for the first four months of this year are even worse than they look.
Then, of course, there is the extraordinary argument of the Minister of Supply, although I do not want to waste time on it. He is convinced that financial figures always reflect the trade figures of two months later. The financial figures come first, he says, and the trade figures two months afterwards. He was very pleased when he said that and said that the better figures of April represented an improvement in the trade position. If the Minister of Supply is right, we must expect the bad financial figures of July, about which there does not seem to be any doubt at all, to be reflected in equally bad trading figures two months from now, and so we cannot, with great confidence, look forward to an improvement in exports in the next month or two, if the Minister of Supply is right.
About imports, surely the Chancellor agrees that imports have got out of hand, especially dollar imports. The question I
1110
put to the right hon. Gentleman—he has referred to it in general terms—related to the expenditure of dollars as a result of freeing the commodity markets. We have put this point time and again in this House, but I do not think that it has yet been accepted by the Chancellor. The result of freeing the cotton market has been a serious increase in the purchase of dollar cotton, and an equally serious decrease in the purchase of cotton from Colonial Territories, particularly with the ending of those long-term contracts. That is bound to have an effect on the dollar balance of payments, and it is no good the Chancellor denying it.
Then, if this is the serious position on visible payments, it is obvious that invisible payments will be no better. From the moment they came into office this Government dedicated themselves to increasing our invisible earnings. That is why we had all the Liverpool cotton business and the rest of it. Yet the net invisible earnings last year were about £30 million lower than in 1951, and they are still worsening. The Chancellor told us that there is this increased payment now in respect of interest charges. The figures in the Economic Survey for last year showed that in 1954, on interest balances held in this country, we were paying overseas £80 million more than in 1951, an increase of £80 million a year on interest account alone.
As a result of the increase in the Bank Rate which took place in February, the Chancellor said this afternoon that he estimates a further burden on our balance of payments of an additional £30 million. It is no wonder that we hear nothing now from hon. Gentlemen opposite about the groundnuts scheme, because the whole of the groundnuts operation cost £36 million, but the Chancellor, with a stroke of the pen, is adding £30 million to our overseas balance of payments in a single year, making a total of £110 million. We certainly get nothing in return for that.
The right hon. Gentleman was talking about reducing overseas expenditure. He has not told us of any direction in which he thinks we shall reduce overseas expenditure, whether in respect of Government expenditure or any other form. I would remind the right hon. Gentleman—I do not think that he will disagree with this—that the position of our balance of payments over the last few

1111
months would be worse were we not getting abnormal shipments of Soviet gold into the country. The Chancellor has given figures of how many millions we have had, which was a departure from the position last year when he would not give the figure because it was against the public interest. Last year we got £60 million, in the winter of 1953–54. I put it to the Chancellor, how much worse would the balance of payments be were this Government not being helped by Red gold?
As I have said, the most serious position is in our gold and dollar reserves. In April, as was stated by my right hon. Friend, there was a very small rise which was largely accounted for by defence aid. In May there was no change at all, and the Prime Minister thought that a very good thing. He said:
"The gold and dollar reserves have remained without any significant change since February, and, in all the circumstances, I think that is a pretty satisfactory situation."—[OFFICIAL REPORT, 9th June, 1955; Vol. 542, c. 62.]
But of course, as we have reminded the Chancellor more than once, this is the time of the year when, seasonally, the gold and dollar balances should be improving. In May of last year they increased by over $160 million. In May, 1953, they increased by $48 million and even in May, 1952, they increased by $12 million. Yet, in the summer of this year, we have seen a steady fall in the gold and dollar reserves. One can only say that if this is happening now, at what should be a period of seasonal improvement, what in the world shall we do when winter comes? And, as the Chancellor knows, winter, so far as the balance of payments is concerned, is the late autumn.
Now we have the Chancellor's proposals as contained in his statement yesterday. First, a proposed cut in investment. The right hon. Gentleman feels now, as he said this afternoon, that we have gone a bit too fast in encouraging investment. Now he wants to have a cut. He has done an extraordinary thing. He has appealed to private industrialists to cut their less essential investments. That is the first time we have heard from the Government that some industrial investment is less essential than other industrial investment. [Laughter.] Yes, I will give proof of that in a moment, and then I hope that hon. Gentlemen opposite will not laugh too loudly.
1112
We thought, from some of the speeches of hon. Gentlemen opposite—I will quote one in a moment—that the Tory philosophy was that all economic activities are equally worthy so long as they all earn a profit. Our approach to this subject of investment has been more selective. During our period of office we used building licensing to concentrate resources on those factories which would make a direct contribution either to dollar earning or dollar saving, and had we not done so there would not have been any solvency at all for the Chancellor at the present time.
On 16th June, when I asked the Government whether they did not think that there was too much investment going on in petrol stations, the President of the Board of Trade worked himself up into hysterics about it. He seemed to think that it was wrong for anyone to cut down on such investment. If petrol stations are making a profit then, presumably, we should build more. But now, presumably, the Chancellor wants the building of petrol stations to be cut down as being less essential. What he is doing is to appeal to business men to select the less essential investments and to cut them down or slow them down.
Mr. Osborne: That is a good thing.
Mr. Wilson: Yes, but I do not think that it is likely to happen.
Mr. Osborne: The appeal is quite right.
Mr. Wilson: The Chancellor can make the appeal until he is blue in the face, but it is not likely to be answered.
On 2nd November, 1950, Mr. Oliver Lyttelton, now Lord Chandos, expressed the Tory philosophy on this question. He thought that the selective control of investment was nonsense and that the thing to do was to put up the Bank Rate. He said:
"The only way to find out what industrial production is likely to be profitable is to find out if people are willing to pay the price for putting up the plants which make the products. If the industrialist thinks that a 5 per cent. interest rate for borrowing his money will still leave him with a profit, the plant will be built, but the marginal capital investments will be discarded."—[OFFICIAL REPORT, 2nd November, 1950; Vol. 480, c. 332.]
There, I think, is a clear statement of the Tory philosophy, and that, I believe, expresses the reason why the Chancellor's

1113
appeal will be made in vain. He is appealing to the industries themselves to select the marginal investments to be discarded when Mr. Lyttelton, as he then was, told us that the only selection would be on the basis of profitability.
It is clear from the Chancellor's statement that the cuts will not be made in the private sector, but in the public sector. The only effective cuts will be made in the nationalised industries and in the local authorities. A Tory Chancellor is taking advantage of the fact that the public sector is the only plannable sector when we want the economy to respond to public policy. In fact, for two or three years of this Government it was the only sector in which investment increased when he wanted investment to go up. Now, when the right hon. Gentleman wants restraint in investment, the private sector begins to catch up and starts to embarrass the Chancellor.
That being so, what does the right hon. Gentleman do? He cuts down on the public sector in ways that are liable to cause great damage to our economy. I regret that although the Chancellor gave way many times this afternoon, he has not answered the questions put to him by sonic of my right hon. Friends. We are not at all sure what is to happen about the roads programme. It looks as if it is to be cut. As one of my hon. Friends said, if one scales down a programme even over a period of years, that means cutting the programme year by year.
I hope that the Economic Secretary to the Treasury will answer our queries about education. We have had some very brave words recently from the Minister of Education, and I would remind the Chancellor, who, apparently, is now to introduce these new cuts in education, that if he were to come to my constituency he would find children of six years and even of seven years of age being told that there is no school available for them. That will be the position. [An HON. MEMBER: "Have they got boots?"] They have all got boots now, because the Labour Government brought full employment to Merseyside. That is why some have shoes there whose parents did not have them before the war.
On the question of housing, the Chancellor was equally evasive despite the
1114
question of my right hon. Friend. It is clear that the programme will be cut to £300,000. What we do not know is how many council houses will he built. I think it is clear from what the Chancellor has said that the brunt of the cut will fall upon council houses, because the Chancellor harbours the extraordinary economic fallacy that if a house is built with some degree of public money, or entirely with public money, it is inflationary, but if it is built for private sale it is not. He therefore cuts down the building of council houses.
Mr. Osborne: The Chancellor has not cut it as low as the right hon. Gentleman's Government did.
Mr. Wilson: The hon. Member's mind works in a rut. It is time that he got out of it.
I would point out that if we had not had to build 1,700 factories in the old derelict areas which we inherited from his Government, and if we had not devoted a great deal of our resources to building up the oil-refining industry—from which the Chancellor now derives great benefits—and also the steel and chemical industries, we should have had far more resources available for building houses. We also had to repair 4 million bomb damaged houses. What are the Government doing today? [An HON. MEMBER: "Building houses."] The hon. Member had better come to my constituency, where they are pulling them down.
The Government have given instructions to pull down "prefabs" and have promised that the people will be rehoused, but this afternoon the Minister for Housing and Local Government could give no assurance that the local authority would be given a housing allocation—and that is in respect of a council whose council house building has totally stopped because of the policy of the Government. That authority must rehouse all the people on its housing list, together with those whose houses have been pulled down by the Government. That is the housing policy that we are now getting. [Laughter.] If hon. Members think that it is funny they had better come to my division.
I now turn to the Chancellor's remarks and announcement about consumption. Here again we have an illustration of one

1115
of the strange obsessions—as my hon. Friend the Member for Stechford (Mr. Roy Jenkins) pointed out—on the part of the Chancellor, that the only kind of consumption that we need to deal with is that which is paid for upon deferred terms. This is largely a question of reducing the consumption of working-class and, to some extent, middle-class people, and of no one else at all. In fact, in his Budget the Chancellor encouraged consumption by the higher taxpayers, as he has done in successive Budgets. He was boasting in the Election about how much he has done by way of Income Tax cuts, and he said:
"The only thing I have not been able to do is to reduce the price of beer, and that I would like to do before I die, because I would like to think it would be on my tombstone."
The Chancellor has done nothing to cut luxury expenditure, which has been going on from tax-free capital gains. Now he says that we must reduce consumption. That is a new doctrine. What did the President of the Board of Trade say, only a month ago? We were querying some of these concessions and he said:
"What about consumption? Do not let us be too afraid of our people consuming things. Sometimes, to hear the right hon. Gentleman, one would think it was terribly shocking for our people to be consuming things which ought to be all going into the export market."—[OFFICIAL REPORT. 10th June, 1955; Vol. 542, c. 162.]
Now the Chancellor says that they have to be stopped consuming things—if they pay for them on hire purchase.
Motor cars and initial allowances have been mentioned. It is interesting to note that the Chancellor is now alarmed at the number of cars produced, because in the Budget debate the Minister of Supply went into rhapsodies about the number of cars available for the home market, and he made a long and eloquent speech about it. The Chancellor referred to the load placed upon the metal-using industries—and we would all agree with him there. It is true that motor cars are one of the main users of metal. Indeed, as my hon. Friend the Member for Edmonton pointed out, they are one of the main users of the imported steel which we are now having to pay for with our scarce reserves.
One of the serious things about the metal-using industries has been that metal has been going more and more into the
1116
production of cars for the home market. We have not the figures for 1955. but the figures for last year compared with 1951 show that of the increase in the total of engineering production in this country of £490 million. defence accounted for £190 million and £135 million went in more cars for the home market. It is, therefore, not only a question of the burden on the metal-using industries but the burden on the balance of payments due to imports of additional steel.
I hope that the Economic Secretary will tell us the Government's plans for defence. I would remind the Government that last year we divided against the Government's defence programme as being unrealistic and unbalanced. Now we are told we have an easement in world tension. "There is not going to be any war" says the Foreign Secretary. That may help to reduce the burden on our defence industry, but there is anxiety in some parts of the world—Wall Street, and places like that—about the danger of peace breaking out. No matter how easily that attitude of mind can be explained in economic terms, it is repellent to most ordinary people, who feel that there should be some great advantage from peace breaking out.
The Government must be ready for a big change in world affairs, if peace breaks out. In the Budget debate, in 1953, we pressed the right hon. Gentleman, when there were the first signs of easement of tension after Stalin's death, and he quite rightly referred us to a speech by President Eisenhower on 16th April, 1953, in which the President said that the way to mobilise the resources of the world if there was disarmament was by a vast expansion in the war against poverty in the backward areas of the world. I hope that the Government, who have been very backward on this question, especially in relation to the United Nations efforts in this direction, will be working out plans along these lines. Perhaps that is a question more appropriate to tomorrow's debate than to our debate today, but it has its relevance to our economic affairs.
What is the position about the Chancellor's speech today? The truth is that his pre-Election boasts have suddenly turned sour, in the light of the events which he disclosed yesterday. The truth is coming out, that the Government, as

1117
the "Economist" said months ago, have been enjoying for the last three years a batsman's wicket and now the batsman's wicket is crumbling a bit. The Chancellor's own reputation as a batsman is due far more to the wicket than to his ability in using the bat. Indeed, now that the Chancellor is discarding it during this period, by dismantling controls and deciding to throw away his bat altogether and rely on his pads, I would remind him of the fate of five English batsmen in the first innings in the Test Match which ended today.
Nothing that the Chancellor has said fills us with any confidence that he has the economic situation in hand. This afternoon we had a further example of double talk from him. This was not a crisis, he said, but he went on to describe a critical state of affairs, especially in our gold and dollar reserves. I must remind the Chancellor that appeals to confidence by statements of the kind we had yesterday, and of panic increases in the Bank Rate, have only a short-run effect. We must judge the economic situation not by any movement of hot money but by basic movements of our exports and imports, of production, and production of the right things.
On these tests, as the Chancellor's statement yesterday showed, the Government's policy has failed, and nothing that the Chancellor has said today suggests that he has any policy for dealing with this except to wait for a change in the economic weather. It is because the Chancellor has, in our view, most irresponsibly changed his tune from month to month during the year and has, in our view, deliberately misled the country both before and during the Election about our economic position, that, having heard him today, we shall find it necessary to divide the House this evening.
9.30 p.m.
The Economic Secretary to the Treasury (Sir Edward Boyle): I listened with great interest to the right hon. Member for Huyton (Mr. H. Wilson), and it seemed to me that every argument he adduced led to the conclusion that the statement which my right hon. Friend made yesterday, and the measures he announced, were very much on the right lines. At the start of his speech the right hon. Gentleman had something to say
1118
about my right hon. Friend's remark on national solvency in his broadcast. I think that it is fair to remember that, during the last month when hon. Members opposite were in power we lost 300 million dollars and £90 million of gold to the European Payments Union; and that, when my right hon. Friend made that broadcast we had, in the previous months gained 19 million dollars to the reserves. Therefore, taking the whole position over the three-and-a-half years, I think that my right hon. Friend's statement was perfectly justified.
The right hon. Member for Huytonsince I am at this moment replying to him—asked a Question yesterday on the subject of the purchase of dollar commodies, such as grain. He said that those should have been obtained from the sterling area. Perhaps I can clear up this matter of grain purchase. The policy of the Government is, as far as possible, to give our importers the greatest possible freedom to buy basic foods and raw materials in the cheapest market, and this is important in order to maintain our competitive position. In the case of wheat, the dollar proportion of our wheat imports has, in fact, fallen each year since 1950. From 1950, when it was 90 per cent., it fell in 1954 to 69 per cent.
I would also point out that the statement of the right hon. Gentleman that we were buying dollar rather than sterling wheat does really rather miss the point. The wheat we get from the dollar area is hard wheat which we cannot do without. There is nothing in the sterling area which could replace that particular wheat. The right hon. Gentleman, I think, knows perfectly well that the level of dollar imports of basic commodities depends far less, in the long run, on whether or not there are import controls than on the level of our requirements, which would be largely met even if we maintained import licences.
Before I go on to make any more controversial remarks I should like, if I may, to join in congratulating the hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) on his very able maiden speech. He said that he represented a town of a hundred trades. As a representative of the city of a thousand trades I am particularly pleased to have this opportunity of congratulating him. Like me, he represents a borough in the

1119
industrial Midlands; like me, he lives also in the south-east of England. I am sure that he will feel, as I do, that we both have very much the best of both worlds in living in the south-east of England and representing one of the most interesting parts of the country.
I pass now to the speech made by the right hon. Member for Leeds, South (Mr. Gaitskell) in opening the debate. He chided us on this side of the House because, he said, my right hon. Friend's statement yesterday was not consistent with his Budget speech. He also talked about bribing the electorate. He had a lot to say about what he called blatant electioneering. I am sure that the House has not forgotten that during the course of the Election the right hon. Gentleman himself was holding before the electorate possibilities of an increase in Government expenditure which, at a conservative estimate, was put at £600 million a year. The right hon. Gentleman shakes his head. That is all very well, but towards the end of the campaign there was not much dispute about the figure. The only dispute was about how it was to be paid for. I have here, if the right hon. Gentleman would care to hear it, some excerpts from his "Daily Herald" article of 11th May. He simply told us that we should devote the increase in production under a future Labour Government to increases in Government expenditure.
Mr. Gaitskell: I said we should devote part of the increased revenue to expenditure for the community.
Sir E. Boyle: I am glad to find that in his more recent speeches the right hon. Gentleman has said that the increase in production should be devoted, as it certainly ought to be devoted, to strengthening our balance of payments. Of course, it is also not so long since the right hon. Member for Bishop Auckland (Mr. Dalton) suggested that the beer tax might have been reduced in the Budget.
Coming to the point about the relation between the Budget and the measures which my right hon. Friend has announced today, I would point out that the whole purpose of my right hon. Friend's policy, ever since he became Chancellor, has been to strengthen confidence in sterling. I am quite sure that nothing could have done more harm to
1120
confidence in sterling than a second consecutive standstill Budget at a time when we had a Budget surplus of £280 million. I am sure my right hon. Friend has been right to make it more difficult for people to borrow money than to increase their real earnings. My right hon. Friend has always believed in the twin weapons of an expansionist budgetary policy and monetary discipline. That is right if the economy is to be run on a sound basis.
I should like to say a word in answer to the right hon. Member for Leeds, South on the subject of the sale of Treasury-owned dollar securities. He asked about that. As my right hon. Friend has stated in reply to Questions in the House, it is not the practice to disclose details of the assets held by the Exchange Equalisation Account, but I will tell the right hon. Gentleman that the securities are worth substantially less than the figure of 2,000 million dollars which he mentioned this afternoon. I cannot give the precise figure but I will say that it is less than half what the right hon. Gentleman suggested, if that will satisfy him.
As my right hon. Friend said last February, there has been no radical change in the policy which the right hon. Member for Leeds, South followed when he was Chancellor, of continuing to hold and manage those securities in the national interest. They are not part of the reserves but they should be considered as part of the national block of foreign investments, and in pursuance of this policy it may become appropriate from time to time to sell a certain number of these securities. In that case surely the long-run national interest is best served by giving British investors an opportunity to acquire these securities for sterling, because in that way the securities remain part of the national patrimony and the dollar income continues to accrue to this country.
Before I come to the two main points with which I want to deal—I shall say something about monetary policy and about investment—there are one or two matters on which I should like to comment briefly. The hon. Member for Stechford (Mr. Roy Jenkins), who told me he would be unable to be here tonight, suggested in his speech that my right hon. Friend's Budget had itself caused the troubles which we have today. I do not

1121
think anybody could seriously believe that. [HON. MEMBERS: "Why not?"] It is quite ridiculous to suggest that my right hon. Friend's Budget in April this year has had a substantial effect on the volume of investment at the present time. It is complete nonsense to suggest that.
The hon. Member for Edmonton (Mr. Albu) and the hon. Member for Leeds, South—East (Miss Bacon) asked about the education programme. I am sorry that I was not here when they spoke, but I will gladly answer the point. There is certainly no truth in the allegation of the hon. Member for Edmonton that the Government are cutting down the plans for higher technological education which were announced only last week. The programmes for 1955–56 and 1956–57 remain firm. Indeed, the programme for 1956–57 has only just been announced. I am sorry that I was not here when the hon. Member for Edmonton spoke, but I understand that he made a helpful and constructive speech, and I have the notes of it.
I now come to the question of monetary policy and how it has worked. I should like to make it absolutely clear that there is no warrant at all for any suggestion that the monetary authorities are now going to relax their use of orthodox monetary methods. It has been suggested in the "Financial Times" only this morning, and also in "The Manchester Guardian," that the decision to make a direct appeal to the banks to reduce lending means that the authorities are not going on with the drive to restrict lending through orthodox monetary controls, and I should like to make it perfectly plain to the House that there is no truth at all in that suggestion.
I think that it would be helpful if for a few minutes I spoke about the work of the monetary instrument during these last months, because I think that the orthodox monetary weapons have worked more effectively than some people realise. Since 24th February the 4½ per cent. Bank Rate has been fully effective, and week by week the market has been in the Bank. Treasury bill rates, as a general rule, have been pressed up to within ½per cent. of the Bank Rate, and the current tender rate is now £3 19s. 5d. I know that the two sides of the House differ about the desirability of a higher Bank Rate and a higher Treasury bill rate. I will not pursue
1122
that point, but I should like to make plain that the Bank Rate has been effective pretty well throughout.
Moreover, there has been no attempt to insulate the public sector from the rest. The local loans rate was raised to 4¼ per cent. on 8th July and the tax reserve certificate rate rose to 1¾ per cent. on 11th July, reflecting a higher rate for Treasury bills and bankers' deposits.
Furthermore, the objective of keeping money tight in the market has on the whole been consistently maintained. That is a very difficult matter, as hon. Members may know, not least at this time of the year. The difficulty one is up against is this: a high volume of Treasury bills to soak up cash in the market tends to relax the pressure on the bankers' liquidity ratio which we are trying to keep up at the same time. Except for certain occasions when money has been easier—there have been a few days at a time when this has happened—on the whole those two objectives of keeping banks tight on their ratios and keeping the money market tight have been fairly consistently maintained.
Furthermore, in the four months from 16th February to 30th June the net bank deposits have fallen by £92 million, but as my right hon. Friend said, the figure for bank advances has not been satisfactory. We freely admit that. There is no dispute about that at all. The reason is that whereas the bankers' liquidity ratios have been respectable, they have made these ratios respectable rather by selling investments than by restricting advances.
Hon. Members may ask—and it is a fair point to make—whether there is all that much difference, from the point of view of warding off inflation, between selling securities and restricting advances. There is the considerable difference that it is very often what bankers would call less active deposits which are used to buy securities sold by the banks, and the great point about restricting advances is that we restrict active deposits—
Mr. Gaitskell: I should not like the hon. Gentleman to end this passage of his speech without offering our congratulations to him on doing what the Chancellor has never attempted to do, and that is to explain to us the mechanism of the Bank Rate. Would he mind, in the course of his remarks, explaining exactly

1123
in what way the effect of the monetary policy since February has increased exports and reduced imports.
Sir E. Boyle: I agree that it is difficult to measure these things precisely. But I am quite sure that, so far as imports are concerned, the trade figures for April and May—and particularly the May figures—did reflect the effect of putting up the Bank Rate.
The April figures may still have reflected the earlier dock strike, but the May figures did not. I think there is no doubt that that favourable month reflected the effect of the measures taken by my right hon. Friend. Since then—I admit this completely—the most recent dock strike has made it very difficult to measure these matters accurately. The whole point about the dock strike is not that we want to use it as an alibi, but that it has made it extremely difficult to evaluate trends.
Mr. Gaitskell: Would the hon. Gentleman explain the theory to us a little?
Sir E. Boyle: I am much obliged to the right hon. Member, and on another occasion I should be glad to respond to his invitation. I have a certain amount more to say, and I think it would be desirable now for me to pass to the next part of my speech.
I want to come to grips with the most important point which the right hon. Member has made. I refer to the question which he asked yesterday, as to whether my right hon. Friend was
"satisfied that the monetary policy in which he believes really does have a sufficiently sharp enough effect upon consumption generally, or whether, by this means, he is not cutting back investment very much too hard."—[OFFICIAL REPORT, 25th July, 1955; Vol. 544, c. 830.]
I want to say a word on the subject of investment because that is extremely important. There is no dispute in the House about the enormous importance of a high rate of investment in productive industry if we are to maintain our position as a trading nation in a competitive world.
It is really not fair for hon. Members opposite, like the hon. Member for Islington, North (Mr. Fienburgh)—whose speech I much enjoyed—to blame us because, as he said, the figures for investment were so unsatisfactory during the
1124
first two or three years of Conservative Government. I am sure the hon. Member knows perfectly well that his right hon. Friend the Member for Leeds, South suspended the initial allowances in the 1951 Budget. That suspension only took effect in the following financial year, 1952–53. Hon. Members opposite must not underrate the effect of the policies of their own Government.
When we came to power in 1951, as hon. Members will recall, we found a state of affairs in which our metal goods industries were very severely overloaded. We simply had not all the resources we needed for exports, defence and home investment. It was therefore quite impossible for my right hon. Friend, in the Budget of 1952, to take special steps to encourage investment in productive industry. We also had an extremely serious balance of payments crisis at that time.
In the next year, 1953, my right hon. Friend restored the initial allowances and reduced Income Tax, but that only had its full effect in the following financial year, 1954–55. I think it fair to remember, also, that the Excess Profits Levy was still operative during the financial year 1953–54. So it is not surprising and not in any way discreditable to this Government that it has only been during the last year that investment in productive industry has gone up so encouragingly.
My right hon. Friend gave the figures this afternoon. The expenditure by private manufacturing industry on new factory building rose by approximately £25 million between 1953 and 1954, an increase of about 25 per cent. There is every indication that that rise is still going on. As I say, it is of the highest importance that we should have a high rate of investment.
The point was made to me the other day, and there is much in it, that there are certain real advantages in some large companies planning important items of investment at a time when labour is short because that encourages them to put the most modern up-to-date machinery in their factories. I think there are real advantages in that.
Having said all that—and none of my hon. Friends will wish to deny a word of it—the fact remains, however, that it is a great mistake, in times of boom, to try to do everything at once. We simply

1125
cannot plan our rate of industrial expansion regardless of our external economic position. The Government, from the moment we took office, have always realised the intimate connection between our economic policy at home and balance of payments abroad. There can be no question about that at all. If we overstrain the economy by trying to do too much at one time, the inevitable result must be that once again we shall get into balance of payments difficulties.
Mr. A. Woodburn: I gather from what the hon. Gentleman is saying that there are some things which are good and others which are not so good. Is it left to the bankers, after they get the letter from the Chancellor, to decide what is to be developed? Is it to be left to the bankers' understanding of the Chancellor's letter, or will the Government decide what ought to be developed?
Sir E. Boyle: I am glad that the right hon. Gentleman has been paying close attention to my argument. I am just coming to that point.
The view of the Government is that it is no use trying to do everything at one time. Therefore, in a time of super-boom, marginal investment projects which are not of the first importance to the economy should so far as possible be postponed. In addition, where it is possible, we want to encourage people to slow down the replacement of their fixed assets.
I quite agree that this is not an easy policy to operate; there is no dispute about that. It is not easy for the banks to decide to whom to make and to whom not to make advances. None the less—and in the Government's view this is absolutely right—the banks have been asked to make a significant reduction in the total size of their advances. It is not an easy policy but that does not in any way disprove that it is a right policy. The very fact that it is so difficult to decide exactly by what criteria to measure urgency shows how dangerous it is to try to do everything at one time.
It is of the greatest importance that we should concentrate on those projects which are of first importance to the economy and postpone those which can be postponed.
Mr. H. Wilson: In the case which has been mentioned—housing—it is obvious that the Government regard council houses as less essential. Public houses are being built. Will the hon. Member explain the mechanism by which the building of "pubs" is to be stopped and the building of council houses is to continue? How is the building of petrol stations to be stopped but the building of essential dollar factories to continue?
Sir E. Boyle: I will say only one thing about housing. Under the present Government, there are more houses for letting and more houses for sale—in fact, more houses for everybody. My right hon. Friend said today quite categorically that we hold to our programme of 300,000 houses a year, and that is much better than hon. Members opposite ever did.
I should like to say one word on the foreign aspect. I do not intend to repeat what my right hon. Friend said today about what was transacted at the Paris conference; but when the hon. Member for Stechford says, as he said this afternoon, that my right hon. Friend's visit to Paris was a costly affair, I should like the House to realise one thing. There can be no doubt whatever that it was by the unanimous will of every country represented that my right hon. Friend the Chancellor of the Exchequer became Chairman of the O.E.E.C. for a further year.
Mr. Gaitskell: It was not by the unanimous wish of this House.
Sir E. Boyle: I have absolutely no doubt that from both the political and the economic view, the conference in Paris did a very great deal of good, and that my right hon. Friend is genuinely fully deserving of the support, not only of this House, but of the country, for the work he did at that conference.
We have heard today from many speakers on the Government side of the House what is perfectly true—that the national economy is basically in a very sound position. My hon. Friend the Member for Scarborough and Whitby (Mr. Spearman), in a very helpful speech, has underlined that point. There is absolutely no truth at all in any talk today about this country being in a state of crisis; on the contrary, there can be

1127
no doubt that this country is enjoying the greatest period of prosperity that it has ever known, and it is only a very short time since the electorate showed quite clearly that it did not wish to go back to the siege economy of a few years ago.
Certainly, we do not pretend that there are not problems ahead of us. My right hon. Friend, in his Budget speech, following the passage which the right hon. Member for Leeds, South quoted, made it perfectly plain that he was not fully satisfied in April. For our part, we believe that it is very much better to take
essential measures in time before a crisis develops, instead of letting that crisis develop so that the whole nation becomes engulfed in it, as happened in 1951, the last year of the Administration of right hon. Gentlemen opposite. We intend to pursue this policy upon which we have embarked, and we are quite sure that we shall succeed in attaining our objective of securing a free economy in a peaceful world.
Question put, That this House do now adjourn:—
The House divided: Ayes 231, Noes 290.

Division No. 28.]

AYES

[9.57 p.m.

Alnsley, J. W.

Evans, Albert (Islington, S.W.)

King, Dr. H. M.

Albu, A. H.

Evans, Edward (Lowestoft)

Lawson, G. M.

Allaun, F. (Salford, E.)

Evans, Stanley (Wednesbury)

Lee, Frederick (Newton)

Anderson, Frank

Fernyhough, E.

Lever, Harold (Cheetham)

Bacon, Miss Alice

Fienburgh, W.

Lever, Leslie (Ardwick)

Baird, J.

Finch, H. J.

Lewis, Arthur

Balfour, A.

Fletcher, Eric

Lindgren, G. S.

Bartley, P.

Forman, J. C.

Lipton, Lt.-Col. M.

Bellenger, Rt. Hon, F. J.

Fraser, Thomas (Hamilton)

Logan, D. G.

Bence, C. R. (Dunbartonshire, E.)

Freeman, Peter

MacColl, J. E.

Benson, G.

Gaitskell, Rt. Hon. H. T. N.

Molnnes, J.

Bevan, Rt. Hon. A. (Ebbw Vale)

Gibson, C. W.

McLeavy, F.

Blackburn, F.

Gooch, E. G.

MacPherson, Malcolm (Stirling)

Blenkinsop, A.

Grenfell, Rt. Hon. D. R.

Mahon, S.

Blyton, w. R.

Grey, C. F.

Mallalieu, E. L. (Brigg)

Boardman, H.

Griffiths, David (Rother Valley)

Marquand, Rt. Hon. H. A.

Bottomley, Rt. Hon. A. G.

Griffiths, Rt. Hon. James (Llanelly)

Mason, Roy

Bowden, H. W. (Leicester, S.W.)

Griffiths, William (Exchange)

Mayhew, C. P.

Bowles, F. G.

Grimond, J.

Mellish, R. J.

Boyd, T. G.

Hall, Rt. Hn. Glenvil (Colne Valley)

Messer, Sir F.

Braddock, Mrs. Elizabeth

Hall, John T. (Gateshead, W.)

Mikardo, Ian

Brookway, A. F.

Hamilton, W. W.

Mitchison, G. R.

Broughton, Dr. A. D. D.

Hannan, W.

Monslow, W.

Brown, Thomas (Ince)

Harrison, J. (Nottingham, N.)

Moody, A. S.

Burke, W. A.

Hastings, S.

Morrison, Rt. Hn. Herbert (Lewis'm, S.)

Burton, Miss F. E.

Hayman, F. H.

Mort, D. L.

Butler, Herbert (Hackney, C.)

Healey, Denis

Moyle, A.

Butler, Mrs. Joyce (Wood Green)

Henderson, Rt. Hn. A. (Rwly Regis)

Mulley, F. W.

Callaghan, L. J.

Herbison, Miss M.

Neal, Harold (Bolsover)

Carmichael, J.

Hewitson, Capt. M.

Noel-Baker, Francis (Swindon)

Castle, Mrs. B. A.

Hobson, C. R.

Noel-Baker, Rt. Hon. P. (Derby, S.)

Champion, A. J.

Holman, P.

O'Brien, T.

Chapman, W. D.

Holmes, Horace

Oliver, G. H.

Clunle, J.

Holt, A. F.

Oram, A. E.

Coldrick, w.

Houghton, Douglas

Orbach, M.

Collick, P. H. (Birkenhead)

Howell, Charles (Perry Barr)

Oswald, T.

Collins, V. J. (Shoreditch & Finsbury)

Howell, Denis (All Saints)

Owen, W. J.

Corbet, Mrs. Freda

Hubbard, T. F.

Padley, W. E.

Cove, W. G.

Hughes, Emrys (S. Ayrshire)

Paling, Will T. (Dewsbury)

Craddock, George (Bradford, S.)

Hughes, Hector (Aberdeen, N.)

Palmer, A. M. F.

Cronin, J. D.

Hunter, A. E.

Pannell, Charles (Leeds, W.)

Crossman, R. H. S.

Hynd, H. (Accrington)

Pargiter, G. A.

Daines, P.

Hynd. J. B. (Attercliffe)

Parker, J.

Darling, George (Hillsborough)

Irvine, A. J. (Edge Hill)

Parkin, B. T.

Davies, Ernest (Enfield, E.)

Irving, S. (Dartford)

Paton, J.

Davies, Harold (Leek)

Isaacs, Rt. Hon. G. A.

Peart, T. F.

Davies, Stephen (Merthyr)

Janner, B.

Price, J. T. (Westhoughton)

Deer, G.

Jay, Rt. Hon. D. P. T.

Probert, A. R.

de Freitas, Geoffrey

Jeger, George (Goole)

Proctor, W. T.

Delargy, H. J.

Jeger, Mrs. Lena (Holbn & St. Pncs, S.)

Pursey, Cmdr. H.

Dodds, N. N.

Jenkins, Roy (Stechford)

Rankin, John

Donnelly, D. L.

Johnson, James (Rugby)

Reid, William

Dugdale, Rt. Hn. John (W. Brmwch)

Jones, Rt. Hon. A. Creech (Wakefield)

Rhodes, H.

Dye, S.

Jones, David (The Hartlepools)

Robens, Rt. Hon. A.

Edelman, M.

Jones, Elwyn (W. Ham. S.)

Roberts, Albert (Normanton)

Edwards, Rt. Hon. John (Brighouse)

Jones, J. Idwal (Wrexhm)

Robinson, Kenneth (St. Pancras, N.)

Edwards, Rt. Hon. Ness (Caerphilly)

Jones, T. W. (Merioneth)

Rogers, George (Kensington, N.)

Edwards, Robert (Bilston)

Kenyon, C.

Ross, William

Edwards, W. J. (Stepney)

Key, Rt. Hon. C. W.

Royle, C.

Short, E. W.

Sylvester, G. O.

White, Henry (Derbyshire, N.E.)

Silverman, Julius (Aston)

Taylor, Bernard (Mansfield)

Wilcock, Group Capt. C. A. B.

Silverman, Sydney (Nelson)

Taylor, John (West Lothian)

Wilkins, W. A.

Skeffington, A. M.

Thomas, George (Cardiff)

Willey, Frederick

Slater, Mrs. H. (Stoke, N.)

Thomas, Iorwerth (Rhondda, W.)

Williams, David (Neath)

Slater, J. (Sedgefield)

Thomson, George (Dundee, E.)

Williams, Rev. Llywelyn (Ab'tillery)

Smith, Ellis (Stoke, S.)

Thornton, E.

Williams, Ronald (Wigan)

Snow, J. W.

Timmons, J.

Williams, Rt. Hon. T. (Don Valley)

Sorensen, R. W.

Turner-Samuels, M.

Williams, W. R. (Openshaw)

Sparks, J. A.

Ungoed-Thomas, sir Lynn

Williams, W. T. (Barons Court)

Steele, T.

Viant, S. P.

Willis E. G. (Edinburgh, E.)

Stewart, Michael (Fulham)

Wade, D. W.

Wilson, Rt. Hon. Harold (Huyton)

Stokes, Rt. Hon. R. R. (Ipswich)

Warbey, W. N.

Winterbottom, Richard

Stones, W. (Consett)

Watkins, T. E.

Woodburn, Rt. Hon. A.

Strachey, Rt. Hon. J.

Weitzman, D.

Yates, V. (Ladywood)

Strauss, Rt. Hon. George (Vauxhall)

Wells, Percy (Faversham)

Zilliacus, K.

Stross, Dr. Barnett (Stoke-on-Trent, C.)

Wells, William (Walsall, N.)

Summerskill, Rt. Hon. E.

Wheeldon, W. E.

TELLERS FOR THE AYES:

Swingler, S. T.

White, Mrs. Eirene (E. Flint)

Mr. Popplewell and Mr. Pearson

NOES

Agnew, Cmdr. P. G.

D'Avigdor-Goldsmid, Sir Henry

Horsbrugh, Rt. Hon. Dame Florence

Aitken, W. T.

Deedes, W. F.

Howard, Hon. Greville (St. Ives)

Allan, R. A. (Paddington, S.)

Digby, S. Wingfield

Howard, John (Test)

Alport, C. J. M.

Dodds-Parker, A. D.

Hudson, Sir Austin (Lewisham, N.)

Amery, Julian (Preston, N.)

Donaldson, Cmdr. C. E. McA.

Hudson, W. R. A. (Hull, N.)

Amory, Rt. Hn. Heathcoat (Tiverton)

Doughty, C. J. A.

Hughes, Hallett, Vice-Admiral J.

Anstruther-Gray, Major W. j.

Drayson, G. B.

Hughes-Young, M. H. C.

Arbuthnot, John

Dugdale, Rt. Hn. Sir T. (Richmond)

Hulbert, Sir Norman

Armstrong, C. W.

Duthie, W. S.

Hurd, A. R.

Ashton, H.

Eden, Rt. Hn. Sir A. (Warwick& L'm'tn)

Hutchison, Sir Ian Clark (E'b'rgh, W.)

Astor, Hon. J. J.

Eden, J. B. (Bournemouth, West)

Hutchison, James (Scotstoun)

Atkins, H. E.

Elliot, Rt. Hon. W. E.

Hyde, Montgomery

Baldock, Lt.-Cmdr. J. M.

Emmet, Hon. Mrs. Evelyn

Iremonger, T. L.

Baldwin, A. E.

Errington, Sir Eric

Irvine, Bryant Godman (Rye)

Balnlel, Lord

Enroll, F. J.

Jenkins, Robert (Dulwich)

Banks, Col. C.

Farey-Jones, F. W.

Jennings, J. C. (Burton)

Barber, Anthony

Fell, A.

Johnson, Dr. Donald (Carlisle)

Barlow, Sir John

Finlay, Graeme

Johnson, Eric (Blackley)

Barter, John

Fleetwood-Hesketh, R. F.

Jones, A. (Hall Green)

Baxter, Sir Beverley

Fletcher-Cooke, C.

Joynson-Hicks, Hon, L. W,

Bell, Philip (Bolton, E.)

Fort, R.

Kaberry, D.

Bell, Ronald (Bucks, S.)

Foster, John

Keegan, D.

Bennett, Dr. Reginald

Fraser, Hon. Hugh (Stone)

Kerby, Capt. H. B.

Bldgood, J. C.

Fraser, Sir Ian (M'cmbe & Lonsdale)

Kerr, H. W.

Biggs-Davison, J. A.

Freeth, D. K.

Kershaw, J. A.

Birch, Rt. Hon. Nigel

Galbraith, Hon. T. G. D.

Kirk, P. M.

Bishop, F. P.

Gammans, L. D.

Lagden, G. W.

Black, C. W.

Garner-Evans, E. H.

Lambert, Hon. G.

Body, R. F.

Glover, D.

Lambton, Viscount

Boothby, Sir Robert

Godber, J. B.

Lancaster, Col. C. G.

Bossom, Sir A. C.

Gomme-Duncan, Col. A.

Langford-Holt, J. A.

Boyd-Carpenter, Rt. Hon. J. A.

Gower, H. R.

Leavey, J. A.

Boyle, Sir Edward

Graham, Sir Fergus

Legh, Hon. Peter (Petersfield)

Braine, B. R.

Grant, W. (Woodside)

Lindsay, Hon. James (Devon, N.)

Braithwaite, Sir Albert (Harrow, W.)

Grant-Ferris, Wg Cdr. R. (Nantwich)

Lindsay, Martin (Sollhull)

Bromley-Davenport, Lt.-Col. W. H.

Green, A.

Linstead, Sir H. N.

Brooke, Rt. Hon. Henry

Gresham Cooke, R.

Llewellyn, D. T.

Brooman-White, R. C.

Grimston, Hon. John (St. Albans)

Lloyd, Rt. Hon. G. (Sutton Coldfield)

Browne, J. Nixon (Craigton)

Grimston, Sir Robert (Westbury)

Lloyd, Maj. Sir Guy (Renfrew, E.)

Bryan, P.

Gurden, Harold

Lloyd, Rt. Hon. Selwyn (Wirral)

Bullus, Wing Commander E. E.

Hall, John (Wycombe)

Lloyd-George, Maj. Rt. Hon. G.

Butler, Rt. Hn. R. A. (Saffron Walden)

Hare, Hon. J. H.

Longden, Gilbert

Carr, Robert

Harris, Frederic (Croydon, N.W.)

Low, Rt. Hon. A. R. W.

Cary, Sir Robert

Harrison, A. B. C. (Maldon)

Lucas, Sir Jocelyn (Portsmouth, S.)

Channon, H.

Harrison Col. J. H. (Eye)

Lucas, P. B. (Brentford & Chlswlck)

Chichester-Clark, R.

Harvey, Air Cdre. A. v. (Macclesfd)

Lucas-Tooth, Sir Hugh

Clarke, Brig. Terence (Portsmth, W.)

Harvey, Ian (Harrow, E.)

Macdonald, Sir Peter

Conant, Maj. Sir Roger

Harvey, John (Walthamstow, E.)

McKlbbin, A. J.

Cooper, Sqn. Ldr. Albert

Harvle-Watt, Sir George

Mackie, J. H. (Galloway)

Cooper-Key, E. M.

Head, Rt. Hon. A. H.

McLaughlin, Mrs. P.

Cordeaux, Lt.-Col. J. K.

Heald, Rt. Hon. Sir Lionel

Maclay, Rt. Hon. John

Corfield, Capt. F. V.

Heath, Edward

Maclean, Fitzroy (Lancaster)

Craddock, Beresford (Spelthorne)

Henderson, John (Cathcart)

McLean, Neil (Inverness)

Crookshank, Capt. Rt. Hon. H. F. C.

Hicks-Beach, Maj. W. W.

Macleod, Rt. Hn. Iain (Enfield, W.)

Crouch, R. F.

Hill, Rt. Hon. Charles (Luton)

MacLeod, John (Ross & Cromarty)

Crowder, Sir John (Finchley)

Hill, Mrs. E. (Wythenshawe)

Macmillan. Rt. Hn, Harold (Bromley)

Crowder, Petre (Ruislip—Northwood)

Hill, John (S. Norfolk)

Macmillan, Maurice (Halifax)

Cunningham, S. K.

Hinchingbrooke, Viscount

Macpherson, Niall (Dumfries)

Currie, G. B. H.

Hirst, Geoffrey

Maddan, Martin

Dance, J. C. C.

Hopkinson, Rt. Hon. Henry

Maitland. Cdr. J. F. W. (Horncastle)

Davidson, viscountess

Hornsby-Smith, Miss M. P.

Maitland, Hon. Patrick (Lanark)

1130

1131

Manningham-Buller, Rt. Hn. Sir R.

Raikes, Sir Victor

Teeling, W.

Markham, Major Sir Frank

Ramsden, J. E.

Thomas, Rt. Hn. J. P. L. (Hereford)

Marlowe, A. A. H.

Rawlinson, P. A. G,

Thomas, Leslie (Canterbury)

Marples, A, E.

Redmayne, M.

Thomas, P. J. M. (Conway)

Marshall, Douglas

Remnant, Hon. P.

Thompson, Kenneth (Walton)

Mathew, R.

Renton, D. L. M.

Thompson, Lt.-Cdr. R. (Croydon, S.)

Mawby, R. L.

Ridsdale, J. E.

Thorneycroft, Rt. Hon. P.

Maydon, Lt.-Comdr. S. L. C.

Rippon, A. G. F.

Thornton-Kemsley, C. N.

Medlicott, Sir Frank

Roberts, Peter (Heeley)

Tiley, A. (Bradford, W.)

Mllligan, Rt. Hon. W. R.

Robinson, Sir Roland (Blackpool, S.)

Tliney, John (Wavertree)

Molson, A. H. E.

Robson-Brown, W.

Touche, Sir Gordon

Monckton, Rt. Hon. Sir Walter

Rodgers, John (Sevenoaks)

Turton, Rt. Hon. R. H.

Moore, Sir Thomas

Roper, Sir Harold

vane, W. M. F.

Mott-Radclyffe, C. E.

Ropner, Col. Sir Leonard

Vaughan-Morgan, J. K.

Nabarro, G, D. N.

Sandys, Rt. Hon. D.

Vickers, Miss J. H.

Nairn, D. L. s.

Schofield, Lt.-Col. W.

Vosper, D. F.

Neave, Airey

Sharpies, Maj. R. C.

Wakefield, Edward (Derbyshire, W.)

Nioholls, Harmar

Shepherd, William

Walker-Smith, D. C.

Nicholson, Godfrey (Farnham)

Nicolson, N. (B'n'm'th, E. & Chr'ch)

Simon, J. E. S. (Middlesbrough, W.)

Wall, Major Patrick

Nugent, G. R. H.

Smithers, Peter (Winchester)

Ward, Hon. George (Worcester)

Nutting, Rt. Hon. Anthony

Smyth, Brig. J. G. (Norwood)

Ward, Miss I. (Tynemouth)

Oakshott, H. D.

Soames, Capt. C.

Watkinson, H. A.

O'Neill, Hn. Phellm (Co. Antrim, N.)

Spearman, A. C. M.

Webbe, Sir H.

Orr-Ewing, Charles Ian (Hendon, N.)

Spelr, R. M.

Whitelaw, W. S. I. (Penrith & Border)

Orr-Ewlng, Sir Ian (Weston-S-Mare)

Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)

Williams, Rt. Hn. Charles (Torquay)

Osborne, C.

Stanley, Capt. Hon. Richard

Williams, Gerald (Tonbridge)

Page, R. G.

Stevens, Geoffrey

Williams, Paul (Sunderland, S.)

Panned, N. A. (Kirkdale)

Steward, Harold (Stockport, S.)

Williams, R. Dudley (Exeter)

Peake, Rt. Hon. O.

Steward, Sir William (Woolwich, W.)

Wills, G. (Bridgwater)

Pickthorn, K. W. M.

Stewart, Henderson (Fife, E.)

Wilson, Geoffrey (Truro)

Pilkington, Capt. R. A.

Stoddart-Scott, Col. M.

Wood, Hon. R.

Pitt, Miss E. M.

Storey, S.

Woollam, John Victor

Pott, H. P.

Stuart, Rt. Hon. James (Moray)

Powell, J. Enoch

Summers, G. S. (Aylesbury)

TELLERS FOR THE NOES:

Price, David (Eastleigh)

Sumner, W. D. M. (Orpington)

Mr. Buchan-Hepburn and

Prior-Palmer, Brig. O. L.

Taylor, Sir Charles (Eastbourne)

Mr. Studholme.

Profumo, J. D.

Taylor, William (Bradford, N.)

Question put and agreed to.

RATING AND VALUATION (MISCELLANEOUS PROVISIONS) BILL
Lords Amendments considered.

Clause 5.—(ASCERTAINMENT OF RATEABLE VALUE.)
Lords Amendment: In page 10, line 42, leave out subsection (8).
10.11 p.m.
The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. W. F. Deedes): I beg to move, That this House doth agree with the Lords in the said Amendment.
I think that this Amendment will prove generally acceptable and that it requires but a few words of explanation from me. We have now had an opportunity of considering the decision of the Lands Tribunal in the City of Birmingham case which was mentioned in the earlier proceedings on this Clause. It is not a simple issue by any means, but the essential point in the context of this subsection is that the sinking fund provision was reduced from £300,000 claimed to £200,000.
My right hon. Friend is prepared to assume that the principles underlying that judgment will apply in parallel cases, and in those circumstances he feels that the proper course is to withdraw the subsection. I do not think I need go further than that at the moment.
Mr. G. Lindgren: On behalf of my right hon. and hon. Friends, I wish to express appreciation of the manner in which the Minister and the Parliamentary Secretary have dealt with this matter. It shows some courage to withdraw a provision that was included in a Bill when it has been shown in debate and by subsequent findings that it is desirable to withdraw it. I think we should say, "Thank you, very much" to the Minister and the Parliamentary Secretary for having done so.
I should like further to compliment the Parliamentary Secretary on the manner in which he held a conference with the water undertakings to which he was so courteous as to extend an invitation for me to attend following my observations in a previous debate. That sort of
1134
attitude is appreciated by hon. Members on this side of the House.
Mr. Derek Walker—Smith: I do not wish to detain the House, but may I say that the attitude of the Minister and the Parliamentary Secretary in listening to informed discussion in this House and adjusting the Bill accordingly is a very good instance of Parliamentary democracy?
Question put and agreed to. [Special Entry.]

Clause 8.—(PROVISIONS AS TO RATES PAY ABLE BY CHARITABLE AND OTHER ORGANISATIONS.)
Lords Amendment: In page 13, line 33, leave out from "by" to end of line 34 and insert:
"an authority having, within the meaning of the Local Loans Act, 1875, power to levy a rate."
Mr. Deedes: I beg to move, That this House doth agree with the Lords in the said Amendment.
This Amendment requires some explanation. It substitutes a new definition of local authority for the one in the proviso to Clause 8 (1). The effect of this substitution is to extend the class of local authorities excluded from the benefit of the reliefs given by the Clause so as to embrace parish councils and joint education authorities—they are the most important bodies envisaged—and all other local authorities in the ordinary meaning of the term. That is the whole point of the Amendment, and I hope that it will be accepted.
Mr. G. R. Mitchison: That seems acceptable to right hon. and hon. Gentlemen on this side of the House, and to myself. May I congratulate the Parliamentary Secretary on going back for 73 years, to a Statute which appears to have no connection whatever with this Bill, to include parish councils, joint education authorities and, possibly, some other ratemaking odds and ends?
Lieut.-Colonel Marcus Lipton: As one of the very few parish councillors who is also a Member of the House, may I express my gratitude to the Parliamentary Secretary for putting parish councils on the map to this extent?
Question put and agreed to.—[Special Entry.]

Clause 8.—(PROVISIONS AS TO RATES PAYABLE BY CHARITABLE AND OTHER ORGANISATIONS.)
Lords Amendments agreed to: In page 14, line 3, leave out from "than" to end of line and insert:
"it would have been."
In line 4, leave out "that amount is" and insert "it is thereby."—[Mr. Deedes]
Lords Amendment: In page 14, line 46, at end insert:
(6) Nothing in this section shall affect any exemption from, or privilege in respect of, rates under any enactment other than this section.
Mr. Deedes: I beg to move, That this House doth agree with the Lords in the said Amendment.
This Amendment is necessary because the old Clause 6, dealing with churches and charities, was split by the Committee of the House into two Clauses—Clauses 7 and 8—and the saving which was in the original Clause 6 is now in Clause 7 and is also needed in Clause 8.

Clause 12.—(INCREASE OF CONTROLLED RENT IN CONSEQUENCE OF REVALUA TION.)
Lords Amendment: In page 20, line 43, leave out "the proposal was settled" and insert:
"the date on which the next demand for rates in respect of the dwelling—house is made."
Mr. Deedes: I beg to move, That this House doth agree with the Lords in the said Amendment.
The House will recall that the purpose of Clause 12 was to avoid the possibility of hardship on landlord or tenant resulting from an adjustment in rates on revaluation, but as the Clause left the House it was defective in one small detail. This Amendment enables the tenant to recover the full amount of the excess rent which has been paid. It is a small point. but not an unimportant one.
Mr. Mitehison: For this crumb from the rich landlord's table we are duly grateful.
Further Lords Amendments agreed to: In page 20, line 44, leave out "from the landlord."
In page 21, line 8, leave out "from the landlord."—[Mr. Deedes.]
Lords Amendment: In page 21, line 10, at end insert:
"and any rent recoverable by virtue of this subsection shall be recoverable from the person (if any) who on the said date is the immediate landlord of the tenant of the dwelling-house (being a tenant of the whole of the dwelling-house who has no sub-tenant of the whole of the dwelling-house) or, if there is then no such tenant, shall be recoverable from the person who is then the owner of the dwelling-house."
Mr. Deedes: I beg to move, That this House doth agree with the Lords in the said Amendment.
This is very little more than a drafting Amendment. All it does is to make clear that where there has been a change of landlord, the landlord from whom the tenant is entitled to recover any excess rent which he has paid is the landlord at the time of settlement.

Clause 13.—(CHARGES FOR LEVYING DISTRESS FOR RATES.)
Lords Amendment: In page 22, line 17, leave out from "1827" to "(which" in line 18.
Mr. Deedes: I beg to move, That this House doth agree with the Lords in the said Amendment.
This Amendment and the next one with it correct an error in drafting which would have deprived rating authorities of their existing power of recovering costs incurred by them in obtaining from the justices distress warrants for the rates. A small point, but an essential one.
Further Lords Amendment agreed to: In page 22, line 21, at end insert:
"and in section one of the Distress for Rates Act, 1849 (which relates to warrants for distress), the reference to reasonable charges, in relation to distress for rates, shall be construed as a reference to the fees, charges and expenses chargeable in accordance with any order for the time being in force under this section."—[Mr. Deedes.]

Filth SChedtlie.—(ADJUSTMENT OF RATES PAYABLE BY CHARITABLE AND OTHER ORGANISATIONS)
Lords Amendment: In page 34, line 24, leave out from "made" to "that" in line 25 and insert:
"(whether before or after the passing of this Act) in the valuation list in force in."
Mr. Deedes: I beg to move, That this House doth agree with the Lords in the said Amendment.
This is mainly a drafting Amendment. It makes clear that in calculating the limit of the rates payable by a charity in the year 1956–57 the effect of a structural alteration in the property which took place in the previous year is taken into account even though the valuation list is not altered until after the end of the previous year.
Question put and agreed to. [Special Entry.]
Further Lords Amendments agreed to: In page 35, line 6, leave out from "than" to "apart" in line 7 and insert "it would have been."
In line 8, leave out "that amount is" and insert "it is thereby."—[Mr. Deedes.]

Eighth Schedule.—(ENACTMENTS REPEALED.)
Lords Amendment: In page 41, line 36, at end insert:

"32 & 33 vict. C. 40.

The Sunday and Ragged schools (Exemption from Rating) Act, 1869.

The proviso to section one."

Mr. Deedes: I beg to move, That this House doth agree with the Lords in the said Amendment.
This is really a drafting point. It corrects an oversight by repealing the proviso to Section 1 of the Sunday and Ragged Schools (Exemption from Rating) Act, 1869.
Lords Amendment: In page 42, line 35, column 3, leave out from "words" to end of line 38 and insert:
"from 'and every notice' to the end of the subsection."
Mr. Deedes: I beg to move, That this House doth agree with the Lords in the said Amendment.
This is a minor drafting point. The Amendment is consequential upon the repeal by Part I of the Eighth Schedule of Section 35 of the Local Government Act, 1948, relating to the procedure in connection with draft valuation lists, which is superseded by the new procedure provided for in the Bill.

COLLIERY WORKERS (INDUSTRIAL INJURIES)
Motion made, and Question proposed,
That the Draft National Insurance (Indus-trial Injuries) (Colliery Workers Supplementary Scheme) Amendment (No. 2) Order, 1955, a copy of which was laid before this House on 8th July, be approved.—[Mr. Marples.]
Mr. Bernard Taylor: May I ask where the Minister is? We should like an explanation of this Order. Perhaps the hon. Gentleman is unavoidably absent; the business of the House may have proceeded too rapidly. I see that he has now come into the Chamber.
10.22 p.m.
The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mr. Ernest Marples): The business of the House finished a little earlier than I expected, and I am sorry that I am a second or so late.
The Order further amends the National Insurance (Industrial Injuries) Colliery Workers Supplementary Scheme, made in 1948, which is the parent Scheme. That Scheme is a contributory one, providing supplementary benefits for persons receiving benefit under the National Insurance (Industrial Injuries) Act, 1946, in respect of colliery accidents and diseases. The Minister is responsible for paying supplementary benefits in certain cases, and in the remainder the National Coal Board acts as the paying agent.
It should be made clear that the Scheme imposes no charge upon the Exchequer or upon the Industrial Injuries Fund. That is an important point to make. In either case the payment is made out of moneys provided by the Fund formed by the contributions from the National Coal Board—4d. a ton on the total saleable tonnage of deep-mined coal—and 4d. a week from the employee; less for boys and women.
The general administration of the Scheme rests with the National Committee, which consists of five employers' representatives and five workers' representatives. The proposed amendments are to increase the benefit. Like those of the earlier Orders, they have been asked for by the National Committee and will be the second set of
1140
amendments this year. Since the earlier amendment a detailed Report has been received by the Government Actuary on the finances of the Scheme. This has revealed a substantial and growing surplus. The increases in benefit now proposed are regarded by the Actuary as well within the surplus which can be prudently released without changes in the contribution rates. In other words, the Actuary is of opinion that the increases now proposed can easily be made out of the money at the disposal of the Committee.
There are many changes. I do not think the House would like me to detail all of them, but I will mention one or two by way of illustration. It is proposed to increase the rate of supplementary injury benefit for adults from 22s. 6d. to 25s. per week, with proportionate changes for juveniles. Secondly, it is similarly proposed to increase the rate of supplementary disablement benefit for 100 per cent. disablement from 22s. 6d. to 25s., with corresponding increases for juveniles. This increase will apply where two or more disablement pensions amount to the 100 per cent. rate, or where the person is receiving approved hospital treatment. It is also proposed to increase the supplementary disablement gratuity from its present proportion of one-quarter of the basic disablement pension rate to one-third, thus bringing it into line with the supplementary disablement pension for less than the 100 per cent. rate, which is already paid at one-third of the basic disablement pension rate.
It is proposed to increase the rate of supplementary widows' pension for the able-bodied childless widow from 6s. 3d. to 7s. 6d. per week, while that for other widows is to be increased from 22s. 6d. to 25s. per week. The final proposal which I will mention is the introduction of a new supplementary benefit. I think this is of great importance to almost everyone. A gratuity is to be payable on the remarriage of a widow entitled to a supplementary widow's pension at the rate of one-third of the gratuity awarded her under the main Industrial Injuries Act. The present industrial injuries remarriage gratuity is equivalent to one year's pension. The supplementary pension will therefore be £39 in the case of a widow on the higher rate of pension.

1141
That is a rather brief and perhaps slightly belated explanation of the Order which I ask the House to approve. I hope the House will accept it. I know that the hon. Member for Mansfield (Mr. B. Taylor), who has followed the course of this class of benefit, would like to say a few words about it on behalf of the Opposition. I believe that this is an agreed Measure, and I hope that the House will pass it with reasonable expedition at this late hour.
10.28 p.m.
Mr. Bernard Taylor: We accept the hon. Gentleman's apology for being a little late, particularly in view of the very lucid explanation that he has given of the Order. My observations will be very brief, in view of what the Parliamentary Secretary has said.
I should like to make these observations because the mining industry is the only one which has initiated a supplementary scheme under Section 83 of the Industrial Injuries Act, and it has been of great help and benefit to people incapacitated in the industry. We have been talking earlier today about economies by the Exchequer; I would emphasise that this supplementary scheme is financed by the joint contributions of so much from the N.C.B. per ton of coal raised and so much per week from the miners themselves. During the past seven years the scheme has been of great help to our incapacitated people and to widows whose husbands had the misfortune to meet with a fatal accident or who died from pneumoconiosis or other industrial diseases.
One all—important observation I must make. In spite of the untiring efforts of the National Coal Board and of the National Union of Mineworkers to promote safety and to reduce accidents in the mining industry and the incidence of pneumoconiosis and other industrial diseases, the figures for the industry are still alarmingly high.
The number of awards of benefit made during 1954 for the mining industry alone is no fewer than 340,000. This House would do well, in a short debate of this kind, to pay a compliment, in view of those circumstances, to those responsible
1142
for the initiation and progress of the Scheme, and, as the Parliamentary Secretary pointed out by inference, to the very healthy state of the Fund. It is indeed a compliment to both sides of the industry, and many of us know that thousands of miners have been very grateful for the additional benefit which the Supplementary Scheme provides.
As the hon. Gentleman intimated, the Actuary and the National Committee representing both sides of the industry are completely satisfied that the Fund can bear this cost without any increase at all in contributions. I wish to reinforce what the hon. Gentleman said about the new feature. It is only a new feature so far as this Scheme is concerned. It has been characteristic of the Industrial Injuries Scheme since its inception in 1948, but here the Committee, I think wisely, has decided that this feature shall now be embodied in the Supplementary Scheme and that a remarriage gratuity shall be paid to the widows who remarry.
We on this side of the House welcome, the Order, and we are very anxious to expedite its passage through the House. We appreciate the efforts of the hon. Gentleman, his right hon. Friend and the Department in bringing the Order before us before the House rises for the Recess so that payments can be made much earlier than they would have been had the Order been delayed until the autumn. We welcome the Order, and I am obliged to the hon. Gentleman for being so expeditious.
Resolved,
That the Draft National Insurance (Industrial Injuries) (Colliery Workers Supplementary Scheme) Amendment (No. 2) Order, 1955, a copy of which was laid before this House on 8th July, be approved.

COLLIERY WORKERS (INDUSTRIAL INJURIES)
  SUNDAY CINEMATOGRAPH ENTERTAINMENTS
  Order made by the Secretary of State for the Home Department, extending Section 1 of the Sunday Entertainments, Act, 1932, to the Rural District of Tow-cester [copy laid before the House, 20th July], approved.—[Sir H. Lucas-Tooth.]

HOUSING (REGULAR EX-SERVICE MEN)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Legh.]
10.34 p.m.
Mr. Charles Doughty: I wish to discuss the question of the housing of Regular soldiers upon release. This matter was down for discussion yesterday week when, unfortunately, my hon. Friend the Parliamentary Secretary to the Ministry of Housing and Local Government could not be here, through a temporary illness. We are all pleased to see him here today ready to deal with the question and, I hope, to deal with it in a way in which certainly the Regular soldiers hope that it will be dealt with.
This is no new question. It is one which, to my knowledge, was raised almost exactly a year ago by my hon. Friend the Member for Harrow, East (Mr. Ian Harvey) in an Adjournment debate on the last day of sitting of this House before it rose for the Recess on 30th July, 1954. In that debate he said:
"It is not a good thing for Regular Army recruitment or for any of the Services that there should be publicity given to the series of eviction cases of people occupying married quarters, even though the Services have got to regain possession of these premises for those who need them more than those who are being evicted."—[OFFICIAL REPORT, 30th July, 1954; Vol. 531, c. 907.]
He went on to say that his right hon. Friend the Minister of Housing and Local Government had appointed a sub-committee which was still sitting, although the question was well and ably raised before the House at that time.
After the sub-committee had reported, the Minister of Housing and Local Government made this statement to the House:
"I have been considering the difficulties confronting Regular ex-Service men, who wish to apply for council houses in areas where a residential qualification is required by the local authority. Sailors, soldiers and airmen, returning to civil life after a period of years in the Forces, as often as not possess no fixed abode anywhere at all. To insist, in such circumstances, on a residential qualification is to make it quite impossible for many of them to get their names put onto the housing list, however great may be their need. That these men should be penalised in this way, solely by reason of the fact that they have been serving
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their country, is a most grievous injustice which should not be allowed to continue. I consider that an application for a council house, made within one year of his leaving the Forces, by a Regular ex-Service man, who has found employment in or near the district, or has family connections with it, should be considered exclusively on the basis of his housing needs, without any regard whatsoever for the length of his residence in the locality."—[OFFICIAL REPORT, 1st March, 1955; Vol 537, c. 1886–87.]
The reception of that scheme can hardly be called an unqualified success, as the figures given in a Written Answer to my hon. Friend the Member for Harrow, East by the Minister of Housing and Local Government showed. It was:
"Out of 1,467 authorities in England and Wales to whom the circular was sent, 860 have so far replied. Of these, 612 assured me that they were already applying these principles; 154 stated that, whilst they had not done so hitherto, they would in future bring their practice into conformity with my recommendations; five authorities are reconsidering their practice and 63 gave replies which were partially satisfactory. The number of negative replies was 34."—[OFFICIAL REPORT, 6th July, 1955; Vol. 543, c. 106.]
Only about two-thirds of the councils brought themselves into line with the Minister's recommendation, but even if that recommendation had been carried out it would not have brought the matter to a satisfactory conclusion, because the local authorities merely placed the retired soldier upon the waiting list with very few points.
I should like to draw attention to a case about which I had occasion, after the Minister's statement, to write to a council. It concerned a distinguished soldier who had retired. Although I mentioned the Minister's statement and the circular, this is the reply that I received:
"I have your letter of the 21st March and regret to have to reply to you in the following strain. The circular pronouncement dated 8th March to which you refer has been received by the Council, together with a copy of the statement in the House made by the Minister on 1st March. These have been considered by the Housing Committee. The Committee were of opinion that the position of ex-Service men generally was not less favourable than that of many of the applicants on the Council's waiting list, being those who had little if any hope of being housed or rehoused by the Council for some considerable time, if at all. Full reference was made to the circumstances of the decision made on the 15th April, 1954, to close the waiting list, and to compile there-from a priority list comprised of applicants with an urgent housing need, and who fulfilled on the whole the necessary qualifications under the 'points' scheme."

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It would appear that even if the council did follow the Minister's advice, the position of the Regular soldier on release would not be very different in practice from what it was before the Minister made his statement.
The problem concerns a very large number of soldiers and, I presume, Navy and Air Force men. In 1953, over 50,000 Regular soldiers were released, in 1954 23,000, and this year from January to May over 24,000 Regular soldiers were released. At least one-third of those were married, and that very large number must be people who have great difficulty in finding houses. Are they, therefore, to be left completely homeless? Worse still, are they to do what so many have done —remain in Army married quarters, if that be their last residence when in the Army and not leave when they become civilians? Such a course is certainly not justified. If one cannot find a house, there may be no excuse for remaining in someone else's property, but I can quite understand their doing so.
So far as I have been able to ascertain, no fewer than 340 such married quarters are at present irregularly occupied by ex-soldiers and their families—people who are now, of course, civilians. So far as the Army is concerned, it is a vicious circle. Serving soldiers who should be occupying married quarters cannot do so. That makes for discontent in the Army and also makes recruiting more difficult, and it has an adverse effect upon the general standing of the Army.
To a large extent, what I have so far said has been criticism, and I appreciate that mere criticism is not of much use to anybody. What solution can there be to this problem? First, of course, in every housing problem—whether it relates to Regular soldiers on release or to people who are civilians—one should re-member that to own one's house is far better than to rent somebody else's, even though one's landlord is a council. In June, the Minister of War announced the Army Savings Scheme to help soldiers to have money for a deposit and for furniture on their release. That scheme does not start until 1st September, and it must be some time before sufficient money is accumulated for Regular soldiers to be able to follow that excellent course.
When we come to the question of how the problem is to be dealt with before
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the necessary time has elapsed, then certainly—though, perhaps, only as a temporary measure—I think something more effective can be done on the lines which I have indicated. Local councils could surely give more points for what is properly called housing need. There is nothing unfair in that. Those families to which I have referred as occupying Army married quarters have a very great housing need, and it is quite futile to say that those people and others must wait until a court has made an eviction order —with costs which someone has to pay—before extra points can be given on the ground of housing need.
It would not be in order for me now to suggest that legislation should he introduced to that end. Indeed, legislation is not required if the proper cooperation can be obtained on the lines which I have suggested; that is, that not only should the Regular soldiers on release be placed upon housing lists in the localities where they obtain employment or in which they have other grounds for being placed on the housing list, but, in addition to their residential qualifications which they are deemed to have, they should have further points on the ground of housing need. That would place them high enough on the list to have a reasonable prospect of being housed in the particular localities where they have cause, by reason of employment or of pre-Service residential qualifications, to require a house.
I know that both the Minister and the Parliamentary Secretary are sympathetic towards the problem. I would ask them to assist this very large number of Regular soldiers who have this very serious problem, and to devise some means of solving it.
10.44 p.m.
The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. W. F. Deedes): My hon. and learned Friend the Member for Surrey, East (Mr. Doughty) has raised a matter of general concern and, as he says, not a new one. I welcome the opportunity to meet some of the points he has made about it, and I apologise for the fact that I was not available to meet them last week, when he first sought to raise this matter in debate.
I must first say one word about the background of this problem, of which,

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I am sure, my hon. and learned Friend the Member for Surrey, East is aware, but which he did not mention and which must not be overlooked. As he knows, under Section 83 (1) of the Housing Act, 1936, local authorities are responsible for the management and control of their houses, including the selection of tenants. It is their responsibility, and while my right hon. Friend and the Ministry can advise, guide, and persuade, there are clear limits beyond which we cannot go, and that applies to all aspects of housing. I should like to stress that point.
As my hon. and learned Friend has just said, the main criterion in selecting tenants should be housing need. But some local authorities give weight to residential claims. They either insist on residential qualification before accepting the application, or they take residence into account when they select tenants. It is, therefore, fair to say that the Regular Service man is handicapped in the circumstances. More often than not he has no residential claim in any area and his wife will have no claim, if she has been living with him in married quarters. In addition, he may not know where he will seek employment when discharged, and so not know to which local authority he should apply before he leaves the Service.
That very difficult situation was most fully investigated by the Housing Management Sub-Committee of the Central Housing Advisory Committee, whose Report appeared only a few months ago. I am sure that my hon. and learned Friend has studied the Report. It has a great deal to say on the problem which he has raised tonight. It is the fruit of very careful and painstaking investigation. It concerns itself very largely with this question of residential qualification and the Regular Service men; and the two subjects are interrelated.
I want now to refer to the recommendation. Local authorities, except those obliged to "export" population and those with Service establishments in their areas, are urged to waive residential qualifications for Service applicants on discharge. The excepted authorities, and I think that my hon. and learned Friend is probably concerned with more than one of the excepted authorities, should waive their requirement when Service men obtain employment in their
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area, or have residential connections with them. Having admitted Service men to their lists, the authorities should see that their applications receive parallel treatment with those of civilians, and are not prejudiced by any weight given to residence in selecting tenants.
A great deal of guidance is also offered in this Report to Service men themselves. They are advised to make their application as early as possible and to keep in touch with local housing departments, and other possibilities in the Report are brought to their notice. It is not to be expected that Service men can or will wish to study a Report of this nature, but I want to say how the Report was followed up by my Department and by other Departments concerned.
My hon. and learned Friend has already referred to the statement which my right hon. Friend made in the House on 1st March in which he gave the Report a very fair wind. Moreover, in Circular 24 /55, which drew attention to the subject, my right hon. Friend recommended all housing authorities to adopt the principle enunciated in his words, which I will not repeat because my hon. and learned Friend has already quoted them, and to let him know their existing practice. My hon. and learned Friend said that the result was hardly an unqualified success. I can, however, bring a little more up-to-date the analysis of the replies which he mentioned.
Out of 1,467 local authorities we have so far had 1,151 replies and 838 are already applying the principles in the circular, while 174 will do so in future. That makes 1,012 out of 1,151 replies promising positive action; 16 are considering action, 82 replies are only partially satisfactory and 41 are negative. My hon. and learned Friend referred to one authority, but I cannot say into which category it falls and whether it is satisfactory or will be reconsidered.
That is not the final return, but I do not agree that it lacks success. I think that in three months it represents a considerable advance on the position at which we arrived before the sub-committee published its Report. We have taken quite definite steps to bring the Report before local authorities and show them our wishes in respect of it. In addition, the three Service Departments have issued instructions on how to apply

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for council houses explaining the responsibilities of councils in this regard. Not everyone understands that quite clearly. That guidance has appeared on unit and mess notice boards and will be brought to the attention of Service men at frequent intervals. Those instructions are being revised, following the circular, so that the men will have up-to-date information.
My hon. and learned Friend clearly feels that this course of action does not go far enough. We cannot discuss the possibilities, but I would say that any form of more definite or statutory action which we could exercise in this field would be more directly opposed to the well-established principles, laid down by the Housing Acts, of giving local authorities the responsibility of providing and managing their own houses. I think it fair to say that it could create resentment among a body of civilians and, without asking whether it was justified or not, that is the one feeling one
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does not want to generate in respect of any of the Services.
To sum up, we know very well this problem of housing Regular ex-Service men. I consider that we have done a great deal about it in recent months. We have a great deal of evidence as a result of the circular that local authorities are increasingly sympathetic to ex-Service men's housing needs. Replies to the circular bear that out. If we wish to increase this sympathy I am convinced that this is the best way of doing so. I am well aware that some local authorities have a real difficulty—I mention one which concerns my hon. and learned Friend, Caterham. We are sure that we shall solve the problem along the lines we are pursuing, that is, by the willing co-operation of those concerned, the Ministries, the local authorities and the Service men.
Adjourned accordingly at seven minutes to Eleven o'clock.