GOVERNMENT EXPENDITURE (ECONOMIES)

HC Deb 03 July 1956 vol 555 cc1163-299

3.39 p.m.

Mr. Harold Wilson (Huyton)

I beg to move, That this House considers that the economic policies of Her Majesty's Government as indicated in the Chancellor of the Exchequer's announcement on 26th June and in other recent statements provide no solution for the economic problems facing the nation.

When the Chancellor made his statement last week and the House had an opportunity of studying the details in HANSARD, it was obvious that we should want to debate it, but since that statement, only seven days ago, the position has now been overshadowed by a series of rapid developments.

The first was the announcement by the British Motor Corporation that it was sacking, out of hand, 6,000 workers. This has been followed by anxieties as to how far repercussions would spread more widely in the industries supplying the motor car firms. Then we had the Treasury announcement that industrial production has taken a sharp down turn. Last week, we had a fall in sterling below the par figures and, only a few minutes ago, what the Chancellor will agree to be extremely disappointing gold and dollar figures for June. We had the announcement of new and menacing cuts in the imports into Australia, which is this country's biggest customer and on Friday we had the Government announcement that we were to pay in gold £16 million more than they have estimated for the privilege of keeping troops in Germany.

The skies are indeed dark and I do not need to tell the House that they are dark with the shadows of Tory chickens coming home to roost. I begin with the Chancellor's statement. First, I must draw attention to the entirely unusual procedure which the Chancellor has followed. We had the Estimates for the year at the normal time. We had the statement on 17th February when he announced the cuts in bread and milk subsidies, and then, between that statement and the Budget, there was a big pressure campaign on the Government to axe Government expenditure. Even Sir Bernard Docker lent the unique weight of his authority to a campaign for austerity.

In due course we had the Budget. The Chancellor announced a Budget surplus above the line, a public saving, of £460 million. He had previously been saying why public savings were quite wrong and why we should not have them, and then he said that we should have £460 million this year, after taking credit for the cuts in the bread and milk subsidies and, of course, the tax changes. He felt that that was not enough, so he announced an economy drive. There was to be a cut of no less than £100 million in the current year.

There has been some doubt whether the cuts he had previously announced in January were to be included in that £100 million. The Chancellor hedged a little in his Budget speech, as we have now found. He referred to a cut in "the Estimates as published" but he also said that the £460 million surplus did take full account of the cuts in food subsidies and needed "further reinforcement" by the £100 million cuts in expenditure. Certainly, that is how the Chancellor's statement was generally interpreted. The City reacted favourably to the Budget for a day or two and Press commentators universally regarded his pledge as being a pledge to cut Government expenditure by £100 million, with new economies additional to those already announced.

Sterling, largely on the strength of the promised £100 million cut, went up, I think to 2.81 dollars. Even Sir Bernard Docker was satisfied, and the country was much reassured when he did not carry out his threat to leave the country permanently. That, of course, would have been the coward's way out. Instead, he wound up his tax reduction campaign and transferred the assets which he had collected for those purposes to a new organisation formed to fight the class war against the trade union movement.

I must confess that, despite that almost universal satisfaction, on this side of the House we had our doubts about the Chancellor's proposals. In the Budget debate I hazarded the view that all we should get would be under-spending of the Defence Estimates. That, after all, is what we have had every year. The Government invariably announce defence Estimates, more to impress themselves and encourage their allies than with any idea of spending them and at the end of the year we find that they are underspent to the tune of about £100 million each year.

We were very doubtful about the feasibility of making those cuts without major changes in policy. We had heard the Lord Privy Seal, year in year out, reiterating that no economies were possible without a major change in policy. The Chancellor, of course, knew better than his predecessor and he went into action with vigour and energy. With his keen operatic flair, he now cast himself for a new rôle, that of "Mack the Knife" in the Government's "Threepenny Opera." Now that a quarter of the financial year has gone, we have had the results of this announcement—and what a disappointment it has been, for hon. Members opposite, who expected a Geddes Axe and who got, instead, these quite small, but some of them very vicious, cuts.

We have been presented with an account of a total saving of £76 million. Nearly half of that, of course, represents a running down of stocks, once for all saving, perhaps not even that, because much will need replacement next year, perhaps at higher prices. Of the so-called civil economies £25½ million were not new at all. They were the bread and milk subsidy cuts of two Budgets ago. That has, naturally, caused some comment. The Economist said: Mr. Macmillan did not make it clear in April that he was going to take credit for these in his £100 million; in fact, some may now suppose that he made it deliberately unclear, so that he could include or exclude them according to the difficulty or ease of his search for genuine new economies. Anxious as I always am to acquit the Chancellor of deliberate deception, I am prepared to accept that rather charitable interpretation which the Economist has put on his action.

Let us turn to the detailed cuts. On the defence side, we have £36½ million of nominal savings, although to that we should add £1½ million from the Ministry of Supply, making a total of £38 million on the military side. Of course—and the Chancellor fairly made this clear last week—that is in no sense a re-appraisal of the nation's defence effort and expenditure. I must tell the Government that we shall want very shortly to debate that whole subject. I will confine myself today, not going into what the Chancellor might have achieved, but commenting very briefly on the piffling reductions announced by the Chancellor in the statement which he did make. A large part of it is running down of stocks. In some cases he has announced a quicker rate of disposal of surpluses, a decision which will have been received with warm satisfaction by the criminal classes who operate on the fringe of the Ministry of Supply's disposal system.

There are then some reductions in what the statement called "manpower adjustments". That is the euphemism by which the Government describe the failure of their recruiting policy. Even the present Government, who have spent so much on aircraft which will not fly, cannot spend money on soldiers and airmen who are not there. For the rest all we have is a clear and decisive announcement that the Government will not place certain orders which, on past form at any rate, they never intended to place anyway. There is nothing disinflationary about refraining from spending money which one never intended to spend. So much for the defence cuts.

Now I turn to the savings in the Civil Estimates. Here the nominal saving was £39½ million, or £38 million after the transfer to the defence side of the Ministry of Supply figures. Of that £38 million, a major item is represented by Civil Defence and a running down of strategic stocks of food and raw materials. Indeed, of that £38 million, £13.4 million is on Civil Defence, or running down of strategic stocks.

Again, I have no comments on the policy involved, because they would be more appropriate to a defence debate, of which I have given the Government warning, but these reductions accord very ill with the high priority which, last year, we were told was to be given to Civil Defence. When we remember the lofty rebukes which the Home Secretary gave to the Coventry City Council, one feels, in the light of the Chancellor's statement, that he should go to Coventry, or be sent there, to apologise. Now we have our £38 million whittled down to £24½ million.

The net effect of the alterations in the agricultural and food grants and subsidies, price reviews, family allowances, and so on—all previously announced and taken credit for in the Chancellor's above the line surplus—amounts to a saving of £13½ million. Our real saving is, therefore, now down to about £11 million. I hope to show later that this includes some normal underspending, and that in any case the whole amount is more than swallowed up in the additional £16 million German support costs. So it is a case of "and then there was none". We see the savings disappear, and the Lord Privy Seal's honour is vindicated, which is very reassuring if this morning's Daily Mail story, that he is shortly to go to another place, is true.

The Lord Privy Seal (Mr. R. A. Butler)

I must tell the right hon. Gentleman that a man can have no greater honour than to be Leader of the House of Commons. There is no truth in this story whatsoever.

Mr. Wilson

I am sure that all Members of the House of Commons will express their relief at that announcement. True or not, however, it is a very good thing that the Lord Privy Seal's honour has been vindicated, vis-a-vis the attacks which the Chancellor has made upon him, by implication.

Within this £11 million—although, economically, as I have said, it is entirely wiped out and has no disinflationary effect—there are some rather damaging and vicious little cuts. There is a reduction of £2½ million in overseas aid. Included in this is a reduction of £80,000 in Colombo Plan expenditure, which was mentioned with great effect in the Government's Election programmes both of 1951 and 1955. Upon the very eve of the Commonwealth Prime Ministers' Conference, and with the future of the world hanging upon competitive co-existence in Asia, the Government cut their Colombo Plan expenditure. Only last October they announced a seven-year programme of £1 million a year for the technical co-operation scheme, and now it is to be cut.

There is a reduction of £1 million in the loan to Kenya for rehabilitation and reconstruction. Perhaps the Chancellor will tell us whether this is a cut, a reappraisal of the Government's Kenya policy, or just another case where they think that they would not be spending it any way, so that they may as well take credit for it as a real cut. Then there is a reduction of £70,000 for the Commonwealth Relations Office. If this is merely to economise in some of the Secretary of State's costly speeches, including the one in Canada, we shall welcome it. Then there is a further cut of over £800,000 in colonial development and welfare.

What kind of philosophy do the Government think they are putting over? They are prepared to make these penny wise economies in colonial development now when, all too often, they have to ask the House for millions of pounds in military support costs which are needed years later in respect of Colonies where hardship is being experienced. There is a reduction of £525,000 in grants and loans to international organisations, but that is not as serious as I first thought. It is not a cut in the grossly inadequate sums that we pay to the United Nations Specialised Agencies; it is a reduction in the grant to the Agency dealing with relief and rehabilitation, and I gather that the cut is being made because the money was not likely to be spent, anyway. But, here again, it is not a saving. It is carried forward to next year under the special arrangements of that Agency so we have another item of underspending for which the Chancellor is taking credit.

I now turn to economies at home. There is to be a cut of £1.2 million in school meals. Here is our "Britain Strong and Free". This is the "Prosperity Plus" upon which the right hon. Gentleman and his friends have been fighting recent by-elections, with marked lack of success. Eleven years after the war the strength of sterling apparently depends upon cuts of this kind. There are minor but harmful little cuts in the Ministry of Health Vote, as revealed at Question Time yesterday.

Then there is a cut of £750,000 in the Vote for the Development Areas. We are told that there are to be more stringent criteria for new building. This is a financial reflection of the change in Development Area policy, which we managed to extract from a very reluctant Government spokesman some weeks ago, at Question Time. I then gave an example of the way in which these new criteria prevented the building of an important factory extension, with a great potential in dollar export markets. The whole House knows that the Government have never had their heart in their Development Area policy. They have created one new Development Area in Lancashire, and built one factory there—which they have never stopped talking about—and that is all. The Development Area policy offends against all the Government's most cherished notions of laissez faire. Now, apparently, to judge from Government statements, including the one made by the Parliamentary Secretary to the Board of Trade this afternoon, the Government are abandoning the whole policy at the very moment when they are doing their best to create new Development Areas in the Midlands.

Then we have economies in the agricultural and food services; the Agricultural Research Council, and the Forestry Commission. We should like to know what those services are. Various economies, amounting to £106,000, are to be made in relation to the fisheries and herring industry. Many of my hon. Friends will want to know about that. Just before the Election we heard a lot about the roads. Now there is to be a cut of £180,000 in economies in maintenance expenditure. That is, roughly, £1,500 for each authority. Even last year the expenditure upon road maintenance was running at less than three-quarters of what it was pre-war, although we now have a vastly greater number of cars and lorries on the roads.

Then there is the most extraordinary cut of £150,000, by way of general economy, on the D.S.I.R. Vote. What a moment to choose to make this cut. According to the expensive week-end speeches which Ministers keep making the country is facing a new battle for survival—the battle of export markets—which is to be fought out in the factories and the laboratories, upon the benches and the drawing boards. The Government choose this moment to slash the D.S.I.R. Estimate.

I would remind the House that in its last Report the D.S.I.R. made it plain that from almost every corner of the country demands had been brought to its notice for further resources and further expenditure. The Report said that the resources available were inadequate, or likely soon to be inadequate. It listed the Industrial Grants Committee; the Scientific Grants Committee and the Nuclear Physics Committee as having asked for more money. The D.S.I.R. did not think that it could give them the money, and now the Government make a further cut.

We then come to the list of administrative economies. I must tell the Chancellor that my hon. Friends are very suspicious about the proposed cut in the administration of the National Assistance Board. We should like to know what that means. Many of us are already becoming aware, or feel that there is strong evidence to suggest, that for some time the Assistance Board has been tightening up in the exercise of some of its discretionary decisions. It is now being forced to take a further cut in way of administrative economies.

Only today we read that the Minister of Education has instructed the London County Council to treble its fees for advanced education. How does he tie all this up with his drive for increased technological education, and the rest? As far as I know, the Ministry of Labour has recently been sacking unestablished factory inspectors—men specially recruited during the war, who have industrial experience, and have had about 10 or 12 years on the job since then. Yet, in the debate upon the Whitsuntide Adjournment, the Parliamentary Secretary complained that between 50 per cent. and 70 per cent. of our factories had no adequate fire warning system. We now understand that the inspectors are being discharged.

I hope that the Chancellor will tell us whether it is a fact that the economies set out in this statement in relation to the Ministry of Labour will fall upon the employment exchange service and the Government training centres, at the very moment when the credit squeeze and automation are creating a new need for the Ministry's services not only in placing but in training labour.

So one could go on all through this miserable list. It is not the price of economic progress; it is the price of the right hon. Gentleman's vanity. It is the price of his attempt at the time of the Budget to show that he could do something which the Lord Privy Seal failed to do. Because, what does it all come to? An assortment, as I have said, of these vicious little cuts whose economic effect, whose disinflationary effect—if there is one—is entirely wiped out by one bad Agreement negotiated last week in Germany.

I know, of course, that the Chancellor, with the peculiar method of accountancy that he has, is not prepared to include any increases in Government expenditure. Since the Budget there have been increases in teachers' salaries and the salaries of civil servants and the Bonn Agreement. I do not know what these all add up to—perhaps £30 million or £40 million a year. The Chancellor says that these must not be offset against the £100 million, they will be cancelled out by normal underspending. But the right hon. Gentleman cannot have it both ways. The so-called economies, as I have shown, include a lot of normal underspending.

It is now seven or eight months since the Estimates were first prepared. We are half-way through the annual financial cycle of the Government and evidence of some underspending is already emerging. Instead of allowing it to accumulate and offset the Supplementary Estimates, which is what normally happens, the Chancellor—when he has passed his cap round the Depart- ments, which he has been doing for the last two months—is asking them to put in any accumulated underspending that they already know about.

We had a case in the House only yesterday, when all of us were shocked at the proposal to cut prison building. Yesterday the Home Secretary said, "This is not a cut." He could not have spent it this year, he could not get the sites in time, so it will have to be postponed until next year. That is another example. Therefore, I say to the Chancellor that if he proposes to take credit for this underspending he must add on the overspending, the Supplementary Estimates, the Bonn Agreement and the rest of it, the need for which is already apparent.

This statement, of course, marks the end of a long road, the end of a great illusion. For years, under a Labour Government, right hon. and hon. Gentlemen opposite told us how they would solve all the country's problems; how they were going to bring down the cost of living by reducing Government expenditure. It was all to be painless—no one would suffer. It was all to be done by administrative efficiency, by sound business methods.

The Lord Privy Seal told us during the debate on the Finance Bill, in 1949, how easy it would be to reduce Government expenditure by 5 per cent. He asked, why not 10 per cent.? Just by administrative economies 5 per cent. would save £330 million and 10 per cent. would save £660 million. The Minister of Education, in that much publicised article in The Times went even further in 1951, and there was all the rest of it.

Now we are in a position to measure performance against promise. This year, after allowing for the Chancellor's cuts, Government expenditure is running at a rate of £1,500 million more than in the last year of the Labour Government; and let us remember that this year the Government are running down stocks while we were building them up. In 1950–51, total Government ordinary expenditure was £3,246 million. This year, it is running at £4,758 million. I know that hon. Gentlemen may say that this is an increase in defence expenditure. There is an increase in defence expenditure, but if we take the total expenditure net of defence, the increase is from £2,469 million to £3,259 million, an increase of £790 million exclusive of defence, or just under one-third.

The Minister of Labour and National Service (Mr. Iain Macleod)

Almost entirely on the social services.

Mr. Wilson

The Minister of Labour and National Service says, "Almost entirely on social services." Even to maintain the level of the social services where they have tried to do so, right hon. Gentlemen opposite have had to spend a great deal more, to keep up with their own inflation. So I hope that we shall hear little more about the success of the Chancellor in cutting Government expenditure. Meanwhile, as the autumn draws on, the right hon. Gentleman goes forward to meet the Conservative Party Conference on this matter—a treat that he has not had before in his present capacity.

The trouble is that, once again, we have to make the charge which we have repeatedly made against the Chancellor, that he has been fiddling with trivialities while the economic situation has been worsening. I said that the week had been darkened by the shadow of dismissals in the motor car industry. I do not intend to say anything this afternoon about the lesson we have had in the past week on how not to conduct industrial relations. I will leave that matter to be dealt with by my right hon. Friend the Member for Belper (Mr. G. Brown), if he is successful in catching Mr. Speaker's eye. But what a commentary this is on the Government's handling of the situation.

In March, we warned the Government of the rapidly deteriorating position in the motor car industry, and we got from the Minister of Labour a classical exposition of the doctrine of laissez faire. During the debate on 20th March he said: … the Government believe that it is essential for employers to decide themselves upon their future labour requirements. I do not believe that that is the task of Government."—[OFFICIAL REPORT, 20th March, 1956; Vol. 550, c. 1036.]

The President of the Board of Trade—fresh from his triumphs in Lancashire—stood at the Dispatch Box week after week answering Questions about the motor car industry. He said that the motor car industry was no affair of the Government. Export markets, the home market, the size of the industry—these were matters for the employers, and only the employers, to decide. That is the doctrine of hon. Gentlemen opposite—"The gentleman in Longbridge" knows best. But this is the pay-off, in more senses than one, for the Government's policy towards this industry.

I do not think I need remind the House of the history of the motor car industry immediately after the war; how the late Sir Stafford Cripps was howled down by the motor manufacturers when he suggested that they should increase exports to 50 per cent. of their total output. And the manufacturers were supported by right hon. Gentlemen opposite. By the limitations placed on the home market and the sheet steel allocation, this industry's exports were raised to record levels. In 1951, 77 per cent. of the production was exported; in 1955, the proportion had fallen to 43 per cent.

Mr. Cyril Osborne (Louth)

But conditions were different then.

Mr. Wilson

The hon. Member has taken my point with more than his usual speed.

Production has increased by 88 per cent. and exports by only 7 per cent. Year by year we warned the Government that the nation could not afford it. The Minister of Supply, who was then responsible for the motor car industry, said in a debate on the Election Budget on 21st April last year: We were told … that the main increase in production has been in motor cars. Why not? I am delighted to see the increase taking place in production by the British motor industry, which really is a magnificent achievement. It is already selling abroad as much as British ingenuity and enterprise can enable it to sell. Why should the manufacturers not use enterprise to produce more cars for the home market?"—[OFFICIAL REPORT, 21st April, 1955; Vol. 540, c. 358–9.]

That was on the eve of the Election. Immediately after the Election we had the President of the Board of Trade, fresh from the hustings, with his imperishable statement of Tory faith. He said: What about consumption? Do not let us be too afraid of our people consuming things. Referring to a speech which I had made, the right hon. Gentleman said: 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.]

Thus encouraged, the motor manufacturers roared ahead with expansion plans. In 1955, capital investment in building by the industry was two-and-a-half times that of 1954. A sum of £52 million was spent on industrial expansion, a 77 per cent. increase on 1954. A further £67 million was planned for this year as part of a total programme of £250 million. In the investment boom which took the Government by suprise last year, the motor car industry led the field. There was no Government planning, no regulation, no controls, and the biggest expansion took place in the industry where it was least needed, in the motor car industry.

I am sorry if the Minister of Education does not agree with this statement. These are the Government's own figures—I know that the Minister of Education always likes to have his own private figures which do not commit the Government—but these are the Government's own figures. The rest of the story the House knows. The Economic Survey said: It became clear that a considerable upsurge in the capital expenditure of industry was being superimposed on the buoyant level of consumers' expenditure—a check to the expansion of investment was necessary. And so we had the weary round of increased Bank Rate, increased Purchase Tax, restrictions on hire purchase.

The measures forced on the Government by the reckless and uncontrolled expansion of this and other industries have had, as their first effect, the creation of unemployment in the industry that sought to expand. The credit squeeze is the price of industrial expansion in the motorcar industry and other industries and it has had to be pushed to the point where it now forces contraction in that very industry. Meanwhile, the investment programme goes on, and the motor car industry continues to expand in its investments.

That is not economic planning; that is the economics of Bedlam. I know what the Chancellor of the Exchequer will say. He will say that there is nothing that we can do about expansion in the motor car industry investment programme; that would mean controls and building licensing, and although we note that the Chancellor is getting a little more receptive to the idea of building licensing, his colleagues will not let him introduce it.

In a speech that the Chancellor made at Leeds a few days ago—a less expensive speech than the one which he gave at Newcastle because it did not cost the country any dollars at all—he said then that he had an open mind on this question, but, of course, building licensing could not work in time. In time for what? It could not work in time for the economic crisis this year. I agree, but we were suggesting this to him last year. It is no good his using the argument about not closing the stable door because the horse has gone, if there are more horses in the stable. He should introduce building licensing this year to avoid next year's crisis. It is no good his saying that the thing works too slowly. After all, his Premium Bonds will work very slowly indeed, and yet he thinks that they will solve the economic problem.

It was the same with imports. Time and time again, we warned the Government that we could not afford the import of dollar sheet steel for an industry that had lost the momentum of its export drive. But no control was exercised by the President of the Board of Trade, so last year 450,000 tons of sheet steel were imported into this country, half of which was for the motor industry. Now the economic realities have caught up with the industry and with the Government. They are seen in the shape of 6,000 men queuing this week at the employment exchanges. Short-time working is spreading. We saw on the ticker tape today that it has even spread to the Prime Minister's constituency and that the night shift has been taken off at the Lockheed brake works, at Leamington.

As the House knows, the satellite empire surrounding the motor car industry is enormous and no one can say where this will end. What is the position of the Government on this? Apart from an impressive display of short temper about the short notice given last week, they are not in a position to have any feelings about this matter. This is what they wanted. This is what they have sought to create. The President of the Board of Trade admitted that the Government policies were, at any rate, partially to blame. On 15th March, he said: I do not stand here in any way to apologise for the measures introduced by Her Majesty's Government which I think are entirely appropriate to the situation."—[OFFICIAL REPORT, 15th March, 1956; Vol. 550, c. 533.] Does he still think that they are "entirely appropriate"? He appears to be nodding, so apparently he does.

I hope that the Chancellor will tell us this: has this unemployment gone far enough in the Midlands to achieve his ends? Does he need more? Is he yet satisfied with his handiwork? We are told that this is the credit squeeze biting. This is what is needed to secure the right distribution of the labour force in the right jobs. What hypocrisy this is. If the motor car industry is not the right industry—if we have to have this uprooting—why did the Government allow the industry to expand so much last year? Because they put private profit and party dogmas above human values and above the national interest. Do they believe that this will secure the right redeployment of the labour force? What machinery have they to secure it?

To dismiss people from the wrong industry does not guarantee re-employment in the right one. We have heard a lot from hon. Members opposite about the need to cut down the Civil Service, and we were told that they would all be redeployed in work of national importance. In four years, the Civil Service has been cut by 57,000 men and women, but they have not gone to the coal mines or the factories; they have gone into advertising, the speculative commodity markets, and trade associations; and, while there has been this reduction of 57,000, there has been an increase of 176,000 in employment in the miscellaneous professional and financial services.

I make this suggestion to the Minister of Labour. This is supposed to be the kernel of the Government's economic policy—the redeployment of the men who are being put out of work. I ask him to keep records of these 6,000 and to tell the House, after the Recess, where he has placed them, if he has placed them. We shall be able to judge then the effectiveness of this instrument. We may see, for instance, how many are in distribution or in industries no more important than the one they have been driven out of. I say—and I am sure that both sides of the House agree—that we stand, as Sir Stafford Cripps did, by the doctrine that full employment does not mean a guarantee to every man of permanent security in his own job. But we believe in economic planning, and not in the blind forces of the market, as the means of influencing the final outcome. That is the difference between us.

No man knows where all this will end. The motor industry is at the centre of a vast economic complex, and in the very week of this grave announcement we heard the news that Australia has cut her imports once again—a 50 per cent. cut in motor vehicles. But it is no good the Government wringing their hands about this. This is not an act of God; this is another Government chicken coming home to roost. We cannot sacrifice the interests of Australian producers to the free policy of the speculative commodity markets and expect them to be able to go on buying from us at the same rate.

The Government abolished bulk buying of primary produce from Australia and elsewhere. It may suit Mr. Rank to buy his grain in dollar markets and others to buy in the Argentine. This Government have severed one by one the economic links of the Commonwealth and our export industries pay the price.

I do not propose to refer to the decline in production in any detail. Last week we had confirmation of what most of us suspected, that production is now falling compared with last year. This is a direct result of the Government's policy. During the Budget debate, I asked the Chancellor what was his policy about production. Did he want production to increase, decrease or stay the same? He was very shy; he did not know. The Economic Secretary was not so coy; he told us that he was counting on an increase of production this year. When I asked the Chancellor, a week or two ago, about this, he said that he was sure that what the Economic Secretary had said was very wise.

This is not good enough. The Government's economic policies seem to us to be deliberately aimed at a reduction in national production—unless the Chancellor reassures us on this point this afternoon. We must warn the right hon. Gentleman that our production was already lagging behind that of almost every other country. We shall not solve our economic problems on the basis of declining production.

The House will want time to study the gold and dollar figures for June which are 16 million dollars up, I understand. That is exactly equalled by the 16 million dollars we received from E.P.U. on the previous month's trading, but in June this year we were in deficit to E.P.U., which means heavy gold payments next month. As the right hon. Gentleman knows, this is the time of year when we should still be in surplus. We have to face the difficult months that lie ahead.

I do not know to what extent temporary factors are at work. The Chancellor's Newcastle speech cost us a great deal, we were told, which perhaps might flow back in the course of time. We are approaching the difficult months of the autumn with far too small a margin. There are factors on our side. As a nation, we can afford to run down our stocks of imported materials for one year, but not for more than one. Invisible imports ought to improve over last year's showing, while exports are slowly, painfully, rising. We must all hope that these measures will work in time.

The Chancellor knows that the testing time is getting near. When we hear him at that Dispatch Box week after week we are worried about his frivolity, the irrelevance and the irresponsibility of his approach to these dangerous economic problems. He has told us that he stands or falls by the fight against inflation and national bankruptcy; in that fight he must get away from playing with words and get back to first principles. The first principle is that all expenditure is potentially inflationary. Nothing is sacred of itself, whether it is public expenditure or private expenditure. The test should be, not "Is it public or private?", but "How essential is it?"

This is why the economic cuts are a statistical irrelevance. What is the merit in cutting £50,000 on this or that social service if millions arc spent on some industrial expansion scheme which the Government, by their actions, condemn as frivolous? The Government have slashed the school-building programme and cut back on the maternity and health centres, as we were told yesterday. Perhaps the Chancellor will explain why a school and a health centre are inflationary while a vast block of offices is not inflationary.

Why is it not inflationary for the oil companies to spend millions on their distribution facilities when the Minister of Housing and Local Government stands at the Box week by week and tells us that the country would be ruined if he were to sanction expenditure of £1,000 upon a public convenience or a sewerage scheme? Perhaps the Chancellor will tell us why a dollar export factory in a Development Area is inflationary whereas a private factory producing frivolities for the home market is not inflationary.

Why is it essential, under "Boyle's law," to charge more for bread, milk, pots and pans, passports, county-court fees, house rents and telephone services, while, at the same time, in the name of stabilisation, nationalised industries are to be compelled, in defiance of statute law and economic sense, to price their services below cost? These are the things that the Chancellor should tell us.

How much longer will the right hon. Gentleman cling to this doctrinaire reliance on monetary policies which no longer serve the interests of the nation? How much longer will he cling to the notion of sterling as an international currency when Commonwealth countries cannot borrow here and are being driven to foreign money markets to meet their requirements? When will he stop passing the buck to the trade union movement and accept responsibility for the economic destiny of the country? When, in short, are the Government going to govern and not stand on one side in a posture of economic abdication? These are questions which the Government ought to be answering this afternoon.

The Chancellor knows this, because I have warned him already. The day of reckoning for him and his Government may be very near. Let him realise that the strength of the £ and all that goes with it are not a party asset, but a national asset. Indeed, they are more than that. On our economic strength rests far more than our material wellbeing, our employment, or our standard of living; more, even, than the maintenance of the Commonwealth as an economic unit.

The nations are now moving from the negative postures of the cold war into an active era of competitive coexistence. The Soviet Union, which has been transformed in less than 40 years from an illiterate peasant economy into an advanced industrial nation, is flexing its muscles for its first entry into world markets for industrial goods. The warning is there for all of us. I remember giving the House a warning in a debate on German rearmaments nearly two and a half years ago. I had just come back from Moscow and I said: I wonder if we are not arming against the wrong danger and if, ten years from now, hon. Members will be saying that the danger is not Russian military power but German military power, and not German industrial power but Russian industrial power. The Soviet Union is expanding her economic production at such a rate that it is a very real danger of which we in this House have to be aware. We have to be aware of weakening ourselves too much economically in order to meet the Russian military danger and then find in the end that we are defeated by the Russian economic potential which has been rising all that time."—[OFFICIAL REPORY, 25th February, 1954; Vol. 524, c. 601.]

It is two and a half years since I said that. The Government, slowly, haltingly, are coming to realise that this is a much bigger and more incalculable danger than anything they have yet recognised. Therefore, as I have said, more than economic issues are at stake, so let the Government and the Chancellor, before it is too late, give the nation the lead that it is seeking or if, as we believe, they have not that lead to give, let them make way for those who have.

4.28 p.m.

The Chancellor of the Exchequer (Mr. Harold Macmillan)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: welcomes the interim statement on economies in public expenditure made by the Chancellor of the Exchequer on 26th June as further proof of the determination of Her Majesty's Government to conquer the dangers of inflation, and pledges its support for all measures designed to maintain our competitive position in the world on which the living standards of our people depend.

This Amendment stands in the name of my right hon. Friend the Prime Minister—[An HON. MEMBER "Where is the Prime Minister?"] At the Commonwealth Conference, as are other of my right hon. Friends.

The right hon. Member for Huyton (Mr. H. Wilson) moved his Motion in a speech of his usual versatility and talent, and as a performance it was very enjoyable. How far it was helpful to the solution of the problems which we have to face, it is for him to judge. I do not think that it was worthy of the situation. That is not to deny that I am very tempted to make some retorts in the same vein, for the last sentence uttered by the right hon. Gentleman seemed to me a very dangerous one coming from him

Much as the right hon. Gentleman would like the House to forget it and much as he would like his party to forget it, we remember the record of the right hon. Gentleman and his friends during the six years in which they conducted our affairs, culminating in one of the most spectacular and shameful collapses of Government. However, except for the right hon. Gentleman's last sentence I would not have been provoked into saying more than that these arc serious questions with which the right hon. Gentleman dealt seriously during some parts of his speech. That I admit, and I shall try to reply to the points he has made.

The Motion was originally planned to cover only a narrow part of the broad economic field. When I heard of it first, it was to cover only the interim administrative and policy economies which I announced a week ago; and I will say a word about that in its proper place. But the terms of the Motion, and so, therefore, of the Amendment, have been widened, and I am glad of it, for it affords us an opportunity and a challenge, an opportunity to review the general economic situation and a challenge to be resolute in our duty.

It may be for the convenience of the House if I try to give an up-to-date picture of the general economic situation as we see it, for it is against this background, as the right hon. Gentleman rightly said, that we must take the decisions as to the handling of particular and local problems.

During the debates earlier this year, both before the Budget, on the two-day economic debate, and during the Budget debates, there was, I think, general agreement on all sides of the House as to what should be the objectives of Government policy. They must surely be twofold: first, to remove the excess of home demand which has shown itself in the constant upward pressure of prices and, therefore, in a balance of payments deficit, with consequential losses on the reserves; and, secondly, to bring about some shift of resources from consumption to support a high level of investment and to increase exports. "To increase exports" means, in a phrase, to move from the production of goods which cannot be sold abroad to those which can. Those aims, I think, met with general approval and I do not think they have been criticised as such.

Some of our critics, in the Press and in the House, have said that we have been approaching our aims too slowly. Others say that we are going too fast. Some say that we ought to rely entirely on material means, leaving out altogether the psychological approach. Restraint, say these critics, must be enforced and not preached. Some say that we ought to rely entirely upon monetary, fiscal and budgetary influences, and others that we ought to employ more direct administrative controls. In all this, however, there is much less difference than we try to make out.

We have powerful controls in many different spheres—over imports, where one-fifth of our imports are under control; over capital issues, through the very strict operation of the Capital Issues Committee; and over the terms of retail trade, such as hire purchase. Anyway, if the purpose is the same, and I assume that it is—to bring about a movement of materials, resources and labour—I do not see much difference from the human point of view. It is not less painful to lose one's job because one's firm has been deprived of its steel supplies by a direct allocation than it is because the firm finds it harder to sell its products.

It is in pursuance of this task which I set myself, and since all our policies are challenged, that I should like to go through it again. I set myself a Budget surplus. I added to it both by direct and by indirect taxation. I made no tax remissions at all except in savings. I conferred no benefits except in the sphere of family allowances and in the Family Allowances and National Insurance Bill. Those were the only benefits we gave.

I drastically curtailed — virtually abolished—the investment allowances and all through the Finance Bill debates, as hon. Members will remember, I resisted one proposal after another which, had I not obtained the loyal support of my hon. Friends in the Committee, would have cut deep into the Budget surplus. I had an estimate made of the cost of implementing the new Clauses had the Committee adopted them. Those from Members of my own party would have cost about £150 million. Those moved by the party opposite would have cost at least £650 million. I hope this will bring comfort to those who voted so steadily and loyally through the long afternoons and nights.

There was one piece of austerity which, in spite of its attractions from a purely logical point of view, I did resist, and I must confess it. The Opposition pressed me strongly to withdraw the initial allowance on the purchase of motor cars. The right hon. Member for Battersea, North (Mr. Jay), as one might expect, was particularly insistent on this. He spoke, or claimed to speak, for his whole party, and perhaps I may recall the exchange that took place between us. In the debate on the initial allowances for motor cars, hon. Members opposite said how wrong the allowances were. I said: I take it that the party opposite would support the exclusion of private motor cars from the benefit of the initial allowances, although not, of course, from being charged as part of business expenses. The right hon. Gentleman answered: Certainly, and as it is not in the power of the Opposition to put down an Amendment on Report, I hope that the right hon. Gentleman will do so to this effect", to which I replied: I should like to know, because it is a very interesting decision … in present conditions."—[OFFICIAL REPORT, 12th June, 1956; Vol. 554, c. 286.]

I must confess that in present conditions I am ready to be guilty of some degree of inconsistency and even of backsliding. I feel that to propose such a Clause as the right hon. Gentleman invited me to propose next week on the Report stage of the Finance Bill would really be pushing logic a bit too far. It would not be economic rectitude; it would be something like economic sadism.

Mr. Douglas Jay (Battersea, North)

Does the right hon. Gentleman not think that if the Government had taken our advice and done this three years ago, the motor industry might never have become so heavily involved in the home market and we might have avoided some of the present troubles?

Mr. Macmillan

That might have been a very good reply if the right hon. Gentleman had not suggested that we should take his advice on 12th June.

To return to the main argument, first we have a large Budget surplus, fortified by increased taxation and successfully protected from any erosion during the Finance Bill. Next we have the first instalment of the £100 million savings, which I announced at the time of the Budget; and since the right hon. Member for Huyton conformed sufficiently to the Amendment to say something about this, I will say a few words about it. I announced exactly what I would do and what were the terms of the remit which I had given to myself; and I kept to them absolutely fairly and honestly. I said that I would deal with the Estimates as published and propose savings in those Estimates, and I made it quite clear what were the conditions of the undertakings I made.

It is very easy to sneer at the £76 million—much easier, incidentally, than it is to find them. It is not a trivial result. On the civil side, if one excludes statutory and other commitments amounting to over £1,000 million and refrains from making any significant cuts in the Estimates for the rest of the social services, amounting to over £900 million, there is not a large field; and I must accept the fact, which the right hon. Gentleman has pointed out, that in our time of office the cost of the social services has risen very considerably. Nevertheless, we have made, if a limited, in my view a valuable, operation.

Contrary to the right hon. Gentleman's assertion, these cuts are not based on and do not include any anticipation of under-spending. They result from deliberate decisions which we have made with the Departments. The defence savings result from deferment and in some cases—just as many cases—from actual abandonment of orders, and also from reduction in stocks. I will come to stocks in a moment. On home defence, we have taken our decisions in the light of the new strategic assessment which we felt able to take on our own responsibility.

On the Civil Estimates, the main contribution arises from the abolition of the bread subsidy and the reduction in the milk subsidy with, of course, countervailing expenditure which I had also to take into account in the Estimates—the larger contribution in the Farm Price Review. I know that in some quarters today not to pay a subsidy is regarded as equal to imposing a tax; and I think that only shows with what economic confusion and contradiction we have entangled ourselves in recent years.

It has been widely argued—and the right hon. Gentleman repeated the argument—that the savings are mainly reductions in stocks, but in fact this is not so. The reductions in stocks, in the sense of using up stocks for current consumption, account for 22 per cent. of the defence savings, none at all of the home defence savings and 3 per cent. of the civil savings. That, I think, answers that argument which the right hon. Gentleman deployed.

Of course, it is perfectly true that these economies reflect no new change in the size and shape of British Forces. That review is proceeding, but I think that every hon. Member, whatever his view of the treaties into which we have entered and the obligations which we have undertaken, would surely accept that such a review must be conducted in consultation with our partners in the Commonwealth and with our allies.

Mr. E. Shinwell (Easington)

Why was it not done three years ago?

Mr. Macmillan

It has been said, and the right hon. Member for Huyton said it again today with an air of triumphant logic, "Still your savings will be offset by new expenses; there will be the cost of the Army in Germany and the cost of teachers' salaries." But what is the point of that argument? Are we never, in private or in public affairs, to curtail our present commitments because we foresee new liabilities? That way indeed is the road to bankruptcy. I am sorry to spend so much time on the £76 million, but it was to have been the sole, and is still a main, item in this confused Motion which has been moved.

Let me sum up what has been achieved in the £76 million. It is equivalent to nearly 6d. on the standard rate of Income Tax, to more than half the whole yield of Surtax, to nearly one-third of the beer duty, to twice the whole Entertainments Duty about which we talked so long the other day, to more than all the stamps revenue. I therefore say that, however much right hon. Gentlemen opposite may turn up their sensitive noses at it, it is not to be sneezed at.

In addition, the 5½ per cent. Bank Rate, the pressure on advances, the restrictive operation of the Capital Issues Committee, the holding back or spacing out of Government expenditure, the pressure on local authority expenditure, all these have been operating on the economy in various ways. It is too early to give any firm estimate of the position which we have reached. One can give only a kind of impression.

At the beginning of April, I felt that we were uneasily balanced between the forces of inflation and the forces of restraint. I felt that we might be at the turning point but that any relaxation might result in the upward pressures regaining their ascendancy. Since then we have had the experience of three months, which is not a very long time; but, quite apart from the question of the motor industry, about which I shall speak separately, there are signs of weakening in the full intensity of the boom.

Let me run over the normal indicators. The first is employment. The peak of unfilled but notified vacancies was reached in July last year—473,000; and vacancies, as we all know, are not always notified. Sometimes, when there is no hope of getting labour, employers cease to ask for it. Nevertheless, I will give comparable figures, on the same basis. What was 473,000 a year ago was 397,000 on 30th May. There were still, perhaps, 100,000 workers on short time.

Still the formal unemployment figure remains nearer to 1 per cent. than the 3 per cent. which even respectable authorities used to regard as something to be taken as tolerable. Incidentally, the figure of unemployment under our Administration has been running at the lowest in the whole of our peace-time history. What is still more significant is that we still have, over the whole country, one and a half vacancies for each person unemployed.

The next normal indicator is investment. I think there is sometimes a little confusion about what our investment policy should be. Of course we want the maximum investment which our economy can sustain, for we know that our future depends upon renewing old plants and building new plants. Last year investment in manufacturing industry rose to a very high figure, about 20 per cent. above previous years. This year it is forecast to run still higher—about another 15 per cent. on top of that 20 per cent.

In a country like ours investment must be so operated as not to throw an undue strain upon the balance of payments. Countries which have their own resources can take risks which we cannot take. We must keep the volume of exports sufficient to pay for our raw materials, out of which those very investments are built. Moreover, investment must not be financed by inflationary bidding for resources competitively, thus pushing up prices; and this has been taking place to some extent. In any case, investment remains very strong. Actual investment in the first quarter of this year was well above the 1955 level.

Mr. Austen Albu (Edmonton)

Can the right hon. Gentleman say what proportion of that investment is taking place in the motor car industry?

Mr. Macmillan

I cannot give the exact proportions, but I am sure the hon. Member will agree that over the whole economy what I have tried to give is a fair picture, as supplied to me by the authorities on which I rely. [An HON. MEMBER: "It does not mean a thing."] Private manufacturers gave us a forecast of their investment intentions for 1956 and, rather to my surprise, they have revised these estimates upwards, not downwards, in the latest returns which we have received. That is not much of a sign of a slump.

Orders in the machine tool industry—and this is perhaps the most significant figure of all—are still rising; they are 20 per cent. by value above their level at this time last year. I think that the machine tool industry is the best indicator of all. There are signs, all the same, of some slackening. Approvals for industrial building have been falling off in recent months. There, the position is balanced; it is too early to tell quite what will happen in the immediate future.

Thirdly, stocks. Last year the inflationary position was largely due to a very high level of stocks. We expected relief this year and there are signs that it has begun. Raw materials other than steel were, in the first quarter, run down by more than the normal seasonal amount. Stocks of finished goods in the hands of retailers, wholesalers and manufacturers have been rising and this, of course, is usual when the boom is beginning to pass its peak. It may be a sign that some stability will follow.

Finally, consumption. In the first four months of 1956, making allowance for price changes and seasonal factors, consumption has been maintained at about the same level as in the second half of 1955. Real incomes have been rising, so that, in spite of a marked fall in motor cars and household goods, consumption may still rise. I am hoping to check it to some extent through the success of our new efforts for savings, but if consumption can be kept within moderate bounds, then stocks can be kept at a moderate level, and imports may not be drawn in so heavily to meet industrial needs. It is hard yet to be certain what will happen to consumption. Perhaps that is the most uncertain of the factors in the economic field.

Some further light is thrown on the position by the balance of payments—to which the right hon. Gentleman referred, though not, I thought, very helpfully—the reserves, and the position of sterling, on which he is always facetious. He twitted me last week on the low value of the £—the lowest, he said, for a long time. It was, perfectly true, one and five-sixteenths cents below the April peak, but I think the right hon. Gentleman must not talk too much about the fall of sterling. Surely, he has not forgotten that summer afternoon a few years hack when it fell from four dollars to 2.80 dollars at one blow? Oh, what a fall was that. But that, I suppose, was the result of taking complete control of the whole economy. That was planning; that was authority.

As a matter of fact, the short-term fluctuations of sterling are not the results of my speeches. I wish it was as easy as that. If so, I should be a very good operator of the market. I could put them up or put them down. Of course, it results, as the right hon. Gentleman knows when he is serious and is not being merely frivolous, from a great variety of causes. The recent dip in the rate was not due, as a matter of fact, to confidence matters or speculation, but was due to the fact that a series of heavy commercial demands for grain, oil, tobacco, aluminium, sugar and cotton happened to coincide rather earlier than normal in the season. That resulted in an exceptionally heavy demand for dollars which was made more difficult by the great strength of the Deutschmark. What matters much more than chance moves up and down are the trade figures and the reserves, and these, as I think the right hon. Gentleman will agree, are the real indication and final sign.

Let us start with the trade figures. In the first five months of 1956, exports were 6½ per cent. above the 1955 figure, and if we allow for the effect of the dock stoppage, I am informed that the true increase would be about 10 per cent. [HON. MEMBERS: "By volume or by value?"] The total of exports is up in value by that percentage; I am talking of value on both sides. Imports, on the other hand, were up by only 1½ per cent., and that is the real point in the balance of payments. I am talking about the balance of payments. If exports were up by 6½ per cent., and if we make the correction to allow for the docks stoppage, it would be about 10 per cent., while imports are only up 1½ per cent. I think that is a healthy figure.

How will the first six months turn out? It takes a little time to make a complete calculation, but I think that—perhaps I may have the attention of the right hon. Gentleman, because he asked me these questions and I am trying to answer them—the overall current surplus, including the invisibles, on the balance of payments will certainly not be less than £100 million. It may well be more, but it is not enough. All the same it is very encouraging, and here again, as usual, I am torn between the conflicting dangers of undue pessimism or undue optimism, but this is the estimate that I give to the House.

Now for the gold and dollar reserves. We have regained reserves every month so far this year. At the end of June, we had £94 million more than at the end of December. We would have liked more, but it is an achievement. As for the future, I can only say that our exports are encouraging. Imports may, of course, rise; we cannot tell, but the invisible balance should be distinctly better in the second half of 1956 than in the corresponding period for 1955. We are now approaching the period when the reserves are seasonally under special pressure, and I expect that our reserves will fall and that the trade figures, in comparison with those of recent months, will not look so good. I hope these events will be judged against the background of what we expect to happen over the year as a whole in our trading accounts, which really is the decisive factor.

Mr. Shinwell

If everything is all right, if everything is encouraging, and all is lovely in the garden, why is the right hon. Gentleman trying to save £20 million?

Mr. Macmillan

Because we need a better surplus. We are approaching a more difficult period of the year, and what I am trying to do is to give, without undue optimism or undue pessimism, a fair picture of the position.

I ought to add this warning to complete the picture. Apart from the need not to relax our efforts, we must face in future some difficulties in the balance of payments of the rest of the sterling area countries. This is partly because some prices have fallen, on which they depend, of course, for their payments into the pool, and because some very big investment programmes are now under way. Of course, we have to face very large loan repayments—staggeringly large repayments of interest and capital—at the end of the year.

I have given the House the best and most objective review of where we stand today, and it looks as if the economy is beginning to move towards the position of balance that we want. The increase in consumption is halted, the increase in investment continues, but a little less sharply, and an increase in exports is accelerating, and is accompanied by a check in imports which is clearly the result of the policies we have adopted, and all this without any increase in import controls, with their terrible dangers of retaliation, or any decrease in the liberalisation of trade throughout the world.

What is wrong with that? Is not this the policy, or is it not, at any rate, the objective, which by one means or another every hon. Member on each side of the House has been putting forward? What I do not understand is the indignation because the policy has begun to be successful. Hon. Members opposite really cannot have it both ways. They cannot claim that the economy ought to be rigidly controlled and restrained, and then cry "Fire" at the very first sign of any restraint becoming operative. Against this background, what should be our general line and what should shape our future policy? These are the questions which the right hon. Gentleman asked, and it is my duty to try to reply to them.

I say, and I am conscious of it, that there is a very heavy responsibility on all of us—on Parliament and on the Government—and although we have our little jokes across the Table, which is, after all, an old tradition, I am conscious of the very heavy burden which lies on us all. There are very many human problems, as the right hon. Gentleman said. There are very many human problems involved in the switching of labour. A switch in materials is painless; a switch in manpower is not.

I ought to say something here about the problem in the motor industry. My right hon. Friend the Minister of Labour and National Service will deal in greater detail with the position in the Midlands, but I think it would be tragic if, faced with the difficulties of temporary unemployment or under-employment in certain industries, we should prematurely and recklessly abandon a broad policy which is calculated to avoid that long-term and massive unemployment which would follow inevitably upon the failure to grasp firmly and courageously with the inflationary problem. Because there are one or two weak spots, it would be very wrong to think that we were in danger of a general recession. On the contrary, if we relax too soon we shall be jeopardising the welfare of the 99 per cent. of our people who are fully employed. The danger to them and too all of us, if inflation cannot be held, lies in our means to pay for our imports. If those are secure, our base is secure.

There are one or two things I would venture to say about the motor industry generally. In the first place, I think that it would be very unfair not to recognise the very remarkable performance which the motor industry has put up since the war. I was very glad that in the debate we had earlier in the year the hon. Member for Northfield (Mr. Chapman) paid tribute to the skill and energy of the management. But the industry, whatever the right hon. Gentleman may say, could not expect to retain the proportion of world trade in motor cars which it obtained, let us say, in 1950. The proportion was then more than half, but at that time there were dollar restrictions in very many parts of the world and, of course, competition from Germany, France and Italy was negligible.

That situation, obviously, could not last. Nevertheless, it would be very wrong not to recognise that, although the production of motor cars has fallen, an export performance of over 40 per cent. of production is a very good effort by the industry and compares very favourably with many of our exporting industries as a whole. But, as the right hon. Gentleman knows, cars do not tell the whole story. In the last four years the volume and value of commercial vehicle exports have been steadily increasing. This year, in spite of all the difficulties, it is running at a much higher rate than last. In addition, there is the very big export business in parts and components.

I am sure the House would feel that it would be an injury to the men employed in the motor industry and to the whole of our national interest if recent readjustments were represented as anything like a catastrophic collapse. That is certainly not true. At the same time, it would be a mistake to believe that the industry has any other choice but to continue the improvement and modernisation of plant and production methods. We must really face these facts. In recent years it is quite true that almost the whole of the expanded output of motor cars has gone to the home market. It is obviously necessary in the national interest that there should be some shifting of resources from the motor industry to others, at any rate until that industry can extend its earning power in exports.

It is well known that the most overloaded part of the economy has, for a variety of reasons, been the metal-using sector. This sector has to meet the huge demands of defence. It has to meet great demands of investment—by that I mean plant and machinery—and of some 40 per cent. of our export market. This overload had shown itself in a demand for steel beyond what the whole industry could meet, and the rise in the imports of steel helped substantially to worsen the balance of payments. It did so in two ways; by the cost of the imports directly and, of course, indirectly by forcing up freight rates. Therefore, by one means or another the demand for steel had to be reduced.

But steel supplies are not the only resources, and not even the most important of the resources of which the motor industry is in present circumstances absorbing an undue share. There is manpower. At a time of acute labour shortage elsewhere the labour force in the motor industry has, by one means or another, grown by 40,000 men in the last two or three years. I am not saying that this in itself is wrong, but in present conditions such a situation is not in the general interest. It is clear, therefore, that we should avoid under-employment or concealed under-employment in the industries which have lost their market when, at the same time, there is a severe labour shortage in industries where markets are still expanding and where there is the mechanical capacity to produce more. If we did that it would reduce production in one field without giving us any compensating advantage in another.

That is the real point of issue. The right hon. Gentleman referred to the May figures of production. He pointed out quite truly, that there was not only no increase but that there was a small fall. That is the crux of the problem, because if we run some industries at half speed we surely delay the time when production can rise in industries which bring us the benefit of full order books and make our export prospects strong. If we did not face this problem, as we are trying to do, we should be guilty of national ca' canny.

Mr. Albu

Can the right hon. Gentleman say why, in these circumstances, his right hon. Friend the Minister of Housing and Local Government is allowing a new factory to be built for a motor car manufacturer in the Luton and Dunstable area, when the engineering employers in the new towns in that area are very short of labour at the present time?

Mr. Macmillan

I have said that I think it would be a most defeatist view to say that because there are these difficulties in the motor industry they should not build modern plants and bring existing ones up to date. That would, indeed, condemn us to absolute frustration.

I say, therefore, that although it is very painful, and although the problems involved in redeployment are painful, we must face them.

Mr. Shinwell

Who must face them?

Mr. Macmillan

Of course, they arouse great anxieties and great fears. For many men and for their families a change of job may be a great personal misfortune. It may mean taking a wage at which they may not be able, at any rate at first, to meet all the commitments into which they have entered. In some cases it may mean leaving a place they have chosen for a place which they would not so freely choose and would like less to live and work in. It may mean, of course, men leaving home earlier and getting back later or changing the work they have chosen for another type.

No one likes that, and no one should underestimate the hardships and difficulties involved. It is for that reason that I think that the maximum consultation and discussion should take place between all concerned. Every practicable method should be used to alleviate hardships. These methods should include reasonable notice and measures to release labour gradually. I certainly feel that it is on these matters that the two sides of industry should get together.

However, we really must not exaggerate any more than we ought to underestimate this problem. After all, a vast amount of mobility takes place all the time in industry and commerce without Government assistance or interference. Men and women change their jobs, and even their places of employment all the time. Even in the time of fullest employment that we have known in our lifetime—in 1955—the changes in jobs amounted to 2½ million. I must repeat the famous statement which Sir Stafford Cripps made on this subject. In 1949 he said: Full employment does not, and can never mean that every individual job is guaranteed for as long as the present occupant wishes to stay in it. That would be industrial stagnation. The aim of a full employment policy is to ensure that everyone who can contribute to a national output of goods and services gets a chance to do so in one way or another.

That was not just a statement of opinion by Sir Stafford Cripps. It was the foundation of policy at the time. In the Economic Survey of 1948 there was envisaged an unemployment figure of 450,000. That figure was accepted as a necessary condition of flexibility and mobility, but it was twice the present number. Whether we proceed by licensing or rationing—and we can argue that point—or whether by restriction of credit, the impact on labour is very much the same. What is important to the nation is to take up the slack quickly, to make the movement of labour rapid and effective and so to increase exports where the demand is strong and the market bouyant. Hence, in spite of all the criticisms which have been made against us, I have no doubt at all where our duty lies.

It is, naturally, of no particular pleasure to me to continue a high Bank Rate, to ask the bankers to continue their policy of restraint, to continue hire-purchase restrictions, high taxation, and all the rest. When I feel that it is right to do so, I shall be the first to propose measures of relaxation, but I hope that when that day comes, as I hope it will come, I shall not be accused of courting popularity by taking risks. Meanwhile, I have no doubt at all as to what we should do. We should persist in the policies which my predecessor initiated and which I have pursued with increasing vigour.

Mr. Jay

rose——

Mr. Macmillan

Yes, I know there is the right hon. Gentleman's new Clause, but I shall not have that. The right hon. Gentleman should sit down; he has had enough to say already.

Mr. Jay

Though all this may be true, can the Chancellor explain why the Government allowed and encouraged this expansion in sales of motor cars at home, when they now think they ought to be cut down?

Mr. Macmillan

Conditions change. What the right hon. Gentleman is saying is that he, with his wisdom, thinks that gentleman in Whitehall would plan production better. I do not think so. We know the old theme. His remedy is to put a fresh imposition upon us.

Mr. Donald Chapman (Birmingham, Northfield)

The Chancellor is absolutely scared to answer.

Mr. Macmillan

There is one other answer which I would venture to give.

Mr. R. H. S. Crossman (Coventry, East)

Some of us in the motor car cities really have not heard an answer to a most important question asked by my right hon. Friend the Member for Huyton (Mr. H. Wilson). He asked the Chancellor whether, in his view, unemployment had gone far enough for Government policy. We are not making party points. [Interruption.] The only conclusion to draw from the attitude of hon. Members opposite is that anybody who cares about unemployment in the motor car industry had better be a Socialist. I am asking the Chancellor this question. Can he give us a frank answer as to whether his policy of creating unemployment in our industry has gone far enough, or is he going to continue it? If the latter, up to what point will he continue it, and what does he want the size of the labour force left in the industry to be when he has finished? Further, will he say something else——

Mr. Deputy-Speaker (Sir Rhys Hopkin Morris)

Order. The hon. Member's intervention at this stage should not develop into an argument.

Mr. Crossman

May I just ask this further question? The Chancellor told us about a 40 per cent. increase in the number of men in the industry. [An HON. MEMBER: "40,000."] Will he tell us why he allows——

Mr. Deputy-Speaker

Order.

Mr. Gerald Nabarro (Kidderminster)

Put it in the Daily Mirror.

Mr. Macmillan

If the hon. Member for Coventry, East (Mr. Crossman) wants to ask me another question, I am quite ready.

Mr. Crossman

The question we are asking is this. If 40,000 men were allowed into the industry, is it really planning to blow it up with 40,000 men and then, when they have all streamed into Coventry, to say that we must plan to get them all out again?

Mr. Macmillan

The hon. Gentleman has asked me two questions. Of course, I have had a very long experience of him in this House, as have, I think, all hon. Members; and I have to be pretty careful in answering his questions because they are put in the well-known kind of phraseology—"Have you stopped beating your wife?" I have had about 32 years at answering that kind of question, and so, no doubt, have hon. Gentlemen opposite. I would say that the true answers to his questions are really these. First, he asks what kind of planning is it that allows an industry first to expand and then, perhaps, to have to contract.

Mr. William Hamilton (Fife, West)

There is no "perhaps" about it.

Mr. Macmillan

Can anybody tell me how one plans the exports of a country, how one can demand that people shall buy what one makes? Does anyone really believe that experts, however good, or that Ministers on either side of the House advised by officials, however wise, can make better trade or industrial forecasts than those who are in industry itself?

Surely, what we have to do—and this is my answer to the first part of the question—is to try to deal with the economy as a whole. I have given the House the indicators of what I see; the boom is on at almost full rate, there are certain signs of slowing down, certain adjustments taking place, but nothing like sufficient reduction in the general economic boom of the whole nation to allow the relaxation of the present restraint.

I occasionally read a journal for which the hon. Gentleman the Member for Coventry, East (Mr. Crossman) writes, and I have heard it suggested that the Government are deliberately planning on creating a position of unemployment in order to break the power of the unions. If that were not such a palpably false charge, it would be a wounding one. My knowledge of the unemployment problem comes from what I knew of it in the past. I remember the days of the 1930's, and saw it very close at hand; I lived very close to it. All men and women of good will, on both sides of the House, tried and searched hard to find some solution. Those days have gone, I hope, for ever, but I still remember them and what I remember is to me an inspiration to do my duty. My whole job as Chancellor is to protect the country from those times coming back, or even from the threat of being repeated in present circumstances.

From where does that threat of unemployment come? Not from deficiency in home demand over the whole country, not from any shortage of things to he done; there are more things to be done than we can get done. It does not come from any lack of will to find the means or the money. The threat of unemployment comes from one quarter and one quarter only, from our own unfitness to compete in the markets of the world. It is the whole object of my policy and that of my colleagues to do what we can to make us, and keep us, fit to compete.

In spite of all the jeers and sneers of those in many quarters and of different parties to reject any method except that of the brute force of facts, I still think we should continue our faith in argument and persuasion. I am not at all ashamed of the appeals which I and my colleagues have made for restraint on all sides, on wages, prices, profits and dividends. This twofold approach seems to me to be appropriate in a democratic society, and nothing that has happened in the last six months has destroyed my confidence in its ultimate success.

5.18 p.m.

Mr. Charles Pannell (Leeds, West)

I am well aware of the continuing anxiety in the Midlands over the motor car industry, and I make no apology for rising to speak about it. I represent a constituency outside that area, but at least I can claim its acquaintance, having worked as an engine fitter in Birmingham. Before I came to this House, I earned my living in the motor car industry.

I want to deal with one or two of the things which have arisen from the present conditions in the motor car industry, and I have particularly in mind this question of consultation with the trade unions, or the lack of it, before these dismissals were launched. I will say straight away that no one who knew the tycoons in the motor car industry should have been at all surprised that they adopted the attitude they did. As a matter of fact, in 1955 I raised this very point of lack of consultation with the Minister of Labour, and I received the "brush-off" from the right hon. Gentleman who is now the Minister of Transport, but who was then the Parliamentary Secretary, about the fears which I then expressed.

Those fears have been completely borne out by events. I do not like to quote my speeches in this context, but they are worth recalling. I referred to the fact that the doctrine in the engineering industry about consultation is 58 years old. I said then that the policy laid down in the great strike of 1897 is still the rule today. This was the policy laid down by the engineering employers, from which they have never deviated. They said: The Federated Employers' … will admit no interference with the management of their business, and reserve the right to introduce into any federated workshop at the option of the employer concerned, any conditions of labour under which any members of the trade unions here represented were working at the commencement of the dispute in any of the workshops of the Federated Employers. That doctrine lasted until the great dispute in 1922, and the A.E.U. is the only trade union which has fought a major battle, not on hours and conditions, but on the moral dignity and right of the individual engineer, fitter or turner to be consulted on the conditions at his works.

What took place at Longbridge last week is not new. In 1926 and 1927, when Morris's went over from bullnose to flat-nose radiators, which was a big moment in British motor engineering, Nuffield put the whole of his works people out for two months without so much as a word, and no one who signed at the labour exchange for unemployment benefit got his job back. I warned the House at that time, because this question was raised in the inquiry which was held into the engineering industry. There are five volumes of evidence in the Library in which the point was brought out by Mr. Jack Tanner, then President of the Amalgamated Engineering Union, that there existed no means by which employers and employees could get down to the effects of long-term economic planning. In effect, employers and employees in the engineering industry only come together in a head-on collision.

I received a "brush off" by the Parliamentary Secretary at the time. I do not think he would mind my saying that I protested in correspondence with him. I sent him letters of considerable length to prove the point, and I think that privately he would admit I proved it. It is a fact that, in the engineering industry, there is a different morality among employers than in any of the nationalised industries. We would never tolerate what took place last week taking place in the nationalised industries. What is the reason for this sort of thing?

The Manchester Guardian made the point that the British Motor Corporation had before it the example of Standard's in which there had been protracted negotiations on dismissals and the B.M.C. was not going to stand for that. It was not prepared to argue the toss about men's livelihoods and whether men should be put off or not. It was not prepared to argue on the order of redundancy and, consequently, cut through everything. We have the old arrogant lash of necessity. It reacted in the same way as the engineering employers have always reacted in my time.

The policy of the Minister of Labour is the policy of the "master race". He got his reputation in this House with an attack on my right hon. Friend the Member for Ebbw Vale (Mr. Bevan). Although he attacked my right hon. Friend across the Floor of the House, he did not face up to the employers in the engineering industry.

Mr. Chapman

He did nothing at all.

Mr. Pannell

He did nothing at all. I am very angry about the whole thing. He knew very well that there were plenty of sanctions within Government Departments by which something could have been done. The whole question of lack of consultation is something to which we have grown accustomed in the engineering industry. I have no doubt that it is a precursor of things to come. Therefore, it is no use the Government snivelling about what took place last week and the Minister saying that he is shocked at the very short notice that was given. Nor is it any use hon. Members opposite signing Motions and the hon. Member for Solihull (Mr. M. Lindsay) getting indignant about this sort of thing. This is the engineering employers reacting in the way they have always reacted—they were true to character.

I want to say a word or two about the merits of the question itself. I had an Answer this afternoon to a Question in which the right hon. Gentleman who manages overseas trade replied to me. I should have thought that a Government Department would understand the Question, which was: To ask the President of the Board of Trade if he will state the volume of exports of motor cars to the United States of America for the years 1951 until the last available return, expressed as a percentage of British production. The right hon. Gentleman replied that it was 4 per cent.

I should have thought that everyone except the right hon. Gentleman who replied would have understood that I was asking for the figure to be broken down over the years. It was a most misleading reply. If we take the actual figures of the American market expressed in figures of production, we find that the amounts of exports to the United States in 1951 were 4.2 per cent. of home production, in 1952 the amount was 7 per cent., in 1953 4.3 per cent., in 1954 3.4 per cent., in 1955 2.2 per cent. and this year 2.7 per cent. That shows that there has been a steady diminution in the percentage of British motor cars exported to the United States.

I also collected some of the larger figures used by Mr. Carron, President-elect of the Union, which he gave in an address to the Unions recently. For 1948, he gave the figure of 334,800 as the total produced, and the total exported was 226,000. The figures for last year were 897,562 produced and 365,846 exported, which again shows a diminution as a percentage.

Mr. R. Gresham Cooke (Twickenham)

I do not see what is surprising in that. No one ever thought in the whole history of the motor industry that a percentage figure of 75 per cent. or 80 per cent. of exports would be kept up forever.

Mr. Pannell

The hon. Member never finds anything surprising about what his late employers did. I should have thought it was surprising, because anyone who knew the broad economic trend would have known full well that there must come a saturation point for motor cars for this country. The employers must have known that we needed a high export figure. There are certain fairly good social grounds preventing the flooding of British roads with motor cars.

Neither side of the House can boast particularly about its road programme, which was the basis on which any expansion of the British motor car industry ought to have been planned; but we badly needed to export because the motor car industry was getting overbalanced and held a too significant place in the British economy. The only excuse for that would have been to export——

Mr. Osborne

rose——

Mr. Pannell

I do not want to have too many interruptions. My complaint about the British motor car industry is that it rallied to the support of the Government. It was given a soft home market from 1951, and the controls were off. It was used as a façade by the Conservative Party. Conservatives said, "Look how the Tory Government help you. You can buy an Austin Seven now. You could not under the Labour Government." That was the sort of argument the Conservatives used.

The motor car industry was allowed to expand and to bloat itself by sucking away men and materials from the trades and the regions which were developed in the cradle of the Industrial Revolution, from Lancashire and the West Riding of Yorkshire. It thus reduced the exports of the great industries of Lancashire and the West Riding, sucking into itself many skilled men, drawing men and materials into the Midlands. We had to provide more schools and services in that region in consequence. The economy has become lopsided. That is the indictment of hon. and right hon. Gentlemen opposite. They are not planners. They completely failed to plan. They let this industry go its own way. The Minister himself has said that most of these matters are for the employers alone.

How did the British motor car industry stand up to its responsibilities? I have just spent ten weeks in the United States. I would not attempt here to pontificate on that country, but I have been able to see the impact, or want of impact, of the British motor car industry on the American economy.

Where does the challenge to the British motor car industry in the American import market come from? It comes from the Volkswagen. Of course, the American driver, particularly on the great speedways they have in America, drives with his foot flat on the floor board, and in the Volkswagen he can do that. The Volkswagen has many technical advantages. It can stand up to climate variations because it has an air-cooled engine. It has considerable weight ratio over the rear axle. It can get off to a good start in snow or frost. There are no freeze-ups. It has a wide bumper that is completely lacking on British cars, and in America bumpers are bumpers and meant to bump. One does not tow a car in America but pushes it. It has a bumper the width of the car. British cars have high revving engines that lack torque. The Volkswagen has a lower revving engine but larger torque, and those are very important considerations.

All this has been known since 1951. What has the British motor car industry done about it? There are about 28 types of British cars circulating in America. I say nothing about the Rolls Royces, the Bentleys, the M.G.s and the Jaguars, cars which are meant to please the boys there just as they are meant to please the same sort of people here, people who want something stylish. I am concerned with the products of the British car industry that earn its bread and cheese, and the sort of impact that they can make on the American market.

The main challenge should be by the Morris Minor, the Morris range, and the Austins, and it is these types which should have the answer to the Volkswagen in the United States. They have none of the selling points of the Volkswagen, but have failed ever since 1950 to produce alternatives for the American market. They are making no impact on the American market.

They are not meeting the German challenge. The impact made by the Volkswagen might have been made by our people if they had adopted similar imaginative organisation and methods. The Volkswagen people insist that dealers in Volkswagen divide their businesses up with separate agencies for the Volkswagen. A dealer has to stock a certain proportion of spare parts, not only rear axles, king pins, brake shoes, but of spares of other rarer things that go wrong from time to time, and stock them in proportion to his sales. The Volkswagen people give the dealers technical advice. The Germans have brought something of their traditional discipline into their motor car industry.

How do we compete against it? Rather than generalise, I should like to give some facts. I was in New Orleans on 7th June, and I have the card here of the International Auto Sales and Service Incorporated. That firm had an Austin Healey, which, after all, is a fairly expensive sports car. Its overdrive had gone. There was not an overdrive in America for an Austin Healey, not one. They telephoned to New York to have one flown down. This firm was very concerned about its prestige. It was a good dealer and its chief tried, with old-fashioned enterprise, to repair the overdrive in his own workshop in order to send the car on to San Francisco, whither it was going.

In San Franciso there was a Triumph car and the windscreen had become cracked and distorted, and not one replacement had been received in twelve months. The owner did not want it repaired to drive it. He wanted it repaired to sell it, and who could blame him?

The British motor car industry has had plenty of time since 1950 and 1951 to improve its export sales. Goodness knows, even the aircraft industry would have produced something in that time. The motor car industry has not in all that time met the challenge of the Volkswagen. It is no use sending out a dozen cars to be tried. The teething troubles of cars should be tried out at home.

I have pleaded for East-West trade before, and I have done so because 80 per cent. of our exports of machine tools in the 'thirties went to countries which are now behind the Iron Curtain, and I cherish the idea of good East-West trade again. But you cannot satisfy every Chinese peasant with an Austin Seven. There are higher priorities than that.

Let us consider the international background of the car industry. The Detroit Free Press stated: The monthly survey of Automotive News showed today that on May 1 dealers throughout the country"— that is, in the United States— had 902,270 new cars jammed in warehouses and storage lots or in transit from the factories. The total compares with an April 1 figure of 898,669 units and is only 1,519 units below the record total set March 1 this year. This was in Detroit, and the weakness of Detroit in the American economy is, as everyone in America agrees, that it is a one-industry city. At the same time as these figures were published Governor Williams of Michigan was quoted in the Detroit Free Press as saying that he had appealed to the American Government to declare Detroit a special area because there were 125,000 people unemployed in Detroit.

I am bound to point out these kind of things. We must have our economy straight, but I hope that nobody will accuse me, with the experience I have had in engineering, of putting people out of work. The Chancellor of the Exchequer made quite a point of this. He quoted Sir Stafford Cripps, but he did not quote the sneers which greeted Sir Stafford when he made the statement that our real salvation lay in pumping out cars into the export market. It ill becomes the present Chancellor to quote Sir Stafford Cripps.

I have never said that full employment meant one job in one town in one lifetime, but in a time of recession we must consider the man who is compelled to seek a job and a home hundreds of miles away. Those of us who have been concerned with bringing up children, getting them educated, and securing special places for them in schools, and in preaching civic consciousness to the community, cannot be deaf to these claims. The people of the Midlands are full of civic pride.

What about the questions of uprooting the family, disturbing a man's security, affecting his superannuation and his pension rights and that kind of thing? I have noticed in local government, and particularly in this House, that we always seem very sensitive about safeguarding those things in the case of people who are employed in the public sector. We must bring the same morality into private industry.

It is true that we cannot be Luddites in the 20th Century. Automation must come, but if we are really civilised, automation must be fed into the economic screen at a rate at which the expanding economy can absorb it. And men are an end in themselves. They are not a means to an end. The Minister of Labour is doing less than his job unless he is prepared to do something more than he has done already and is prepared to say, "You are not going to put people off in this fashion in future. If you are going to behave like people behaved in the jungle of the hungry '30s, we in the Government, expressing the conscience of the country, will seek powers to see that you do not do this kind of thing." The Government should see that they do not do less for the people in the private sector than they do for the people in the public sector.

Therefore, for the transition period we may have to turn over our ideas of unemployment benefit. We may have to pay transition wages and help people by paying their removal expenses. Why not? If their profits fall in a bad year, the big corporations expect some excusal of Income Tax. Why should we not help these workpeople in some similar way? I shall not claim that the mere return of a Labour Government will settle all these things. I would not deceive the people and would not wish to be returned on a suffrage which created an illusion of that kind. The return of a Labour Government would mean the return of 300 people who are politicians and who cannot be expected to create an alibi for every industrial question. Incidentally, some of the 300 or 400 people returned will probably be half-starved as long as hon. and right hon. Members opposite do not face the question of paying Members of Parliament properly.

When the Government do not face the idea of proper remuneration for people whom they know and ought to respect and recognise as colleagues in the business of the nation, the reason why the Conservative Party has such contempt for the people on the factory floors is quite obvious. We can be very objective about people whom we do not know. When hon. Members opposite can see the amount of trouble there is even in this place among a community of 600 Members and can ignore it for the sake of selfish and cowardly party gains, I see very little hope for the people on the factory floors.

Mr. Osborne

That is just absolute drivel.

Mr. Pannell

The hon. Member is an authority on drivel.

Mr. Osborne

I have been listening to it for a long time.

Mr. Pannell

The trade unions also have a responsibility to tell their rank and file the facts of life and to see that there is as little pain and hardship as possible as we adjust ourselves to a changing economy. Our economy cannot be static. It must be dynamic, and my indictment against the Government is that they have allowed the motor car industry to go back to the old, static situation, and the Minister says, "This is the business of employers. This is not my business at all." That is what the Minister has said today.

These are things to be thought over. This debate is important because we are taking stock of the economic situation of the nation, but the only tools with which we have to work are men and women. I say that we should be just as much moved by what happens to an engine fitter or a turner in Birmingham or Coventry as we are moved sometimes to great indignation on such a question as capital punishment and whether ten people are to be hanged in a year. I have steadily supported my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman), but the men for whom he pleaded are, in the main, completely unworthy people. If we considered the worth of individuals, we should go very much astray on that issue. But here we are concerned with our good men and women, with the people of the British nation, the people whom we ought to cherish. In the main, the trade unions have devoted their efforts to the lifting up of these people.

I warn the Minister that next time the Government will not get away with it. What happened last week will cause great bitterness in the trade unions. Nobody has been more reluctant than the trade unions to damage the economy of the country, but unless the Government come out with great courage on this issue, this will be the precursor of real trouble. At present, the Government stand condemned on their record as a Government without the guts to govern or the grace to get out.

5.49 p.m.

Mr. Lawrence Turner (Oxford)

I want to follow one or two of the points made by the hon. Member for Leeds, West (Mr. C. Pannell). The hon. Member might like to know that in Oxford we arc down to 750 Morris Minors being manufactured this week against an average of 1,400 per week over the last two or three years. This whole matter naturally concerns us in Oxford just as much as it does the other end of the British Motor Corporation.

We have just had 850 men dismissed at a week's notice and without any consultation from the Morris Motors division and a further 158 from the Morris Radiators branch, which leaves us with a balance of labour force in those two factories of about 5,000. Of these, nearly 4,000 will be working a 4-day week. Furthermore, this process is spreading to the large Pressed Steel factory which normally employs 11,000 men. Quite a lot of those will be receiving their dismissal notices this week. Quite a lot of them are being put on part-time as a direct result of policy in the motor industry.

Unlike the hon. Gentleman the Member for Leeds, West, I am glad that my right hon. Friend the Minister of Labour or his Parliamentary Secretary will be winding up this debate. I say that because the point that is worrying most of us is not so much the redundancy, which has been known for some time, but the method of making the announcement. The first point that is worrying us is the question of joint consultation. The second point is, what will happen to those who are dismissed? The third point is the question of overall policy, which I shall not now embark upon, having done so in the autumn.

Mr. Pannell

If I may interrupt the hon. Gentleman, although I did not mention Oxford, I am sorry, because it so happened that I have a special feeling for it. I worked at Morris Motors during 1926 and 1927, when it was their custom to put people off for a couple of months without notice. I assume, therefore, that the animal is merely reverting to type.

Mr. Turner

I appreciate the fact that the hon. Gentleman has worked there. There is in Morris Motors a long tradition of happy labour relations. [An HON. MEMBER: "Not very long."] There are incentive schemes, there is profit-sharing, there is a happy relationship at that end of the British Motor Corporation. No one in the motor industry will deny that Morris Motors, as such, has always been good, and that there is an extremely happy spirit there even today, though it is part of a much larger and seemingly more ruthless organisation.

Without mentioning names, I must say that I think the management at Cowley is just as concerned as the representatives of labour, all of whom I saw on this issue at my request a day or two ago. The shock of instant dismissal in that group came all the more severely since it was done without consultation with the representatives of labour, either in the form of the five unions concerned or the shop stewards committee, all of whom have been to see me.

It seems that only on Tuesday were the representatives of labour notified that they would be required to attend a meeting at 11 a.m. last Wednesday. They were then handed a printed notice from the British Motor Corporation notifying them merely as to the numbers who would be dismissed that week with one week's wages. Although ever since February there has been weekly consultation, certainly at Cowley, which has been valuable, between the representatives of the shop stewards committee, the five trade unions concerned and the management, at no stage, even up to last week's meeting, was there any indication that the dismissal would take the form it did. In a traditionally conservative area such as that—I say that not in the political sense—it came as a great shock to be dealt with in that way. The same thing is going to happen in the case of Pressed Steel.

I want to pay a tribute to the Department of my right hon. Friend. I do not suppose that he or his Department were notified in advance of the decision——

Mr. Chapman

Oh, yes. The Minister said so.

Mr. Turner

Then all I can say is that the Department acted expeditiously A new branch of the Ministry was set up as a temporary arrangement in the Cowley Road, and the efficiency and courtesy of the staff in dealing with a difficult job at short notice has been admirable.

I want to ask my right hon. Friend if he is aware that there are 800 vacancies on the books of the local branch of his Ministry in Oxford, though many of them are perhaps not quite real, and that there are at present 950 people dismissed, with another 200 or 300 coming along this week. I hope very much, therefore, that my right hon. Friend and his Department will realise that in Oxford, at any rate, there is no real alternative occupation. And once we lose the key men from the motor industry in Oxford, because they will drift away to other industries, it is certain that Cowley will not be able to compete with the Volkswagen and with Italian and American cars.

If my right hon. Friend believes, as I am sure he does, and as his right hon. Friend the Chancellor said this afternoon, that the relationship between management and labour is of vital importance for the future, will he use his great influence, even at this late hour, with the top four of the British Motor Corporation to get them to consult top representatives of the five main unions involved? I ask him that with all the sincerity I can command, because I believe that it is important.

Will my right hon. Friend also please consider afresh, and from the unbiassed point of view he has always shown, the establishment of a quick-working, fact-finding committee for our entire motor industry? I believe that such a proposal has been put forward in the past and negatived, but it is urgently needed today. I should be happy to serve on such a committee. The facts ought to be made known, and if such a committee were set up by my right hon. Friend, he and his Department would be rendering a great service to an industry which is hard-hit after a long run of prosperity, an industry which is suffering from competition and policy. Such a committee, acting quickly, both on short- and long-term prospects, would be a great help to this country.

5.57 p.m.

Mr. Clement Davies (Montgomery)

By the Amendment which the Chancellor of the Exchequer has moved, I am asked to welcome "the interim statement on economies in public expenditure" which was made by the right hon. Gentleman on 26th June— as further proof of the determination of Her Majesty's Government to conquer the dangers of inflation. … That is asking a great deal of one's imagination, quite apart from anything else. All the economies that the Chancellor of the Exchequer was able to suggest were economies of £70 million on a Budget of between £4,500 million and £5,000 million, and an economy on the expenditure on defence of £70 million out of an expenditure of between £1,400 million and £1,500 million.

It does not seem to me that this shows a grim determination to deal with the dreaded inflation which has been with us since the beginning of the war. What is more, that statement was made and cheered by the supporters of the right hon. Gentleman on 26th June. Three days later, the Minister of Defence came down to the House and said, "We have saved £70 million, but, unfortunately, we have now had to give away about £30 million to Germany in respect of defence and maintenance of our Armed Forces in that country." So apparently in one week after this tremendous effort has been made, there is a net saving of about £40 million, and I am then asked to say that this is further proof of the determination of the Government to conquer the dangers of inflation. I want a great deal more proof of the determination to conquer inflation than a mere saving of £40 million.

I agree with what the right hon. Gentleman said, that it is difficult to make these small trimmings—that is what they really are. Once the amount has been voted by the House, there is a sort of vested interest in all Government Departments to maintain at least that amount, and, if possible, to increase it. What is more, in any effort that the Chancellor usually makes to cut down the expenditure, he gets very little assistance from hon. Members. The situation has changed completely from what it used to be in the old days when the House itself was the guardian of the public purse in keeping expenditure down. On the other hand, hon. Members now almost regularly move for something to be done which would involve considerably greater expenditure, and the true guardian of the public purse is the Chancellor. Therefore, one realises the difficulties which confront the right hon. Gentleman. Nevertheless, all that has been presented to us is that, after a considerable amount of trouble, which I am sure had to be undertaken, we get a net saving of £40 million.

I am anxious to know what is the real policy of Her Majesty's Government to deal with inflation. The problem has been with us now since 1945. It has almost become a regular feature of the life of the country that every year, or certainly every second year, the Government have found themselves face to face with some new economic crisis. Everyone says that it is absolutely necessary to conquer inflation. Everyone has given his own definition of inflation. One which has been generally accepted is "Too much money chasing too few goods". That will do as a working definition.

What has happened is that during and since the war we have been unable to produce the quantity of goods needed in this country and also for exports so that we might pay for our very necessary imports in materials and food. This situation has arisen, first, from the immense sacrifices that we made during the war, and it has been due, secondly, to the enormous backlog that had to be made up in providing new buildings, new plant and new machinery to replace what had become out-of-date or had been destroyed by the enemy. In addition, we have also all along been short of technicians and those to lead them.

What is our position? We are spending more than our production warrants. Time and time again one considers where one can effect savings, but savings as a general rule, apart from policy, are small. One can go through them and do the best one can, and ultimately one comes to the conclusion to which the Chancellor seems to have come, "That is the best I can do at the present moment to cut down expenditure, unless there is some change of policy."

Where are our main expenditures? First, let me take the Welfare State. Nobody wants to cut down on that. Also, nobody wants to cut down on education. Both are necessary, and both are the best investments that the country can possibly make, not only for the present and for the general welfare of the people, but for the future of the country. It would be entirely wrong to cut down upon them.

However, there is another item which is absorbing not only a large quantity of money year by year, but also a vast quantity of material and hundreds of thousands of young men, who, if the need was not there, could be much better and more usefully employed. I am referring to our defence. If it is necessary, we shall have to continue it, because the most precious of all our possessions is our freedom and our own way of life so that we may not be dominated by anybody else. I said, "If it is necessary." What I am anxious to know is what consideration the Government are today giving to the necessity for maintaining the vast expenditure on defence which is going on year by year.

Mr. Ellis Smith (Stoke-on-Trent, South)

Is it not obvious that it is too great a strain on the country? Does the right hon. and learned Gentleman remember how some of us took a stand on this when it was first suggested and how we were dealt with? Is it not now obvious that, in relation to our national income, we are spending more than other countries are? Has not the time arrived when we should inform the other countries that we can no longer stand it?

Mr. Davies

That is really the point that I am making. I agree with the hon. Member. I do not want to go into great detail about it at the moment. I am anxious to know what thought the Government are giving to it at the moment. There is a general feeling that we are involved in a far greater expenditure per head of population than any of the other free countries. I believe that the amount being spent by all the free countries at the moment is about £40,000 million. That is merely expenditure of money without taking into account what is taken away from industry and from supplying the needs of people the world over. The result is that inflation is not confined to this country. It is felt in nearly all the free countries, and especially among the little countries, which find it very difficult to deal with this tremendous problem.

So long as there is a threat to our liberty, the House will be unanimous that we must spare no effort and no expense in making ourselves safe. But is that the position today? From 1945 to the outbreak of the Korean War in June, 1950, I and my colleagues regularly opposed the continuation of conscription, for we felt that it was unnecessary. We could get no reply to our question why it was being continued. When the Korean trouble started, my colleagues and I felt that danger was so near that we withdrew our opposition and supported the continuation of conscription.

Is it necessary today? Thousands of our best young men, at the best time of their lives, have been taken away from industry and production. How much could they not have done if they had been allowed to go straight into increasing the amount of our manufactured goods. They have been taken away at the time when they could best be trained, too. On addition, is it necessary today to have the vast quantities of materials which are being used in our supposed defence? The Chancellor of the Exchequer today emphasised that a vast quantity of necessary steel is in use. I very much doubt the necessity for it today.

Something greater than a relief of tension has happened. I now think, and all of us hope, that it is true that the third world war has disappeared for ever. All of us hope and pray that that is the case. If that is so, the Government should be turning their attention to that situation. I agree with the Chancellor of the Exchequer that we cannot do it alone, that it will have to be done with our fellow nations, for example, those who are members of N.A.T.O. However, it should not be confined even to those. It should be a matter of close study not only at Commonwealth Conferences, but day by day.

If it turns out that I am right in my supposition and that it is not necessary to continue conscription, it is unnecessary and, in fact, dangerous to have vast armies and even a big navy which in these days does not afford the protection it once gave, because guided missiles can follow ships for vast distances. If I am right, we shall be relieved not only of an immense amount of taxation—perhaps in the neighbourhood of £1,000 million a year, or more—but we shall add to our industrial strength enormous numbers of men who now have to wait two years, and we shall also have the advantage of great quantities of material now being otherwise used.

It is interesting to see the different approach which the Russians are now making to disarmament. Until recently the one thing for which they have asked at every disarmament conference was that we should do away with nuclear weapons, the atom and hydrogen bombs. Now they have come forward and said that they are prepared to begin by reducing their armed forces by one million men. Their critics have suggested that that may not be done, but I believe that that figure of one million is an underestimate.

I agree with the right hon. Member for Huyton (Mr. H. Wilson) that the danger to the free world today is not from a military war, but from an economic war. He said that two and a half years ago, and some of us were saying it much earlier. It has always been the Communist doctrine that the moment the Communists were in a position to carry out to the full the principles of their doctrine, they could defeat capitalist doctrine and defeat it economically. They are in an extraordinarily strong position. At present they have control of an area including about half of Germany and stretching to the China seas. One does not know how far they will be assisted by the 600 million Chinese, but they have political, social and economic control over those millions and over the raw materials of that area.

What is our position? In the Brussels Treaty we agreed that we should go to the assistance of France, Belgium and Luxembourg, if they were attacked and we also agreed to co-operate with them socially and economically. We have not done a single thing about that, except that in the year following the Brussels Treaty we repeated those statements in the N.A.T.O. Agreement. While the Communists have those enormous forces concentrated in that great area—I am speaking now of the economic war—we are at sixes and sevens and quarelling amongst ourselves.

The one good feature at present is that at the N.A.T.O. meeting in Paris it seems to have been realised that N.A.T.O. could be put to far better purposes than at present. Hitherto it has relied merely upon the military position. Now it seems to be realised that what is needed is help from one another and three men have been set the great task of considering those problems.

I want to know Her Majesty's Government's policy on these matters. That is the way to conquer inflation. It is the way to have more and more material to meet the demands of our people and of exports. Those demands will not be met by action such as has already been taken, a mere cheeseparing and a trimming bringing in only £40 million net. That is not the way to conquer the problem which has been with us now for more than 11 years and which, unless something great is done, will continue with us until we are ground to death.

6.16 p.m.

Mr. Geoffrey Stevens (Portsmouth, Langstone)

I do not think that any hon. Member will dissent from the hope expressed by the right hon. and learned Member for Montgomery (Mr. C. Davies) that the third world war will never take place. I am bound to say—I may be open to a charge of being a man of little faith—that I find it difficult to support him when he says that he believes with confidence that the third world war will never take place. I am sure that the right hon. and learned Member was a classical scholar, and although I was not a very good classical scholar, I am sure that he will remember si vis pacem pare bellum. Nature abhors a vacuum, and I believe that if we and the other Powers of N.A.T.O. allow our armed forces to fall to a dangerously low level, we shall find that third world war upon us and it will be too late to stop it.

The right hon. and learned Gentleman also waxed sarcastic, as did the right hon. Member for Huyton (Mr. H. Wilson), at the small amount of the interim economies announced last week by the Chancellor. The right hon. Member for Huyton criticised them also on other grounds. He said that in any case they largely consisted of running down stocks and he said that some were very mean. So far as meanness is concerned, it is worth while getting the facts on record, for example, in relation to the additional penny for school meals.

I am sure that it will be within the right hon. Gentleman's recollection that in 1949 the Government of which he was a member increased the price of school meals from 5d. to 6d. At that time the food element of the meals cost 1s. 2d., so that the subsidy element was 8d. In 1951 the Government of which he was a member saw fit—quite properly in my view—to make a further increase of a 1d., from 6d. to 7d. and the cost price of the food element then was 1s. 3d. and so the subsidy remained at 8d. When my right hon. Friend, now the Lord Privy Seal, in 1953 put 2d. on the school meals, increasing the price from 7d. to 9d., the actual cost was 1s. 5½d. and so the effective subsidy was 8½d.—a ½d. more than the right hon. Gentleman saw fit to support. Prices have risen in the last few years and the food cost is now 11d., 9d., and with the increase from 9d. to 10d. the subsidy element is now 11d., which is 40 per cent. more than the right hon. Gentleman saw fit to support in years gone by.

My right hon. Friend the Chancellor set the right hon. Gentleman's arithmetic to rights by pointing out that three-quarters of the savings are genuine and are not due to a running down of stocks. In any case, the first thing that a prudent businessman does when he finds that he is getting short of cash and the credit squeeze is beginning to affect him is to look round to see whether he can economise upon his working capital. One of the first things he does is to look at his stocks with great care, to see if they are not unreasonably high. If they are he can cut them down and carry on with a smaller working capital than before. That is precisely what my right hon. Friend has done.

Furthermore, as the world temperature has lowered we have heard cries from hon. Members on both sides of the House for a reduction in defence expenditure. What is the simplest and best way to start that reduction? Clearly it is to run down warlike stores of all kinds. Provided that it is justified, I should have thought that a running down of stocks was the wisest form of reduction in expenditure for the time being. Hon. Members opposite say that it is a once-for-all reduction——

Mr. H. Wilson

The hon. Gentleman is a very distinguished accountant. If one of his clients were to run down his stocks and present it as a revenue saving, I fancy he would be in very serious trouble with the Chancellor.

Mr. Stevens

How right the right hon. Member is. Perhaps he, in his wisdom, would dissent from the Report of the special Committee appointed by his own Government to consider the form of national accounts. One of the recommendations considered by that Committee was that we should keep our accounts as I should like to see them kept, but the Committee reported against such a course, and the Government accepted the Report. The right hon. Gentleman's sarcasm is somewhat misplaced.

There has been a good deal of argument about the economy of £70 million. Expressed as a proportion of the total Budget it is very small, but that is a completely wrong way to consider the matter. During the last year there has been much argument as to the extent of the inflationary pressure existing in the system. My guess is as good as almost anybody else's, and the sort of figure that I have often heard quoted is about 2 per cent. of the gross national product. In 1955 the gross national product amounted to £16,000 million, and 2 per cent, of that sum is about £320 million, so that the sum of £70 million is just about one quarter of the amount of the inflationary pressure in the system at the present time.

Seen in that context these economies are likely to have a much more real effect than has been suggested. Furthermore, they must be taken in conjunction with the slowing down of the Government's capital investment programme, the nationalised industries, the suspension of investment allowances in the private sector of industry, the tightening up of loan sanction to local authorities, and the increased exports induced by the credit squeeze and stiffer hire-purchase requirements. These steps should amount to at least £200 million or £225 million——

Mr. Ellis Smith

Do not leave out the sacking of thousands of men.

Mr. Stevens

I am unable to follow the hon. Member's interjection, but I hope that he has been able to follow my argument.

A saving of about £320 million is necessary; £70 million has already been found by my right hon. Friend and £220 million by the methods which I have just referred to, leaving £25 million or £30 million more for my right hon. Friend to find.

This afternoon my right hon. Friend gave some indication whether or not these measures are having the desired effect. The price index in May was the same as the April one. That is only one month following another, and I am well aware that one swallow does not make a summer. But it gives some indication that these methods are having the effect that we all want.

I should like to say a few words about the situation in the motor car industry. For many years hon. Members on this side of the House have constantly preached that higher wages without correspondingly increased productivity would mean a loss of world markets in due course. It is quite true that the motor car industry has been handicapped, especially recently, by import restrictions imposed by other countries and by the construction of domestic assembly plants and factories, but in 1955 Germany was able to overcome those handicaps and overtake this country as the greatest world exporter of motor cars.

Mr. Chapman

I should like to refer to one point upon which the hon. Member seems to be misinformed. Is he suggesting that within the motor car industry there has not been an increased output per worker in proportion to the increase in wages? If so, the contrary is the case. There has been an enormous increase in the output per worker corresponding to the increase in wages.

Mr. Stevens

With the greatest possible respect, I suggest that the proof of the pudding is in the eating. Compared with our competitors in the world markets that is not the case; otherwise cars of equal size and quality could not be sold at prices which are more than competitive with ours.

I want to be completely objective about this matter because it is far too serious for party bickering. There have undoubtedly been faults on the part of the manufacturers. There have been instances of poor after-sales service. We have also been extraordinarily slow to introduce as standard fittings such things as automatic gear boxes. It seems a tragedy that although this country saw the first car fitted with a self-changing gear box and a fluid flywheel, we use an American transmission system founded upon the same thing when we build a motor car with a two-pedal control. Powered steering is common in all motor cars in the United States, but not here.

In the last four or five years the motor car industry has been too ready to meet an easy home demand rather than take some trouble in order to earn exports, and that is very natural and understandable. None the less, as has already been pointed out, the motor car and motor vehicle industry generally has a wonderful record of exports. It is also true that, year after year, the after-sales service has improved. I find great difficulty in believing the story about the Triumph motor car which was left in the United States for twelve months with an unrepaired windscreen. I wonder whether that speaks volumes for the efficiency of the American motor car repair organisation.

But the proof of the pudding is in the eating. Productivity has not increased sufficiently; the inevitable has occurred, and we are being priced out of world markets. The numbers of men being sacked at present are not large, but if the unemployment figure is only one, to the single person affected it may be a tragedy not only for himself but also for his wife and children. That is not likely to happen while we still have 400,000 jobs waiting to be filled. On more than one occasion I have been accused of being old-fashioned. When I was a boy it was commonly said that one should be willing to go wherever one's bread and butter could be earned, and we have heard that sentiment expressed in a different way this afternoon.

We shall never compete successfully if we always try for the same kind of work in the same place and at an ever-increasing wage. Labour at every level, whether on the workshop floor or in the boardroom, has to be mobile and ready to move to the place where the pressure of demand is greatest. I am surprised that there has not yet been any quotation from the first leading article in today's issue of The Times. That may be because it knocks both sides of the House so hard.

Mr. James Harrison (Nottingham, North)

It knocks the hon. Member's side.

Mr. Stevens

It knocks the Opposition as well. It is impartial. It doles out brickbats, and very few bouquets. It is headed, "The Rigid State", and at the end it states that we must have a truly energetic and resilient economy if we are to have our fortunes restored. I think that absolutely essential if we are to exist in a competitive world.

Here I would put in yet another plea for the abandonment of that awful phrase, "the two sides of industry". That phrase does as much harm psychologically as almost anything does. There are three partners in industry—and the hon. Member for Northfield (Mr. Chapman), who is laughing, knows that perfectly well.

Mr. Chapman

I am thinking that in my constituency they know at the moment only two sides and no partners.

Mr. Stevens

In that case there are certainly two sides to blame. I have not put my name to a Motion in the names of some of my hon. Friends blaming the British Motor Corporation for the summary dismissals which have taken place, because I am cautious by nature. I have only heard half the story and I would rather hear the whole story before taking any action of that kind. I would say that certainly in that case there are faults on both sides.

The hon. Gentleman knows perfectly well, however, there are three partners in industry—the Government, the employers, and the trade unions. In this connection I wish to commend strongly the good work of the joint productivity committees. To me it has been a source of pride to sit on the same platform with a Socialist Member of Parliament and a trade union leader and preach the same gospel. I wish more of that sort of thing could happen. Problems arising from automation and temporary unbalance in the economy can be met only by co-operation between the three partners in industry, and the joint productivity committees do good work in showing people how that co-operation can achieve the results which we desire.

These economies and the credit squeeze have as their main objective a reduction of excessive demands for labour and of the home demand for exportable goods. Mechanical equilibrium may be calculated, and by craftsmen it may be achieved. Equilibrium in economic affairs, the equation of production with reasonable demand, cannot be calculated. Not by any means, whether rigid controls or otherwise, can it be steadily and consistently achieved. We on this side of the House believe in high and increasing real wages, but excess demand for labour forces up its price and threatens the very thing we all want, namely, economic equilibrium, that is, stable value for our money.

These economies are small in relation to the total national expenditure, but large in relation to the marginal nature of our problem. I shall not be satisfied if my right hon. Friend is content to leave the economies at the amount which he has so far announced. But I have no reason to imagine that he will do so. I wish to congratulate him on tackling the problem of excessive Government expenditure, and I shall look forward at no distant date to congratulating him on the next instalment.

6.32 p.m.

Miss Jennie Lee (Cannock)

The hon. Member for Langstone (Mr. Stevens) has come nearer than anyone who has yet spoken in this debate to the point of view which is being expressed at this very time in great conferences of miners and railway workers and, of course, by the motor car workers meeting in family conferences around their firesides and in more formal public conferences. The hon. Member has expressed a point of view which is very much in the minds of the workers, but he has put it from the opposite angle.

The international cold war has receded, and I agree with what was said by the right hon. and learned Member for Montgomery (Mr. C. Davies) when he referred to defence cuts. But though the cold war internationally is receding, cold winds are beginning to blow with cruel force in our internal affairs. The hon. Member for Langstone quoted from to-day's leading article in The Times, which is headed, "A Rigid State". It is interesting to examine the proposals made in that article. Those proposals will not be read by the men who are now unemployed, because they do not buy The Times every morning, but they will hear about them from other sources, as will all other workers.

The leading article is more outspoken than the Chancellor was. He committed his indiscretions in public speeches earlier. Government spokesmen have talked in general terms which may not be so easily understood. The Times article says bluntly that rents ought to be higher, that we should have what it calls realistic rents. It goes on to ask why we should pamper a man who is working half-time by giving him employment maintenance. That should be taken away from him, he should be brought down to a starvation level, then, The Times argues, he would be more mobile.

I represent a constituency where there are labour vacancies in the coal mines. The hope of the Tories to make condition more difficult, create what is hoped will be controlled unemployment—just enough unemployment to make labour less rigid, so that men now working in Coventry, Birmingham, Wolverhampton and elsewhere will go back to the pits around Cannock or back to South Wales. They hope to obtain cheaper and more humble labour and, by having just enough unemployment, to force workers into the coal industry which is at present, admittedly, undermanned.

There are many fallacies in that argument, but before dealing with them I wish to ask one or two questions about the motor industry. I do not pretend to be expert on the problems of that industry. Some of my hon. Friends who represent towns where the motor industry is carried on will, I hope, speak later in this debate. But this I know. We are operating in a world where the total market for cars is expanding. Last year the French market expanded by 10 per cent., the West German market by 25 per cent., and the Italian market is growing dramatically. I wish someone, therefore, would tell me why the British industry alone has not expanded. I hope I shall not receive the same old answer that it is because labour is too dear.

The hon. Member for Langstone took that line. He referred to wages, hard earned wages, but he made no reference at all to profits. The British Motor Corporation announced last year profits of about £24 million.

Mr. Osborne

It was £21 million.

Miss Lee

We will split the difference: although, if I add undisclosed profits and personal allowances and expenses accounts, my figure of £24 million would prove an under-estimate. But on either figure over £20 million was, it is admitted, paid out in profits. On my reckoning the Corporation has been making at least £400 per worker in profit, and that is not reduced very much even though I accept the figure mentioned by the hon. Member for Louth (Mr. Osborne). But we hear nothing about that side. Nor do we hear anything about the British Motor Corporation putting up the cost of their commodity, even at a time when their profits were mounting recklessly and in a way which is out of tune altogether with the appeal of the Government for economies and cuts. I should like an answer to these questions. It seems to me that the British motor industry——

Mr. Osborne

Perhaps the hon. Member for Cannock (Miss Lee), while she is asking her questions, would care to bear in mind that of the £21 million trading profits, £9¾ million went in taxes to maintain the Welfare State; £8¼ million went to reserve, to maintain an efficient plant and £2½ million went in dividends. So that if the hon. Lady deducted the whole of the dividends it would not affect the selling price of the cars.

Miss Lee

I will deduct all the dividends if the hon. Member will include all the expenses. I am not asking for gold-plated cars—or for gold-plated ladies to match.

The hon. Member knows perfectly well that those living on the profits of the industry have been living very well indeed. They have been taking more than their share, and it is very unfair to try to centre a debate of this kind on the old argument that if we could only make the workers poorer and more amenable, all would be well.

Coming now to the effect of these conditions on the mining industry, we see in today's Press that the President of the National Union of Mineworkers has been making a plea for a seven-hour working day for the miner. Will hon. and right hon. Members on the Front Bench opposite tell me whether they think that demand is relevant to what they are discussing today? The leader of the miners tells us that if the miners can have a forty-hour week—and that is not asking much—and a seven-hour day, we can bring an additional 12,000 to 15,000 men back to the mining industry, many of them ex-miners. That is his reckoning.

We have first, however, to see that we do not take men away from the motor industry if the present unemployment is due to the inefficiency of the employers in that industry. I should like to know if there is any reason why a single man should be unemployed in the motor industry if we were doing our export job properly. There is no sense in boasting about the overall capital investment figures, as the Chancellor did. They must be broken down so that we see what it is we are investing in. For instance, it is the economics of a madhouse to spend dollars, of which we are short, in bringing in steel for the making of motor cars which we cannot sell. In my view, it is equally the economics of a madhouse to import steel, coal and other raw materials in order to produce guns and planes for nations which do not want to buy them and which we cannot afford and ought not to be making.

In this year, 1956, the people of Britain are afraid of two things more than anything else—more than the fear of war which, thank God, has receded for the moment. First, there is the fear caused by the rising cost of living; next the fear caused not only to those already unemployed, or on short time, but also to those who feel the threat of unemployment. Have we learned anything at all from our past experiences? Are we going to tackle these economic issues in the spirit of The Times leading article, that is, in cold war fashion? Are are to tackle them piecemeal, as we did in the days before the Second World War? I do not think that this generation will stand for that kind of treatment. The generation that has grown up during and since the war, and which has been used to full employment, will not allow any Government or any employer or groups of employers to take them back to the conditions that prevailed between the two world wars.

I believe that our choice is simply this. Are we enlightened enough to help Britain forward with the minimum of industrial dislocation and the minimum of individual suffering, or have hon. Members opposite and on this side of the House to fight it out with one another; and, if we do not fight it out literally, fight it out, as will certainly happen, in strikes, industrial disputes and bitterness of every kind?

I do not believe that the weekly wage is relevant any more to contemporary thinking. I do not believe that even the monthly wage is relevant. I know that it is something to feel, when threatened with unemployment, that one will at least get a month's notice. I see that the Manchester Guardian today suggested six months' notice. That is better, but are we not in danger in stopping at a half-way house? What are we really accomplishing by compelling employers to keep on workers that they cannot use while the basic dislocations of our economy remain unmended?

Certainly let us do any first aid that we can. We have not prepared for this situation. The Government have obviously been taken by surprise. Therefore, let us see what we can do for the men immediately threatened with unemployment. What benefits can be given, and if these men have to go to other jobs, what travelling expenses can be given and what other first-aid? But all that is not enough. This morning I telephoned to my constituency to check on up-to-date happenings at our local employment exchanges and in our local government offices dealing with housing problems. We talk about encouraging men thrown out of work in Birmingham and Coventry to go into the coal mining areas, yet I find that the Cannock Urban Council—right in the heart of the West Midlands, on expanding coal fields, where we can assimilate many thousands of additional miners—has a waiting list for houses of 1,900 people, most of whom are miners or associated with coal getting. The rural council adjoining has a waiting list of 1,400, that is, 3,300 on the waiting lists for houses, and most of whom are miners.

One of the most shocking things that have happened since 1945 is that responsible miners have been treated most shabbily in regard to housing accommodation. The man who cannot afford to build himself a house but has tried to keep his family in decent circumstances has had no chance of being at the top of the housing list. There is always someone in a worse house or whose family circumstances are worse. He has been kept waiting and waiting. How can we talk of bringing men into an area so short of houses without causing the most serious trouble? What is the sense of talking about the newcomers finding lodgings? If hon. Members tried to find lodgings around Cannock they would know what this problem means. There is no spare accommodation.

I do not want men to come into an industry which my family has been associated with for generations, an industry which breeds proud men, in the spirit of refugees driven there by despair and poverty. I want them to come in because it is intrinsically worth their while, and because the work underground and the living conditions on the surface are such that, taken in toto, they make a good life.

I am not talking about the working conditions underground. We cannot make them wholly safe or comfortable, and no one in a miner's family expects that, but I do say that we have made no provision whatsoever for absorbing additional labour. The Chancellor, when Minister of Housing, had a wonderful time building sub-standard houses in the wrong places. Tory Chancellors, past and present, have compelled councils in the industrial areas to cut back their building programmes. The Coal Board has begged the Government to help it produce more coal by building more houses for miners. All we now receive are driblets here and there, inadequate in number and without the necessary preparation.

Economic situations have to be dealt with months, indeed years, ahead of events. We are caught in Britain at the present time in an unhappy transition stage. We must either go back to the disciplines of poverty, unemployment, and all that goes with these, or we must prepare to go forward with more controls, planning of our resources, and more nationalisation. We cannot have some industries nationalised, with the price of their goods controlled, and other great basic industries allowed to go free with the sky as the ceiling so far as profits are concerned.

I hope that the Minister, when he replies, will give us a coherent picture of what the Government intend to do. This is not just a motor car problem or a mining problem; this is a national problem involving not only our capital expenditure in industry but our capital expenditure in arms. It is crazy for Great Britain to be spending £1,500 million a year on arms and yet finding that our old long-term export commodities in which we can build up our overseas markets are being lost to us. So I ask that attention be paid not only to the sentiments but to the mood that is now developing among working people, and which is being very strongly expressed at the great annual conferences of miners, railwaymen and others similarly held.

It is quite unreasonable to ask men or women to withhold a demand for increased wages at a time when the cost of living is going up, and when they see so much selfishness and inefficiency on the employers' side and in the private sector of industry; and when they see a Government who so far have shown nothing but complacency and have not been so outspoken as The Times leader in what it said, but who have acted in the spirit that this is a cold war. I hope that the advice of The Times, for all our sakes, will be repudiated.

6.50 p.m.

Sir Robert Boothby (Aberdeenshire, East)

The hon. Lady the Member for Cannock (Miss Lee) has made a good speech, as she always does. I cannot say more than that. We have listened to it with great interest because she speaks with authority and knows what she is talking about, which cannot always be said of all of us. I shall come back to one or two specific points that she dealt with.

I want first to refer to the basic cause of our economic problems, which is that the sum of our domestic consumption and investment exceeds our total production. That is what is wrong at the moment. We must get down to the guts of the thing. This has led inevitably to an excess of imports. Not only has the balance between imports and exports been adversely upset, but there is no longer a balance between social and industrial investment inside this country. We can all agree, on both sides of the House, that excessive Government expenditure is a primary cause of our troubles, and that without a really substantial reduction there can be little hope of releasing the necessary resources for productive investment.

The Chancellor of the Exchequer has recognised, in his Budget and since, that increased savings are of paramount importance. But, although he did the best he could, he and everybody else know that the cuts so far announced in expenditure are, to say the least, a little disappointing. When we get, on top of that, the further decrease in those cuts caused by our obtaining only £34 million for the upkeep of our forces in Germany, leaving £16 million to be made up very largely in gold, the disappointment is increased.

I want to say, categorically, that we cannot afford this. These four divisions in Germany can neither prevent a major war, nor be sufficiently mobile to deal with the minor trouble-spots overseas which are the daily fare of international politics. In terms of expenditure and manpower we are now shouldering a heavier burden than our European Allies, with very little that is effective to show for it.

I am certain that nobody sympathises more wholeheartedly than the Chancellor of the Exchequer when I make an appeal for a radical revision of strategic thought and policy which should have been undertaken by N.A.T.O. long ago. I am sorry that we did not raise the matter more forcibly at the last meeting of the Council of Ministers of N.A.T.O. We must have a token force in Europe for psychological reasons; and so, I hope, will the Americans. But our security today depends upon the deterrent effect of our retaliatory bombing power, and upon nothing else. Tomorrow it may well depend upon long-range missiles, of which at the moment we have none.

The sooner we face up to this position, and ruthlessly scrap the obsolete weapons which are draining the economic lifeblood from our country and our national economy, the better. The Government, I believe, are in complete sympathy with this idea; and most of all, not unnaturally, the Chancellor of the Exchequer. The time has come when we should make the most forcible representations to N.A.T.O. to do what should have been done two or three years ago.

Hitherto, the Chancellor of the Exchequer has relied in the main upon monetary policy. I am the first to admit that it has its part to play; but in our modern society there are more effective methods of curbing the volume of money in circulation than an exorbitant Bank Rate which, at its present level, hits the small man rather than the big, and acts as a restraint on some productive investment which is desirable and necessary. We cannot get away from that fact.

What I have in mind as a monetary policy which would be more effective is, first, a reduction of the amount of Treasury bills. I am sure this is constantly in the Chancellor's mind. The amount of Treasury Bills outstanding at any given time is undoubtedly the most persistent and damaging inflationary factor of the lot. Secondly, if necessary, an increase in the reserves of the joint stock banks expressed as a ratio of their deposit liabilities; at the same time giving the joint stock banks a greater discrimination in administering the credit squeeze than they have at present. The banks know best what is a good risk and what is a bad risk. They know better than the Treasury. Thirdly, funding part of the enormous short-term debt of the Government; and fourthly, reverting to the system of deposit receipts. That might not be very popular with the banks, but would be very effective.

I am merely throwing out these ideas. We should not delude ourselves by thinking that a very high Bank Rate, sustained over a long period, is necessarily the best form of monetary policy, which admittedly has a pretty considerable part to play.

This debate arises from the fact that the credit squeeze is now beginning to be felt. As was to be expected, the first of the major industries to be hit is the motor industry. It is not much use being indignant about that with anybody, not even with Sir Leonard Lord. One of the primary objectives of the credit squeeze was to increase the mobility of labour. The Manchester Guardian says, in its leading article this morning: Mobility of labour is not a matter of making speeches; it requires the physical means of making wage-earners more mobile. That brings me to the point raised by the hon. Member for Cannock.

I have always held that the Minister of Labour, whom I am very glad to see so close to me, should also be Minister of Production, in the sense that he should be in a position to estimate future industrial trends, and to encourage the right kind of productive enterprise and discourage wasteful activities. For this he requires far better statistical information than he has got, and much closer consultation with both sides of industry. I shall not make too much of this "both sides of industry" business; but I mean employers and trade unions.

It astonishes me not a little that my right hon. Friend the Minister of Labour did not ask Sir Leonard Lord to come to see him a year ago, and ask him his opinion as to how things were going, telling him to keep in close touch about all developments. He might well have said, "We must plan a campaign together in order to deal with the situation". Equally with the trade unions. My right hon. Friend suggests that Sir Leonard Lord would not be too enthusiastic about coming to see him; but that is not necessarily the case. If a Minister asks any industrialist or trade unionist to come and discuss current problems, on the whole he comes; and it was obvious that the motor industry would be the first of the major industries to be hit by the credit squeeze.

What action can be taken? As the hon. Member for Cannock suggested, perhaps the most important thing that the industrialist can do is to give longer- term contracts of service. The Manchester Guardian suggests six months. They have gone tip to six months already in the United States. Even if we had three months in this country, it would be a great advance; and infinitely better than a week.

It has become customary to pay many people compensation for loss of office, and I do not see why this principle should not be extended to the workers as well as to everybody else. Here is something that industry could do, and I feel it to be of vital importance. It was advocated by Lord Chandos, in a powerful article about six months ago, in the Sunday Times. It therefore appears that at any rate some big industrialists are on the side of the angels in this matter.

What can the Government do? I disagree with the hon. Lady the Member for Cannock about unemployment benefit being extended to short-time workers in such a way as to discourage all labour mobility. I do not think that the best assistance that the Government can give is to go on paying unemployment benefit to people who are working on short time, which only encourages them to stay in their jobs.

Miss Lee

The hon. Member is compassionate enough to want at least three months' pay for those people, but when a man is thrown out of a job, with no other job available and no other home available elsewhere, he would immediately "dock" him of unemployment assistance and reduce the man to the minimum of short-time earnings.

Sir R. Boothby

Only for a short time. I would give the man a three months' contract, and pay him full wages for three months after he had lost his job. I would only dock unemployment benefit for short-time workers; and I would replace it with other forms of financial assistance, which, I think, would be more beneficial to the national economy—such as, for example, the provision of houses, which are not at present available in Cannock but could be made available in other places, travelling expenses and lodging allowances. I was very glad that my right hon. Friend the Chancellor of the Exchequer, in his speech today, recognised all these as practical measures which might be taken. I hope that in winding up the debate tonight my right hon. Friend the Minister of Labour will have something to say about these things, because the State can do much to facilitate the redeployment of labour by mitigating the hardships involved.

When we have dealt with all these specific human problems, the crux of the economic problem will remain the balance of payments. I believe that our economic survival depends on building up a substantial surplus. We have not got it, or anything like it, at the present time; and until we get it our situation will give cause for the gravest anxiety.

There remains a considerable difference of opinion between those of us who would like to see a more purposive direction of the national economy, including capital investment; and those who cling to the outworn dogmas of a laissez-faire system which ignores the need for positive action to restore equilibrium. [HON. MEMBERS: "Hear, hear."] I wish that hon. Members opposite would stop cheering. They are not the only people who believe in the strategic planning of the national economy at the top. It has been preached by my party for 500 years.

Mr. Chapman

Why do they not do it?

Sir R. Boothby

Because they have been infiltrated, temporarily and unfortunately, by a number of Whigs who have nowhere else to go.

I believe, however, that the gap between us can be bridged; and I further believe that the power to exercise a flexible control over building, and over imports, is a minimum requirement. I am sure that the Chancellor of the Exchequer will ultimately be driven to it. Why not let him do it while things are fairly tranquil and calm? Nobody need get in a panic. He does not need to put anything into action at once. Let him just take these powers and, having got them, let him keep them and never give them up again. Our greatest mistake was that we gave them up, because in the final analysis it is the physical use of our resources that matters.

Once those powers have been taken, they can be put away. If my right hon. Friend does not want to use them, there they can sit. Then one day, when a squall begins to blow, there they will be; and he can pick them up and put them into operation by an Order in Council before anybody has a chance to stock up or do anything anti-social. I shall not be happy until I see those powers on the Statute Book, and I believe I shall see them back there sooner than a lot of people think.

My right hon. Friend the Minister of Housing and Local Government really shocked me the other day when, in defending his decision to put up this ridiculous tower in Battersea Park, he said: Planning controls were never intended by Parliament to be used for regulating capital investment …"—[OFFICIAL REPORT, 26th June, 1956; Vol. 555, c. 243.] My answer to that is that they should be used to regulate it, and the sooner the better.

Our imports of coal, steel and feeding stuffs during the last few years have been nothing to make any of us proud. They are due to the shortcomings alike of the trade unions, the employers and the Government. The main reason why we have been obliged to import coal, steel and feeding stuffs to the extent that we have done from the dollar area is that ever since the war there has been a pervading spirit of restrictionism right through industry.

That is one of the great troubles confronting this country at the present time. It is no use blaming anybody in particular; but one example of it is the resolute refusal of the miners, against the advice of their leaders, to accept any foreign labour to help us get the coal we so desperately need. I could quote a thousand examples from the other side of industry as well. It is a hangover from the 'thirties, and I am not surprised by it; but it underlay the decision not to set up another big strip mill for steel. When we set up the one in South Wales, we should have had another in the North. Had we done so, we would not have the present shortage of steel. These are things of the past, but it is well to remember them.

There are certain questions that I want to put to the Government tonight, and to the House as a whole. Do they really think that we can go on indefinitely dishing out to the commodity markets dollars that we have not earned? Dollars that we have earned, yes; but dollars we have not earned—that is very dangerous, because it must affect the balance of payments. Do they think we can go on with absolutely unrestricted building in our present situation? The Chancellor of the Exchequer put the spring into building, he gave it a tremendous impetus at the right moment; but I do not think that it can be left absolutely unchecked so far as dwelling-houses are concerned. There must be some direction here.

Can we go on importing unlimited quantities of cereals and meat, and at the same time subsidise our farmers in respect of the end products? I do not think we can do these things without national bankruptcy. I believe that we can produce a great deal more food in this country than we are now doing, but we shall not be able to do so without some control over imports—varying controls—because recent experience has proved conclusively that on a free market the level of imports has just as big a bearing on agricultural prices as the level of the Government's price guarantees. Any practical farmer will concur with this view.

Therefore I say—and this is my last word on the subject of controls—that without the power to encourage productive investment and to discriminate in trade; without the power, therefore, to direct investment and control imports in various ways, we shall never be able to make the maximum use of our own resources. We shall not even be able to associate with the projected European market, which in this age of mass production is essential if we are not to be crushed by the continental economies of the Soviet Union in the East, and the United States of America in the West. We need not only the markets, we need the workers of Europe, if we are to remain a great industrial Power. If the countries of Western Europe do not get together economically, I do not see how they can survive during the remaining half of the century.

Here is something that is near to the Chancellor's heart, for he has dealt with these matters at Strasbourg. I say to him that he will not get any effective economic co-ordination in Europe, first, unless we take the lead; and secondly, unless we have the necessary powers to discriminate in trade.

Lord Keynes remains the greatest economist of the twentieth century; and I want to give the House two small quotations from him. After a weary sigh about how difficult it was to make progress against the weight of tradition, or to get people to consider economic problems afresh, he said, in 1939: If higher earnings lead us to import more bananas than we can afford, this cannot be remedied by the Treasury chastising itself with a high rate of interest. We ought to think hard about that one. "Bananas" and "interest" are the operative words; and hon. Members can see the truth of it.

In 1945, he said: I do not suppose that the classical medicine will work by itself, or that we can depend on it. We need quicker and less painful aids, of which exchange variation and overall import control are the most important.

We are deprived of the weapon of exchange variation by the Bretton Woods Agreement, which fixes our rate of exchange with the dollar and therefore with gold. One day, I hope, we shall get a more flexible international exchange system. But we are depriving ourselves of the second weapon—the overall control of imports—gratuitously, and I think quite unnecessarily.

In conclusion, I agree absolutely with what the right hon. and learned Member for Montgomery (Mr. C. Davies), the Leader of the Liberal Party, said in his most powerful speech—that we now face by far the greatest and the most formidable Communist challenge. It is no longer a military offensive which they have launched against us. It is an economic and technical offensive, centrally directed, and it will succeed if we fail to match it with superior techniques and direction of our own.

I am certain of this: our greatest danger lies not only in rigidity but in restriction and in obsolescence. As I said in the House on 3rd February, 1953: If the preservation of the existing structure of industry, and of jobs people are already doing, becomes the primary objective of our domestic economic policy, then I believe that sooner or later we shall he sunk."—[OFFICIAL REPORT, 3rd February, 1953; Vol. 510, c. 1738.]

It is fortunate that at the very moment when our power is no longer based on orthodox naval and military forces, orthodox military and naval power has ceased to count in the world. In the field of nuclear energy we hold our own. Why only in that field? Why not in all the others? We built up our position in the world by courage, enterprise, energy, imagination and skill; and we shall hold it by the exercise of these qualities, or not at all.

7.12 p.m.

Mr. Maurice Edelman (Coventry, North)

The theme of the few remarks which I shall make tonight is that the Government attitude of laissez faire is killing the motor industry and, a fortiori, the economy of the country. The House will therefore not be surprised if I do not disagree very much with the hon. Member for East Aberdeenshire (Sir R. Boothby). After all, he is a Socialist sporting a Tory configuration—or, perhaps, with a Tory configuration. He is one of the very few hon. Members opposite who believes in planning.

Not long ago we had a debate on employment in the country, and it soon became very clear that not only were there two parties holding different views in the House but that the views expressed could be analysed into two quite clear, well-defined and conflicting positions. On the one side, there were my hon. Friends who believe in central planning and in using physical controls as instruments of planning and on the other side, as it emerged quite clearly, particularly from a speech by the Minister of Labour, there was the Government's attitude, which was evidently one of laissez faire.

During that debate, we warned the Minister that if he persisted in this attitude of laissez faire, which was an underground encouragement to the motor manufacturers to do whatever they wanted, not only economically but also, as has recently been seen, socially, the result would be disastrous to the motor industry of the Midlands. As one of the Members for Coventry—and I know that I speak for my hon. Friends from the city—I say frankly that in the last six months or two a great fear has come upon those men, who during the last ten years have been accustomed not only to full employment but to a high standard of living.

They came from the depressed areas of the country, from Clydeside, from South Wales, and from other parts of Britain which experienced considerable suffering during the great depression. They went to Coventry, where they found that they could exercise their talent and their skill. They were paid high wages and, in return for their high wages, they gave good work. Their good work was such that in the years after the war, when Sir Stafford Cripps, by his deliberate policy of stimulating the export trade, raised not only the level of production but the level of productivity as well and purposely directed it towards the export market, Coventry became a thriving city and the Midlands as a whole prospered from the energy, the initiative and the forays into the export market which were so successfully made by the industrialists of Coventry. That did not happen by chance. It happened because all the time the central intelligence of the Government was directing the energies of the city and directing the efforts of the industrialists towards the export market.

It has often been stated in the House how gradually, from 1945 onwards, the level of exports rose. It rose because Sir Stafford Cripps, unpopular though he was with the motor car manufacturers, persisted in his policy. They suggested that it was impossible to reach the target which he recommended, and they made excuses to the hon. Members representing the city and to Sir Stafford Cripps, then Chancellor of the Exchequer, to the effect that we could not have a thriving export market unless we had a very high level of domestic consumption. Nevertheless, the Chancellor persisted, and by means of physical controls, in which the allocation of steel was the principal instrument, he enabled the motor car industry steadily to push up its exports to approximately 73 per cent. of its total output.

It was not easy. There was a certain amount of competition, and there was the inertia of the industry, which even then would have much preferred to meet the softer home demand than to meet the hazards and difficulties of the export market. Nevertheless, because the Government believed in planning and because that planning had a purpose, the motor industry became our leading export industry.

Today we see a most extraordinary paradox. The point which the Government, and the Chancellor in particular, have been consistently making is that it is necessary to have mobility of labour; and that in order to get the men out of the industries which are serving the home market, and which have therefore become petrified in their labour resources, it is necessary to create such a position in those industries that there is a buying recession and ultimately the men move into the so-called export industries.

All that sounds logical enough until we consider what is now happening. The motor industry is and has been our leading export industry, and the very men who today should be working to stimulate production, who should be turning out motor cars for the export market, are being driven out of their jobs. That is the extraordinary paradox, and I do not know how the Chancellor can explain it. How can the Chancellor say that his aim and object is to get men out of the home industries and, into the export industries when the very first industry from which he is driving men is the motor industry?

I can see no rhyme or reason in that. Perhaps the Minister of Labour will explain. It is useless to say that we want to enlarge our export market and encourage our export industries in view of the fact that the motor industry, which for ten years has cultivated one of our most successful export trades, is in this difficulty. By their action, by their credit restrictions and their indifference to that industry, the Government are permitting the slow decadence of what has been our leading export industry in the past and should be our leading industry in the future.

One of the most serious points is that we have at the head of the industry both men who are looking back to the bad old days and certain younger men who are looking forward to the recreation of those bad old days. We have heard a lot about Sir Leonard Lord, and I must say that he represents a brutal tradition which for many years certain employers have sought to revive but they have been prevented from doing so by the organised strength of the trade union movement, in association with the Labour Party. That has been true of the past. As long as there was a Labour Party, these people were extremely reluctant to show their true character.

It is a fact that, whenever in the past there were some suggestions of action of the type which we have seen recently in Coventry and Birmingham, there was immediately a very powerful reaction by the trade union movement, sustained by the political wing of the Labour movement. Both in the House and in the country, there was resistance to that attitude, and the result was that those who would have liked to apply these strong-arm methods to the workers drew back because they knew they could not get away with it.

Today, under the encouragement of a Tory Government, under the encouragement of the speech made by the Minister of Labour in the House during the employment debate, men like Sir Leonard Lord and Mr. Alick Dick, of the Standard Motor Company, have both in language and in their methods revived what was worst in the labour relations of the 1920s and 1930s. That is a very serious matter.

Mr. Gresham Cooke

There is no truth in that.

Mr. Edelman

Last week, when I asked the Minister of Labour at Question Time to request managements like Standard's, for example, to refrain from the use of the hectoring and bullying terms which they have used towards the trade unions a few days earlier, the Minister sat down silently and would not give any answer. Now I want to put this question to him, and I submit that this is a question of vital importance to the interests of the workers in the industry in the Midlands. I want to ask him whether he had any private information from his labour officers in Coventry and Birmingham, or from the industrialists there, of the sackings that were about to take place. The right hon. Gentleman can answer that now or later.

Mr. Chapman

Yes, he had.

Mr. Edelman

I am obliged to my hon. Friend, but perhaps the Minister of Labour would speak for himself. I am asking the right hon. Gentleman whether he had any advance information that the sackings were to take place, and if so, if he will say what action he himself took to impress upon the industrialists the effect, not only economically but in personal and social hardship, which these sackings would create. Perhaps, if he will not answer now, he may answer later on.

Mr. Iain Macleod

The hon. Member can make his own speech and his own misrepresentations if he wishes. He must be the only Member of the House who is not aware that I told the House last Thursday afternoon that I knew on Monday about this. Whatever the hon. Member may say about it, I told that to the House then.

Mr. Edelman

I am obliged to the right hon. Gentleman, but surely that makes his position even worse. If he knew in advance about it, why did he not give warnings to the people concerned to take action to mitigate the hardship that would be caused to the workers? If he did not do these things, he had no right to sit there silently while all around him heads were nodding while the British Motor Corporation was being condemned for its ruthlessness. He adopted a sanctimonious attitude in putting the blame elsewhere, or in allowing it to appear by default that he himself had been energetic and active in preventing the motor manufacturers from exercising this arbitary and harsh method which they have recently revived.

All these are very serious matters, and I can assure the House that in Coventry today there is very grave anxiety. There are many people who are wondering, as the Bishop of Coventry said only the other day, how the houses they have bought, how the television sets in their homes which they bought on hire purchase are to be paid for, and they want to know what the future will bring them. If the Government follow out their policy of laissez-faire to its logical conclusion, it is obviously quite useless to expect from the Minister of Labour any coherent answer, because if he washes his hands of the whole thing and says that his responsibility is merely confined to the setting up of labour officers inside the factories whose only function is trying to fit men into alternative jobs, it is useless to put questions on any economic matters to him at all. Yet the right hon. Gentleman is a member of the Cabinet and has a responsibiilty for Government policy.

Here, I want to ask the Minister some specific questions. What have the Government done about the Australian import cuts? I want to deal with that point, because Australia is the market on which the motor industry relies in the winter. It is specifically the winter market of the motor industry. Here we have 6,000 men who are being sacked from B.M.C.—and some more may be sacked tomorrow—in Coventry, and we shall be deluding ourselves if we do not take into account the fact that, when the effect of the Australian import cuts becomes felt, there will be even more dismissals than have taken place in the last few days.

I would have thought, first of all, that the Government would have had some advance notice of the Australian import cuts, and that, secondly, either the President of the Board of Trade or whatever other Minister is responsible would have made representations at the very highest level to the Australian Government in order to see what could be done to mitigate the hardships produced by the situation. If I had been asked what I would propose, I would have said that long ago our own Government, seeing the way things were going, should have tried to achieve some sort of division of labour between the British motor industry and the industries of Australia. Something could be done in a direct way, whether through the manufacture of components or whatever else it may be. Instead of that, to go on in the same course, knowing that ultimately the Australians would have to cut their imports because they were faced with similar problems to our own, seems to me to be the depth of foolishness.

Now I come to my last main point. It is no use now merely dealing with the symptoms of a slump which is threatening in the motor industry, because there is no doubt that there will be a real slump unless something is done. While six months ago it might have been an exaggeration to compare Coventry, a single industry city, with Clydeside in the past, I say that today it is no wild comparison to say that, unless drastic, radical and structural action is taken to recast the motor industry for the markets which are available or can be made available, Coventry today will become a Clydeside of tomorrow. These are serious matters, and I should like to make a few firm suggestions about what should be done to stimulate the motor industry and to secure full employment for the workers in the industry.

In parenthesis, I would say how much I agree with my hon. Friend the Member for Cannock (Miss Lee) and the hon. Member for East Aberdeenshire about the needs for compensation payments for those who, in the meantime, will be rendered redundant. The only way to diminish the bitterness which is felt by workers in Coventry who are turned off, perhaps at a few hours' or a week's notice, is to give them compensation payments, not out of general taxation, but out of the profits of the companies to which they themselves have contributed so much for so many years.

The proposals which I should like to make are simply these. It is perfectly clear that no amount of exhortation will drive the motor manufacturers into the export markets while they still have any hope that they can fall back on a profitable home market. When the Tory Chancellor gave them the lead, they went ahead and allowed their export organisations, such as they were, to run down, and concentrated on the market for home consumption. I am not one of those who advocate an expansion of the domestic market. I do not agree with some of my hon. Friends who, in the Finance Bill debate, urged some stimulation of the domestic market at the present time. I think that nationally that would be a bad thing, however good it might be for a short time and from a local or regional point of view. Considered nationally, it would be a bad thing.

The crux of the whole matter is to turn the attention of the motor industry towards the export market, and the only way in which the motor manufacturers can be forced into the export market is to tell them that unless they export a certain quota of their total production, they will not get the steel. Of course, that involves steel control, but at this moment, when there is a shortage of steel, when we are importing from America millions of pounds worth of dollar steel which, certainly in the last few months, has been going to the home market, when we are spending dollars we can ill afford, I would say that, if the sanction of steel allocation were applied to motor manufacturers, their energies could he successfully directed to export markets as they were in the time of Sir Stafford Cripps.

I refer to what my hon. Friend the Member for Leeds, West (Mr. C. Pannell) said, when he spoke about the difficulty of selling British motor cars in the United States. I can well believe what he said, but I would assure him, much as I agree with what he said about developing a proper servicing organisation, that the difficulties of selling to the American market, great though they have been in the past, will be greater in the future, the reason being that the American motor industry is in process of contraction. A great nightmare to me, though perhaps it is a nightmare not many people have, is that all of a sudden the American motor manufacturers may decide that they will export 2 per cent. more of their production. We can be quite sure, if they do export another 2 per cent. of their production, that with one shrug of its shoulders the American giant can jostle the British motor industry out of the export market.

That reinforces my second point, which is that in order that we should have successful export markets we must have a directing Government policy. This is a matter on which the Government can talk to the Americans. I believe the time has come when we should turn our attention to the possibility of trade with the East. My hon. Friend the Member for Leeds, West referred to this also, and he made sympathetic reference to it. I think that if we try to force our exports into the already congested markets of the United States and Western Europe, into the corral of Western Europe, we shall have very great difficulties.

There is one great structural weakness in the car industry, and that is that it has not been rationalised. There is a multiplicity of models and a tremendous amount of internecine competition. As long as that lasts the country will have a motor industry which, however active it may appear to be, will not be serving the country as well as it could. I think the future of the industry lies in the country having a Government who will turn their back on the laissez-faire policies practised by the present Government, and the only way to ensure that is a rapid return of a Labour Government.

7.33 p.m.

Mr. Harold Gurden (Birmingham, Selly Oak)

I shall refrain from dealing with the many aspects of the subject which could be covered in view of the remarks which have been made by my hon. Friends, and, indeed, by some hon. Members on the other side. I want, in particular, to mention the burning question of the motor car industry, since it affects Birmingham more than most areas, and my own constituency is next to that in which the Austin works are situated.

It is common knowledge, I believe, that I object very strongly to the treatment by the British Motor Corporation of the workers who have, after all, served them well. That treatment is certainly not in line with Conservative Party policy as I know it and on which I fought the last Election. The British Motor Corporation has ignored the advice the Conservative Party has given to it and the need for collaboration between management and men. I claim to represent all my constituents, whether or not they voted for me, and many of them must be employed at the Austin works. I do not hesitate to blame the employers in this case, and I cannot say too strongly what I have to say.

I think that at least they might have given the workers some prior knowledge of their intentions, even if they did not want to make them known nationally. I think they might have taken the workers into consultation a very long time ago. The directors of the British Motor Corporation must have known enough about the situation months ago to have been able to have told the workers that there must he some redundancy. If it was to be as serious as it is, affecting 6,000 workers, then the directors certainly evaded their duties.

As others have said, this is a problem of the motor car industry having priced itself out of some of the world's markets. Those of us who have been abroad recently, and many in this House must have been on the Continent, must be struck by the noticeable lack of English cars in France, for instance. What on earth France is doing buying practically all German cars, I do not know. I speak without import-export figures, but I speak from what I have seen on the roads of France.

Mr. Gresham Cooke

My hon. Friend may like to know that the French do not allow any more than a purely nominal quota of British cars into France.

Mr. Gurden

I think that helps very considerably in stressing the point I am making. My right hon. Friends may know more about this than I do, but it does not seem right to me that the French are excluding British cars.

Mr. Julian Snow (Lichfield and Tamworth)

Perhaps the hon. Member will allow me to correct his hon. Friend the Member for Twickenham (Mr. Gresham Cooke) by saying that German exports to France are almost mathematically double. The French import restriction is in terms of horsepower and category of car. There is a market for a substantial element of our own industry, if our sales organisation is efficient.

Mr. Gurden

That is as may be, but we can compete in the small car market, taking horsepower into consideration, since we have from the B.M.C. works some of the smallest cars produced in this country.

As I was saying, if we have priced ourselves out of the motor car market abroad, let the workers understand as well as the management that both sides have contributed to this, and not only the workers in the motor car industry, but the workers in the other industries, too, particularly the nationalised industries. I saw quite recently that the miners were talking about another wage increase. Let us make no mistake about it, that will be another blow to the motor car industry if they get it. Those people who are increasing their profits are also contributing to this trouble.

I wonder whether the workers realise the tremendous amount of taxation which flows in from the profits of those industries upon which we depend if we are to maintain the social services at their present level.

Mr. Herbert Butler (Hackney, Central)

And to pay unemployment benefit.

Mr. Gurden

Yes, although, strictly speaking, that comes out of a separate fund. We should not forget to remind the workers where the money comes from for the social services and to subsidise the nationalised industries which contributed a great deal in taxation out of their profits before they were nationalised.

Mr. A. Blenkinsop (Newcastle-upon-Tyne, East)

Will the hon. Member explain how the coal industry under private ownership managed to make a large contribution?

Mr. Gurden

The nationalised industries used to contribute to taxation out of their profits, and at the moment the money is going the other way. [HON. MEMBERS: "No."] Furthermore, we are having to pay far too great a price for their products. [HON. MEMBERS: "And compensation."] What is paid in compensation is the business of hon. Members opposite. It was not fixed by my party. There would have been no compensation for me to defend, because I should not have nationalised the industries anyway. When old-age pensioners are thinking in terms of an increase in pensions, with which we often have great sympathy, and when the National Health Service is being discussed, I say that the workers must realise that any demands for higher wages and, unquestionably, for higher profits in industry, will jeopardise, more seriously perhaps than we and the workers realise, the possibility of a continuance at their present level of the social services and the other things which we all praise so much.

Those who blame the Chancellor of the Exchequer and his predecessor for this situation are not very realistic, because, short of fixing prices, wages and profits, this problem could not have been averted. There may be other contributory factors, but, short of doing those things that I have mentioned, of applying controls to industry generally and of not doing one of those things without doing all the others, this terrible catastrophe in the motor car industry could not have been averted. As to the extent of the trouble, I am sure that Birmingham, at the moment, fortunately, can absorb the redundant labour, provided that it is given time.

Mr. Chapman

How long?

Mr. Gurden

We must realise that there is a waiting list of as long as three years for export orders in the machine-tool industry and in some other industries, and it is high time that employers in those industries obtained the labour they require in order to compete in world markets.

7.44 p.m.

Mr. Roy Jenkins (Birmingham, Stechford)

The hon. Member for Selly Oak (Mr. Gurden) began his speech, which contained a large number of very remarkable judgments, by saying that a number of things had happened in Birmingham recently which had not played any part in the election programme which the Tory Party put forward at the last two General Elections. There is nothing unique in that, because many things have happened in the country recently which did not play a part in those programmes. I thought that the Chancellor of the Exchequer was in an unconvincing mood this afternoon. [An HON. MEMBER: "He generally is."] He was, if anything, a little more unconvincing that usual. I thought that that was largely because he insisted upon being most vehement about those parts of Government policy which are clearly quite indefensible.

When the right hon. Gentleman mentioned the balance-of-payment figures for the first half of the year he was quite reasonable and moderate but, when he was defending the past record of the Government in the motor industry, he was extremely violent. I thought that I saw coming through his speech a slight sign of strained loyalty to the Leader of the House. I almost thought that he was going to say that the Leader of the House was the best Lord Privy Seal that we have got. But these signs of strained loyalty seemed to be entirely understandable, because the Chancellor at present wishes to present himself to the House and to the country as being what one might describe as a semi-planner.

The right hon. Gentleman has been saying, "Do not believe that we are not depending on planning mechanisms at all. We have the Capital Issues Committee, I have strengthened hire-purchase controls and some import controls. We have quite a lot of important devices which we can use and intend to use". If the right hon. Gentleman takes this position as a semi-planner, having in his control a number of important planning devices, I should like to know how he can possibly defend the attitude of the Government towards developments in the motor industry over the past three years, because it is the most extraordinary story.

I thought that the weakness of the Chancellor's case was illustrated by the fact that he had to rest himself upon the cheap cry to my right hon. Friend the Member for Battersea, North (Mr. Jay), "I suppose that the right hon. Gentleman is again saying that the gentleman in Whitehall always knows best". But judging from what has happened to the motor car industry in the past few years, the gentleman in Whitehall, whoever he might be—even if he were the President of the Board of Trade acting on advice—could hardly have done worse.

It is not a case of people being wise after the event. There were a great number of people in the House and outside who were extremely worried about the very rapid expansion in the motor car industry and were very anxious not to allow it to go on in a completely uncontrolled way. If the Chancellor says that the Capital Issues Committee is an extremely effective planning device, how does he defend its use towards the motor car industry in the past few years? Did the Committee sit down and, under instructions from the Chancellor, pass all these schemes of expansion because, taking all the circumstances, it decided that the schemes were justified, or did it not?

There is no doubt that at least some of the leaders of the motor industry have proved extremely bad counsellors over the past years. A great deal has been said in the course of the debate about Sir Leonard Lord. One of the issues raised by his behaviour over the past week or ten days is the general question of responsibility in industry. I am sure that the President of the Board of Trade would say that the head of a great concern like the British Motor Corporation has a certain responsibility towards the shareholders and the workers and the community as a whole. Here we have a situation where, without doubt, Sir Leonard Lord has taken a decision of very great importance not only from the point of view of the workers, but of the country as a whole, in a most brusque way, yet, as far as we can see, he is out of communication with everybody concerned.

Mr. Denis Howell (Birmingham, All Saints)

He has disappeared.

Mr. Jenkins

This, no doubt, raises in very sharp form the whole question of responsibility in industry.

As I understand it, the Chancellor says, "Of course, this great industry, because it is under competition, must modernise itself, must put in new plant and replace old plant." Do not let us forget, however, that all that has been happening and is still happening is not only the improvement and modernisation of plant. There are great schemes of expansion which have been going ahead and which are still going ahead.

I understand that the Chancellor also said that export markets are difficult things and that it is not easy to predict what will happen. I find that point of view a little in contradiction to that put forward by the hon. Gentleman the Member for Twickenham (Mr. Gresham Cooke), and by some other Government spokesman, namely, that anyone could have told from 1950 that the percentage of exports of the industry was bound to decline steadily because of the factors in the world situation which could clearly be foreseen. Therefore, I find it a little difficult to reconcile those two statements, but I have no doubt that the hon. Gentleman the Member for Twickenham, if he speaks, will give his comments upon the matter.

It is extremely important that we should realise what has been the attitude of the Government. As my hon. Friend the Member for Edmonton (Mr. Albu) pointed out, in an intervention in the speech of the Chancellor, there is a test case at the present time. The motor industry is about to erect a new factory in the Dunstable area. Admittedly it is for lorries, not for passenger cars, but it is in an area where no houses are available, no labour is available; and it is likely that most hon. Members who have knowledge of the Midlands will agree that there will be surplus factory capacity in the motor industry there in the future.

Despite all these circumstances, the Minister of Housing and Local Government has given permission for General Motors to erect that factory in the Dunstable area. It seems to me that this is a test case as to whether the Chancellor is even a semi-planner. If the right hon. Gentleman is a semi-planner, and if he has the power which he wishes us to believe he has, he should look at that project again, whatever the Minister of Housing and Local Government has decided, to see whether the decision is a sensible one in the present circumstances.

There is one other point to bear in mind. In defending what had happened to the motor industry the Chancellor did not, as some of his hon. Friends have done, and as the Minister of Labour did in our debate in the early spring, say that it is all a question of what the market is like from time to time, that the Government have very little responsibility, and that we must let the industry accommodate itself to a particular demand at a particular time. The Chancellor did not say that. He said that one of the main reasons why it is necessary for the Government to limit the demand for the products of the industry on the home market was that the industry was swallowing too much labour and too much steel.

Once one gets on to those grounds one is getting into a position in which the Chancellor is not leaving it to the market but is making a decision himself as to what he thinks should happen. When we put questions to the Chancellor as to how he views the future, how far he thinks the shrinkage should go, what rundown in the labour force there should be, it is intolerable that the Government or the Minister of Labour should shrug their shoulders and say, "We do not know. It is not our responsibility. The industry must accommodate itself to circumstances as they develop."

But, of course, circumstances as they will develop in the industry are largely the concern of the Government and of the Ministry of Labour. I fully agree that the future size of the motor industry in this country must be geared closely to the future export prospects of the industry. I do not for a moment believe that we can have a huge motor industry without a large percentage of exports. But if one is dealing with future export prospects, a certain amount depends on the competitive performance of the individual manufacturers.

I am far from convinced, in spite of the number of rather platitudinous tributes paid to the motor manufacturers this afternoon, that their performance in certain cases is by any means all that it should be. Of course a certain amount depends on that, but a great deal more depends on general commercial conditions in the world, which are to some extent within the control of the Government, and which in any event can, or should, be foreseen by the Government to a far greater extent than is possible for even the best informed and most farsighted person in that industry. We are concerned about the present position of the Australian market, as my hon. Friend the Member for Coventry, North (Mr. Edelman) said. That is something on which the President of the Board of Trade ought to have a better view than Sir Leonard Lord or anyone else in the industry.

Another big problem which faces the industry, and British economy as a whole, was mentioned by the hon. Member for East Aberdeenshire (Sir R. Boothby), who referred to the plans for a common market in Western Europe. I feel sure that the president of the Board of Trade will not disagree with me when I say that the Western European plan amongst the six Powers in middle Europe presents us with a great dilemma. So far as I can see, we have the choice between remaining outside the scheme, and seeing German exports, including German motor exports, having a preference over ours throughout Western Europe—which I should have thought would mean pretty well the end of British exports to Western Europe—or we can go into the scheme and, quite apart from Imperial Preference, the British motor industry would lose its substantial 33⅓ per cent. preference in the home market.

It may be possible that a compromise solution will be worked out, but it is a grave dilemma for the country, for the motor industry and for a number of other industries. I raise the matter here partly to mention the subject as such, but also partly to illustrate what I think is the indisputable fact that the future prospects of the industry depend to a large extent on matters which are far more the concern of Her Majesty's Government than they are of anyone directly concerned with the industry. It is a disgraceful shelving of responsibility, on any view of economic policy, for the Government to say that they cannot predict the future, and that they do not know what is likely to happen.

Mr. Gurden

I am interested to hear what the hon. Gentleman has said about the position in Western Europe, but he did not offer any solution. What would he do about such a position?

Mr. Jenkins

I say frankly to the hon. Gentleman, as I began my comment on this passage, that I believe the plan, which for a variety of reasons I do not think we can or should sabotage, places us from the point of view of trade policy in a difficult position. It may be possible for us to work out a compromise solution, by which we associate ourselves with the arrangement. However, I do not think that the hon. Gentleman would seriously argue that because I cannot, in the course of one sentence in reply to an interruption, frame a policy for dealing with these complicated trade problems, that is a reason why the Government should have no policy at all about it and should offer the motor industry no guidance.

Now I want to turn for a few minutes from the position of the motor industry to one or two more general questions. In his speech today the Chancellor tried to give us a rosy picture of what was happening, and of course there are one or two features which are slightly encouraging. Certainly the trade figures for the first six months fall into that category. However, they must be considered in conjunction with another consideration; that is, that 1956 may be going to be a better year for the United Kingdom than was 1955, but is it going to be a better year for the sterling area? That seems to me to be extremely problematical, and if, as may prove to be the case, 1956 is a bad year for the sterling area then, because we frittered away our resources in the easy year of 1955, when we had no excuse for not building up our reserves, we shall be in grave difficulties.

We also have to consider one other important aspect of the policy of the Government, as I understand it, which is to achieve some sort of price stability. We are not seeing much result here yet, and one reason is that the Government's thinking on this matter is extraordinarily muddled. One can approach the problem of getting price stability by taking inflation out of the economy either by, as it were, trying to deal with cost inflation and hold prices steady, or by trying to deal with demand inflation so that prices are not pulled up through an excess of purchasing power.

If one takes the view that it is demand inflation pulling up prices through an excess of purchasing power with which one must deal most urgently, it may sometimes be sensible to apply what I understand my right hon. Friend the Member for Huyton (Mr. H. Wilson) refers to as "Boyle's Law", and push up prices in order to bring down the cost of living, because, by doing that, one can argue that one syphons off purchasing power from places where it might otherwise be spent.

But one must have a consistent line. I find it completely impossible to understand what possible diagnosis can lead the Government at one and the same time to decide, presumably justifying their action by saying that by this means one is syphoning off purchasing power from other places where it might be spent, to put up the cost of school meals, bread and milk and impose the policy of price stabilisation on nationalised industry.

Those two policies, taken in conjunction, make no sense at all. The greater the extent to which one allows one's costs to be pushed up in that way, the more general disinflation one must have if one is to have even a hope of getting anywhere near the Chancellor's long awaited plateau.

Do not let us deceive ourselves. We are already paying a fairly heavy price for what may be described as the Government's attempt at general disinflation. We have not heard much today about the question of production in this country. Let us be in no doubt that this is one plateau that the Chancellor has attained. We may be a long way off his price stabilisation plateau, but we are certainly already in a situation in which production is not going up and may be coming down very slightly.

Even before this situation was achieved, one could easily make extremely disturbing comparisons and say that, even on conservative estimates, the rate of growth of the Russian economy at 6–7 per cent. was at least three times that of ours, and we could draw extremely disturbing conclusions from that. At the present time, we cannot measure the rate of growth of the Russian or any other economy against ours because ours is not growing at all. The Russian economy is growing an infinite number of times faster than ours. We are paying that price.

There is another price that we are paying which should be borne in mind.

The Economic Secretary to the Treasury (Sir Edward Boyle)

Surely the rate of growth is measured best by the rate of production in the investment goods industries? Production in the investment goods industries has been rising appreciably this year. The fall in production has come only in the consumable durable industries.

Mr. Jenkins

I do not consider the major test to be production in the investment goods industries. It may be production in the investment goods industries which governs the rate of growth, always provided that one's investment goods industries are not devoted to useless investment. After our experience in the motor industry, about which we have been talking, we may be getting a little doubtful on that point.

The other price that we are paying for the Government's general deflationary measures is that we have now had an extremely long period of dear money. One can argue that there may be something to be said for a short, sharp burst of dear money, but we have had sixteen months of it. It is doing very grave harm, without question, to the sterling area and to London, as its centre. As I understand it, one of the arguments for the Government's monetary policy is that it is necessary in order to make sterling strong and to build it up into a world currency. However, curiously and paradoxically, in the course of doing it we are making all sorts of other markets very much more attractive to members of the sterling area as a source of borrowing than London is, and some of them are taking advantage of it. It would be strange if, in pursuing a policy of liberalisation combined with monetary discipline, we damaged the unity of the sterling area.

8.5 p.m.

Mr. R. Gresham Cooke (Twickenham)

The hon. Member for Stechford (Mr. Roy Jenkins) has challenged me about my view on the exports of the motor industry over the last few years. I have always held that the export percentage, as such, was bound to go down, because one could not keep the home markets starved of motor cars, but, at the same time, I had every hope that the overall number of cars exported would be maintained. Indeed, that has, generally speaking, been the case.

If one looks back to the beginning of 1955 and looks at the background to the present troubles in the motor industry, it is instructive. There was a general expectation 18 months ago that production would increase by about 10 per cent. in 1956 and that exports might increase by about the same ratio. Within this general expectation, I suppose the British Motor Corporation was the most ambitious of all, hoping for a production rise from 9,000 to about 12,500 per week.

What has happened? In 1955 production rose, and exports also did slightly, but in the first six months of 1956—these are the interesting events—the home market went back by about 5 per cent. The Labour Party cannot complain about that. It has all the time been asking that dollar steel should not be used for putting motor cars on the home market. The right hon. Gentleman the Member for Huyton (Mr. H. Wilson) has said many times, and said it again today, that the nation cannot afford to use steel in this way. He cannot complain about any fall in the home market.

It is a very interesting reflection that the fall in the sale of cars on the home market has just about been made up by the rise in the sale of commercial vehicles. Therefore, broadly speaking, the home market has not been very greatly altered for firms which make both cars and commercial vehicles. Thus, there has been no catastrophic fall there.

Where there has been a fall has been in the export of cars, while commercial vehicles have maintained their own. This has meant that there has been a fall in production of about 8 per cent. overall in the first few months of this year. No motor manufacturer wanted a fall in the export of motor cars. No motor manufacturer wants his turnover to go down. I am convinced that the motor manufacturers have been trying all they can; but there have been a large number of world difficulties, such as the extra troubles in America and the troubles in Australia.

Within the general figure of a fall of 8 per cent. in production, there has been a good deal of straightforward old-fashioned competition. Some companies have gone down more than others, and one or two may even have gone up. I cannot see hon. Members opposite complaining about that. I sat many days during the proceedings on the Restrictive Trade Practices Bill, and I heard hon. Members opposite, the champions of competition, saying, "Sweep away these restrictive practices in industry. Take away all these collective agreements. Let the sweet air of competition blow in." Now they are getting exactly what they asked for. They are getting a lot of competition, with the results that we have seen.

The intellectual hard core of the Socialist Party opposite—and I refer, of course, to the Members who represent Coventry; I am sorry that they are not here—always said, "Let the big boys in the motor industry get together. Let there be more rationalisation." They said a few years ago, "Let Morris and Austin combine." Now Sir Leonard Lord did exactly that. He brought about rationalisation and this combine. How delighted our intellectual friends must have been with Sir Leonard Lord. But now the chosen darling of the Socialist intellectuals is hardest hit by the fall in production.

No one in the motor industry, least of all the trade unions, has been surprised at the dismissals. Perhaps there has been surprise at the scale and perhaps at the delay, but I do not think that fundamentally it was thought that the position in Birmingham could remain as it was for ever and ever. The lessons which hon. Members and industry generally should learn from this are that we cannot expect firms to retain the same share of the home market as they had in 1946. Some firms have to go up and some down. One cannot expect a nation to remain static. Employers have been saying for a long time that, if wage increases went on and on, we should eventually price ourselves out of the export market, and that, I am afraid, is now happening. We have led ourselves into trouble, particularly over the last increases in March.

Over the week-end, I made some inquiries about the differences in wage rates for ourselves and for our biggest competitor, which is Germany. I know that rates of exchange may be difficult to correlate, but I find that a piece-rate worker in Germany earns about 5s. 2d. an hour and in the United Kingdom 6s. 11d. an hour. A skilled toolmaker in Germany earns 4s. 8d. an hour and a skilled toolmaker in this country 6s. 8d. There is, therefore, a real differential in labour costs to begin with. I was interested to see that last year there was very little difference in the hours of work in the two countries. Germany had an average of 47.4 hours and in the United Kingdom the average was 46.9 hours, which does something to dispel the sort of criticism often made, that we do not work hard in this country.

A further lesson which we have to learn, as hon. Members have so frequently said, is concerned with the complaints about finish and about the detail preparation of cars as they leave the works. The men must share some part of the blame for that, because I have always understood that in the Midlands there has been a good deal of resistance to tightening up inspection of the final delivery of motor cars. As we all know, dealers have had to do a good deal of work in what is called preparation for delivery. They have had to do a good deal of work in putting right cars which have come out of the works in an incomplete and imperfect condition.

I am not defending Sir Leonard Lord's methods of dealing with the men. He is perfectly capable of defending himself, if need be. I am bound to say that I do not think that the experience of the consultation over redundancy in the motor company was very conducive to putting Sir Leonard Lord in a good frame of mind for consultation with the trade union. I know Mr. Alick Dick of Standard's very well. He is one of the modern type of employers and is a very reasonable man. Standard's have got on very well with labour in the last two years, but I have always felt that Mr. Dick was met with extreme rudeness when he tried to discuss redundancy with the trade unions. They never got past the first item on the agenda at any meeting at which redundancy was discussed, and his shop stewards said that they would not deal with the topic of redundancy at all. That kind of attitude has possibly rather encouraged Sir Leonard Lord, whom we all know to be an impetuous character, to take the line which he took.

It is obvious that people must move from one firm to another and from one industry to another as opportunity offers. The other day I elicited from the Minister of Labour the fact that the male labour force in Coventry had increased by 10,000 in the last five years. It is obvious that a great number of those men must have come from towns other than Coventry, perhaps from Cannock, Leicester, Nottingham and so on. The principle is, "first in last out". Many of those men who have recently arrived must not be surprised if they have to go back to their own towns to find work in their original homes where work is at present being offered.

Lastly, I suggest that the unions must face the problem of redundancy. They should have some programme to meet it and be willing to discuss with employers the difficulties which may be coming to this and other industries and how to deal with men and translate them to other parts of the country and to other work.

8.15 p.m.

Mr. A. Blenkinsop (Newcastle-upon-Tyne, East)

The hon. Member for Twickenham (Mr. Gresham Cooke) has made his rather expected apologia for the motor car industry, but he has not met the particular point which some of my hon. Friends have been stressing in this debate and for almost a year, the excessive concentration of steel and capital resources on development plans for this industry to the serious detriment of other industries, in particular, the industries in which some of us are interested in the North-East, the shipbuilding industry, where very large further contributions to our export trade could well have been made had steel been more freely available.

I want to follow the comments of my hon. Friend the Member for Stechford (Mr. Roy Jenkins), who pointed out that the Chancellor of the Exchequer had declared himself to be a semi-planner, a rather curious phrase which brings in its train some very proper criticisms. It is clear that the Chancellor of the Exchequer is a semi-planner in the sense that he approves the use of physical as well as financial controls in the public sector of industry, while he does not approve the use in general terms of physical controls in the private sector.

We have had some recent pertinent examples of how that works in practice. For example, we have recently heard of a great number of cases where various Ministries are either deferring or altogether rejecting various proposals for capital expenditure on public projects. One example raised in the House the other day at Question Time concerned the Minister of Health, who is now rejecting and postponing proposals for the erection of old people's homes of one form or another. That is the type of accommodation provided by local authorities under the National Assistance Act, 1948. Unquestionably such homes are urgently necessary, but apparently because they are being provided by public authorities, they are subjected not only to high costs but to high rates of interest for borrowing, and local government borrowing is subject to further restrictions and the schemes themselves are actually prohibited. That is a typical example, and I quote only one of very many which the Minister has turned down. Indeed, since April he has rejected schemes to a total value of nearly £1 million in this limited category of the provision of accommodation for the old and semi-infirm.

I want to quote one example to reinforce the arguments which have been brought forward at Question Time and in this debate. It concerns the city of Newcastle, part of which I have the honour to represent. The corporation is following out the recommendation of the previous Minister of Health who, I understand, is to reply to this debate. In the early part of last year, he recommended that local authorities should concentrate upon schemes for housing the elderly and infirm. He told them to give more consideration to the needs of those people, and to build larger types of hostel accommodation for them.

That was a very welcome proposal, and as a consequence the local welfare committee decided to scrap one of its original proposals for a smaller home and put up proposals which it felt would meet the Government's wishes. It proposed to provide accommodation for about 64 elderly and infirm persons, together with a certain amount of nursing care. The Ministry welcomed that proposal when it was made; it was approved in principle in October of last year, and it was thought that the scheme would go forward, because very much depends upon it. It provides an opportunity of making fresh use of old accommodation by converting the old public assistance institution into a hospital.

All this hung upon the development of the new building to be provided on one of the new housing estates. I appreciate that the right hon. Gentleman has to prepare his reply, but I am rather sorry that he is leaving the Chamber at this moment—because he bears a good deal of responsibility for what is happening.

The present Minister of Health goes about the country calling upon local authorities to pay special attention to precisely this problem of the care of old people and the provision of accommodation for them outside hospital, but the astonishing fact is that, at the same time, he is being forced by the Chancellor to cancel many of these very schemes—no doubt with promises that at some time in the future they will be reconsidered.

Schemes of this kind, which are of undoubted importance and value, and have been referred to by the Minister himself as priority cases, are now to be cut out—for the benefit of what? We could understand it if the Government were making an attempt to secure the flow of labour and materials into the most essential field. Past Administrations have had to adopt such methods. In Newcastle at the present time, however, private building of all kinds is going forward. Private building and development, in the alteration of shop fronts and the erection of large new office blocks, is going forward. None of these is subject to the form of control or check which is imposed in the case of local authority projects. What none of us on this side of the House can accept for one moment is a Ministry or a Government which says that, because work is being undertaken by a public authority, it has to be subject to much more strict control and check than work which is agreed to be of far less importance and is being carried on under private enterprise without any public sanctioning being required.

The Minister of Health (Mr. R. H. Turton)

The reason why the loan sanction for the Newcastle scheme—which is to cost over £60,000—has not been granted in this half year is to enable other Part III accommodation, which we believe will meet even more urgent and essential needs, to go forward. Over £900,000 has been sanctioned for this work in the half year, in addition to the other loan sanction given before April. No scheme has been cancelled, and all will be reconsidered at the end of the half year.

Mr. Blenkinsop

Yes. The right hon. Gentleman says that this is not a cancellation. Apparently he does not like that word. But how are we to know that this scheme will be allowed to go forward in October, or at some time later? We have no promise of any kind to that effect. I take it that the right hon. Gentleman's point is that this scheme is to be postponed in order that other work can go forward. That is plain nonsense.

Is the right hon. Gentleman saying that the labour which would have been used for this job will be used for another comparable project? I can tell him that it will not. The other scheme put up by the Newcastle Corporation was withdrawn by it in favour of this one, so the right hon. Gentleman cannot say that the labour and materials which would have been used for this scheme will be used for any other scheme which he may care to mention. In fact, as he knows, the materials and labour which would have been used may well go into one of the schemes for development or the alteration of shop fronts which are going on in the city at the moment—or into a multitude of other private projects. The building of new public houses seems to be a quite active occupation at present.

Those are the alternative schemes which are going forward at the moment; those are the other fields into which the labour and materials will no doubt go. It is impossible for the right hon. Gentleman to deal with this practical example of what the Government are doing by pretending that the effort will be diverted into other valuable and equally vital projects. It is just not true, and he knows it. I wish to make clear that when my hon. Friend the Member for Stechford suggested that the Chancellor is a semi-planner he was absolutely correct. The right hon. Gentleman is prepared to control, to limit, and even to postpone projects of vital public importance while taking no action, except that of a general high interest rate, to limit the development of private projects.

We cannot hope to instil a sense of national urgency into people, or make them appreciate the urgent economic problems and the need for restriction on consumption and so on if, on the one hand, we hold back vital and acceptable schemes while actively encouraging a great deal of waste and extravagance such as the vast expenditure on advertising, for example, which the Government are, [...]o some extent, subsidising. I cannot believe that the Minister of Health is happy about this position, and I ask him to make vigorous representations to the Chancellor to ensure that these delays, and the cancellations, as I prefer to call them, be rescinded as early as possible; and to impress upon his right hon. Friend the need to take effective action against the private sector of industry.

Sir E. Boyle

Is it really the view of the hon. Member that it is socially desirable—to use his own phrase—that there should be no shop or other such building at all in the country at present?

Mr. Blenkinsop

I never said that, and I do not think that the hon. Gentleman should suggest it. I said that the private sector should be subject to effective control, and as much control as the Government are prepared to apply to the public sector.

8.31 p.m.

Mr. William Shepherd (Cheadle)

I listened with some interest to the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop), and I think that he was hardly fair to the private sector of industry. It is just not true to say that, while the public sector is subjected to rigid restrictions by the Government, no applications are made to the private sector. In the first instance, there is the question of the rate of interest, which is a considerable one. In the second case, there is the squeeze on the banks, a very effective factor, and thirdly, there is the Capital Issues Committee. It would be quite improper to take the view that was voiced by the hon. Gentleman that the private sector is let off scot-free while the public sector is restricted.

The hon. Gentleman may take the view that there should be more rigid restrictions on the private sector than there are at present. That is a debatable point, but it is not true to say that the public sector is chained while the private sector is allowed to go free.

Mr. Blenkinsop

Will not the hon. Gentleman agree that, whereas the public sector has to suffer all the disabilities which he has mentioned, it has also to suffer the specific disabilities to which I have referred?

Mr. Shepherd

There are plenty of people in the private sector of industry who would be happy to substitute some form of physical control for the various forms of control to which they are now subjected. I do not propose to enter into that argument, which is an extensive one, but it is not true to say that the private sector is left entirely uncontrolled.

The hon. Gentleman's argument was interesting from the point of view that it typified the approach of the whole nation to the problem of inflation and excessive demand. We all know that the total demand upon goods and services in this country is more than we can meet. That is common knowledge. We know that it is the source of our present difficulties. Everyone says, "If you are proposing to cut, you must not cut something affecting me, or something in which I am interested."

I know that the hon. Gentleman is interested in this matter, as indeed I am, and the provision of homes for aged persons is an urgent need. But it is impossible to deal with the situation if every sector of the community says in turn—as, indeed, they do—"Yes, we agree that the sum total of demand on goods and services is excessive, but if you are going to cut something, be certain that you do not cut anything in which I am interested." Certainly, it should be said that if there is to be a reduction in the overall demand on goods and services, the Government should make a contribution. Today the Government are very big spenders, and they must reduce their demand on goods and services. It is quite improper to say that it should all fall entirely upon the private sector, because the public sector must make some contribution.

I have listened to as much of this debate as my duties outside the Chamber permitted, and I have been struck by an apparent reluctance on the part of hon. Gentlemen opposite to accept the need for change. I wonder whether hon. Gentlemen opposite stop to consider how dramatic has been the change in the pattern of our trade, particularly our world trade, even during the past 15 years. Now the balance has swung from textiles and certain consumer goods violently in favour of the metal-using industries and engineering work. We have undergone a dramatic change in the pattern of our trade overseas. These changes in trade cannot be of the permanent nature of things. I often hear people making comparisons between the inefficiency of the United Kingdom and the efficiency of the United States. It is true that their productivity is higher for the basic reason that they can effect a greater degree of standardisation than we can.

We have to supply myriads of overseas markets which demand different products, and if standard mass production methods were applied to try to meet those varying demands, we should end up with higher end costs of production than we have at present. It is also true to say that if we are to meet the varying demands of the export trade—and we have certainly to do that—we must face this change in the nature of our production. If people do not want to buy motor cars from us, we must sell them electric generators, and labour and brains must be used in following the export demand. We cannot say that because we have had a violent change that this is the end of a change in the pattern. The pattern will continuously change, and we must follow the change in demand if we are to survive.

Many hon. Members, particularly hon. Members opposite, have talked as though this issue affected only labour. They have talked about the effect of this situation resulting in employment or unemployment. That is really a misinterpretation of the facts. What we want to see is a general reduction in demand in relation to supply, and this will affect not only employees but employers. The idea that only the workers suffer as a result of employment or unemployment is sheer nonsense. The evils of over-employment and over-demand are visited as much upon the employers as upon the workers.

Mr. Percy Shurmer (Birmingham, Sparkbrook)

Not in the B.M.C.

Mr. Shepherd

The hon. Gentleman says "not in B.M.C." But if there had been less demand for British motor cars than there has been consistently, we would not have the situation in B.M.C. that we have today. Excess of demand is damaging to the employer as well as to the employee.

Mr. Shurmer

The directors do not have to go on public assistance.

Mr. Shepherd

I do not think that is a very effective intervention.

Mr. Shurmer

Does the hon. Member suggest that some of the directors and shareholders of the Austin motor works will have to foreclose on their mortgages or have to sell some of their goods, or have to seek public assistance? Has he seen that the successor of Sir Bernard Docker is in conflict with the Income Tax authorities, who found that he had just deposited £2 million in a deposit account in one of the Birmingham banks?

Mr. Shepherd

I only wish that I had. I do not know the personal circumstances of the directors of the Austin Motor Company or the British Motor Corporation. All I feel is that, on the whole, they will not be as happy now as they were 12 months ago. I want to make the point that excessive demand is damaging all round to industry. People are apt to say that it affects only the workers, but it damages the employers too. Two industries which we know a good deal about, the textile industry and the motor car industry, would be today in a much better competitive position had they not had their fat years. Fat years of excessive demand are bad for industry, and we have to recognise that fact.

Over-demand for goods and services means lower quality. One of my hon. Friends said that it was difficult to maintain inspection standards in Coventry under existing circumstances, but one German firm, the Mercedes company, spends 13 per cent. of the total cost on inspection, a situation which we could not conceive of as existing here. Excessive demand lowers quality and reduces the desire to improve design. It certainly lowers output. It may well be that we would get a higher output with 98 per cent. of our population employed than we get from the employment of 99 per cent., and we would have greater flexibility.

Therefore, I hope hon. Gentlemen opposite will not interpret this situation solely in terms of employment and unemployment. This is the effect of excessive demand, which is damaging and harmful throughout the entire range of industry. It certainly increases our costs. We have been trying to get new ideas over in industry, but the change-over from one industry to another was hampered at every turn by the excessive demand for goods and services, of which the demand for labour is only an effect. Some of our supporters in the country talk about high wages and excessively good conditions in industry as being a cause of our present difficulties. I think they are merely an effect.

If we have an excessive demand for goods and services, we shall get the situation that we now have. Nowhere is it better highlighted than in the motor industry, which has had years of extreme prosperity in which Britain has led the field in world exports. Yet we now find that we are being overtaken by the Germans, not only in Central European markets where they enjoy a geographical advantage, but also in countries like the United States, with cars that we would not have dreamed would have got away with it. The Volkswagen is a gimmick. We have motor cars that ought to sell as well as the Volkswagen in the United States. We ought to look at our sales policies to see whether they are right or wrong.

The disturbing thing is that we are not merely being outdone in novelty of design, as in the past three or four years, but are now being undersold by German cars. The answer is very simple; we pay unskilled and semi-skilled labour excessively high wages in our motor factories. Excessive demand has built up wages for semi-skilled persons to an absurdly high level in our motor factories. We have to get down to it in the British motor industry. I do not say with Mr. Lawrence Pomeroy, who is an expert in the motor field, that we are producing the wrong cars, giving the wrong service and producing at the wrong price. I think those are rather hard and heavy criticisms.

It is nevertheless true that what we now have to do is not to think whether we can work four days a week, or stop men from being discharged; we have to think about our export market. We have to produce cars that have more novelty at lower prices. We can produce cars at lower prices. In our motor industry, we have a much better set-up than in Germany. We have at least as good engineers and our workers are just as good. They can work as long hours as the Germans. A large part of the unskilled and semi-skilled labour in the motor factories is being paid wage rates much higher than is economically justifiable. We must get down to selling cars more cheaply and making better cars, as I am convinced we can do.

I want to turn for a moment to what was said about the apparent lack of control by the Government over the motor industry. The right hon. Member for Huyton (Mr. H. Wilson) asked why we allowed this industry to expand and now have to cause it to contract. It is not really as simple as that. Two years ago, I was discussing this very question because I had great fears as to the soundness of the motor car expansion programme. It had not been discussed individually among the firms, whose programmes had been conceived in isolation.

Two years ago, who could have said or who could have confidently forecast that that expansion was misconceived? We may have had our doubts, but two years ago the motor industry was the pride of Britain. It was exporting at an unparalleled rate. It had built itself up in a most exemplary manner. Would any hon. Member in control of the country's economic affairs have said to the motor car industry, in the face of its efforts and its success in exports, "No, you must not expand"? I really do not think there is a case for saying that an economy can be controlled by central control with that form of exactitude.

The hon. Lady the Member for Cannock (Miss Lee) said that she did not believe we could deal with today's problems by pre-war methods. Nobody is attempting to deal with the problems of the latter half of the twentieth century by the methods employed between the wars. No one really believes today in a policy of laissez faire or that the Government can divorce themselves entirely from concern for our industrial affairs. It is a question of how far we seek to influence the economy by one means or another. I hope that hon. Members, on both sides, will be open-minded about the methods which are to be used.

I am well aware that a monetary policy and a fiscal policy have their disadvantages. It is not all advantage when high money rates or other fiscal measures are applied; there are disadvantages to weigh against them. There may be justification for bolstering up some of the measures we have applied by a limited form of strategic physical controls. It may be that, if we had some limited form of strategic controls of a physical nature, we might be able to limit the harshness of some of the monetary and fiscal measures. All these ideas today are in the melting pot because we are dealing with a situation unparalleled in our economic history.

It would be wrong for any of us to take a dogmatic view on this question. All I can say is that the measures taken by my right hon. Friend the Chancellor of the Exchequer, for all the criticism they have endured today, can be shown to be moving in the right direction. The economy is definitely on the mend. That is not to say that all is well, that some reverse might not take place next year or that there might not be dramatic changes in the export sphere—all these things are possible. All I say is that the measures which have been taken have had their effect and are bringing us in some degree towards our goal. Whether those measures should be bolstered by physical controls of some kind or other is a matter for consideration. At the moment, I do not think a definite decision could be taken. We are not far enough on with our existing policy to form a proper judgment.

I urge hon. Members who have been highly critical of the Government to appreciate that, by means of these monetary and fiscal measures, we have succeeded in going along the lines we want to go in reducing the level of demand, in improving our investment side, in increasing our exports without corresponding increases in imports, and in improving our gold and dollar reserves. All these favourable changes have been brought about as a result of this policy.

I feel sure that if we can get the response from people in industry, too, so that they re-orientate themselves to the new, changed circumstances and flow into the industries where labour is badly needed, and even give a little more than they have been giving in the last eighteen months; and if they realise that the need for change is the urgent need of a nation living on exports, as we do, then we have the capacity, I believe, to pull the country through, and I believe that we have the men and women to do the job.

8.51 p.m.

Mr. William Hamilton (Fife, West)

The hon. Member for Cheadle (Mr. Shepherd) is more or less repeating and reflecting the complacency with which the Chancellor bemused the House earlier this afternoon. I should have been happier if the speech made by the hon. Member for East Aberdeenshire (Sir R. Boothby) had been made from the Government Front Bench, for he made what I think was the crucial point in a debate in which we are discussing how to get inflation out of the economy; he suggested that the only major sphere in which we can get swingeing economies is in defence, and there we have a greater measure of agreement inside and outside the House than in any other field which is open to us.

I am not one of those who believe that there has been a large change of policy recently in the Soviet Union, but I nevertheless believe that, while we should retain our defences at their present strength, we can do that and still make serious inroads into the expenditure entailed.

I asked a Question in the House about a fortnight ago about the cost to the country of military aircraft in the eight years from 1948 to the present time, and the Answer was that we spent £1,200 million on military aircraft alone in those eight years. That is an average of £150 million a year, or £500,000 every day for the eight years. I wonder how many of those aircraft can now be written off as obsolete?

It is no use the Chancellor telling us, as he did last week, that we are making cuts amounting to £36 million in the defence programme. That is a derisory figure out of a total expenditure on defence of £1,500 million. The Government know very well that they will make these cuts in National Service and elsewhere, but they will make them at the politically strategic time.

I was amazed at the Chancellor's complacency this afternoon. He talked about exports being "encouraging". Let us look at what his own Bulletin for Industry said in June, 1956—last month: Last year the United Kingdom's share in world exports of manufactures fell again. In 1954 they were 20.4 per cent. of the world's exports of manufactures, and in 1955, 19.8 per cent. The Bulletin says that German exports in the first four months of this year were 16½ per cent. higher than a year earlier, while ours were only 6 per cent. higher; and surely the vital issue for us, fighting in a competitive world, is not the absolute improvement in our exports but the comparative improvement vis-à-vis our competitors overseas; and on that score we are obviously failing.

The Chancellor talked about the gold and dollar reserves. The brutal truth is that from the middle of 1954 to the end of 1955 the gold and dollar reserves steadily drained away, and, again quoting the Bulletin for Industry for last month, The gold and dollar reserves in the first five months of this year have recovered about two-fifths of last year's losses. Since the first half of the year is normally better than the second, it is only moderately encouraging. That is what the Treasury Bulletin says, and the Chancellor comes along today and says we have nothing to worry about, and that our gold and dollar reserves are fine.

Mr. Shepherd

rose——

Mr. Hamilton

No, I cannot give way; I have not the time.

If we consider the prospectus on which this Government were elected, this is what we find in the Tory Campaign Guide of 1955. It says— Inflation has been curbed. Under Mr. Butler's firm direction, we have been rebuilding our reserves. They are lower now than they were in 1951, when the Government came in—considerably lower. Again— World confidence in sterling has been restored. On the subject of inflation, if we take the Government's own Economic Survey for 1956, we find this: At the beginning of 1956, the United Kingdom economy was still in an inflationary condition.

The new Chancellor, after this great success story of his predecessor, comes in, and will obviously continue the policies which so signally failed in the previous four years. He comes in as a new broom to sweep clean, and what does he do? The Budget was introduced with a great fanfare of trumpets, and the Economist of the 21st April summed it up. This is what is said: The only encouragement to production in this Budget"— and this is the vital point we are discussing today— is that to the production of more children; the only politically possible incentives in the Conservative philosophy are incentives to gambling and procreation. That was the Economist immediately after the Budget. Then the Chancellor comes along and follows that up with another wonderful proposal for a £76 million cut—a derisory attempt at facing the situation we are now in.

Let me now say a word on the question of the stabilisation of prices in the nationalised industries. The Times was quite right when it said that this, as a serious economic solution to our problem, is sheer nonsense, because the nationalised industries are under a statutory obligation to pay their way. If, by the stabilising of their prices for a year, deficits accumulate, all that we are doing is putting off the evil day. The Government should not feel that because they have introduced stabilisation, or have brought pressure to bear on the nationalised industries to stabilise their prices, that they are thereby bringing pressure to bear on the workers in those industries to stabilise their wages or to refrain from wage demands. So long as the Government put up the prices of milk and bread and the cost of school meals, etc., and permit rent decontrol, which is coming, no matter what the nationalised industries do about the stabilisation of prices, wage increases will come.

If the Government combine that kind of policy of increasing prices in other spheres with an attempt to stabilise prices in the nationalised industries, that is the sure way to disaster, and it is bound to come unless the Government get down seriously to the problem of cutting back defence expenditure in a serious way instead of in the niggling way which the Chancellor indicated last week.

8.59 p.m.

Mr. George Brown (Belper)

We have had today a debate characterised by a clear distinction between the two sides of the House. On both sides of the House references have been made to the gravity of the situation and the unhappiness that people feel about it. On this side of the House there have been speeches calling for some action to be taken by the Government to reduce the gravity of the situation, to reduce the unhappiness. On the other side of the House there is, I think, the most frightening air of complacency about the whole business. Everybody over there, from the Chancellor downwards—I cannot speak yet about the Minister of Labour and National Service: we shall know about him in due course—makes all the right references to nobody wanting any unhappiness, but does not suggest that anything should be done about it.

If anybody said that I was allergic to the charms of the Chancellor as an orator he would only be stretching the point a little. I find it a little difficult to put myself on the same wavelength as him. Maybe, he returns the compliment. However, I think he conveyed today a general air of complacency and of being in two minds that really was quite extraordinary even for what I have come to regard as normal for him. He did not seem really to worry either about our balance of payments situation or about the unemployment problem in the Midlands, in the car industry, one little bit. He certainly ended with a passage in which he told us how worried he was, and that he remembered the 'thirties, but I should have thought that any of us who really remembered the 'thirties and were deeply affected by the memory of them would have felt that the situation of today would have required some action, and not just the kind of posing that the right hon. Gentleman exhibited to us today.

I thought that came out most clearly when he was telling us about the weakening of—what did he call it?—"the full intensity of the boom." He started by claiming that as a great success for Conservative Party policy, saying that the Government had weakened the full intensity of the boom, that there had been a bit of a drop in consumption, in employment, and so on; but halfway through the story in which he was proving that he had weakened the full intensity of the boom he started to explain to us that it was not, of course, very much, that it did not amount to anything, that it had not gone very far, and that if it had, he would have been upset by it.

I think that this is really the Tory dilemma and the real issue that the Government have to face. One of the things everybody seems to regard here as slightly indecent is that anybody should score party points. If anybody wants to score a party point he starts by saying that he is not going to do so. However, we carry on our Government on a party basis, and we ought to have party political views, and I think the main dilemma of the Chancellor and the Government as a whole is that they really do not want to face the real political content of their own policy.

The right hon. Gentleman stated the Government had weakened the full intensity of the boom. He said he would be wounded if anybody said this to him, nevertheless, I must risk it: he said they had to produce some slight unemployment, to weaken the power of the trade unions to resist attacks on them. Suddenly, halfway through the operation, realising that it is wounding to have this said of him, he says he has not succeeded in doing it. It is no use him saying that halfway through the operation. He has succeeded in doing it, and that is his curious dilemma, which showed itself in his speech.

He told us that investment remains strong. When he was asked by one of my right hon. Friends to tell us what proportion of the investment remains strong, and whether it was only that in the motor car industry, he regarded that as a quite irrelevant question to ask, even at a moment when we are discussing that industry, which has already been inflated and expanded beyond capacity. The right hon. Gentleman appears to shake his head, but I should have thought that that was the whole point of the operation. He had no knowledge of the proportion of the investment at the moment in the motor industry. He had even less knowledge of the proportion of this investment, for which he was claiming credit, going into the distribution side of the business, the petrol stations, and the like. Yet that is information which we should expect any Chancellor of the Exchequer to have. It is no use saying that investment remains strong unless it is remaining strong where it matters most to us at the moment—unless it is relevant investment.

We are entitled to ask the Minister of Labour, even though the right hon. Gentleman has set the pattern for him, to give us the figures about this, to give us some breakdown of the figures, to let us know what rate of investment is going on in the motor car industry, what the size of the industry ought to be, what the chances to export are, and what investment we are continuing to make. I should like to know how much is going into petrol stations, etc.

The Chancellor attempted to make great play about this question of the man in Whitehall or the man in Longbridge knowing best. I should not have thought that the man in Longbridge did very well, but what the Chancellor does not seem to get into his mind, and I am trying to implant it there, is that the Government are a party to what is going on in the motor car industry, because the Government represent all the rest of us. There are about 52 million people in the country but only a very small proportion of us are represented by either the man in Longbridge or even by the trade union which represents the workers in Longbridge. The rest of the country suffers from the effect of what goes wrong in Longbridge, and in that respect the Chancellor represents the Government, who are our representatives, though a very poor lot of representatives at the moment. "The best that we have" is all one can say of the Prime Minister, and that goes for the rest.

Therefore, one is entitled to press the point that the Government have a part to play, and that they cannot leave it to the man in Longbridge in that charming old-fashioned phrase of the Chancellor of the Exchequer, who gave his political philosophy so completely away the other day when he said that this was a matter for master and men. That is a phrase that went out when I was quite a young fellow. Since then, we have had departments, managements and workers—which shows how far away the Chancellor is from modern industry.

This is not a matter for masters, and not even a matter for masters and men. This is a matter for the nation in which the worker and the management and the industry and the rest of us as taxpayers, as sufferers from the balance of payments position and as the recipients of industrial depression, if it gets under way, are all concerned. My theme will be that the Government have to take the lead, not in the sense that they know better and can tell other people but in the sense that they represent an important third party and therefore have to be a party to the decisions made.

Then there are the Chancellor's references to savings. His references to the £76 million were less than convincing. He tried to criticise my right hon. Friend the Member for Huyton (Mr. H. Wilson) for his comments on the subject, but it seems to me that the Chancellor again missed the whole point that my right hon. Friend made. Our point is that these cuts for which the right hon. Gentleman is claiming credit are not cuts that he has made at all. To some extent, they are cuts for which he has had the credit, and, although he needs as much credit as he can get, we think that for him to take it twice is a bit too much.

The cuts include underspendings, which the right hon. Gentleman was not going to spend anyway. I heard the right hon. Gentleman say "No", and I believe that I see him now shaking his head, but he must put himself right with the Home Secretary, who yesterday told us exactly the opposite. The idea of a divided Cabinet may be usual but this division is surprising to me. [Interruption.] I do not see the right hon. Gentleman at such close quarters as right hon. Gentlemen opposite see each other.

If the Chancellor can tell us today that it does not happen when the Home Secretary yesterday said that it did, we are entitled to decide who is right. I would ask the Chancellor to get the matter right with his colleagues and not have us told two different stories on different days. There is an element of claimed cut in this which my right hon. Friend the Member for Huyton said is not a cut at all, and there is this rather lovely, belated admission by the Chancellor that the field in which we can make a cut is so small.

I think of all the stories that present occupants of the Government Front Bench—the right hon. Gentleman the Member for Monmouth (Mr. P. Thorneycroft), the right hon. Gentleman the Member for Kingston-on-Thames (Mr. Boyd-Carpenter), the hon. and learned Gentleman the Member for Hertfordshire, East (Mr. Walker-Smith), to say nothing of the 'Minister of Education—used to tell us about the wonderful wide field for cuts that was available. Now the Chancellor has discovered that it is only a tiny field anway and that he can make cuts of only £70 million. I hope that that has a profound influence on the rest of the Government party, so that those behind the Government Front Bench, as well as those on it, know the real story.

As the Economist said, the Chancellor has gone shrimping. They are not even decent shrimps, not even Dublin Bay prawns, they are small, miserable shrimps of cuts for which he has looked all over the place, counting them twice, consuming stocks which he will have to replace, in order to cover a complete lack of policy.

A few days ago the right hon. Gentleman made a speech to the Foreign Press Association on defence. At a time of great suspense in the affairs of N.A.T.O., at a time of great crisis in the defence plans of the West, his contribtuion was to think in terms of a £700 million cut in defence. He said, "Would it not be lovely if we could get a £700 million in defence? What we could do with it if we had it."

Mr. H. Macmillan

indicated dissent.

Mr. Brown

It is no use the right hon. Gentleman shaking his head, I have the hand-out here. Two pages from the end he said, "Of course, we have not got it; it is only a pipe-dream". We have had talk from the Minister of Defence about getting rid of conscription. We have had a pipe-dream from the Chancellor about a £700 million cut in the cost of defence. The real point is that they have no policy on defence, they have no policy on the reorganisation of defence, on the reorganisation of the Armed Forces, and they come, therefore, with these miserable little shrimps of bits and pieces, bits and bobs here and there, some of them "phoney," some dangerous, and present them to cover up their lack of policy.

I do not want to be unfair. The Chancellor is no worse than his colleagues—but I do not think he is any better either. There was the speech of the Prime Minister at Perth, the speech of the Minister of Labour at Geneva, the speech of the Lord Privy Seal at Dunmow. All were cast in the same pattern, vapid, uncertain, gripless glimpses of the obvious, with no real policy, no real grip in them. What we are really waiting for in this country is a lead from a Minister.

We accept that we have a Tory Government. We accept that they can count 67 more heads than we can. But that does not excuse them from giving a lead, from having a view, and that is what is wrong. Hitting this Government is like hitting a feather cushion which just goes in. There is no policy with which to get to grips. That is what is the matter. The two-party system becomes difficult when there is an Opposition with a policy and a Government with none. In the years immediately before the war, it was the other way round. It was just as difficult but less worrying for the country.

May I tell the Chancellor the three headings under which I think he betrays most woefully a lack of any policy? I see the right hon. Gentleman laughing. Let him have his little laugh and then get settled down so that he can pay attention and hear what I am saying. First, there is the question of the balance of payments. We are importing things that we should not import. We are importing things that we do not need to import, particularly primary products. We are importing grains that we could grow here or that we could arrange to be grown by our friends in the Commonwealth and thus save ourselves dollars, but that would require action. That is what the right hon. Gentleman shirks.

Today, the Chancellor, in the course of a long passage in his speech, used figures by value. It took a long time to get that out of him. It was not until he had a nod from someone that he got clear in his own mind the difference between value and volume. In a long passage he showed that exports had gone up more than imports. That would be so if he were talking in terms of value. The point is that this was all right for a slick passage in a speech, but from the point of view of examining where the country is getting, it is volume that matters and not value, because value merely reflects temporarily changing prices. It merely reflects temporary gains, of which one takes account, which may have very little to do with oneself. The point relates to terms of volume. If the right hon. Gentleman had used figures of volume instead of value, we should have had a different story from the one he sought to give.

Secondly, there seems to be no policy for real co-ordination within the Commonwealth. We have the Commonwealth Prime Ministers here now. We have the Prime Minister of Australia here. What are the Government doing to try to arrange some co-ordinated policy so that we do not have the Australians cutting our throats because we are cutting theirs, and so that they may get the sterling with which to buy our sterling goods? What is the point of the Commonwealth unless we become an economic entity with some interactions among us? We want some statement from the Government. We want some policy. These things do not fall like apples from trees. We have to arrange to get them. So far we hear absolutely nothing of that at all.

Thirdly, our exports are declining just where they ought to be rising. In the European countries, where there is no motor car industry, and where it is a free market, our exports are going down. We are losing our share while the share of other people is going up. This is especially true of Sweden. It looked to me to be true of Holland when I was there a week or two ago. This is what we ought to be tackling. I should like to know something about the line that the Government are taking to deal with this matter.

We are told, generally speaking, that we are losing export markets on grounds of the finish of our products, of price or of delivery dates. One cannot get this over to people just in the course of a lecture. When my right hon. Friend the Member for Southwark (Mr. Isaacs) was Minister of Labour and Sir Stafford Cripps was Chancellor of the Exchequer, they undertook a campaign through the country in which meetings of trade unionists and employers were held, and they talked to them frankly about our problems and encouraged them to make a reality of consultation. We should do the same thing now.

If the question is one of the finish, the price or the delivery date, why do not the Government arrange to get employers and workers together in the plants concerned and encourage the employers to put forward evidence about what is going wrong? Let us have some samples of the things which are better finished overseas than we finish them. Let us have some evidence of comparative delivery dates. Let us have some evidence of the comparative prices being quoted. Let us give our people some evidence which they can grasp and understand. This requires direct action from the Government, as was given by my right hon. Friends some years ago.

All this leads to physical controls. It sounds nice to be against controls. Everybody likes to be against everything which is inconvenient, awkward and uncomfortable and likes to be for everything which is acceptable. It is woolly to talk in that way. Civilised life—this is where it differs from pagan life—consists of a great many restrictions and controls in the interest of the public good. The Chancellor, in the course of a long passage today, showed how many controls the Government still have and to what a wide extent they still operate physical controls. Tories who believed that they were supporting a Government which was against physical controls have been put to rout this afternoon by the Chancellor, who explained clearly that, like the Labour Government, the Conservative Government believe in physical controls, although they stop short of the extra ones which we think would be so important.

If the physical controls which the Chancellor operates are so good and useful, I find it very difficult to understand why the others which we suggest should be rejected by him. Why does he not go the whole hog and do the thing properly? The real point is that, beyond the physical controls which he claims to be operating, those for which we argue, such as building licences and material allocations, are selective. The right hon. Gentleman said, "I prefer to rely on my form of control". His form of control is a restriction just as much as the other, but he said that he preferred to rely on that, and the result is that the control is unselective and hits over the whole range.

Mr. H. Macmillan

I can think of no more selective control than the Capital Issues Committee.

Mr. Brown

As my right hon. Friends immediately remind me, the Capital Issues Committee allows a number of questionable projects to go through. However, I am not dealing with that.

I have said that the Chancellor operates controls for which he puts up a case, but when he comes to the credit squeeze and to blanket higher interest rates, he has deliberately chosen unselective forms of control as against selective forms. If his case about the C.I.C. is right, that would be a reinforcement for my argument that he should have further selective controls, instead of these blanket, unselective forms, like the credit squeeze and higher interest rates, which hit good and bad equally and which, because the good is often not so profitable as the bad, sometimes hit the good harder than the bad.

I give the Chancellor his point, for what it is worth, that when we argue for controls, we must realise that that means restrictions. We realise that that would mean that people would not remain in a job, if they were wanted somewhere else. That is part of the operation of planning. If that is the system of planning with a system of selective controls, one has a combined operation—both the jobs out of which one wants the men to come and the jobs into which one wants them to go. However, that is better than the arrangement which results in 6,000 men at a time, in one large city, leaving their jobs with no arrangements to take them elsewhere, with all the unhappiness that is caused and all the other consequences. Every day that these men in Birmingham are out of work the country is losing its most vital asset. What is the use of lecturing us about producing more when 6,000 men are signing on at the employment exchange in Birmingham, 6,000 men who, with a little planning, could have stayed in their jobs until they could have been moved to other jobs without loss in between? This is a most grievous loss of our most valued asset and most important raw material, the labour of our men.

That brings me to the motor car situation, where we are reaping the rewards. Sir Leonard Lord has come in for a rough time from the other side of the House. He has been knocked about. Far be it from me to defend him, but, a little unworthily, he has been made the scapegoat for the sins of the party opposite. It would have made no difference if he had given the men one week's notice or two weeks' notice that they were going to be out, if the Government were not planning in respect of the other jobs to which they were to go. They would still have been out and would still have had the toothache, and the tooth would still have had to be pulled. If the tooth has to come out, it makes no difference to lengthen the period of the toothache.

Sir Leonard Lord may have acted rudely or abruptly. I do not defend him over that at all, but I do say that on the Treasury Bench are the real sinners and the real villains who set off the economic policy which encouraged Sir Leonard Lord and other manufacturers to get rid of their men with no arangements for the men to go into other work when they become available. It is no use venting spleen on Sir Leonard Lord, when the fault is with the Government who have to plan for these things.

I want to refer to consultation. Too often the word "consultation" is being used as though it means the same thing as information. In the trade unions we are not asking to be informed when we are to get the sack. We are asking to be consulted about what is to be done and whether it is necessary. We are asking to be consulted in advance of decisions about what happens to our people who are affected. That means real and effective consultation, and we are muddling the words which we use when we confuse that with information which would not save anybody any trouble at all, but which might simply spread the unhappiness and ill-feeling and still leave people angry if they were out of a job.

The real problem is that the Government have repeatedly told employers that it is their business to decide how many people they employ and whether those people are on full time or short time. In that respect the Minister of Labour has something to live up to. He may not hold it in my favour, but I intervened at the end of his speech in the debate on employment on 20th March last, to the anger of some of my hon. Friends, who did not think that I should do so, and reminded him that he had said that this was the employers' responsibility. I have the report of the debate here, if the right hon. Gentleman wants to dispute my statement. I could not help thinking it was a mistake, and I said that we were all liable to make mistakes at the Box, and that I thought he would like to take the opportunity of withdrawing what he had said. He refused to do so—and repeated it. He said, in terms, that the Government believed that it was essential for employers to decide about their future labour requirements. Trade unions were not mentioned; consultation with the workers or the Government was not mentioned, and Mr. Lord did exactly what the Minister of Labour emphasised that he should do. I knew that it was wrong at the time, but the Minister of Labour

was so sure that he insisted upon it. The Government are now reaping the whirl-wind. They have refused to make plans and, as a result, the country is in its present situation.

Even at Question Time today I thought that the Minister of Labour, answering a Question by one of my hon. Friends, showed the same complacency as he did in the employment debate in March. Let us consider the Government's Development Areas policy. Could anybody believe that at this stage, when the Government are talking about a switch, and about not wanting unemployment—and the Chancellor is being wounded by suggestions that he does want it—they are refusing to build factories in the Development Areas where the work could be begun and the unemployed persons fitted in?

This is very much a psychological problem, and everybody concerned is very much in the grip of psychological emotions. Everybody in the Development Areas knows full well that, in the main, those areas merely have the branch establishments of the main companies, and they are terribly frightened that if the present situation worsens the branch establishment will go first. The moment the Minister refuses to build new factories in those areas he is giving them a warning that he is writing them off. It is an incredible policy, but that is what is happening. We warned the Minister that this situation would develop.

Do not let us think that this is a matter which affects only the motor car industry. It does not; it affects the plastics industry, the foundries—we make no motor cars in my constituency now but two foundries are putting people off—the glass and chemical industries, and a whole host of other industries very far removed from the making of motor cars. All these will be progressively involved in the next few weeks.

I want to make quite clear our view about labour rigidity. Do not let us invent differences where they do not exist. In March I said that under full employment there could not be a guarantee that a man would always stay in the same job and in the place where he was at the moment. But I pointed out that in that case—[Interruption.] If the hon. Member for Wokingham (Mr. Remnant) has nothing better to do than sit there mimicking my physical actions, he is being rather silly when we are discussing a serious matter. I said that if the men were to accept that they had no fixed right to a certain job in a certain place, the Government must accept the obligation to facilitate their mobility, by means of transfer and lodging allowances, travelling time allowances, special housing arrangements, etc. At that time the Minister of Labour said: I know that the right hon. Member for Belper will call this a laissez-faire attitude … if I rejected straight away, as I do, his proposals about the mobility of labour."—[OFFICIAL REPORT, 20th March, 1956; Vol. 550, c. 1036.] These people, who rejected my views about the workers being mobile, are now lecturing us about the very need for mobility to which they would not agree previously.

The Government must make up their mind between two objectives. Either they want deflation and some unemployment, or a phased and controlled transfer of men from one job to another. We want to know which, because we are not clear about it. I do not want to wound the Chancellor too much, but I am not sure what he wants. I have a strong feeling that he really wants some unemployment and some deflation, and that when the Government instructed the nationalised industries to resist wage claims which had not been tabled they did so knowing that the unemployment which they were creating would make the position of the unions that much weaker, and the instructions that much easier to carry out.

I believe that, and if they do not want that—if I am wrong—they should show where I am wrong. In my view, the only way they can do so is to have some plan for carrying out this vast transfer of labour from jobs where it is not wanted to jobs where it is. It is no use the Minister of Labour and National Service telling me that he has the powers. I know that he has powers, and when I put down a Question to him, he told me what powers he has. What I want to know is to what extent he is using them and which powers he proposes to use.

I wish to say a word about the British Motor Corporation. I should like the Minister to tell us what are his views on some proposals which may well be made, and whether the Government feel that as early as possible there should be a high-level meeting between the unions concerned and the management of B.M.C. In the first place, there should be effective consultation about what has happened and what is to happen, and the compensation which should be awarded to those men who in the last two days have been unjustly thrown on the streets. I welcome the support of hon. Members opposite who were so rough with Sir Leonard Lord, and I look to them to support us in a demand that there should be compensation made to the people who have been put out. Compensation for loss of office is not an unknown thing in this country.

At Geneva the Minister spoke about how it could be done, and I wish to know whether he will support us in saying that this should be a matter for an immediate high-level consultation with the B.M.C. management; that there should be adequate notice of what they feel they may have to do afterwards; that there should be a public inquiry into the position of the motor industry. We must try to find out the size of the industry which we can stand; how much investment should continue; how far it should be applied to the American companies, leaving out the British companies; where the transfer should be made and whether some factories could engage on other work.

If the Government will not help, we shall be left with a situation in the car industry which will cause repercussions throughout the trade unions and upon employed workers. That is frightening our people. In many ways it is a test case. We welcome sympathetic words from the Minister and from his friends, but we should be better off were some real action taken. I ask the Minister of Labour and National Service to recognise that there is a long list of sins behind him and his colleagues which have produced this economic and industrial situation, and that he should do his best to remedy that position tonight by announcing some real action.

9.33 p.m.

The Minister of Labour and National Service (Mr. Iain Macleod)

There have been two main themes running through this debate; first, that of criticism and defence of the general economic policy of the Government, and secondly, anxiety about particular problems in relation to the motor car industry in the Midlands. I think that the House would prefer me to deal mainly with the second theme and with the actions and responsibility of the Government in this sphere.

I do not intend to follow the right hon. Member for Belper (Mr. G. Brown) in the purple passages of his speech. Only in the last minute or two did he return to the issues which really concerned the House—[HON. MEMBERS: "No."]—only in the last minute or two. The right hon. Gentleman was carried away on the wings of his own oratory. He suggested at the beginning of his speech that he had not seen a divided Cabinet, but, as he is sitting next to the right hon. Member for Huyton (Mr. H. Wilson), I do not think that was particularly good co-ordination.

I do not wish to use many figures in my speech, and if hon. Members will forgive me I should like to pack what figures I use into the next few minutcs. It is of great importance that we see the present position against the background of employment and vacancies in the country. Since the beginning of this year, there has been a seasonal decrease of 41,000 in the numbers unemployed, and the latest figures, which are still those for 11th June, give the figure of 223,000, or actually under 1 per cent. On the other hand, in the Midlands the rate of unemployment has risen in the same five months from 0.6 per cent. to 1.2 per cent., or in other words has doubled. On short time working, the figure of 35,000 in November, 1955, rose to between 90,000 and 100,000 in most weeks from the middle of March. As the House knows, the industries most affected were motor vehicles, cotton and furniture.

In the motor car industry, although employment in the last five months of this year has fallen by rather more than 10,000, after rising by over 40,000 in the last three years, the number of wholly unemployed motor car workers rose from 1,425 to 2,468 in the first six months of this year, and that latter figure is still well below 1 per cent. of the numbers employed in the industry. Of course, it is true, as hon. Members have said, that there will be repercussions in the manufacture of parts and accessories, but the figure of unemployment there has remained very stable this year, and it is on the last count less than one-half of 1 per cent., although there have been substantial fluctuations in short time working. In the manufacture of motor cars, the Midlands has been the most affected region because it employs something like 40 per cent. of the labour in that industry. As a result of the recent decisions that have been taken by Standard's and the B.M.C., something like 7,000 people whose last employment was in the motor industry will be looking for other work in the Midlands.

I will, with the permission of the House, deal separately, later in my speech, with vacancies for men in the areas of Birmingham and Oxford, and the possibilities of employment. The picture which I have given very rapidly to the House can in no sense be called that of a depressed economy. Unemployment at 1 per cent. is almost as low as it has ever been and vacancies at 397,000 are getting on for twice the unemployment figure. It is still a picture of the kind of economy in which the demands for labour are very high but one in which redistribution of labour has begun to show itself.

I turn to the question of the redistribution of labour in which we all, the Government, the trade unions and the employers have responsibilities, but as I am answering for the Government, it will be expected that I should concentrate on the Government's part. Many of the speeches which we have had today took this point particularly, and, if I may say so, the best speeches from the back benches were made by the hon. Lady the Member for Cannock (Miss Lee) and by my hon. Friend the Member for East Aberdeenshire (Sir R. Boothby). It is common ground—everybody has said it—between the two sides of the House that mobility of labour is an essential part of a full employment economy. I need not argue that point further. We are agreed on the diagnosis but not, as the right hon. Gentleman the Member for Huyton said, on the prescription.

I believe that if we are not ready to change our pattern of employment, or if we try to freeze employment where it may be at any given moment, we will very soon lose full employment itself. There is a great deal of labour mobility in this country, much more than people realise. As my right hon. Friend the Chancellor of the Exchequer said this afternoon, it is estimated that in the past year there have been 2½ million changes of job in the manufacturing industries alone, and that figure represents some 30 per cent. of the total labour force. We cannot say how many of those jobs have involved a change of home, which is the question most in people's minds. The figure obviously has been very large, and there is a very interesting table, which hon. Members may have read, in the most recent issue of the Ministry of Labour Gazette. That gives the figures for interregional moves in one year, between May, 1954, and May, 1955. These figures, which mean a change of employment from one region to another, do not necessarily mean a change of residence, as the regions are very big areas. They show that 38,000 men and 15,000 women moved into the Midlands area and that 33,000 men and 14,000 women moved out. There was a more substantial movement still into the London and Southern regions.

It is clear that there is already taking place as part of the normal life of our country a sizeable geographical movement of labour. What is perhaps more important is what is called "occupational mobility," and it is on that that questions were asked. It is interesting to see, as we are beginning to see now, from what a wide area the workers at the B.M.C., who are affected by these changes, come. They are registering at West Bromwich, Wolverhampton, Droitwich, Bromsgrove, Coventry, Nuneaton and many other places. In a number of cases it must be clear, from the demand for labour that there is in those places, that their next jobs will probably be nearer their homes than the last.

The right hon. Member for Huyton made a suggestion with which I have a great deal of sympathy. It was that we should try to follow up the result of this movement of labour. A day or two ago, I thought of it from rather a different aspect. The right hon. Gentleman was thinking of it as a post mortem on the efficiency of the service. If we had such a follow-up it would be a social document of very great importance indeed, and it would be of great value to us all to know exactly what happened to all these people, where they went and how many had had to change their type of job.

I will, therefore, try to see how practicable it is to have a record of the type of vacancies into which these workers are first placed, remembering that I can only do that for workers who use the employment exchange services.

As far as powers are concerned, the right answer is that we should concentrate on seeing first that we have the powers available for giving special assistance to limited classes of people, and secondly, of seeing whether we should make greater use of those powers. The scope is ample under the 1948 Act. I detailed, in answer to the right hon. Member for Belper in the House, some of those powers in relation to fares, lodging allowances and so on. The policy we should pursue here is to keep under close review the powers that we have for facilitating the transfer of workers from areas where the prospect of employment is poor, and we should push on in the wider field with the provision of more housing accommodation. We should encourage, in particular, the maintenance of as big a pool of houses to let as possible. In that field a solution lies.

The first protection that a man in difficulties has, whether from unemployment or anything else, is our social security system which is unequalled in the world. [HON. MEMBERS: "Hear, hear."] Certainly. I remember that, in a broadcast a short time ago, I was asked, "Surely you do not mean that the Labour Party produced anything good?" I said, "Of course they did." There has been a suggestion canvassed in a number of papers, and particularly in an article in the Economist, which many people have read and which is of great importance to study, whether the level of unemployment benefit should be higher for the first few weeks of unemployment.

At first sight, that is an attractive idea, but I do not think it stands up to close examination. In the first place, ever since the Beveridge Report, it has been more or less common policy with both sides of the House that the sickness and unemployment benefit rates should be closely linked, and secondly, that there should be general uniformity in rates. I do not think the House would accept as a whole that benefit should relate to earnings—and no doubt, if benefits varied, contributions would have to vary also. These things need not be laws of the Medes and Persians, but they are important considerations.

I believe that the decisive argument is that, in the early days of unemployment, the provision of P.A.Y.E. refunds, plus any payments that may have been made, often means that a substantial sum is available to a man, but I do not believe that the level of unemployment benefit itself is a decisive factor in a man's calculations when he decides to change his job or to stay on short time. I believe that much more important is his own estimate of how soon he will be back on full time, and what his level of earnings will be in the meantime.

That leads me to the question, which the right hon. Gentleman and others mentioned, about compensation. The question, in effect, is whether the level of unemployment benefit should be supplemented, and if so by whom. I should like to refer at this stage to the speech of my hon. Friend the Member for East Aberdeenshire, who referred to the possibility of a longer contract of service in some cases. That is a difficult question and not one on which I should like to make any pronouncement tonight, but it is a subject which is well worth discussion as long as we bear in mind that there are very different problems and conditions in all the industries.

I made a speech at Geneva, to which the right hon. Gentleman referred, in which I touched on this question of compensation. I do not believe in any way that it can be, or should be, a matter for Government direction, and I do not see how that could possibly work. I believe that the matter of compensation to redundant workers is a matter for employers to decide in the light of their own circumstances. [HON. MEMBERS: "Oh."] I do not see how the Government can decide it.

Mr. G. Brown

The right hon. Gentleman said that employers should decide it. Did he mean that, or was he not thinking of employers in consultation with their workpeople?

Mr. Macleod

Of course. It is a matter, naturally, on which the unions would make representations to the employers and to managements, which, one would hope, they would discuss in that way and in the light of what I am saying.

What I said to the International Labour Conference at Geneva was in connection with the very special problem of automation. I said that it may be appropriate for a firm to make compensation payments, and I pointed, out that in this country that can be done in addition to the unemployment benefit which is paid by the State—that is, without reducing the unemployment benefit paid by the State. I was talking about the case of workers being displaced after long and satisfactory service owing to the introduction of new machinery.

There are many reasons why a man may lose his job. It may well be because of the coming of change or the coming of automatic processes—[Interruption.]—or through the actions of Governments. It may be through his own or his firm's inefficiency, because of a drop in demand or because changes of habit have passed by the product in which his working life has been concerned.

I think it is generally agreed, however, that the social security system cannot, and should not, try to distinguish between these methods for the payment of benefits or of allowances, nor is any distinction drawn at the employment exchanges because of the past history of those seeking work. It should, however, be more widely known than it is that those payments can be made as I have indicated, both in my speech at Geneva and again in the House tonight.

I should like to turn quickly to another responsibility of the Government in relation to training. There are at present 16 Government training centres, and a number of men and women are also in training under the vocational training scheme at technical and commercial colleges. Men in training receive maintenance allowances, which are, for example, 118s. for a married man with a dependant child, and lodging allowances can be paid when the trainee has to live away from home.

Mr. Shurmer

The right hon. Gentleman has made a statement that compensation will not affect a man's right to draw unemployment pay. Will he say what he thinks ought to be the position of the Austin motor workers who are receiving one week's pay in lieu of notice? Will they be able to draw unemployment pay for the week they are out of work?

Mr. Macleod

I should like to answer that, but I do not see how I can answer such hypothetical questions until they are put in the ordinary way. I am trying to go quickly through one or two important matters, and if the hon. Member would like to speak to me afterwards I should be glad of the opportunity.

It is easy to say that a man should be re-trained, but a man does not lose his skill when he loses his job, unless that whole range of jobs has become outmoded, perhaps through technological change. The schemes to which I have referred arc very intensive and take six months or even more to complete. It is obviously not likely that more than a very small number of people would be suitable or, perhaps more important, be willing to undertake that training.

As the House knows, provision in this matter—and this has been common policy of both Governments—has in the past largely been restricted to the disabled. It is agreed policy between industry and the Government that the vast bulk of industrial training must be done by industry, and there have been encouraging signs of greater interest.

The expansion in technical education gives us a real chance to provide new courses to suit industrial needs. I have been discussing this with my right hon. Friend the Minister of Education, and if industry wants men to take these courses at the colleges, then my right hon. Friend will encourage the schools and colleges to give them all the help they can. This is a most important matter concerning the training in our technical colleges, and I hope very much that employers will release their young men and women for such training.

May I now come to the question of the jobs available, particularly in the Midlands area. I said a short time ago that there are about 12,000 jobs within reasonable daily travelling distance of Birmingham, but many hon. Members opposite have, perfectly fairly, said, "Never mind the numbers; are those jobs suitable for the people or not?" Whatever differences we have, we must recognise this difficulty: we cannot tell whether a job is suitable for Bill Smith—and that is what it comes down to in the end—until, first of all, we know what is the status of Bill Smith, whether he is going to be on short time or amongst those redundant; and, secondly, until he registers at the exchange and we know what jobs he would be suitable for and what jobs he would be prepared to take.

Nevertheless, I think the House would like to have the latest figures of registrations and placings. The latest information I have is that about 1,370 of the workers discharged by the B.M.C. in Birmingham have registered at employment exchanges, that 718 of those, or about 53 per cent. have been submitted to jobs, and that practically all the skilled men have been submitted to skilled jobs and the remainder to a variety of jobs in the light manufacturing industries, the Post Office and transport.

At Oxford, 484 of the workers discharged had registered by this morning, and all except 32 of those have been submitted for other employment. I was very glad to hear the tribute paid by my hon. Friend the Member for Oxford (Mr. Turner) to the local services there, and I am sure that at Coventry and Birmingham, too, although under heavy pressure, the services have been of a very high standard. We have sent, as quickly as we can, from all other areas in the country details of vacancies which may be suitable for semi-skilled and unskilled workers. We have drafted extra staff to the Birmingham area, and, as I notified the House this afternoon, I am acquiring extra premises where necessary to ease the temporary congestion. I have already looked into the point which the hon. Member for Northfield (Mr. Chapman) was good enough to put to me this afternoon, and I will either speak to him afterwards or write to him about it. I

think he may find the situation a little more cheerful than he thought when he asked his supplementary questions.

These are the fields in which I think the House accepts, as the Government certainly accept, that we have a major responsibility. This debate has been concentrated very largely on the immediate problems in the motor car industry, but it is actually on the general economic policy of the Government. The Opposition will no doubt express their opinion on that in the Lobby, and no doubt they will be defeated.

We believe that the real tests of our policies are those to which the Chancellor referred this afternoon—the strengthening of our gold and dollar reserves, the steady improvement in the trade figures, the switch of resources from consumer to capital goods—and in all these, without being in the least complacent about them, many of the signs are definitely encouraging. We do not intend to relax our policies. We believe that they are fully justified, and we believe that we can ask for the support of the House and of the country.

Mr. Edelman

Before the Minister concludes, would he say something about the Australian import cuts which—

Hon. Members

Order.

Mr. Edelman

—are presently threatened, and which are likely to have a serious effect by the winter?

Question put, That the words proposed to be left out stand part of the Question:—

The House divided: Ayes 239, Noes 310.

Division No. 251.]	AYES	[9.58 p.m.
Ainsley, J. W.	Boyd, T. C.	Crossman, R. H. S.
Albu, A. H.	Braddock, Mrs. Elizabeth	Cullen, Mrs. A.
Allaun, Frank (Salford, E.)	Brockway, A. F.	Dalton, Rt. Hon. H.
Allen, Arthur (Bosworth)	Broughton, Dr. A. D. D.	Darling, George (Hillsborough)
Allen, Scholefield (Crewe)	Brown, Rt. Hon. George (Belper)	Davies, Ernest (Enfield, E.)
Anderson, Frank	Brown, Thomas (Ince)	Davies, Harold (Leek)
Awbery, S. S.	Burke, W. A.	Davies, Stephen (Merthyr)
Bacon, Miss Alice	Burton, Miss F. E.	Deer, G.
Baird, J.	Butler, Herbert (Hackney, C.)	de Freitas, Geoffrey
Balfour, A.	Butler, Mrs. Joyce (Wood Green)	Delargy, H. J.
Bellenger, Rt. Hon. F. J.	Callaghan, L. J.	Dodds, N. N.
Bence, C. R. (Dunbartonshire, E.)	Castle, Mrs. B. A.	Dugdale, Rt. Hn John (W. Brmwch)
Benn, Hn. Wedgwood (Bristol, S.E.)	Chapman, W. D.	Dye, S.
Benson, G.	Chetwynd, G. R.	Ede, Rt. Hon. J. C.
Beswick, F.	Clunie, J.	Edelman, M.
Bevan, Rt. Hon. A. (Ebbw Vale)	Coldrick, W.	Edwards, Rt. Hon. John (Brighouse)
Blackburn, F.	Collick, P. H. (Birkenhead)	Edwards, Rt. Hon. Ness (Caerphilly)
Blenkinsop, A.	Collins, V. J. (Shoreditch & Finsbury)	Edwards, Robert (Bilston)
Blyton, W. R.	Corbet, Mrs. Freda	Edwards, W. J. (Stepney)
Boardman, H.	Cove, W. G.	Evans, Albert (Islington, S.W.)
Bottomley, Rt. Hon. A. G.	Craddock, George (Bradford, S.)	Evans, Edward (Lowestoft)
Bowles, F. G.	Cronin, J. D.	Evans, Stanley (Wednesbury)
Fernyhough, E.	Lipton, Lt.-Col. M.	Royle, C.
Fienburgh, W.	Logan, D. G.	Shawcross, Rt. Hon. Sir Hartley
Fletcher, Eric	Mabon, Dr. J. Dickson	Shinwell, Rt. Hon. E.
Fraser, Thomas (Hamilton)	MacColl, J. E.	Short, E. W.
Gaitskell, Rt. Hon. H. T. N.	McInnes, J.	Shurmer, P. L. E.
Gibson, C. W.	McKay, John (Wallsend)	Silverman, Julius (Aston)
Gordon Walker, Rt. Hon. P. C.	McLeavy, Frank	Silverman, Sydney (Nelson)
Greenwood, Anthony	MacMillan, M. K. (Western Isles)	Simmons, C. J. (Brierley Hill)
Grenfell, Rt. Hon. D. R.	MacPherson, Malcolm (Stirling)	Skeffington, A. M.
Grey, C. F.	Mahon, Simon	Slater, J. (Sedgefield)
Griffiths, David (Rother Valley)	Mainwaring, W. H.	Smith, Ellis (Stoke, S.)
Griffiths, Rt. Hon. James (Llanelly)	Mallalieu, E. L. (Brigg)	Snow, J. W.
Griffiths, William (Exchange)	Mallalieu, J. P. W. (Huddersfd, E.)	Sorensen, R. W.
Hale, Leslie Hamilton, W. W.	Mann, Mrs. Jean	Sparks, J. A.
Hannan, W.	Marquand, Rt. Hon. H. A.	Steele, T.
Harrison, J. (Nottingham, N.)	Mason, Roy	Stewart, Michael (Fulham)
Hastings, S.	Mayhew, C. P.	Stokes, Rt. Hon. R. R. (Ipswich)
Hayman, F. H.	Mellish, R. J.	Stones, W. (Consett)
Healey, Denis	Messer, Sir F.	Strachey, Rt. Hon. J.
Henderson, Rt. Hn. A. (Rwly Regis)	Mikardo, Ian	Strauss, Rt. Hon. George (Vauxhall)
Herbison, Miss M.	Mitchison, G. R.	Stross, Dr. Barnett (Stoke-on-Trent, C.)
Hewitson, Capt. M.	Monslow, W.	Summerskill, Rt. Hon. E.
Hobson, C. R.	Moody, A. S.	Swingler, S. T.
Holman, P.	Morrison, Rt. Hn. Herbert (Lewis'm, S.)	SyIvester, G. O.
Holmes, Horace	Mort, D. L.	Taylor, John (West Lothian)
Howell, Charles (Perry Barr)	Moyle, A.	Thomas, Iorwerth (Rhondda, W.)
Howell, Denis (All Saints)	Mulley, F. W.	Thomson, George (Dundee, E.)
Hoy, J. H.	Neal, Harold (Bolsover)	Thornton, E.
Hubbard, T. F.	Noel-Baker, Francis (Swindon)	Timmons, J.
Hughes, Cledwyn (Anglesey)	O'Brien, Sir Thomas	Tomney, F.
Hughes, Emrys (S. Ayrshire)	Oliver, G. H.	Ungoed-Thomas, Sir Lynn
Hughes, Hector (Aberdeen, N.)	Oram, A. E.	Usborne, H. C.
Hunter, A. E.	Orbach, M.	Viant, S. P.
Hynd, H. (Accrington)	Owen, W. J.	Warbey, W. N.
Irvine, A. J. (Edge Hill)	Padley, W. E.	Weitzman, D.
Irving, S. (Dartford)	Paget, R. T.	Wells, Percy (Faversham)
Isaacs, Rt. Hon. G. A.	Palmer, A. M. F.	Wells, William (Walsall, N.)
Janner, B.	Pannell, Charles (Leeds, W.)	Wheeldon, W. E.
Jay, Rt. Hon. D. P. T.	Pargiter, G. A.	White, Mrs. Eirene (E. Flint)
Jeger, George (Goole)	Parker, J.	White, Henry (Derbyshire, N. E.)
Jeger, Mrs. Lena (Holbn & St. Pncs, S.)	Parkin, B. T.	Wigg, George
Jenkins, Roy (Stechford)	Paton, John	Wilcock, Group Capt. C. A. B.
Johnston, Douglas (Paisley)	Peart, T. F.	Wilkins, W. A.
Jones, Rt. Hon. A. Creech (Wakefield)	Plummer, Sir Leslie	Willey, Frederick
Jones, David (The Hartlepools)	Popplewell, E.	Williams, David (Neath)
Jones, Jack (Rotherham)	Price, J. T. (Westhoughton)	Williams, Rev. Llywelyn (Ab'tillery)
Jones, J. Idwal (Wrexham)	Price, Philips (Gloucestershire, W.)	Williams, Rt. Hon. T. (Don Valley)
Jones, T. W. (Merioneth)	Probert, A. R.	Williams, W. R. (Openshaw)
Kenyon, C.	Proctor, W. T.	Wilson, Rt. Hon. Harold (Huyton)
Key, Rt. Hon. C. W.	Pursey, Cmdr. H.	Winterbottom, Richard
King, Dr. H. M.	Randall, H. E.	Woodburn, Rt. Hon. A.
Lawson, G. M.	Rankin, John	Woof, R. E.
Lee, Frederick (Newton)	Redhead, E. C.	Yates, V. (Ladywood)
Lee, Miss Jennie (Cannock)	Reeves, J.	Younger, Rt. Hon. K.
Lever, Harold (Cheetham)	Reid, William	Zilliacus, K.
Lever, Leslie (Ardwick)	Robens, Rt. Hon. A.
Lewis, Arthur	Roberts, Albert (Normanton)	TELLERS FOR THE AYES:
Lindgren, G. S.	Roberts, Goronwy (Caernarvon)	Mr. Bowden and Mr. Pearson.
	Rogers, George (Kensington, N.)

NOES
Aitken, W. T.	Bidgood, J. C.	Channon, H.
Allan, R. A. (Paddington, S.)	Biggs-Davison, J. A.	Chichester-Clark, R.
Alport, C. J. M.	Birch, Rt. Hon. Nigel	Clarke, Brig. Terence (Portsmth, W.)
Amery, Julian (Preston, N.)	Bishop, F. P.	Cole, Norman
Amory, Rt. Hn. Heathcoat (Tiverton)	Black, C. W.	Conant, Maj. Sir Roger
Anstruther-Gray, Major Sir William	Body, R. F.	Cooper, Sqn. Ldr. Albert
Arbuthnot, John	Boothby, Sir Robert	Cooper-Key, E. M.
Armstrong, C. W.	Bossom, Sir Alfred	Cordeaux, Lt.-Col. J. K.
Ashton, H.	Bowen, E. R. (Cardigan)	Corfield, Capt. F. V.
Astor, Hon. J. J.	Boyd-Carpenter, Rt. Hon. J. A.	Craddock, Beresford (Spelthorne)
Atkins, H. E.	Boyle, Sir Edward	Crowder, Sir John (Finchley)
Baldock, Lt.-Cmdr. J. M.	Braine, B. R.	Crowder, Petre (Ruislip—Northwood)
Baldwin, A. E.	Braithwaite, Sir Albert (Harrow, W.)	Cunningham, Knox
Balniel, Lord	Brooke, Rt. Hon. Henry	Currie, G. B. H.
Barber, Anthony	Brooman-White, R. C.	Dance, J. C. G.
Barlow, Sir John	Browne, J. Nixon (Craigton)	Davidson, Viscountess
Barter, John	Bryan, P.	D'Avigdor-Goldsmid, Sir Henry
Baxter, Sir Beverley	Buchan-Hepburn, Rt. Hon. P. G. T.	Deedes, W. F.
Beamish, Tufton	Bullus, Wing Commander E. E.	Digby, Simon Wingfield
Bell, Philip (Bolton, E.)	Burden, F. F. A.	Dodds-Parker, A. D.
Bell, Ronald (Bucks, S.)	Butler, Rt. Hn. R.A. (SaffronWalden) Campbell, Sir David	Donaldson, Cmdr. C. E. McA.
Bennett, F. M. (Torquay)	Carr, Robert	Doughty, C. J. A.
Bennett, Dr. Reginald	Cary, Sir Robert	Drayson, G. B.
Bevins, J. R. (Toxteth)

du Cann, E. D. L.	Jones, Rt. Hon. Aubrey (Hall Green)	Pitt, Miss E. M.
Duncan, Capt. J. A. L.	Joseph, Sir Keith	Powell, J. Enoch
Duthie, W. S.	Joynson-Hicks, Hon. Sir Lancelot	Price, Henry (Lewisham, W.)
Eccles, Rt. Hon. Sir David	Kaberry, D.	Prior-Palmer, Brig. O. L.
Eden, Rt. Hn. Sir A. (Warwick & L'm'tn)	Keegan, D.	Profumo, J. D.
Eden, J. B. (Bournemouth, West)	Kerby, Capt. H. B.	Raikes, Sir Victor
Emmet, Hon. Mrs. Evelyn	Kerr, H. W.	Ramsden, J. E.
Errington, Sir Eric	Kershaw, J. A.	Rawlinson, Peter
Erroll, F. J.	Kimball, M.	Redmayne, M.
Farey-Jones, F. W.	Kirk, P. M.	Rees-Davies, W. R.
Fell, A.	Lagden, G. W.	Remnant, Hon. P.
Finlay, Graeme	Lambton, Viscount	Renton, D. L. M.
Fisher, Nigel	Lancaster, Col. C. G.	Ridsdale, J. E.
Fleetwood-Hesketh, R. F.	Langford-Halt, J. A.	Rippon, A. G. F.
Fletcher-Cooke, C.	Leather, E. H. C.	Roberts, Sir Peter (Heeley)
Fort, R.	Leavey, J. A.	Robertson, Sir David
Foster, John	Leburn, W. G.	Robinson, Sir Roland (Blackpool, S.)
Fraser, Sir Ian (M'cmbe & Lonsdale)	Legge-Bourke, Maj. E. A. H.	Robson-Brown, W.
Freeth, D. K.	Legh, Hon. Peter (Petersfield)	Rodgers, John (Sevenoaks)
Gammans, Sir David	Lennox-Boyd, Rt. Hon. A. T.	Roper, Sir Harold
Garner-Evans, E. H.	Lindsay, Hon. James (Devon, N.)	Ropner, Col. Sir Leonard
George, J. C. (Pollok)	Lindsay, Martin (Solihull)	Russell, R. S.
Gibson-Watt, D.	Linstead, Sir H. N.	Sandys, Rt. Hon. D.
Glover, D.	Llewellyn, D. T.	Schofield, Lt.-Col. W.
Godber, J. B.	Lloyd, Rt. Hon. G.(Sutton Coldfield)	Scott-Miller, Cmdr. R.
Gomme-Duncan, Col. Sir Alan	Lloyd, Maj. Sir Guy (Renfrew, E.)	Sharples, R. C.
Gough, C. F. H.	Lloyd, Rt. Hon. Selwyn (Wirral)	Shepherd, William
Gower, H. R.	Lloyd-George, Maj. Rt. Hon. G.	Simon, J. E. S. (Middlesbrough, W.)
Graham, Sir Fergus	Longden, Gilbert	Smithers, Peter (Winchester)
Grant, W. (Woodside)	Low, Rt. Hon. A. R. W.	Smyth, Brig. Sir John (Norwood)
Green, A.	Lucas, Sir Jocelyn (Portsmouth, S.)	Soames, Capt. C.
Gresham Cooke, R.	Lucas, P. B. (Brentford & Chiswick)	Spearman, Sir Alexander
Grimond, J.	Lucas-Tooth, Sir Hugh	Speir, R. M.
Grimston, Hon. John (St. Albans)	McAdden, S. J.	Spence, H. R. (Aberdeen, W.)
Grimston, Sir Robert (Westbury)	Macdonald, Sir Peter	Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)
Grosvenor, Lt.-Col. R. G.	Mackie,	Stanley, Capt. Hon. Richard
Gurden, Harold	McLaughlin, Mrs. P.	Stevens, Geoffrey
Hall, John (Wycombe)	Maclay, Rt. Hon. John	Steward, Harold (Stockport, S.)
Hare, Rt. Hon. J. H.	Maclean, Fitzroy (Lancaster)	Steward, Sir William (Woolwich, W.)
Harris, Frederic (Croydon, N. W.)	Maclean, Neil (Inverness)	Stewart, Henderson (Fife, E.)
Harris, Reader (Heston)	Macleod, Rt. Hn. Iain (Enfield, W.)	Stoddart-Scott, Col. M.
Harrison, A. B. C. (Maldon)	MacLeod, John (Ross & Cromarty)	Studholme, Sir Henry
Harrison, Col. J. H. (Eye)	Macmillan, Rt. Hn. Harold (Bromley)	Summers, Sir Spencer
Harvey, Air Cdre. A. V. (Macclesfd)	Macpherson, Niall (Dumfries)	Sumner, W. D. M. (Orpington)
Harvey, Ian (Harrow, E.)	Maddan, Martin	Taylor, Sir Charles (Eastbourne)
Harvey, John (Walthamstow, E.)	Maitland, Cdr. J. F. W. (Horncastle)	Taylor, William (Bradford, N.)
Harvie-Watt, Sir George	Maitland, Hon. Patrick (Lanark)	Teeling, W.
Hay, John	Manningham-Buller, Rt. Hn. Sir R.	Thomas, Leslie (Canterbury) Thompson, Kenneth (Walton)
Head, Rt. Hon. A. H.	Markham, Major Sir Frank	Thompson, Lt.-Cdr. R. (Croydon, S.)
Heald, Rt. Hon. Sir Lionel	Marlowe, A. A. H.	Thorneycroft, Rt. Hon. P.
Henderson, John (Cathcart)	Marples, A. E.	Tiley, A. (Bradford, W.)
Hicks-Beach, Maj. W. W.	Marshall, Douglas	Tilney, John (Wavertree)
Hill, Rt. Hon. Charles (Luton)	Mathew, R.	Touche, Sir Gordon
Hill, Mrs. E. (Wythenshawe)	Maude, Angus	Turner, H. F. L.
Hill, John (S. Norfolk)	Maudling, Rt. Hon. R.	Turton, Rt. Hon. R. H.
Hinchingbrooke, Viscount	Mawby, R. L.	Tweedsmuir, Lady
Hirst, Geoffrey	Maydon, Lt.-Comdr. S. L. C.	Vane, W. M. F.
Holland-Martin, C. J.	Medlicott, Sir Frank	Vaughan-Morgan, J. K.
Holt, A. F.	Molson, Rt. Hon. Hugh	Vickers, Miss J. H.
Hope, Lord John	Monckton, Rt. Hon. Sir Walter	Vosper, D. F.
Hornby, R. P.	Morrison, John (Salisbury)	Wade, D. W.
Hornsby-Smith, Miss M. P.	Mott-Radclyffe, C. E.	Wakefield, Edward (Derbyshire, W.)
Horobin, Sir Ian	Nabarro, G. D. N.	Wakefield, Sir Wavell (St. M'lebone)
Horsbrugh, Rt. Hon. Dame Florence	Neave, Airey	Walker-Smith, D. C.
Howard, Gerald (Cambridgeshire)	Nicholls, Harmar	Wall, Major Patrick
Howard, Hon. Greville (St. Ives)	Nicolson, N. (B'n'm'th, E. & Chr'ch)	Ward, Hon. George (Worcester)
Howard, John (Test)	Nield, Basil (Chester)	Ward, Dame Irene (Tynemouth)
Hudson, Sir Austin (Lewisham, N.)	Noble, Comdr. A. H. P.	Waterhouse, Capt. Rt. Hon. C.
Hudson, W. R. A. (Hull, N.)	Nugent, G. R. H.	Whitelaw, W. S. I. (Penrith & Border)
Hughes Hallett, Vice-Admiral J.	O'Neill, Hn. Phelim (Co. Antrim, N.)	Williams, Paul (Sunderland, S.)
Hughes-Young, M. H. C.	Orr, Capt. L. P. S.	Williams, R. Dudley (Exeter)
Hulbert, Sir Norman	Orr-Ewing, Charles Ian (Hendon, N.)	Wills, G. (Bridgwater)
Hutchison, Sir James (Scotstoun)	Orr-Ewing, Sir Ian (Weston-S-Mare)	Wilson, Geoffrey (Truro)
Hyde, Montgomery	Osborne, C.	Wood, Hon. R.
Hylton-Foster, Sir H. B. H.	Page, R. G.	Woollam, John Victor
Iremonger, T. L.	Pannell, N. A. (Kirkdale)	Yates, William (The Wrekin)
Irvine, Bryant Godman (Rye)	Partridge, E.
Jenkins, Robert (Dulwich)	Peyton, J. W. W.
Jennings, J. C. (Burton)	Pickthorn, K. W. M.	TELLERS FOR THE NOES:
Johnson, Dr. Donald (Carlisle)	Pilkington, Capt. R. A.	Mr. Heath and Mr. Oakshott.
Johnson, Eric (Blackley)	Pitman, I. J.
Johnson, Howard (Kemptown)

Main Question, as amended, put and agreed to.

Proposed words there added.

Resolved, That this House welcomes the interim statement on economies in public expenditure made by the Chancellor of the Exchequer on 26th June as further proof of the determination of Her Majesty's Government to conquer the dangers of inflation, and pledges its support for all measures designed to maintain our competitive position in the world on which the living standards of our people depend.