DEBATE ON THE ADDRESS

HC Deb 12 November 1957 vol 577 cc783-918

[SIXTH DAY]

Order read for resuming adjourned debate on Question [5th November]:

That an humble Address be presented to Her Majesty, as follows:

Most Gracious Sovereign,

We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.—[Lady Tweedsrnuir.]

Question again proposed.

3.38 p.m.

Mr. Hugh Gaitskell (Leeds, South)

I beg to move, at the end of the Question, to add: but humbly regret the omission from the Gracious Speech of policies designed to increase production and productivity and to establish better relations in industry. In moving this Amendment, Mr. Speaker, may I express the appreciation of, I am sure, the whole House for the words of wisdom which you have just given us on the length of speeches?

The Amendment expresses shortly and clearly a major criticism and anxiety on the part of the Opposition about the Government's latest economic policies. We do not believe that reference to production and productivity and to the need for better relations in industry was omitted from the Gracious Speech just by accident. It is all too much of a part with what the Government have been doing and saying in the last few weeks.

In underlining the importance of those two subjects I wish to make it plain that, on the Opposition side, we are in no way indifferent to the matters actually referred to in that paragraph of the Speech which deals with economic policy, namely, to the need for …restraining inflation, to strengthen our balance of payments and to fortify our reserves. Indeed, on many occasions we have ourselves underlined the significance of those objectives. But we believe that the diagnosis of the Government in the present situation, if, indeed, one can call anything that has been said by the Chancellor of the Exchequer by that name, and also the remedies which he proposes to apply, are not only wrong but are dangerous to the health of our economy.

I observe that no Minister representing the Treasury is to speak in the debate today. Seeing that this is an Amendment which goes, I should have thought, to the heart of the Government's economic policy, that is a little surprising. Nor is any representative of the Ministry of Labour taking part in the debate. Instead, we are to have the Home Secretary and the Paymaster-General. We are always glad to welcome old faces back again into economic debates. I am sure that the old firm will do themselves justice this afternoon and this evening.

There have been rumours of a certain lack of enthusiasm on their part towards the new policies of the present Chancellor of the Exchequer. Be that as it may, looking back on the years when they presided at the Treasury, and allowing for the passage of time, I cannot help looking upon their presence with a kindlier eye. At least, one can say of them that they did not say or do so many foolish things in such a short time as the present Chancellor of the Exchequer has done. Or, if they did, they certainly tried to explain why they were doing it.

I do not propose, however, to spend much of my time this afternoon on the past record of the Government. My right hon. and hon. Friends last week put forward devastating criticisms on that particular matter. I would just say that if the Chancellor of the Exchequer's policy today is right, then the fact that it had to be adopted, together with the speech of the Chancellor on 29th October, is a far greater indictment of the Government's policy than anything we can say from these benches.

Consider these facts. Less than six months after a Budget in which the Chancellor of the Exchequer took the view that there was room for manoeuvre, and in which he gave away £100 million to carefully selected recipients, and within six weeks of a debate on inflation in which no announcement of policy was made other than the setting up of the council of the so-called "Three Wise Men", we are confronted with a drastic change of policy, with a speech which indicates that the nation faces an economic situation of the utmost gravity, and a series of warnings of the difficult times through which we now have to pass. At the very least, these indicate the gravest errors of judgment on the part of right hon. Gentlemen, or a deplorable lack of candour during the Chancellor's Budget speech, or perhaps just hopeless confusion.

The consequences of the new policy in the particular field of housing were discussed very fully yesterday. It is our business today to discuss its wider implications for the economy as a whole. As I take it, the aims of this policy are twofold. First, the Chancellor came to the conclusion, and announced on 19th September, that it was necessary to reduce demand at home, and, in particular, to cut back the rise in investment which had hitherto been planned. Further, he came to the conclusion that it was necessary to take fresh action by monetary means to stop what is sometimes called the "cost spiral" or the "wage-price spiral". I wish to examine the policy and its effects upon our economy.

The first question we have to ask ourselves is: what will the effect of this policy be upon production? However we may differ on other matters, I do not think that there will be any dispute in any quarter of the House that a high level of production and productivity is absolutely vital to our economic future. It is one of our quarrels with the Government that they have never indicated exactly what they think the consequences of this policy will be on production.

I can conceive of circumstances in which it might be argued that even policies as drastic as this would not necessarily lead to any fall in production. We might have a situation of acute demand-inflation, where prices were rising very rapidly, there was a balance of payments crisis, and the additional outpouring of money from the banks or from the Government or private spending was leading only to depletion of stocks or the piling up of orders. Therefore, if we were to cut down there would be no harm to production, but simply—so to speak—a creaming off of the flow of money towards goods. Are the Government saying that that is the situation with which we are now faced?

I ask the House to look back over the past few years at the production record. The production increase since 1951 has been half the annual rate it was in the previous six years. Between 1951 and 1956 the total increase was 15 per cent., an average of 3 per cent. for the five years, and almost the lowest of any industrial nation. From the spring of 1955 to the spring of this year there was no rise in production whatever. Indeed, the Chancellor defended this situation in his Budget speech. I quote some of the words which he used when describing the position in 1956. He admitted that there was a check to the growth of industrial production, but said: It is a picture not of industrial apathy but of a nation girding itself for renewed and greater effort. He went on to make a valid point with which I do not quarrel at all. He said: While we deliberately used our industrial capacity less intensively in 1956 than in 1955, the capacity itself was growing. It was growing because investment was maintained at a high level. We were building the means to produce more and to produce it for export markets. The process of economic growth cannot be absolutely regular. There will be years of growth and years of consolidation. Our long-term growth will be all the sounder for the consolidation we undertook in 1956."—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 968.] That was the Chancellor's defence of stagnation of production in that year, but which was, as I say, spread out over two years.

Is the Chancellor saying to us that within four months of the rise in production beginning again—it began in May—we have reached the limit of our capacity? Is he saying that when production has been rising approximately at a rate of only 3 per cent. over 1956, and was slightly lower than 1955, we are stretched to the limit? If that is so, it is a very depressing prospect indeed for the whole country. When faced with this fresh measure of restriction, one is bound to ask when we are to have an expanding economy again. At the very moment that output is picking up—as, indeed, we expected it would and most of us said in the Budget debate it would—down comes the Chancellor and clamps down once more. Is he saying that he had to do this because demand had so far outrun supply that there was a grave danger of more inflation?

In deciding our policy in this situation another thing we have to do is not merely to look back, but to look forward. We have to ask ourselves what the prospects will be and what is likely to happen in the absence of any new policy by the Government. What does that prospect indicate? Does it suggest, for instance, that in 1958, apart from these last measures, there is likely to be any great increase in the volume of investment orders placed in industry? I submit to the Chancellor and to the House that a study of the available evidence suggests in fact precisely the contrary.

I will quote, first, something which was published recently in the Financial Times about the prospect in industrial building which, after all, is a key part of investment. This is what the industrial correspondent of the Financial Times had to say on 11th October, 1957: Industry has cut back its plans for building new factories and modernising existing plants. The numbers of schemes approved so far this year and the factory floor area they represent are both the lowest for four years. The latest estimates for capital spending in manufacturing industry, which were prepared just before Bank Rate was raised to 7 per cent., forecast a 10 per cent. fall this year and another fall of 9 per cent. next year. But, since building costs have been rising—and are still going up—the actual fall in work done will be greater than the spending figures suggest. The building industry is certain that if new estimates were available today they would, in the light of the Government's latest measures, show an even bigger fall. That is the prospect for industrial building. I make no reference to house building, because that was very fully discussed yesterday, but I do not think that anyone will deny that the outlook for house building is, if anything, considerably worse than that for industrial building in terms of the amount of employment created and of work done.

Let us look at some other aspects of investment. The machine tool industry would, I think, be accepted as a fair indicator of movements in investment. What is the position there? Orders have now been falling for machine tools for fourteen months in succession. In August, the orders placed were the lowest for three years. Orders for the home market are down in real terms by 13 per cent to 16 per cent. compared with last year. Deliveries are now exceeding orders by about 20 per cent., and the amount of orders on the books are about eleven months compared with fifteen months last year. I do not think that is a very encouraging picture of expansion.

Take the question of steel production. There was a very interesting article this week in the Economist about prospects for the steel industry. I will quote only one paragraph from what is a highly technical article, but which I think sets out fairly the conclusions. It says: For 1958, the industry will probably have capacity to produce 23½ million ingot tons; but it will begin the year operating below capacity, and with fears that demand over the year may fall about a million tons short of that practicable figure. These are guesses, based partly upon the state of the industry's order book; partly upon the fact that any running down of consumers' and merchants' stocks, which now amount to about four months' consumption, could easily bring about a real slump in orders; and partly upon a reading of general economic prospects in Britain and in world trade. It is always easy to sneer at those who believe that the outlook is not entirely favourable. I do not in the least object to right hon. and hon. Members opposite criticising me for forecasting what I described as a minor slump, but I do honestly believe, on the basis of such expert advice as is available, that there is—to use my own words—a real prospect of a minor trade recession. If we take the home market that is in a sense even more evident than if one looks at America. I make no observations about the American scene; I would agree with hon. Members that it is difficult to sum it up. I certainly believe that the situation could change very substantially if American monetary policy were to be altered. For the moment, I am concentrating on the prospect in the home market and I think it is as I have described it.

If there are still doubts in the minds of hon. Members, and if they have the idea that I am suggesting such a thing just because I happen to be a member of the Labour Party, I would remind them that a very well-known Conservative, who is also an economist, Mr. Roy Harrod, takes this view very strongly. Instead of the cuts in public investment which the Government are putting forward he has pressed that there should be an increase of £300 million a year in public investment at the present time because he fears —heaven knows, he has no axe to grind—that in this matter there will be a decline in private investment which has to be offset in this way.

One may well ask, in those circumstances, what is the case of the Government for this sharp increase in deflation? I suppose the answer will be, "It is all very well for you to talk, but look at the exchange crisis which happened in September. What else could we do when faced with that situation?" I say to the Chancellor, in reply, "What exactly had the exchange crisis to do with the production situation here? Why should reducing production here help that particular type of exchange crisis?" Let us take some of the Government's own explanations. The Chancellor of the Exchequer said last week: Some people say all this is due to speculation. It was not "some people" who said that; it was the Chancellor himself who said it. It was he who said it in no less a place than the International Monetary Fund meeting. He said: Our difficulties in recent weeks have been due not to lack of competitive ability as a trader, but to speculation. The right hon. Gentleman really cannot object if some of us take him at his word and accept the fact that that is what is wrong.

Let me pursue this idea of our competitive position as a trader. Had the crisis been due to over-trading, had the balance of payments been in serious deficit as it was in 1955, as it was in 1951—because of the great rise in import prices—then, of course, action would have been necessary to reduce the volume of imports.

I am not going to argue now about the relative advantages of doing that one way or the other But the fact is that today the balance of payments is in surplus. The Chancellor is always telling us that there was a surplus of more than £200 million in 1956–57. Now we have the effect of falling import prices; they have fallen quite substantially in the last few months and in the coming months that will give us a very lucky bonus on our balance of payments. In fact, it has been estimated that we shall be saving about £200 million a year on the fall that has already occurred.

If we add that in, I do not think anyone can really say that there is any immediate fear about balance of payments, although I would readily admit that the fail in commodity prices is only too likely to create difficulties in the sterling area. All the same, I must ask this question because we must try to find what it is the Government are attempting to do. Is the policy of deflation, restriction, cutting back of investment, and tightening up the money supply aimed at achieving a still larger balance of payments surplus?

On occasion, the Chancellor has said things which suggest that that is his desire and I can understand it as a desire. I have no intention on going back on things which have been said many times from this side of the House, to the effect that we need a balance of payments of at least £300 million a year. Is he suggesting that we need another effort at redeploying labour to plan for an even larger surplus?

If the Chancellor is relying on that, the redeployment of labour in the last two years has not been exactly encouraging. About 150,000 men were released either through a reduction in the Services or for other reasons and about half have become unemployed while the rest have become employed only in the professions and distributive trades. There is no sign from the available labour figures of any effective redeployment of labour to boost exports and keep down home demands. If the Chancellor is saying that we must aim at a still larger surplus so as to sustain the whole sterling area and that we cannot do that unless we have a surplus of £300 or £400 million a year, does he really believe that in present circumstances there is much chance of expanding exports by cutting down home demand?

I should have thought that this was about the most difficult moment to try that operation that one could imagine, because here we have another factor which we cannot ignore. That is the fall in commodity prices. Advantageous as it is to our import bill, and much as it helps our balance of payments from that angle, it will certainly make it more difficult for us to expand our exports. Indeed, we shall be lucky, in the coming months, if this fall in prices does not lead to a decline in exports from this country.

I pass on, leaving on one side that question, to the other reason for the crisis in September—speculation. It was speculation and it is not good enough for the Chancellor to say, "Ah well, it is not only that they wanted to get into marks; they wanted to get out of sterling." In any case, if there was an expectation that the mark was going up in value, of course traders and financiers would get out of sterling into marks, because it would be profitable to do so. One could argue that because there was a switch at that time that there was not necessarily a great lack of confidence in sterling itself.

The second point is this. Another development had been taking place. Over the years, and particularly in the last eighteen months, exchange control has been substantially relaxed and, as has been pointed out on several occasions, British holders of capital have been allowed to export that capital through what has become known as the Kuwait gap. I ask the Minister, who is to reply, if he will reply to something which the Chancellor has not answered. It is: how much money was lost through the Kuwait gap? Is it the case, as the financial Press says, that between £80 million and £90 million of British capital exports took place through this loophole in exchange control?

The fact is that, if we relax exchange control in this way, we are bound to get this sort of thing happening, and this is one of the major reasons, I submit, for the crisis in September. There were others as well. I would not deny that the sterling area position presents difficulties. There was a withdrawal of sterling balances and there has certainly been a withdrawal of sterling balances which itself has been made possible to some extent by the uncontrolled export of capital to the sterling area. We lend to people the money and then they exchange it for dollars. That is not a very happy way of conducting our affairs. I admit, too, that the world dollar situation has probably placed an additional strain on our exchange, because when other countries become short of dollars they can obtain them and finance their purchases of dollar commodities through London. All this is the result of a series of relaxations introduced by the Conservative Government.

The basic difficulty about our position is that we are trying to run a world banking business, with freedom to customers to deposit and withdraw whenever they like, with excessive short-term liabilities and wholly inadequate reserves. This is the truth of the matter. The real fault of the Government in this field has been their complete failure to build up reserves while simultaneously relaxing controls and loosening up relations within the sterling area.

Suppose the Government go ahead with their policy; suppose they do depress production and investment; suppose they succeed in keeping down wages. Will this prevent another exchange crisis if the sterling area is in deficit to the dollar area? Will this prevent another exchange crisis if members of the sterling area start drawing down their balances rapidly and if the balances are being swollen by uncontrolled lending from here? It seems to us on this side of the House a really ridiculous situation that we should be cutting investment here, controlling it quite rigorously in some fields, while leaving it completely free so far as the export of capital to the sterling area is concerned.

Does the Minister think, if this were to happen—and heaven knows it is not a fantasy; we know that it is quite liable to happen as the result of the fall in commodity prices—that speculators are going to hold off selling pounds because of the Government's policy here? I say that, whatever the merits of the policy, it is certainly quite inadequate for dealing with the exchange situation.

I repeat what my right hon. Friend the Member for Huyton (Mr. H. Wilson) proposed in his speech. We consider that the time has come to reconsider the whole of the exchange situation and to reimpose some of the controls that have been taken off. We think that the time has come when we should have a proper and serious conference with the sterling area, looking ahead and trying to plan as far as possible, to avoid this crisis. We also think, and say, that the Chancellor should have gone very much further than he did at the meeting of the International Monetary Fund in asking for additional international credit to deal with capital movements. His brief reference to it he merely remarked that there was some kind of problem here—was totally inadequate. I cannot see for the life of me why he did not make a firm and urgent demand to have this matter considered.

Finally, the argument of the Government is, of course, that they had to do this because they had to stop the wage-price spiral. They have discovered a new formula. The emphasis now is on "not providing money to finance the spiral of costs." This is a wonderful new idea, but it is interesting to reflect that all the time the Lord Privy Seal was Chancellor—in those four years when he was sitting in the Treasury—it never occurred to him that this was the way to deal with inflation. He did, it is true, think up the Bank Rate. He was the person who reactivated the Bank Rate, so to speak; but apparently he did not think that the way to deal with the situation was not to finance the spiral of costs.

The Prime Minister, when he was Chancellor, had one bright idea—Premium Bonds. But it does not seem to have occurred to him that this was a solution, that this was the "gimmick" which would do the trick. It was left to the present Chancellor suddenly to discover this thing out of the wealth of his economic knowledge. Now, apparently, we know what to do. We did not know what to do between 1951 and 1955 when the right hon. Gentleman the Lord Privy Seal was there; we did not know what to do when the Prime Minister was Chancellor, but now we do—we have got the answer. I shall have some comments to make on the significance and efficacy of this new gadget in a moment or two, but there is another point which I want to make first.

Does the right hon. Gentleman not think it wiser, before trying a new cure, to diagnose what exactly is wrong? This brings me to the astonishing remark of the Chancellor that he was not concerned to judge between those who call this a demand inflation and those who call it a cost inflation. I do not wish to enter into a very technical discussion, but I am bound to say that I would have thought that an admission of indifference to those two things was quite extraordinary in a person responsible for the economic and financial policy of the country.

Of course, there is a great problem here. This is the major economic problem of the post-war years. I venture to say to the Chancellor what I think the difference is and why I think it is significant. I think that there is a demand inflation when we have such an excessive demand that the negotiated rate of wages follows the actual rate of wages paid in industry. When there is such a shortage of goods and such a demand for labour that employers compete against each other, and it does not matter much what the unions do, wages go up and then the collective bargaining rates follow.

That implies that there is no slack in the economy at all. It is a picture of a demand inflation. I say, first, nevertheless, that this was not true of most of the post-war period. I would certainly say that it is not true today. There is, indeed, no need for the Chancellor of the Exchequer to be quite as apologetic from this angle as he appears to be. During most of the post-war period we have not been suffering from this excessive demand inflation. We have been suffering from a cost inflation, and by that I mean that costs go up and are followed by higher prices even when no excess demand exists.

Let me admit at once that we suffered from this between 1946 to 1951, and the major cause of it, the major initiative, in those years came from rising import prices. They were, as I think all will admit, beyond our control. They were world prices which were rising very fast. We tried to hold back internal prices as much as we could, and not without success. Although import prices doubled during these years, the cost of living went up by about one-third. But in the following six years, 1951 to 1957, the stimulus to the rise in costs was direct Government action to raise prices, which encouraged the wage-price spiral still further, and this was also helped by the relatively small increase in productivity during these years.

When the Government cut subsidies and drive up prices they naturally initiate a demand for a corresponding rise in wages. When they push up rents they do the same thing. This has been the policy of the Government over these years, and, of course, it is not merely that you get a rise in wages to balance the increase in prices, but the rise in wages itself puts up prices still further. What the Government were doing was spinning that spiral still faster, when any sensible Government would have put the brake on it.

This begins to put the problem we face in perspective. The wage-price spiral is not a kind of original sin on the part of trade unionists. If the Government had not acted to drive up prices during those years, it is extremely doubtful whether we should even be bothering to have this debate today, because in my view we should not have had a cost inflation at all.

I fear that the Government are now going to make matters considerably worse, and I will say why. The significant thing is, of course, not the actual movement of wages, but the movement of labour costs, and labour costs depend on wages in relation to the rise or fall in productivity. The record shows that quite clearly since 1948. For about two years, 1948–1950, there was a very slight rise in labour costs only, because although wages were going up productivity was rising faster. There was then a bad patch. There were higher wages and in 1952 an actual fall in productivity. Then came a better period in 1953 resulting from the recovery and expansion of production.

Then there was another particularly bad period in 1956 when, again, production was being clamped down but wages continued to rise and so labour costs went up. At the moment, as my hon. Friend the Member for Wrexham (Mr. Idwal Jones) pointed out, it is quite likely, as has been stated by one of the Bank Reviews, that labour costs are falling because production has been rising, but if the Government carry on with their existing policies I am afraid it is almost inevitable that the position will be reversed and labour costs will rise again. Of course, we can carry the process so far, we can squeeze production down so far, that unemployment stops any wage rises at all, but I understand from the Prime Minister that that is not the Government's idea. What they want to do is to damp things off, but, nevertheless, still avoid unemployment.

That brings me to the gadget—the supply of money as the instrument of control. If the Chancellor had said, "We are tightening bank credit. We think that it has got a bit slack and, therefore, we shall make another appeal or give another instruction to the banks about bank advances," it would not have been very novel, but at least it would have made a little sense. But to speak as though we shall stop the spiral specifically by cutting off the supply of money is at best an extraordinarily stupid and clumsy idea.

Is the Chancellor's notion that bank managers should apply this doctrine to individual firms and industries? He has told the banks that they must not expand advances at all, but they have to give their managers some instruction. Is the idea that the bank manager says to the firm when it approaches him, "Have you increased wages?" Is that the idea? Or are bank managers supposed to go further and to say, "Have you increased productivity, because if you have increased productivity you can have the advance"?

It is a ridiculous picture. I am glad to see the Chancellor nodding in agreement. But if that is the case, let us see what this means. What is the significance of all this talk about not financing wage increases? If it is not to work through bank managers, as it is supposed to work through the Government and the Transport Commission, there will be one rule for the public enterprises and another rule for the private enterprises.

A good deal has been said already about the velocity of circulation. The Chancellor of the Exchequer dismissed all that by saying that there was always a technical solution to a technical problem. It would be very interesting to know whether he knows what is the technical solution—indeed, whether he knows what is the technical problem. It is not quite as simple as that. It is not so easy to stop an increase in the velocity of circulation. It is very commonly the case that if the supply of money is reduced people use their money more actively and, correspondingly, the velocity goes up and one does not have the effect which one wants to have.

Here is another complication. Commodity prices are falling. It is quite likely, in those circumstances, that, in fact, there will be less demand for bank credit. It may be that stocks are falling, as well, in consequence of this. If there is less demand for bank credit on that account, how does the control work? How does it stop the wage-price spiral?

But I think that the more serious danger is this, which I put to the Chancellor. We all want an increase in productivity. Does he say that this must take place in the face of a rigid freeze of bank credit and bank advances? I think it is a very dangerous position to adopt, if I may say so to him, because the logic of his argument is that, despite the fact that there is an increase in output through higher productivity, nevertheless prices have not merely to be stable but they have actually to fall. Is that what he wants? What he was saying the other day suggested it. I am bound to say that I think the only effect of that kind of policy is to stop the rise in productivity altogether.

I would end these remarks by quoting again what Mr. Harrod has to say about it. He is a friend of the Chancellor and I hope that the Chancellor will take him seriously: It does not seem to be appreciated that the holding down of the quantity of money for so long a period"— the last five years— is highly unusual and artificial. Its main effect is to make Government borrowing extremely expensive—at the cost of the taxpayer. Under the gold standard, when these things were supposed to work as they should, one has to go back to 1878–82 to find a five-year period when the quantity of money was not increased, And those years figure in economic history text-book, as 'The Great Depression'. I think that the Chancellor should take that to heart and perhaps be a little less free with his formula and his gadget than he has been in recent weeks.

More serious than this muddled thinking about the relationship of credit to wages however, is the Government's handling of specific wage issues. I must briefly return again, first, to the question of the Health Service employees. My right hon. Friend will have more to say about that this evening, but I want to put these points to the Prime Minister and the Chancellor. I am sure that we all regret the employees' decision, announced this morning, that they will not indulge in any overtime. It could have serious consequences for all of us. But I am bound to say that they have been put in an almost impossible situation. The procedural situation needs clearing up. The employees cannot go to arbitration, because there was no dispute on the Whitley Council. What happens now'? Is the issue to remain there? Have they no alternative at all? What are the future arrangements to be?

When the Government do something unprecedented like this, turn down a recommendation of the Whitley Council, I should have thought that, in effect, they were really casting aside the present machinery of negotiation, because it is no good the employees negotiating except with the employer—the man who decides whether to pay or not. Since the Government have taken away the right of the management side of the. Whitley Council to decide, is it not now necessary to think afresh about the whole constitution of the Council? I suggest to the Prime Minister that he be not too stickly on this, not too insistent on saving faces. It really is very desirable to get out of this situation, and there are various alternatives. One is to invite the staff side to bring up the matter again, and then to instruct, I suppose—absurd as it may seem—the management side to refuse. The matter can then go to arbitration.

But there lies behind this a second point, a point of substance, and it is more important. The Government's decision suggests that they are not prepared to consider wage applications on their merits, and that even if the case, as I believe is the truth in this instance, is very strongly based on the cost of living and relates to low-paid workers—I know myself of some in my own constituency with no more £7 than a week—nevertheless the rigid rule is, "You must not give way."

The second case is that of the Transport Commission, and to it I shall refer only briefly. We still do not know whether the adjective of the Minister of Labour, that the Government would not finance an "inflationary" increase means anything or not. I gathered from the Prime Minister that it meant jolly little and that, in fact, whatever the justification, whatever the explanation of any increase that might be awarded by an arbitration tribunal, the Government did not intend to do anything about it.

Let us consider what is implied. The Minister of Transport himself has said that it is extremely unlikely that there is any way out by way of higher wages; that would not help; it would lead to reduced traffic. The Government are, therefore, saying to the Commission, "If you get an arbitration award against you, you must cut down on investment." Does that make sense? Here is a railway investment programme which was designed to get us away from the present situation, and so to increase productivity, services and the rest as to enable the Transport Commission to pay reasonable wages Now we have the dilemma that if the Commission does pay even the minimum considered necessary it has to cut investment.

One last remark on this. It is not very long since an inquiry on the railway wages situation produced a rather famous Report. The House will recall these words: The nation has provided by statute that there shall be a nationalised system of railway transport which must be regarded as a public utility of the first importance. Having willed the end, the nation must will the means. This implies that employees of such a national service should receive a fair and adequate wage, and that, in broad terms, the railwaymen should be in no worse case than their colleagues in a comparable industry. That Report was accepted by the Government. Do they still stand by it? We need an answer—and the railwaymen certainly need an answer.

We believe that if the Government persist in these policies which combine crude deflation and dictatorial instructions to industry they will inflict needless loss and damage on our economy. We believe that this can still be avoided, but only by a repudiation of some of the things that have been said—and some of the things that have been done—in these last few weeks.

I have already explained what I think should be done internationally. I want to emphasise that the solution to our problem at home is, in present circumstances, high investment and high production. If this involves any risk of going too far then, instead of damping down activity generally, there is an overwhelming case for specific controls, of which building licensing is an obvious instance. But I am not saying that even that is necessary, in view of the figures I gave earlier.

Secondly, I would say that to handle the so-called wage-price spiral the first thing that the Government must learn is not to aggravate it, as they have aggravated it all these years. Here, I must mention something that they have done very recently which must do just that. To finance a pensions increase entirely out of contributions, to make arrangements that actually yield the Treasury a profit is not only socially unjust but, in present circumstances, is extremely silly as well.

This action is all the more intolerable after the last Budget of the right hon. Gentleman, when he gave substantial reliefs in direct taxation. He really cannot be surprised, first, if prices go up as a result of this, because the employers will pass on the cost of their contribution, and although I am not making prophecies—and I hope that I will not be accused of encouraging anybody to do anything [HON. MEMBERS: "Oh."] Hon. Members should know better than that—the plain fact is that if contributions are put up by nearly "two bob" a week a lot of workers will ask, "Where is the money to come from?" They will say that because the Exchequer is not carrying any part of this new burden.

On the general issue of wages, the Government are perfectly entitled, of course, to express their views, but they must not give the impression, as they have done, that when workers, trade unionists, come to arbitration, the dice are loaded against them. The claims must be dealt with on their merits. Finally, if they want agreement on restraint—and there are some signs that, at last, they are beginning to see the need for it—it must be agreement, not dictation; it must be agreement covering all incomes, and not wages only; it must cover dividends and it must cover profits, and it must involve an effort by the Government, on their side, to play their full part in keeping prices down.

I say to the Government that that is the course that they should follow. If it means abandoning doctrines which are dear to the Chancellor's heart, if it means abandoning doctrines of laissez-faire which they have drifted into year by year, let them, for once in a while, put country before party.

4.28 p.m.

The Paymaster-General (Mr. Reginald Maudling)

The right hon. Gentleman the Leader of the Opposition began his speech by referring to the speakers who are to take part in this debate from this Front Bench. As I believe is traditional on the last day of the debate on the Address, it will be wound up by my right hon. Friend the Leader of the House. I cannot myself claim to be a Treasury Minister in the sense to which the right hon. Gentleman referred, though I can inform him that when one becomes Paymaster-General the first thing one receives is a Minute from the Treasury saying, in effect: "It must be clearly understood that the business of your office is run by the Treasury, and you had better keep out of it."

This Amendment is quite clearly designed as a Motion of censure on the Government's economic policies. I will treat it as such, and try to follow in detail, and, if I can, in sequence, the arguments advanced by the right hon. Gentleman, which were, as is usual with him, weighty ones.

Perhaps I may first just refer to one or two things he said about my right hon. Friends. He referred to my right hon. Friend the Chancellor and talked of errors of judgment—and "lack of candour" was a phrase he used when comparing the situation of the spring and summer with the crisis of this autumn. I do not remember that at the time of the Budget this year the right hon. Gentleman was very forward in suggesting further measures of deflation. In fact, all the proposals coming from that side were pressing on for inflation. I must remind him—because he referred to my right hon. Friend and talked of a lack of candour—that before the crisis of 1951 when he was Chancellor, although I have searched the records, I have found no record of any publicly announced policy to deal with the impending balance of payments crisis other than a small reduction in imports of dollar cheese.

Moreover, the right hon. Gentleman referred to my right hon. Friend the Home Secretary and asked why it was that he never thought of the idea of using the volume of money as a way of dealing with the spiral of costs in a balance of payments crisis. In the winter of 1951–52 my right hon. Friend used precisely the methods of the Bank Rate and the methods of a very large funding operation to deal with the crisis left behind by the right hon. Gentleman himself.

I want to turn to the arguments put forward by the right hon. Gentleman on the general economic policy of the Government. First, may I start by restating our objectives, because the right hon. Gentleman talked in terms, as he said himself, of diagnoses and remedies and he challenged us on both these points. What are our objectives? They are twofold—first, to resist a speculative attack on the £, and that is a phrase used commonly on both sides, and in resisting that attack my right hon. Friend has already had considerable success; and our second and simultaneous objective is to call a halt to the steady and almost automatic decline in the value of the £ which has been taking place for many years under succeeding Governments.

These two things are linked because the strength of sterling abroad is linked to the strength of sterling at home. The external value of the £ is based entirely on its internal value. I do not think there is any quarrel about this, because I see that the right hon. Gentleman himself on 25th July this year said: If those who own the sterling balances begin to feel that the value of the is going to fall continually, we may be quite sure that they will wish to withdraw their money."—[OFFICIAL REPORT, 25th July, 1957; Vol. 574, c. 712.] In other words, there was a direct link, although he appeared to be denying it, between any capital movement against sterling and the prospects for the internal purchasing power of the money. Therefore, I do not think there can be any quarrel about our objectives here, which are to stabilise the value of the £ for internal and external reasons alike.

The argument from the Opposition must be that our methods are wrong—which has been explained in some detail by the right hon. Gentleman—and that the methods of the party opposite would be better. I did not hear much explanation of what their methods would be or why they would be better.

What I should like to do would be to examine both those propositions. First, may I make an analysis of the present problem, following what the right hon. Gentleman said. We have a dual source of external difficulties. First, in our position as traders, we may lose our competitive position if costs rise; and secondly, in our position as bankers, money may be drawn out of this country in the form of capital movements, although we may have a strong balance of payments situation.

The right hon. Gentleman said that we have at the moment a substantial current account surplus, yet we have had a balance of payments problem of considerable size, largely because of capital movements. This, as he pointed out, stems largely from our position as bankers for the sterling area. There are arguments that can be advanced, and often are canvassed, about the relevant advantages and disadvantages of our position as bankers to the sterling area, and as the country whose currency is used so widely throughout world trade. There are immense advantages that investment income brings to us, such as access to cheap raw materials. On the other hand, there are distinct disadvantages. We have to carry the stress of the sterling area's dollar requirements, and, indeed, in a world where dollars and hard currencies are getting scarcer, as they are at the moment and have been for some time, the United Kingdom currency has to carry the burden of almost the whole world's shortage of dollars.

One may discuss as an academic exercise whether this a good position to be in. The fact is that we are in it and cannot get out of it even if we wished to do so, for two overwhelming reasons; first, because the sterling area system is now a central part of the whole cement of the Commonwealth, and secondly, because the sterling balances represent moneys invested in the United Kingdom economy and which cannot be withdrawn from that economy without disastrous consequences. Therefore, we are in a position where we must face the sterling area problem, accept its advantages and try to deal with its difficulties.

I would suggest that what the right hon. Gentleman said about the sterling area was of very great significance indeed. He was talking about the Kuwait gap. I understood him to say that the reason why money could flow from this country out of the sterling area through Kuwait was because of some change in the exchange control regulations which we had introduced. I do not think he will find that is so. It has always been possible for sterling to move freely within the sterling area, throughout the sterling area, and there have never been controls upon such movement.

The right hon. Gentleman was suggesting that. He was suggesting that there should for the first time be introduced exchange controls to control capital movements within the sterling area. There may be a case for that, but that is a very big suggestion indeed, and the right hon. Gentleman should ponder both the possible advantages and the very great possible disadvantages of a measure which might undermine the whole strength of the sterling area with all that it means to us. It is because these capital movements and current trade movements interlock to some extent that, for both reasons, we must do all we can to maintain the internal value of our currency.

There was talk of foreign exchange control. One cannot protect an international currency like sterling by wrapping it up in the cotton wool of exchange controls. One cannot force people outside this country to hold sterling if they do not want to. They will only hold sterling if they think it is worth holding. If they are asked to hold sterling they will think of its future value and, quite rightly, its future value relative to other currencies. But in assessing the value of sterling they will look at Government policies and they will assess to what extent they believe the Government intend fully to carry out their declared policy, despite the criticisms and difficulties involved. There will also—and I should mention this fact, because it is of importance—be the effect upon foreign holders of sterling, particularly as an election advances—of policy declarations by a possible alternative Government.

I do not wish to question in any way—I know him far too well—the sincerity of the right hon. Gentleman for saying that he will always do all he can to maintain the strength of sterling, but I would say to him that foreign holders of sterling will look behind what he says to the policies of his party, and, in so far as those policies are or appear to be of an inflationary character, it must reflect upon the judgment of foreign holders of sterling. That is a point which is fair to make and a very true point in present circumstances.

I believe the main lesson that we have learned in our economy since 1945 is that we cannot run this economy flat out all the time. If we try to run the whole machine flat out all the time it will overrun and we shall get into trouble. This has been apparent ever since the right hon. Member for Bishop Auckland (Mr. Dalton) used his famous phrase about "lubricating the economy with a sufficiency of purchasing power." Unfortunately, the result of the lubrication was all that followed in 1947 and in 1949.

Mr. Hugh Dalton (Bishop Auckland)

It prevented a repetition of the shocking incidents immediately following the First World War when, through lack of purchasing power, there was mass unemployment. We did not have that.

Mr. Maudling

That is precisely my point. We need to have an adequate volume of purchasing power to maintain full activity, but we must not go so far as to have inflation and a balance of payments crisis. The problem for any Government in this country, of whatever party, is how to maintain adequate demand, to sustain full employment and full activity, without going too far and having a balance of payments crisis which, with our inadequate reserves, we cannot afford to face.

Time and again—in 1947, 1949 and 1951—the economic machine was allowed to run too quickly and had to be checked by succeeding Governments, who in each case had to restrain the volume of home demand. That is what we are doing at the present moment. We are trying to restrain the volume of home demand to prevent it over-running and thereby creating intolerable difficulties for our currency on external account.

The right hon. Gentleman somewhat chided my right hon. Friend the Chancellor of the Exchequer for not knowing the difference between what is often called, in the revolting terms of some economists, a demand-pull or a cost-push inflation. I think it was his right hon. Friend the Member for Huyton (Mr. H. Wilson) who said that the other day. I suggest to the right hon. Gentleman that economics is not yet such a precise science as all that. It is all very well to say that we cannot cure the disease until the cause is diagnosed, but if we assume a greater degree of accuracy in the diagnosis than is justified we might very well be treating the wrong disease. Therefore, it is not wise to say that this is one kind of inflation and that is another kind.

I suggest to the right hon. Gentleman that the two are interlinked, because a cost inflation has to be fed and sustained by adequate demand, and, equally, an excess of demand, as we have seen, will stimulate a cost inflation. I do not believe it is possible to distinguish between them and to divide the one from the other.

So our policies are twofold; first, to restrain demand by operating on the total level of purchasing power, and secondly, to seek effective restraint of personal incomes, and thereby operating both on a demand inflation and a cost inflation simultaneously.

To take the first point first, methods of restraining demand, here we have, in the increased Bank Rate, the limitation of public capital outlay, in the limitation of bank advances and new directives to the Capital Issues Committee, a single unified programme designed to restrain the total effective demand in the economy. What is the alternative? The right hon. Gentleman himself said that the increase in the Bank Rate was effective as a temporary measure to meet a balance of payments crisis, but no one has ever suggested that a 7 per cent. Bank Rate is here for ever.

I think it is fair to say that the cost of capital, like the cost of anything else, is influenced by supply and demand, and we cannot really expect an era of very low long-term interest rates in circumstances in which the world is short of savings, and there is a growing demand for capital throughout the world. That does not make sense. Investment is not to be cut, but held back at its present level. I think the right hon. Gentleman said something about the level of investment. May I remind him that in his Budget in 1951 one of his major proposals was for abolishing initial allowances in order to reduce the level of investment. [Interruption.] Exactly, he did it deliberately. I thought the right hon. Gentleman would raise it. He deliberately planned to reduce the level of civil investment, as he said at the time, to make room for defence and exports. But we have at this moment a level of defence expenditure 32 per cent. above then, a level of exports 27 per cent. above then, and we are not cutting but maintaining a level of investment 70 per cent. above then.

If investment is not to be restrained, if the right hon. Gentleman is against all these cuts in investment, how will he restrain demand? Will he cut consumption, because that is the only alternative? If he will, what forms of consumption and where? Do not let us talk as if the matter concerned only a few garages, cinemas and petrol pumps, because they are trivial and do not have any real relation to the size of the problem whatever.

The right hon. Gentleman reverted again, as in the past, to the question of production, which is of immense importance, and I want to answer the serious argument which he put forward. Indeed, I think he helped me, because only in July he asked this question: Do the Government want production increased? Do they regard an increase in production as a solution? He went on to say: For what it is worth, I do not think that increased production is necessarily the cure for inflation. If it is due to increased productivity it helps enormously, of course. But if it is simply due to the re-expansion of industry after a period of stagnation, it is then certainly not a cure for inflation, unless, first, we have no trouble about our balance of payments, and we do not get what the Chancellor has warned us about, namely, a situation where, as production expands, imports rise and exports do not rise correspondingly, so that we are back again with a balance of payments crisis."—[OFFICIAL REPORT, 25th July, 1957; Vol. 574, c. 715–6.] That is exactly the point. Experience has shown that we cannot run this economy flat out the whole time without running into balance of payments difficulties. Therefore, it was possible, as succeeding Governments found, in 1949 and 1951, to take measures to restrict the pace of our advance in order to make that advance more sure and certain.

Experience has shown that, when we allow the economy to expand again, it happens that the rate of expansion of the level of incomes goes ahead of the rate of expansion of production, and we find ourselves back in trouble and faced with inflation and a balance of payments crisis. Therefore, it seems to us that in this connection, it is extremely important to find effective methods of insuring restraint of personal incomes if we are to help the problem of expanding production and avoid a return to a balance of payments crisis.

In talking of restraint, we are talking of all forms of personal income. It is perfectly true that attention normally tends to be fixed on wages, and there are two good reasons for that. First, the volume of demand involved in the case of wages is very much bigger than that involved in the case of dividends, and, secondly, rising wages always mean, as a consequence, rising profits and rising dividends. That is why attention tends to be focused on wages, but clearly the principles which apply to one form of income must in fairness apply to the others.

There are some things which we are not proposing that it has been suggested we are. We are not proposing to apply a wage freeze. Such a thing, I think, would be wrong in principle and impossible in practice, as experience has shown. We are not suggesting a Government-imposed wages policy, a phrase often used, but not so often fully understood, nor do right hon. Gentlemen opposite support such a suggestion. Nor do we propose to interfere with the established processes of arbitration.

Sir Frederick Messer (Tottenham)

The Whitley Councils.

Mr. Maudling

The position is that the Whitley Council in the development of the National Health Service wages position was not an arbitration, as my right hon. Friend explained. It is important to bear that distinction in mind. It was made quite clear by my right hon. Friend. I repeat what I said—that the Government have no intention of interfering with the established processes of arbitration. I think I can explain the position and our attitude in the matter by reminding the House of what the right hon. Gentleman opposite himself said. In his speech as Chancellor of the Exchequer to the T.U.C. in 1951, he said this: If incomes go up more than production goes up, then prices will rise. The truth is as simple as that. I would like to see it hanging as a text on the wall of every office inhabited by any employee or trade unionist concerned with negotiations about any increase in income.

Mr. Gaitskell

I am much obliged to the right hon. Gentleman for quoting from that speech. I stand by everything I said then, and I do not think that anything I said this afternoon is in conflict with it. I would ask the right hon. Gentleman, however, whether he is also proposing to adopt certain other measures which I proposed at that time, such as statutory control of dividends, and an offer to increase food subsidies in return for an agreement on wage stabilisation?

Mr. Maudling

I am certainly not advocating statutory control of dividends. I simply said that the principles which apply to one form of income should apply to another. I do not think he would propose the statutory control of wages. I am not quarrelling in any way with what the right hon. Gentleman said. I was quoting the right hon. Gentleman to show that, in this matter, the principles on which we are operating are those which commend themselves to the other side, and which would undoubtedly do the most good to this country's economy.

Not only is that true, as the right hon. Gentleman has said, but it goes further than that, as my right hon. Friend the Chancellor showed recently. If all production increases are absorbed by wage increases, it means that there is nothing left for the salary earner, the pensioner, the social services or the expansion of capital. In this field of wages itself, there is this difficulty—that some industries can increase their productivity by their very nature, much more quickly than the others. In transport, there is, I am sure, room for a good deal of economy and re-organisation, but we cannot expect a bus driver to double his productivity by driving twice as fast. Therefore, in wages, we cannot get a rough fairness between man and man if the total increase in productivity in the industries which can go at full steam ahead is absorbed by the people in those industries, leaving nothing for the others. These are weighty and difficult problems. On the face of it, they look like arguments for a wages policy, but I think that that would be entirely wrong.

What we are saying is that the principles I have been trying to state, which I believe to be in accordance with the principles the right hon. Gentleman set up on this wages point, should be observed by all who are concerned with wage and salary negotiations, with arbitration, or with dividend distribution. In all these matters, these principles should be borne in mind because they are a basis for fair play between one section of the community and another. That is the attitude of the Government, and I think that it should command fairly general agreement.

In the light of this policy, the Government must consider what they are going to do, first, as employers and, secondly, as controllers, in effect, of the volume of money, a subject to which I shall return in a minute or two. As employers, as my right hon. Friend the Minister of Labour said, we have said that we shall apply in our dealings with our own employees the principles which should be employed by other employers. For ourselves, we say that—no more and no less. We go on to say that, if increases in cost arise from increases in wages, then we shall have to find countervailing economies elsewhere within the total of government expenditure.

As controllers of the volume of money, we have, first of all, a direct responsibility in the case of the railways, and secondly, an indirect but equally effective responsibility in the case of industry generally. In the case of the railways, to which reference was made by the right hon. Gentleman, my right hon. Friends have made it perfectly clear that what we have said is that we cannot increase the amount of money flowing from the taxpayer to meet the railways' operating deficit. In so far as, in accordance with negotiations or arbitration decisions, they find themselves paying more wages, they will have to find that cost somewhere within their own resources. That is, I think, a quite fair statement of principle.

As regards industry generally, to which the right hon. Gentleman referred, he put forward some rather strange idea about bank managers asking people about their productivity—he knows that is nonsense; he knows about these things just as well as others do. He brought up the question of velocity of circulation, on which we could, no doubt, hold a long and erudite debate. I do not think he was right in attacking my right hon. Friend again on this point, because, surely, the argument is this, that the total amount of demand in any year is represented by the amount people earn plus the amount they borrow plus the amount they draw from their savings.

Whatever happens about the velocity of circulation, that is the total effective demand, and the Government's policy is to control the total effective demand, controlling it to this extent, that, when we say we do not intend to finance an inflation, we do not propose to perpetuate a system whereby the level of money demand always expands enough to allow higher wages and higher profits to be automatically passed on in higher prices. That is, I think, a simple statement of what we mean by financing inflation. That is our policy. We think it is the right one, and we intend to stick by it.

Mr. Frank Bowles (Nuneaton)

There are two questions here, balance of payments and inflation. I should be glad if the right hon. Gentleman would keep them apart. We encourage foreigners to come to this country, particularly Amen-cans, who spend a great deal of money, and therefore, I should think, increase prices. They certainly doubled the prices in Portugal, to my knowledge. In putting this question, I have in mind the inquiry about the new hotel where some Americans are supposed to be likely to spend nearly £75 a day. Supposing one hundred thousand come in and spend that sort of money during their three weeks' visits, and other foreigners come, how much of that will be responsible, does the right hon. Gentleman think, for inflation in this country?

Mr. Maudling

It would be responsible for an increase in effective demand; it would be responsible also for an awful lot of dollars coming to the Treasury.

Mr. Bowles

The two should be kept separate.

Mr. Maudling

The hon. Gentleman asked me to separate the cost of living and the question of foreign exchange. It was precisely because the right hon. Gentleman the Member for Bishop Auckland did make that separation that he got into the trouble he did, because they are two things one cannot separate.

Mr. Gerald Nabarro (Kidderminster)

Would my right hon. Friend permit a question from this side, a more sensible one than the last, I hope? My right hon. Friend has said, in relation to the nationalised industries, that it is not the purpose or policy of Her Majesty's Government to underwrite inflation. He has related it particularly to the railways. What is the position in regard to the coal industry? What is the position if the National Coal Board grants a large increase in wages? Does my right hon. Friend propose then to underwrite that by authorising a further increase in the price of coal, having regard to the statutory obligation on the Board to pay its way taking year with year?

Mr. Maudling

I refer to the railways for two reasons; first, because the right hon. Gentleman the Leader of the Opposition did and I was trying to follow him; and, secondly, because of the special position of the railways vis-à-vis the Exchequer. But it would be quite wrong and contrary to all precedent to discuss what might be the effect of wage claims which have not been formulated or put in, and I am, therefore, sticking to the railways.

I have been dealing so far with the Government's policy and defending it. I now want to turn for a little time to the alternatives which would have been offered by the right hon. Gentleman if he had troubled to tell us what his alternatives would have been. From a study of his recent speeches and those of the right hon. Member for Huyton, I gather that their suggestions fall into two parts: first of all, what we should get other people to do; and, secondly, what we might do ourselves. The first part is usually the more prominent.

The right hon. Gentleman proposes, for example, that there should be more international liquidity. The creditor countries would have to see about that. He proposes that we should study the problem of supporting world commodity prices. That is extremely important, but once again the main burden would have to fall on countries in a financial position to stand it. He proposes that there should be further and closer consultation with the Commonwealth. All these things depend upon the action of other people, and all these things, incidentally, are matters to which the Government have already paid close attention.

If the right hon. Gentleman would study what my right hon. Friend said at the International Monetary Fund Conference, he will find there an indication of how closely this point was dealt with at the international level. If he will study the communiqué from the Mont Tremblant Conference, he will there see exactly the attitude of the Commonwealth towards our common interest in maintaining the value of sterling. I do not, therefore, think that his suggestions add anything great to what is known already about our economic problems.

Another of his proposals is that we should have what is called a system of selective controls. I should like for a moment or two to analyse this proposal, because it is the only original proposal to come so far from the other side, and, therefore, it deserves close analysis.

What sort of controls do right hon. and hon. Gentlemen opposite mean, and how will these combat inflation? Do they mean import controls? No. The right hon. Gentleman stated again that import controls are no cure for inflation. Do they mean foreign exchange controls? I have explained already that one cannot force foreigners to hold sterling; one can but persuade them that it is worth holding. Do they mean raw material or process controls, a system whereby businesses must obtain licences for raw materials in a time when raw materials are in very easy supply?

Do they mean a system of process controls, telling people what they should or should not manufacture? Can one say that some industries are essential and some inessential, as has been suggested? Can one say, for example, that the toilet preparations industry is inessential and should be controlled? If the idea is to maintain process controls, and one is to say to the toilet industry that it is inessential, what will happen to its export trade, which is important? Can one really say to the people who want to buy lipsticks or cosmetics that, although they want to buy them and they have the money, they must not buy them because we must control the people who want to make them? The alternative will be that the products will be imported, and that will fall even more heavily on our balance of payments.

Lastly, the right hon. Gentleman apparently wants investment controls. This seems to be the principal starter in this particular race, and we have heard a good deal about it from right hon. Gentlemen opposite. These controls can take three forms—financial controls, controls over plant and machinery, and controls over building. So far as financial controls are concerned, we have the Capital Issues Committee and we have the instructions, advice or guidance issued to the banks, to which the right hon. Gentleman himself referred. Do right hon. and hon. Gentlemen opposite propose to have controls over the acquisition of plant and machinery? That, I think, would be a complete innovation in peacetime, and I do not think that it is seriously proposed.

Is it to be building controls? What can be done by controlling building? Of the total volume of building in this country a very large amount is maintenance. One can hardly control that and say what is to be maintained and what is not. The next really large chunk is factory building. Is it proposed to control inflation by telling people when to build factories or when not to build factories? Is it proposed to tell them when a factory is wasteful? Surely the best way of showing industrialists that certain factories are wasteful is to see that money cannot be got except for good propositions.

We are brought to the small section of miscellaneous building—about 7 per cent. or 8 per cent. of our total building expenditure. That includes hotels—which earn a lot of dollars—warehouses, shops and offices. They are hardly inessential. In fact, the only things that might be so regarded are some garages and cinemas—and I believe that for every cinema being built, if any are being built, more than one is falling into disuse. What building controls boil down to is a relatively small section of the economy. How can that be regarded as inflationary?

Sir Robert Boothby (Aberdeenshire, East)

I do not mind what the Leader of the Opposition said about import controls and inflation, but can my right hon. Friend tell me whether it is the considered view of the Government that we can afford to import dollar commodities in unlimited quantities, without having any regard to our balance of payments position with the United States? That is the one control that might have to be brought in.

Mr. Mourning

We do not do anything of the sort. The open general licence which covers the dollar area is for basic commodities, and the inessential commodities are still subject to a licensing system. These actions are not a cure for inflation. We cannot possibly cure inflation by stopping these things coming in, thus ensuring that there is an excess of demand over supply. If fewer things come in there is a smaller supply, and that makes inflation even worse.

Finally, we come to the possibility of price controls. It is quite true that it is inconsistent to say that price controls mean nothing and yet ask for restraint in passing on price increases. It is true that restraint in passing on costs in the form of price increases can be a great help in dealing with an inflationary spiral, as at the present time, but price controls as a permanent policy cannot deal with the problem of inflation. If we control the price of an essential commodity below its true market price we merely increase the demand for it without increasing the supply. That means either rationing or importing more to meet the demand. If we control the price of essentials and the volume of money is the same, the price of inessentials rises further, as happened in 1949 and 1950. Labour then flows into the inessential industries, because the returns are greater and the prizes higher.

Neither type of action can be a solution for the problem of inflation. I suggest that this great new policy of selective controls is rather like the patent medicines that are sometimes sold by hucksters, in magnificent bottles with fine labels on the outside, but with very little analysis of the murky contents, and which are said to cure all ills so long as the patient survives.

I have endeavoured to follow the right hon. Gentleman. I think that I have covered most of the arguments that he advanced.

Mr. Nabarro

My right hon. Friend has demolished them.

Mr. Maudling

Our objective is the same. We want to sustain the value of sterling. That is essential for internal and external purposes. If our objective is the same we can choose between the methods of the present Government and those suggested rather tentatively by the Opposition—and when it comes to a choice between the two there is no doubt whatever on which side the balance of the argument lies.

5.3 p.m.

Mr. Michael Stewart (Fulham)

In following the right hon. Gentleman, I should like to make one or two comments upon his speech. The first thing that occurred to me, as a layman rather than as an expert in the science of economics, was that we all understand that the policy of the Government is not to finance inflationary increases. My right hon. Friend inquired how that Government policy was to be carried out, and drew an interesting picture of what would happen if it had to be carried out by bank managers making themselves the vehicles of Government policy. The right hon. Gentleman said, "That is absurd; no body thinks that it will be done in that way." We all waited with interest to hear, if it was not to be done in that way, in what way it was to be done—but the right hon. Gentleman then moved on briskly to talk about the velocity of circulation.

My other comment upon his speech is that he showed a great desire to talk about 1951 rather than 1957. It is time that hon. and right hon. Gentlemen opposite, who try to avoid discussion of our present difficulties by referring to the grave difficulties of 1951, remembered one of the essential facts about that period. We were then engaged in a war—in military action—in accordance with our obligations under the United Nations. It was military action of a very grave and serious kind, and the successful resistance to aggression was one of the most important events in post-war history. This Government come to us at the end of this last twelve months having to their credit in that respect only the waging of an unsuccessful war against the United Nations.

When we were engaged in the Korean war every difficulty—political, military and economic—that the Government then experienced was ruthlessly exploited by the party opposite, from the Prime Minister downwards. Any attempt to compare the events of 1951 and 1957 while neglecting that fact is a dishonest presentation of the facts.

The main point that I wanted to make—and I am remembering Mr. Speaker's comments upon the desirable length of speeches—was the complete inadequacy of the Government's policies in view of the real problems with which we are faced. I have listened very, carefully to the two brilliant and learned speeches which have been delivered. What interested me was that, so far as I could judge, the conclusions to which economic science leads us in this matter are substantially the same as those to which common sense would lead us, namely, that if we want the country to get out of its economic difficulties we must learn to produce more. We must make an hour's work, a week's work, or a year's work more productive of things actually satisfying human wants.

In the short run, there may be considerations as to where we get our materials from, and how the balance of payments position fits in but, in the long run, unless we learn to produce more we cannot possibly get out of our economic difficulties. It is all the more important that we should realise that when it has been so spectacularly demonstrated to us in the heavens recently that not only this country but the whole of the Western world is very gravely under challenge, both in regard to its power to produce destruction and weapons of war and also in regard to its power to raise its own standard of life and to help the more backward people of the world.

We have to ask ourselves whether or not it is going to be true that democratic societies, which do not possess the power to compel all their people to act together, and which do not possess the power arbitrarily to concentrate all resources upon particularly selected issues, have in consequence a lower survival value than dictatorships. That is the big question facing us at the present time, and if it is answered wrongly it means the disappearance of human liberty.

I am speaking of something that need not happen this year or next, but something that might very well happen in our lifetimes unless democracies can show greater purpose and efficiency in solving their economic problems than this country has shown under its present leadership.

Democracies, not being able to become united by compulsion and by shutting the minds and ears of their peoples to any suggestion from outside or any criticism of what the Government are doing, have to seek that unity by giving people a belief in social justice—a belief that the set-up within which they are working is basically a fair one. Democracies, not being able by mere order to concentrate resources upon certain selected objectives, have to be able, by wise leadership, to persuade the whole nation that in time of difficulty one's energies must be concentrated upon making one's methods of production modern and efficient, and on concentrating upon the most essential things in the whole productive task.

What are the essentials for us today? Because of the need of a democracy to persuade its people that the set-up within which they work is fair, it has to make proper collective provision for those who are in need for any reason; it has to see that those who are working are satisfied, in the main, with the rewards for work, and it also has to see that the way in which wealth is distributed is fair.

Then we have to make proper collective provision for our defence, and, finally—most important of all—we have to make proper collective provision for the increase of our material equipment and our knowledge. It is those things that really matter if we are to get out not merely of the present economic difficulties, but of the menacingly declining position of the West in comparison with the fierce dictatorship of the East and the threat to human liberty that it involves. Those are the essentials.

How are the Government making out on them? I do not propose to say much on the first three because we have discussed them previously, but on the matter of collective provision for need I would say that the Government will have noticed the extremely cold reception that their rather inadequate pensions proposals have received. The fact that they are inadequate is evidence of the fact, to which we on this side of the House, both here and in the country, have drawn attention, that we cannot really make adequate provision for the old while we stick to the present plan of flat-rate contributions.

Why is it that the Government, with their far greater resources for discovery and research than can be available to an Opposition, are limping so far behind in this discovery? All that we have had from the Government is a rather silly and undignified performance by the Minister of Pensions and National Insurance trying to show that our proposals are unsound. The right hon. Gentleman was singularly unsuccessful in doing so, and merely drew public attention to the question of why is it that at a time when the Opposition, with comparatively limited resources for research and discovery, have put forward a workable answer the Government have only just begun to think about it?

On the provision for need, I hope that while thinking of pension rates some attention will be given to the earnings rule with regard to all benefits. This point was drawn to my attention very forcibly recently by a widow in my constituency who was just able to manage and then had a 10s. rent increase slapped on her. The only way for someone like that is a relaxation of the earnings rule principle.

The second thing I mentioned as essential was a just distribution of the wealth produced among those who are responsible for its production. When the right hon. Gentleman was challenged by my right hon. Friend the Leader of the Opposition as to whether he proposed to introduce any of the measures which went concurrently with an appeal for wage restraint in 1951, he again decided that it was more prudent to talk about something else.

I am not sure—I may be doing the right hon. Gentleman an injustice—but I do not think that he attended much of our debate yesterday. In view of his responsibilities today, that is understandable. If the right hon. Gentleman had listened to the debate yesterday he really would not have been able to get up today and say so calmly that of course the restraints applying to wages must apply to other forms of income as well.

The Rent Act is an invitation to a considerable section of the community not to practice restraint at all. The staggering thing about wage restraint is the fact that it is introduced after, to put it unkindly, the friends of hon. Gentlemen opposite have got in and taken their slice. The Government first of all pass a Rent Act and allow house owners to get a reasonable amount in their pockets. It is only after that that the Government decide that we must exercise restraint. Let us, said the Prime Minister, not be too anxious to see if we can chisel a bit off someone else. I wish that those golden words had been addressed to the landlords. One does not get the unity of purpose that a democracy requires by that kind of social policy.

The third essential which I mentioned was proper collective provision for our defence. Any one who heard the debate on that subject and heard or read the speech of the Minister of Defence will not feel that it is necessary for me to say anything much further about the Government's disastrous failure to meet that need. We all know that defence is financially and economically a great burden, but I do not think that we can get out of our economic difficulties simply by saying that we control it all by cutting down what we spend on defence.

We have to face the international situation in which we live. Moreover, I believe that if our economy were expanded at the rate at which it used to be expanded before this Government came to power, and the rate at which it could and ought to expand, the burden of defence would not be too great. What is disquieting is to meet all this defence cost and then to find that what we are getting for it in actual power of defence is so remarkably short of what we ought to expect.

My last essential was the need for maintaining our material equipment and knowledge. That is supremely important if we are to be a progressive economy. Unless we can step up the rate of increase of the national wealth year after year nothing else that we have been talking about is really going to make sense at all. The remarkable thing is that if we had to describe what parts of the Government's policy are going to be most obvious to people who are engaged in public work throughout the country, we should have to say that they are a slowing down of the rate of development of the publicly-owned industries and an attack on education at a time when we are in an economic situation which requires pre-eminently more material equipment and more up-to-date equipment and a more knowledgeable and better trained population. That is the situation. The circulars that have been coming out from Government Departments are circulars that strike at exactly those two things.

In the development of a better-equipped economy we have to pay particular attention to the public sector. We have heard speeches from some hon. Members opposite from time to time trying to prove that most of our economic difficulties are due to mismanagement in the public sector of our economy. Let us face the fact that, despite the propaganda from the benches opposite, no one really believes that the fuel and power industries, from an old industry, from coal, to the new form of atomic energy, could really be run by private enterprise today. It behoves the Government, whatever their own political predilections, to make up their mind that these great public enterprises have got to be a success. Public enterprise is going to be increasingly something that modern society must use.

Mr. Nabarro

The hon. Gentleman referred to the publicly-owned fuel and power industries. I am sure he will immediately concede to the present Government that the rate of investment this year—which is the level pegged for next year and the following year—in the three nationalised fuel industries is, approximately, £100 million for coal as compared with £30 million in 1951, £233 million for electricity compared with £181 million in 1951, and £60 million for gas, which is more than two and a half times as great as in 1951. That means that in every industry, in real terms and in money, the rate of investment today is far higher than in the days of the Labour Government.

Mr. Stewart

Remembering Mr. Speaker's words about the length of speeches, I am not going to allow the hon. Member for Kidderminster (Mr. Nabarro) to rekindle the smouldering fire of my eloquence. We have heard all that before, and what we are talking about, and have to talk about, are the things of 1957.

I spoke at the beginning of my speech about the silliness of continually bringing up 1951. The question at issue is not how these figures of investment compare with 1951, but how they compare with the needs of 1957. We have been told that they are to be held at a certain level. My point is that any kind of check on the development of this part of the economy is the last rather than the first thing one should look at as a way of dealing with the present situation.

The point I was making was that no one in his sane senses really believes that the fuel and power industries should be run by private enterprise. Public enterprise is as essential a part of the equipment of the modern State as any modern machinery—telephones, typewriters, anything else. Any Government who want to serve their country must make up their minds that they are going to make public enterprise a success. The present Minister of Education genuinely tried to do that when he was Minister of Fuel and Power, and earned the hatred and contempt of a number of his hon. Friends in consequence. One of the drawbacks of a Conservative Government is that they do not really want to see public enterprises successful.

Mr. Nabarro

That is not so.

Mr. Stewart

It is a prejudice we cannot afford at the present time.

Mr. Nabarro

There is no hatred at all.

Mr. Stewart

I expect we shall have an opportunity of hearing the hon. Gentleman either today or on some subsequent occasion.

I come to the question of knowledge. It will not be denied, I think, that one of the Government's reactions to the situation has been to make educational economies. I much fear that greater ones are threatened. There is in the Queen's Speech a reference, in language which I think is obscure because there is a certain amount of shame about it, to the block grant proposals. I am not going to develop the argument on that now, because other hon. Gentlemen have referred to it already, and we shall have later opportunities this Session to discuss it in full, but I want to remind the Government of this.

There is not a person in this country who knows how the educational system works who does not believe that this block grant proposal is injurious to the development of education. Ever since it was brought forward the chorus of protest against it has swelled, and even the Times Educational Supplement comes at the end of the queue at last unable to endure any longer the injuries done by a Conservative Government to education.

That makes absolute nonsense in a situation where one of the things we want is an increasing number of well-trained and well-educated people. The right hon. Gentleman was ridiculing controls. What is the circular recently sent out from the Ministry of Education but a control? We are told that one of the things we cannot do is what are called minor works, so that there is no chance, for instance, of turning a dilapidated, ill-equipped school into something suitable for the middle of the twentieth century. We are told that rural education is to be economised upon. When we know perfectly well that the opportunity which children in country areas have is already seriously inferior to that of those in the towns and we ought to be considering how we can prevent this throwing away of talent, we are told that rural education is to be one of the things at the expense of which there is to be economy.

I am not going to attempt to argue the whole thing out statistically, but I do know this, that in the neighbourhood where I live, on the borders of Kensington and Chelsea, week after week new shops open devoted to the selling of antiques or to the provision of beauty treatment for dogs, or something of that kind, which adds nothing whatever to the total wealth of the nation. It seems to me nonsense to say that while that sort of thing can go on we cannot afford to give children in the countryside a better chance of education.

No doubt the amount we could do for more essential things by preventing frivolous waste not so much of materials but of the energies of human beings on unnecessary and undesirable luxury consumption is not very great, but the point is this, that we are living in a situation where this country has got to face concentration on the essential and where we have got in every way we can to encourage the people not to think that they can go on seeing luxury expenditure growing while vital things are being neglected.

Mr. Maudling

I am listening closely to the hon. Gentleman's argument, and I see the point he is making, but how in practice are we to stop people from opening antique shops? What practical policy does he advocate to stop the opening of what he believes unnecessary shops?

Mr. Stewart

To be quite frank, I am not going to attempt to answer now. Does the right hon. Gentleman not know perfectly well, however, that if the country once made up its mind that concentration on essentials was necessary to national survival we should find the answer to the right hon. Gentleman's question almost immediately? He knows perfectly well that that kind of thing can be done by a nation which wants to do it, and if he, in his Governmental position, cannot imagine administrative ways of doing it, then that is a shocking confession of failure.

Most serious is the failure to make anything like adequate provision for what will be the growing number of students in our universities in a few years' time. I asked the Chancellor of the Exchequer a Question about this recently, and he referred to an announcement on 14th March last, an announcement which The Times newspaper commented on very adversely not long ago. It said, referring to the Government's proposal for help to universities in the next five years: Yet vice-chancellors' estimates of the amount of preparatory development"— that is, preparatory for the great growth in the number of people of university age we expect to have— that their recurrent grants will make possible in the later years of this quinquennium range from 'negligible' to 'modest'. From Cambridge comes the news in that paper: Prospects of fresh developments within Cambridge University during the next few years could not be described as anything but bleak… From Oxford comes the news that they cannot afford to keep the Bodleian Library open sufficiently long to meet the real needs of students. That is really an astounding thing to be occurring at a time when the Prime Minister tells us we have never had things so good.

Oxford University is reported to be faced with the prospect of a deficit of £89,000, says The Times, …at the end of the current financial year because the amount of Government grant is not sufficient to cover present commitments. Oxford reports that it is unable to make anything like adequate provision for the expansion we all know is necessary.

I have further references here to the Westminster Medical School, which is incapable of making provision for developments in medicine and veterinary medicine and agriculture; and to London University, which is unable to make adequate residential provision for the increasing number of students it can expect and which in the national interest it ought to have.

How much longer is this neglect going on? The whole situation is far more serious than the Government have realised. I repeat something I said to the House on an earlier occasion, that our whole civilisation is faced with the same question which Lincoln put in the middle of the last century, when he spoke of civilisation conceived in liberty and dedicated to the principle of human equality. The question is, can any society so conceived and so dedicated long endure? Will it have the vigour, the vitality, the power to concentrate on essentials that the tyrannies have? Not under the leadership of this Government.

5.30 p.m.

Sir Thomas Moore (Ayr)

As so many other hon. Members want to speak, I will not comment on either of the Opposition speeches so far delivered, except to say that it was rather unwise for the Leader of the Opposition to charge the Chancel-/or of the Exchequer with lack of candour, and, in fact, with deceit, in view of what many of us still remember of the late Sir Stafford Cripps, in the days before he carried out devaluation of the £. He denied it on many occasions, as we can ail recall.

I would also express our regret at the abysmal ignorance displayed by the hon. Member for Fulham (Mr. M. Stewart) of the Conservative attitude towards the nationalised industries. Many hon. Members resent some of the Bills that are passed in the House and they argue against them, but, in a democratic Assembly such as we believe this to be, when the Bills are passed into law we accept them and try to make them work. That is the attitude of this side of the House towards nationalised industry.

It was the Government's decision to refuse to finance inflationary awards that caused the Opposition to put on the Order Paper its Amendment to the Address in reply to the Gracious Speech. I should like, therefore, to preface my remarks with a few words on inflation. This bugbear, this menace, this pest of inflation has threatened us for years past, and for years past successive Governments have either ignored it or appeared to despise it or just accepted it, but until today no Government has faced it and fought it. It is only reasonable to express our gratitude that at last we have a Government who have the courage to grasp this vicious, poisonous nettle.

It was with a certain amount of cautious timidity that the late Sir Stafford Cripps referred to the need for "increased productivity" as he called it, but that was as far as he dared to go. But, as many hon. Members have asked in this and in other economic debates, what does that phrase mean to the laundryman, or to the railwayman? How can they produce more? Speaking for myself, I should be prepared to produce more if I knew how, but I do not know how to produce more or how to work harder. I am perfectly satisfied that I should be prepared to work longer hours for the same number or for fewer pounds if I felt sure that the pounds would thereby buy more of what I need.

Many of our fellow-citizens are still bemused by Treasury notes—those comparatively valueless pieces of paper, as paper, which are worth only just what they can buy. There is a feeling in a large section of the community that the more £ notes go into the pay packet, or the fatter the cheque, the richer they are. That is just nonsense. It will continue to be nonsense until and unless the Government finally succeed in controlling a possible run-away inflation.

Reference has already been made today to the mad inflation that occurred in Germany after the First World War and, therefore, there is no need to refer to it further. If Sir Stafford Cripps had courageously said that "we" must work harder or for longer hours, for the same or for even less money, he might have been understood, but to use words like "increased productivity" at that time, and even today, means very little. When I say "we" I mean all of us, the employers, the directors, the managements, the technicians, as well as the workers on the floor of the factory and at the bench.

I now have to say something which will create unpleasantness. The trouble up to now has been lack of courage among our leaders generally. Neither Governments, nor Oppositions, nor trade union leaders have had the courage to speak harshly enough, or tell the truth. Conservative Governments have been placed in a difficult position because of the declared hostility of leaders of organised labour. Many of us were shocked recently by a statement by one of these leaders that he considered industrial action might be properly taken to bring down the Government of the day if that Government was Conservative. That, in a most exuberant moment, was Mr. Hill, who is referred to by his friends as "Ted" Hill.

The present Government, therefore, have to walk very warily and delicately in their handling of industrial problems. The Opposition have kept quiet on the subject for fear of losing political support. Trade union leaders have feared that such open speech might lose them not only their members, but possibly their jobs as well. This has all arisen from the tragic decision of the Trades Union Congress to ally itself with only one political party. I have never understood this anachronism. The purpose of the trade unions and their declared aim have nothing to do with politics. Their professed and proper aim is to safeguard and improve conditions of work of their members, and more power to their elbow and success in doing that. In my opinion, our economic health will never be fully secured until the unions and their leadership are completely divorced from any political affiliations, whether Liberal, Labour or Conservative. [An HON. MEMBER: "Or Communist."]

As the Government have so courageously gone so far, would it not be wiser to increase and develop their attack on this enemy, inflation? At present, as far as we know, the limits of their attacks are the credit squeeze, the restrictions on hire-purchase, the Bank Rate and the refusal to finance inflationary wage awards. Are those enough? We have had a declaration on the subject today by the Paymaster-General, but I sincerely ask whether it was right to balk at dividends.

I ask why the Government leave dividends untouched, if only for the reason that the psychological effect of dealing with them would have a restraining influence on wage demands and on the whole attitude of labour towards profits and dividends. I do not think that it is deliberate, but much misunderstanding exists in many minds about dividends. This is. I regret to say, largely due to the Press, which proudly announces one day that a record dividend of 15 per cent. or 25 per cent. has been paid by such and such a company. No doubt that company is rather proud of the publicity, but it would be fairer and wiser if the Press, when making such announcements, pointed out that the actual dividend, the return received by the stockholder, the owner of the shares—and many of these are in the modest-income group—is about 4 per cent. or less. I am sure that the confusion created in the minds of wage-earners and other workers would be readily relieved if that were done.

Mr. Charles A. Howell (Birmingham, Perry Barr)

The hon. Member might also like the Press to state how many bonus shares are issued as well.

Sir T. Moore

That remark reveals another misunderstanding, but I will not go into the subject now. It could be easily shown that no one is better off as a result of a bonus issue.

Mr. John Hall (Wycombe)

Will my hon. Friend also agree that, while the real value of dividend income has fallen by 30 per cent., the real value of wages has gone up by 40 per cent.?

Sir T. Moore

I am glad that my hon. Friend has reminded me of that point and I hope that he will have the opportunity of developing it further. I seem to have started a discussion which has nothing to do with my speech. Perhaps I had better get on with it.

I was not quite in agreement with the statement made by the Paymaster-General that it would be improper to freeze either dividends or wages. Could there not be a general freeze for only one year, until this wild orgy of luxury spending has been halted and the enemy has been crushed? Quite properly, there is to be a freezing of investment for two years—

Mr. M. Stewart

And rents.

Sir T. Moore

Wait now—rents are a different subject altogether. The Government have shown great courage, as indeed with the Rent Act, in bringing forward oppressive restrictions which they knew would lose them support in the country and also possibly cause a certain amount of disunity amongst their own supporters, but which they believed to be right. If the Government accepted the proposal to freeze dividends as well as wages, it might lead us back to the unity of a one-nation country. We united to face the physical peril of war and succeeded in winning. Here is an even more dangerous enemy, this economic enemy of inflation.

We know that there are many wise, shrewd, far-sighted, and patriotic men on both sides of industry. We were greatly encouraged to read some of the remarks made at the meeting of the Institute of Directors last week. These showed that, if the will is there, we can defeat this enemy, but we must have the will and we must got the leaders on both sides round a table, so that they can see each other's point of view. I was glad to read that the Chancellor took that step last week. We could then discover where the difficulties lie, where the misunderstandings lie, if there are any, and how they can be ironed out to ensure justice for all.

In conclusion, I believe that the general policy of the Government should be, as I believe it is, to offer suitable incentives to those who try, to give adequate rewards to those who succeed, to provide reasonable security for those who fail through no fault of their own. Finally, and this is important, they should ensure that justice is done to those on fixed incomes and pensions. That is the one section of the community without any organised strength but with the greatest grievance.

If we united that policy at home with a similarly intelligent policy abroad, I believe that there would be no end to the continuing greatness of Britain.

5.43 p.m.

Mr. Jack Jones (Rotherham)

One could agree with much of what was said by the hon. Member for Ayr (Sir T. Moore). If what he said was shown to be accepted by direct evidence from the Front Bench of the Government, we would agree with what he said rather more than we do now. Actions speak louder than speeches, and I want to bring the House back for a few minutes to the situation as I see it today.

A few days ago the Prime Minister said that we had better not start to knock each other about. That was a laudable thing to say, but it is regrettable that the right hon. Gentleman said it after he had already set about the people who should not be knocked about. Here we are in the year 1957, when the Chancellor of the Exchequer was able to hand out largesse of £100 million to those who did not really need it, and in the same year the Government tell the old-age pensioners that there will not be even the skin off a sausage before next Christmas.

That is the kind of thing which is harrassing and bewildering and upsetting the ordinary working chap. We have listened to two brilliant speeches today, but I suggest to the Front Benches that if the average British working man reads HANSARD tomorrow he will still be harassed and perplexed and worried. He is not worried about the balance of payments and the dollar and the fellow who preferred to put his money into the mark rather than into sterling. What Bill Smith wants to know is where he is going to get next week's wages from, how much they will be, and how long will they continue. That is the situation. What do people see around them? They see around them rising profits. I am not one of those fools who say that industry can be run without profits. There must be profits, there must be the finance to plough back, there must be new finance.

The hon. Gentleman the Member for Kidderminster (Mr. Nabarro) seemed to think he was scoring a point when he mentioned the huge amount of money that this year has had to be found for the three fuel and power industries. That is an indictment of all the money that was not found for them in the past. That is an indictment of the situation in which they were left. The more that is needed to be done today suggests logically that some of it, at least, could have been done in years past. But to talk about the years that have passed is like talking about water flowing under the bridge, it is futile; and this debate has something to do with labour relationships.

I am proud to come from an industry, with which I am still associated, which is proud of its labour relations. In the main, this arises from the fact that the men are paid for what they produce. They are paid to the third and fourth decimal part of a penny per ton, and it works. It sounds fantastic, but it works. Those men look to this Government, as they would look to a Socialist Government, to make it possible for them to make their contribution to solve our economic difficulties.

So does the agricultural labourer. Is anyone prepared to say that the agricultural labourer of this country, working in the greatest basic industry, is getting a fair deal? Is anyone prepared to say that, relatively, having regard to the cost of living, the man who can milk the cow, who can forecast tomorrow's weather, who can plough furrows, is being paid as he ought to be paid relatively speaking? Of course he is not.

Then we come to coal. I know that there are many mining representatives in this House, and I know that they are perturbed. Once I got into an awkward scrape by talking about Saturday morning work in the coalfields. I remember being rather a lone voice in that connection. Well, we are not getting all the coal we want with Saturday morning work. How would we have been without it? Those men have made a huge sacrifice. I am the last man in the world to deride or belittle what the British miner is doing. He has the rottenest job of all, in the worst circumstances. Yet the facts are there to be seen and we must face them. Many of our young fellows in the mines do not seem to accept that sense of individual responsibility to their country that I would have them do.

I do not want to advertise the facts of absenteeism, but any miners' representative who talks to me in confidence is perturbed and worried. I should like to see the production we get in the week before Christmas every week in the year. That is asking a lot, perhaps it is asking too much. I know, however, that if this nation gave a sense of importance to the ordinary fellow, which it has never done up to now; if this Government would give credit where it is due, and stop talking about what people do not do, but talk about what they are doing and are capable of doing further, we should get somewhere.

Steel has been mentioned today. The industry is doing a great job of work. It cannot do any more with its present capacity. It works round the clock. It has worked 168 hours a week since long before the last war, and is continuing to do that. Labour relations are good; none better in the world.

I know that the leaders of the mining industry, including Jim Bowman himself, are worried about the situation. I happen to know that there is a well-founded rumour that he is looking around for guidance on a cure for some of the evils in the mines. And of course there are evils, of course there are black sheep in every family. Indeed, I might have been the one in my own. There are problems that have to be solved, and the Prime Minister was right when he said that we had better not start knocking each other about.

Having regard to the international situation, this nation is too small for it to divide itself by industrial anarchy or industrial trouble. The hon. Member for Ayr said that one leader of a trade union had stated that he thought the ills could be cured by industrial action. That man was talking through his hat, and I tell him so publicly. Any industrial leader or any Communist shop steward, or indeed any Socialist shop steward, who seeks by industrial action to do something which will make the problem of my party greater when we come back to power is a fool, because we have problems big enough. I believe in my heart that the Labour Party will come back to power at the next election.

There are many other fools in this country, people who think that if they put a cross on a piece of paper in a different place from where they put it before, then they cure economic evils. They do nothing of the sort. What we must do is convince those people who put these crosses on the pieces of paper in sufficient number that, having done so, they should support and work for a policy which will bring about a reasonable climate in industry and a sense of fair play all round. At the moment that is not in evidence. It does not exist.

We must face the facts. The average man in the workshop is worried and perturbed. He listens to all the airy-fairy stories and then he looks at the Stock Exchange prices. He knows that big dividends are being paid, particularly in engineering, and at the same time he thinks—as he is entitled to think—that the Government, by their philosophy and their policy, are in some way trying to coerce the leaders of industry to prevent the workers from getting what they know they are earning. The Government Front Bench will argue that this is not so, but, like other hon. Members, I have found that my postbag is already full of resolutions on the subject from my constituents. I have received a spate of communications from National Health Service employees about it. I have heard from the railwaymen, too, because the Gowers Report has not been implemented. The Resolutions are beginning to be sent in to me in large numbers.

In this democracy of ours it behoves every one of us, regardless of party, to put our country first. Having travelled in many countries, I still believe that this little island of ours, with all its ills and evils, is the finest country under God's sun. But those who are called upon to toil and work to maintain its preservation honestly believe that they are not getting a fair deal. This talk of trying to prevent wage increases and trying to clamp down on legitimate wage claims is leading to industrial trouble.

I am not one of those who claim to possess all knowledge about industry; I possess only knowledge of the industry from which I come. Nevertheless, I know that in the final analysis everything which is wrong has to be settled round the table. This idea of either a Tory Government or even the trade unions setting about the Government with a big stick, and believing that at the end of the day the evils caused by their so doing will have created a better position than that from which they started, is poppycock.

Let us consider the position in Germany. I am not surprised that foreign investors are investing in the German mark. I have been to Germany more than 40 times since the war, and what we see there we can believe. Whatever we think about the Iron Curtain or about the policies behind it, both Western Germany and Eastern Germany are going ahead economically. They have no Stock Exchange in East Germany and no fiddling of expenses sheets, etc. They have raw materials and labour, working under the compulsion of tommy guns, and they are getting production. It is the wrong way to do it, but the fact remains that they are producing commodities which are being sent into the world's markets, where they are competing with our commodities.

For the period they are to remain in power, which will not be long even if they run their full course, the Government will do well to seek to create a climate of opinion in which people will try to create wealth in order that everybody may live decently, instead of having luxury on the one hand and on the other hand, at the bottom, people struggling, as old-age pensioners are struggling today, on a bare pittance.

Yesterday I listened to the debate about rents. It is all very well to say that we should not knock one another about, but the body blows have already been delivered. The increase in the Bank Rate means an increase in costs for everybody buying a house. We have had the body blow about the suggested wage freeze and the clamping down by the Minister of Health on an award, with his instruction that the award is not to be implemented. All those things militate against the best interests of a healthy climate of opinion and industrial harmony. Industrial harmony is essential if we are to survive. The more we knock each other about and the more we decide that political animus and venom will suit the best purposes of Britain, the more will Mr. Khrushchev and his pals laugh themselves to pieces.

5.56 p.m.

Sir Toby Low (Blackpool, North)

There was a time, about four or five years ago, when it was invariably my privilege to follow the hon. Member for Rotherham (Mr. Jack Jones) in debates. Then, as now, apart from some political forecasts, I always found a good deal of jolly good sense in what he had to say. Then, as now, he was a good example to us of a man who did not mind telling the truth to his friends or his opponents and did not mind having the truth told to him. I agree with him that we do not want to knock each other about, but we must not be so pussy-footed that we are unable to tell each other what we believe to be the truth. In that I follow him and agree with him.

May I try to put before the House what I believe are some important factors about the present situation and the issues before us? I think it was a pity, to put it at its lowest, that in a debate opened by the Leader of the Opposition we heard from him no constructive proposals. He spent some time in a lucid and clear way trying to knock about some of my right hon. Friends on the Front Bench and then, in passing, he put forward the suggestions for exchange controls and some selective controls. In all those suggestions he was completely defeated and his argument explained away in a masterly fashion by my right hon. Friend the Paymaster-General.

Mr. Nabarro

He was demolished.

Sir T. Low

I do not think I need refer to the speech of the Leader of the Opposition, therefore, and I will turn to the terms of the Amendment.

It would appear from the terms of the Amendment I know this was meant to be a debate on the economic policy of the Government, but we must have regard to the terms of the Amendment—that hon. and right hon. Members opposite really think that the removal of inflation will not strengthen our production and will not increase productivity. They appear to be making all this fuss because, as they think, in the short term production will not increase as much as it might have done and some investment will be postponed. The fuss has rather fizzled out this afternoon because the Leader of the Opposition himself admitted that the level of production by itself does not solve inflation. Indeed, he went so far as to admit—and my right hon. Friend, I know, agrees with this—that the level of production itself in certain circumstances can lead to more inflation.

We must have regard to the object of production. The object of production is to sell and in this country the main object of our industrial production must be to sell more overseas. Of course, if demand at home is increased we can sell more at home and we can produce more for home consumption, but that leads to balance of payments difficulties and to inflation as we experienced—we must be frank and honest about it—at the end of 1954 and the beginning of 1955. Those problems were solved by reducing demand; exports went up and imports went down.

It is quite a good thing to see how producers for export are affected by the present policies of the Government. Of course, productivity, efficiency, investment, good management and all that are very important to exports. There are, however, two factors which are of prime importance concerning exports. The first is one that we all know well, and that is prices. If our prices go up more than those of our competitors, we do not sell so much overseas. If our prices remain steady when our competitors' prices go up, we will certainly sell more overseas and we will certainly get more production at home; and not only will we get more production, but we will get a higher standard of life.

There is one other point about prices. If industry is able to quote firm prices for large contracts several years ahead, it will be in a far better competitive position than it is today. Industry is not able at the present time to quote firm prices covering several years ahead without large contingency sums to cover increases in labour costs, in rail freights and in the price of coal and of other home-produced necessities.

We know perfectly well how labour costs have risen in recent years. They have been going up ever since the war. The Treasury Bulletin for Industry for September gives the figures for between 1950 and 1956. Wages and salaries rose by 70 per cent., output by 21 per cent. and the labour cost per unit of output in manufacturing industry by 40 per cent. In those circumstances, to put it at its lowest, we are hampering our export effort. That plays far more part in the level of production than anything else which has been talked about this afternoon. We cannot get round that by subsidies or by dumping. We cannot do that as a large world trading nation.

The first point, then, I want to make is that the best contribution to higher production and to higher exports would be steady labour costs. That does not mean that wages do not go up; it means that they do not go up by more than the increase in productivity.

My second point is that in selling overseas it is vital to our industrial effort that we are flexible. We cannot have a flexible economy if demand is too great. We cannot have a flexible economy if there is over-full employment. We saw that a year or two ago too.

We must have change in our industry. As some of my hon. Friends wrote in a pamphlet two or three years ago, "Change is our ally". If we examine our exports and the success of our industries we see how that success has depended upon change, upon new exports from year to year and almost from month to month. We must be flexible enough to deal with that. We cannot be flexible if demand is too high. We cannot sell if prices are too high.

There has been much talk about productivity, but do not let anybody think that getting our money affairs in order will not have some effect upon productivity. It will have an effect upon it because it will encourage efficiency in industry. Efficiency in industry is encouraged when economic conditions are such that the efficient man wins and the inefficient man loses or goes to the wall.

When we had a soft home market, that was not encouraging efficiency. When we have a tight home market, that is encouraging industry. The contribution made by my right hon. Friend the Chancellor of the Exchequer to industrial efficiency by the Restrictive Trade Practices Act is already being felt; it has already had its impact in industry. An even greater contribution, however, has been made by getting rid of the worst part of the demand inflation a year or two ago.

Now I come to investment. It has often been said, but it is worth saying again, that the present level of investment, even the level following the curbs recently imposed by my right hon. Friend the Chancellor of the Exchequer, is a level of investment leading to stagnation. That is a ridiculous argument. We have had from my right hon. Friend the Paymaster-General this afternoon the figures of increase in investment in the public sector and generally since 1951. They speak for themselves. Is it not just possible that if the Government ensure that only that amount of money is spent on investment which is covered by savings and can he represented by resources, we will get sooner rather than later the new plant which we all want?

There must be many cases known to hon. and right hon. Members of investment plans made three or four years back which have not yet come to fruition because the plant has been delayed. That has been due to the fact that we were trying to do just a little bit more than we could do. So do not let us think that a pause in investment need hit us very much, but let us all concentrate on trying to make that pause as small as possible.

There is one point I should like to make about investment in plant. In the last four, five or six years, I have had a good deal of experience in going around industry and I sometimes think that our crying need in industry is not necessarily for more plant, but to make better and fuller use of the plant that we already have.

Mr. Nabarro

Double shifts.

Sir T. Low

The October issue of the Treasury Bulletin for Industry contains a very interesting passage about the American attitude to shifts in industry. It points out that American engineering industry makes far more use of three-shift systems than we do. As a result, American industry is able to make fuller use of its plant and to turn it over more quickly. If plant is turned over more quickly, the more quickly can the most modern and up-to-date plant be introduced into the factories. It may be that there is a part for the Treasury to play in all this in reconsidering the basis of depreciation allowances.

One other point which I should like to make about investment concerns research and development. Whilst I was at the Ministry of Supply, I learned the great value of the expenditure of vast sums of money on defence research and development. The great value extended into the civil field, and it can be seen now in many of the export orders that win us so much money overseas.

I am not advocating the maintenance of defence research and development for that purpose. What I do say is that it may well be right to rethink over the whole problem of the part that the Government, through the Department of Scientific and Industrial Research, or through some other central body, play in financing basic and secondary research and development proposals, because that, too, is vital for our production, productivity and success in export markets overseas.

I want to say a short word on industrial relations also, but before doing so I should like to mention one point about the Government's present policies. The Paymaster-General reminded us that economics was not a very exact science. I consider my right hon. Friend a very good man to remind us of that, because of all the men I have listened to in this House he has the ability most clearly to explain an economic problem so that I can understand it. All this clever talk from the economists on the benches opposite—they have all now left the Chamber—about the difference between demand and inflation, and the wage push or cost pull, whichever it is, of inflation, may be very good for debates in this House, but it does not help to solve the present problems. It is true that before when we have had a demand inflation that has been largely corrected by attacking demand. It is true that the main cause of the present inflation is the push that constant increases in wages without productivity gives to prices and costs.

Surely, it must also be true that those wages could not be paid unless the money was there to pay them, and that is the reason why it seems to be right that the Government should tackle the problem of money supply. It is a great mistake for hon. Gentlemen opposite to think that the policies of the Government hit only at wages. They hit at profits too. The hon. Member for Rotherham said that profits were still rising. If he will examine the latest returns and statistics published in the Financial Times, he will see that that is not so. There are large parts of the engineering industry—

Mr. Jack Jones

Particularly in the engineering industry.

Sir T. Low

It is particularly the engineering industry in which the hon. Member will find that the position has been reversed.

In fact, these measures for curbing the supply of money will not hit directly at any one section of the people. If any one section is hit, it would appear, from the information one receives, that the damage will be caused to the one section of our people who have already suffered most from inflation. Do not let us think that either this policy or the general policies of the Government are aimed at or are likely especially to hit organised labour or the working people, They will not. After all, organised labour—the workers generally—have done better than any other section of the people since 1951. They have enjoyed a real increase in their earnings of 15 per cent., and we should not forget that. I ask hon. Members opposite not to forget it when they attack the Government for injuring industrial relations.

No one has thought more deeply about these problems than my right hon. Friend the Minister of Labour and National Service. Hon. Gentlemen opposite who know my right hon. Friend will agree, and the same could be said of many of my right hon. Friends in the Government who have had to deal with these matters. There is a better understanding in industry. Men are beginning to feel that they have a greater stake in the country and in industry. Certainly we can go further. And from the employers' side we were very encouraged to read the speeches made at the recent annual general meeting of the Institute of Directors. Whatever anybody may think of the detailed proposals of Lord Chandos, the fact that he made those proposals at least shows that he and other leaders of industry are thinking of what is to come next after the end of the pause now advocated by Government policy.

It is important that both sides of industry should realise the necessity to think about what is to come after; when this policy has been the success which I am sure it will prove to be; when there has been a pause, and when we have had time for output to catch up with income. What is to happen after that? I repeat again, whatever one may think of the detailed proposals of Lord Chandos—and many of us think it would be wrong for any one industry to try to put all the increases of its productivity into increased wages—there is a lesson for us. We should think out perhaps a better system, a more secure system, for the aftermath so that men working in industry may know that they will enjoy the fruits of their labour.

I have had to go overseas a great deal in the past few years. In fact, when I was at the Board of Trade I visited 18 different countries, and I have been to one country since. I found out a good deal about our industrial production and export efforts during those visits. There was one thing which I encountered everywhere I went. It was that men who have respected and loved us were suspicious about our ability to cure our inflation. Because of that, some of them—not all, of course—did not order goods from us. Because of their suspicions about our ability to cure inflation, some of them do not leave their deposits of money with us, or else they move them away. We are now being judged in the world more than ever before on the simple issue, are we or are we not going to cure inflation; are we or are we not going to make our money honest at home so that it will be worth at the minimum 2 dollars and 80 cents. Overseas in the future?

That is the big issue and we must solve it. It does not matter what excuses or alibis we may have; we know that if we do not solve that problem, we shall go down. We cannot have the simple expedient of devaluing once again without it being far more disastrous than before. While I agree with and support the policy of the Government that there should be no wage freeze, no Government wage policy and no interference in the established processes of the Treasury, I say with all the sincerity I can that we have to see that our costs do not go up. I believe that this Government and its supporters and the country will be judged on our success in that respect.

6.18 p.m.

Mr. D. L. Mort (Swansea, East)

I am sure that the House will forgive me if I do not follow the trend of this debate so far. I have a specific subject to which I wish to refer and in doing so I shall give a practical demonstration that I listened with attention to the advice which Mr. Sneaker gave us today about being brief. My subject concerns South Wales and the industrial revolution happening there in the tinplate and steel industry.

When we look at the past development and the modernisation of the steel and tinplate industry we note that over a period of years it has come along gradually. The people of South Wales, Monmouthshire and North Wales have known that this cloud would descend on them eventually. There have been many phases of it when we thought that there would be a disaster, but the industry recovered. Then we had 600 Italians to help us. Now, again, a recession has come into the world markets. Tinplate produced in modern mills is what people now require. The old tinplate mills and steelworks have gone out of commission. It has been a gradual process.

A lot of people displaced have been absorbed, but now saturation point has been reached. During the last fortnight, four industries have closed and two others have informed their workers that in a week or two they also will close. They are not only tinplate works, but steelworks. In my industry, Messrs. Stewart and Lloyd have just informed the people working in their tube works in South Wales that the works will close down within a very short period. The death of Sir William Firth stirred my memory about the progress that has been made. He was a great prophet and what he prophesied has come to pass.

The people in the tinplate and steel industries of South Wales are not Luddites. They do not complain about the wonderful things that have happened. They welcome them. As I have said in this House before, God did not make men to work as hard as they did in the old-fashioned tinplate industry. Everyone with experience of it will agree. New conditions have come. There are many old philosophers in these industries. I spoke to one old tinplate worker who had lost his job. "Jim," I said, "don't forget progress." "I welcome it." he said, "but, my boy, if the scaffold is made of gold that is of no advantage if it is going to cut your head off." That is the kind of man of whom we are talking.

My plea to the Government and to the House is not an individual one; that would be bad enough. I have known these men for more than thirty years. I speak for the communities such as those in Gower. My hon. Friend the Member for Gower (Mr. Grenfell), as the Father of the House, will know Pontadawe, Gorseinon and Goweston. What is going to happen to them? The younger men will go away from them, as they must, to live. Those communities will be left with the older people. The Government should be aware of all this. They must be aware of it, because they appointed the Lloyd Committee with the definite objective of advising the Government what to do in such a situation, but nothing happened.

This is a great sociological problem and we must face it. Everybody will agree with the idea of Remploy, the wonderful scheme of Governmental assistance to disabled men, but here we are talking not only of men but of communities that may rot and die. That would be terrible. When people begin to lose hope, as they will in such a situation, they must be helped. What can the Government do.

I suggest that the Government should meet the employers whose works are closing and, if necessary, offer an inducement. The buildings concerned are very good industrial structures. The Steel Company of Wales has advertised that it will welcome the occupation of its buildings, and I do not suppose that it would make a charge. The Government could go forward in that direction. Something must be done so that this curtain—this iron, steel or tinplate curtain—may be drawn away. We cannot afford to let these communities die like modern versions of the "Deserted Village." The villages are deserted and every time the gates of the cemetery open another step is made towards annihilation of the little cottages and villages.

I appeal to the Paymaster-General, the Minister of Labour, and others. I know they are sympathetic, but I want the House to declare that they must do something about one phase of this great industry which is now passing out.

6.26 p.m.

Sir William Robson Brown (Esher)

It is a remarkable coincidence that I should have the opportunity to follow the hon. Member for Swansea, East (Mr. Mort) and to support him, quite spontaneously—I did not expect that he would speak or that I should follow him—in reference to the closing down of many steel and tinplate works in South Wales.

I managed many of these works myself. I have walked the floor of these mills. When I read the other day that these plants were to close down one by one, the news did something to my heart. Behind these mills were the hundreds of men whom I knew and remember. I hope that they have not forgotten me either.

I support the plea of the hon. Member for Swansea, East, to the Government. This is a very especial case, completely out of the ordinary. These people are in a grievous plight. It is no one's fault. It follows from the march of time, which is having its effect upon the small villages in and around the Swansea Valley and in Monmouthshire. Very careful consideration, the support of the employers and consultation with the Government are required to make some of those fine, comparatively modern buildings available at favourable leases, or even at leases with no rental attached in the first period, so as to bring new industries to those small communities. I say from my own knowledge that the employers in the Tinplate Association who are involved in this matter have, over a period of years, been compassionately planning for this sad day. They have made splendid provision for men in particular age groups who will be the most damaged and injured.

It may not be quite the same with the steel plants. I have a pretty good feeling that the employees of the steel plants will not find the company that employs them unsympathetic; very much the reverse. There is no wish on their part to turn away thousands of men who have served them so long and so well. There is no class of labour in any other industry outside the pits that has worked harder than that in the old hand mills of South Wales.

The Prime Minister of our country made an utterance last week which every thinking man and woman supported, when he said that we were at a turning point in our history. He was thinking of the broader international scene. I know his mind was moving on the problems of inflation and the fall in the value of money. He was also thinking of the actions of the Government in the financial and economic world. I support every one of them without reservation. His appeals to labour were based on the vital urgency of the situation that we face.

Unless all of us—and I mean all of us, not one section of the community, and I shall define some of those sections which require to show more restraint than others and do not include old-age pensioners, war disabled and people living on savings and fixed incomes earned in other days, who have been forbearing beyond all measure—unless we all show this national restraint and national conscience we shall go the way of France. That is the road we shall travel. Where France is showing narrow self-interest France is destroying the nation and forfeiting the respect of the world. No longer in the eyes of the world is she a first-class nation.

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

She has been invaded three times.

Sir W. Robson Brown

Yes, she has been invaded three times; but that is not a reason for their not living up to their obligations as citizens of a great nation—a nation which could be great again. I cast no aspersions on the French. I hope that under their new Prime Minister they will find a new road. His rôle is one of toughness; the times demand a sincere and honest facing of the facts.

I have a feeling that on both sides of industry—in management and trade unions as well—there has been enormous temptation to think that there was some virtue and some advantage in inflation and foolishly to try to float on the leaky water wings of inflation. Soon, if inflation is not stopped, we shall get deflation and the water wings will be deflated. If we do not stand together we shall again get mass unemployment and general misery for all. Those are the facts we have to face and I think the Prime Minister had them in his heart and in his mind.

Mr. Sydney Silverman (Nelson and Colne)

We have been telling the Government that for years.

Sir W. Robson Brown

Certainly, but hon. Gentlemen opposite have not stood up to the proper solutions. The hon. Member for Nelson and Colne (Mr. S. Silverman) will have an opportunity to speak later. I do not want to enter into an argument with him now, as he is much too clever a man for that.

Nations are not judged by the words of their leaders, clever as they may be, but by the actions, quality and behaviour of their people. That is what makes a nation great and that is why at this moment, speaking with all my heart, I say that the British nation is on trial and words have to be backed by action. What I believe the world is requiring and expecting of us at the moment is that we shall be able to stand on our own feet. The American alliance on the defence front and on the wide N.A.T.O. front, and the understanding between our two nations is absolutely vital and necessary. The general friendship of Americans for us is more deep and profound than we sometimes realise, but we must stand on our own feet and not always be turning to see what is happening in America before deciding what is to happen in our country.

The nations of the free world and nations which have not the standards we accept require that an Englishman's word should be his bond. Therefore, I suggest three vital points. First, the £ should be a solid, reliable, static £. I was in sympathy with part of a speech by an hon. Member opposite and I knew what he was trying to say, as it is in many of our hearts. Second, Britain must build up a free and secure society and way of life which will be an example to the world and the proper answer to Communism. We cannot answer Communism with words. We cannot tell people that Communism is wrong in words—we have to show that in our country we have a free and secure way of life for all in the nation and that there is no exploitation of one by another.

Third, we have to aid and develop the backward countries of the world. We used to be tremendously proud, as I was as a young lad, to see so much of the world marked in red on the map as the British Empire. Perhaps in those days I did not realise the responsibilities which went with that pride. We cannot repudiate them today. If we have any value as a leading nation we must so conduct our affairs that there will be an excess of production of material and men to send out to aid and develop the backward nations. This whole question is far above party politics. It is a bitter regret that tonight we have to divide the House on one of the greatest issues facing the nation. Some of the young men in my constituency, young Conservatives, have asked, "Why can't you get together, you and the other side, and concentrate for a little time on the things that matter?"

Mr. Arthur Lewis (West Ham, North)

On the Rent Act?

Sir W. Robson Brown

Never mind about that. The hon. Member for West Ham, North (Mr. Lewis) can speak on these topics at other times; there is plenty of opportunity.

On this issue it is a question of the conscience of the nation being roused. There is far too much selfishness abroad in the land. The answer to the problem will not be found by everyone asking for more and forcing the cost of living still higher. If there were a referendum of the country and housewives were asked if they wanted their husbands to have more pay or stability in the cost of things they buy, I do not think there would be any doubt whatever that all the people would vote for stability, not for more and more wages or more and more profits and dividends.

A stern duty has been laid on both sides of industry by this crisis. It is not new. Political capital cannot be made out of it. Hon. Members opposite were in exactly the same dilemma in the time of Sir Stafford Cripps, and now we are facing similar difficulties. Unless we face them together and are truthful about the basic causes we shall never arrive at a solution. Words alone are of no importance or value. I say quite bluntly that at this time in the nation's affairs anyone who selfishly pushes up prices without justification or regard to cost of raw materials and the like—which may be beyond his control—or who pays excessive dividends or asks for higher wages or shorter working hours without justification, is lifting his hand against our nation.

Mr. Lewis

And Surtax payers?

Sir W. Robson Brown

If we want the best work out of a team we have to pay a man for the value he gives, and that goes for Surtax payers as well as for anyone else.

Mr. William Ross (Kilmarnock)

The hon. Member for Esher (Sir W. Robson Brown) prefaced that remark by saying that words are not enough and then used some words. Will he tell us how this could be achieved?

Sir W. Robson Brown

That is a fair question and I propose to develop it. I say, first, that we shall not achieve it by new waves of requests from all over the country for shorter working hours. That is the most positive way to failure. That is getting increased wages by the back door—worse than that, it is reducing the efficiency of the machinery. We have heard a speech this afternoon asking for double working shifts, yet we have widespread demands for shorter working hours. That is against common sense. The hon. Member for Rotherham (Mr. Jack Jones) made a speech packed full of common sense. He made the point that in the steel trade mills and furnaces are kept going almost all the time.

I want to say one thing about profits. We must bear two things in mind—that excessive profits are an aggravation and a provocation; but we also must bear in mind that there is a terrible risk in running any industrial concern. We cannot guarantee, fix or control or relate profits, particularly when we are competing with the exporting countries of the world. The British Motor Corporation is an outstanding example. In the earlier part of the year, it was actually making a loss, but that loss was transformed very rapidly into a profit by the turn of trade.

I have been long enough in industry to know that in one six months period one can be in a profitable position, but that can be changed by the turn of trade and in another six months one can be in a position of loss. Therefore, it is the duty of every company to provide in every way that it can for a good level of profit and plough back a considerable amount of its resources, both to reserve capital, and, more particularly, to the development and building of new plant.

I want to say a few words about the Conservative Government. In one particular way, I think they have fallen short. One of my hon. Friends referred to speeches made at a meeting of the Institute of Directors the other day. I would remind my colleagues that seven years ago I put a proposition before the Central Council of the Conservative Party, propounding a workers' charter to be prepared and presented by the Conservative Government to the workers of our country, in order to show that the Conservative Government understood their problems and sympathised with them. My main plank on that occasion was the one put forward the other day by Lord Chandos—a proper notice related to years of service. I say to the Government Front Bench that we have been too long in preparing our proposals in this matter, and we have not done the greatest amount of benefit to our country by taking so long.

I have heard play on the word "productivity." I think that "productivity" is one of those complex words that the working man does not understand. We cannot relate productivity to every job and task throughout the nation. I suggest to the House that it is not always higher output that is the complete and absolute answer. It may be, when trade is settling back a bit, that what we want is better quality and lower costs. Do not let us just chase the word "productivity." I do not think that we should object to it in the mines, but that is another matter and I do no want to deal with it tonight.

Generally, in industry, I think that this talk about productivity has very often gone over the head of the working man. I suggest a very homely phrase that can be better understood—better co-operation. Let us start a new watchword both in Government and in industry of better co-operation inside the factories with unions and management and extend this right across the national front.

Mr. Lewis

And in the Health Service?

Sir W. Robson Brown

I do not think that it is reasonable for the hon. Member for West Ham, North to interrupt in that way.

I want to finish on one particular aspect of national affairs. There has been comment on every hand about the amazing development of Germany. No one will deny it. There has been comment about the amazing development and revival of Japan. No one will deny that. What grieves me here is that I understand that today Japan has become the leading shipbuilding nation of the world. That takes some swallowing in this House and I think that the shipbuilding employers and employees had better put their heads together to find the answer to it.

Mr. Nabarro

"Screwy" strikes.

Sir W. Robson Brown

There has been a great deal of excitement in the Press about Sputnik I and Sputnik II. I suggest that they are scientific seven-day wonders. They have their place, but they have done one thing which I do not think the Russians intended that they should do—at least I hope that they have done one thing. The industrial menace of Russia is not from Sputnik I or Sputnik II, but from the fact that if she can succeed with Sputnik I and Sputnik II there is no industry or technical development in which she cannot achieve success, if she has the will.

Mr. Silverman

Why is it a menace?

Sir W. Robson Brown

I will tell the hon. Gentleman. If the Russians were dealing with a labour force and a standard of living such as we have in this country, I would not say a word about it. It would be fair, equal competition; but the Russians are dealing with a substandard people. I will not debate that, because the evidence is there. Russia is dealing with people who have no freedom, no unions, no voice and who are told what to do. They are led today by the greatest mass army of technicians that the industrial world has ever known. I am not worried about a third world war so long as we watch our defences, but I am worried about a first economic war instituted by Russia. She will be able to select one particular industry or set of industries and by her cheap labour and technicians flood the markets of the world with the deliberate intention of creating economic chaos for us in the West.

Mr. S. Silverman

I do not want to interrupt the hon. Member, because I have been listening to his speech with great interest and a good deal of sympathy. I understand what he says about the absence of civil liberty. But he was talking about the power which the Russians may have to increase their productivity in any industry, and he called that a menace. Quite apart from all the other things which are not debatable now, he surely does not want the House to understand that if the Russians produce more and more industrial goods of a civil kind that would be a menace to anyone.

Sir W. Robson Brown

The answer is obvious, and I have already given it. If the Russians were competing on an equal and fair basis and working cooperatively with the rest of the world, and if they were not now, as I am much afraid they will be, using their economic strength as a weapon to create disruption in countries in order to try to force mass unemployment and bring the creed of Communism into lands in which they could never get it in any other way, I could understand and sympathise. I do not quarrel about the United States or Japan or Germany and their production. It is all on an equal and fair basis. [An HON. MEMBER: "Not Japan."] The British people have never been afraid to take on a fair fight, whatever it may be. But we are in very great danger in our own country of paralysing ourselves by tying our hands and indulging in talk of class war and petty arguments in industry, instead of getting industrial peace and facing the facts of life by everyone in every section of the country pulling together.

I want to say something sentimental. I know that the House does not like sentiment, but I am going to say it. On Sunday I watched a memorial service. I stood before a certain war memorial, and what impressed and puzzled me is how men of all types and classes can stand together, fight together and die together on battlefields and then, for some extraordinary, inexplicable reason, come home and start quarrelling with each other. Let us get something of the spirit of the men who died in the war. They handed the bright torch on to us; do not let it flicker out and die.

6.50 p.m.

Mr. John Diamond (Gloucester)

The hon. Member for Esher (Sir W. Robson Brown) has said many things with which most of us on this side would agree. He spoke with great sincerity, and those of us who know something of his activities outside the House know that he puts into practice what he says about labour relations and management generally. But he was liable to interruption from my hon. Friend the Member for West Ham, North (Mr. Lewis) because so much of what he was saying had no relation whatsoever to what his Front Bench is saying and proposing, and what his Government are doing. For that reason, one finds it difficult to relate his speech to the rest of the debate.

He was right, of course, in saying that if any inquiry were made of our housewives as to whether they would prefer a stable price or a wage war—as I think he said—they would prefer the former. Of course they would, but that is not the option before them. They are asked to agree to a rise in price and to a limitation in wages. That means a fall in the standard of living, and that is what they are asked to agree. The hon. Gentleman must be completely out of touch with a great number of things, and I invite him to go around some of the less well-to-do parts of his constituency and find out some facts—

Sir W. Robson Brown

I perfectly understand the problems of the working man, and I hope that I keep very much in touch with him. What is beyond my comprehension is the argument that if we stabilise wages, we reduce standards. I should very much like the hon. Member to develop that argument.

Mr. Diamond

I will. I am seeking to draw attention to the fact that the proposals of the Government have no relevance to this problem. Their proposals will not do that at all. What the Government are doing is launching an attack on the living standards of the workers. It is as plain as plain can be. Those are the points with which I want to deal a little more fully on this occasion, when I speak with considerable humility—but, at all events, hon. Members opposite will be relieved to know that they will not be put to the abominable trouble and almost impossible insincerity of giving effect to the usual courtesies when I sit down—

Mr. Nabarro

A partial maiden.

Mr. Diamond

I would not wish to deceive the House at all. Hon. Members should not regard me in any sense as a maiden. I would rather they regarded me as someone with a six-year-old beard, cut after the style of one R. V. Winkle.

I want to put before the House arguments that will, I hope, destroy for good and all what is implicit in every recent announcement of the Government—that it is the workers who are responsible for the lack of improvement in production, the workers who are responsible for inflation, the workers who are responsible for all our present ills, and that the only thing one can do about it is to stand up to the workers and to their unions. That is implicit in everything that has been said from the Government benches.

It is the Government that are responsible for the fall in production, for inflation, and who are deliberately responsible for starting an attack on the living standards of the workers at a time when, as the hon. Member for Esher has said, we need the fullest possible co-operation and the fullest understanding of the needs of the workers.

Coming back to this House, as I do, after a long time, it is very obvious to me that the Government have adopted, as does any weak man who has failed, the policy of finding someone to blame—a scapegoat. That is the simple answer to everything they are saying. Let us look, first, at production and see whether any of the Government's proposals will improve it. Increased production flows almost entirely from new ideas, and new ideas are a function of management. Production has very little to do with the workers at all. We can get more production by having more workers, but we are fully employed. We can get more production by the workers working longer hours, but they work pretty long hours as it is.

I do not know whether any hon. Member has recently had the experience of trying to canvass during the day time, and of going to house after house only to find the householder and his wife out. Both are at work. Occasionally, the householder is in, but fast asleep upstairs—and heaven help one if he is disturbed, because he has to be on at night. Occasionally, the housewife is in, but she is in to look after the children, and as soon as the husband comes home to take over she will be going out to do cleaning and the like in the evening.

That goes on in house after house. I remember, on one occasion, canvassing a whole street and finding only one woman at home—with her one-day-old baby. I had to canvass her through the bedroom window, and as she was then the mother of five, and I was the father of four—

Mr. Nabarro

No wonder the hon. Member has been away for six years.

Mr. Diamond

—we had a useful exchange of views. I hope that it is accepted that everybody is hard at work and that, therefore, there is little one can invite the workers to do to increase production.

There is a great deal one could invite management to do, but it all mostly depends on increased efficiency. That is derived from technical progress and technical advance, and calls for new plant, new machinery, new ideas, and money to back it. That is where the Government come in, with their three-pronged attack of the credit squeeze, the high Bank Rate and the cutting of investment plans, and, in some cases, the cutting back of investment.

As to the credit squeeze, I understand that it is the instruction of the Government that the banks should not authorise advances in excess of those ruling over the past twelve months. That may mean 1956, or it may mean part of 1956 and part of 1957. One knows that in 1956 the supply of money in relation to the national income—which is the only real test—was the lowest since 1927. What possible cause can there be, in those circumstances and with those statistics, to limit bank advances which could usefully be given to those who need to invest further so as to increase our productivity? There is no question there of too much money going about.

A 7 per cent. Bank Rate is a thing unheard of in this country for thirty years, and a 2 per cent. increase in the rate is a thing unheard of for over a century. It is an astonishing decision. The Government have been pleased to call it a policy; I prefer to call it a plain admission of defeat. A 7 per cent. Bank Rate cannot be called a cure for inflation; it is a symptom of inflation. Unfortunately, it is with us, and we have to deal with it.

What is to be the effect of borrowing against a Bank Rate at that level—borrowing at 8 per cent., 81 per cent. or 9 per cent.? Who can afford it? Only the most profitable of industries. There is no correlation between the most profitable and the most essential; if anything, it is the other way round. We can certainly say that here is one of the selective controls that the Paymaster-General was so anxious to decry. Here is a selective control that selects against the needs of the basic heavy industries.

The one type of industry that cannot afford it—it has been referred to already, and is one in which unemployment has started the one type of industry affected by a Bank Rate of this magnitude is one that is socapitalised that it turns its money over virtually once a year, against the average industries which do so twice or three times a year, and the very light industries which may do so three or four times a year.

Whether an industry can afford the Bank Rate simply depends on what is the charge of that Bank Rate against its profits. If it turns its money over once and borrows at 8 per cent., then the charge is 8 per cent. If it turns its money over twice, then at the same rate of borrowing the charge is 4 per cent. If it turns its money over four times, the charge is 2 per cent. An increase in the rate of interest has no effect whatever on the light industries. It selects against the heavy industries, against the basic industries, against the industries we need to support above all others.

It is not right to say that the only argument against a 7 per cent. Bank Rate is that it is the wrong sort of instrument and ploughs down everything ahead of it. It does worse; on the whole, it selects the most necessary industries for its worst effects by clamping down on investment. Those industries, we know, are working well below capacity. They need the additional finance. They can sell anything they make. Nevertheless, the Government are to hold them down and to prevent the increase in productivity which is needed to solve our inflationary situation.

Another method of increasing efficiency is to have a wage increase. It should not be overlooked that one of the best stimuli to increased efficiency is increased cost of labour. That is what makes managements put their caps on and start thinking. The reason why the American kitchen is full of gadgets is the high cost of domestic labour in America. The reason why we transfer from manpower to horsepower, which is the way we achieve efficiency, is the high cost of manpower. Having manpower too cheaply, just as having coal too cheaply, tends to cause the inefficient use of our resources.

I should be the last to say that reasonable increases in wages in any way work against efficiency. Quite to the contrary. I hoped that we should hear more about this from hon. Members opposite. The managements with which the Government Front Bench are in touch are unknown to me. I must say in all fairness that I have come across an entirely different reaction. Apparently, as soon as the management to which the Government are accustomed have difficulties in bringing down labour costs or producing more efficiently, they write letters to the Prime Minister complaining about what these horrid trade unionists have done and asking how in the circumstances they can carry on their business.

The managements with which I am accustomed to deal react much differently. If they have problems of this kind they say, "How can we overcome them? How can we increase our efficiency? By what method can we proceed so that, instead of employing three men, we employ two at a higher rate and release the third for useful production work elsewhere?" It generally means some new idea, some new technical development and some new capital, and it is this capital which the Government are determined that these firms shall not have. That is the position against a background where the money supply has been lower during the past year than at any time since 1927.

The facts of production are very well known. We know that, unfortunately, during the past six years production has increased at a critically poor rate, and we on this side of the House think we know the reasons for that. I am dealing at the moment only with the facts. I suggest that the Government are responsible for this critically poor rate. Through their policies throughout their life—policies which they are continuing—they have been responsible for preventing production from forging ahead as fast as it otherwise would have done if management and men had been allowed to get on with the job together. The Government's policy has prevented that from happening. I cannot see why the Government have gone out of their way, in view of the desire to improve labour relations, to give this unwarranted insult to both managers and workers by blaming them for the lack of production in this country today.

I turn to the question of wage increases. Some hon. Members opposite, and certainly the right hon. Member for Blackpool, North (Sir T. Low), thought that the 7 per cent. Bank Rate would stop wage increases because there would not be the money to finance them. This is an unusual thought and I cannot believe that it is true.

Mr. Nabarro

Nobody said that.

Mr. Diamond

The right hon. Member for Blackpool, North said so, specifically, and it is part of the policy of the hon. Member's Government that it should be so. They keep repeating that their purpose is not to finance increased wages. The hon. Member could not have been in his place when it was said.

Let us see what happens. The cost of financing increased wages is negligible. It has never yet presented managements with any problems. At the most, it will mean a diversion of some capital from some capital development project, but the cost of financing wages week by week is a very small cost indeed. The capital element required does not enter into it at all. When it begins to mount up, all that happens is that it is dealt with by taking a little longer credit from the creditors or shortening the term for the debtors, or reducing stocks very slightly. That will solve it, or, if not, one simply does not replace plant; one does not keep up with plant, never mind improve it. Certainly if one has a project for development and is faced with the fact that one will be short of cash at the peak time of the year because wages have risen, then what suffers is capital development. Wages have to be paid.

Wage increases have never yet been refused on the ground that the employer has not enough money. They have been refused on the ground that the employer has not enough profit—that the profit and loss account does not justify it, not that the balance sheet does not justify it. That is an entirely different consideration and I am sorry that the hon. Member for Kidderminster (Mr. Nabarro) cannot understand it. It is interesting to note that as far as he is concerned things go on very much the same as they did six years ago.

The point which I am making is that the 7 per cent. Bank Rate will not have the slightest effect in stopping wage increases because of the small amount of capital required for them. The Government realised that and therefore found it necessary to reinforce it by their first there would be no wage increase without broadside, by producing this formula that a growth of real wealth. It will be appreciated immediately that if the Government had thought that the 7 per cent. Bank Rate would achieve its purpose in stopping wage inrceases there would have been no need for them to say a single further word about it.

Let us look at the background of this policy, see how it will work and see what conclusions we can draw. Let us see how fat the workers have been getting at the expense of the community since right hon. and hon. Members opposite came into power and I, unfortunately, went out at the door. Since 1950 production has risen, broadly, by 3 per cent. per annum. Since 1950 the real wages of workers have risen, broadly, by 2 per cent. per annum. There has been a 2 per cent. per annum increase in real wealth for the workers and a 3 per cent. per annum increase in real wealth for the nation.

Is there anything wrong with that? Does anybody suggest that the workers have had an unfair share? Does anybody suggest that doubling the standard of living in fifty years—which is what is meant by 2 per cent. per annum—is too short a time? Although I was not here to hear it said, I have been told that the generally accepted philosophy of hon. Members opposite is that there is no reason why the standard of living should not be doubled in twenty-five years. It will be fifty years' time at the rate things are going. Hon. Members opposite are continually accusing the workers of this country, as they did this afternoon, of ganging-up through their unions, getting an unfair advantage through their bargaining strength against the community, and drawing an unfair share of the nation's wealth.

Mr. Julian Ridsdale (Harwich)

Nobody mentioned it.

Mr. Diamond

I see nothing wrong with the workers getting a 2 per cent. share if the nation as a whole gets a 3 per cent. share.

The right hon. Member for Blackpool, North referred to rising costs, in the sense of the cost per unit of production. The interesting point about that, so far as the timing of this latest onslaught of the Government is concerned, is that in the past eighteen months the costs per unit of production have been going down slightly, mainly caused by the slight rise in production in the last few months. This formula is very unsoundly based. Worse than that, it cannot possibly be interpreted in the way in which it is intended to be, to help in Labour negotiations.

I should like to consider one or two cases that I happen to know about. I have certain responsibilities of a very unimportant character in relation to Sadler's Wells. Sadler's Wells and Covent Garden recently had a strike. The chorus struck and went to arbitration. At the arbitration the matter was settled on its merits, as every argument should be. Suppose this had taken place not a month or two ago when I was occupied elsewhere, but in a month's time after the arbitrator had had the benefit of the information which has now been given by the Government about increased production and harder work and so on. On what sort of basis would he settle a strike, between employer and employee, of singers in a chorus? Are they to be told to sing twice as loudly, or twice as long, or to get top G instead of F?

Mr. Arthur Holt (Bolton, West)

This is a very important point. Would the hon. Gentleman say on what basis the original arbitration decision was made?

Mr. Diamond

The original arbitration decision was made on its merits.

Mr. Ray Mawby (Totnes)

What merits?

Mr. Diamond

Both sides put their case before the arbitrator and the arbitrator decided what the answer should be. He took all matters into account. I was not the arbitrator, and I know not what went on inside the arbitrator's mind. Indeed, I think it essential that nobody should know what is going on in an arbitrator's mind if one is to have a fair arbitration. I am unable to say which argument weighed most with him. He took all the factors into account, but what he did not take into account was increased production; nor could he.

Then there is the railway system. When I was in Gloucester recently I attended several meetings of the N.U.R. branches, and at that sort of level people are talking in very matter-of-fact terms. What I found them discussing were methods of securing the safety of the public and other matters arising out of the introduction of diesel engines which, as we all know, will mean that there will be less manpower required on the railways and increased efficiency as a result. There is no need for a fireman when there is no fire to stoke, as in the case of the diesel engines. But we do need greater security by reason of the fact that there are not two men in the engine.

These were the matters which these men, some of whom would be declared redundant as a result of this conversion to diesel, were discussing sensibly, constructively and with a desire to co-operate fully with the British Transport Commission. If any argument were to arise about railwaymen's wages, I do not know how this would be decided under the latest terms relating to increased production and productivity that are to be put forward to those who have to negotiate and arbitrate. What a lot of nonsense that is going to be in relation to an engine driver. Has he got to get to Brighton ten minutes earlier or has he got to do his job properly as he is told to do it, and as every worker is told?

The Government are slowing down the plan for development. The Government are postponing the day when there shall be railwaymen free to take on other productive jobs because the diesels will have taken the place of the old steam engines. That is what the Government are deliberately doing. As a result of the announcement of the Chancellor, they are slowing down the railway programme.

There is a third case that I would mention with some delicacy. I have found, to my pleasant surprise, that the remuneration for the job of a Member of Parliament today is not what is used to be. I do not know whether there was increased productivity by M.P.s. I do not know how many night sittings there were last year. I am told there were none.

Mr. Ross

Not unless one was a Scotsman.

Mr. Diamond

What nonsense it would be to try to decide a fair remuneration for a Member of Parliament on the basis of increased productivity. It has to be decided on its merit, as every other wage claim has to be decided. Let us not hide our heads in the sand about that.

As we know, there are some 4 million workers who automatically get a cost-of-living increase without any negotiation or arbitration of any kind. Do the Government expect the millions to sit back and watch their mates get this increase while they get nothing at all? Is that what is intended if, as a result of the Government continuing their present policy, production does not go up but remains static? The Government have got us into an impossible situation which can be interpreted only as the Economist has interpreted it and as the hon. Member for Oldham, East (Sir I. Horobin) interpreted it when he said: If the Government then continue to let the trade unions get away with it, they will produce a political situation which will make Gloucester look like a unanimous vote of confidence."—[OFFICIAL REPORT, 29th October, 1957; Vol. 575, c. 98.] The Economist said: The Government has made plain its view that the nation would be better served this winter by standing up to strikes than by giving way to inflationary wage settlements. That is the real interpretation which every one of us must put on the latest move of the Government. That is the effect that these decisions will have unless we help those who are going to be prejudiced by them. It is the bankruptcy of policy of the Government which has, no doubt, driven them to this—a situation in which wages are going to be fixed and costs are going to rise as a result of continued inflation. It is a situation which is absolutely intolerable to those of us on this side of the House.

It may be that some of the things I have said savour more of the hustings than of what is customary on these benches, but it is not out of place that from time to time hon. Members opposite should be reminded of them. It is not surprising when we think of the various people who have "never had it so good." I know the workers are supposed to have "never had it so good." My hon. Friend the Member for West Ham, North (Mr. Lewis), I believe, also agrees with me that it is the landlords who have "never had it so good." As for my constituency, they have had increases on decontrolled houses of 300 per cent. time and time again. I do not want to confuse the House with figures. I am talking of the 300 per cent. increase in rent which the landlords have had, and not the 3 per cent. increase in wages which the National Health employees have been refused.

The same remarks would apply to a number of others, and particularly to those who have money to lend, who also have never had it so good. Their standard of living is going to be doubled in ten years' time at the present rate of interest, as compared with the twenty-five years which the Home Secretary suggested and the fifty years which the workers are offered, and to which hon. Members opposite object.

It is not surprising that I want to associate myself as strongly as may be with this Amendment censuring the Government, coming as I do from a constituency where, two years ago, two out of every four electors were supporting hon. and right hon. Gentlemen opposite and where today three out of every four are against them. That tells the story, whether or not hon. Gentlemen opposite care to argue and not recognise the facts about what is happening over rent increases, rates of interest and the increasing cost of living. Those are the real facts of the situation, and if hon. Members have any doubt about them they can take the honourable course and go to the polls.

7.21 p.m.

Mr. Julian Ridsdale (Harwich)

I hope the hon. Member for Gloucester (Mr. Diamond) will forgive me if I do not follow in detail some of his arguments, but I cannot allow some of the inaccuracies of his speech to go unanswered, particularly when he said that we on this side of the House wish to attack the living standards of the workers.

Mr. Lewis

Hon. Members opposite are already doing it.

Mr. Ridsdale

I know that I can speak on behalf of all my hon. Friends when I say that that is completely untrue. We wish to attack the cost of production, because it is the cost of living that matters, not only to the workers, but more particularly to pensioners and those living on fixed incomes. As was said by my right hon. Friend the Member for Blackpool, North (Sir T. Low), what matters is that what we produce we should be able to sell abroad. It is the cost of production which, if not checked, can have such a disastrous effect on our export trade.

That is why we have welcomed the Government's determination to fight inflation, but the Opposition Amendment talks about policies designed to increase production and productivity. I can see the argument that it is vital to keep up investment, but the right hon. Member for Leeds, South (Mr. Gaitskell) talked about production and I sometimes wondered whether he meant production at any price. How does the right hon. Gentleman propose to produce increased investment? By going to the public sector and trying to encourage further public investment such as he said Mr. Harrod might want? Where is the money to come from for that investment to be carried out?

The point that I want to put forward this evening is that, at the present moment, whilst fighting our wages inflation, if we are to keep up our investments and cure inflation, it can only come now from spending less on the part of the Government, from decreasing taxation and seeing that these savings are taken up for investment in the private sector of the economy.

I feel bound to say that unless the Government act on these lines as soon as possible, they will find that they have cured inflation at home only to place our private industry behind in world markets, because its equipment is not up to date. I would therefore press the Government to act very much along the lines suggested by the Amendment on the Notice Paper in the names of myself and my colleagues from the Liberal-Unionist Group, urging that, in view of the fact that high taxation is in itself inflationary, to take bold steps to reduce taxation so that the finance required for further capital requirements, both in the public and private sectors of industry, comes from the real savings of the people. Wages are, of course, one factor in rising costs, but let us not deceive ourselves. High taxation is another, and I am convinced that if we are to help industry to compete more favourably in the export markets at this critical time, it is vital that we should take all possible steps to reduce taxation so as to encourage saving, but not consumption. Such reductions could take many lines. For instance, cannot we help with further initial allowances? Are we certain that we have been doing all we can to help shipping in face of the serious threat from flags of convenience?

As the Financial Times said last week: Company earnings are the main source of finance for the re-equipment and modernisation of industry and the rate of return on capital is probably the largest single influence on investment programmes. Falling company earnings are not likely to bring about the high investment that the Government wants. Indeed, as the Financial Times pointed out, private investment cannot be turned on and off like a tap. The interval between a change in policy and the production of goods from completely new factories can be a very long one. That is why I consider it vital at the present moment that, hand in hand with our policy to stop the wage inflation, should go a far-sighted policy to encourage investment in industry by reducing taxation.

There are other factors, too. Is not the high rate of taxation, especially at the managerial level and at the level of the skilled and the technician, forcing more and more of our best men to leave the country? Is not high taxation itself inflationary in that as investment by Government so often exceeds real savings, it forces a rise in the price level, and in the end the saving is done by those people least able to afford it—those living on fixed incomes and retired, and we all know from our constituencies the types of people who have suffered because Government saving is not always balanced by real savings? It is indeed this rise in prices which over the years has stopped the habit among so many of us of saving at all, even if we had the money. How often have many of us during the last six years said, "I had better save and buy it now, because it is only going to go up later."

I know it is all very well to ask for more saving and investment, but surely we have to make certain that the individual or the company has the money first. From what sector of the economy can these savings be made? I am sure that for too long we have been shouldering far too big a share of the burden of western Defence. It is for that reason that I welcome the Prime Minister's visit to Washington, and I only hope that it has brought savings which are vital if our economy is to face up to the economic challenge that faces us.

I welcome also the new financial arrangements between central and local government. They should provide thrift and responsibility in local government's expenditure. I do not agree with the hon. Member for Fulham (Mr. M. Stewart) who said that this would mean cuts in education. I believe, too, that much that is paid out to local authorities by the Public Works Loan Board should be raised by local authorities direct from the market, and that the various acts of Parliament under which so many of them shelter, and especially the county councils, to cover their extravagances, should be vigorously examined and amended where necessary.

Has the last word been said about the financing of the nationalised industries? I consider that one of the items of top priority for the Government is to devise a scheme as urgently as possible to see that investment in the nationalised industries is done on a voluntary basis of saving from outside. I know that the answer which the Treasury and others will give is that people will not risk their money in it. But if the real savings of the community are taken away by the Government in high taxation, how can they?

In any case, who were the people who found the capital for the American, Argentine and Chinese railways? It was the private British citizen, who in those days was not taxed almost to the point of extermination or of being driven out of these islands. Further, if our nationalised industries were put on a proper business basis, they would attract foreign capital in the same way as many of our great industries in the private sector of the economy do.

With such reductions in spending as I have tried to outline, it should be possible, I am certain, to take bold measures to reduce taxation. Where should these reductions go? I am convinced that, at this present moment, they should go to help savings and not consumption. I have already suggested that we should do far more to help our shipping and industry engaged in the export market. I am certain that it would be idle for us not to do something to dissuade skilled people and technicians from joining the queues to go abroad. Whether we like it politically or not, we must do more to reward quality and not mediocrity. It is vital that we ensure that our industry is competitive and put on a far sounder basis for investment. Reduction in taxation will prevent waste, too, in Government spending and the unending price rises which are caused, in a subsidiary way, by investment not being balanced by real savings.

What is more important is that the measures I propose would give hope again to the individual citizen, for they would make it worth while for him to save again. We should have broken out of the wretched strait-jacket in which our economic life has been almost imprisoned since the end of the war. We must be hold and brave enough to create an economic climate in which saving is possible. We cannot do this if we are half-hearted in our belief in a free economy. We can never have that faith restored until we reduce taxation.

I say to the Government, "You nave given us a most encouraging lead in one sector by showing your determination to hold down wage inflation. I trust that you will give us a lead in the other, and take bold steps to reduce taxation so that the finance required for further capital requirements in both the public and private sectors of industry comes from the real savings of the people."

Surely, the real difference in outlook between the Government and the Opposition is that if hon. and right hon. Gentlemen opposite were in power, they would increase investment in the public sector at the expense of the private by increasing taxation. Provided that we are able to hold the wage inflation, I am convinced that we can increase investment by lowering taxation, but only if we make sure that the Government spend less.

7.33 p.m.

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

I have been very interested to hear this treatise read to us by the new Liberal movement, as I assume it must be. I have been told that there is a great spread of Liberalism, and the mere insertion of the word "Unionist," I suppose, does not mean very much in addition to the word "Liberal." In this interesting speech with regard to the economy of our country, anachronistic though it was, I suppose that we were listening to the rebirth of Liberalism. I hope that there will be more opportunities to hear other Liberal versions later on.

The thing which is astonishing to anyone on these benches is to hear the hon. Member for Harwich (Mr. Ridsdale) painting a terrifying picture of the country and its economy, battened down under this terrifying burden of taxation, even though his right hon. Friend the Prime Minister only a very short while ago told us all that we have "never had it so good." It is very difficult to reconcile the two positions. It is important that hon. Members opposite should begin to live in the world of today and not hark back in their minds to conditions before the war.

I want very briefly to refer to a matter which has already been raised in our debate on the Address. It is one in connection with which I have had some responsibility in the past. The Health Service is the first sector of our economy to be touched by the Government's new policy on wages. It is tragic that the new Minister of Health's first action in this House should be to defend his attack on wages in the Health Service, an attack which has caused great disturbance indeed throughout the Health Service and may lead to its disruption. It is very tragic that, instead of a new Minister of Health being able to announce to the House development proposals he may have in his mind or explain his interest in the work of the Ministry, he should have had to make his first speech on behalf of the Treasury, announcing this very severe attack upon Health Service employees.

It is unfortunate that we have had a succession of Health Ministers. I am very sorry indeed about the reason the former Minister of Health had to resign his office, and I hope that he is recovering in health. It is a great tragedy that this Department has been under so many heads during the last five years, and, as I say, it is all the more tragic when a new Minister comes along, after only a matter of weeks in his Department, and has to make this his first action in the House of Commons.

I am all the more amazed at this action of the Government because I should have thought that, in this House, we recognise the value of the Whitley machinery and the difficulty of operating it in the Health Service. I know that the Whitley machinery has been successful in operation in the Civil Service and local government for many years, but in the Health Service there have been many special difficulties, some on the staff side and some on the management side.

I suppose that it is inevitable that we should have so very many separate functional councils. It is equally inevitable, I suppose, that we should have on the staff side both professional and trade union representatives with not altogether a similar approach to the problems. In spite of that, some unanimity of view has been built up in the Health Service Whitley Councils over the last few years, helped to a very great extent by the recommendations of the Guillebaud Committee which were acted upon by a previous Minister of Health, whether the immediate predecessor of the previous Minister, I do not know.

The recommendation of the Guillebaud Committee was that the management side of the Whitley Council should be more fully representative of those who actually employ the staff, that is to say, of the management committees of regional hospital boards, with a reduction of the representatives from the Ministry of Health itself. That recommendation of the Guillebaud Committee was adopted and acted upon by the Government, by a predecessor of the present Minister. Apparently it is that action which the present Minister, and above all the Chancellor of the Exchequer, now condemns. He has repeated on many occasions that the management side of this Whitley Council has a very small minority of Ministry of Health representatives, and, therefore, in effect, they were unable to block this particular proposal for a wage increase which was, in fact, agreed by both sides. As I say, it seems rather extraordinary that the very action which succeeded in bringing about better relationships in the Whitley Council should have been so rudely cast aside by the present Minister.

There is another point. I do not know whether the Minister of Health or the Chancellor of the Exchequer, or, possibly, the Financial Secretary to the Treasury, has read a book published only a short while ago by Professor Chester and Mr. Hugh Clegg, of Manchester University, on the history of the working of Whitley Councils in the Health Service. That book, which is a factual account of the development of these councils, makes it perfectly clear that the Whitley machinery has always acted, in fact, to delay wage advances. It has acted in support of Government policy, if Government policy it is, to try to hold back wage advances. That has been a major criticism of Whitley Councils from the staff side, but it could be said that if conditions were reversed—if the general tendency were for deflation and wage reductions—the staff might obtain an advantage from this machinery. They have continued to support it even though it is in many ways disadvantageous to them.

The Government are endangering the future of the Whitley Council procedure even though that procedure has throughout the years of its establishment worked in their favour and has, in many cases, held back wage advances which should have been paid much earlier. Indeed, it is clear from the position of the clerks and administrative workers in the Health Service that they have not enjoyed the wage advances which have been paid elsewhere. I imagine that at least one reason for this is the lengthy procedure of the Whitley Council machinery, which inevitably results in this holding back.

It is, therefore, a very great tragedy that the spokesman for the Health Service should have been singled out by the Treasury to make this attack. It is unfortunate, as the Minister is probably beginning to recognise, that the effect is not only upon the particular group of workers in the Health Service, but is upon the Health Service as a whole. If there was ever a service that needed the loyal co-operation and understanding of the people within it, professional and otherwise, it is the Health Service. Unhappily, the Minister of Health has endangered that working together.

We have at the present time a very great opportunity for leadership. It is perfectly true that many workers realise the absurdity of the position in which they are placed in pressing for wage advances which result only in price increases. It is equally true that a vast majority of workers have become sick and tired of the amount of overtime that they are working. One hon. Member earlier in this debate spoke about the need to keep up the hours of work—at least, he said that there was no pressure for reducing the hours of work.

The hours of work have been increased over these last years and we now have the absurd position that a very large part of the workers are doing as much as three nights' overtime a week, plus frequent overtime at weekends. A good deal of that time, they believe, is wasted, but it is almost essential that they should get the overtime to have any decent rate of income at all in modern conditions.

That is a matter that could perfectly well be discussed, with many other matters concerning the efficient working of industry, between the unions and management, with the Government perhaps coming in also, industry by industry. This could bring real results in improvement. However, those results could be obtained only if the Government for their part are willing to set the seal by making it possible for the parties to enter into the negotiations. Therefore, this is a political matter.

If the workers and employers are to come together to any purpose, the Government must show their willingness by taking action to hold prices in so far as they can do so. The Government have today a far better opportunity than any Government have had before. They are working in conditions in which the prices of goods imported from abroad are falling, and not rising, as has been the position faced by past Governments. These are very favourable conditions in which to act.

It is up to the Government to take action in the spheres for which they are directly responsible. That means, above all, irrespective of any views which have been expressed before, that they must be willing to review the effect of the Rent Act upon the wages of workers. This is one of the essential tests. The Government must be willing, for example, as part of their bargain to show a willingness to reduce the interest rates, at least on housing, to meet the position of those who are attempting to buy their houses.

There must be something much more definite offered in the way of control of dividends and action in relation to capital gains of all kinds, including the pools and the Government's own Premium Bond scheme gains. When an earlier speaker in this debate said that unhappily the country was suffering from too much selfishness, he was quite right, but who is to blame for that? The Government are encouraging the whole atmosphere of selfishness. We on this side believe that this is the whole basis of the division between the Socialist viewpoint and the capitalist view, as expressed on the benches opposite. We believe that this Government can appeal only to the most selfish instincts of the community.

That way is barred for the future. It is only if the Government are willing to make a wider appeal to the higher instincts of the community that they can have any hope of success. The responsibility is upon them. If they cannot offer these pre-conditions, they must give way to a Government which can.

7.48 p.m.

Mr. F. M. Bennett (Torquay)

In the debate today, as in the recent two-day economic debate, most of us on this side of the House have noticed the extraordinary degree of shadow boxing by nearly all the Opposition speakers. It is especially exemplified today by the extremely sparse attendance of Opposition Members at a time when their thunder is supposed to be rolling in criticism and censure of the Government for bringing about the downfall of the working people. Yet the Opposition can muster no more than about four Members in the Chamber. This bears out my contention that there is indeed a degree of shadow boxing.

That is not surprising, because we all know perfectly well that the Labour Party, when in power, faced precisely the same problems as we face today. We also know that when they attack us for taking certain measures today, they all too often took those same sort of measures themselves under exactly similar difficult circumstances. Nor is it any good for Opposition speakers, when Government spokesmen remind them of these things, to say that it is unfair to dig into the past and that we must dwell solely in the present. What the Opposition are doing is to present themselves to the country as strongly as they can as an alternative Government. Therefore, the people are entitled to be reminded of the steps taken by Socialist Ministers when they were in office. It is not, therefore, merely a negative matter of digging into the past.

Dealing first with the point about wage increases and productivity, the Paymaster-General today quoted from a speech by the Leader of the Opposition, when in Government himself. We are all fairly used to a certain degree of political inconstancy in the views of the Leader of the Opposition and therefore should not be surprised to see a change too on this front. But there was one Minister, unfortunately now dead, Sir Stafford Cripps, whose integrity was believed in fully by all of us, and it is worth recording what he said on three occasions about wages and productivity.

One remark was: …we cannot afford increases in wage levels or shorter hours unless they increase productivity per man year."—[OFFICIAL REPORT, 10th March, 1947; Vol. 434, c. 994.] He also said at the Trades Union Congress, in 1948: There is only one way by which, with a given volume of employment, we can increase our real standard of living, and that is by each of us producing more. There is no other answer. In 1949, at Workington, he said. You must be patient, and you must not ask for or expect any further advance in social standards or wage levels until we have been able to increase the productivity of our industries… I defy any hon. Member opposite to say that in any single respect those quotations differ from our appeals in the same vein which are nevertheless attacked as "a wage war" and "a war on the trade unions."

Mr. Blenkinsop

The hon. Member must accept that in the days of the Labour Administration, Sir Stafford Cripps made sure that the burdens which had to be shouldered were borne equally. The basis of our complaint is that that is no longer true.

Mr. Bennett

I should be happy to be diverted along that line, but I must not allow myself to do so because of the promised need to keep my speech short. When one compares the level of the cost of living, the value of real wages and the value of pensions under the Socialist Government, not one of those factors bears out the claim that the ordinary people were better protected than they are now.

It is said that we have had a great number of production cuts and that that is a crazy way to solve our problems. Now we have had an extremely modest statement by Ministers to the effect that we are doing no more than restraining production from an actual increase in the coming year. I feel, however we may differ over diagnosis, we all agree that the inflation in the time of the Socialist Government was a demand inflation. Yet in 1947 the Socialist Government thought it right, at a time when inflation was caused by a too great demand and a too little supply, to introduce cuts of £200 million in the investment programme, which was 16 per cent. of the total programme for the year. Faced again with a similar economic crisis in 1949, they introduced cuts in the then investment programme of £140 million or 10 per cent. of the total programme for the year. Is it possible now for any Socialist spokesman to attack as wrong, foolish and misplaced the extremely limited pause which we have made in our productive drive and at the same time give no explanation for the savage cuts in investment which the Labour Government made?

Mr. Cyril Osborne (Louth)

The Labour Government cut food subsidies in the same year.

Mr. Bennett

They also put ceilings on the National Health Service.

During this debate we have had a large number of criticisms about the 7 per cent. Bank Rate. I have not yet heard a spokesman of the Opposition suggest what the Socialist Party would do about the Bank Rate if it formed the Government. Do hon. Members opposite think it should be lowered? Do they give us a pledge that if they should form a Government they will lower it? Do they think it is much too high or a little too high? Are they suggesting that they might go back to the happy days of cheap money and the 2½ per cent. Bank Rate? Is that what this censure of the Government involves? If they put themselves forward as the alternative Government we are entitled to know the facts.

There is a misplaced idea about the Bank Rate and its effect. It seems to be thought that the act of reducing the Bank Rate necessarily makes money cheap. No greater fallacy exists. The actual cost of money, as with any other commodity, is determined entirely by supply and demand. The reason the Bank Rate was increased is well known. It was partly for psychological purposes and partly for practical purposes. It has had the effect of restoring our gold and dollar balances in a remarkable way in the last few weeks.

But it is a fallacy to believe that by pulling down the Bank Rate it is possible to make money cheap or plentiful. Canada has, I believe, a Bank Rate of 5½per cent., but no business man would imagine that he could borrow at anything approaching that figure if he sought to establish a business there. The other day the hon. Member for Reading (Mr. Mikardo) tried to attribute all our export problems to the rise in the cost of money and not to the rise in wages, which, he said, was insignificant. He said that that was what was making us uncompetitive with the rest of the world. That was a remarkable statement. One of our chief competitors is Germany. Germany has a low Bank Rate, but the current rate for borrowing for business purposes is 9, 9½ or 10 per cent. Yet no one can deny that the Germans do well in the competitive export field.

Again we are told that we have invested and are investing far too little overseas from the point of view of the future of this country and of the territories concerned. Let us look once more at the record. Between 1946 and 1951 the Socialist Government invested overseas an annual average of £80 to £90 million. Between 1951 and 1957, on the basis of Treasury figures, this Government have invested an average of £180 million, double the amount of the Socialist Government. As the Socialist Government invested only half of the amount the Conservative Government have invested, it makes their attacks in this context difficult to understand.

If we take investment in the Commonwealth only, but including grants-in-aid and other help given to Colonial and other dependent territories, we find that we are currently investing by direct and indirect methods more than £200 million a year. We frequently get the cry from the Opposition that we should increase our investments in dependent and underdeveloped countries to a target figure of 1 per cent. of the gross national product. Yet on the figures which I have given we are already at present by this method investing 1¼ per cent. of our gross national product in those territories.

I am not sure that the Government have yet found the answer to inflation. I am not sure that any Government in any country has found it. It is not a British problem alone. We are all striving within the limits of a free economy—I do not imply by that any difference between our two sides; I am talking about a free society—to find a method of solving the problem of inflation. I am not sure that we have it yet. What I am sure is that the Opposition, from their record and their pronouncements, have not got it either. It is utterly false for them to suggest to the public that they have the answer to inflation.

No matter how much the Opposition may be able to fool themselves and the electors—and I hope they will not be able to fool too many electors—the people they have not managed to fool are those overseas who buy and sell the British £ and trade with the British £. Whenever a Gallup poll shows a drop in Conservative strength and whenever there is a Conservative reverse at a by-election, hon. Members should look at the Financial Times and see what has happened to the value of the £ overseas. The people overseas are not politicians; they are simply business people. The moment that investors overseas, corporate or individual, believe there is a prospect of the Labour Party coming back into power, the value of the £ slips.

That is not a political assertion by me; it is a plain fact, which can be checked by anybody who doubts my word. Indeed, I do not think that it is doubted. One of the problems which the Socialist Opposition have to face is that, as an election approaches, if there is even a prospect of their getting in the value of the £ begins to fall steadily throughout the world. Nor has this been said first by a Conservative, namely, myself. Some years ago the right hon. Member for Dundee, West (Mr. Strachey) wrote an article, or a letter, which was later much criticised by his colleagues, in the New Statesman and Nation, in which he said that we ought not to fool ourselves, and that if a Socialist Government were returned the gold and dollar reserves would be leaving this country in a torrent. He was not far wrong.

I am not worried from the point of view of this preoccupation on the part of the Socialist Party, but I am worried on behalf of the country and the Conservative Party. Our Government already have severe economic problems to face. In addition, they are having to pay back large amounts in dollars for loans contracted and spent before they came to office, and now they have to face in times to come the problem of maintaining foreign confidence against the fear of a Socialist Government coming into office.

For all those reasons I wish the very best to Conservative Ministers, and indeed I think that they deserve all the confidence, help and support that they can get from us.

8.1 p.m.

Mr. Robert Edwards (Bilston)

I should like to follow the argument of the hon. Member for Torquay (Mr. F. M. Bennett), but I resist the temptation because I want to deal with two aspects of the Amendment before the House. I do not doubt that those who speculate in British currency will very greatly fear the return of a Socialist Government, because that Government will do something about the parasites who produce nothing but who live very luxuriously all over the world by speculating in other people's currencies.

Mr. F. M. Bennett

It is not fair to talk about people as speculators when they are customers of this country. It is not right to speak of them as if they do nothing but live overseas as parasites. If a country which is an international banker, as we are, wants to call its customers speculators, it must stop being an international banker.

Mr. Edwards

Confidence in this country is based upon the toil and intelligence of the industrial workers, and the security of our economy. No Government have done more to shatter the stability of our economy than the present Administration. They have reduced productivity and production. The cost of living in this country is almost the highest in the world, and our production is almost the lowest in Europe.

I have not the slightest doubt that bankers and financiers, while they are allowed to exist in this world without producing anything, have much more confidence in a country which balances its economy and gives the workers a real incentive to increase the volume of production, so I reject the suggestion made by the hon. Member.

The first point that I want to concentrate upon is the tremendous harm which the Government have done to industrial relations. I feel certain that they do not realise how dangerous a situation they have created. Over the years we have built up a system of collective bargaining based, fundamentally, upon the balance of strength in industry. It has never been abused by the trade unions in a state of full employment. If the trade unions worked in complete unison and made big demands they would have to prevail; no force in this country could prevent them, because it is the workers who do the work. It is the miners who dig the coal; the steel workers who make the steel; the chemical workers who make the chemicals, and the clerical and administrative workers, the nurses and doctors, who run the social services. It is the toilers who make possible the normal functioning of this House of Commons.

If they all worked in unison and fought for their demands, those demands would have to be met. Because this is a fundamental truth it should be clear to everybody that our British trade union movement has been very restrained in its demands. Apart from Western Germany, where the situation is rather different, and Holland, where they have a realistic wages policy, we have had fewer days lost in industrial disputes over the last seven years than any other country in the world.

Mr. Douglas Glover (Ormskirk)

Under the Tories.

Mr. Edwards

I said during the last seven years; not merely under the Tories. It is because of our collective bargaining system—which the Tories are trying to undermine—and because of the common sense of the British trade unions that during the last seven years the number of days lost in strikes per thousand of the industrial population has been only 151, whereas in America during the same period it was 1,500. In Japan, Australia and Canada the figures are infinitely greater than ours. That very sensible situation in industrial relations is in very serious jeopardy because of a political decision of the present Government to interfere in the most calculated way in the normal practices of collective bargaining.

I am the general secretary of a trade union. In my industry, the chemical industry, only very local disputes have occurred. But what is the overall situation? In the Health Services we have the Whitley Council. We have decent workers who are very lowly paid. In my constituency some are receiving only £7 10s. a week. They are decent human beings, doing a job of work in the hospitals because they want to do a spiritually satisfying, human job. These folk have had a very poor wages deal. If there is any doubt about it, let us take a quick look at the facts.

Let us consider, first, the men earning from £385 to £390 in 1948. In the Civil Service since 1948 salaries have increased by 56 per cent.; for teachers the increase has been 60 per cent.; for local government workers 45 per cent.; in the electricity industry 47 per cent., and in the gas industry 51 per cent., but in the health services it has been only 34 per cent. They are right at the bottom of the scale. In the case of men earning between £490 and £495 a year in 1948 there has been a 71 per cent. increase in the Civil Service; a 62 per cent. increase for teachers; 46 per cent. for local government workers; 46 per cent. in the electricity industry; 45 per cent. in the gas industry, and only 33 per cent. for those in the health services.

There is no doubt that these good folk, clerical and administrative workers, who earn less than £1,200 a year are right at the bottom of the wages scale. They are not a political body; they are not even affiliated to the Trades Union Congress. They have never talked about militant action to maintain their claims. They have always been reasonable. Yet today these people have been forced to declare a ban on overtime. This seems to me to be scandalous. The Government are committing a dastardly crime against the people and against the interests of the nation.

If that is what the Government propose to do with the workers who have an unanswerable claim, what is to happen when the railwaymen make their claim? Does it mean that the railwaymen will be forced into a national strike, merely because they are trying to maintain their wages in line with increased prices? Is it a crime for a trade union to function as a trade union, to keep the earnings of its members in line with the rising cost of living? The industrial workers of this country, and these health workers to whom I have referred, are not asking for the moon. They are asking merely for a decent financial hold on life; not for luxuries or for extra pounds a week. They are asking for a 3 per cent. increase in their very low salaries; and the Government have denied them the right to enjoy that modest increase when their own Whitley Council unanimously decided in favour of it.

What are these people to do? They are being provoked into extra-constitutional action because they have no other means of expressing themselves. What is to happen if this stupid, disastrous policy is pursued in respect of a claim from the miners? Are we to have the same dogmatic, deliberate, calculated refusal'? Have we really fallen for this stupid idea that we can have a show-down with the trade unions and split this nation, with the resulting welter of an industrial upheaval? Do hon. Members opposite really think that will solve the problem of inflation?

I read the statement in the Economist and I am amazed that intelligent people in a country such as ours, with an economy which is balanced on a knife edge, should seriously argue that maybe it would be cheaper to force the unions into a strike and empty their treasuries than to have an annual increase in wages. What kind of economic anarchy is this? They do not understand the first principles of the struggle waged by the industrial workers. I remember a strike that lasted for nine long, bitter months. The strikers did not receive any strike pay and the first "sub" they got from their employers they used to pay their back trade union dues. Uninformed people should not dare to try to gauge the attiture of British trade unionists by the amount of money in their funds at any given time. If the workers are forced into a strike, those responsible will be doing a great disservice to the country now and for the future.

I beg the Government to have second thoughts about this matter. I beg them to look again at the question of the 3 per cent. increase for the health workers; to call a meeting of the Whitley Council and agree to accept the decision. That would not be considered as a defeat for the Government. The members of the Government would be regarded as being bigger men than before. The British people are not stupid about these things. They are prepared to overlook a genuine mistake and to forgive those politicians who are big enough to admit an error of judgment.

Another question which has been discussed frequently in this debate is that of wages and productivity. If productivity is to be tied to wages, the British productive industries will have to face big wages claims. I have been examining this question and I find, regarding one sector of my own industry, the drug and fine chemical sector, that in 1937 the output was £21 million. By last year that figure had increased to £143 million. The increase in the number of workers was only 20,000. Bearing in mind this increase in the labour force and increased prices, the real increase in output amounted to 300 per cent. The wages of the workers have not increased by anything like that amount.

On examining the general question of wages and productivity, I found that since the 44-hour week was introduced in 1948, output per worker in the manufacturing industries has increased by 23 per cent. But the real earnings have increased by only 17 per cent., so that there is a big surplus which has been enjoyed by the rest of the community. It has not been sucked out of the industry by the productive workers. In the engineering industry, for example, the output since 1948 has increased by 28 per cent. per worker, and their real earnings have increased by only 18 per cent., which means that in a unit of production where the workers earned £5 they are receiving only 92s. for that unit.

In the whole chemical industry during the same period output has increased by 54 per cent., but the real earnings of the chemical workers have gone up by only 20 per cent. If tomorrow we argued a case for increased wages based on actual production, we could claim, on the figures published by the Government, an increase of 22s. a week for every £5 earned today.

The argument which has been used during the debate about inflation being caused by wage increases does not hold water. The workers have been restrained in the demands made through their trade unions. They have not exploited "over-full employment" as it is called. They have not used their strength to increase unreasonably their weekly earnings. They have considered the general interest of their fellow-workers who are not in productive industry, and the increased cost of the social services. They have taken into account the fact that this country has to compete in the markets of the world. They have considered the difficulties of the nation, and it is a very grave injustice for hon. Members opposite repeatedly to argue about inflation being caused by increases in wages.

I have spoken for longer than I intended and there are other arguments which I wished to advance to the House, but time does not permit. In conclusion, I urge the Government to reconsider their attitude regarding the trade unions. It is a battle which in the end the Government will lose. They might win a few temporary votes from the middle-class who are always afraid of bogies. But people generally are becoming increasingly "bogy proof," and no matter how much they think they will, the party opposite will not win elections in this way. They may consider that they can plunge the country into a series of industrial disputes, then call a quick election and frighten the people and thus win votes. If they won a cheap victory in that way, at the next General Election they would be wiped out of the political life of this country. It is because I think this kind of confidence trickery is harmful to British democracy that I urge the Government to reconsider their attitude, particularly in relation to the justifiable demands of the workers engaged in the health services.

8.20 p.m.

Mr. Montgomery Hyde (Belfast, North)

I am sure that the hon. Member for Bilston (Mr. R. Edwards) will understand if I do not follow him in his interesting speech, because in the few minutes that I propose to take up of the time of the House I wish to look at the question of production and productivity in the economy of a part of the Kingdom which has not been mentioned so far this evening, Northern Ireland.

In doing so, I am reminded of the true story of the young English writer who went to the St. James's Theatre where he met the Irish author of a successful play. The younger writer had just written a successful book. The Irish dramatist who met him said, "I have a bone to pick with you about the book you have just published and about the way you have treated me in it." "I do not understand," answered the writer. "I did not even mention you in my book." "That's just it," replied the Irishman.

The bone which I have to pick is that in the Gracious Speech there is not a single reference to Northern Ireland. There are references to Malta, Cyprus, Canada and even Milford Haven. We do not grudge Milford Haven having its harbour, but one would have thought there would be some reference to a part of the Kingdom which, in the past twelve months, has been faced with a remarkable combination of civil disturbance and economic difficulty.

There have been more than two hundred incidents caused in Northern Ireland by illegal organisations and resulting in damage in excess of £600,000. On the economic side at the present time the number of registered unemployed in Northern Ireland amounts to more than 29,000 people, or 6.2 per cent. of the total number of insured employees. It represents only a reduction of 7,000, or 1.5 per cent., since the setting up two and a half years ago of the Northern Ireland Development Council.

I am glad to see in his place the right hon. Member for Blyth (Mr. Robens), who knows something about this subject. At the end of the last Parliament he introduced a Motion relating to the economy of Northern Ireland. During the debate, the then Home Secretary said that an Economic Development Council was to be set up, and on that occasion I said this: It must be our constant hope and prayer in Northern Ireland that, with the establishment of this Council, a new era will begin in the industrial history of Ulster."—[OFFICIAL REPORT, 5th May, 1955; Vol. 540, c. 2029.] This hope has not yet been fulfilled. That is not due to any inherent faults of the Development Council, which has done a pretty good job in conjunction with the Government of Northern Ireland in attracting new industries, particularly from the United States, but rather to difficulties which could hardly have been foreseen at the time the Council was set up. I refer particularly to the ebbing of industrial development in Great Britain and more particularly to the increasingly severe restriction of credit by the high interest rates prevailing here which are naturally reflected in Northern Ireland; and, finally, to the mood of uncertainty and sense of crisis created in Northern Ireland by some of the actions taken here by the Government.

It is true that the credit squeeze has not been applied in Northern Ireland with the same severity as here, but the fact remains that overdraft rates are still higher in Northern Ireland than they are across the border in the Republic of Eire. Surely that is an anomalous situation. Banks in Northern Ireland, mostly subsidiaries of the "Big Five" banks, are too cautious. Surely they might take a little more risk. But something more is needed than simply making bank borrowing easier, particularly as many private firms in Northern Ireland are reluctant or unwilling to contemplate new ventures.

In this connection I have a suggestion to make. It is not new; it has been made before, but it has recently come into prominence through the publication by two economists on the staff of Queen's University, Belfast—Professor K. S. Isles and Mr. Norman Cuthbert—of an Economic Survey of North Ireland, undertaken at the request of the Government of Northern Ireland.

My suggestion is the project of a Government-sponsored Industrial Finance Corporation; I mean, sponsored by the Imperial Government here, either directly or by putting capital at the disposal of the Government of Northern Ireland. It is envisaged that the company would have a capital somewhere in the region of £2 million or £3 million, and that it should undertake the following duties. First, it would provide new firms with capital out of its own resources or help them to obtain capital from the public by forming themselves into public companies and issuing shares. Secondly, it would provide existing firms with additional capital or help them to raise it from the public, in order to increase their scale of operations on a sound basis if, owing to the rise in the price level or because they have relied mainly on bank overdrafts to finance development, they have become under-capitalised.

Thirdly, it would provide cash resources for enabling proprietors to meet death duties, and here I would remind the House that there are more small family businesses in Northern Ireland than in any other part of the Commonwealth. Fourthly, it would advise upon and arrange for the financing of reconstruction and amalgamation, particularly of private companies wishing to become public companies, in order to be able to increase the size of their undertakings through public issues.

The board of directors of this company would consist predominantly not of bankers but of business men who would, so far as possible, be free from all Government interference, even if the Government should become the majority shareholder. Similar corporations have been set up with success in other parts of the Commonwealth, such as South Africa and Canada, and also in Eire. The Industrial Credit Company in Eire has achieved considerable success by acting as an intermediary between firms wanting capital and the investing public.

The central Government have a particular responsibility towards Northern Ireland, including matters relating to its production and productivity, because Northern Ireland, despite all the measures that have been taken, still remains a depressed area, perhaps the last in the United Kingdom. I am sure my right hon. Friend the Home Secretary is aware of this, just as much as he is of our peculiar constitutional position, although some of us in Ulster sometimes wish he and his colleagues in the Cabinet would give us more positive signs of that awareness.

It is in that spirit and in all seriousness that I commend this project to him when he considers the detail of this Session's legislative programme. I would beg him, the Prime Minister, and all members of Her Majesty's Government not to forget us in the loyal, hard-working and, what I am convinced is at bottom, fundamentally viable part of the United Kingdom, Northern Ireland.

8.29 p.m.

Mr. Arthur Holt (Bolton, West)

I have some sympathy with the hon. Member for Belfast, North (Mr. Hyde) who complained that the Government had left out from the Queen's Speech any mention of Northern Ireland. There are quite a number of other things also left out of the Queen's Speech, and because of some particular matters which have been left out in regard to the economic problems which are facing us today my party has put the following Amendment on the Order Paper:

But, while welcoming the belated recognition of the paramount need to maintain the value of money and restrain inflation, humbly regret that there is nothing in the Gracious Speech which can give the nation confidence that the Government have a policy for industry which will promote industrial peace and encourage owners, management and workers to recognise their common interest in increased productivity.

The debate has been rather strange in some respects. We have had one or two powerful speeches from hon. Members on the back benches opposite and one wonders why they are making those speeches now. I have sat here for six years and often while I have been sitting here I have heard remarks thrown across from the other side of the Chamber to many of my personal friends, if not my political friends, on this side to the effect that we had six years of Socialist misrule. Whether that be true or not, I cannot think in regard to inflation that anything can have been quite so bad as the six years of Conservative misrule we have had on this problem.

The hon. Member for Torquay (Mr. F. M. Bennett) has now left the Chamber, but I cannot forbear to make a remark about his speech. He started with some excellent sentiments and, I believe, a correct analysis of the then situation by Sir Stafford Cripps. The hon. Member appeared entirely to accept the premise of Sir Stafford Cripps. One would have thought that when the Conservatives got into office in 1951 they would have acted on that premise, but, although various speeches have been made from time to time about the harm that inflation does and although some attempts—a little half-hearted—have been made from time to time, they have never really got down to curing inflation because they have never really had the determination to do so.

One does not only want determination. The hon. Member for Esher (Sir W. Robson Brown), in a very forceful speech, was full of determination, but that is not everything; one must have the right methods. I think the situation was well presented to the House by the right hon. Gentleman who is now Paymaster-General in a speech, the date of which I cannot remember, in an economic debate about a year ago, at the end of which he outlined the dilemma of the Government. He said we are engaged on a great experiment in endeavouring to run a Welfare State, a free economy and full employment without inflation, and so far, we must admit, we have not been able to do all those things.

What we must be quite clear about is that the Government are now saying that what we have been doing for the last six years is really all wrong. We cannot let this inflation go on any longer because, as has been said from the Government benches, if inflation goes on it will bring unemployment and, of course, full employment was one of the things they wanted to keep. It was because they were mindful of the need for full employment that we must stop inflation.

I should hate to read extracts from speeches which I and members of my party have made on this subject, but this is the point we have made times out of number—that inflation was the real evil and unless we stopped it employment, the Welfare State and even freedom itself were in danger. What I am concerned about is that the Government so far have tackled the problem from only one aspect. It was particularly disconcerting to hear the right hon. Member for Blackpool, North (Sir T. Low)—whom I always looked upon when at the Board of Trade as one of the more liberal-minded members of the Government—talking about what was to be done now. He referred to a meeting of the Institute of Directors, which was addressed by Lord Chandos and said that the great lord had had a thought and we must all know about it. This is not something new; it is not now that we should start to think about what happens when inflation stops. Some thought should have been going on with the whole idea of stopping inflation. It may be too late if we merely stop inflation, are thrown into great unemployment and then ask, what do we do about it?

It is our concern that the Government have not explained or shown that they really have a policy for expansion, for increasing production, for improving productivity where it can be improved or expanding trade whilst carrying out this severe monetary policy which, we agree, is necessary to control the supply of money and to stop financing further inflation. It is to these and other remedies that I wish to address myself for a few minutes.

In passing, I should like to say that while I followed the opening speech of the Leader of the Opposition with very great interest and attention, as I think all the House does when he talks as an economist, when he started later to produce the remedies, it appeared to me that he had then donned his mantle as Leader of the Socialist Party and somewhere in the background was the latent economist. In the remedies he offered to the House, I am afraid I cannot go along with him.

Mr. Ellis Smith

On what proposals?

Mr. Holt

I am coming to them. The Paymaster-General then rather twitted him for his suggestion about selective controls. These are some of the things he suggested with which I do not agree. The Paymaster-General is not on very good ground himself because what is C.I.C. if it is not control? What, indeed, are the curbs on hire purchase?

Mr. Walter Monslow (Barrow-in-Furness)

rose—

Mr. Holt

I am sorry I cannot give way, but I have had to wait a long time to speak. What, indeed, are the instructions to the bankers other than selective controls? What, indeed, is Purchase Tax other than a selective control? The Liberal Party disagree on these matters with both the Paymaster-General and the Leader of the Opposition, and we are finding that an increasingly large number of people in the country are agreeing with us.

The root cause of our problem, I think, arises from the continuation of the restrictionist policies pursued both before the war and since. They have been made more severe and damaging in their effect by the continuation of post-war inflation. In effect, the kind of policies that are being pursued may give advantage to some vested interests in the community, but they certainly act to the disadvantage of other people and are never conceived as policies for the benefit of the community as a whole.

I think that it springs from the change of emphasis which has taken place in the House over thirty years, a change of emphasis which understandably came about as a result of unemployment in the 'twenties and 'thirties when people said, "There is all this talk about looking after the consumer; we must take notice of the producer because, of course, if the producer has no wage he is not even a consumer." I suggest that this has led us too far the other way, and that what we want now is a change of emphasis in policies which will pay more attention to the needs of the consumer and less attention to the demands of the producer.

I am very glad that in their suggestions about cutting taxation and taking a lot of restrictions off trade the Liberal Party now have the support of a very well-known Professor, Professor Colin Clark, in a recent pamphlet which he produced called "The Cost of Living". In it he said that high taxation is sometimes defended on the ground that it weakens monopolies, but he goes on to point out that monopolies have done very well out of high taxation and that the people who have suffered have been private business men, small business men, who get their capital from ploughing back their profits. These are the people who have suffered under high taxation. The pamphlet continues: The experiment of high taxation combined with protectionism has been a complete, utter, howling disaster. We urgently need a Government which will have the courage to admit this unpleasant truth and not just tinker with things as they are now, but take steps to dismantle the whole experiment with all speed. I do not wish to follow the argument into detail. No doubt hon. Members can get the pamphlet if they wish and can read it and understand the case far better than I can explain it. Briefly, however, this has for long been the policy of the Liberal Party. Not until taxation is reduced and the channels of trade released both at home and abroad, with free and fair trade both at home and abroad, shall we stimulate society and reduce the cost of production, which is our problem. It is one thing to curtail demand and to refuse to finance inflation, as the Government have said, but that alone will not solve our problem. We need at the same time to go to the root of the problem and both release initiative to enable people to develop, by reducing taxation, and clear the channels of trade so that we may have a proper use of the resources of the nation and so that people who are enterprising can start new businesses and can readily find markets without hindrance by Government.

In no way do I wish to avoid the responsibility of explaining our views on cutting taxation. I will briefly say under what main headings we should like to see it done. I do not see how anyone can be satisfied with a system of defence which costs us £1,500 million a year and which even the Minister of Defence says is nevertheless inadequate. We have been led to expect some further cuts in that expenditure in the coming year. I welcome the initiative which has recently been taken, again after very long delay, more closely to co-ordinate the defence activities of Europe and the Atlantic Alliance, and I hope that further economies will arise from that, but certainly substantial cuts can be made in defence expenditure without any detriment to our security.

Further, as I will outline in a moment, as the Free Trade Area develops and as tariffs are reduced there is no reason why agricultural subsidies should remain at their present high figure. There has always been a case for a considerable support of agriculture while a large part of British manufacturing industries was given tariff protection of 30, 40 and even 50 per cent. Although the vast majority of it is at a lower figure of about 25 per cent., even that is substantial. While that has persisted, agriculturists have always had a case; they have said that as they have very little tariff protection they are entitled to something else in its place. As we enter the Free Trade Area the case for subsidies will diminish year by year and a considerable saving is to be obtained there. I agree that it is not an immediate saving, although there could be an immediate saving on one or two elements of the subsidies.

Thirdly, cuts may be obtained in taxation by not having to collect so much to finance local government activities and the nationalised industries. Far too much of the nationalised industries' finance has been obtained other than from the customer. I am really getting out of patience, particularly with hon. Members opposite who complain about the price of coal. I have been saying for several years now that coal is still too cheap here, and hat until the price is more in line with the prices at which we have to buy it from outside we shall not get that economic use of it that we all desire. While a thing is cheap, people will waste it.

I certainly do not want to pay more for house coal than I do now, but I must admit that I am wasting it every day, and polluting the atmosphere into the bargain. I have done my best, in a small way to reduce consumption, but no inducement in that direction will act so well as an increase in price. I and the Liberal Party would like to see the importation of coal freed so that the Coal Board no longer had to continue carrying a subsidy, bringing in American coal at a high price and—of all the ridiculous things that have ever been done in the industry—sell it at the same price as coal coming from our pits. It is economic nonsense, and should be stopped as soon as possible. If that were done, there would be no reason at all why the Coal Board should not make a handsome profit, that handsome profit should be ploughed back into the industry, in which case there would be no need for the industry to come to the taxpayer for its capital.

I would seriously ask the House to consider with fresh minds the problem of free trade. To many people, this is a battle fought over long ago. It was at one time won by the Liberals, and Disraeli said that the subject was dead and buried, but it was resurrected and we became a protectionist country once more, particularly in the 'thirties, although it started in the 'twenties.

It is now being put forward that there are great benefits in removing our tariff barriers against some 15 European countries. Is this a good thing? If it is, why limit the benefit? Why should we not give these tariff reductions to the other countries with whom we trade? Our trade with the fifteen countries in Europe is only 20 per cent. of our total, but it is apparently considered a great thing and something of great benefit to remove those tariffs. Why not remove them for the rest of the world with whom we do the other 80 per cent. of our trade?

A student of the subject may reply that we already have done so for the Commonwealth, with which we do 50 per cent. of our trade. I agree that, with few exceptions, the Commonwealth has a free and open market in the United Kingdom, but that still leaves 30 per cent. of our trade which is restricted by tariffs and quotas. If it is a good thing for us to enter this Free Trade Area in Europe, it must be an even better thing to extend it throughout the rest of the world.

That can be done by one simple action—rather, it can be done by doing nothing at all. It is suggested by this Government that when the Free Trade Area comes into being they will ask the nations of G.A.T.T., and those nations with whom we have most-favoured-nation clauses, for a waiver. The Government will say, "We are lowering our tariffs with European countries. Under our most-favoured-nation clauses we really should do the same with you. We are going to ask for a waiver." That is what the Government are proposing they should do. I suggest that they should not ask that. As our tariffs go down as we enter the Free Trade Area, so, bit by bit—let this be done steadily, for we do not want any violent upset overnight—the tariffs with other countries outside Europe will also be lowered, and if we can get a quid pro quo I am all for that as well, but let us have half a loaf if we cannot have all of it.

We should follow up this policy and back it with a real attack on restrictive practices at home. We in the Liberal Party regret particularly that the Government did not make price fixing agreements illegal when the Restrictive Trade Practices Act went through this House. My hon. Friend the Leader of the Liberal Party said in our last debate on economic affairs that there is now competition in this country on everything except price. My information about those firms who are affected by the Restrictive Trade Practices Act is that all they are doing is to make legal alterations in their agreements in order that they will not be caught by the Act, but they are making no substantial alterations in their practices in industry.

If we really want to get the cost of living down, we must pursue a policy of attacking restrictive practices, and it must go hand in hand with the policy of refusing to finance inflation. But merely to refuse to finance inflation without energetic policies to cut taxation and to bring in free and fair trade is bound to fail. I hope that before it is too late the Government will adopt these additional policies.

8.52 p.m.

Mr. Alfred Robens (Blyth)

We have reached nearly the end of a very long debate upon the Gracious Speech, and during these past few days we have dealt with very important matters, some of which were contained in the Speech and some of which were not in the Speech at all.

Today my right hon. Friend the Leader of the Opposition moved the Amendment in his name and in the names of some of his hon. Friends, and I think the House will congratulate both my right hon. Friend and the Paymaster-General, because I think we all listened to two first-class economists putting their arguments in such a way that even laymen like myself could follow them fairly easily.

If one were to say that one could not accept what the Paymaster-General said or the conclusions that he drew, that would only be expected from this side of the House. But I must say that with the present financial crisis, with the increase in the Bank Rate to 7 per cent. and all that it involves, the credit squeeze, and the cuts in investment which are euphemistically described by the Chancellor of the Exchequer not as cuts but as mere phasing, one would have thought that the Gracious Speech would have dealt in volume and certainly in great detail with measures which were designed to increase our production and productivity. Hence the Amendment on the Order Paper.

Certainly it seems to us that the real method by which this country is to make its way out of the recurring economic crises is to increase production, particularly to increase productivity, to push up our exports, to stop the rise in the cost of living, and to bring some stability to the economy; in other words, to bring this country's economic affairs into such a pattern that, as the Leader of the House once promised us, we should double the standard of living within twenty-five years.

In the Gracious Speech, these matters are conspicuous by their absence, and one would have thought, because of the measures the Government have taken, particularly for cuts in investment, that it was fairly obvious that industry would need to work much more intensively, and work the existing machinery already installed more intensively, than ever before. If the cut in investment is to lead to cuts in new machinery in industry, the automative processes and so on, it must follow that the existing facilities we have in our workshops, mines and factories will have to be worked in the most intensive way possible.

This means the abolition or avoidance of all restrictive practices, from whichever quarter they come. It means a really co-operative effort on the part of workers and management. It means, in fact, the more efficient use of the resources we now have if we are no longer to have the sort of investment that was at first projected. If we are to make these changes in industry and get rid of restrictive practices, if we are to get real co-operation between management and men, we must create the atmosphere in industry in which this sort of thing can happen, and it cannot possibly happen in an atmosphere of mistrust and industrial strife.

I believe it is quite impossible to secure the changes in working methods which in this era we urgently need in industry if there are strikes, "go slows" or indeed any interruption at all in industrial peace. What is it that causes unrest in industry? Workers do not strike because they like it. They do not quarrel with managements without some reason. The real reason disputes take place is that the workers are suffering under a sense of injustice. It does not matter whether that injustice is concerned with conditions of work, with wages or with the facilities that are given to enable the workers to do their jobs. If the worker feels a sense of injustice, from whatever cause it may be, inevitably troubles are bound to follow.

The Queen's Speech contained nothing that was sound and constructive to provide the right climate in which increased production and productivity could take place, and it did nothing to remove the sense of injustice which the workers in industry at present feel very keenly.

The Government have made two great mistakes. The first mistake was psychological, because for the past few weeks and no one can deny this—an atmosphere has been worked up throughout this country on the part of the Government and their supporters that the unions were to blame for the present financial problems.

In my own constituency, I have a Conservative opponent, and he was directly reported in the local Press as saying that, if it were not for the unions, there would have been no need to increase the Bank Rate. I admit that he is only a minnow in the large political stream, Nevertheless, he has picked that up from others who are not minnows but leaders of their party and members of the Government. I think it is a very bad thing and a tremendous mistake, because already there has been created among the workers the wrong sort of climate for the changes to which I have referred to take place.

This campaign went on, and I suppose it reached its climax with the exhibitionist bell-ringing of Lord Hailsham, the Lord President of the Council. I suppose that of all the men in this country in this last few weeks, his utterances in relation to the trade unions and the workers have done more damage than anything else I could think of.

I do not make these remarks about Lord Hailsham because I want the Prime Minister to dispense with his services. Far be it from me to suggest these things. I like Lord Hailsham in his present position as a Cabinet Minister and Chairman of the Conservative Party. He is one of our greatest electoral assets. Whatever might have been the case before, there certainly will not now be 3 million trade unionists voting for the Tories at the next General Election. I do not suggest that one should do anything drastic about Lord Hailsham. Let him plunge about at all the by-elections; the more he goes to, and the more times he goes, the better for us. Let him air his views on all sorts of things. Let him go on attacking the party and the leaders of the party as much as he likes. We have no complaint about that.

One thing, however, I say most urgently to the Chancellor of the Exchequer—and I would say it particularly to the Minister of Labour. The Government would be very wise to tell Lord Hailsham that, while he is free to talk about anything else he likes, he ought not to talk about things of which he knows nothing, things which are a most delicate and sensitive part of our economy, namely, the life of the workers of this country and the trade union movement. In these matters, he is plunging around and doing harm to the nation as a whole.

A few days ago, the Prime Minister, I think, uttered some rebuke to Lord Hailsham. When the right hon. Gentleman attended the Institute of Directors' Conference, he said something with which I entirely agree. The Prime Minister said: We do not want civil war in this country. We have a lot of trouble to face in the world together. We had better not knock each other about. That is plain common sense, and the sooner it is realised that the trade union movement not only has a contribution to make but is willing to make it if the right conditions are created, the sooner shall we have a chance of keeping our political battles where they belong, that is, in this House and on the hustings, but not in the workshops and factories where they can do so much damage.

The second mistake made by the Government after that initial error of creating this very bad climate in the country was, of course, the very firm declaration by the Chancellor of the Exchequer, which was explained in some degree by the Minister of Labour later, that whatever may arise from negotiation between the railway workers and the British Transport Commission, the Government would make sure that there would be no additional money to meet it. That has been repeated, in a rather different form, by the Paymaster-General this afternoon.

This declaration by the Government seems to the trade union movement clearly to be a declaration that normal negotiation and arbitration are, at the moment, useless and that increased wages are only to be obtained on the basis of a trial of strength. Indeed, only last week, the Minister of Labour, apropos this matter, said that it would depend upon whether union funds ran out or the £ cracked first. I do not say that he said that as a challenge; he did not.

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

I should very much like to make it quite clear, as I am sure the right hon. Gentleman knows, that I said it would be a tragedy if such a situation arose in which there was a trial of strength to see which would crack.

Mr. Robens

Yes; I was saying that the right hon. Gentleman did not say this as a challenge. But what he said other people have been saying also, in not quite the same way. People have been declaring, "Let us see whether union funds run out first". What the right hon. Gentleman was saying—I do not disagree with him at all—was that it would be a tragedy if such a situation arose. If he had allowed me to finish my sentence I should have made that clear.

Then, of course, the Government acted. The first thing they did was to take the poorest, or very nearly the poorest, paid workers in Government service—there are others on lower rates—and veto a decision of the Whitley Council. There has been a reply by the workers concerned instituting a ban on overtime, which is the only means they have of registering their attitude. This is now the sequence of events.

The first people to suffer by the new policy of the Chancellor and the Government are workers in the National Health Service. Their properly constituted machinery comes to a decision and the Government veto it. I shall come later to some of the reasons advanced by the Minister of Health. They then declare a ban on overtime. I emphasise that because it is as well that the Minister of Labour, who, I am sure, understands this, should make it clear to his colleagues that it is not necessarily strikes that will emerge if this sort of thing continues and it is not necessarily those things which will run out the unons' funds.

We had our experience when we were in government. In the power stations, it does not cost much to move only a few engineers, but they can bring the whole industry to a stop. It is a shocking thing when it gets to the stage that the first reaction of a body of public servants is that they ban overtime. What will happen with the engineers, the miners and everybody else who is in a much stronger position?

This is a shocking atmosphere in which to start a new effort to bring Britain out of the present economic difficulties and to try to build up future prosperity. Indeed, it will not work—it cannot work. I hope that the Government will have the sense to look again at this policy and to modify it.

None of us will quarrel if the Minister of Labour or the Chancellor of the Exchequer urges upon the unions the necessity for wage restraint—that was done, and extracts have been quoted, by Sir Stafford Cripps; but together with urging wage restraint in the time of Sir Stafford Cripps, the Government themselves were adopting policies that enabled the trade union movement, with some success, to urge wage restraint.

The Government are not doing that. Whilst they urge wage restraint, what they have done for their own employees in the Health Service is not wage restraint. In the case of the railwaymen, for whom they have refused to provide any more money for wage increases, and in the case of the lower-paid workers in the Health Service, it is not wage restraint. It is a wage freeze. Never at any time during the period of the Labour Government was there a wage freeze. The Paymaster-General this afternoon said that there was no wage freeze, but I say that these two examples are in fact a wage freeze and not wage restraint. A wage freeze is bound to be resisted.

It is no use the Government saying that they are agreeable to wage increases where they are earned by increased productivity. That is not sufficient in itself, because there are literally millions of workers whose work does not bring them into the type of job in which their efforts can be measured by productivity. As the Paymaster-General himself admitted this afternoon, it is not right that the whole of wage advances or rewards for service should go only to those workers who are in the productive enterprises.

My hon. Friend the Member for Bilston (Mr. R. Edwards) made this point in an excellent speech, in which he said that all workers—in fact, everybody—must share out of the common pool of the nation's total productivity. Therefore, it is a bad thing to say that only workers who are connected in some way with tasks in which there can be a measurement of their productivity will be entitled to wage advances, the inference suggesting that those whose productivity cannot be measured cannot get any advance at all.

The Government are not only making a colossal blunder in the way in which they are handling their labour relations—and the Minister of Labour will, I think, have a difficult time over the next few months—but certainly their policy is not altogether shared by some of the leading industrialists. The conference of the Institute of Directors was interesting for the number of constructive speeches that were made. I was interested, for example, in Sir Frederick Hooper's contribution, in which he said that The measure of efficiency we should apply to ourselves is that increased profits should only stem from increased volume. That should be the heart and soul of our creed. The Archbishop of Canterbury had said that a new spirit of approach was needed between those who were mainly concerned in industry—that is, between the bosses and the unions. Sir Frederick Hooper continued: And this, gentlemen, is the annual conference of the Institute of Directors—the bosses. What are we going to do about it? Then he went on to say some of the most sensible things about the way in which worker/management relations should be conducted that have ever been said by anybody in a single speech.

I return for a moment to the question of the health services, where the Government are the bosses. I want to say something later about the position of the Government where they are not the direct bosses, but where, as in the case of the railways, they have some influence on wage decisions. These are the two sectors for which the Government are directly responsible. Although they have some responsibility for the private sector, they have not shown us how they will control the wage situation there. I noticed that today, as last week, Questions asked by the Leader of the Opposition about how the banks were to deal with advances when money was required for wages, were dodged. I hope that the Leader of the House will return to that subject and give us the answer to Questions which have been asked on two occasions and to which we have not yet had any reply.

To return to the workers in the health services, I think the Government have played a rather dirty trick on the staff side. At one time, the Whitley Council was made up of officials and representatives of the unions and associations, and when there was a breakdown in negotiations, the staff side, and the Council as a whole, could go, on agreed terms, to the Industrial Court. If one looks at the record of wage advances in that Whitley Council, one sees that the bulk were based upon decisions of the Industrial Court and not upon agreed decisions within the Council.

Then the Guillebaud Report came along, and it suggested that there should be other than officials on the management side. The Government accepted the proposal and put the representatives of the hospital boards and others—I will not read them out; they are all in the booklet dealing with the Whitley Council—all on the management side, leaving about nine unions and associations on the staff side.

As I understand it—perhaps this might be cleared up—the management side was told by the officials—it was the management side; not the staff side—that the Minister would probably veto any recommended advance. I understand that that was not disclosed to the staff side at that time. Consequently, while the management side, meeting in private, overruled, as it could, the five representatives of the Ministry, when the negotiations took place and those concerned voted as sides, they obviously came to an agreed recommendation, the staff side believing that, as always, the recommendation would be acceptable. It had no reason to believe otherwise.

What happens? The Minister of Health comes to the House and makes some explanation in which he says that there are two stages in this matter, the negotiation in the Whitley Council which produces the recommendation, and then the Minister must have the power of veto. Of course, if the staff side had known there was a difference on the management side there would not have been a recommendation. The matter could then probably have gone to the Industrial Court, and the Government would then have been faced with an Industrial Court decision. But that did not happen. The Government merely told the management side in advance that they would not pay any recommended increase. The staff side was led to believe that the Whitley Council was functioning normally and accepted in good faith the decision to recommend increases of 3 per cent. and 5 per cent. respectively. Then the Minister comes to this House and we have this scandalous and disgraceful affair in which the final step of arbitration was denied to these poorest paid workers in the land.

I do not want to make any capital out of the fact that the Government take the view that a 5 per cent. increase to those in receipt of salaries over £1,200 a year is not inflationary while a 3 per cent. increase to those who get less than £1,200 is. I know their argument is that those earning less than £1,200 got an increase of 3 per cent. some time ago, but there is still a difference of 2 per cent. lying around somewhere.

That is not the aspect that wish to go into, however. My point is that because of the disgraceful and underhand way in which this matter has been dealt with the Government have put the whole basis of Whitley Councils into serious jeopardy. There are nine functional councils in with the health services, and I cannot see any of the other eight trusting the management side again. What an impossible situation the management side has been put into in relation to the official side.

I now want to turn to the railways. Here again, we must have some more enlightenment tonight from the Leader of the House. I am sure that I express the views of everybody in this House when I say how much we regret the terrible and tragic passing of Jim Campbell. Those of us who knew him knew a very fine gentleman. Just before his untimely death he wrote an article for the Railway Review, in which he asked some questions. I shall repeat those questions, and I hope that the Leader of the House may have within his brief some of the answers.

Jim Campbell had read what had taken place in the House, and he noted with great care the words of the Chancellor of the Exchequer and the Minister of Labour. He said: What will happen when the Railway Staff Joint Council meets again? Are the B.T.C. in a position to give a reply based solely on the merits of the trade union submissions and unbiassed by outside pressure? Could anyone believe that they can? He went on to say: The destruction of faith in negotiation machinery would harm the nation every bit as much as the employers and the trade unions. It is only because the N.U.R. and the B.T.C., for example, could sit round a table and discuss their problems with mutual trust that we can point with pride to 31 years without an official strike. And heaven knows, we have gone through some critical negotiations during that time. Is this record of thirty-one years of industrial peace—or of no official strikes—between the National Union of Railwaymen and the British Transport Commission to be continued, or will the action of the Government force, if not a strike, then working to rule, going slow and working to the handbook, which is about the slowest thing that can be done on a railway? It is done quite legitimately; the rules are laid down for the observance of the safety of the travelling public. What a stupid thing it would be for all this to happen.

I therefore beg the Government to look at this matter again. After all, they have a special responsibility to the British Transport Commission. It is not the Commission's fault that it is not at present able to enter into negotiations with the National Union of Railwaymen and the other railway unions and, if it is thought correct by both sides, to grant an increase. It is not the Commission's fault that it has not got the funds to grant an increase. The fault lies with the Government. It was this Government which hived off the most profitable part of transport; it was this Govenment which, month after month, delayed the advances in charges which properly should have been made, and this Government which have been very largely responsible for the situation which the Commission is in today.

Now what does the Commission do? Has any advice been given to it? Does it go into negotiations and reach conclusions based on the merits of the case to be submitted by the railway unions concerned? And if on the merits of the case there is an advance to be granted, what part of its investment programme has it to cut? Do the Government advise it which part of its investment programme to cut or which additional services it is proposing to give should be postponed, or how many more branch lines and other services must he cut out?

I say that the Government are putting the British Transport Commission into an absurd and ridiculous position and that they are themselves residing in a coward's castle. It would be far better for the Government to tell the Commission that it must not give a penny than to say that they will give no more money other than the operating deficit of last year, and leave it to the Commission—that is what the Government said last week—to determine whether an increase is or is not an inflationary award. I think it a disgraceful position in which to put the trade union movement.

This afternoon the hon. Member for Kidderminster (Mr. Nabarro) intervened and said something about the mining industry. [HON. MEMBERS: "Where is he?" I will say something about the mining industry. I will say that in the years since the war, if the mining industry had demanded a minimum wage of £20 a week, it could have got it, and it could riot have been refused. Instead the miners still manage on a basic rate of £8 10s., with everything else they earn on the basis of bonuses. Has greater restraint been shown by any other body of men? And this at a time when we cannot get people into the mines; when the country is crying out for coal and when labour is so short. They have, in fact—

Mr. Geoffrey Hirst (Shipley)

What about the Hungarians?

Mr. Robens

—exercised the greatest restraint.

I should like to know from the Leader of the House whether the Government have issued any instructions to those in control of the nationalised industries. The position in the mining industry is rather different from that in the B.T.C. But it cannot be the case—can it?—that one nationalised industry, because of the peculiar circumstances of the case, has this control, while other nationalised industries have not been advised about what they should do. Is it the case that the National Coal Board has been told that it must not grant wage increases in case they happen to be inflationary? Can we know what instructions, directions or advice has been given to the nationalised industries?

At the same time, the Leader of the House might be good enough to tell us just how he proposes to deal with the private sector, because on that side we have had no information at all. When the Leader of the House is answering some of these questions, he might answer another one. There was a previous occasion when the Government intervened in the private sector in a wage application. It happened last year in connection with a pay claim by the engineers. There was a strike and the matter went to arbitration. Finally the sum of 11s. was agreed on. Do the Government believe that the advice they tendered to the engineers and employers was good advice in view of what has happened as a result of it? Is that the sort of advice they are now giving in the private sector, or are they saying nothing this time and relying on the speeches made in the House and outside?

Finally, I wish to ask about production, because this is where I think the Chancellor has been at his brilliant best. Why have we done so badly over production? Have all the workers gone idle all of a sudden? What has happened? Have we bought less machinery? Have we closed down some factories? The answer is, of course, that production has fallen because of Government policy, and at the moment the Government are seeking to put the blame on any shoulders but their own. In April when we were discussing the Budget, the Chancellor was full of optimism. He then said: How then should we summarise the prospects? After making full allowances for the factors I have mentioned, I see some grounds for cheerfulness. As I see it, the temperature of the economy has been brought down to a more normal level by our disinflationary policies in the last eighteen months. Resources appear to be at least adequate to the demand on them. It is reasonable to hope for further substantial export gains. All this seems to be a basis not for standing still, but for going forward. Expansion must be the theme. That contrasts a little with the speeches that he has been making recently about "rephasing", I think he calls it, the investment programme. To speak of "cuts" seems a little vulgar, really.

On the same day, the right hon. Gentleman was a prophet. He was looking ahead. He said: …in the coming year, and indeed, beyond, I see no sign of stagnation in investment. In the public sector the plans designed for atomic energy, for coal, for transport, are large. The problem posed by investment plans for the basic and in part publicly-owned sector of the economy is not, in the main, whether we contemplate too little, but how we can manage to do so much. Yet we are right to do it. Ask any industrialist. Few would say that in this section we are guilty of being over-bold. We need more power, more steel, and more transport facilities."—

Hon. Members

Hear, hear. Investment such as this is, indeed, vital to the economy of our country."—[OFFICIAL REPORT, 9th April, 1957; vol. 568, c. 982 and 981.]

Hon. Members

Hear, hear.

I am glad that Government supporters can cheer those remarks more than six months later. They are very different from what the right hon. Gentleman and his friends have been saying in last week's economic debate.

The real truth about the great economic problems is not something that happened last week or last year. We are suffering from the lack of policy on the part of the Government, their complete refusal to do anything to plan the economy and their belief that laissez faire is the way in which this country can meet the situation.

All I would say to the Government, in conclusion, is that today they have embarked upon the most dangerous path of their whole existence. The trade union movement and trade union leaders generally are anxious to see this country on top. For God's sake do not destroy what has taken half a century to build up in collective bargaining, in agreement and the good will of a great movement that has done so much for this country.

9.28 p.m.

The Secretary of State for the Home Department and Lord Privy Seal (Mr. R. A. Butler)

I think it is a tradition for the Leader of the House to conclude the debate on the Address in reply to the Gracious Speech. I warmly welcome the opportunity to deal with the Opposition's main Amendment, a brew which is not of the gravity we had expected; it was mild in draught and, thanks to the Leader of the Opposition, not even bitter in exposition. I shall attempt to follow the Opposition's example, but I shall also hope to point out some defects in their policy, although they have unsuccessfully attempted to point them out in our own.

Before I come to economics—we have really had quite a lot of economics from two of our greatest economists in the House, the first and second speakers, and I am sure we should like to pay a tribute to their contributions to our debates—I would say a word about the more human contents of the Gracious Speech. First, I would thank our three maidens, my hon. Friend the Member for Hornsey (Lady Gammans), my hon. and gallant Friend the Member for Dorset, North (Colonel R. H. Glyn) and my hon. Friend the Member for Edinburgh, South (Mr. M. Clark Hutchison) for their contributions during the debates. Time prevents my going into the merits of their speeches, but I hope that they will often be heard in the House of Commons. I hope I may refer to two remarriages, if I may so express it without offending the Establishment. One is by the hon. Member for Gloucester (Mr. Diamond) who sat with distinction in the Chair of this House, and the other is by the hon. and learned Member for Ipswich (Mr. Dingle Foot). I should like, in passing, to pay my tribute as Leader of the House to the robust qualities of his predecessor, Dick Stokes.

The new hon. and learned Member for Ipswich may be remembered for the occasion twenty years ago when he moved in this House an adaptation of Dunning's famous Motion that the powers of the Executive had increased, were increasing, and ought to be diminished. We can accordingly expect his support for the Bills which we propose for this Session, which are as follows: to diminish the volume of emergency powers relating to land, to lessen Whitehall control over local democracy, to do away with disciplinary powers and to amend Part II of the Agriculture Act, and to augment the rights and liberties of the individual along the lines suggested by the Franks Report.

In this Session we are going to take great strides forward in carrying forward our philosophy of championing individual rights. This House, as I believe was evidenced in the debate on the Franks Committee Report, is the birthplace of ordered freedom. We all have a serious and special duty to support all these Measures and to see that the spirit of liberty is kept alive in the struggle and bustle of modern Britain.

The debate on economics ties together many of the other major themes in the Gracious Speech. It ties them together because without a sound and prosperous economy we cannot pursue the imaginative foreign policy upon which with the friendship of the free nations we are launched and, from that base of strength, to help save the peace of the world. Nor without a strong economic policy can we hope to proceed with that chapter of social policy to which reference is made in the Gracious Speech, namely, the provision for the old and disabled, for homeless children, and for prisoners. I and Her Majesty's Ministers look forward to the help of the House in passing forward this social legislation, which can only be paid for out of the proceeds of an expanding and strong economy.

In passing, I would say that there will be other matters which are not referred to in the Gracious Speech. Some will have to be dealt with by administration, but some by legislation and some matters, such as the contents of the Wolfenden Report, can only be proceeded with, in my opinion, after we have been able to take the opinion of the House and tried the effect of a debate before we make up our own minds.

We have before us, therefore, objectives upon which I think we can all unite, and these are the increase of our national wealth and a community of purpose of the whole country. I agree with the right hon. Member for Blyth (Mr. Robens) that these are essential prerequisites to the achievements of our ends, the keeping of peace, and the helping of those in need. Therefore, perhaps at the conclusion of this debate on the Address I may say that this debate takes place at one of the significant moments in man's history when science, according to the words of the Gracious Speech, is advancing "into the unknown."

I have not time to speak of the measures which the Government are taking to further our technical advance, but I will say that our ideals must expand in the same proportion as our scientific advance and our statesmanship will have in the course of this Session to widen its frontiers if, together, we are to see the country through into happier times ahead.

I should like to reply shortly to the hon. Member for Cardiff, South-East (Mr. Callaghan) who spoke in the debate. He questioned whether our scientific advance was equal to the moment. I will only say this. I think our nuclear programme, especially in its civil aspects and in many aspects of its research, will make us not only a worthy ally in the case of trouble but a worthy opponent in the same circumstances.

The hon. Member made great play with our dilatoriness. I should like to refer to only three developments which are taking place or have been planned in the last eighteen months. First, 320 new technological building projects, estimated to cost over £60 million, have been approved. Eight colleges of advanced technology have been designated. Courses for those working in industry, with alternative periods of work and study, have been doubled and the number of full-time technical teachers has increased by 10 per cent. This is all based on the foundation which the right hon. Gentleman the Member for South Shields (Mr. Ede) and I created in the Education Act, 1944. I think that it is valuable, in reply to the hon. Gentleman who asked us questions on this subject, to show what progress has been made in this field.

Now I come to some of the more economic subjects to which the Amendment is directed. I would remind the House, first, that in each of the six years of Socialist administration Britain added less to her wealth in factories, power stations, houses, plant, machinery and ships than in the year before the war, namely, 1938. Under our administration, investment at home is well above pre-war; indeed, it has surged forward.

Mr. John Hynd (Sheffield, Attercliffe)

Twelve years after the war.

Mr. Butler

There is no need to talk about stagnation. Investment in the public sector in 1957–58 will be about £1,500 million as compared with £1,100 million in 1951. This is a comparable figure adjusted for price variation and it shows that in real terms public investment over this period has increased by no less than 37 per cent. Let me give some detailed figures. Investment in real terms in the fuel and power industries will have increased by two-thirds in 1957–58 compared with 1951. Investment in transport and communications has almost doubled over the period in question. I will give the figures.

When we assumed office, in 1951, the figures for fuel and power investment were £270 million, and in 1957–58 they will be £450 million. For transport and communications, the equivalent figures are £165 million in 1951 and £320 million in 1957–58. The scale of private investment has shown an equally large increase over the period 1951 to 1957 and is still at a very high level. All this investment is bearing, and will bear, fruit.

As for our overseas investment, which is running at over 1 per cent. of our gross national product, it is more than that of any other country in the European community at the present time. So much for the ridiculous charge that we are ravaging the seed corn. It is, however, only responsible to add that investment expenditure, however essential it may be, cannot be permitted to outrun available savings without aggravating inflation.

Before I come to the attitude that we have felt bound to adopt in the face of our present economic difficulties, I must ask the Opposition how they justify their own irresponsible policies. Our trade with the world, our standards of life, our savings for the future and our provision for the old could not be long maintained and honoured in the conditions of chronic inflation which the policies of right hon. Gentlemen opposite would undoubtedly bring about.

While I was away I was able to listen to the right hon. Gentleman the Leader of the Opposition on the air as well as to read him in "Industry and Society". Not only do hon. Gentlemen opposite propose to subject the steel industry and the road transport industry, with their long and successful record of industrial relations, to unnecessary and widespread dislocation, but what contribution do they imagine that they will make to productivity or better industrial relations with Labour's policy on future public ownership, "Industry and Society", a copy of which I have in my hand?

How can they expect the vast range of British industry to settle down single-mindedly to increase productivity when the reward for success and the penalty for failure alike consists in being cowed, confused and clipped by the Labour Party? If a firm is not doing well, what do we read of the intentions of the Labour Party on pages 56 and 57 of this document? The firm is told, "You are failing the nation and we shall take you over". If a firm is doing well they say, "The community must acquire a stake in the fruits of your enterprise. We must take over your shares". In other words, they do a take-over.

I wonder whether hon. Members opposite have ever counted the total cost of the proposals with which they apparently hope to bribe and drug the electorate. As far as I could follow the marathon speech of the hon. and learned Member for Kettering (Mr. Mitchison) yesterday, it appears that we shall have to take into account the interest charge on the capital sum of taking over a large proportion of the 5½ million municipalised council houses. We shall have to account for the abolition of the National Health Service charges. We shall have to pay the services compensation for nationalisation and take-over shares.

According to a remark of the Leader of the Opposition, his view in 1951 was that we should restore the food subsidies. I should like to ask him whether that is his view today. [HON. MEMBERS: "Answer."] I did not expect an answer.

I should like to ask the hon. Member for Coventry, East (Mr. Crossman) what will be the cost of the long-term pensions scheme envisaged at the Labour Party Conference at Brighton. When I look at this prospectus of the Opposition with the cost which is involved—I think it is very good for the country to remember these things—I am reminded of the words of that fine comedian of the Windmill, Mr. John Tilley, who in one of his famous sketches was reading out the auditors' report at a company meeting. The auditors' report, on the prospectus of right hon. Gentlemen opposite, runs as follows: We certify that everything in the accompanying balance sheet, with the exception of the figures, appears to be correct; and the business of the company, if any, appears to be on the incline. We cannot afford the extravagances of the Socialist programme. We must state quite simply that the sooner their policy comes back to what it was as expressed by the right hon. Gentleman the Leader of the Opposition in his own 1951 Budget speech the better. I quote his own words. He said that there must be no …increase in wages and salaries beyond what is justified by the growth of productivity…"—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 831.] That is sense, and that is precisely the policy that my right hon. Friend the Chancellor of the Exchequer is supporting.

The right hon. Gentleman the Member for Blyth asked me about production. I will try to give him the latest and most up-to-date assessment of production that I can. It so happens that the average production in the September quarter appears to have been the highest ever. It is about 3 per cent. higher than in the corresponding period of 1956. That is the answer to him. The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) says that we had a 15 per cent. production increase in a period of five years. That is exactly what I said when I made my speech about doubling the standard of living in twenty-five years. I said that if our production could increase by 3 per cent. per annum—which is 15 per cent. in five years—we could achieve that result. I am very gratified that he should confirm my impression.

Not only have we a good figure for September but we also have good indications for certain industries. Motor car manufactures are up by about 62 per cent., and the production of plastics and machine tools, hosiery, radios, television sets, and in the chemical industry, are all going up.

I now want to tell the House the problem with which my right hon. Friend the Chancellor of the Exchequer is dealing. The problem with which he is dealing is that in the first six months of 1957—and this is the national problem with which we have to deal—the increase in production was approximately £180 million—about 2 per cent.—while wages and salaries were 6 per cent. up—about £300 million. That is a ratio of two to six. The ratio in 1956 was one of a 1 per cent. increase in production to a 9 per cent. increase in wages and salaries, and a nearly 4 per cent. increase on profit margins.

That is the problem with which we have to deal, and, in my opinion, my right hon. Friend had no alternative but to adopt the strict policy that he has adopted with the full approval of his colleagues in Her Majesty's Government. As is seen at present, and as is evidenced by the strength of sterling, he has had his first victory for sterling, for which we should all be thankful.

I can only say this from my own experience, that any Chancellor of the Exchequer dealing with an exchange crisis, whether it be of the type that I dealt with in 1951–52—which was of a different type, because that was a case of a bad balance of trade, and we had to cut imports—or a crisis such as this, where wages and salaries are frankly outrunning production and where profits are not up to the wages and salaries, can only deal with it by limiting the circulation of money, as my right hon. Friend has done.

I come to some of the other questions raised by the right hon. Member for Blyth. I would first reply to his reference to the White Paper of 1948, the Statement on Personal Incomes, Costs and Prices. There are one or more extracts in this that I should like to bring to the attention of right hon. Gentlemen opposite. In paragraph 5, it is said: It is essential, therefore, that there should be no further general increase in the level of personal incomes without at least a corresponding increase in the volume of production. It goes on to make clear that unless we follow that policy it will hurt our exports, That is precisely the policy that we are following today.

The only difference between our policy and that of right hon. and hon. Gentlemen opposite is that at that time, when the matter was discussed on 12th February, 1948, Sir Anthony Eden, who was then in charge of our side, said that if the White Paper was not aimed only at one section, be it wages, salaries or profits, it would have the support of the House and the nation. There was no vote of censure, there was no Division and the Opposition supported the Government. In face of our national difficulties today, the Opposition should not just pay lip-service to the need for joint collaboration in dealing with these problems but should copy our example on that occasion.

The right hon. Gentleman made reference to one of the leaders of our national life, namely, Mr. Jim Campbell who, together with Mr. Hollywood, was, to our great regret, killed in an accident in a far-off country, and I immediately take up the right hon. Gentleman's reference to these leaders of the trade union movement and express our own sympathy with their relatives in this great loss. [HON. MEMBERS: "Hear, hear."] I do not want to go on with that because I want to say that Mr. Campbell was a respected figure in the trade union movement. We respect his words, and it is no part of Government policy to seek to destroy the industrial relations or the collective bargaining which he did so much to foster. Nor do we intend to destroy the arbitration machinery. With my experience, having been for some long time Parliamentary Secretary and for a very short time Minister of Labour, and as a member of Her Majesty's Government, I would not myself support any such policy.

The case of the Health Service employees has been raised by the right hon. Gentleman and it would be wrong for me to allow the debate to close without referring to it. The Ministers in question—namely, the Secretary of State for Scotland and the Minister of Health—were acting in accordance with their statutory duty in a case where the Government are in effect, although not in form, the employer, because all the money for the wages in question comes direct from the Exchequer—that is, from the taxpayers' pocket.

I here take up a remark made by the Leader of the Opposition—"the man who decides whether to pay." The man who decides whether to pay in this question is the Chancellor of the Exchequer. It may be unfortunate that there is this confusion, arising from the right hon. Gentleman's reference to the Guillebaud Report, on the subject of the management side and the official side, but what is absolutely certain is that there was absolute rectitude on the part of my right hon. Friend the Minister of Health. His official representatives were instructed from the start to oppose the grant of this wage award and, what is equally clear, he and his right hon. Friend the Secretary of State for Scotland were acting in accordance with the policy announced by the Chancellor of the Exchequer on 29th October, namely, that where the Government are themselves the employer we must seek to follow policies similar to those which we urge on others. It is our intention to adhere to that policy, whatever opposition and whatever clamour we may meet.

The right hon. Gentleman talks about the private sector. I should have thought, looking at the effect on the Stock Exchange, looking at the very stiff Bank Rate, at the credit squeeze to which the private sector is being submitted at the present time, and at the relationship of profits to wages in the figures which I gave, the private sector is certainly suffering a sufficient squeeze from the Chancellor of the Exchequer at the present time. In answer to the Leader of the Opposition, I am satisfied that the policy is balanced as between the public and the private sector.

The position about the Transport Commission, in answer to the right hon. Gentleman, is not that there can be no question of wages agreements within the ambit of the railways. Of course, there can be wage negotiations, but what it is perfectly legitimate for the Government to do is to decide that they cannot make any more money available by subsidy to the Transport Commission, and to give them that warning ahead, so that the responsibility lies with them.

I will read one more extract from the White Paper of 1948, which says this: …the Government have decided…that if…remuneration is increased in any class of employment, whether in private industry or under a public authority, there can be no presumption, whatever may have been the practice in the past, that the resulting costs will be taken into account in… the various …financial matters requiring Government action. Taken with due regard to the different financial climate, price-fixing and so forth, to which reference is made, that is the equivalent in the country's economy, as we are running it now, of the policy which I have stated.

I want to make it quite clear that we intend, whatever the difficulty, to carry forward that policy. What is at stake, in fact, is this, and this is a problem which arises before every Chancellor of the Exchequer, before every Minister of Labour and probably also before every Government. At one time or other, the economy is so expanded that one has to hold back, and then the time comes when production lags and one has to go forward. We are at a moment now when production is actually showing signs of improving, but when wage claims and demands upon the products of the economy exceed by far the increase in productivity. We have, therefore, no alternative but to adopt a stiff policy.

That stiff policy has already been effective for sterling, and my right hon. Friend the Prime Minister has indicated

that we do not propose that this policy should result in such deflationary effects as will bring about the difficulties to which the Leader of the Opposition referred. We are not pessimists, like the right hon. Gentleman. We believe that our record especially in the years 1953 and 1954, when we managed to balance the economy between production and demand, can be repeated again. If there is any one man who can repeat it, it is my right hon. Friend the Chancellor of the Exchequer.

The Government are stoutly behind him and behind the Minister of Labour in their dual policy of working with the trade unions and maintaining collective bargaining, and in seeing that our production exceeds the demands made upon it. That is our task, and to that end we dedicate ourselves tonight.

Question put, That those words be there added:—

The House divided: Ayes 260, Noes 313.

Division No. 2.]	AYES	[19.59 p.m.
Ainsley, J. W.	Darling, George (Hillsborough)	Henderson, Rt. Hn. A. (Rwly Regis)
Albu, A. H.	Davies, Harold (Leek)	Herbison, Miss M.
Allaun, Frank (Salford, E.)	Davies, Stephen (Merthyr)	Hewitson, Capt. M.
Allen, Arthur (Bosworth)	Deer, G.	Hobson, C. R. (Keighley)
Allen, Scholefield (Crewe)	Delargy, H. J.	Holman, P.
Anderson, Frank	Diamond, John	Holmes, Horace
Awbery, S. S.	Dodds, N. N.	Holt, A. F.
Bacon, Miss Alice	Donnelly, D. L.	Howell, Charles (Perry Barr)
Baird, J.	Dugdale, Rt. Hn. John (W. Brmwch)	Howell, Denis (All Saints)
Balfour, A.	Dye, S.	Hoy, J. H.
Bellenger, Rt. Hon. F. J.	Ede, Rt. Hon. J. C.	Hubbard, T. F.
Bence, C. R. (Dunbartonshire, E.)	Edelman, M.	Hughes, Cledwyn (Anglesey)
Bonn, Hn. Wedgwood (Bristol, S. E.)	Edwards, Rt. Hon. John (Brighouse)	Hughes, Emrys (S. Ayrshire)
Benson, G.	Edwards, Rt. Hon. Ness (Caerphilly)	Hughes, Hector (Aberdeen, N.)
Beswick, Frank	Edwards, Robert (Bilston)	Hunter, A. E.
Blackburn, F.	Edwards, W. J. (Stepney)	Hynd, H. (Accrington)
Blenkinsop, A.	Evans, Albert (Islington, S. W.)	Hynd, J. B. (Attercliffe)
Blyton, W. R.	Evans, Edward (Lowestoft)	Irvine, A. J. (Edge Hill)
Boardman, H.	Fernyhough, E.	Irving, Sydney (Dartford)
Bottomley, Rt. Hon. A. G.	Fienburgh, W.	Isaacs, Rt. Hon. G. A.
Bowles, F. G.	Finch, H. J.	Janner, B.
Boyd, T. C.	Fletcher, Erie	Jay, Rt. Hon. D. P. T.
Braddock, Mrs. Elizabeth	Foot, D. M.	Jeger, George (Goole)
Brockway, A.F.	Forman, J. C.	Jeger, Mrs. Lena (Holbn & St. Pncs, S.)
Brockway, A. F. Broughton, Dr. A. D. D.	Fraser, Thomas (Hamilton)	Jones, Rt. Hon. A. Creeoh (Wakefield)
Brown, Thomas (Ince)	Gaitskell, Rt. Hon. H. T. N.	Jones, David (The Hartlepools)
Burke, W. A.	George, Lady Megan Lloyd (Car'then)	Jones, Elwyn (W. Ham, S.)
Burton, Miss F. E.	Gibson, C. W.	Jones, Jack (Rotherham)
Butler, Herbert (Hackney. C.)	Gooch, E. G.	Jones, J. Idwal (Wrexham)
Butler, Mrs. Joyce (Wood Green)	Greenwood, Anthony	Jones, T. W. (Merioneth)
Callaghan, L. J.	Grenfell, Rt. Hon. D. R.	Kenyon, C.
Castle, Mrs. B. A.	Grey, C. F.	Key, Rt. Hon. C. W.
Champion, A. J.	Griffiths, David (Rother Valley)	King, Dr. H. M.
Clunie, J.	Griffiths, Rt. Hon. James (Llanelly)	Lawson, G. M.
Coldrick, W.	Griffiths, William (Exchange)	Ledger, R. J.
Collick, P. H. (Birkenhead)	Grimond, J.	Lee, Frederick (Newton)
Collins, V. J. (Shoreditch & Finsbury)	Hale, Leslie	Lee, Miss Jennie (Cannock)
Corbel, Mrs. Freda	Hall, Rt. Hn. Glenvil (Coins Valley)	Lever, Harold (Cheetham)
Cove, W. G.	Hamilton, W. W.	Lewis, Arthur
Craddock, George (Bradford, S.)	Hannan, W.	Lindgren, G. S.
Cronin, J. D.	Harrison, J. (Nottingham, N.)	Lipton, Marcus
Grossman, R. H. S.	Hastings, S.	Mahon, Dr. J. Dickson
Cullen, Mrs. A.	Hayman, F. H.	MacColl, J. E.
Dalton, Rt. Hon. H.	Healey, Denis	MacDermot, Niall
McGhee, H. G.	Peart, T. F.	Strauss, Rt. Hon. George (Vauxhall)
McGovern, J.	Pentland, N.	Stross, Dr. Barnett (Stoke-on-Trent, C.)
McInnes, J.	Plummer, Sir Leslie	Summerskill, Rt. Hon. E.
McKay, John (Wallsend)	Popplewell, E.	Swingler, S. T.
McLeavy, Frank	Prentice, R. E.	Sylvester, G. O.
MacMillan, M. K. (Western Isles)	Price, J. T. (Westhoughton)	Taylor, Bernard (Mansfield)
MacPherson, Malcolm (Stirling)	Price, Philips (Gloucestershire, W.)	Taylor, John (West Lothian)
Mahon, Simon	Probert, A. R.	Thomas, George (Cardiff)
Mainwaring, W. H.	Prootor, W. T.	Thomas, Iorwerth (Rhondda, W.)
Mallalieu, E. L. (Brigg)	Pryde, D. J.	Thornton, E.
Mallalieu, J. P. W. (Huddersfd, E.)	Pursey, Cmdr. H.	Timmons, J.
Mann, Mrs. Jean	Randall, H. E.	Tomney, F.
Marquand, Rt. Hon. H. A.	Rankin, John	Ungoed-Thomas, Sir Lynn
Mason, Roy	Redhead, E. C.	Osborne, H. C.
Mayhew, C. P.	Reeves, J.	Viant, S. P.
Mellish, R. J.	Reid, William	Wade, D. W.
Messer, Sir F.	Rhodes, H.	Watkins, T. E.
Mikardo, Ian	Robens, Rt. Hon. A.	Weitzman, D.
Mitchison, G. R.	Roberts, Albert (Normanton)	Wells, Percy (Faversham)
Monslow, W.	Roberts, Goronwy (Caernarvon)	Wells, William (Walsall, N.)
Moody, A. S.	Robinson, Kenneth (St. Pancras, N.)	West, D. G.
Morris, Percy (Swansea, W.)	Rogers, George (Kensington, N.)	Wheeldon, W. E.
Morrison, Rt. Hn. Herbert (Lewlsim, S.)	Ross, William	White, Mrs. Eirene (E. Flint)
Mort, D. L.	Royle, C.	White, Henry (Derbyshire, N.E.)
Moss, R.	Shawcross, Rt. Hon. Sir Hartley	Wigg, George
Moyle, A.	Shinwell, Rt. Hon. E.	Wilcock, Group Capt. C. A. B.
Mulley, F. W.	Short, E. W.	Wilkins, W. A.
Neal, Harold (Bolsover)	Shurmer, P. L. E.	Willey, Frederick
Noel-Baker, Francis (Swindon)	Silverman, Julius (Aston)	Williams, David (Neath)
O'Brien, Sir Thomas	Silverman, Sydney (Nelson)	Williams, Rev. Llywelyn (Ab'tillery)
Oliver, G. H.	Simmons, C. J. (Brierley Hill)	Williams, Ronald (Wigan)
Oram, A. E.	Skeffington, A. M.	Williams, Rt. Hon. T. (Don Valley)
Orbach, M.	Slater, Mrs. H. (Stoke, N.)	Williams, W. R. (Openshaw)
Oswald, T.	Slater, J. (Sedgefield)	Willis, Eustace (Edinburgh, E.)
Owen, W. J.	Smith, Ellis (Stoke, S.)	Wilson, Rt. Hon. Harold (Huyton)
Padley, W. E.	Snow, J. W.	Winterbottom, Richard
Paget, R. T.	Soskice, Rt. Hon. Sir Frank	Woodburn, Rt. Hon. A.
Paling, Rt. Hon. W. (Dearne Valley)	Sparks, J. A.	Woof, R. E.
Paling, Will T. (Dewsbury)	Steele, T.	Yates, V. (Ladywood)
Palmer, A. M. F.	Stewart, Michael (Fulham)	Younger, Rt. Hon. K.
Pargiter, G. A.	Stonehouse, John	Zilliacus, K.
Parker, J.	Stones, W. (Consett)
Parkin, B. T.	Strachey, Rt. Hon. J.	TELLERS FOR THE AYES:
Paton, John		Mr. Bowden and Mr. Pearson.
NOES
Agnew, Sir Peter	Brooman-White, R. C.	Dugdale, Rt. Hn. Sir T. (Richmond)
Aitken, W. T.	Browne, J. Nixon (Craigton)	Duncan, Sir James
Allen, Arthur (Bosworth)	Bryan, P.	Duthie, W. S.
Alport, C. J. M.	Bullus, Wing Commander E. E.	Eccles, Rt. Hon. Sir David
Amery, Julian (Preston, N.)	Burden, F. F. A.	Eden, J. B. (Bournemouth, West)
Amory, Rt. Hn. Heathcoat (Tiverton)	Bulcher, Sir Herbert	Elliott, R. W. (N'castle upon Tyne, N.)
Anstruther-Gray, Major Sir William	Butler, Rt. Hn. R. A. (Saffron Walden)	Emmet, Hon. Mrs. Evelyn
Armstrong, C. W.	Campbell, Sir David	Errington, Sir Eric
Ashton, H.	Carr, Robert	Erroll, F. J.
Astor, Hon. J. J.	Cary, Sir Robert	Farey-Jones, F. W.
Atkins, H. E.	Channon, Sir Henry	Fell, A.
Baldock, Lt.-Cmdr. J. M.	Chichester-Clark, R.	Finlay, Graeme
Baldwin, A. E.	Churchill, Rt. Hon. Sir Winston	Fisher, Nigel
Balniel, Lord	Clarke, Brig. Terence (Portsmth, W.)	Fletcher-Cooke, C.
Barber, Anthony	Cole, Norman	Forrest, G.
Barlow, Sir John	Conant, Maj. Sir Roger	Fort, R.
Barter, John	Cooke, Robert	Foster, John
Baxter, Sir Beverley	Cooper, A. E.	Fraser, Hon. Hugh (Stone)
Beamish, Maj. Tufton	Cooper-Key, E. M.	Fraser, Sir Ian (M'cmbe & Lonsdale)
Bell, Philip (Bolton, E.)	Cordeaux, Lt.-Col. J. K.	Freeth, Denzil
Bell, Ronald (Bucks, S.)	Corfield, Capt. F. V.	Galbraith, Hon. T. G. D.
Bennett, F. M. (Torquay)	Craddock, Beresford (Spelthorne)	Gammans, Lady
Bennett, Dr. Reginald	Crosthwaite-Eyre, Col. O. E.	Garner-Evans, E. H.
Bevins, J. R. (Toxteth)	Crowder, Sir John (Finchley)	George, J. C. (Pollok)
Bidgood, J. C.	Crowder, Petre (Ruislip—Northwood)	Gibson-Watt, D.
Biggs-Davison, J. A.	Cunningham, Knox	Glover, D.
Birch, Rt. Hon. Nigel	Currie, G. B. H.	Glyn, Col. Richard H.
Bishop, F. P.	Dance, J. C. G.	Godber, J. B.
Black, C. W.	Davidson, Viscountess	Gomme-Duncan, Col. Sir Alan
Body, R. F.	D'Avigdor-Goldsmid, Sir Henry	Goodhart, Philip
Boothby, Sir Robert	Deedes, W. F.	Gough, C. F. H.
Bossom, Sir Alfred	Digby, Simon Wingfield	Gower, H. R.
Boyd-Carpenter, Rt. Hon. J. A.	Dodds-Parker, A. D.	Graham, Sir Fergus
Boyle, Sir Edward	Donaldson, Cmdr. C. E. McA.	Grant, W. (Woodside)
Brains, B. R.	Doughty, G. J. A.	Grant-Ferris, Wg Cdr. R. (Nantwich)
Braithwaite, Sir Albert (Harrow, W.)	Drayson, G. B.	Green, A.
Bromley-Davenport, Lt.-Col. W. H.	du Cann, E. D. L.	Gresham Cooke, R.
Brooke, Rt. Hon. Henry

Grimston, Hon. John (St. Albans)	Lindsay, Hon. James (Devon, N.)	Rawlinson, Peter
Grimston, Sir Robert (Westbury)	Lindsay, Martin (Solihull)	Redmayne, M.
Grosvenor, Lt.-Col. R. G.	Linstead, Sir H. N.	Rees-Davies, W. R.
Gurden, Harold	Llewellyn, D. T.	Remnant, Hon. P.
Hall, John (Wycombe)	Lloyd, Rt. Hon. G. (Sutton Coldfield)	Renton, D. L. M.
Hare, Rt. Hon. J. H.	Lloyd, Maj. Sir Guy (Renfrew, E.)	Ridsdale, J. E.
Harris, Frederic (Croydon, N. W.)	Lloyd, Rt. Hon. Selwyn (Wirral)	Rippon, A. G. F.
Harris, Reader (Heston)	Low, Rt. Hon. Sir Toby	Roberts, Sir Peter (Heeley)
Harrison, A. B. C. (Maydon)	Lucas, Sir Jocelyn (Portsmouth, S.)	Robertson, Sir David
Harrison, Col. J. H. (Eye)	Lucas, P. B. (Brentford & Chiswick)	Robinson, Sir Roland (Blackpool, S.)
Harvey, Sir Arthur (Macclesfd)	Lucas-Tooth, Sir Hugh	Robson Brown, Sir William
Harvey, Ian (Harrow, E.)	McAdden, S. J.	Rodgers, John (Sevenoaks)
Harvey, John (Walthamstow, E.)	Macdonald, Sir Peter	Roper, Sir Harold
Harvey-Watt, Sir George	McKibbin, Alan	Ropner, Col. Sir Leonard
Hay, John	Mackie, J. H. (Galloway)	Russell, R. S.
Heald, Rt. Hon. Sir Lionel	McLaughlin, Mrs. P.	Sandys, Rt. Hon. D.
Henderson, John (Cathcart)	Maclay, Rt. Hon. John	Schofield, Lt.-Col. W.
Henderson-Stewart, Sir James	Maclean, Sir Fitzroy (Lancaster)	Scott-Miller, Cmdr. R.
Hesketh, R. F.	McLean, Neil (Inverness)	Sharpies, R. C.
Hicks-Beach, Maj. W. W.	Macleod, Rt. Hn. Iain (Enfield, W.)	Shepherd, William
Hill, Rt. Hon. Charles (Luton)	MacLeod, John (Ross & Cromarty)	Simon, J. E. S. (Middlesbrough, W.)
Hill, Mrs. E. (Wythenshawe)	Macmillan, Rt. Hn. Harold (Bromley)	Smyth, Brig. Sir John (Norwood)
Hill, John (S. Norfolk)	Macmillan, Maurice (Halifax)	Soames, Christopher
Hirst, Geoffrey	Macpherson, Mall (Dumfries)	Spearman, Sir Alexander
Hobson, John (Warwick & Leam'gt'n)	Maitland, Cdr. J. F. W. (Horncastle)	Speir, R. M.
Holland-Martin, C. J.	Maitland, Hon. Patrick (Lanark)	Spence, H. R. (Aberdeen, W.)
Hone, Lord John	Manningham-Buller, Rt. Hn. Sir R.	Stanley, Capt. Hon. Richard
Hornby, R. P.	Markham, Major Sir Frank	Stevens, Geoffrey
Hornsby-Smith, Miss M. P.	Marlowe, A. A. H.	Steward, Harold (Stockport, S.)
Horobin, Sir Ian	Marples, Rt. Hon. A. E.	Steward, Sir William (Woolwich, W.)
Horsbrugh, Rt. Hon. Dame Florence	Marshall, Douglas	Stoddart-Scott, Col. Sir Malcolm
Howard, Gerald (Cambridgeshire)	Mathew, R.	Storey, S.
Howard, Hon. Greville (St. Ives)	Maude, Angus	Stuart, Rt. Hon. James (Moray)
Howard, John (Test)	Maudling, Rt. Hon. R.	Studholme, Sir Henry
Hughes Hallett, Vice-Admiral J.	Mawby, R. L.	Summers, Sir Spencer
Hughes-Young, M. H. C.	Maydon, Lt.-Comdr. S. L. C.	Sumner, W. D. (Orpington)
Hulbert, Sir Norman	Medlicott, Sir Frank	Taylor, Sir Charles (Eastbourne)
Hurd, A. R.	Milligan, Rt. Hon. W. R.	Taylor, William (Bradford, N.)
Hutchison, Michael Clark (E'b'gh, S.)	Molson, Rt. Hon. Hugh	Teeling, W.
Hutchison, Sir Ian Clark (E'b'gh, W.)	Moore, Sir Thomas	Temple, John M.
Hyde, Montgomery	Morrison, John (Salisbury)	Thomas, Leslie (Canterbury)
Hylton-Foster, Rt. Hon. Sir Harry	Mott-Radolyffe, Sir Charles	Thomas, P. J. M. (Conway)
Iremonger, T. L.	Nabarro, G. D. N.	Thompson, Kenneth (Walton)
Irvine Bryant Godman (Rye)	Nairn, D. L. S.	Thompson, Lt.-Cdr. R. (Croydon, S.)
Jenkins, Robert (Dulwich)	Heave, Airey	Thorneycroft, Rt. Hon. P.
Jennings, J. C. (Burton)	Nicholls, Harmer	Thornton-Kemsley, C. N.
Jennings, Sir Roland (Hallam)	Nicolson, N. (B'n'm'th, E. & Chr'ch)	Tiley, A. (Bradford, W.)
Johnson, Dr. Donald (Carlisle)	Nugent, G. R. H.	Tilney, John (Wavertree)
Johnson, Eric (Blackleg)	O'Neill, Hn. Phelim (Co. Antrim, N.)	Turner, H. F. L.
Joynson-Hicks, Hon. Sir Lancelot	Ormsby-Gore, Rt. Hon. W. D.	Tweedsmuir, Lady
K Merry, D.	Orr, Capt. L. P. S.	Vane, W. M. F.
Keegan, D.	Orr-Ewing, Charles Ian (Hendon, N.)	Vaughan-Morgan, J. K.
Kerby, Capt. H. B.	Orr-Ewing, Sir Ian (Weston-S-Mare)	Vickers, Miss Joan
Kerr, Sir Hamilton	Osborne, C.	Wakefield, Sir Wavell (St. M'lebone)
Kershaw, J. A.	Page, R. G.	Walker-Smith, Rt. Hon. Derek
Kimball, M.	Pannell, N. A. (Kirkdale)	Wall, Major Patrick
Kirk, P. M.	Partridge, E.	Ward, Rt. Hon. G. R. (Worcester)
Lagden, G. W.	Peyton, J. W. W.	Ward, Dame Irene (Tynemouth)
Lambert, Hon. G.	Pickthorn, K. W. M.	Watkinson, Rt. Hon. Harold
Lambton, Viscount	Pike, Miss Mervyn	Webbe, Sir H.
Lancaster, Col. C. G.	Pilkington, Capt. R. A.	Whitelaw, W. S. I.
Langford-Holt, J. A.	Pitman, I. J.	Williams, Paul (Sunderland, S.)
Leather, E. H. C.	Pitt, Miss E. M.	Williams, R. Dudley (Exeter)
Leavey, J. A.	Pott, H. P.	Wills, G. (Bridgwater)
Leburn, W. G.	Powell, J. Enoch	Wood, Hon. R.
Legge-Bourke, Maj. E. A. H.	Price, David (Eastleigh)
Legh, Hon. Peter (Petersfield)	Price, Henry (Lewisham, W.)	TELLERS FOR THE NOES:
Lennox-Boyd, Rt. Hon. A. T.	Profumo, J. D.	Mr. Heath and Mr. Oakshott.

Main Question put and agreed to.

Resolved, That an humble Address be presented to Her Majesty, as follows: Most Gracious Sovereign, We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

To be presented by Privy Councillors or Members of Her Majesty's Household.