Commons Sitting of 30 October 1957

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  ROYAL AIR FORCE

    Low-flying Aircraft, Reading
    Mr. Mikardoasked the Secretary of State for Air what steps he has taken to eliminate the nuisance caused to the residents of Reading by low-flying aircraft from Greenham Common.
    The Secretary of State for Air (Mr. George Ward): I have explained to the hon. Member in correspondence why aircraft coming in to land at Greenham Common may have to approach the airfield from the general direction of Reading. A detailed investigation which we have since held does not suggest that aircraft using this airfield cause substantial disturbance to Reading, which is some fourteen miles away.
    Mr. Mikardo: Is the right hon. Gentleman aware that the results of his investigation are in conflict with any amount of testimony that he can get from the people of Reading themselves? Is it not silly to site an airfield in the middle of a densely populated area with the main runway pointing straight across a large borough? Does he know that every time there is a complaint there is a slight improvement for a short time—which shows that it can be improved—and will he now effect a permanent improvement?
    Mr. Ward: I have been into this very carefully, because I do appreciate that there is a noise problem; but I am satisfied that the United States authorities really are doing all they can to minimise the nuisance.

    Disused Airfields, Essex
    Mr. Biggs-Davisonasked the Secretary of State for Air the Government's policy regarding disused airfields in Essex.
    Mr. Ward: We are keeping those which may still be needed by the Royal Air Force and disposing of the rest.
    Mr. Biggs-Davison: May I ask my right hon. Friend whether those which it is necessary for the Department to retain include the present disused airfield at Willingale?
    Mr. Ward: We are retaining a part of that, and disposing of the rest.

    Recruitment
    Mr. Liptonasked the Secretary of State for Air why recruitment for the Royal Air Force fell from 1,642 in August, 1956, to 752 in August. 1957; and what action he is taking to improve recruitment.
    Mr. Ward: The falling off in 1957 has occurred primarily in recruitment on short-term engagements. In fact, the entry of apprentices and boys shows an increase of some 30 per cent, compared with 1956. As regards the second part of the Question, I would ask the hon. Gentleman to await the Answer to be given later to the hon. Member for Newcastle-under-Lyme (Mr. Swingler).
    Mr. Lipton: Is the Secretary of State aware that on those deplorable figures we shall, before long, have no Air Force at all, unless National Service is continued indefinitely; and as we are not getting the men and have not the machines, what is he doing with the £500 million Air Estimates that we gave him a few months ago?
    Mr. Ward: I think the hon. Member will agree that if we are to have an all-Regular force by 1962, the main people are the long-service ones—the apprentices and boys—and, as I say, recruiting for them is very encouraging.

    Air Trooping
    Captain Corfieldasked the Secretary of State for Air to what extent the calls on Transport Command involved in the movement of two companies of infantry from Kenya to Muscat prevented Transport Command from undertaking the transport of 600 troops to Christmas Island; and if he will make a statement on the adequacy of Transport Command for these purposes.
    Mr. Ward: Hardly at all; most of this move was carried out in Beverleys, which are not designed for long-range trooping such as the move to Christmas Island. On the second part of the Question, we are, as the House is aware, greatly expanding the capacity of Transport Command. Even at its present size however, the Command would have been well able to undertake the move to Christmas Island had it not been for other high priority tasks.
    Mr. de Freitasasked the Secretary of State for Air which private firms hold air trooping contracts obtained without competition from the nationalised air Corporations.
    Mr. Ward: The air charter firms at present holding regular Service contracts are Air Charter; Airwork; Britavia; Dan Air; Eagle Aviation; Scottish Aviation; Skyways and Transair.
    Mr. de Freitas: Although most of these firms are highly reputable and experienced, will not the Government change their doctrinaire, anti-B.E.A., anti-B.O.A.C. policy and give troops and ratepayers the benefit of competition from our national airlines?
    Mr. Ward: There is no reason to suppose that troops or families or anyone else will be any better served by the Corporations, and the record of the civil operators in this sphere has been excellent.
    Mr. de Freitas: Will the right hon. Gentleman please answer my point? Will he not give the taxpayers the benefit of the competition? If the position is as he says, no harm will be done.
    Mr. Ward: I am sorry to have to keep repeating this—I have repeated it several times. The policy of the Government is to allow the Corporations to concentrate on scheduled services.

    Vulcan and Victor Aircraft
    Mr. de Freitasasked the Secretary of State for Air when he now expects the re-equipment of operational squadrons with Vulcans and Victors to be completed.
    Mr. Ward: It would not be in the public interest to give that information at this stage.
    Mr. de Freitas: Is not the Victor appallingly delayed? In view of this, what change are the Government going to make in the procedure of giving contracts to very small aircraft firms?
    Mr. Ward: No one is more keen than I am to get aircraft into service at the proper time and without delay, but the hon. Gentleman knows that in developing new aircraft one gets inevitable delays. He himself implored me as recently as 31st July not to make optimistic delivery forecasts which might later cause disappointment.

    Supersonic Bombers
    Mr. Beswickasked the Secretary of State for Air what new decisions have been taken, since the publication of the Defence White Paper, with regard to the operation by the Royal Air Force of supersonic bombers.
    Mr. Ward: None, Sir.
    Mr. Beswick: Are we to understand that the tender which has been prepared or which has already been sent out to the industry for a supersonic bomber has been prepared without the knowledge of the right hon. Gentleman?
    Mr. Ward: The Question on the Order Paper asks whether our policy about the supersonic bomber has altered since the White Paper was produced, and the answer is that it has not.
    Mr. Beswick: May I press the right hon. Gentleman further? Is it proposed to invite the industry to prepare specifications for a supersonic bomber?
    Mr. Ward: I am not prepared to discuss that at this stage.
    Mr. de Freitas: Surely this is an important point. Will not the Secretary of State recognise that in the White Paper the Government said that they were not going in for the supersonic bomber? Is it not true that there have been tenders invited for such a bomber?
    Mr. Ward: Tenders have not been invited for a supersonic bomber.
    Mr. Shinwell: In view of the statement recently made by the Minister of Defence about the inadequacy of bombers in the event of a nuclear war, is it not desirable that the Government should state frankly that they do not intend to produce any more supersonic bombers?
    Mr. Ward: That statement was made in the Defence White Paper at the beginning of the year, and nothing has happened since then to alter it.

    All-Party Delegations (Insurance)
    Mr. Beswickasked the Secretary of State for Air why the air journey of the all-party delegation to the Royal Air Force station, Waddington, on 26th September was excluded from the provisions of the insurance cover recently announced.
    Mr. Ward: As my right hon. Friend the Chancellor of the Exchequer explained in his reply to my right hon. Friend the Member for Kelvingrove (Mr. Walter Elliot) on 1st August, the arrangements to which the hon. Member refers apply to hon. Members travelling on a Parliamentary committee or delegation set up directly by the House, Committee of Selection, or Mr. Speaker. I understand that the visit to Royal Air Force Station, Waddington did not fall within its scope.
    Mr. Beswick: Surely the Secretary of State understands that this visit was a useful one, carried out at his invitation, and if it was a useful one, as most of the Members thought it was, why is it so excluded from this arrangement? Is it a Treasury direction, or did the Secretary of State merely think that it was not worth while applying the arrangement in this case?
    Mr. Ward: I think the hon. Member knows how very much I value visits by hon. Members to our airfields. I wish these visits occurred more often. But the scope of this particular scheme is not a matter for me; it is a matter for my right hon. Friend the Chancellor of the Exchequer.
    Mr. P. Williams: Would my right hon. Friend not agree that the really important point here is that the scope of this scheme should be expanded?
    Mr. Ward: I would ask my hon. Friend to address that question to the Chancellor of the Exchequer.

  CIVIL AVIATION

    Aircraft Noise
    Sir H. Lucas-Toothasked the Minister of Transport and Civil Aviation whether he is aware that the increasing
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    power and numbers of civil aircraft are causing a nuisance to an increasing number of people who reside in the lines of flight from airports; and what progress is being made in the direction of silencing aircraft engines.
    The Minister of Transport and Civil Aviation (Mr. Harold Watkinson): I am well aware that aircraft engine noise is a cause of disturbance to many people in the neighbourhood of airports, and I am anxious that everything should be done to reduce it. Some progress has been made; for example, the Comet IV when it comes into service will have noise reducers. Further work may lead to improved types of noise reducers, and also to the design of engines which have a lower output of noise in relation to the power developed. My Ministry will watch the situation very closely and will take the nuisance aspect very carefully into account.
    Sir H. Lucas-Tooth: Can my right hon. Friend say whether he has power to enforce the use of these improvements as they are discovered, and can he enforce them in the case of foreign machines as well as in the case of British machines?
    Mr. Watkinson: What I can say is that, before aircraft of this type have the unrestricted use of London Airport and other airports in this country, we shall want to be satisfied that the level of noise is not such as to cause an intolerable burden to the inhabitants who live around those airports.
    Mr. Fenner Brockwayasked the Minister of Transport and Civil Aviation what progress has been made in the provision of extended runways or by other means to reduce the noise of rising aircraft over residential areas to the west of London Airport, including Colnbrook and Langley.
    Mr. Watkinson: Extension of runways is not a satisfactory method of reducing aircraft noise in areas west of London Airport. Better results have been obtained by arranging for aircraft to climb as quickly as possible after take-off and fly at higher altitudes over residential areas near the airport.
    Mr. Brockway: Is the right hon. Gentleman aware that, when I raised this matter earlier, the Minister replied that the runways were being extended eastwards to

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    deal with the problem? Will he consult his Parliamentary Private Secretary, who shares the representation of Colnbrook with me? Will he also remember that at Langley, in addition to the old village, there is a large L.C.C. estate and that life is becoming intolerable for those people because of the noise of aircraft?
    Mr. Watkinson: My hon. Friend leaves me in no doubt of the views which he and his constituents hold on noise. The whole House will realise that this is a growing and very great burden for people who live around major airports. Nonetheless, improvement must come from technical improvements in aircraft, in silencing take off and so on, and not from longer runways.

    Errol Airport (Air Service)
    Mr. G. M. Thomsonasked the Minister of Transport and Civil Aviation what answer he has made to the recommendations of his Scottish Advisory Council regarding the need for a regular air service from Errol Airport.
    The Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation (Mr. Airey Neave): My right hon. Friend has received no recommendations from the Scottish Advisory Council.
    Mr. Thomson: Is the Minister aware that during the Summer Recess the Scottish Advisory Council has definitely come down in favour of an air service from Dundee? Is he further aware that there is now an urgent need of new industry in the city, and that it is generally accepted that the lack of modern air communication is one of the obstacles to attracting new industry to Dundee?
    Mr. Neave: All I can tell the hon. Gentleman about the meeting of the Scottish Advisory Council is that I understand that in August it resolved to write to my right hon. Friend and also to B.E.A. We have not yet so far received the letter. Of course, if we do, we shall take into account what it says.
    Mr. Strachey: Would not the hon. Gentleman agree, whether or not he has received recommendations from the Scottish Advisory Council, that he has certainly received representations from everybody else in Dundee and that part of Scotland?
    Mr. Neave: My right hon. Friend sympathises with the local interest in this question, but as I think the right hon. Gentleman knows, it is a matter for B.E.A. and other operators to decide whether they can find a remunerative route to include Errol in their network.

    London Airport (Rail Communications)
    Mr. Brockwayasked the Minister of Transport and Civil Aviation what decision he has reached on the proposal made to him by a committee representing the British Transport Commission, the British European Airways and the British Overseas Airways Corporation that railway communications should be established between Victoria Station. London, and London Airport.
    Mr. Watkinson: Having studied the Report of the Committee, I have asked the Chairman of the British Transport Commission, in consultation with the Airways Corporations, for further information, which I am hoping to have before the end of November.
    Mr. Brockway: While thanking the right hon. Gentleman again for that reply, may I ask him whether it is clear that the opening of the terminal at Kensington does not rule out proposals for inter-railway communication with Victoria?
    Mr. Watkinson: It is not quite like that. I have announced plans for a very large expenditure on improved road communication between west London and the airport. I have now asked for a further study to be made of the rail link. I ought to add that I am still very interested in a possible monorail link, and this we shall have to discuss.
    Mr. Woodburn: Is there any chance of the vacant space underneath the air terminal being used for a stop on the present Underground railway? Gloucester Road is about ten minutes walk away, and it is a little inconvenient for people to get there because there is no bus service.
    Mr. Watkinson: I have asked the Transport Commission, now that the terminal is opened and now that they can assess the passenger traffic, to say what further improvements may be necessary to make it as accessible as possible.

    Gatwick Airport
    Mr. Jannerasked the Minister of Transport and Civil Aviation whether he will make a statement on the progress being made at Gatwick Airport.
    Mr. Watkinson: Progress has been satisfactory. While I cannot as yet give a firm date for completion, all concerned are working to the target of April, 1958, and I am assured that the airport will be ready as planned for next summer's operations.

    Houses, Feltham (Damage)
    Mr. Hunterasked the Minister of Transport and Civil Aviation (1) whether an investigation has been carried out into the complaints of damage caused to houses in Cairns Lane, Bedfont, Feltham, by the Soviet jet air liner when it left London Airport on Sunday, 8th September; and whether he will make a statement;
    (2) what claims for compensation have been made to his Department by the householders in Cairns Lane, Bedfont, Feltham, whose houses were damaged by the Soviet jet air liner when leaving London Airport on Sunday, 8th September; and if he will make a statement.
    Mr. Watkinson: Following a preliminary inspection by officers of my Department and of the Air Ministry Works Department, the Building Research Station of the Department of Scientific and Industrial Research made a thorough examination of the houses concerned, and concluded that the damage complained of was very largely of long standing and was not caused by the take-off of the TU.104. As to the cause of the rest of the damage, such as a cracked pane of glass in one of the houses, there was no definite evidence either way. As regards compensation, no formal claims have been received by my Department.
    Mr. Hunter: Will the Minister insist that the new jet air liners, irrespective of nationality, use silencers to deaden noise before they are allowed to land at London Airport in view of the large population living round the area? Regarding damage, I should like to point out—[HON. MEMBERS: "Question."]—that I inspected the houses in Cairns Lane and questioned constituents. I am convinced
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    that the damage was caused by the Soviet jet air liner when it took off at 4.10 a.m. on 8th September.
    Mr. Speaker: The hon. Member really ought to ask questions at this time.
    Mr. Watkinson: I have answered the first part of the supplementary question by the hon. Member for Feltham (Mr. Hunter) in a previous answer which I gave on jet noise. As to the second part, I must take the advice of the Building Research Station in this matter and not the hon. Member's.

    Accident, Nutts Corner
    Mr. Beswickasked the Minister of Transport and Civil Aviation if he has yet decided to hold a public inquiry into the accident at Nutts Corner to a British European Airways aircraft on 23rd October; and if he will make a statement.
    Mr. Watkinson: On 23rd October, 1957, a Viscount aircraft of British European Airways Corporation was making a flight from London to Nutts Corner with a crew of five and an employee of the Corporation and his wife as the only passengers. At approximately 16.45 hours, in conditions of low cloud and rain, an approach to runway 28 was made using a ground-controlled approach. On completion of the G.C.A. talk-down the pilot commenced to take normal action to overshoot. Almost immediately afterwards the aircraft crashed near the up-wind end of the runway. It was almost completely destroyed and all on board were killed.
    The Chief Inspector of Accidents is conducting a detailed investigation into this accident. In accordance with normal procedure, I shall decide, when I see his preliminary report, whether the circumstances justify a public inquiry.
    I am sure, Mr. Speaker, that the House will wish to join with me in expressing sympathy with the relatives of those who have lost their lives.
    Mr. Beswick: Whilst assuring the Minister that we on this side of the House would certainly like to associate ourselves with the sympathy which he has expressed, may I ask whether it is not unusual for these preliminary inquiries to take so long before it is decided whether or not to have a public inquiry?

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    Can the right hon. Gentleman say whether there are any unusual circumstances in this case?
    Mr. Watkinson: The only circumstance that has delayed matters is the fact that the aircraft crash was such that wreckage was very widely spread and very much dispersed and damaged. Therefore, the investigation has taken my officers rather long. Otherwise, I know of no other unusual circumstances, and I await the preliminary report on which I must decide.

  TRANSPORT

    Traffic Lights
    Mr. Russellasked the Minister of Transport and Civil Aviation what steps are being taken to make the mechanism of traffic lights respond more quickly to approaching traffic, especially at night when the volume of traffic is very light, and so avoid both unnecessary delay and wear and tear on engines and brakes of road vehicles.
    The Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation (Mr. G. R. H. Nugent): The majority of light signals are now vehicle-actuated. To make the mechanism respond more rapidly at times of light traffic would increase the risk of accident.
    Mr. Russell: Can my hon. Friend say how this would increase the risk of accident? If a light remains red in one direction for a longer time and only changes when traffic approaches it, surely it means that there is nothing coming in the other direction. How can that affect the risk of accidents?
    Mr. Nugent: There is a certain danger in the speed with which vehicles approach the red signal in anticipation that it may change to green by the time they get there. To shorten the interval in the present phasing might very well lead to a greater accident risk.

    Motor Vehicles (Compulsory Inspection)
    Mr. G. R. Straussasked the Minister of Transport and Civil Aviation what progress has now been made in the preparation of the scheme for compulsory inspection of motor vehicles; and when he expects the first stage of that scheme to be in operation.
    Mr. Watkinson: I hope that the scheme will come into operation next year, but discussions are still proceeding and I cannot yet give a firm date.
    Mr. Strauss: In view of the large number of accidents which it is hoped will be avoided by the introduction of this scheme and the large number of deaths which may be eliminated, are not the Government awfully slow in tackling this business, considering that the Measure authorising it was introduced about two years ago? Can we not have some greater speed in view of the importance of the matter? Further, has the right hon. Gentleman yet decided to what extent licensing stations will be publicly or privately operated?
    Mr. Watkinson: In answer to the first part of the right hon. Gentleman's supplementary question, I do not mind being pressed, but I am determined that, if possible, this scheme shall come in by agreement and meet the various needs which must be met if it is to work satisfactorily. That is the only reason for the delay. I am as anxious as is the right hon. Gentleman to get it working as quickly as possible. As the right hon. Gentleman knows, I shall have to come to the House when we have a scheme.
    Mr. Page: Will my right hon. Friend assure the House that this scheme is not a victim of any cuts in Government expenditure?
    Mr. Watkinson: No, it is not.

    Driving Licences
    Mr. Pageasked the Minister of Transport and Civil Aviation if, for the purpose of a licence to drive a motor vehicle, he will initiate a regulation excluding heavy motor cars from Group A, placing them in a separate group and requiring applicants for a licence for such vehicles to pass a test showing competence to drive that type of vehicle.
    Mr. Nugent: No, Sir, I do not consider that there are sufficient grounds for doing so.
    Mr. Page: Is it not a fact that at present a young man can take his test in, for example, a "bubble" car, and the very next day after passing that test drive a heavy petrol tanker? Was it not the case before the war that there was a separate

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    test? Ought not this to be resumed now that the Minister has legalised higher speeds for these heavy vehicles?
    Mr. Nugent: No. I do not think there is sufficient evidence to show that there is necessity for a separate test for the drivers of these heavy goods vehicles. In the main, the standard of driving by these drivers is exceptionally high.

    Accidents
    Captain Pilkingtonasked the Minister of Transport and Civil Aviation the rate of accidents per 1,000 vehicles on the roads in 1938 and in 1956.
    Mr. Nugent: Accidents involving personal injury numbered 64 per 1,000 vehicles in 1938 and 33 in 1956.
    Captain Pilkington: Does my hon. Friend ascribe this mainly to better roads, better drivers or better pedestrians?
    Mr. Nugent: It is due to a number of factors, not the least of which is better road safety measures.
    Mr. S. Silverman: Is not the interesting deduction to be drawn from these figures that the very much higher rate of road accidents, injuries and fatalities, is due exclusively to the fact that the roads are so much more congested, and ought that not to encourage the Government to go on with the road programme more expeditiously?
    Mr. Nugent: The hon. Member has the deduction the wrong way round. The figure in 1956 was 33 per 1,000——
    Mr. Silverman: Yes, I know.
    Mr. Nugent: —as compared with 64 per 1,000 in 1938. More than twice as many vehicles are on the roads today. I think I ought to make this point in drawing deductions. This is not a measurement of the mileage actually driven by these vehicles. It is difficult, therefore, to draw any precise deduction from it.

  RAILWAYS

    Station Taxi-Cab Ranks
    Mr. Brockwayasked the Minister of Transport and Civil Aviation what decision has been reached as a result of his discussions with the Chairman of the British Transport Commission regarding
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    the abolition of privileged taxi ranks at railway stations.
    Mr. Watkinson: The Chairman of the British Transport Commission has given me his report, and to complete the picture I am now obtaining the views of the representatives of users by referring the matter to the Central Transport Consultative Committee and to the Scottish and Welsh Transport Users Consultative Committees.
    Mr. Brockway: While welcoming that considerable development and while expressing appreciation of it, may I ask the right hon. Gentleman whether he is aware that the working committee of the Home Office has recommended that railway station ranks should be served in rota by nearby taxi ranks, and has urged it in the interest of the public? Is the right hon. Gentleman further aware that taxi drivers are becoming impatient, and that unless an early decision is reached he may have difficulties all over the country?
    Mr. Watkinson: I quite agree with the hon. Gentleman that it is the convenience of the public that ought to be studied in this matter. It is only fair to the Commission to say that its view is that the convenience of the public is best studied by a continuance of the present arrangement. That is why I thought it only fair to take it further to the consultative committee.
    Miss Bacon: Is the right hon. Gentleman aware that this matter is becoming urgent, and that only a few weeks ago a taxi driver in Leeds was summoned because he picked up a fare after he had set another one down? Arising out of discussions which took place at that time, it was discovered that the whole of one of the stations in Leeds was let not to an association but to one man who can exclude anybody he wishes?
    Mr. W. Griffithsasked the Minister of Transport and Civil Aviation whether he is aware that licensed taxi-cabs in Manchester are allowed free access to the station approach at three main line stations, but not at the Exchange Station; and whether he will take action to end this anomalous situation in the course of his discussions with the Chairman of the British Transport Commission.
    Mr. Watkinson: The conditions at Manchester Exchange Station are exceptional because of the local licensing difficulties. I understand that the general manager of the London Midland Region of British Railways is looking into the matter with the interests concerned.
    Mr. Griffiths: Is the right hon. Gentleman aware that late at night and in the early hours of the morning passengers arriving at Manchester Exchange Station who do not find a taxi-cab on the rank very often have to walk down the long approach to pick up a cab cruising at the bottom of the approach? That does not apply to the other three main line stations in Manchester. Is not this a ridiculous anomaly?
    Mr. Watkinson: It is because of the boundary between Manchester and Salford, and it is that point which the general manager hopes to overcome and, perhaps, to arrange some common practice.

    Modernisation Programme
    Mr. D. Jonesasked the Minister of Transport and Civil Aviation whether he is now in a position to give the result of the British Transport Commission's reassessment of the cost of the modernisation programme, after taking into account the changes in prices and all other factors which change the scope of the programme.
    Mr. Watkinson: The British Transport Commission estimates the cost of the work covered by the plan prepared in 1954 at £1,500 million. This revision takes full account of changes in price levels and of major technical decisions reached since the plan was first published, as well as the reassesment of costs which detailed planning has made possible.
    Mr. Jones: Can the right hon. Gentleman say what part of the £170 million which the Chancellor announced yesterday is to be devoted to the modernisation programme is to be used for ordinary replacements on which the railways spent more than £100 million last year?
    Mr. Watkinson: If the hon. Gentleman wants an answer to that question, he had better put it down.
    Mr. Ernest Daviesasked the Minister of Transport and Civil Aviation what changes it is proposed to make in
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    the railway modernisation programme in view of the reduction in capital investment; and what delay in its fulfilment will result.
    Mr. Watkinson: It will not now be possible to accelerate the programme in the next two years as much as the British Transport Commission had planned, but because the programme is ahead of schedule the level of investment will not fall below that forecast in the Command Paper, Proposals for the Railways, and there will be no delay in the fulfilment of the programme as a whole.
    Mr. Davies: Is it not a fact that the actual amount which will now be spent and the actual authorisations made in the next few years will be less than had been planned for, and does that not mean that the Commission will be in serious difficulties in regard to revenue as a result? Can the Minister state precisely whether there is going to be a cut-back in the plans which have been made for expenditure on railway modernisation this year and next year?
    Mr. Watkinson: The Chancellor of the Exchequer gave the figures yesterday, which I entirely accept. They are very large sums of money. I expect the Commission to get the best value for them, and that is its job.
    Mr. G. R. Strauss: Can we have a little more information on this matter, because at the moment we are rather in the dark? Yesterday the Chancellor of the Exchequer said that he was going to cut the payments to Transport Commission services to £170 million a year. The proposals in the White Paper for railway modernisation amounted to £135 million and £140 million for the next two years. Can the Minister somehow reconcile those figures so that we may be assured that the modernisation programme will not be affected, as he has just said in reply to the Question?
    Mr. Watkinson: If the right hon. Gentleman likes to put down another Question, I shall be only too happy to answer it. I can help him a little bit by repeating what I have just said and what I said in July, that the programme is well ahead of schedule. Therefore, the payments are higher than were originally, anticipated when the plan was made. These are therefore allowed for, and that

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    is the reason for the higher figure. Therefore, the higher figure really shows the amount of acceleration which the Commission has been able to achieve, and which is very necessary.
    Mr. Davies: Does it not also include the greater costs to which the Minister referred, and will there not be a reduction in the amount of materials consumed and of work done as a result of increased prices?
    Mr. Watkinson: I think that that question had better be put down. There is a detailed answer. I am quite satisfied that the Commission has a fair share of the investment programme. It knows I now expect it to make the best possible use of it, and it will do.

    Howitt Report
    Mr. D. Jonesasked the Minister of Transport and Civil Aviation whether, in view of the conflict of view between Sir Harold Howitt as indicated in his report and those of Mr. E. L. Gethin, relative to the recommendations indicated in the Blue report, and the British Transport Commission directive of 13th August, 1957, he will arrange to have a copy of the Blue report and the directive of 13th August, 1957, placed in the Library of the House of Commons, to enable hon. Members to judge for themselves on these documents.
    Mr. Watkinson: No, Sir. As I have already informed the hon. Member, Sir Harold Howitt's report itself gives all the relevant material from Commission documents necessary to his findings.
    Mr. Jones: In paragraph 47 of the report to which the right hon. Gentleman has referred is a serious conflict of view between Sir Harold Howitt and Mr. Gethin. Indeed, the directive issued by the British Transport Commission on 13th August, according to Mr. Gethin, differed fundamentally from the Blue report. Why will not the right hon. Gentleman make them available in the Library? Has lie anything to hide?
    Mr. Watkinson: Nothing at all. I can easily dispose of the matter by repeating what I have said publicly and in a statement, that I fully accept Sir Harold Howitt's version as being a completely impartial and accurate account of the affair.
    Mr. Ernest Davies: Would the right hon. Gentleman be a little more definite why this report cannot be made available to hon. Members? It is now past history, but it has been referred to both in this House and in this report published by Sir Harold Howitt. Is it not desirable that the House should have the full contents of them so that these differences of opinion may be resolved?
    Mr. Watkinson: The reason is this, and I am glad to state it. I think it is quite wrong that the Commission, which is trying to run itself as a commercial concern, as it is the Government's wish it should, should think that its internal documents should at any time be produced and laid for public examination. It is done once a year when the Commission's accounts are thoroughly investigated. Otherwise, I think it ought to be left alone to get on with the job.
    Mr. Gresham Cooke: In the light of Sir Harold Howitt's report, were not the charges satisfactorily disposed of, and ought not the matter now to be left to rest?
    Mr. Watkinson: That is my view.

    Finance and Capital
    Mr. Ernest Daviesasked the Minister of Transport and Civil Aviation, in view of the reduction in capital investment, what revision has been made in the Estimates contained in Command Paper No. 9880, Proposals for the Railways; by what year it is now estimated that the British Transport Commission will balance its accounts; and how the deficits are to be met.
    Mr. Watkinson: The British Transport Commission informs me that it can distribute the amount of capital investment now approved so that no revision of the estimates in the Command Paper of its financial position is called for. This will not affect the date by which it is estimated that the Commission will balance its accounts. Deficits will be met in accordance with the provisions of the Transport (Railway Finances) Act, 1957.
    Mr. Davies: How does the Minister reconcile that with the fact that there is going to be a cut in the expenditure? Does he not recall that in the White Paper it was made quite clear that fulfilment of the estimates to bring the Commission

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    into balance by 1961 or 1962 was dependent upon there being no cut in the modernisation programme? A cut is now taking place, and the financial circumstances of the Commission are difficult. Does he really believe it will be able to achieve those estimates by 1961 and 1962?
    Mr. Watkinson: Yes, I do, and so does the Commission.
    Mr. D. Jones: If £170 million is to be made available to the Commission for all its capital purposes in the next financial year and, according to the White Paper, it requires£135 million to keep its modernisation programme up to schedule, does that mean that it will have only £35 million for all its other capital purposes?
    Mr. Watkinson: If the hon. Gentleman wants to pursue these detailed matters, he must put down Questions. I have given a clear answer to the Question on the Paper.

  ROADS

    Street Widening
    Mr. Russellasked the Minister of Transport and Civil Aviation what further progress has been made in widening streets by narrowing unnecessarily wide pavements in urban areas.
    Mr. Nugent: Of the list of sites in London given in my right hon. Friend's Answer to my hon. Friend on 27th February, 1956, three schemes have now been completed and two are in hand.
    Mr. Russell: Will my right hon. Friend do everything possible to speed up improvements of this kind, as very great improvements in traffic flow could result?
    Mr. Nugent: Yes, we think that an improvement can be made in some places. I am now pursuing inquiries into the five suggestions which I have recently had from my hon. Friend, and I will let him know the outcome shortly.
    Mr. Gresham Cooke: Will my hon. Friend consider taking one narrow main road into London, for example, King's Road from Putney Bridge to Chelsea, to see whether he cannot systematically widen the road by taking off unnecessarily wide pavements and see whether great improvements to traffic flow cannot
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    be made on one road as an example of the sort of thing which might be done generally?
    Mr. Nugent: We are now considering where pavements are wider than is necessary for pedestrian flow and where such improvements can be made, and in due course they will be made.
    Mr. Lipton: Will the hon. Gentleman bear in mind that, no matter how much he may narrow the pavements in London, there will still he too many cars on the roads?
    Mr. Nugent: We can make some improvements in this way.

    Gatwick By-pass
    Mr. G. R. Straussasked the Minister of Transport and Civil Aviation why the new Gatwick by-pass is in part a dual carriage-way and in part a single carriage-way with three lines of traffic.
    Mr. Watkinson: Because it will eventually be by-passed by the Brighton Radial Road, which will be a motorway. The present by-pass is intended to provide extra facilities only for the airport.
    Mr. Strauss: That may well be, but is it not ridiculous that when a new road is being built some parts of it should be dual carriageway, some parts single carriageway—two lanes on one and three on the other? When a new road is being built, it should be dual carriageway from beginning to end. Is the Minister aware that there is no question of lacking space for building a big road, but that there is plenty of room on both sides of the road?
    Mr. Watkinson: There are two other points. One is that the radial road, when built, will lie alongside the present road and, if the present road were all dual carriageway, there would then be two roads each with dual carriageways. Parts of the present road are dual carriageway, firstly, to facilitate entry into the cloverleaf junction within the airport and, secondly, because there were dangerous curves and my engineers did not want to miss the chance of dealing with them.

    Temporary Diversions
    Mr. Russellasked the Minister of Transport and Civil Aviation if he will arrange for notices to be displayed at each

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    end of all traffic diversions caused by road works, showing the date on which normal working will be resumed.
    Mr. Nugent: The date when a temporary diversion ceases to be necessary depends on the progress of the work, which in turn is dependent on weather and other factors and cannot, therefore, be accurately forecast. I fear that for this reason my hon. Friend's suggestion would be extremely difficult to implement.
    Mr. Russell: Does not my hon. Friend agree that, if the date could not be accurately forecast, it could be approximately forecast? Is he aware that there has been a very long diversion in West End Lane, Hampstead, for most of the summer, and would it not be most helpful to motorists to know the dates so as to be able to avoid it for a certain time?
    Mr. Nugent: I will try to meet my hon. Friend's point by speeding up the work where we can, but it would not be helpful to predict a date when there are so many uncertainties.

    Trunk Road, Kent
    Mr. Bottomleyasked the Minister of Transport and Civil Aviation if he will make a statement about the proposed new trunk road for Kent.
    Mr. Watkinson: I hope to advertise early next month a draft scheme under the Special Roads Act, 1949, showing the proposed line for the Medway towns bypass. This new motorway, about 25 miles long, will provide a greatly improved route between London and Dover as well as North Kent.
    Mr. Bottomley: Does the Minister not agree that all the arguments which can be adduced show that the Medway bypass should have priority, and will he give an assurance that that will be the case?
    Mr. Watkinson: I can give the assurance that it is one of the five main projects to which I attach great importance, and those five main projects will now be carried out as soon as physically possible.

    Classified Roads (Maintenance)
    Mr. Hornbyasked the Minister of Transport and Civil Aviation whether he will reconsider his decision, as expressed in his letter of 2nd August, 1957, to the
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    Secretary, Urban District Councils Association, to raise the population limit from 20,000 to 30,000 for urban district councils and non-county boroughs, who can at present claim the right to maintain classified roads.
    Mr. Watkinson: The question of highways functions as a part of local government reorganisation is still under consideration, and I cannot anticipate my right hon. Friend's legislative proposals.
    Mr. Hornby: Will my right hon. Friend bear in mind when these proposals come up for discussion that many local authorities are extremely worried at the possibility of a change in this figure and see no reason why the present state of affairs should be changed and think it may well lead, if claiming rights are refused, to increases in costs and less efficiency in road maintenance?
    Mr. Watkinson: Yes, I will see that that is carefully considered.

    Road Works
    Captain Pilkingtonasked the Minister of Transport and Civil Aviation how the amount of work done on the roads in 1938 compares with that being done in 1957.
    Mr. Watkinson: There is no ready yardstick to provide an exact comparison of "work done."
    Captain Pilkington: Is my right hon. Friend satisfied with the position in view of the fact that the Road Research Board says that the present programme is not keeping pace with the increased traffic?
    Mr. Watkinson: I am quite satisfied that I have a fair share for the roads in the country's capital investment programme.

    Marble Arch—Hyde Park Corner Scheme
    Captain Pilkingtonasked the Minister of Transport and Civil Aviation whether he will now state when the Marble Arch—Park Lane—Hyde Park Corner scheme is to begin and when it will be completed.
    Mr. Watkinson: No date for constructional work to start can be given until the necessary legislation has been passed.
    Mr. Strauss: Has the Minister no idea when that will be?
    Mr. Watkinson: It is customary not to anticipate the Queen's Speech.
    Mr. M. Lindsay: Is my right hon. Friend aware that this is the sort of answer we have had for many years? Can he give an indication when he hopes to get legislation through, the date when it will be started, and by when it will be finished?
    Mr. Watkinson: No, Sir, certainly not. It is not customary in the House to anticipate the programme for a new Session.

    Improvement Schemes
    Lieut.-Colonel Bromley-Davenportasked the Minister of Transport and Civil Aviation whether, in view of the recent changes in the financial situation, it will be necessary to make any modifications in the immediate programme for road improvement in Great Britain; and which particular schemes or projects are to be given a lower priority.
    Mr. Watkinson: I would refer my hon. Friend to the statement made yesterday in the debate on the economic situation by my right hon. Friend the Chancellor of the Exchequer.

    Pooles Lane, Willenhall
    Mr. Stonehouseasked the Minister of Transport and Civil Aviation when approval will be given for a grant for the improvement of the west side of Pooles Lane in the urban district of Willenhall.
    Mr. Nugent: I regret that this may not be possible for some time.
    Mr. Stonehouse: Is the Minister aware that the road is in an absolutely shocking condition? Is he aware that the Staffordshire County Council has approved its part of the grant and it is only the parsimonious approach of his own Ministry to the scheme that is holding up this very urgent improvement?
    Mr. Nugent: I quite accept that this, like many other schemes, is desirable, but this is a Class 3 road and the amount of traffic it carries simply does not warrant its having the priority which the hon. Member would like.

    Rainham Road, Dagenham
    Mr. Parkerasked the Minister of Transport and Civil Aviation what progress is being made with the widening of Rainham Road, Dagenham, from Dagenham East Station to the junction with Ballards Road.
    Mr. Nugent: We expect to authorise the scheme within the next week or so.

    Temporary Bridge, Maldon
    Mr. B. Harrisonasked the Minister of Transport and Civil Aviation whether he is aware of the condition of the temporary bridge at Fullbridge, Maldon; and when work will commence on the new bridge in order that the difficult and dangerous diversion can be done away with.
    Mr. Nugent: Essex County Council has applied to us for a grant towards this scheme, but I am unable to say when we can authorise it.
    Mr. Harrison: Will my hon. Friend please look at this matter again? Is he aware that it is only the skill of bus and lorry drivers who use the bridge that prevents very many nasty accidents, and that the condition of the bridge is a great inconvenience and danger to people living in the borough?
    Mr. Nugent: I know that it is a bad spot, but I am afraid that it still will have to wait its turn.

  SHIPPING

    Aberdeen Trawlers (Stranding)
    Mr. Hector Hughesasked the Minister of Transport and Civil Aviation if he will make a statement about the stranding of the Aberdeen trawler "Carency" on 29th June last, north of Wick Harbour; and if he will state the time, place, and other details of the formal investigation he has ordered.
    Mr. Neave: Yes, Sir. The trawler "Carency" left Aberdeen shortly after noon on 28th June, 1957, for the West Coast fishing grounds. The ship stranded in fog off Greenigoe, about one mile north of Wick, at about ten minutes past midnight on 29th June. Later that day the Wick Lifeboat and the trawler "Gilmar" made unsuccessful attempts to

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    tow "Carency" off the rocks and, as there was by that time a danger of the ship capsizing, the crew were taken off in the lifeboat. At about 5 p.m. the ship heeled over and subsequently became a total loss.
    As already announced, the formal investigation into the casualty will be held by a sheriff's court in the Sheriff's Court Buildings, Aberdeen, beginning at 10.30 a.m. on Monday, 18th November.
    Mr. Hughes: I thank the Minister for that Answer. Can he say whether reference to that inquiry will provide a means of assessing compensation for those who were injured or who suffered loss in this unfortunate occurrence?
    Mr. Neave: It is, of course, the duty of the court to make a full report on the casualties, and no doubt that is a matter which it will take into account.
    Mr. Hector Hughesasked the Minister of Transport and Civil Aviation if he will make a statement about the stranding of the Aberdeen trawler "Girdleness" on 4th July last, near Cantick Head, Orkney Islands; and if he will state the time, place, and other details of the formal investigation he has ordered.
    Mr. Neave: Yes, Sir. The trawler "Girdleness" left Aberdeen at noon on 3rd July, 1957, for the fishing grounds north of latitude 61°N. The ship stranded in fog near Cantick Head, Hoy Island, Orkneys, at about 4 a.m. on 4th July; she refloated under her own power on 7th July with the crew still on board.
    As already announced, the formal investigation into the casualty will be held by a sheriff's court in the Sheriff's Court Buildings, Aberdeen, beginning at 10.30 a.m. on Monday, 16th December.
    Mr. Hughes: Is the Minister in a position to say whether this and the ship to which the preceding Question referred carried the latest type of life-saving apparatus, and, if so, what type?
    Mr. Neave: I am not in a position to say that without notice, but it is the function of the court to make a full report, and I cannot anticipate that. I have not got that information at my disposal.

    Life-Saving Appliances
    Mr. Spenceasked the Minister of Transport and Civil Aviation whether he will consider making some form of radar reflector a compulsory and standard piece of equipment for all life-saving appliances used at sea.
    Mr. Neave: My right hon. Friend does not at present propose to make equipment of this kind compulsory, but he will certainly keep under review the desirability of doing so.

    1939–45 STAR (DUNKIRK ACTION)
    Mr. Spenceasked the Prime Minister if he will authorise the issue of an appropriate clasp on the 1939–45 Star recognising the Dunkirk action.
    The Secretary of State for the Home Department and Lord Privy Seal (Mr. R. A. Butler): I have been asked to reply.
    No, Sir. Although the normal time qualification for the 1939–45 Star was six months, this was waived in favour of men who took part in the operations in France and Belgium between the 10th of May and the 19th of June, 1940.
    Mr. Spence: May I ask my right hon. Friend to convey to the Prime Minister the sense of disappointment that his answer will bring to many people?
    Mr. Butler: I will certainly convey my hon. Friend's sentiments, but I would remind him that a previous Prime Minister, Lord Attlee, felt constrained to reply in a similar sense to the question as long as eleven years ago. This matter has been very carefully considered from time to time, and I do not think that my hon. Friend will be able to alter his mind.
    Mr. Vane: Is my right hon. Friend aware that the formations which took part in that campaign took the full force of the first attack during the war and that many of those who took part were volunteers? Is he aware that they feel that less than justice has been done? They have no appropriate recognition compared with others who later spent a short time in the back areas or in the N.A.A.F.I. but qualified equally.
    Mr. Butler: If there had been special recognition in respect of Dunkirk, for example, it would have been difficult not to recognise other operations which, although they may not have the same emotional or historical significance, were in themselves very important, and some of them, such as the campaigns in Dieppe and Norway, were themselves already included in the conferment of the Star.

  MINISTRY OF DEFENCE

    Recruiting and National Service
    Mr. Swinglerasked the Minister of Defence if he will make a statement on the future of conscription, with reference to the current level of recruiting to the Regular forces.
    Mr. G. Brownasked the Minister of Defence whether, in view of the continued decline in Regular recruiting as disclosed by the latest published figures, he will give an estimate of the effect this is likely to have on Her Majesty's Government's timetable for the ending of National Service; and what steps they propose to take to arrest the fall.
    Mr. Doddsasked the Minister of Defence if he will make a statement giving details of the present position with regard to recruitment for the Armed Forces; what are the prospects for the immediate future in this respect; and if he will give consideration to an all-party investigation into the problem or give details about any other line of action that has been decided upon to deal with the situation and the ending of conscription.
    The Secretary of State for War (Mr. John Hare): I have been asked to reply.
    Returns of Regular recruiting for July and August have been placed in the Vote Office. The return for September will be available shortly. The Government's policy with regard to National Service remains as stated in Command Paper 124. My right hon. Friend proposes to make a full statement about recruiting early in the new Session.
    Mr. Swingler: While regretting the absence of the Minister of Defence and hoping that he will be soon fit again, may I ask whether it is not now absolutely clear that the assumption on which the Government promised to end conscription
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    is not being fulfilled because of the decline in recruitment and, therefore, either the assumption will have to be changed or the programme will have to be changed? May we not, therefore, know immediately what the Government intend to do about it?
    Mr. Hare: I cannot accept the hon. Member's assumption for one second. There has been, of course, an appreciable falling off in recruitment, but it would be quite unwise to make any of the conclusions that the hon. Member has made until my right hon. Friend makes his statement on recruiting early next Session.
    Mr. Dodds: Is the right hon. Gentleman not aware that there is some feeling that there is too much complacency by the Government on this important matter? Without giving any secrets away, can he not at this stage answer that part of the Question which asks if the Government will give consideration to an all-party investigation? Can he say whether that has been considered or not, and if not, is there not something else being done in view of the very unsatisfactory position?
    Mr. Hare: I can assure the hon. Gentleman that neither I nor my right hon. Friend have any complacency in this matter. Quite clearly, my right hon. Friend's statement on recruiting will show that various points raised both in the House and outside, such as the Question put down by the hon. Gentleman, have been considered. Beyond that I cannot say anything, except to assure the hon. Gentleman that there is no complacency on the part of the Government in this matter.
    Mr. G. Brown: Will the Secretary of State convey to the Minister of Defence that this is exactly what now begins to be apparent to everybody but himself? So far, every month he and his colleagues are denying what is obvious. May I ask him whether the latest figures do not show that the Government are not within streets of reaching the figures on recruiting that are essential if conscription is to end by the date they have given? Is he not aware that, unless something drastic is done urgently, the Government will have to announce to the House that their programme has changed? Will he, at any rate, be less complacent when speaking to the Minister of Defence than when he makes his statements when talking to us?
    Mr. Hare: I do not know whether the right hon. Gentleman is suggesting that I am complacent. I have just told the hon. Gentleman that I am anything but complacent, and I can assure the right hon. Gentleman that my right hon. Friend shares the same view as myself on this matter.
    Mr. Shinwell: Will the right hon. Gentleman understand that, even if the figures are not satisfactory and remain unsatisfactory, the one thing we do not want on this side of the House is a resumption of National Service after 1960?
    Mr. Hare: On that question, Her Majesty's Government's policy has, as I said in answer to the Question, been laid down clearly in Cmd. 124.

    Tuberculosis
    Mr. Hastingsasked the Minister of Defence whether he is aware of the heavy cost to the nation arising from the incidence of tuberculosis in the Armed Forces; and what steps he has taken, or will take, to institute mass miniature radiography of chests of recruits and B.C.G. vaccination where necessary.
    Mr. John Hare: I have been asked to reply.
    The Services have been making use of mass miniature radiography for at least the last ten years. Service men are examined both on entry and periodically during their service. B.C.G. vaccination is available, in appropriate cases, to anyone who has been in contact with tuberculosis. As a result of these measures, the incidence of tuberculosis continues to show a steady fall.
    Mr. Hastings: Is it not necessary to take very special care in such cases, because the conditions in barracks are such as to favour the spread of tuberculosis to those not already infected if there is even a single individual suffering from the disease in an active and infectious form?
    Mr. Hare: The hon. Gentleman is right in saying that every care should be taken about this dangerous disease, but I will send him figures which show that there has been a steady decline during the last four years.

    Anglo-South African Talks
    Mr. Stonehouseasked the Minister of Defence whether he will make a statement on the recent talks with the South
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    African Minister of Defence, and the arrangements being made for a conference to integrate and develop the joint planning already undertaken.
    Mr. John Hare: I have been asked to reply.
    As the answer is rather long, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Stonehouse: May I ask the Minister at this stage if it is proposed to allow the Union of South Africa to establish defence bases in the High Commission Protectorates?
    Mr. Hare: I suggest that the hon. Gentleman should read the rather long reply and then, if he likes to put down another Question next week, I am sure that my right hon. Friend will be delighted to answer it.
    Following is the reply:
    Talks with the South African Minister of Defence, at which the Minister Without Portfolio represented Her Majesty's Government, took place in London between 3rd and 18th September.
    The Ministers reviewed the threat to South Africa from external aggression and the contributions which their two countries could best make to its defence against that threat.
    It was agreed that they should seek to extend to other countries concerned the Agreement for the Defence of the Sea Routes round Southern Africa which had been reached during Mr. Erasmus's last visit in June, 1955.
    It was also agreed that further action should be taken with a view to holding a Conference to develop plans for ensuring the adequacy and security of logistic facilities and communications within Southern Africa. In the meantme, the two Governments will develop co-operation on a bilateral basis, and the Union Government has agreed to take the initiative in making proposals to this end.
    A proposal by the Union Government for the grant of certain overflying rights in the High Commission Territories was accepted in principle. Her Majesty's Government in the United Kingdom undertook to give careful consideration to further requests by the Union Government for facilities in the territories in relation to planning for the defence of South Africa on the understanding that the exclusive responsibility of Her Majesty's Government for the security of the territories themselves would not be affected.

    Chaplains
    Mr. E. Johnsonasked the Minister of Defence if he will take steps to amalgamate the Army chaplains and Royal Air Force chaplains into one branch of the Services.
    Mr. John Hare: I have been asked to reply.
    There is already a great deal of mutual assistance between chaplains of the three Services; and it is not clear that any saving would be obtained by amalgamation.
    Mr. Johnson: Is my right hon. Friend aware that he is mistaken in the statement? Cases frequently occur when an Army chaplain travels to take a service for the Army to a place where there is already a R.A.F. chaplain who, in turn, travels to take a service for the R.A.F. at a place where there is already an Army chaplain. Does it much matter what colour trousers are worn under a surplice?
    Mr. Hare: If my hon. Friend could give either my right hon. Friend or myself details of those instances, I should be delighted to look into them.
    Mr. de Freitas: Is it not a fact that those details have already been given in this House in the Estimates this year, and how can it be that the Secretary of State does not know about them?
    Mr. Hare: It is all very well the hon. Gentleman getting excited. Those questions have been looked after, but I assume that my hon. Friend will be producing new examples, though I can only assume that.

  EMPLOYMENT

    Pensions Schemes
    Mr. Remnantasked the Minister of Labour the number of cases in 1956 which have been reported to his Department where trade unions, in negotiation with employers, have requested either the initiation of, or improvements in, pension schemes.
    The Parliamentary Secretary to the Ministry of Labour and National Service (Mr. Robert Carr): Only two such cases were actually reported to my Department. There may, however, have been other cases.
    Mr. Remnant: Does my hon. Friend not agree that, first, there is at least a moral responsibility on industries to provide pensions for those who work in them, and secondly, will he consult the insurance companies dealing with these
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    matters for a proper scheme of transferability of pension rights, so that a man can keep his pension rights when transferring from one job to another?
    Mr. Carr: I doubt whether the second part of the question is proper for me to answer. On the first point, whilst circumstances in different industries must determine these matters, I would certainly support the idea of occupational pensions.

    Wage Claims
    Major Beamishasked the Minister of Labour whether he is aware that the system of settling disputed wage claims through the medium of the Industrial Disputes Tribunal is widely held to be unsatisfactory, having frequently led to the award of higher wages, without any reasons being given for the decisions, apparently unrelated to productivity, to the cost of living, or to vital national needs; what consideration is now being given to a new system which will be generally acceptable to employers and employees; and whether he will now make a full statement.
    Mr. Carr: I am aware that there has been criticism of the Industrial Disputes Tribunal. The Industrial Disputes Order under which the Tribunal operates is dependent on Defence Regulations. It is the Government's intention to dispense with these Regulations wherever possible and discussions with industry are in progress as to the nature of any permanent arrangements which might take the place of the Order.
    Major Beamish: Will my hon. Friend bear in mind that although only a very small percentage of wage claims are settled by the Tribunal, these awards have an important influence on the pattern of wage claims and wage settlements throughout the year, and will his right hon. Friend please hear that in mind during the discussions?
    Mr. Carr: We will certainly keep these points in mind in the discussions which are taking place.
    Mr. Fernyhough: Would not the hon. Gentleman agree that there is an imputation in this Question with regard to the integrity, honesty and impartiality of those who sit on the Tribunal, and does he think that this is just making trouble for trouble's sake?
    Mr. Carr: I think the hon. Gentleman is really wrong in imputing intentions of that kind to this Question. Equally, I would be wrong to comment on it whilst these discussions are taking place.

    Safety Regulations (Abrasive Wheels)
    Mr. Allaunasked the Minister of Labour when the new revised draft regulations on the fencing of abrasive wheels, in substitution for the withdrawn draft of 1956, will be made available.
    Mr. Carr: It is hoped to send out a preliminary draft to the organisations interested in the near future.
    Mr. Allaun: Whilst noting that reply, may I ask the Minister to end this serious delay, particularly since abrasive wheels cause more accidents, and I may say more painful accidents, than any other piece of equipment in industry?
    Mr. Carr: I am certainly aware that it is a most important matter from the safety angle. The new regulations are more comprehensive than the original version, and therefore the discussions are rather complicated and prolonged, but we hope that the draft will be sent out within the next three months.

    Hungarian Refugees (Coalmining)
    Lieut.-Colonel Bromley-Davenportasked the Minister of Labour what is the present position in regard to the employment of Hungarian refugees in coalmining and auxiliary occupations.
    Mr. H. Fraserasked the Minister of Labour what is the latest position regarding the employment and training of Hungarian refugees for work in the coal mines; and if he will make a statement of the Government's policy in this regard.
    Mr. Carr: I am informed by the National Coal Board that 482 Hungarians are now employed in coalmining and 249 in ancillary occupations. Six hundred and forty-four are still at training centres. The National Coal Board is responsible for placing them in coalmining employment, but the Employment Exchanges of my Department will assist those who may wish to take up work outside the coal-mining industry.
    Lieut.-Colonel Bromley-Davenport: Is it not a shame that these poor people who
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    have suffered so much should not be allowed to earn the very highest wages and at the same time assist in our national recovery?
    Mr. Carr: We would all wish that these Hungarians could have been absorbed into the mines. Equally, we should recognise the efforts which have been made, not only by the National Coal Board, but by the leaders of the National Union of Mineworkers, to get this accepted. Unfortunately, whatever we may think, people cannot be forced in this way.
    Mr. Wade: With regard to those who have been trained for the mines and have not been placed, are any arrangements in hand for retraining them for some other occupation, or are they remaining and waiting indefinitely to find employment in the mines?
    Mr. Carr: As I said, the number Involved is 644. We must wait a little longer to see what happens as to their absorption before we discuss points of that kind.
    Mr. Fraser: Does my hon. Friend consider that if this slow rate of absorption continues, it is unfair both to the taxpayer and to the Hungarian refugees? Will he give the matter more urgent consideration and reach a conclusion on a scheme which, so far, has not been successful on account of the attitude in the unions?
    Mr. Carr: We are, of course, considering this matter from all the angles which my hon. Friend and others have mentioned. As I said earlier, in these matters of personal relations, whatever we may regret, we cannot compel people to work with others.
    Mr. Blyton: Is the Minister aware that the question of foreign labour in the mines is governed by an agreement of 1945? Am I to take it from what his hon. Friends have said that they want to break the agreement irrespective of what happens in the mines?
    Mr. Carr: This is more a question for my hon. Friend than for me. I would repeat that that agreement is well known and that this scheme has had the active support of the leaders of the National Union of Mineworkers.
    Mr. Woodburn: Will the Minister not ask his two hon. Friends, whose sympathetic attitude to trade unions would help greatly, to approach the miners concerned and to use their influence with them?
    Mr. Carr: Any imputation about the sympathetic or lack of sympathetic interest of my hon. Friends is unjustified in this respect, because this is a matter which we all regret.

  NEW MEMBERS SWORN
  John Diamond, esquire, for Gloucester.
  Dingle Mackintosh Foot, esquire, Q.C., for Ipswich.

BUSINESS OF THE HOUSE
Proceedings on the Motion standing in the name of Mr. Viant relating to the House of Commons Members' Fund exempted, at this day's Sitting, from the provisions of Standing Order No. 1 (Sittings of the House).—[Mr. R. A. Butler.]
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Heath.]

ECONOMIC SITUATION
3.35 p.m.
Mr. Douglas Jay: We have just had an eloquent and timely testimony to the electoral popularity of the Government's policy. For my part, I think that the Chancellor of the Exchequer missed a great opportunity yesterday to call off the declaration of war on the trade unions made by Lord Hailsham. I hope that the Minister of Labour and National Service will take that opportunity today.
The Chancellor said yesterday that it would be a disaster if wage rises now claimed were granted. I do not know whether he intended that as an ultimatum. It sounded to me unpleasantly like that other ultimatum on Suez which we heard in this House exactly a year ago today; neither thought out beforehand nor capable of being carried through afterwards—a "phoney" ultimatum which gives all the odium of war without any practical hope of success. I can only trust that the Minister of Labour may be playing the part of the Lord Privy Seal in this industrial Suez rather more effectively than the Lord Privy Seal himself last year.
I can tell the Chancellor this. His remarks about the railways will certainly be taken by the railwaymen, who are not highly paid—of whom, incidentally, I have many thousands in my constituency—as a declaration of war on them. Is it really the policy and intention of the Government that, although rents and other prices rise, there should be no rise in railwaymen's money wages? Is it the Government's considered policy—perhaps the Minister of Labour will tell us today—that the real wages of railwaymen and other lower-paid workers are now to be forced down? Is that the Government's policy?
Of course, the main cause of the price spiral since 1951 has not been the action of the trade unions, or some mysterious process called "inflation" but the deliberate action of the Government. We had at least some wage and price and dividend restraint, let us remember, from 1948 to 1951. But this Government smashed up the whole thing. Then, in a world of falling prices, the Government

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deliberately set the spiral working by the following ill-fated decisions.
First, they cut the food subsidies. Secondly, they abolished price control. Thirdly, they abolished housing subsidies. Fourthly, they raised the Purchase Tax on all sorts of necessities. Fifthly, they repeatedly raised the National Insurance contribution. Finally, and most sharply of all, came the Rent Act. That has been the cause of rising living costs—which, the Chancellor himself agrees, is simply the reverse medal of the falling £ abroad—and not anything which the trade unions have done. As a result—and this is the true criterion of Government policy—living costs here have continuously risen faster than abroad.
If trade union action had been the cause of the trouble, that would also have been true in the years between 1945 and 1951. But it was not. The figures for that have been given in this House over and over again. That proves to any open-minded person that Government action since 1951 has been the main cause of the spiral in those years.
Let us look at the latest figures, given by the United Nations, on the movement of the cost of living in different countries. Between 1953 and 1957, the cost of living rose by 16 per cent. in the United Kingdom; in Germany, by 6 per cent.; in France, by 4 per cent.; Switzerland, 5 per cent.; Belgium, 6 per cent.; and Italy, 9 per cent. Sweden, Norway and Holland all had smaller rises than the United Kingdom. Of course, in those circumstances we lose exports and we lose gold to our industrial competitors.
The simple truth about the cost of living, proved by twelve years' experience, is this. When the Government tried to keep the cost of living down before 1951, it rose less fast than world prices, and when the Governmment has tried to push it up since then, strangely enough it has risen even when world prices have been falling. That story at least affords to me some practical hope that if we had a Government which tried to keep the cost of living down at a time when world prices were stable or falling, it might be possible to stabilise prices in this country.
I should like to put this question to the Minister of Labour. When the Government embarked on this policy of raising living costs, as they are still doing
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with the Rent Act, did they realise that the wages of 3 million or 4 million workers are automatically linked with the cost of living in any event? And did they expect that all other wage and salary earners would sit back and see their families' real incomes falling? Did the Government expect that or did they not?
Now, ignoring living costs altogether, the Chancellor tells us that wages may rise only if productivity rises. I believe that a Government are entitled to say that if they are doing all in their power to see that production goes up. But the present Government, on their own showing, have been deliberately holding production down. Having themselves stopped the rise in production, the Government turn round and rebuke the wage earners for not raising it. The hon. Member for Harwich (Mr. Ridsdale) laughs, but I will quote to him what the Financial Times wrote, which expressed the point very well:
"When the level of production is a matter of Government policy, it is a little irritating to be told that we might eat more if we produced more"
What happens is that a worker is put on short time by his employer, and then is told by the Government to work harder if he wants to recoup what his wife has lost through rising prices.
Mr. Julian Ridsdale: Does the right hon. Gentleman think that the Government keep down production in the coal mines?
Mr. Jay: The hon. Member must surely know that it has been rising.
The Economist had some fascinating figures on productivity on 5th October. It showed that what I have said is exactly what has been happening, and I commend this to the study of the Minister of Labour. It was in 1956, when the Government stopped the rise in production deliberately, that as a result the rise in productivity stopped also. Of course it is in the power of the Government nowadays, and not of the individual worker, to raise or lower productivity over the whole country.
What happened in 1956 was that production was halted, productivity fell back, and the cost of living went on rising—not a very good advertisement for the stagnation policy.

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After all this the Chancellor suddenly makes up his mind, one day in September, that full employment must go, too. It is no good the Prime Minister denying what the right hon. Gentleman said in the United States. On 24th September the Chancellor said in the United States that if an attempt were made
"to take out of the system in money income more than is put in by new effort and production, the only result would be a reduction in activity and the employment of fewer men."
The Times correspondent in Washington added, in the very next sentence:
"This evolving British view of the subordination of full employment to a sound currency has, one notes, been more forcibly expressed in private by the Chancellor's delegation."
We should like to know whether that is or is not true and why the Chancellor has changed his views since 25th July, when he said in the House:
"What we have been seeking is full employment in a free society, and it would be a sorry reflection on our society if in search of stable prices we could only find them by throwing away full employment or throwing away the freedom."—[OFFICIAL REPORT, 25th July, 1957; Vol. 573, c. 650.]
But apparently there has been a major change in the Chancellor's policy, because on 8th October at the Mansion House—he has made a great many speeches in the last few months—he said:
"We are at a turning point in our fortunes. Important decisions are in train."
That epoch-making change of policy seems all the odder, one must admit, because the Chancellor also said this in his Mansion House speech:
"Events in general have not moved contrary to our expectations at the time of the Budget."
Yet there was some sweeping change in policy "in train." No wonder, after all this double talk, that the public does not know what the Chancellor means, and many of them do not believe that he knows either. The Government certainly owe the country a clear statement in this debate whether or not they have thrown over the Tory pledge to a full employment policy.
What happened exactly in September 10 justify what the Chancellor himself called a momentous change of policy? The Chancellor gave us no analysis or diagnosis, either yesterday or at any other time, which would justify either his actions or his language. I should like to ask the Government whether there has been a
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major change in the internal situation since his speech on 25th July or whether there has not.
The Economist wrote that the Chancellor of the Exchequer
"jumped into the water because his trousers were on fire."
I can understand that if foreign speculation is the trouble a temporary high Bank Rate may be necessary. But why, without explanation, except privately to some foreign bankers abroad, abandon overnight a national pledge of full employment which has stood since the famous White Paper of 1954?
Sir Thomas Moore: It was 1944.
Mr. Jay: That is correct. I thank the hon. Member.
In place of any economic analysis yesterday, the Chancellor said he would rather have a million dollars of gold than a lot of academic argument. It is, of course, possible to have both. The trouble about the Chancellor is that he provides us with neither.
I agree so far with the hon. Member for Eastleigh (Mr. D. Price), who said yesterday that the public outside is not so much interested in partisan dialectics, as in learning some of the economic lessons of the last twelve years. I therefore suggest, briefly, that that experience should by now have taught us at least these four lessons: first, as I have been saying, if the Government in the United Kingdom deliberately force up living costs, we shall crtainly have a price spiral, a loss of exports and a loss of gold to our industrial competitors. Secondly, the sterling area in its present form is unworkable with the pitifully inadequate gold reserve we now have. Thirdly—and I think the hon. Member for Aberdeenshire, East (Sir R. Boothby) will agree with this—if we recklessly weaken our external controls, we not merely invite crises, but we place the economic policy of this country at the mercy of foreign speculators. And, fourthly, if we then throw away internal and external controls altogether we are inevitably plunged into the dilemma that either full production and employment, on the one hand, or external solvency, on the other, has to be sacrificed.
First, about the reserve. Some hon. Members yesterday did not like the figures given by my right hon. Friend the Member for Huyton (Mr. H. Wilson) for

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the gold reserve. If they do not like this, let us not deceive ourselves, let us take the simple figures as published by the Treasury. So far as we know, on 30th September the size of the gold reserve was £661 million. Even if we give the right hon. Gentleman the benefit of the £200 million he borrowed last winter, it is still £400 million—nearly 40 per cent.—less than in October, 1951.
Actually, we have lost £390 million since the Lord Privy Seal invited us to, "Invest in success." We have even lost £185 million since July of this year, when the Prime Minister uttered that other stern warning that we had "never had it so good." In the present crisis, we have lost the whole of the £200 million worth of dollars that we borrowed to get through the last one only ten months ago.
The annual report of the International Monetary Fund has just produced some illuminating new figures, which show how ludicrous the present reserve really is. The industrial countries in O.E.E.C., and Japan, have a reserve averaging about 45 per cent. of their annual imports. The sterling areas' reserve was at the same date, only 20 per cent. of U.K. imports; and so must have been a still smaller fraction of the sterling area imports.
Secondly, with a reserve as pitiful as this, if we blithely cast away nearly all exchange controls, we are bound to have recurrent crises which end in the humiliating position of our external and internal economic policy being dictated by foreign bankers and traders.
Action taken by this Government on the exchange control front ever since 1952 has made this humiliating position inevitable. In 1952, the Government abandoned co-operative Commonwealth planning of dollar imports and, incidentally, as one result of that the U.K. itself is actually now taking 46 per cent. more dollar imports than in 1954 and only 10 per cent. more sterling area imports. In February, 1955, transferable sterling was made virtually convertible. The result of that was described, not by me, but by the City Editor of The Times on 23rd September this year, as follows:
"The virtual convertibility of sterling through London commodity markets and through the officially supported transferable markets in New York, and Zurich thus enabled the Western world to satisfy its growing need for dollars at the expense of the £."
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He went on:
"The re-emergence of the world's dollar deficit found sterling with fewer controls than at any time since the war.…"
As if that were not enough, in an article in Barclays Bank Review for August, 1957, the author gives a list of seven other major relaxations of exchange control, all tending to a loss of gold and dollars during 1956 and 1957, when the reserve was falling practically all the time. All this means, of course, that British workers and industrialists are being urged to raise productivity and increase exports, and a large part of the dollar proceeds are being lost through these experiments in "Conservative freedom."
I ask the House to look at what is known as the "Kuwait Gap," about which the Chancellor did not say anything yesterday. It appears from his Balance of Payments White Paper that tens of millions of dollars were lost through this gap in our controls earlier this year, until, at last, in July the Government took action. The Times City page, on 16th October, contained the statement that the sharp rise of about£90 million in what the White Paper calls long-term lending abroad between the first half of 1956 and 1957,
"is a measure of the transactions through the Kuwait Gap which were stopped at the beginning of July."
I wish the Government would tell us whether the figure of £90 million is anything like the total of the gold lost through these transactions in Kuwait alone in these six months. If it is, it is equal to more than half the total proceeds of United Kingdom exports to the United States during the period. If it is only half that, it throws an astonishing light on the Government's management of our affairs; and also, incidentally, on the fable that, somehow, it is all due to the trade unions. I suppose Lord Hailsham will tell us that Mr. Cousins has been speculating in Kuwait all these last nine months.
What, to me, is particularly frightening about the Chancellor is that he takes all these risks when the whole dollar situation, as we have constantly warned the Government, is turning against us. A prudent British Government should have been especially careful in this last year. But when we said so earlier, the Prime Minister said how terribly pessimistic and gloomy we were. Now a minor U.S. recession is threatening, and the Sterling

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Area dollar earnings are falling. But all the Chancellor does is to go round repeating over and over again that the U.K. has a balance of payments surplus, as if that solved the whole problem. Does not the right hon. Gentleman realise—perhaps he thinks this an academic argument—that the very fall in commodity prices which is giving the U.K. a surplus at present is cutting down the whole Sterling Area dollar earnings, which are far more important?
Having both forced our costs out of line with those of other countries, and removed controls which alone could have protected the reserve, the Government found, as we always predicted, that they could check the crisis only by damping clown production. That is the reason why production had to be stopped rising in 1956. That is why we now alternate between rises in production, which throw us into a balance of payments crisis, and a few months' respite from balance of payments crisis achieved through stagnating production. That is the story of 1955, 1956 and 1957. In conditions of Conservative freedom there is no escape from that dilemma.
It is not surprising, but it is, nevertheless, disastrous that as a result we are, as a nation, falling back even further in the production race. Yesterday, the Chancellor did not give us the latest United Nations figures which show this lamentable picture. Since 1953, industrial output in Germany has risen 47 per cent. In France, it has risen 45 per cent, and in the U.K. only 16 per cent. All the following Western European countries have had a faster rise than the U.K.; Germany, France, Italy, Belgium, Holland, Norway and Sweden. Surely, all party argument apart, we shall not long remain a great nation if that process goes on.
Having deprived himself, for doctrinaire reasons of all other methods of meeting the latest crisis, the Chancellor pushes up Bank Rate to 7 per cent. At least he has this in common with Lord Hailsham. He has
"only one notion for crossing the ocean"
and that is to push up Bank Rate again.
Certainly, Bank Rate at this catastrophic level may stop a run on the £ for a few weeks. But at what stupendous cost. Does the House realise that the
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annual financial cost of the debt interest alone—let us not go into the other consequences—which was less than £500 million at the time of the Labour Government, must now be getting near £800 million a year? After five years of Bank Rate policy—this delicate instrument—we have nearly doubled the interest bill and nearly halved the gold reserve.
Sir T. Moore: Was not that because of the £1,000 million loan on which we began to pay interest in 1952?
Mr. Jay: I do not know how the Chancellor managed to halve the dollar reserves by a dollar loan, but we will let that pass.
Nevertheless, to be fair to the Chancellor, he has one other idea. He keeps on saying that he intends to cut off the supply of money. If it is as simple as that, one wonders why neither he nor his predecessors have done it at any time during the last six years. The Chancellor talked yesterday as though he had just entered the Cabinet at the weekend. I thought that everybody understood, and had understood for the last twenty or thirty years, that it is not the supply of money—whatever that is—but the flow of incomes that is important. Yet this very spring the right hon. Gentleman stoked up the flow of incomes with £35 million extra purchasing power to Surtax payers. What a reckless act that was in April, 1957!
Is the right hon. Gentleman, or is the Economic Secretary, who is hopping about, intending to say that the present crisis has, of course, nothing to do with any internal excess of spending power at all? If that is true, why make these capital cuts? How can it be right, on any diagnosis, at one and the same time to give extra current spending power to Surtax payers, and to cut down atomic energy investment, electricity, and railway modernisation? Incidentally, we also had this pearl of oratory in the Chancellor's Mansion House speech. He said that
"Budgetary and monetary policy must always march together."
It is really incredible, even for this Government, that atomic energy investment, which was stepped up less than twelve months ago to get us out of the last crisis, is now being cut down to get us out of this one. We are not merely losing

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most of the gold in the present, but are now undermining the future as well. Only on 25th July, again in this House, the Chancellor said this of the public investment programmes, which he is now cutting:
"In my judgment, these programmes are not the cause of inflation; they are the necessary basis of the expansion of production which is needed to overcome it."—[OFFICIAL REPORT, 25th July, 1957; Vol. 574, c. 648–9.]
I should like to know what his judgment is now—if he has any left.
Mr. Speaker, what a terrible, tragic contrast all this muddle is to the spirit, policy and purpose we had from Sir Stafford Cripps. I think that the best I can find here to say for the Chancellor is that in his heart he really knows that to be true. Hon. Members opposite have asked, very naturally, what we on this side would do. The answer I would give is, "Recapture some of the spirit and purpose of Sir Stafford Cripps's time." The truth is that in the circumstances of today a policy of laissez faire extremism or, indeed, of planless opportunism for Great Britain and the sterling area is bound to be disastrous.
Abroad, we must have at least a plan for expanding Commonwealth resources, and a British proposal for replenishing the world's gold and dollar resources. At home, I believe that our problem, though not easy, is at least, in a sense, simple. As a first priority and a long-term policy we must build up the gold reserve. Secondly, we must invest at a high level both in Britain and abroad. Finally, we must give a fairer share of what is available to the old people at home.
We shall not achieve any of those things, let alone all of them together, either by ringing bells or by starting a class war against the trade unions. They can be achieved, in my view, only in three ways. The first is by maintaining steady, full employment, full production and rising productivity. To abandon full production in order to get out of a speculative crisis, caused by the absence of exchange controls, is at once a confession of failure and a counsel of despair. Secondly, we must concentrate the fruits of full production on the essential tasks first, cut out all waste, and put the luxuries at the end of the queue. Thirdly, we must have co-operation, not war, with industry and organised labour.
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If hon. Members opposite ask me how we propose to do that, the answer is, "By any method which is at once efficient and fair." The present Chancellor has inhibited himself against anything but the Bank Rate. He has only this one notion for crossing the ocean. We do not object to the use of Bank Rate in any circumstances. But we do say that to use Bank Rate and nothing else—neither the Budget, nor building licences, nor price control, nor exchange control—all of them unholy—is just a piece of witch-doctor economics.
I believe that there are really only two things that our people will not stand. One is unemployment; the other is social injustice. Surely, after all the lessons we have learned since 1945, and after all the follies and the waste of these last five years, it is about time that we were ready to use any method, consistent with social justice, to achieve real, national solvency again.
4.6 p.m.
The Minister of Labour and National Service (Mr. Iain Macleod): I will reply, if I may, more to the opening part of the speech of the right hon. Gentleman the Member for Battersea, North (Mr. Jay) on employment and wage policy than to the interesting dissertation on sterling and the reserves with which he completed his speech. Many speeches have concentrated on the employment aspect and, of course, it is natural that this should deeply concern Members of Parliament. I should like to try to answer them, and also to take up some of the very important issues that were raised yesterday as to how the policies announced by the Chancellor affect the Ministry of Labour and its relationship with the unions, and with the nationalised industries in particular.
I have only one piece of advice to give, if I may, to the Opposition. I should like to give it straight away—and I will give it in the cheerful confidence that they will take not the slightest notice of it. It is this. They might like to remember, sometimes, as they make their speeches, that they have been prophesying mass unemployment under the Tories for six years now, and they have never been right yet. We do not have to go back even to the prophecy of 1 million unemployed in 1952. Even in the defence debate and in the debates on the motor car industry this year, the Opposition were

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professionally pessimistic, and, as the figures now show, entirely wrong.
As a basis for looking to the future, I should like to start with our present employment position and to try, if I can, to gauge its strength. Although this part of my speech must be a little factual, I do not think that it need be too pedestrian. The latest figures we have for those in civil employment show 23 million at work—very nearly a record figure. But, more important, they also show that there is increasing employment of those people. The latest figures show only 40,000 on short time and, at the same time, 1½ million people working overtime, that is, 40 people on overtime for every person on short time. This improvement has been reflected in productivity, and so far this year output per man in manufacturing industries has been running at a higher level than in any other year since the war.
On the other side of the coin, unemployment is still very low. We have had the September figures, and I now have the October ones. The provisional figure is 275,000, or 1·3 per cent. unemployed, and unfilled vacancies numbered 274,000—practically the same figure. In October of last year there were 254,000 unemployed and 318,000 vacancies; and in 1955, 215,000 unemployed and 401,000 vacancies. I regard the ratio of vacancies to unemployed as a key figure in judging how inflationary the situation is. At this moment, in October, that figure is 1 to 1; at the same time, in 1956, it was 1·3 to I; and in 1955, it was 1·9 to 1.
Clearly, therefore, there is a better balance now between the supply and the demand for labour than we have had for some time. This low level of unemployment has been achieved in particular in spite of the fact that the defence rundown has been going more quickly than I thought it would and as I prophesied to the House in the defence debate.
In the six months ending in May this year, there has been a reduction of 100,000 in the numbers employed on defence production, but with practically no increase in unemployment. More remarkable still is the fact that since May, when I look at the employment in aircraft, explosives and ordnance, the three industries most particularly con-
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cerned, there has been a reduction in employment of 6,700; but unemployment, at the same time, has actually gone down by 443. The local difficulties to which I have previously referred have proved, as hon. Members know, a good deal less than we thought. Hawkers, we thought, would be the worst problem, but there, in Blackpool, 2,700 have left since January and only 107 are still registered as unemployed. At Swynnerton, about which there has been a good deal of comment here, nearly 700 workers have already left the factory and only 41 of those are still registered as unemployed.
I want to pick out, just for a few sentences only in view of the long debate we had on it, one industry, the motor car industry, for special mention. The House will remember that at the end of last year unemployment had risen to 19,000 and short-time to over 50,000. We made some concessions on hire purchase which helped to turn the corner but, even so, the recovery in the motor car industry has been quite remarkable; and all credit to everyone who has taken a share in that recovery. Unemployment and short-time working have virtually disappeared.
Better still, production in recent months, at 19,000 cars a week, has been higher than during the previous peak of production in September to November, 1955. Very great progress has been made in exports. But best of all, it is worth remembering that this has been achieved with a labour force of no less than 30,000 fewer than was reached in the peak two years ago. There has, in other words, been a very great increase in productivity in the industry.
I do not want to claim that the picture is equally good all over the country; of course it is not. I should like particularly to say that over most of Scotland unemployment remains higher than in the country as a whole, although the gap has narrowed recently in comparison with the years immediately after the war. For the past twelve months unemployment has averaged a little over 2½ per cent, as compared with 1½, per cent. in Great Britain, and the latest figure for Scotland, at 2·2 per cent., shows the lowest figure for any post-war October.
All the same, particular places—Dundee and Greenock—cause us very great anxiety indeed. At Greenock, from where

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we recently received a deputation led by the Member of Parliament, I think that there are some hopes of more jobs becoming available, and in Dundee, where we have promised to give special attention to proposals for new industry, unemployment is actually lower now than at any time during the summer, although it is still about 3·7 per cent.
Lastly, Wales, too, like Scotland, has unemployment running at an average of 21 per cent., and I think that fears for the future at the moment in Wales centre not really on the effects of the Government's policies, but on the modernisation of the tinplate industry of West South Wales. So far the redundancies have been absorbed reasonably well. I think that it will be more difficult in the future and it is a matter that I shall have to watch very carefully indeed. So much for the present.
I think that I can claim from that review that we were right in our belief, which we have expressed in many employment debates over the last year or two in this House, in the adaptability of industry, whether we are thinking of management or workers. The Ministry of Labour has a special part to play in this, particularly in doing what it can to aid and ease transition and change and the mobility of labour.
I refer only to one point in this connection. I announced to the House some time ago the institution of a temporary transfer scheme, which might help in an area where what one would hope were temporary difficulties had arisen, to transfer workers to areas which had jobs to spare. I think that this scheme will provide facilities which will be valuable, but I must in honesty tell the House that remarkably little use has so far been made of them. It is quite clear that people have, in the main, tended to seek, and perhaps after a short interval obtain, employment within daily travelling distance of their homes.
All the same, I think that the scheme is a good idea. We shall, of course, keep it and it could be extremely valuable if the situation were to deteriorate more swiftly than we thought. That is the picture, before I come to the future, which I wish to put before the House. I do not see how we can add it up to any other conclusion than that of a balanced, resi-
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lient economy which is very well placed to take advantage of the opportunities that are there for us. Yet we have found it necessary to take serious measures— and, of course, they are—and we have done so.
The reason is, as the Chancellor of the Exchequer has said, because, in our judgment, we cannot again take the strain as we had to do in 1955–56 and the winter around 1956–57 of taking out of the system in money incomes more than we have been able to put into it by new effort and production. It is our view that if increases continue to be granted that have no relation to production then, in the end, inflation must master us, and the most serious casualty would, of course, be employment itself. We have done what we have done in the belief that it is, in the long run, the only protection for full employment.
The House knows these measures and I will not go into them. But what will their effect be on the future level of employment? Naturally, I have been studying as closely as I can all possible evidence. I must tell the House that I can see no indication so far—and they have been in operation six weeks—that these measures have had any effect on production or employment. I do not intend to make a precise forecast to the House. It is seven years since anyone tried to forecast the level of unemployment a year ahead, and I do not think that it is an experiment that anyone wants to repeat.
As to our aim for the future, it is the firm policy of the Government to keep unemployment at the lowest level compatible with the avoidance of inflation. Those are not my words. It is a phrase for which I am indebted to the Leader of the Opposition when, as Chancellor of the Exchequer, in March, 1951, he was defining the full employment standard for the United Kingdom as 3 per cent. at the seasonal peak. He made, to be quite fair, a number of reservations on both sides of that figure. Unemployment today stands at 1·3 per cent. as I have told the House, in the very latest figures.
I do not say for a moment that it will remain as low as it is, or that changes in the level of employment in different firms and industries will not take place. But change is a process that has been going on for a very long time and I am

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confident that we can deal with an intensification of it. I state then quite firmly that it is the view of Her Majesty's Government that there need be no serious increase in the level of unemployment provided we are all prepared to keep our demands within the total of what we produce. There is no doubt that heavy unemployment is bound to come if we fail in that task.
Mr. R. J. Mellish: I follow the right hon. Gentleman's arguments about production, and it is right that we must have more, but how does he relate this argument to the bus driver, the docker, and so on?
Mr. Macleod: I am, of course, talking of the global figures of the country's effort. I am coming to one or two examples a little later.
I think the House will agree that the anxieties of hon. Members opposite about what we intend were perhaps best put in the speech of the hon. Member for Newton (Mr. Lee), and I would like to try to answer the very serious questions that he put. I would condense them into two. The first is: what is my position and that of the Ministry of Labour in the light of the Government's decisions? The second one is: what is the Government's position in future action in relation to wage claims, particularly in the nationalised industries?
As to the first question, I understand the dilemma which the hon. Member was putting forward—and not for the first time, because this has worried him for a long time and, therefore, it is not only connected with these measures before the House of Commons. But I do not believe that this dilemma is a real one. All Chancellors since the war, without exception, have had, in one form or another, policies of wage restraint, and all Ministers of Labour have been, as members of the Cabinet, privy to them and presumably in agreement with them, just as I am now in the closest agreement with the Chancellor as regards both the diagnosis and prescription in our present economic difficulties.
The hon. Member himself who raised this question was at the Ministry of Labour while wage restraint policies were in effect. He did not find that position particularly embarrassing to him in any way; nor, of course, do I,
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although it is perhaps rather a sardonic reflection on policies of wage restraint that in that year, the last year of Socialism, when wage restraint, we are told, was in operation, the index of wage rates went up by 10 per cent., while in the last year, after wage restraint had been abandoned, it went up by 5·2 per cent., or just about half of that original figure.
Mr. David Jones: What about the year after that?
Mr. Macleod: We have not got to next year yet. We are still in 1957.
Mr. Jones rose—
Mr. Macleod: No, I cannot give way; I am dealing with a very important point.
Let me emphasise, first, how much of the industrial relations work of the Ministry is not concerned with wages at all. Indeed, many of the great disputes which have occupied the headlines this year—at Briggs, Covent Garden, De Havillands —have been essentially not wage disputes in any sense of the word, Many of the great strikes that there have been in fairly recent years, including particularly those in the docks, have not been over questions of wages. But I do not even think that in the direct field of wages my position is in any way compromised. The work of the Ministry of Labour has gone on for a considerable number of years. It has gone on in times when the going was tough and in times when the going was not so tough.
The Chancellor told us yesterday that the going will be tougher both in the field of wages and of profits. He has told the House why that has to be. Neither I myself as Minister, nor my officials, can determine the outcome of a dispute. Indeed, we have neither the desire nor the power to do so. It is the parties to the dispute which have got to do that in the light of their ordinary assessment of the facts. That situation does not change. It may be, of course, that the facts of the situation change, and in that case the parties to the disputes, if disputes there must be, have to take them into account.
Some hon. Members yesterday commented on what the Chancellor said in relation to wage increases and the attitude of those who ask for them, who

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grant them and who adjudicate upon them. Let me make it quite clear that we are not attempting to instruct arbitration tribunals. Indeed, it would be inconsistent with their functions if we were to do so. But we do believe that the Government have a duty to make plain to everyone concerned with these grave decisions what we believe to be the true economic facts that confront us. It is no light matter that we invite them to consider. The Chancellor has explained the grievous damage that could be done to the nation as a whole.
The hon. Member for Ealing, South (Mr. Maude), in an excellent speech yesterday, pointed out that the Government's policy could be frustrated if employers and trade unionists so decided. That is perfectly true, but that is not, of course, a criticism of our policy, because the same comment applies equally to any policy put forward in a democracy by this or by any other Government. It can be frustrated by the people, in this particular case on the two sides of industry. But I do not think that it will be. I think myself that too much is at stake. I believe that the statement of the Chancellor yesterday was so clear that no one in industry, whether members of employers' federations or of trade unions, can have any doubts as to the effects that will follow if we cannot find a measure of restraint.
I would like to state the position of the Government. The Government is the largest employer in this country. In wage claims where we are the direct employer we will apply and we will be seen to apply the most stringent tests. Where our influence, although important, is less direct, we will act in the sort of way that the Chancellor outlined yesterday.
Mr. Percy Collick: I am obliged to the right hon. Gentleman for giving way to me. I thought the whole House understood yesterday—I certainly did—that if the Chancellor of the Exchequer said anything at all in his speech it was a clear indication to all the negotiating bodies in industry to reject wage applications. That, I thought, was as clear as anything could be clear. The Minister of Labour, if I understand him aright, is trying to retract from that position.
I think that the House should be abundantly clear here. Let us take the
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simple case of railways. Are we to understand now that the machinery of negotiation, which is nominally functioning, will consider claims solely on their merits without any indication from the Government in accord with the Chancellor's statement yesterday?
Mr. Macleod: There is not the slightest inconsistency between what I have said and what the Chancellor said yesterday. The Chancellor neither said nor meant the words that the hon. Member is putting into his mouth, and, as far as the example of the railways is concerned, we do not intend to usurp the functions in negotiations of the British Transport Commission, but we do intend to make clear to them and to everyone else our continuing determination that we will not finance inflationary awards, however those awards are secured, whether through negotiation or through arbitration.
Mr. Alfred Robens: Even arbitration?
Mr. Hugh Gaitskell: The Minister has made a very important statement. I would like him to clarify it. As I understand it, he is saying that even if an arbitration award is made under which the British Transport Commission pay increases in wages, the Government will not provide the money to enable this award to be fulfilled. How, then, does the Minister see the Transport Commission behaving? Is it then automatically to cut investments because there is an award which enforces higher wage payments upon the Commission?
Mr. Macleod: I am sorry, but the right hon. Gentleman is very confused on this. If he will study the Chancellor's statement he will find no difficulty at all. We do not intend—[Interruption]—that is what I have said and I will repeat the words. I intended to make clear to hon. Gentlemen and to everyone else our continuing determination that we will not finance inflationary awards whether obtained through negotiation or arbitration. It was made clear yesterday by the Chancellor, and if necessary he will repeat it tonight, that the determination of the Government in these circumstances is not to finance inflation.
Mr. Gaitskell: The Minister has slightly altered his phraseology. [HON. MEMBERS: "No."] He now says that the

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Government will not finance an inflationary award. Are we to understand that the Government will decide whether an award made by an arbitration tribunal is or is not inflationary? Exactly what will be the criterion they will apply?
Mr. Macleod: The right hon. Gentleman is quite wrong. If he will study HANSARD tomorrow he will find that the word "inflationary" came into my original statement and also into the later one. The question put by the right hon. Gentleman——
Mr. William Hamilton: The Minister has not answered the question.
Mr. Macleod: Indeed I have, and I have repeated exactly the position, which remains as the Chancellor of the Exchequer expressed it to the House yesterday, if an award should be made in those terms.
A number of speeches from the Opposition benches——
Mr. Ernest Popplewell: Before the Minister leaves the railways, may I ask whether he remembers that when the last award was granted for increased wages to the railwaymen, certain observations were made by the tribunal? They were to the effect that if the Government willed public ownership they must provide the means to pay reasonable wages. Is it not a fact that the British Transport Commission has had to run into a deficit for a considerable time and to borrow money accordingly?
In the event of the new wages applications of the trade unions being approved by the appropriate tribunal and an award being given in their favour, what would be the position of the Government? Previously, the Government have indicated that the Commission would have to borrow to meet the deficiency. Will it be allowed to continue its borrowing policy to meet the just claims of the award, or is that a case which would be regarded as an inflationary award?
Mr. Macleod: The answer is precisely in the terms laid down yesterday by the Chancellor of the Exchequer in column 57 of the OFFICIAL REPORT, and no more than that.
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The second part of the question that has been raised is whether this policy will lead to war with the unions. The phrase "war with the unions", about which we have heard so much was started, I think, by the Leader of the Opposition, in an unfortunate and unhappy speech in Brighton. In many speeches I have declared my position on this matter and I should like, if I may, to do so again, because it is an essential part of my thinking. It has always been so, before I became Minister of Labour and. indeed, before I became a Member of Parliament.
This is what I believe. It would be disastrous if we got into a state of civil war in industry. It would be disastrous if there were a trial of strength to see whether the union funds or our currency would crack first. In such a senseless struggle there would be no victors, and only our competitors would gain. Such thinking is utterly out-of-date. I have said that many times and I would like to say that again.
Mr. Hamilton: The idea was started by Lord Hailsham.
Mr. Macleod: I do not think hon. Members have read the whole of the speech made by the Lord President of the Council. I will quote a sentence which most of the newspapers left out, and which was:
"By the like token I do not believe that Britain would encourage or condone in a Government any attempt to provoke a quarrel with the unions, and we shall provoke no such quarrel."
That is exactly what I have said.
I believe this, too: In this country we have lost our sense of perspective over strikes and we exaggerate their importance. Our record is, in fact, one of the best of all industrial countries of the world. I find these figures fascinating: last year we lost through industrial disputes no more than 50 minutes for every worker engaged in industry. We lost through industrial accidents eight hours and through sickness 100 hours.
There is another and most important consideration. It is true that a large-scale strike or series of strikes in this country would lead to a loss of export and other orders and would impose a strain on our balance of payments. But it is true, also, that a continuation of the inflationary settlements of the last two years would

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put just as big a strain upon our position and would affect confidence just as much.
Mr. Ellis Smith: Would the right hon. Gentleman give us an example?
Mr. Macleod: The position of the Government in this matter should be made quite clear. We do not seek industrial unrest and we will not encourage others to create or to maintain it; but if, after the processes of bargaining have been completed and a reference to arbitration has been made, if that is appropriate, serious industrial trouble still comes, the Government would not hesitate to meet that situation, because the decisions that we have taken are, we believe, in the interests of all our people. If that is so, we will not fail in what we conceive to be our duty. [An HON. MEMBER: "Even turning down the arbitrators."] There is no question of turning down the arbitrators. We have given no instructions to arbitrators.
Mr. Robens rose—
Mr. Macleod: We are having this debate on the Motion for the Adjournment and a Motion of censure or otherwise has not been tabled by the Opposition. I find this, as I think the Press find it, a very extraordinary state of affairs indeed, because these are the measures on which the Opposition wanted to recall Parliament. These are the measures which every single speaker for the Opposition has said mean war against the trade unions, yet the Opposition have announced that they are not going to fight until next week.
Mr. Harold Wilson: Wait till ten o'clock.
Mr. Macleod: It is not possible for the Socialist Party to fight inflation, because it has tied its own hands. A few weeks ago we had a tie-up with the Motor Show, in the production of the 1957 Socialist model. This model differs from the models of all other years inasmuch as it has built-in inflation, whereas, previously, inflation was just an optional extra.
Every single speaker, every single delegate at the Labour Party Conference was carrying a torch for inflation. I believe that they have reached a point where, if they were the Government of this
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country, they could not possibly both carry out Socialist policies and fight inflation; conceivably one, but certainly not both. We believe that we can carry out our policies and combat inflation at the same time.
We are quite ready to take up the challenge of the Opposition, either tonight or next week if, by then, they have recovered from the Recess. As far as the country is concerned, in two years' time —perhaps a little more, perhaps a little less—we shall take the opinion of the country with confidence as well.
4.41 p.m.
Mr. Harold Lever: It is quite clear that, whatever the 1957 Labour Party model motor car is like, the 1957 model of the Conservative Party is only going to run sweetly when it is in reverse gear.
I observe that when these economic problems of inflation, balance of payments and the like, are discussed, the Government show a marked reluctance to analyse the use of the terms of which they make free service. Consequently, we find that the Chancellor says he does not care whether it is cost inflation, demand inflation, push inflation, or anything of that kind. It is of the highest importance that we should know what we are talking about because the word "inflation" is used in no less than three senses. Inflation can mean the mad, tear away devaluation of the currency such as happened in Germany in 1919–20. The second meaning is the gradual erosion of the value of the unit of currency. The third meaning of inflation is a situation where there is too much money chasing too few goods, with consequent economic dislocation.
It is important to bear in mind that at present there is no danger, and never has been any danger, of what I might call the Germanic printing press type of inflation. The second point that ought to be borne in mind is that for some time past nobody has been able to argue that there is a serious economic inflation in the sense that there is a great weight of money buying power unmatched at current price levels with the supply of goods and services. It is quite clear, therefore, that the problem of inflation which exercises the minds of everyone in this country, irrespective of the side of the

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House on which they sit or for which they vote, is the problem of the continual erosion of the currency unit, the £.
It is important to make this distinction because we are not dealing with a situation such as that with which Sir Stafford Cripps had to deal. Then there was excessive monetary demand for the supply of different goods and services. A Government which cut down the monetary demand might be accused of cutting it from the wrong places and of doing social injustice, but until they cut it below the actual supply of goods and services no one could say that they were doing any harm to the economy of the country because the mere excess of monetary demand is not good for any country and is not required to keep it all out.
Where we have a situation where no one alleges that the supply of goods and services is being fought for by an excessive body of money and where the two are in reasonable balance, as they are today and have been for some time, to cut down the money demand is to put them out of balance deliberately. The result is that the Chancellor is doing what would be appropriate for the other kind of inflation —that is to reduce the tension of inflationary pressure where the money demand and the goods and services are out of balance. It is a widely different situation from that in which money and goods and services are in balance. It follows by elementary logic—much as it might be disliked by the economists—that, as night follows day, one would be deliberately creating imbalance where there would be more goods at current price level than there would be money demand for them. That means a recession.
We are told that this inflation by erosion of the currency is a terrifying thing and if the Government let it go on as it has been going on sooner or later it would mean the downfall of the country, of full employment, prosperity and so forth. I am not saying there are not many disadvantages—with which I will deal briefly—in having persistent and sustained erosion of the value of the currency, however gradual, but any claim by a Government that its continuation indefinitely threatens full employment is complete, fraudulent nonsense.
I say "fraudulent", not in the sense that they do not believe it themselves—I do not suggest they are not bemused;
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they honestly believe their own misconceptions—but it should be noticed that this bogey of inflation in the sense in which we are using it, that is of the sustained erosion in the value of the unit of the currency, has been going on continuously since 1938. Far from that being a period in which full employment has been threatened, it has been a period of the greatest sustained full employment and increase in the standard of life and of production. Whatever the evils are they are not inconsistent with the continued high level of employment, the continued expansion of production and continued utilisation of modern technical development which can proceed apace in a climate where the demand is always pressing and creating a tension for more goods and services.
I did not say that there were no evils attendant upon it; of course there are. One is not that it threatens full employment. It is deflation not inflation which threatens full employment, deflation which prevents and discourages the use of modern technique in industry, deflation which prevents the expanded use of the world's resources and talents. What happens in inflation in the sense in which the term is being used today is a complex series of internal transfer payments. When we alter the value of the unit of buying power at home it means that the overall value of goods and services remains. Nothing has been lost but some people's claims on the total value of goods and services increase and some people's decline. Notable cases are the old-age pensioner, the ex-Army officer and many other worthy and patriotic citizens of society who have rendered valuable services and can be deprived of what it was agreed by society they should have.
The first task of an honest and intelligent Government should be to address their mind, not to these complex theoretical questions of whether it is possible to maintain full employment and expanding production while still maintaining suitable currency value. That is a very debatable point. I happen to hold that it cannot be done permanently, but I think we have to accept a certain tendency to depreciation of currency. That has gone on in this country for a long time without the country going to the dogs so badly as we were warned that it would. It has been going on, with brief interruptions, since the Battle of Waterloo and England,

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I am glad to say, still stands—and still stands very proudly—in her place in the world. So do not let us get panicked at this obscene notion of our currency depreciating continuously.
I am not saying that it is not conceivably possible, sometimes, to maintain the stability of currency and still have full employment, but the first task of the Government is not to engage in these abstruse metaphysical calculations beloved of economists and financial wizards; their first task is to say that in an inflation which makes a series of transfers of demands on the country's income —many of them undesirable, and of the kind that I have mentioned, such as old-age pensions—they will take steps to see that those people shall not suffer as a result of the automatic impact of inflation.
One of the problems is that we tend to think that in an inflation the buying power of the old-age pensioners' money goes out of the window. The poor old Army officer, who is living in extreme poverty, feels that the buying power of his income, and his standard of life, have gone up in smoke. His income has not gone up in smoke; it has gone into somebody else's pocket. Every penny lost by a victim of inflation—in the sense that I am using the word and in the sense that the Minister has used it—is a penny in the pockets of a beneficiary of inflation. The overall volume of goods and services being the same, or even growing, the way in which it is allocated by the currency unit means that for every victim there is pro tanto, to a penny, a beneficiary. The task of the Government would be a relatively simple one, if they were not bemused by the intellectual acrobatics exercised by every crackpot theorist and financial wizard. It is to see that the automatic beneficiaries of inflation hand over something to the automatic victims, where desirable.
In the reallocation of income the working class has been able to protect its share and even to improve it slightly, though not a great deal. The real trouble of the Government is that our taxation system is so out of date. That fact, coupled with a certain doctrinaire obstinacy on the part of hon. Members opposite in relation to taxing capital gains, prevents their looking at one aspect of the beneficiaries of inflation.
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The Government are powerless to fulfil this task of, to some extent, emptying the pockets of the beneficiaries and handing some money to the victims.
It is an internal problem. It does not relate to the question of full employment. Full employment is quite consistent with the continual erosion of the currency, which has gone on, probably, for 150 years, with intermittent interruptions. The declining buying power of the £ has been apparent since the Battle of Waterloo. But the happiest periods in the life of our people have not been those when the £ was regaining its buying power. There never was a time better than 1931 for the man who said, "The £ is at last buying a good pound's worth." Those were the bad times, and those times will be brought upon us again by the Government if they persist in their policy.
The right hon. Gentleman enjoys very great respect for his intelligence and sincerity. He said that some people were foolish enough to say that a Tory Government would bring unemployment. I was never one who said that. I never believed, and I do not believe, that the benches opposite are peopled by the sole repositories of folly, criminality and a desire to bring war, internal disaster, conflict and unemployment. But if they, or any other Government, pursue a policy inconsistent with full employment they will bring about unemployment.
If they have two contradictory objectives and are being firm in regard to one —purchasing power of the £—and not in regard to the other—full employment— it is no good the right hon. Gentleman saying that he does not want unemployment. He does want unemployment, because he wants to make the L's buying power stable year by year. If it results in large-scale industrial conflict unemployment and the aggravation of every economic difficulty in the world for us, so much the worse for Britain and for our people. We shall have our stable buying power, as we had it in 1931, 1932 and 1933. Let the right hon. Gentleman ask himself if he wants to repeat the revaluation which occurred then in order to halt the terrible drift in the buying power of the £.
The key question which brought this matter to a head has nothing to do with full employment or efficiency. There are

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certain disadvantages which follow from the erosion of a currency. There is a savings problem. People are disinclined to invest in fixed interest stock. But surely the Government can cope with that sort of difficulty. In fact, many intelligent people have already coped with it, long ago. The big investors and the insurance funds have had no difficulty. They realised long ago that it is no use investing all one's money in fixed interest securities. They took appropriate measures. They had a mixed portfolio, tied to real values. They were able thus to deal with the problem of investing. The small investor, on the other hand, feels that he has been rather swindled by inflation. He feels it bitterly, and when he sees the trade unions in the position of being able to protect the working class he tends to fall for this stupid and ill-thought-out line that the trade unions are responsible for the erosion because their members are not victims.
The real truth is that the Government are responsible for seeing that in an inflation, in the sense that I mean it, the victims must be protected. One of the victims is the small saver, who cannot have a complicated and balanced portfolio. The Government could introduce stock which would maintain its value in real terms, as against the present position where the man who is misguided enough to invest in War Loan with his small savings gets a terrible buffeting, aggravated by the misguided policies of the Government, with their 7 per cent. Bank Rate.
I now want to deal fairly briefly with the matter which brought the whole problem to a head. Everything was going along quite well until we got this problem of speculative pressure on the £. It was not as if the brilliant theorists of the Government Front Bench surveyed our economic, financial and industrial situation with alarm because of the erosion of the £; nothing worried them. In fact, they were making buoyant and optimistic speeches upon the subject—and not without some justification. What brought upon them great anxiety and panicked them, in these complex circumstances—about which they appear to understand little—was the fact that a number of holders of sterling in various parts of the world flew to the Deutsch-mark. It was not a flight from the £; it was a flight to the Deutschmark. They
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took the view that the Deutschmark was making such strides and the German economy was so sound and over-exporting that the state of the other countries would force upon them a revaluation.
Sir Robert Boothby: There was a much bigger flight to the dollar.
Mr. Lever: The hon. Member may think that there was a bigger flight to the dollar. As far as anybody knows what happens in these days—and it is all clouded in mystery—the big flight was to the Deutschmark. There may have been some flight to the dollar. The hon. Member says so. I do not think that he is right, but he may be. Even if he were right it would not affect my fundamental point, which is that there was nothing defective in the British economy which drove us to this high Bank Rate.
It is bad enough to have an economic crisis, but when we have to listen to sober lectures on economics, which are as devoid of logic as they are of humour, how can we have any honest prospect or confidence that the Government's measures will benefit the people?
The crisis was brought about either by a flight to the Deutschmark or, as the hon. Member says, by a flight to the dollar, and not because of anything that we were doing wrong. It was purely because the holders of sterling were taking up a speculative position.
The question is: what shall we do about it? Are we, because of the operations of speculators to the tune of a few hundred million pounds, to take a pessimistic view? Are we to be asked to mutilate permanently our own economy, which turns out thousands of millions of pounds each year in goods and services? Are we to call a halt to this expansion and reduce fundamental investment policies when economically, even under the present Government, we are doing extremely well?
There was some cause for pride. A Labour Government would have done much better, but the present Government were not doing too badly at all. We were going along fine and paying our way. We were not naughty boys importing too much and exporting very little, and expecting the world to keep us. As a matter of fact, this speculative exchange

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crisis came at a time when our figures were very good and we were doing extremely well, when we were showing the world that we were really stalwart chaps doing our jobs and not intending to live on anybody's backs, and it was not due to the shortcomings of the people of this country at all. It relates to a chronic uncertainty of the world in which we live.
Secondly, the real persons to be blamed are not the working class of this country, not the trade union movement of this country, but the Treasury and the highest direction of the Bank of England. First of all, in fairness it must be said that they are operating in very difficult circumstances, but what has happened is this. Before the war, the British Navy and British military power was enough to protect us in the world, and the £ sterling was matchless on its own in the world. But we all have to recognise that there have been a few changes. A political readjustment has taken place in this country, and we have to recognise that our political and military policies must be changed to fit our changed military and political position in the world.
That is why groups like the extreme wing of the "Suez group" are discredited now, not only in the Labour Party, but in the Conservative Party opposite. Their policies constantly collide with reality. What has not been adjusted to the same extent are our financial and economic policies in the modern world in relation to Britain's power in the world. This has not been done financially and economically to the same extent as it has been done politically. Though the "Suez group", politically, remain on the other side of the House—a rather sincere and nice minority—they have been utterly discredited politically and nobody will now allow them to collide with reality to the ruin of this country by pretending that we are still the power that we were before the war.
In the Treasury, where financial "Suez groupers" still hold the fort, when they collide with reality, because they will not grow up and realise that the £ in 1957 is not as strong as it was when they were boys, and is never likely to be, when the financial and economic "Suez group" at the Treasury and the Bank of England collide with reality, it
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is not so obvious to the ordinary people of this country that the damage is caused by the "Suez group" in the Bank of England and the Treasury, because the average man in this country does not understand economics. In fact, he knows practically as little about it as the Bank of England and the Treasury, though he is not so articulate as they. They get in first and say, "You are always asking for more wages, when you have got these social services and all these other things; you are responsible for all these difficulties", ignoring quite cheerfully the fact that this country, despite the social services, full employment and a rising standard of life, has managed to pay its way in the world after the most devastating war and the loss of all its overseas investments.
The "Suez group" at the Treasury are getting away on the ignorance of the ordinary people of this country, who are beginning to believe that these international crises affecting our £ are brought about by their own behaviour. I say that that is absolutely untrue. They are brought about because the international set-up is such as to encourage temporary waves of speculative selling of the £.
One cannot gear one's whole style of life and economy to the fact that at some time somebody will make a "bear" raid on the currency. If I were trying to gear my standard of life to the fact that somebody might panic my creditors, I would have to change in and out of flats every week because when my creditors panicked, I should not be able to afford my flat, my car and some of the friends I have. A temporary emotional crisis on the part of my creditors would induce in me catastrophic general changes in my permanent way of life. My friends, my car, my flat and my whole standard of life would go. That is what the Government are doing. They are saying that because momentary waves of international speculation may affect the sterling position, this crisis has come about.
I am not suggesting that it is not important and should not cause them great concern. I do not doubt that this is a ground for real anxiety but the Government must not allow their anxiety to drive them to make permanent changes in the economy of the country when it is basically sound, and send it backwards instead of forwards, which is where it

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was going, because in the long run we would be worse off even in relation to our international position.
Now we must return to the "Suez groupism" at the Bank of England. They believe basically that though things have changed a little since they were boys, they have not changed very much and that, with a little ingenuity on their part and a little discipline and loyalty on ours, sterling will be again w hat it was when they were boys. Every time that our reserves get stronger, they have their fling and they begin to disappear again. The first time that actually happened was the time of the American Loan of £1,000 million.
I know that the Americans insisted that we should agree to convertibility, but by the time it was due, and the right hon. Gentleman the Member for Battersea, North (Mr. Jay) will remember that I said this to him, not after but before the event, and many hon. Members of this House can claim the same—that this £1,000 million would go down the drain if we had convertibility. The reason why we did have convertibility was not that it was dishonourable to break the agreement with the Americans, because we could just as well have gone to our creditors and got out of the terms of the contract before bankruptcy as after bankrupting ourselves to prove our sincerity. The Treasury say "We could not help ourselves. We did not want convertibility; indeed, we fought against it." It is true that was what the American Government wanted, but if we had tried to show at the crucial time to the Americans that to insist on convertibility would be to send the money down the drain we would have been released. The Government were saying at the time that we were doing it because the Americans insisted, when what was happening was that we were throwing money out of the window because the Treasury believed we could succeed with convertibility.
Let me now deal with one thing that reflects great discredit on the Chancellor and his advisers—though he may know nothing about it, as I think he does. Indeed, it will reflect even more discredit on him if he really understands the situation. This is the question. The "Suez group" in the Treasury and the Bank of England have been talking about Britain's position as a nation which exports capital. They say we should go
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back to the time when they were boys when this country was exporting capital. They still believe that things are really the same or should be brought back to be the same as they were then, when we were exporting capital on a large scale.
Though I am not against certain particular specialised exports of capital, it is the most destructive nonsense to the British economy to say that we are a country which should be exporting capital today. This is megalomania. This is "Suez groupism" in a financial sphere. This country cannot afford the additional capital it needs for vital things such as internal communications like roads and railways upon which our whole economy will depend. We have quite insufficient capital for all the development we ought to make at home, but we have capital to spare for investment in Canadian oilfields. This is doing what the "Suez group" appeared to suggest—that we should export capital because we always have done and because it is a good thing to do in any case. We cannot afford to allow the speculator in this country to buy Canadian dollar stocks and invest money in all sorts of Canadian oil propositions, not only because they are highly speculative and the money is likely to go down the drain but because we have urgent need of the capital at home.
The £ sterling in the international market has lost more strength by the loss of those dollars, which could have been used to counter the short selling, than it has lost by any of the trade union demands made in recent times. If the Chancellor will continue to dissipate our reserves at the behest of the out-dated "Suez group" at the Treasury and the Bank of England then, of course, he will find himself beset from time to time by a selling crisis of sterling for which he has not the reserves.
The Chancellor of the Exchequer and the Prime Minister, and the Minister of Labour who has spoken in the debate today, are not regarded, I believe, by many people in this House as reactionary blimps. In different parts of their political careers both the Chancellor of the Exchequer and the Prime Minister have been responsible for many things of which they are entitled to be justly proud in moments of lively-mindedness and independence of thought. What dismays

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me more than anything at the present time is that in the middle of the panic brought about by the Treasury because of the situation of sterling in the international market it looks as if both right hon. Gentlemen have sold out on every decent, lively-minded and creative thought they ever had. It looks to me as if they have sold out to the kind of economic and financial fiction which resulted in consequences against which they were in violent protest before the war.
I cannot help thinking that for the Chancellor and the Prime Minister, who, after all, are regarded by many of us as bright, forward-looking individuals, although of a different political philosophy, to come to the point where they deliberately sabotage British industry, deliberately slash investment and where they exalt usury to the chief instrument of economic and financial planning—and it is not even good planning at that—is something to be deeply regretted.
I never hoped to see the day when the newspapers of this country would be so full of invitations to usury and where so much of the economy of the country revolved around it as at the present time. I do not know whether the Prime Minister is going to be proud that, having achieved by a number of accidental circumstances extreme power, he is now going to use it to support all that was stupid and all that was antedeluvian in financial and Tory thinking and against which he himself in his best moments before the war was in protest.
I beg right hon. Gentlemen opposite not to do this and not to throw away the good will of the trade union movement which, far from being justly accused and sneered about and propagandised against by every subtle hint which is intended to wound and damage it in the eyes of the people of this country, particularly by those who are the sore victims of the present financial process, is the most loyal, decent and patriotic trade union movement in the world and to which the people of the country owe a debt of gratitude. I beg the Prime Minister not to disown his own ideals and not to take us into a period of restrictive and backward policies, into the bad old days against which all his own best thinking was directed before the war.
5.14 p.m.
Sir Robert Boothby: The House will have listened with great interest and considerable amusement to the stimulating speech of the hon. Member for Cheetham (Mr. H. Lever). I hope to come back to it in a moment or two. At the outset, I would only say that the hon. Gentleman complained about the economic lectures that so many people give to the House, and I must warn him that I am about to deliver an economic sermon.
Mr. H. Lever: I was complaining of the Minister's lectures, not those of the hon. Gentleman.
Sir R. Boothby: What I propose to say will be worse than a lecture; it will be a sermon. A sermon demands a text, and my text is taken from Walter Lippmann:
"A society cannot stand still. If it loses the momentum of its own progress, it will deteriorate and decline, lacking purpose and losing confidence in itself."
At present, we are losing out to the Communists in almost every field, and nowhere is this more dangerous than in the economic field. Together with the United States, who bear by far the greater load of responsibility, we are at this moment taking certain steps which are calculated to intensify any pending world economic recession, which I think was on the way anyhow.
Industrial production has been sagging, both here and in the United States. Commodity prices have been falling steadily, while the cost of manufactures has been rising. The underdeveloped countries have, in consequence, been feeling the pinch. These three factors, in combination, provide, in the words of The Times, a classic setting for an international trade recession.
Yet we continue to pursue restrictive monetary and credit policies on both sides of the Atlantic. This obliges me to say, "This is where I came in". I have been through it three times—in 1925–26, when we went back to the gold standard and went on to the General Strike; in the crisis of 1929–31, when Snowden introduced the maddest Budget ever presented to this House; and again in 1937, when we were only saved from a serious recession by the advent of the Second World War.

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I am now going to do a shocking thing. I intend to quote, at some length, from a speech I made almost exactly twenty years age to the night, on 2nd November, 1937. It will not bore many people, because very few can have been in the House at the time, or will have heard it before; although I see one or two hon. Gentlemen opposite who might have been around. Anyway, it will give the Official Reporters a bit of fun, getting it out of HANSARD. They will probably have to send to the cellars for it. I said:
"Under a capitalist system, prosperity can be maintained only through the steady flow of capital into industry under the stimulus of confidence and anticipated profits. There is no other way in which you can get the wheels of capitalism to go round satisfactorily. Today, the rate of investment in capital goods is falling off in the United States and, in a less degree, in this country.…There is another rather disquieting factor. My right hon. Friend the President of the Board of Trade said, rightly, that we had no right to interfere in the internal affairs of the United States. Nevertheless, it cannot be said that they are no concern of ours. The fact remains that whether it is President Roosevelt in America, or the Chancellor of the Exchequer in this country, any man with power and authority who makes a speech, or gives a Press interview which brings about a diminution of confidence does, by that very fact, deal a blow not only at the economic system of the United States and this country but also at the democracies and the democratic systems of the world.…
Lastly, another lesson which we can learn is that whether we have a Socialist or a capitalist Government in this country, managed finance is here to stay; and the power of the managers is almost unlimited—far greater than any of us ever imagined it would be. Bad management and lack of co-operation between the United States and this country were, in my opinion, largely responsible for the slump of 1929; and they are almost entirely responsible for the recent recession ….
Just think of the ultimate forms that co-operation might take—a de facto stabilisation of the £ and the dollar, to which the currencies of all those countries of the world which are not behind a closed system would ultimately link themselves; the maintenance on both sides of cash reserves and credits at the banks, sufficient to maintain commodity prices; and last, but not least, as an ultimate aim, is there any reason why, in co-operation with the United States, we should not use some of the vast stocks of gold that we possess in a joint lending policy to try to re-establish a measure of prosperity in those countries which are still impoverished as a result of the war, and of the slump of 1929–32? There are countries which are crying out for purchasing power, to whom gold loans would be invaluable. We could quickly increase international trade, and purchasing power, by acting thus together with the United States.…
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I have not touched, and have not time to touch, on the political advantages of economic co-operation between the English speaking peoples, as others already have done. I would only say that I believe it is by far the best hope, and perhaps the only hope, of saving our civilisation from war and destruction."—[OFFICIAL REPORT. 2nd November, 1937; Vol. 328, c. 824–6.]
Every sentence of that speech, made in 1937, applies exactly to the present situation. I find that a little disheartening. One bats away and does one's stuff, and everybody says, "Jolly good speech" and stands one a drink; but nothing much happens. That is the depressing thing about politics. Here I am again, saying exactly the same thing. However, I never give in, and I am not giving in now.
I now turn, for a moment, to the Chancellor. He said, in April:
"There are some who say…we should depress demand to a point at which employers cannot afford to pay and workers are in no position to ask for higher wages. If this be the only way in which to contain the wage-price spiral, it is indeed a sorry reflection on our modern society. To slash production, to drive down investment, to push up unemployment…is…a high price to pay for price stability."—[OFFICIAL REPORT, 9th April. 1957; Vol. 568. c. 969–70.]
That is a clear statement.
In September, the Chancellor introduced a new economic policy. My remarks will not be as critical as some hon. Members opposite may imagine. I think I understand how it all happened. The essence of the Chancellor's new economic policy was, in his own words, to put the present fixed rate of the £ ahead of full employment as an economic objective. In short, the level of our industrial activity is now to be varied rather than the level of the £ sterling in the exchange markets of the world.
It is no use my right hon. Friend or anybody else pretending that this does not constitute a pretty sharp change in policy, over a comparatively short period. What caused it? It was the run on sterling. In this respect a great deal of nonsense is talked—I am not referring to the hon. Member for Cheetham—about speculation. Sterling is one of the great trading currencies of the world, and every day thousands of perfectly legitimate traders have to take a view about it, in order to conduct their ordinary business transactions. A great deal depends on the view they take. Latterly, they have taken the view that sterling would depreciate in

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value, and they have acted accordingly, Those who are responsible for all this are not a lot of mad gamblers sitting round a table drinking whisky in Zurich. They are, to a large extent, traders of the world who have to take a view about sterling. We talk in a rather loose way about speculation. The fact remains that these traders have taken this view about sterling, just as they have taken views about the D-mark and the dollar.
What we must ask ourselves is what caused them to take that view about sterling. The answer is twofold. One reason is our wage-cost inflation; and the other—I believe this to be the primary and basic cause—is our terrifying lack of reserves, as bankers to the sterling area. The rise in the Bank Rate to 7 per cent. was regrettable. I do not say that, at that moment of time, it was avoidable. I know that the pressures brought upon the Chancellor by the Bank of England were not wholly dissimilar from the pressures brought on the Labour Government in 1931. I know what a Chancellor must feel when he is told by the Governor of the Bank of England that, unless he does something drastic, there will be no reserves left in another five days. Something like that must have happened; and I do not blame the Chancellor for taking the very drastic action which he did.
I now want to say something about the two causes, the wage-cost inflation and the lack of reserves. I think that the second is the more dangerous and graver of the two. It has been said by various Ministers that the supply of money is the root of the matter so far as inflation is concerned. I do not want in any way to be offensive, but I am bound to say that it is nothing of the kind. Indeed, I do not think that the supply of money has anything at all to do with it. The supply has risen by only 10 per cent. since 1948, and it has not risen at all since 1954. In fact, our supply of money has risen much less than that of the United States or Germany; and our wage-cost inflation has been financed entirely by the increased velocity of circulation. I do wish Ministers would stop talking about the supply of money as the cause of our inflation, because it annoys people who know that that is not so.
The argument that the control of the money supply can by itself prevent wage
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inflation has rightly been condemned by the Financial Times as:
"…an instance of the regrettable consequence of basing a national economic policy on an intellectual fallacy."
One cannot go much further than that. All I have said, and not in any offensive way, is that the supply of money has nothing to do with the matter.
There is no doubt at all that inflation is like Munich and Suez. It is a very inflammable and emotional topic. It arouses passionate emotions in the breasts of everybody, and most people find it difficult to take a steady view of it. However, Professor James Meade had a good sentence in a letter in The Times this morning. He quietly said:
"It remains very desirable to find some way of preventing a continuous inflation of prices without stopping economic growth."
That is not on the face of it a very startling sentence, but it is a profoundly true one. It represents the dilemma confronting the Chancellor, for it is what he has to try to do.
I dislike dear money, for various reasons. First, it costs a lot in increased interest payments on the sterling balances and the service of the National Debt. Amounts of £50 million or £100 million here and there may not seem much, but they add to the total burden. Secondly, dear money as such has never yet succeeded in bringing about any substantial or lasting improvement in our balance of payments, which is one of the things that matter most. Thirdly, and worst of all, it must involve cuts, of varying severity, in public and private investment; and thus retard the growth of productivity.
I was encouraged by an examination of the figures which the Chancellor gave yesterday about cuts in the public investment sector. They were not as bad as I had been led to fear. I think he is doing his best; but it is no good pretending that a 7 per cent. Bank Rate will not retard, restrict or curtail productive investment in industry, and that, to my mind, must be bad, because I believe that our failure to modernise and rationalise our industrial structure between the wars is one of the main causes of our present difficulties. I believe that we have to do it now—although not, I hope, between two more wars. If we fail to do so it will affect the generation fifteen

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or twenty years hence, as it is affecting us at this moment.
In the long run, production is the real, and only, criterion of wealth. If I had been Chancellor, I should have adopted from the start a policy designed to maximise productive investment in this country; and in order to do it I should not have hesitated to limit our dollar imports to the level of our dollar earnings, and to retain the system of building licences. I am sorry to have to make that last remark, but I am on the record as having said if for years. However, I believe that this horse has now bolted the stable, and the buildings have already been erected—offices, hotels, and petrol stations, and, I might add, some schools which might well have been designed as "de luxe" hotels for the Nassau beaches. A lot of waste has taken place; but with the pressure now being exerted generally over the economy as a whole the main part of the unnecessary building boom is over. I regret bitterly that building licences were ever dispensed with. I shall never change my view. It has done a lot of damage to the economy of this country.
Mr. Ian Mikardo: That is why the hon. Gentleman was never Chancellor of the Exchequer.
Sir R. Boothby: Despite the loss of two stones. I remain a convinced and unrepentant expansionist. I shall never change. In my heart, I agree with an American friend who wrote to me the other day:
"The attempt to cure a wage-cast inflation by drastic deflation is like trying to cure a sore thumb by cutting off your arm."
I cannot help feeling that there is an elernent of truth in that. I would say to the Chancellor "Deflation, as well as inflation, can get out of control. So watch it. We have seen it happen before." Let me add that the Bank Rate is easier to raise than to lower; and that confidence is easier to undermine than to revive.
I would say this to my right hon. Friend, also. An essential corollary to an expansionist policy must be the relief of taxation for those who have to live on small fixed incomes. As my hon. Friend the Member for Tynemouth (Dame Irene Ward) has consistently said, we in the Tory Party have failed to a very great extent in not relieving these people from
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taxation five or six years ago to a far greater extent than we have done. As the hon. Gentleman the Member for Cheetham said, people living on small fixed incomes are bound to be the victims of an expansionist or, if the word be preferred, an inflationary policy. We have not looked after them, and I ask my right hon. Friend whether he will at any rate, bear these words of wisdom in mind for the next Budget.
That being said, it is essential that the Chancellor's policy at the moment should succeed, in so far as it prevents any further depreciation of the £ sterling. If it is not accompanied by a reduction in wage increases, it could easily result in prices rising faster; for it is at least possible that sonic industrial firms will find it easier to provide the money to pay increased wages by cutting their investment programmes. If they do that, consumption will be increased at the expense of capital development, which is the last thing the Chancellor wants. That is a real danger.
We listened this afternoon to what thought was a characteristically sensible, and level-headed speech from the Minister of Labour. The Government are large, if not the largest, employers of industrial labour; and on the most vulnerable front. I believe that the Government, in these circumstances, have a direct and inescapable responsibility, and must give a lead on this matter of wages. I do not want to get into trouble here with the Opposition. Though I have had a number of cheers up to now, I do not think that this part will go over quite so well. I believe that, in general, wage increases must now he found from increased productivity; that is to say, from increased efficiency.
Coming straight to grips with the problem of the Transport Commission, I believe that any impartial observer of the British railway system must be convinced that it would not be difficult to finance a 3 per cent. wage increase by increased efficiency. I believe that that can be done; and I hope that the Government will press for it and will say, "We will not go on dishing out the dough. If you agree upon a 1 per cent., 2 per cent., or 3 per cent. increase, you must find it from increased operative efficiency."

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I have two other suggestions which I would put to my right hon. Friend the Chancellor. I am delighted to see him here, and I am grateful to him for listening, because I believe that these two suggestions are not bad ones. I have made them before, in the debates of 21st February and 3rd July last year. First, I do not think—I believe he would agree, and I hope he will say so—that we can go on indefinitely on a 7 per cent. basis. We want the rate to come down as soon as possible. I doubt whether the sterling area will take it indefinitely. If we want it down, however, I suggest that the Chancellor should take statutory powers to fix the reserves of the joint stock banks expressed as a ratio of their deposit liabilities. That would be a much more effective form of control than raising the Bank Rate to 15 per cent. The authorities have that power in the United States, and I consider that we should have it here.
Secondly, I suggest, as I suggested in July, 1956, that we should revert to the system of Treasury deposit receipts. This will not be popular with the joint stock banks, but, even at the risk of further jeopardising my overdraft, I am prepared to say tonight that I do not care whether it is popular with the joint stock banks or not. My right hon. Friend should just go ahead and do what he thinks right, telling them where they get off.
I come now to the second part of my speech, which will be a much briefer part. though it deals with what is by far the graver problem of the two.
Mr. H. Lever: Is not the effect of what the hon. Member has said this? He says that he is an expansionist, but what he really has said so far is that he is in favour of less painful anti-expansionist measures than the Chancellor. Whereas the hon. Gentleman is opposed to a high Bank Rate, he recommends to the Chancellor other forms of restrictionism like deposit proportions, Treasury receipts, and so on. He is a restrictionist like the Chancellor, though not as old-fashioned. That is what he is saying.
Sir R. Boothby: No. That is not quite fair. I consider that the Chancellor should have these powers because they are more effective than the ones he has got. What the hon. Gentleman has said does not at all represent the general gist of my re-
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marks. However, I cannot make the whole first part of my speech over again. Perhaps I may get on with the second part now; and, if the hon. Gentleman would read it together with me tomorrow morning, I will go over it and explain any doubtful points to him.
The dollar gap has reappeared and, with it, the problem of the United States balance of payments with the rest of the world, which I myself believe to be the basic economic problem of our time. The United States, with one-tenth of the population, produce as much as the whole of the rest of the free world put together. The thing is hardly ever in balance. On top of this, outside the dollar area and Germany, the free world is suffering from a terrible shortage of liquid resources. It is absolutely fantastic that there should be over 25 billion dollars of gold reserves in the United States, 6 billion dollars in Federal Germany, and only 1,800 million for the whole of the sterling area. That is the situation now, and it does not make any kind of sense.
This problem of international illiquidity derives, of course, from Bretton Woods and the ill-starred American Loan, which we should never have taken. The hon. Member for Cheetham was quite right. The theoretical price paid at Bretton Woods for fixed exchanges was adequate and well distributed gold and dollar reserves for the free world as a whole, and they were not provided. That is really the root of the trouble.
What is the danger now? It is that the international shortage of liquidity may give rise to cumulative restrictions in demand; and, therefore, to a serious contraction in world production and trade, signs of which I am beginning to see now. In these circumstances, a continuation of the tight money policy in the United States, their refusal to increase the price of gold, and their refusal to increase the lending facilities of the International Monetary Fund cannot possibly be justified. America is, after all, the leading economic power of the free world; she dominates us. There it is, and we cannot help it. For better or worse, America is our economic boss; and I think that the policy being pursued by the United States at the moment is a very selfish one.
As far as I can see—somebody might as well say it—the financial policy of the

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Americans at present is being pursued by them with their eyes fixed exclusively upon their internal problems; in other words, the price of refrigerators inside the United States is causing them much more anxiety than the economic welfare of the free world outside the United States. That should, I think, be said.
For the restrictive monetary policy, Mr. Martin is, of course, responsible. He is Chairman of the Federal Reserve Board. I have already paid my tribute to him in this House. He is very able indeed. The way he pulled the country out of the recession of 1953–54, when every economist in the world was predicting an American slump, was a most remarkable achievement. He knows all about these things. But 1957 is not 1953. Dollars were then flowing out of the United States. Today, they are flowing into the United States. Commodity prices were rising then. Today, they are falling. There is a very sharp difference. It will not be so easy to pull out of this one.
I was in Washington two years ago, at the time when Mr. Martin told the Senate Banking Committee, under the chairmanship of Senator Fulbright, that his policy was to "lean against the wind". I may, perhaps, be permitted to say that he is now sailing far too close to the wind for my taste. Mr. Martin is a very tough fellow, not to be interfered with easily. I hope that the drift of this speech of mine somehow reaches him. Some of my American friends tell me that the great question now being asked in Washington is: when will the President send an airborne division to the Federal Reserve Board? That story gives some indication of the power of its chairman. But his responsibility is not only to the United States. It is to the whole free world, and it is an almost terrifying responsibility.
There has been some foolish talk recently about inducing an attack of economic influenza in order to avoid pneumonia later. What has yet to be realised in Washington and New York is that a mild head cold in the United States can reduce the sterling area at this moment, bereft as we are of reserves, to a state of rigor mortis. The Americans had better think that one out.
To raise international reserves to an adequate level in relation to trade, we need an international conference of the
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kind suggested yesterday by the right hon. Member for Huyton (Mr. H. Wilson). I support his plea that such a conference should be held at the earliest possible moment. It is just as important that we should have this conference as the high-level conference which my right hon. Friend the Prime Minister indicated will take place at N.A.T.O., in December. If we could have a second conference on the economic front, at an equally high level, with my right hon. Friend the Chancellor of the Exchequer attending, it would be invaluable.
We face just as serious a Communist challenge in the economic field as we do in the nuclear or in the diplomatic sphere. The capitalist economy of the twentieth century is on test now against the Communist economy; and Russia does not have to restrict production in order to maintain the exchange value of the rouble under a Bretton Woods agreement. Russian production is going straight ahead.
It does not matter how many changes there may be in the Kremlin: there is no change in Russian production. It marches on; and Russia can also offer stable prices to the uncommitted primary producing countries of Asia and of Africa. If they think that we are now going back to the old "boom and bust" system of the 'twenties, these countries will leave us and come to terms with the Communist world, as some of them are doing now; because the Communists can say, "We will give you X amount for your rubber, your cotton, your tin, your copper or whatever it may be, and that stands. We do not mind what happens in the commodity markets. It will not make any difference to us."
We have ourselves to devise a new and more flexible monetary system under which some of the economic pressures can be taken by variations in exchange rates, and in which international reserves and credit facilities will be sufficient to enable it to function in the context of sustained economic expansion. It is absolutely essential that we should do that. We have also to co-ordinate monetary policies and plans for investment in the underdeveloped countries, which we have not done at all since the war.
Finally, we have to work out various schemes for securing greater stability in the prices of primary products, because it is the instability of the capitalist world

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that gives the greatest ground for criticism of it. All these things ought to have been tackled at Bretton Woods in 1945. We let them go. We have been able to carry on largely through American generosity, but that cannot last for ever, We have also to accept the necessity for some discrimination against dollar imports if our deficit with the United States exceeds a certain limit, and the dollar countries themselves have to recognise that fact.
That was precisely what the Strasbourg Plan sought to achieve. We wanted to bring the Commonwealth into Europe altogether, united; and to link the raw material economy of the sterling area with the industrial economy of Western Europe by preferential and other arrangements. It was a much better plan than the proposed European Free Trade Area. We would have come in altogether as a Commonwealth, or at least with a large number of Commonwealth countries, with our raw materials, and reached good arrangements with Europe, because the basic problem there is no longer one of trade, but of payments and of investment. That was the plan we had.
Until these problems are solved, I do not think that we ought to touch the Free Trade Area as such, because we should be slaughtered by the Germans, and have our remaining reserves gutted in six months, if we had not come to previous arrangements about currency, about investment, about credits, and about all the things that matter so much more than trade. The problem at the moment is one of payments and not one of trade. The trade would flow all right if the means of payment were available.
The right hon. Member for Huyton yesterday asked, towards the conclusion of his speech, who was the eminence grise behind the economic policy of the Government. He thought that some strange figure shrouded in the recesses of the Treasury, or perhaps not in the Treasury at all, might be directing the policy of the Government. Let me assure the right hon. Gentleman that it is just the dear old Treasury, and nobody else. The Treasury are the people who are directing the economic policy of the country.
I hope that my right hon. Friend the Chancellor of the Exchequer will not take umbrage if I say that sometimes, when I lie awake at night, I think what a good
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Chancellor of the Exchequer I would have been myself; and when I do this I feel quite sorry for the country. Then, I remember something that was told to me by a high Treasury official thirty years ago, just after I first got into the House. He said to me, "There is something which you, as a young promising politician"—that is what I was then—"ought to know. There is only one man who has ever made the Treasury do what it did not want to do, and that was Lloyd George. And let me give you one assurance: there will never be another." [Laughter.]
It is all very well for the right hon. Member for Huyton to laugh, but I understand that he has designs on that office. He may well find himself in the same position, and, if so, I shall be very interested to see what happens. I am inclined to think that it will be the same old story.
However, I must end on a cheerful and optimistic note. I also remember that, despite all the hammer blows that the Treasury has delivered to this country in the last thirty years, we have survived. It is a tremendous tribute to the resilience and strength of our people. And, after all, there is always the chance that the Treasury might do better in the future.
5.46 p.m.
Mr. Victor Collins: We have listened to a speech from the hon. Member for Aberdeenshire, East (Sir R. Boothby) which, like many of his other speeches, has met with a great deal of agreement on this side of the House. In fact, I think that all the cheers came from this side and none from his own benches. I am particularly in agreement with the hon. Member's remarks about Bretton Woods and the American Loan, on which he and I were in the same Lobby.
Another of the hon. Member's remarks which was of the utmost importance concerned the question of confidence. This House fails to realise, I think, that one of the most important things in our present situation is that we should not destroy the confidence of the workers. If the workers once get it into their heads that unemployment is looming, then, without any directions from above and without any kind of consultation or general arrangement, they will restrict their production.

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Anybody who is in day-to-day contact with workers in industry will be aware that by some kind of grape vine or alchemy, they are fully aware of the state of the order book. In my own industry, although it is not exactly seasonal, at some periods of the year there are fewer orders than at other times. Although the workers are all on production rates, it is the case that without any increase in the numbers of personnel and only a small increase in overtime hours worked, they increase production, when it is needed, by as much as 50 per cent. comparing one part of the year with another. One of the most dangerous things that could be done would be that as a result of this debate and as a result of the Government's policy, the workers in industry became convinced that if they put out their full effort, they would work themselves out of a job.
The hon. Member for Aberdeenshire, East referred to his 1937 speech, when he said that bad management and lack of co-operation were responsible for recession. That is precisely what we have had from the present Government—bad management and lack of cooperation. The lack of co-operation is now becoming intensified and it seems to me that the management becomes worse and worse every week and every month. The hon. Gentleman said—if I may paraphrase his words—that restriction of capital investment was the death knell of capitalism. It is precisely of that that we are to have another dose. It is no good the Chancellor saying that in terms of money the present investment in the nationalised industries will be more than it was in 1951. In real terms it is going to be less. In real terms development is going to be hampered; production is going to be hampered and reduced.
It is unfortunate that in the two speeches of the Minister of Labour today and of the Chancellor of the Exchequer yesterday there has been what, in my view, amounts to positive double-talk, particularly about the workers in the nationalised industries. Yesterday the Chancellor said that it was necessary that the Government should state with clarity their view of the economic situation and, as employers, act accordingly. He said the Government should create the economic climate in which they and other em-
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ployers could so act, and he said that those who adjudicate on wage claims should have regard to that. He said that British Railways had been told that Government financial assistance to the railways for 1958
"…will not be in excess of the ascertained deficit of 1957…"—[OFFICIAL REPORT, 29th October, 1957; Vol. 575, c. 57.]
In the light of that, how can the Minister of Labour pretend that there is not going to be a precise instruction that those who adjudicate in these matters shall tell the railwaymen, "You can have nothing"? Alternatively, as, relatively speaking, their wages are low, if their case is so strong that it might have been conceded, will they not be told, "You cannot have the award because it cannot be paid for, as the Commission has to keep its expenses within the limits of 1957"? In one way or another the Commission is restricted and held up.
It is no use the Minister of Labour saying, "If we do have trouble we are prepared to face it," because the trouble is likely to come in just those industries where the wage level is lowest and where the importance of the work to the nation, as a whole, is the highest. That means real trouble for the country.
It is no use denying that this is a threat to the trade unions and is, in effect, a declaration of war. The Minister of Labour twitted the Opposition by asking us to remember that we have been prophesying mass unemployment for six years and have not yet been right. The reason why we have not yet been right is that time and again the Government, having created the situation, have run away from a showdown. It rather looks as though, on this occasion, they are screwing up their courage so that they will not run away, and the consequences, I think, will be very serious indeed.
This debate has confirmed that the Government's only weapons with which to combat the situation are capital cuts and restrictions on development and production, and monetary policy. Their supporters ask us not to be fractious, not to talk about the past six years, but to deal with the situation as it is today. However, we have to talk about the last six years in order that we may see what has been the outcome of their policy, because what we are saying is that they must stop

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it, stop carrying out the policy which has been going on for so long.
The present situation has been manufactured by the Government out of a combination of gross incompetence and malice aforethought. From the very moment they came to power six years ago their whole policy has positively invited wage demands—the removal of subsidies on staple foods, and the even more important scrapping of controls on distribution and prices; the raising of interest rates; the scrapping of housing subsidies and the introduction of the Rent Act. Every item of their policy day by day and month by month has been expressly designed to put up prices and to make life more difficult for the working men and women.
The Government's only answer to the inevitable wage demands is to exhort the workers to exercise restraint and to plead with union leaders not to make demands. It is not the leaders who make demands. It is the men behind them, and their wives, who have been goaded by the Government into a course of action which they know to be useless in the long run, but which is the only course open to them.
I should say—and I think that the hon. Member for Aberdeenshire, East would approve—that in these six years there have been only two logical explanations for Government policy. One is that they were out of their mind. The other is that they have been determined to create unemployment and thus force the workers to accept lower living standards. I am charitably minded, and I have always believed the second alternative to be the true explanation. Having run away so many times from the situation which they have created they are, I think, now trying to screw up their courage to have this showdown.
As the House is aware, I am an employer in industry, and the president of an employers' federation, and I say that the only way to keep wages down is to stop prices going up. It is not possible to issue some kind of edict which would cover the whole of industry and stop wages increasing. There is no one in this country, there is not any body of persons in this country, nor is there a Government body, which can keep wages down, and the Minister of Labour cannot keep wages
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down unless prices are kept down, or, alternatively, unless considerable unemployment is created.
When wages are negotiated with the men or their unions there are discussions on the facts, discussions on living costs, but the men are no longer interested in quotations from the cost-of-living index. I am in an industry in which we have a cost-of-living bonus directly tied to the index, but the men are not convinced any longer by reference to it. They know they are getting worse off. Even if their view is partly the result of psychological effect, the fact remains that their demands have to be met.
Irrespective of any demands or negotiations there are 4 million workers whose wages move up or down with the cost of living index. Does anyone believe that when those workers get increased wages as of right, all the rest of the workers can be persuaded not to ask for more? All the speeches by the Chancellor of the Exchequer and the Prime Minister to employers and unions and the National Council of Industry are a sheer waste of time unless and until the Government reverse their policy and start to hold prices down.
There is not a Minister who has the slightest real, practical knowledge of industry or of industrial relations—not one. Ministers have never had any real knowledge of industry or of how wages are negotiated between employers and employees.
Mr. Cyril Osborne: How many on the hon. Member's side have that knowledge? [HON. MEMBERS: "Dozens."] The hon. Member is making the very serious criticism that there are no real industrialists on the Treasury Bench. How many are there on his own side?
Mr. Collins: Far more than half of the hon. Members on these benches are members of trade unions. [HON. MEMBERS: "How many industrialists? How many employers?"] Hon. Members opposite must not scoff. I can assure them, if they do not know it, that when there are negotiations the men on one side of the table are members of trade unions and many hon. Members on this side of the House—most of them, indeed —have active and recent knowledge of these matters. Only a fortnight ago I

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personally was in an industrial court, and am a member of a joint industrial council, and have been for the past fifteen years. So I do know what I am talking about.
The Minister of Labour, I believe, is learning, and he often uses in a balanced way words of wisdom which he has gained from his experience, but his efforts are nullified by the kind of speech made by the Lord President of the Council when he accused the trade unions of sabotage and of some deep-laid plot against the community.
Mr. John Hynd: And by his own speech today.
Mr. Collins: Yes.
We all know, whatever hon. Members on the other side may think, that the next election will see Labour come to office. The question is when the election will be. If the present Government stay in office another year they will do tremendous harm and will cripple the country in years to come. I therefore urge them, however long they are in office, to start to do some good before it is too late. They should not think that, having created conditions for industrial strife, they can sit back and watch the outcome of a civil war in the industrial army. That way lies national suicide. They should try to restore the workers' confidence by giving back the social services which they have taken away.
Last April the Chancellor stopped the babies' milk and gave the money to the Surtax payer. That same week-end Mr. Edward Westropp, a financial expert, wrote in the Sunday Express:
"Thorneycroft's Budget has set Throgmorton Street ablaze. From shops to ships there is a feeling of better times in the air. The men of the market place think that a great boom is developing and before the year is out the best ordinary shares will be on a 3½ per cent. yield basis."
That was only six months ago.
Mr. Osborne: What a good prophet.
Mr. Collins: My right hon. Friend the Member for Huyton (Mr. H. Wilson) said yesterday that the Chancellor was getting his financial advice not from the Treasury but from some outside source. Judging from results achieved it could apparently have been from Mr. Westropp. Let us hope that the Chancellor obtains other
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advisers. A boom and 3½per cent. yield. What a hope.
The important thing for the Government to realise is that there will be no better times until the knowledge of better living permeates the workshops and shipyards. Before we can produce ourselves out of our present difficulties we must create conditions in which men know that they are getting a fair crack of the whip. I can think of no better or cheaper way of doing this than by taking resolute action to reduce food prices. I am astonished that in the course of the debate—and I have heard the greater part of it—no one has mentioned the over-riding importance of the price of food in this connection. It is the whole basis of wage demands, because increases in food prices not only hurt people most but it is what they notice most. It is the housewife, laying out the weekly money, who is most impressed and depressed by the constant increases she encounters every day and every week. She is constantly talking to her husband about it, constantly saying she needs more money, and the end product of that is, understandably, a trade union demand for higher wages.
I have been looking into increased food costs, not just as a total percentage but into the individual items. I made a very interesting discovery. I extracted from the Grocer, a well-known trade paper, the prices of 43 different grocery articles in October of each of the last four years—the same articles of the same brands and the same weight, biscuits, rice, cheese, jam, coffee, cocoa, sardines, tinned soups and so on. I found that in more than half of my selection, which was a very fair one, prices had not varied a penny in four years. I found that the total cost of my 43 items in October, 1954, was £4 18s. 1d. and this month the total was £5 0s. 10d.—a difference of 2¾ per cent. on that very big and very fair and wide selection of articles.
The great increase in food prices, therefore, does not lie there. It is in the things which the Government have messed about with—bread which is doubled, milk, tea and many other things and, above all and the one people feel most, meat. The trouble stems from the disastrous policy of complete freedom plus the substitution of support prices for the guaranteed prices of the Agriculture Act, 1947. I ask the Chancellor to take

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notice of the figures, which are of considerable importance. We talk about saving money and we are looking round for the money that the Government can save.
The taxpayer is paying possibly £100 million more in subsidies because of support prices than he would have been paying under guaranteed prices. Secondly, the housewife is paying exorbitant prices and, finally and, in the long run, equally disastrously, the farmer is getting less and will soon be producing less. Less than two years ago a top-grade bacon pig on my farm would have made £23 to £24. My last return last week showed a figure of £17 to £18 each. That is a very big drop, a disastrous drop. Even to maintain that figure is rapidly exhausting the accumulated F.M.C. funds.
Mr. F. M. Bennett: Is the hon. Member aware that 50 per cent. of our food, including a rather higher proportion of the food he has mentioned, comes from abroad? One of the constant pleas made from the benches opposite has been concerned with the disastrous effect of a fall in commodity prices, including food. The hon. Member is now suggesting that these prices are too high and that they ought to fall further. Could he tie that suggestion with the remarks of some of his colleagues earlier in the debate?
Mr. Collins: If the hon. Member will allow me to make my speech in my own way. I will come to that point. I have put these points fairly. Before I examined the prices of the grocery articles which I mentioned, I thought, quite honestly, that I should find a big change, but I have given the result. I repeat that with these support prices the taxpayer is paying £100 million more, the housewife is paying very much higher prices and the farmer is getting less. I have mentioned that two years ago we were getting £23 to £24 for a pig and now we are getting £17 to £18. Costs have not fallen. In those two years wages have advanced. Therefore, the producer is losing money. He will curtail production and eventually the induced shortage will again mean higher prices. Despite that fall in bacon and pig prices, the prices in the shops are not falling. The prime cuts have gone down
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2d. a lb. in the last five weeks, but the prices of the cheaper cuts of bacon have not fallen at all. The wholesale price of the best English bacon five weeks ago was 304s. a cwt. Last week it was 270s., a fall of more than 10 per cent. There is a market glut, but entirely because of Government policy no one is benefiting from it except the distributors. The normal gross profit on bacon is 16 per cent., but today it is 26 per cent.—a 50 per cent. rise in the profit going to the distributors. The housewife is not getting the benefit and neither is the producer, and the Government are to blame.
If the Government mean business about reducing prices, it is in a matter of this kind, where prices can be brought down without hurting anybody, that they can make a start. I have mentioned guaranteed prices. If we are to make an improvement in this matter, we must realise that the price of food is basic to wages and we must get back to guaranteed farm prices.
This year's barley harvest was a very bad one in my part of East Anglia. I sold my barley in August at 100s. a quarter, or £25 a ton. Since then plenty of feeding barley has been sold in the same area at 70s. a quarter, or £17 10s. a ton. This compares with the guaranteed price of £29 a ton. From this, two things are certain. One is that the taxpayer, because of these low prices, will have to pay a huge bill for subsidies, the support price margin being so great. Secondly, since, irrespective of the price at which they sold, all farmers will receive the same rate of subsidy, there is a wide disparity in the final price and many farmers will make serious losses. It is incontrovertible that there is no longer a guaranteed price for these main farming products. Anybody who knows anything about it will know that inevitably it means reduced production, and that is the most serious thing that can happen at present.
Let us relate that to the industrial field. We are all delighted that the figures of car exports are so good, but the motor car industry can never earn in foreign currency as much as the Government's farm policy is likely to cost us if there is a serious decline in home food production. We talk about earning £100 million from motor car exports. We could lose hundreds of millions of pounds sterling if farm pro-

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duction dropped by a serious percentage. Those are the real, practical things that we ought to be considering in a debate of this kind. From the housewife's point of view, the most irksome item of all in her budget is the price of meat, which has risen out of all reason. Here, again, Government policy is to blame.
A few weeks ago seven and eight score pigs were selling on the market at £7 or £8, that is 1s. per lb. live weight, but prime cuts of pork are still 4s. 6d. per lb. in the shops. I say to the Government that if they really want to tackle living costs and attack the mainspring of all wage demands, they must get back to guaranteed food prices and restore the confidence of the farming community. They must control the distribution and prices of the major foods. The things which have gone up fantastically in price are the ones with which the Government have meddled. It is very late in the day, but not too late to admit this grievous error and get back on the right course.
In this debate and in the country today there is talk and fear of slump or recession. People of my generation are asking, "Is this where we came in?" We have had the boom, are we now going to have the bust? When the country lacks clear political leadership, as it does today, people have only memory to guide them in a crisis, and memory tells them that we have had it all before, the boom and the bust.
Of course, conditions differ greatly today, twelve years after World War II, from what they were twelve years after World War I. Then we had too many grim and cheerless homes, with none of the symbols of comfort, such as washing machines and refrigerators, which are now a sign that everyone must do his own work. Then there was little leisure and a great demand for adult education. Now there is a lot more leisure and T.V. to relieve the sheer boredom. We also lacked then what we possess now, the experience and wisdom which eases men's fears and lights the flame of hope. There is also understanding of the simple fact, which is not so often appreciated on the benches opposite, that food is grown to be eaten and goods produced to be consumed.
Let the Government abandon their doctrinaire policies which have failed so dismally; stop knocking the people
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about; start giving the industrial team some leadership; create conditions where management and workers can play together in the team on terms of equal status and fair rewards. Let the Government see that the main rewards go to the producers instead of to the people who merely move goods about. Let them start it now, and try in every speech and by every act of policy to build up real industrial co-operation, and then this country will come through its difficulties in a way that will astonish the world.
6.13 p.m.
Sir Alexander Spearman: It must be very unusual for any country which has a surplus on its balance of payments of £200 million to suffer the losses of gold that were experienced this autumn. It seems to me that if we are to judge fairly the Chancellor's remedies we must be clear about the cause of the lack of confidence in sterling.
I believe it was due to a rise in wages in this country out of proportion to the increase in production, and that, both at home as well as abroad, caused fears of an acute inflation at the same time as there were doubts whether the Government were willing and prepared to act to deal with it.
The consequence of that inflation would, of course, if carried far enough have meant devaluation. The fact that, partly as a result of Suez, we have incurred lately very heavy debts which have to be repaid at no distant date obviously accentuated those fears and, therefore, holders of sterling, and particularly those who wished to spend the money at no distant date, accelerated their sales.
If I am right in thinking that the rise in wages—again I emphasise without a proportionate increase in production—was the cause, it is worth examining why it is that employers do pay more wages. It may be because of better work, better management, better machinery, or all three. In that case, of course, rises in wages are altogether admirable. It may be, in the case of the nationalised industries, that they are able to pay more wages out of loans not available to private enterprise. Or it may be because demand for goods is so great that employers know they can retain labour they do not want, or bid against each other to get labour,

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confident that they can put the cost of it on to the price.
The right hon. Gentleman the Member for Battersea, North (Mr. Jay), in opening the debate for the Opposition today, said that the trade unions were not to blame for these wage rises, and I agree with him. I do not in any way blame the trade unions for the wage rises. I think that if trade union leaders did not press for increases in wages at a time when they knew the employers would give way there would be break-away strikes and the moderate men would lose their authority. Therefore, I have no confidence in that preaching to the trade union leaders or in the exhortations to them which have been made. To my mind, it rests fairly on the Government to see that there is such a balance between money income and national resources that excess demand is not there.
The right hon. Gentleman the Member for Huyton (Mr. H. Wilson) asked yesterday whether the Government want more production this year. I am not in a position, and I shall never be in a position, to answer for the Government, but I can make a good guess. Of course we want all the production we can get, but not if it means a disproportionate increase in demand.
Unfortunately, there is a very strict limit to the increases in production that can be made quickly, but there are almost no limits to the increase in money incomes that can take place, as we saw in the inflationary situation in Germany. Whether inflation causes an expansion in production or not in the short run, it is certainly disastrous to it in the long run. In September, the Chancellor took steps to ensure that there was overall balance between production and consumption. I ask hon. Members who criticise the raising of the Bank Rate what measures they can suggest that would be one half as effective and as swift at a time when we were losing gold and dollars at the rate of £100 million a month?
A former Governor of the Bank of England said that a 7 per cent. Bank Rate would get money from the moon. I think that may be a bit premature, but it is a clear signal to the world that the Government mean to prevent inflation at all costs. It has been accepted by the world, and I think that the measures announced by the Chancellor yesterday
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clearly justify that decision by the world to accept the Government's resolution to stop inflation.
Of course, we must be disappointed if investment has to be cut, but I really do not think that the cuts or postponements announced by the Chancellor are anything for us to be too tragic about. What I think my right hon. Friend wants to do is to keep down investment for the next two years to 60 per cent. above what it was in the last year of the Socialist Government. That is not a turn round, it is merely a temporary slow down.
If we want to know why this slow down is necessary, it cannot be put more shortly than in the words of Earl Attlee who, when he was in this House, had such a well-deserved reputation for saying things concisely and clearly. The then Prime Minister, Lord Attlee, on 6th August, 1947, defending the Government in one of those debates on the financial crises which occurred in alternate years, said:
"It may be that we have tried to do too much in a short time."—[OFFICIAL REPORT, 6th August, 1945; Vol. 441, c. 1489.]
I think that we are still suffering from that today.
I do not always find myself in agreement with my hon. Friend the Member for Aberdeenshire, East (Sir R. Boothby), but we all agree with him that we do not want to see a 7 per cent. Bank Rate for long. It is an emergency measure and it must be reduced as soon as possible. But I doubt whether his solution of having liquidity ratios for the banks is quite as effective or as simple as he suggested. I am not convinced that bank advances would be restricted by this change if money were cheap.
I want to say something about the control of the supply of money, which is very important. The fundamental difficulty here is the size of the floating debt due to the insatiable demands of the nationalised industries, who have been undeterred by the discipline of shareholders or fear of bankruptcy which acts as such a healthy brake on private enterprise. Until a year ago, borrowings by nationalised industries were financed by issues to the public but, actually, those issues were never taken up by the public, because the price at which they were offered was unattractive. They were taken up by the Government Departments, who financed this by the issue of

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Treasury bills. Now we have the method of Government financing them by direct loans, raising the money on Treasury bills.
I urge on the Chancellor that he must take the most drastic steps to fund more of the floating debt so as drastically to reduce it, even if he has to pay a high price. I know that it will cost a great deal, but the cost of doing that is very small, compared with the cost of inflation. Much has been said about the effect of these measures on employment, but the overwhelming danger to the standard of living today is not unemployment but inflation. It is the height of un wisdom to be deterred from taking steps to prevent inflation by imaginary fears of something which does not exist.
I cannot see any reason why moderate measures to prevent aggregate spending increasing faster than production should lead to heavy unemployment, unless, of course, quite unjustifiable wage demands are made and pressed to a strike. Last week, I read the long article in the Manchester Guardian by the right hon. Gentleman the Member for Huyton. Yesterday, I listened to him in the House. He is a most industrious person. His pen is almost as prolific as his tongue. In the second of those articles he wrote:
"Inflation occurs when summation"—
his word not mine—
"of decisions to spend outruns available resources".
In the third article he said that a Labour Government would advocate restriction of inessential investment on consumption.
Clearly, those measures must lead to some small temporary unemployment, whether they are carried out by a Conservative or Socialist Government. They would not achieve their purpose unless they did and that was very well understood by Sir Stafford Cripps who, on 26th October, 1949, said:
"To insist upon the rigid maintenance of the present pattern of employment would be to destroy all hope of full employment."—[OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 1341.]
Mr. J. Hynd: Is the hon. Gentleman aware that the policy of restricting inessential investment was carried out for six years at the same time as we were achieving full employment for the first time in the country's history?
Sir A. Spearman: What the right hon. Gentleman for Huyton was saying was that inflation occurs when decisions to spend outrun available resources. He said that to deal with that a Labour Government would restrict consumption. A restriction of consumption or investment must lead to some temporary unemployment. There is no possible way by which any Government can take measures to cut down demand without causing some temporary unemployment. What I am saying, and I feel that I am in very good company when quoting Sir Stafford Cripps, is that that measure of unemployment is not serious unemployment.
Mr. Mikardo: It is serious for the men who are unemployed.
Sir A. Spearman: It is a question of alternatives, of whether it is better to have a few temporary unemployed or to run a grave risk of mass unemployment for a long time.
I am convinced that the future of the country depends not on feather-bedding declining industries, but on encouraging and stimulating expanding industries. If we freeze the economy in an obsolete direction there is no end to the unemployment we shall have. With the knowledge which we have today, there is no longer any need to fear mass unemployment, except for one thing. Mass unemployment is no longer an avalanche. We know how to control it, but the one thing is our ability to get raw materials. If we cannot get raw materials, we will indeed have mass unemployment, and if we have inflation to a sufficient degree followed by a balance of payments crisis we shall not get the necessary raw materials. Undue fears of unemployment and excessive precautions against unemployment are just the one way in which we may get mass unemployment.
It was said yesterday that the Chancellor's announcement was war against the unions. That is as great a piece of rubbish as I have often heard. It is war against a disease which would be disastrous for the trade unions and the whole country. The Chancellor's policy as he announced it yesterday is to make an increase in profits harder to get, and that is a jolly good thing. This means that wage increases will be harder to get and will have to be striven for. It also means a stimulus to efficiency. Lazy and

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wasteful firms will suffer and the efficient and competent firms will find it easier to get labour and resources and the result should be increased production and lower prices.
Although there is no prospect of that in the near future, we will then be getting towards the next instalment when the Chancellor can safely reduce taxation. His object must be to create a situation where profits are hard to get, but very well worth while getting.
In conclusion, I want to pay tribute to the Chancellor. He has had the courage to act to stop a crisis without any fear of unpopularity. The result of that is that all over the country among all sorts of people there is today an upsurge of confidence, and if the Government stick to their present policies I believe that that confidence at home and abroad will grow and grow.
6.30 p.m
Mr. Austen Albu: The hon. Member for Scarborough and Whitby (Sir A. Spearman), as we had expected, has given us a lecture on orthodox economics. Perhaps the most disturbing point in his speech from our point of view is the strong support which he has given to the Chancellor. He made some reference to the very interesting and, on the whole, very good speech made by the hon. Member for Aberdeenshire, East (Sir R. Boothby). A more extraordinary contrast of economic policies by two Members of the same party it would be almost impossible to find.
As one listens to the debate, and indeed as one has listens to all economic debates which have taken place in the House at least since I have been a Member, one realises that we are trying to struggle with an economic system in which too many factors are fixed. My right hon. Friend the Member for Smethwick (Mr. Gordon Walker), in winding-up the debate last night, referred to the difficulties of conducting an economy with full employment, stable prices, fixed exchange rates, balance of payments and rising investment and consumption. Certainly these are not possible combined with policies of fewer controls, of increased trade liberalisation and of increasing convertibility of sterling, including the possibility of the movement of capital over wide areas.
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Economic policy is concerned, politically, with the determination of priorities, and we on this side of the House have firmly chosen, and apparently some hon. Members opposite, too, still hold, that the first priority is full employment and economic expansion. We heard the schizophrenia on the other side of the House in the speech of the Minister of Labour who struggled to combine his obvious beliefs in industrial peace and expansion with his loyalty to the Cabinet decisions which have been taken to restrict them.
As has been pointed out by many hon. Members, the present danger is that the three major industrial countries of the free world, the United States, Germany and ourselves, have now chosen as a priority stable prices, and apparently they have therefore given up full employment and economic expansion. Her Majesty's Government, in spite of what the Minister of Labour said, is apparently ready to face serious industrial unrest and, according to the Chancellor, for two years a restriction on economic expansion; but of course, such a policy is much more serious for us than for the other countries concerned because, as several hen. Members have pointed out, including my hon. Friend the Member for Newton (Mr. Lee) and the hon. Member for Eastleigh (Mr. D. Price), we desperately need a continually enlarging Investment policy in order to change the composition of our exports and to raise the technical level of our industry as a whole.
If we look at the immediate problem, at what seems to be the Government's greatest concern, we see no sign as yet that the measures violet; they have so far taken are likely to have any effect on prices at home. It is true that they have had an immediate success in stopping the speculation against the £, but, as we all recognise, the only safeguard for the £ finally is a strong balance of payments position.
At present, we are benefiting from the falling prices of commodities in our balance of payments, but, as has been pointed out time and again, this is a very doubtful advantage either economically or politically. Economically it must lead to a fall in world trade, from which we are likely to suffer more than anybody else. Politically, the hon. Member

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for Aberdeenshire, East, in a very pertinent part of his speech, drew our attention to the seriousness of its effect, and in particular he quoted the excellent articles written recently by Mr. Walter Lippmann.
The truth of the matter is that however much we may deflate temporarily, we shall soon be back in the position when we need to export more goods. The Government must decide, and we must decide, in determining economic policy, whether it is more valuable to our economy to maintain the present degree of convertibility of sterling and the free movement of capital which is now allowed over a very wide area than to increase investment to enable us to sell more goods abroad. It seems to me that restrictive economic measures at home will always be necessary as long as we allow so much economic freedom abroad and while our reserves remain so low.
We have to face the fact that we either have to undertake a very long pull to increase our reserves to an adequate level—and I believe that this could not be done at the present time without maintaining a very serious degree of deflation—or we have to adjust ourselves to living with very small reserves. That is unless measures are taken throughout the world, or among the countries most concerned—measures such as those mentioned by my right hon. Friend the Member for Huyton (Mr. H. Wilson) yesterday and the hon. Member for Aberdeenshire, East today—to increase international liquidity, and I see no chance of that happening.
If these measures are not taken, and I do not think there is much sign that they are likely to be taken in the very near future, then I think it is better for us to adjust ourselves to living with very small reserves, because there is little sign that our reserves will increase at any rapid pace.
What have we to do? We must, of course, reverse the movements which have taken place in the last few years in the convertibility of sterling, but I do not think that is enough. I think we shall have to control the movements of capital even within the sterling area, as some members of the sterling area already do.
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I was in Rhodesia this year, and the financial authorities there were extremely worried by an inflationary building boom which had taken place on the basis of some extraordinary capital movements. There is a well known and very reactionary news letter in this country whose directors have set up in the Bahamas an investment company for the purpose of erecting buildings in Rhodesia. Anybody who has been to that country recently will have been astounded at the enormous amount of building taking place of skyscrapers, flats, office blocks and so on, all presumably founded on copper at £400 a ton. Of course, this movement of capital escapes the normal control of the Capital Issues Committee.
I was also told that a well-known gentleman was walking around the country with £500,000 in his pocket. This, I was told, was funk money, which was escaping death duties and high taxation in this country. When the authorities and Ministers complained to me that they were unable to borrow on the ordinary market in this country because they were low on the priority list of the Capital Issues Committee, I replied, "What can you expect as long as this funk money is leaving the United Kingdom in this way? As long as there is this free movement of capital, of course at home we shall be in an inflationary situation and it will not be possible for us to lend abroad for serious projects."
I am not concerned with Rhodesia which, perhaps, can look after itself, but many of my hon. Friends, and I think some hon. Members opposite, know that there are very serious economic and political problems in under-developed areas and that we shall not be able to carry out our obligations in those areas, particularly those in the British Commonwealth, as long as capital can move as freely as it does even within the sterling area for projects for which there can be no priority whatever either politically or economically.
I have no doubt that some people will point out to me that to restrict still further the movement of capital in the sterling area might mean the end of the sterling area. We have to ask ourselves whether the sterling area is not now too big a liability in view of our present position. The very interesting speech of my hon. Friend the Member for Manchester.

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Cheetham (Mr. H. Lever) was relevant in this matter. Every day new central banks are coming into being, enlarging the number of independent authorities on whose independent discretion in the expenditure of sterling and the purchase of dollars the sterling area depends. I do not know whether it is possible to continue a system of that sort with reserves as low as they are at present.
Of course, any change of such a magnitude must be very difficult and no doubt must be very carefully prepared. What we must not do is to allow myths generated in the City of London to prevent its examination.
My hon. Friend the Member for Stechford (Mr. Roy Jenkins) pointed out yesterday that the part played by the City as an international banking centre is much less than it used to be as a means of earning our much needed imports. According to the very interesting General Electric Company Export Guide in its most recent issue, our annual trade gap today is only 18 per cent. of our total import bill compared with 41 per cent. before the war. In fact last year, 1956, our exports and earnings from shipping more than paid for our imports and payments for shipping; and of our total credits, invisibles, other than those for travel and foreign Government aid, amounted to only 13½ per cent.
I ask the House, how much of this would be lost if the sterling area did not exist? My hon. Friend the Member for Stechford made an estimate of £30 million which is probably a good overall figure. This must be compared with an import and export figure on both sides of the account, or rather on the two sides of the balance of payments account, of about £5,000 million. We must not continue to refuse to face the realities in our position because of myths generated in a very different period in our history. If we had to give up the City earnings, it seems to me that it would be a small price to pay if it enabled us to maintain and increase our industrial expansion and increase our exports or reduce our imports. The truth is that we in this House and in the country have never faced the question whether this country is a trading or a manufacturing nation. I have no doubt that we are a manufacturing nation, and that our economic policy must be ordered to suit.
6.42 p.m.
Mr. Ronald Bell: The hon. Member for Edmonton (Mr. Albu) has enunciated what I believe to be a most dangerous policy, that we can be considered a manufacturing and not a trading nation. I have no doubt that we engage in a great deal of manufacture, but if we could not sell the products of our manufacturers it would not help us much. The speech of the hon. Member for Edmonton was, I think, a defeatist speech and I am delighted that the Government have taken a totally anti-Socialist point of view and are proposing to pursue a policy which moves in the opposite direction, After all, what the hon. Member was saying was that we should disband the sterling area because, if we tried to retain it, we could not carry out the Socialist policy of relying upon control. That is what he said. That is what he implied.
Mr. Albu: If the sterling area would accept the sort of controls over capital movement that I suggested, the sterling area should be maintained.
Mr. Bell: I quite appreciate that. I think that the hon. Member was quite rightly assuming that the sterling area would not accept any such crazy system.
The hon. Gentleman also said—this was the heart of his speech—that we could not maintain the sterling area in those conditions, with its present reserves. I agree with that. The central reserves of sterling are extremely inadequate, and I think they have the first claim on the attention of the country. But the conclusion I draw from that is not that we should disband the sterling area, and sacrifice all that it has meant to us and still means, because our reserves are inadequate, but rather that we should take measures here at home to build up the reserves of the sterling area. That is precisely the task to which the Government are addressing themselves. The important feature of this debate and of the discussions of the last few weeks has been that at last a post-war British Government are determined to stop inflation.
I hold the view that the Government of this country, had they really wanted to stop inflation, could have done so without undue difficulty at any time since 1945. What has been lacking is the will to do so. The reluctance to carry through

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the measures necessary to stop inflation has been based upon a fear of the possible consequences. Let us face it, a very big vested interest in inflation has been built up in this country. The truth is that from 1945 until today only a very few people have suffered from inflation while a great many people have done very well out of it.
That being so, not unnaturally people say to themselves, "Well, after all, if a system like this benefits the great majority, or appears to do so, and it damages, however grievously, only a very few, might it not be best to allow that system to go on, rather than to incur the risks which we all see would attend any resolute action to break it down?" That attitude has been fortified by the tremendous political implications of the word "unemployment." We should not forget that as lately as 1951 the party opposite fought a General Election upon the issue, "You don't want any more Tory unemployment." Hon. Members opposite have been using that label for many years. I am not now going to job back and say whose unemployment it was between the wars. The fact is that it burnt very deeply into the consciousness of many people in politics today and a fear of it—not only the electoral implications, but the genuine fear of it—has been a dominant feature in the minds of many people. Many people, and hon. Members on both sides of this House, have sincerely said that, rather than take any risk of serious unemployment, they would prefer to see a quiet inflation going along.
However understandable that may be, I am sure that it is the wrong approach to the problems with which we are faced. There are many reasons why we must stop inflation and we would agree about them on both sides of the House. First, there is the problem of that minority of the population which is so bitterly affected by inflation. We all know the injury suffered from inflation by pensioners, for example. In the case of State pensioners we can do something to mitigate the effect. In the case of private pensioners we can do very little. I know—I expect most hon. Members know—of really tragic cases of people who retired from private employment under pension schemes conducted through insurance companies which, naturally, are not in a position to pay supplements
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based on the cost of living. Such people are now in a very sad condition.
Yesterday the right hon. Member for Smethwick (Mr. Gordon Walker) paid a passing tribute to these people. But he went on to discuss selective controls and similar subjects. It is not good enough from the moral point of view to pass these people by all the time and to say, "Well, inflation is very comfortable and we must leave them there." There comes a point when on the moral issue we have to stop a progressive debasing of our currency. But there is a more important practical side. Although we can have thrift going on beside inflation, as we have at the present time with small savings so much improved on what they have been, it is possible only because of a belief in the minds of people that before long inflation will be stopped. If once they believed that both major parties in the State had come to terms with inflation and that it would continue indefinitely, then the very source of the threat would be destroyed.
For those two reasons alone—there are plenty of others—the time has come for us to face the problem and tackle inflation. If we do not, our industry will run down, our competitive position in the world will be destroyed, and our moral position, even at home, will be completely gone. An immediate stand against inflation is the first duty that I require from any Government.
The Opposition are more to blame than anyone else for the inflation that we have suffered since the end of the war.
Mr. Mikardo: Is the hon. Gentleman sure that the blame does not lie with the Liberal Government of 1906?
Mr. Bell: The hon. Gentleman has always been particularly preoccupied about the past. I was about to say that the reason why the Government which he supported from 1945 to 1951 did nothing about inflation was that it was preoccupied about the past when it should have been attending to the future. An hon. Member once said that the trouble with that Government was that they were haunted by James Ramsay MacDonald. They were so worried by what happened between 1929 and 1931 that they were afraid to face the problems of the postwar world. It does not in the least surprise me that the hon. Member for Reading (Mr. Mikardo) now seeks to go

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back to 1906. Most of his colleagues base all their politics and their very conception of progress on the nineteenth century, let alone 1906.
The problem of the conquest of inflation that we now face could have been tackled in more favourable circumstances each year going back towards 1945. Whatever risk there may be now—it is very small—of unemployment following upon the necessary measures, the risk was non-existent in 1946 when there was a famine for goods and strict rationing of the whole community. If the Labour Party had been willing to face inflation throughout those years, it could have been cured without difficulty and without any risk of unemployment. But the opportunity was lost, and the result was that there was built up a machine, the momentum of which is our problem now.
All through that period the Labour Government had full employment, rationing and a 2 per cent. Bank Rate. At a time of full employment and rationing, the right hon. Member for Bishop Auckland (Mr. Dalton) was continuing to oil the economy with cheap money. It was that slippery policy which started Britain on the downward slide which we are now trying to arrest. When I look back to that era and see what went on—the black market, the controls, the attempt to decrease demand by physical controls, but no attempt whatever to check inflation—I can well understand why the right hon. Member for Huyton (Mr. H. Wilson) wrote two months ago that the Socialist Governments covering the period 1946 to 1951 made too little use of the credit weapon and relied too much upon physical controls. How right he is, and how clearly it shows that the present Government are embarked upon the right procedure.
By the use of the monetary weapon after 1951, the Conservative Party very quickly and very safely released the country from rationing. This followed a period of six years in which the Bank Rate had remained unchanged at 2 per cent. The Labour Party flatly refused, as a matter of principle, to use the monetary weapon. That is why the right hon. Member for Huyton admitted two months ago that they made a mistake and had failed to use the sharpest weapon—he did not call it that, but I do—at their disposal.
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By using that weapon we also checked the rise in the cost of living. Last night the right hon. Member for Smethwick talked about a full employment economy as the only one with a head of steam in it, and said that a full employment economy was inherently one with an inflationary demand. That is a counsel of despair, and a significant one. We checked the rise in the cost of living in 1952–53 by the use of the credit weapon, but it is interesting that in the autumn of that year the fact that there had been no rise in the cost of living did not prevent wage claims being made just the same. The claim was for a 10 per cent. increase, and there were strikes in support of it. There was a national one-day strike by the engineers, and there were localised strikes, called "wildcat" strikes, by the Electrical Trades Union.
The point is that, although we had checked the cost of living by the credit weapon, the break-through by wage demand occurred just the same the following autumn. So we had another round of inflation. We checked it again in 1955–56, and again last autumn, with very little justification indeed, there having been only a 3 per cent. rise in the cost of living, we had another breakthrough.
We must learn from these things and take account of them in shaping the policy that will get our country out of the inflationary situation. I entirely agree with all that has been said about the folly of a Government attempting to intervene directly to control either profits or wages. The latter attempt was made in our history by means of various statutes such as the Statutes of Labourers, but everybody knows that no outstanding success resulted and none would result if it were tried again. I am far from advocating any course of that type. All I want to say in passing—because my main theme is that I support the Government's choice of reliance on the credit weapon—is that if it is generally unwise for a Government to intervene directly to control wages there may nevertheless be certain occasions when they ought to do so, such as when some general principle of long-term importance is at stake.
One matter that I have in mind is something mentioned by an hon. Member opposite yesterday, which, in a non-partisan atmosphere—I hope we may one

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day achieve that—we ought to consider. I have in mind the disturbingly large number of people whose wages are directly linked by agreement to the cost of living. I hope that when we get a suitable atmosphere both sides of the House may combine to tackle the problem, because it represents a dangerous system, as is becoming ever more widely recognised. Making all proper allowances and discounts, I believe also that there is still something we can do about restrictive practices. We have done a lot about them on one side of industry, and I think we should look at them on the other side also. I hope that that can be done in a reasonable, detached atmosphere and without direct Governmental intervention, but it is something which ought to be mentioned in a debate of this kind.
I would now return to my main theme of support for the Government in taking the action that they have taken. I would not have had any doubts about it myself, but if I had, listening to some of the speeches from the Opposition Front Bench in this debate would have convinced me of it. I found it very disturbing that in none of the speeches from hon. Gentlemen opposite was there any policy put forward for stopping inflation and I am very much afraid that my right hon. Friend the Minister of Labour was right and that the leadership of the party opposite having lost its grasp of the policy content is secretly aware that it is riding an inflationary horse, that it cannot get off it, and that inflation has indeed been built into the 1957 programme. Accordingly, it is starting a little clever footwork to shift its position and to say that perhaps we have to come to terms with a very mild sort of inflation.
In the old days secular inflation, altering the value of the currency very slowly, may have been acceptable and may even have done a job of work in mitigating the tendency towards accumulation which we all know is in the capitalist system, but there is not much tendency towards accumulation left uncured in the capitalist system now with heavy taxation and death duties.
Any attempt to settle for quiet inflation would be absolutely disastrous for this great industrial and trading country. If that is the conclusion the Opposition come to, and I am beginning to suspect
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that it is, both from the absence of proposals for cure and the general tenor of some of their speeches, I think it is a very alarming prospect for us indeed.
After all, what has been suggested? Reliance on international conferences primarily. My hon. Friend the Member for Aberdeenshire, East (Sir R. Boothby) was preconising the advantages of international conferences. They do not do much harm and they are sometimes very valuable, but it would be a dangerous form of escapism for us to think that there is any cure in a series of conferences which would relieve us of the necessity of putting our house in order. For goodness' sake do not let us avoid this issue in a sort of morass of discussion and conferences. There is a plain task facing us, the task of breaking the relationship between wages and the cost of living and salaries and the cost of living—because salaries have not gone up much less than wages—let us face that—and establishing a new link between salaries and wages and production.
We can do that. It is simple in its outline and fully capable of being done by a Government that intends to go forward with it. There is no doubt about that. I believe that the measures chosen are apt but if they are inadequate there are others. If they are pressed forward we shall have struck a blow for the prosperity of our country which will put us back on the right road. My hon. Friend the Member for Aberdeenshire, East said —and here I agree with him—how terribly important it is that we should compete with Communism in the economic sphere. That is something that we must not take for granted. I am sure that we can only do that if we clear our minds of this error which is being put forward from the other side of the House, and I have heard it in other countries of Europe—it is wrong wherever it is put forward—that by some clever chess playing, some trickery with the currency we can get for ourselves more than we produce.
That is a cardinal error which I think has bedevilled many countries in Europe for long enough. If the Government will persist in their present course they will confound their enemies and annex many neutrals who have been wavering and doubtful about the future of this country,

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neutrals inside it and outside it, and earn the respect and steady support of their many friends.
7.4 p.m.
Mr. Ian Mikardo (Reading): Among the many pleasant courtesies which are enshrined in the practice of this House, one of the most pleasant is that a hon. Member, when beginning his speech, should make some reference to the contribution of the hon. Member who has preceded him. While the hon. Member for Buckinghamshire, South (Mr. Ronald Bell) was speaking, I, considering the possibility that I might catch your eye, Sir, and immediately follow him, listened carefully to what he was saying in order to find some contribution upon which I could comment, but with the best will in the world I failed to find a contribution in the whole of his speech. Therefore, with the deepest regret and utmost reluctance, I have to leave to another occasion the extension to the hon. Gentleman of those courtesies which I should dearly have liked to offer him.
Mr. Douglas Houghton: Did not my hon. Friend hear the hon. Member for Buckinghamshire, South (Mr. Ronald Bell) first indulge in the old debating trick of the saucepan calling the kettle black, secondly celebrating the victory over inflation, and, finally, pronouncing a benediction upon the Chancellor?
Mr. Ronald Bell: The hon. Member for Reading (Mr. Mikardo) will have much more time to comment on the speeches from his own Front Bench. He should find no difficulty in doing that, because John Milton succeeded in writing 2,000 iambic pentameters about empty space.
Mr. Mikardo: I will not endeavour to compete with that rather lamp smelling wit. I shall not try to cover all the ground which the hon. Gentleman has invited me to cover, because I want to detain the House for only a short time and to deal with one subject which, I say with respect, I think has not had sufficient detailed treatment during the course of the debate. That is the British export position and our future problems in exports.
In what I have to say I shall be talking only about things of which I know
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from direct experience and which I have seen recently at first hand. If I may strike a personal note, since the beginning of this year I have done a good deal of travelling, almost all of it with the purpose of carrying out market research in a number of countries. In the course of this time, rather less than 12 months, I have visited and studied the economic conditions in 3 countries spread over three continents, some of them inside the Commonwealth and some outside, some of them on this side of the Iron Curtain and some on the other. During the course of these visits, I have seen some British exports which are doing very well, some which are doing reasonably well, and some which are doing rather badly. I had the opportunity of studying why those which are doing badly are, in fact, doing badly.
I have seen how far buyers and potential buyers have been influenced by prices and other factors, such as delivery and design, and so on. I make no apology for inflicting the results of this experience upon the House, because I know that I shall carry the whole House with me when I say that the most critical factor in our economy is our long-term export prospects. Taking the figures month by month, quarter by quarter, year by year, sometimes we are up a bit and sometimes down a bit; but there is no sense in thinking just of this month, this quarter or this year.
We have a chronic problem, a secular problem of beating back the intense forces of competition in export markets for as far ahead as we can see, but we shall not succeed in doing so unless we can clearly diagnose what is at the back of it. In my judgment, speaking from my own experience, I believe that we commit a gross over-simplification when we say that the great danger is that we may price ourselves out of the export market, and then go on to imply, as some people, including the hon. Gentleman the Member for Buckinghamshire, South, do, that the danger of pricing ourselves out of the export market arises only from wage increases. That thesis, which is very commonly argued, has some truth in it, of course, but it seems to me to be a dangerous over-simplification to rest all our treatment of our export problem on the acceptance of it as the only factor.

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In hard practice, it is only in a comparatively small number of markets and, there, only in respect of a comparatively narrow range of goods, that price today is the dominant factor. I have just come back from two Commonwealth countries in which there are sewing machines on offer at less than half the price of Singer machines, but Singers sell nearly all the sewing machines sold in these two countries.
As regards commodities where price has put us out of the market, the process of being priced out of the market took place a very long time ago. The obvious example is cheap and simple textiles. It is precisely because we cannot compete with some other countries in that sort of thing, and have not been able to for very many years, and will not ever be able to again, that we are turning our minds away from that sort of commodity to capital goods and other products of the engineering industry as the main basis of our export trade.
During the last few years, I have examined rather more than 20 cases in which a large order for capital goods looked, on the face of it, as though it were coming to Great Britain, but finally went elsewhere. To my certain knowledge, there was only one single case among all those in which price was the reason for our losing the order. When a customer is building a factory, what matters most of all to him is that he should get the machinery for it installed in the appropriate order and at the right time. Any piece of equipment purchased for the factory which comes late, out of its proper turn and proper time, may result in his losing much production and profit. It follows that the customer is often willing to pay anything up to 10 per cent. more in order to get his machinery or equipment six months or a year earlier.
There is another factor besides delivery which enters into the matter, namely, design. This applies to both consumer goods and capital goods. I am sorry to say that some sectors of British industry show themselves to be less modern and less adventurous in design than some of our overseas competitors. On this subject, we had a most authoritative expression of opinion the other day from Mr. Paul Reilly, Deputy Director of the Council of Industrial Design, who said:
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"In many trades, British manufacturers have bemused themselves into thinking that old designs are the only things worth making. Worse still, they have done all in their power to convince overseas customers that copying old things is what Britain does best."
I am shocked to say that I heard that last expression dozens and dozens of times in a number of overseas markets in the last few years, "What you chaps can do best is copying the old over and over again." It is a pity that we leave ourselves open, with some justification, to that sort of charge.
When all has been said about delivery and design and some other factors with which I will not trouble the House, there is, of course, a price factor to be taken into account. I do not deny that. I merely say that we must keep it in proportion. What I cannot for the life of me understand is why some people assume that the only factor which goes to make up the price of an article is the wages which go into it, nor why they assume that the only factor which forces up the price of an article is a rise in wages. In fact, it is true to say—and I can prove it, as I shall hope to show—that the major part of higher prices for British goods in recent years has not been due to wages, but to factors other than wages.
Some hon. Members will have read a very careful and factual analysis in last Sunday's Observer of the export prospects for the British vehicle industry, particularly in relation to the coming of the European Free Trade Area. It was obvious from that analysis that the greatest immediate threat to our car industry and its export potential is not any possible rise in wages, but the imminent restriction in the home market which will be caused by the Government's policy of dear money, hire-purchase restrictions, and the credit squeeze in general. This is what the Observer analysis said:
"The most decisive factor in determining costs is volume of output"—
not wages—
"and it is a contraction of the domestic market rather than wage increases that is exerting pressure on British vehicle prices at present ".
That situation provides an almost perfect example of prices being forced up not by any trade union leader, but directly by the Chancellor of the Exchequer.
This is not the worst of it. A 2 per cent. increase in interest rates makes an

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even more direct contribution towards raising prices. This is particularly true in the engineering industries and trades where expensive machinery is used, with the result that there is a high figure of capital employed per worker. I listened with great interest, as we all did, to the hon. Member for Aberdeenshire, East (Sir R. Boothby). He said that there were three reasons for not liking dear money, and I agreed with all three. But he forgot the fourth, which is, perhaps, the most important of all, that dear money prices our goods out of our export markets. The cost of money is a factor which enters into the cost of every single thing manufactured in every single British factory.
In many parts of the engineering industries, upon which we rest our main export hopes, the average capital employed per worker may be £10,000 or more, that is to say, a certain number of articles are turned out each week by a partnership consisting of a worker and £10,000 worth of building and equipment. The interest upon that £10,000 of capital is just as much a part of the cost of the goods turned out each week as are the wages of the worker himself. If there is no rise in productivity, then the unit cost of each item turned out by the worker and his equipment will go up if his wages go up, and it will go up also if the interest on the money borrowed to pay for the equipment goes up.
If the £10,000 worth of machinery used by a worker is paid for by borrowing at 5 per cent., there is then £500 a year, say £10 a week, going into and helping to make up the cost of the goods turned out during the week, just as much as the worker's wages of £12, £14 or £15 are added in each week. If that 5 per cent. goes up to 7 per cent., then, leaving out questions of depreciation and amortisation, which do not directly affect the argument except to underline and reinforce it, the £500 a year interest charge becomes £700. The £10 a week goes up to £14 a week. In other words, the figure for the wages of the worker and his equipment has gone up by £4 a week.
Sir John Barlow rose—
Mr. Mikardo: I assure the hon. Member for Middleton and Prestwich (Sir J. Barlow) that I am not just speaking
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from theory. I will give way to him soon, but I should like, first, to quote an actual example.
Two or three months ago I took out the costings of a component in a piece of generating equipment. There were interest charges on the equipment used of about £10 a week. That was the actual figure. The worker was getting an average of £14 a week. Thus, when we made up the cost, adding in raw materials, administration overheads, selling overheads, light, heat and power, the two items taken together, wages and interest on capital equipment, were £24 per week. The workers were turning out averagely 16 pieces per week, so that there was a cost of 30s. for each unit of these components representing wages and interest on capital equipment.
Suddenly, up go the interest rates, and, as a result, the £24 goes up to £28 a week, and the unit cost for those two items goes up from 30s. to 35s., an increase of nearly 17 per cent. I want to ask the hon. Member for Middleton and Prestwich, who is about to intervene, and the Minister who is to wind up the debate, a question based upon a very simple piece of arithmetic. It is a very simple question. If we add 10s. per week to the worker's wages we add 7½d. to the unit cost of the 16 pieces that he is turning out in a week, and then, they say, we are pricing ourselves out of the export market. If we add £4 a week to the cost of the equipment, and thus add 5s. to the unit cost of each of the items the worker is turning out, how do they figure that we are not then pricing ourselves out of the export market?
Sir J. Barlow: I am grateful to the hon. Member for giving way. I think that he is relying entirely on the theory of finance. He made the suggestion that an increase of interest on £10,000 worth of plant made the product so much more expensive. That plant has probably been installed over a period of years. The interest may have been from 3 per cent. to 6 per cent., but it has gradually been amortised and replaced. It is wrong from a practical point of view to suggest that an increase of 2 per cent. increases the cost of the man's work, on the assumption that the machine is paying 2 per cent. over the whole time. It is just not so.
Mr. Mikardo: I said that I would not introduce incidental factors like amortisation and depreciation, because this is not the place to do so. I shall be glad to give the hon. Member some of the facts. I have been doing this sort of costing professionally for only about twenty-five years. The hon. Gentleman ought not to cast a slur on the excellent companies who use these costing methods. I shall be glad to show him that in the upshot and over the average, where the interest rates go up by 2 per cent., the cost of the equipment goes up. [Interruption]. I shall also be willing to educate the hon. Member for Louth (Mr. Osborne) as well.
One of the complications which make this matter so serious is that the more complex and technical the industry is the higher is the figure of the capital employed per worker. By and large, it is the luxury trades in which a very high proportion of the cost goes in wages and only a low proportion is interest charged on capital, because there is very little machinery There is very little capital employed per worker in such industries as polishing gem stones, high-class dressmaking or bookmaking. On the other hand there is a high capital cost in precision engineering, steel making, and other industries in which our export hopes reside.
Higher interest rates not merely strike at our exports in general, but strike at the most vulnerable sections of our export trade. It is bad enough when high interest rates add to the cost of equipment, but it is even worse when they result in re-equipment not taking place. I agree warmly with what was said by the hon. Member for Aberdeenshire, East. What is happening now is that high interest rates plus the credit squeeze are resulting in necessary re-equipment not taking place while, at the same time, some of our keenest competitors are sharpening their weapons with every day that passes. One hears that the Consett Company, which was being prepared to double its capacity to meet the demand for steelplate, will have largely or wholly to abandon its plan because of the Chancellor's recent action. All over the country firms are having to do with second best because they cannot afford, or cannot raise the money to convert to, the first best.
Out of hard and sad practical experience, I have formed the opinion that what
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the Government have done in recent weeks has contributed more than anything else to pricing us out of the export market, and has struck a most damaging blow at the long-term prospects of the British export trade. For that alone they deserve the condemnation not merely of this House, but of the country as a whole.
7.26 p.m.
Mr. Godfrey Nicholson: Whatever difficulties the hon. Member for Reading (Mr. Mikardo) may have felt about commenting on the speech of my hon. Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) I have no difficulty whatever in commenting upon the hon. Member's own speech. I found his speech most interesting. He will not expect me to say I agreed with all he said, but I recognised it as a speech of a man who knew what he was talking about and was not trying to score cheap party points.
But I simply cannot follow him in his opinion that a temporary increase in the Bank Rate prices us out of the market. I would agree with him if, over a long period of years, the Bank Rate remained at 7 per cent., but that is not probable. The hon. Gentleman was arguing on the basis that every bit of machinery in this country is owned by the banks, and that interest on the overdraft has to be paid to the bank the whole time. That is just not so. If it went on for a period of years the hon. Gentleman's argument might well be true that costs would rise when the Bank Rate rose. I bow to the hon. Gentleman's great knowledge as an industrial consultant, but I assure him that in this case he is barking up the wrong tree.
Mr. Mikardo: I am grateful to the hon. Member for Farnham (Mr. Nicholson) for his very kind observations. I was not thinking of a permanent 7 per cent. Bank Rate. Is he aware that the Bank Rate has been raised ten times since 1951, and that each time an entrepreneur bought equipment on the expectation of having to pay at one interest figure he found himself paying at a higher figure?
Mr. Nicholson: I do not think it will be found that the raising of new capital on the market has cost an exhorbitant price. If the hon. Member looks at the history of capital issues over the past six or seven years he will not find that, by

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and large, it was done at an exorbitant rate. The hon. Gentleman was rather overplaying his hand. There is no prospect of the Bank Rate remaining for long at 7 per cent.; indeed I shall be very much surprised if it remains there for more than six months, but this is purely a personal speculation.
These debates on inflation provide a field day for cranks in a most emotional field. We are all rather cranks when dealing with inflation, because certain aspects worry one individual more than they worry others. I shall speak briefly about two aspects of inflation that particularly worry me.
I do not believe that more than a very small fraction of the electors knows what inflation is all about, or realises the cause of it or the various cures that are proposed. I am not at all sure that every hon. Member is fully aware of the prime cause of inflation. I am subject to correction and contradiction, but I would like to state what I believe to be the fundamental cause of inflation.
Of course we can have inflation by working the printing press and printing pound notes, but no one is suggesting that that is being done in this country, or is likely to be done. Inflation in this country has sprung from Budget deficits which have been financed by increasing the floating debt. I lay that down as axiomatic. If the Government of the day issue £100 million of Treasury bills which are taken up by the banks, that would immediately inflate the credit structure of the country to the tune of £300 million. We have now turned that tap off and are in a wages-cost inflation, which represents the surplus bath water lying on the floor after the tap has been turned off. It is the existence of this measure of inflation which is the real menace to the whole economy of the country, which is not realised by the electors, but which I consider to be Public Enemy No. 1. I do not think the electorate as a whole recognise the danger.
I confess that I am a deflationist. I believe the only way to mop up this bath water on the floor, this cost inflation, is a temporary reduction of industrial activity. I find some measure of implied support from the Opposition Front Bench. I heard the right hon. Member
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for Huyton (Mr. H. Wilson) yesterday—probably I am not quoting his exact words—saying that one of his remedies would be to reduce activity in the less essential industries. I think that behind all our minds lies the fact that one of the most dangerous secondary consequences of inflation is over-full employment. That, of course, gives the Opposition full opportunity, of which they are quite entitled to avail themselves, to accuse us on this side of the House of wanting unemployment. I want to put an end to over-full employment. I cannot see anything but the greatest danger to the public if employers are bidding against each other for available labour and workers are, quite legitimately, selling their labour at the highest price they can get. My ideal is one job for one man, not two men for one job, or two jobs for one man.
It may be a legitimate party point for hon. Members opposite, but I do assure them that I will to the death oppose a wilful, intentional showdown with the trade union movement. I believe there are those in this country who accuse irresponsible trade union leadership for our inflationary difficulties and the wages-cost inflation. If I were a trade union leader and saw little indication from the Government of the day that inflation was to be checked and if there seemed every likelihood that prices would go on rising, I would not only be foolish, but would not be doing my duty by my men if I did not put in wage claims as high as I thought I could get for them. I am not saying this for the sake of effect, but because I believe that trade union leadership in this country reaches the highest level in the world today. I believe that, properly approached with the confidence that inflation is to be tackled and tackled successfully, a fully adequate response will be gained from the trade union movement.
That leads me to my second point, my second cause for anxiety. Here I am not so much reflecting my own approach as reflecting what I believe to be the views of the man in the street. I believe the public in general has been most receptive and most welcoming to the latest steps taken by the Government, but I believe that public is still in doubt about the fundamental question. The man in the street is asking himself—at least those in the street who take the same sombre view

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of inflation as most of us take—do the Government mean business? Do they mean to see it through? Do they accept all the implications? Are they prepared to fight against inflation with no weapons barred? Are they prepared, if necessary, to consider remedies which may be Socialist, Liberal or anything else, if they are essential to the conquest of inflation?
They are asking, is there to be more delay and more and more speeches full of clichés, more and more speeches saying "It depends on you, the people of the country, whether we conquer inflation."? Is there to be more mystification and dressing up of economic facts in a miasma of words? I believe the greatest service the Government can render the country today is to make it clear—to use another cliché—beyond a peradventure, that they have nailed their colours to the mast. There are three main reasons why they should do so. I am convinced that this is one of the most crucial moments in our history. If we do not overcome inflation in the next year we may be really beaten, not for a year, but for a generation to come. Secondly I believe the battle will be half won if the workers of this country and the nations of the world are convinced, and sincerely convinced, that the Government will stick at nothing to achieve success.
Take, for instance, the trade union leaders about whom I was speaking just now. If a trade union leader is sincerely convinced that we have achieved stability, or are about to achieve economic stability in this country, is he going to risk the future peace of the industry, risk the future employment of his men, by making unreasonable wage demands? There may indeed be some who would do so, but, by and large, I proclaim they would not do so.
There is a third reason why I think it essential that the Government should nail their colours to the mast. This is a purely party point of view. I think it is almost a certainty that the necessary measures will provoke electoral unpopularity. There has been too much tendency, on both sides of the House, ever since the war to direct their gaze on the ballot boxes at the next General Election rather than on the necessities of the situation. I venture to remind cleverer and wiser people than myself that the hallmark of statesmanship is to do what the situation requires and not to consider whether it
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will be popular among the people. Nation after nation, empire after empire, has tumbled because its politicians have not seen that that was necessary to turn them into statesmen. Throughout history that has been the case.
I believe we are all guilty in this House. We have not had the courage on all occasions to ignore popularity. I know the tendency is for Governments to convince themselves that the greatest possible disaster that could occur for the country would be for the Opposition to form a Government. The Opposition convinces itself that its highest duty is to replace the Government. That is not the path of statesmanship. My appeal tonight is to the Government to risk unpopularity, even to risk defeat at the next General Election, to go down fighting for what they believe to be right, rather than to go down because they did nothing in particular. Our battle against inflation is not just a party battle, it is a national battle and its success or failure depends mainly on leadership.
I leave this final thought with the House. It is possible that we are approaching a world depression. I do not feel qualified to say whether I think it is likely or not; all I say is that we pray that is not the case. But I ask this question: if there is to come a world depression shall we not face it with greater prospects of successful emergence if inflation has once been overcome? As I started by saying, I regard inflation as Public Enemy No. 1; let us knock it on the head.
7.40 p.m.
Mr. Douglas Houghton: It requires a great deal of political courage to tackle inflation in a parliamentary democracy because it is no longer possible to check inflation, still less to cure it, by attacking the few. It is essential to attack the problem over the widest front, and the great mass of the people have voices and votes and, obviously, when measures are taken which they feel will injure them, they have a point of view both about what is being done and why.
It is no good a Government hoping for success merely by nailing their colours to the mast; they have to get the people on their side, and the people will rally to the Government's side when they feel that they are working with them and not against them. It is important to avoid

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creating the impression that there is a gulf between Government and people in dealing with our present economic difficulties. My right hon. Friend the Member for Battersea, North (Mr. Jay) referred at the conclusion of his speech today to the spirit of the people. I believe in the spirit of the people; it has worked miracles in our history and may well do so again, but it will be called to the side of the Government only if the people feel that the policy is right, that it is necessary, and that a sense of justice as well as wisdom is being brought to bear upon our problems.
At present, the Government must feel that they do not enjoy the wide measure of electoral support—if by-elections are anything to go by—which they really ought to have if they are to follow this courageous policy; but that is how it is. They are Her Majesty's Government, and if they do not feel that circumstances require them to obtain a fresh mandate then Government they remain, and we must do our best to work with them for the good of the country. That is what I feel about the matter.
One of the strange paradoxes in the present situation is that at a time when national insecurity is so great there has never been a stronger feeling of individual security. It is that paradox which has to be explained if people are to understand what inflation is about and what its dangers are. As the hon. Member for Farnham (Mr. Nicholson) has just said, a great many people cannot see anything very much wrong with this inflationary situation. The hon. Member for Buckinghamshire, South (Mr. Ronald Bell) said that a great many people had a vested interest in it. That is equally true, and the impression created upon the public mind by some of the things that they see around them must not be ignored.
For example, at present more costly meals are being eaten by more people at other people's expense than ever before. Entertainment has for some reason or another become an essential and lavish accompaniment to business activity. Is it really true that Britain's customers can see the quality of our goods only through a wine glass? Have we come to that?
These are the things that people notice. They say, "If these business men can enjoy a high standard of life on the firm, where do we come in?" A worker said
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to me the other day, "There is no incentive for us chaps; there is nothing for us to 'fiddle'." So it becomes a moral as well as an economic issue, and hon. Members opposite have to attend to these manifestations of an inflationary situation which have a tremendous impact upon the public mind.
Again, at a time when the Chancellor sternly says that further wage increases unaccompanied by a corresponding increase in production will be a disaster, and that those who claim them, those who grant them and those who adjudicate upon them must have this fact in the forefront of their mind, every night of the week, in commercial television, sums of money totalling £30 million a year are being poured into subtle and insidious advertisements to increase more and more the consumer power out of wages which the Chancellor says the consumers must not have.
It is not a scrap of good making all these high-falutin' speeches about the national interest and the courage of the Government without understanding how ordinary folk think about the things they see and know. If the Chancellor wants to strike a few blows against inflation in order to create the kind of atmosphere among the people which it is necessary to have, he should hand over the whole of the commercial television outfit to the B.B.C. in the hope that a fall in consumption will be accompanied by a rise in public taste. At the same time, he should announce in his next Budget that no further entertainment expenses should be chargeable either against personal incomes or taxable profits.
Then the country would see the difference. It would see how necessary it is to have this lavish standard of entertainment to get orders and do business with our customers.
Mr. Osborne: The hon. Member's argument is very sound, and I agree with nearly everything he is saying, but while he is closing down advertisements on I.T.V. will he cut down newspaper advertisements and placards, which make the same sort of appeal?
Mr. Houghton: I should do that, too. I think that my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) was perfectly sound in his argument when, years ago, he proposed to

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limit the amount of expenditure upon advertising as a charge against taxable profits. He was driven off that idea by the Board of Inland Revenue, who are always against discriminatory tax reliefs or other refinements of taxation which distinguish between one form of expenditure and another, but the formula which he proposed was a perfectly practicable one, although it might have caused difficulties for certain firms.
But housewives see all this detergent stuff coming through their letterboxes every day of the week, and my friends tell me that they never pay the normal retail price for a packet of detergent because they try all the different brands in turn. What is this nonsense which means that the economic price of detergents for household use can be the subject of a substantial discount and very expensive advertisement and free voucher programmes? That is not business. That is not a basis upon which our affairs should be conducted.
I do not want to dwell upon this point any longer, but I repeat that these are the things that people see, and in this free society that we now have there are signs that "spivs," racketeers and those engaged in quite useless enterprises can make a lot of money; occasionally their affairs receive wide publicity in the newspapers. There have been one or two cases recently. The hard-working chap and his wife read the paper and say, "If that sort of thing is going on I wonder the Chancellor has the nerve to get up and say that our modest standard of life must stay put or even be reduced because the country or the Government cannot afford it."
Mr. Nicholson: Is not everything that the hon. Member has said an argument that strengthens all the arguments for the conquest of inflation? Everything that he has been saying about ridiculous expenditure and the false standards set by the Press is a by-product of inflation.
Mr. Houghton: I am not against the measures to stem inflation—goodness me, no. We all want to stem inflation. We do not always know when we are suffering from it. It is like a rash. One only knows one has got it when somebody else tells one, and that is part of the trouble here. On each of these occasions when
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we have had an inflation crisis, it has been the foreigner who has told us that we had it. There has never been a row about inflation in this House or in this country of late by reason solely of its manifestation on the domestic front.
It is the lack of confidence overseas that brings us sharply up against the tendencies of our economy, and what other people think of the likely results. We then draw in our horns, take notice and take measures to restore overseas confidence when we see the serious results of a lack of confidence in the drain on our gold and dollar reserves. The debate on this occasion gives us an opportunity of turning our eyes away from the foreigner for a moment and of seeing what we can do to put our economy on a firmer basis for the future without having to wait for these periodic setbacks to bring the matter to our notice.
I want to come now to the question of wages and full employment. It is full production that we want. Full employment is an objective of policy, but it is not an end in itself. Full production is what we want, and full employment will accompany it and be essential to it. There is a good deal of waste of manpower going on in the country today. Because of the shortage of workers, many firms are holding workers against wastage or for future requirements. They are hogging labour in some cases, and not fully utilising it in others.
I wish that the trade unions could come to terms with private industry to remove the ideological inhibitions against making the most fruitful use of the private sector in our economy. If, as I have always assumed, as far as we can see, there will always be a substantial private sector in our economy, notwithstanding any possible extension of public ownership in one form or another, and since the private sector will mostly be the manufacturing and trading sector which is so vital, it seems to me that it is essential to get the maximum co-operation in that field of business and manufacturing activity.
If we could get something of the approach of the American unions to productivity, and insist on it and require other employers to provide the capital equipment to enable higher and higher wages to be paid, I think that is the essential need in Britain today. One

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great contrast between conditions here and in the United States that I noticed last year was that there were no ideological inhibitions in the way of the fullest co-operation between American trade unions and private employers. That is not to say that I think that private enterprise is necessarily the best form of business activity in all cases, or even in most cases, but we cannot wait for social and economic change to take place over the years to come before we have geared our affairs to the highest level of productivity and the fairest basis of distribution, which is an equally important part of the national morale.
What has the Chancellor said about wages? What sort of problem has he set the trade union leaders? I was very grateful, as one closely associated with the trade union movement, to hear the comments made not only by the hon. Member for Farnham, but also by the hon. Member for Scarborough and Whitby (Sir A. Spearman). I know from my quite modest but long experience that wage demands are forced upon us from behind. Modern trade union leadership is always trying to equate the demands of its members with the possibility of real advance, and there are many keen and controversial debates in the unions on these matters. It is quite untrue to say that the trade union leaders are themselves making needless and still less irresponsible demands upon the economy. Trade unions will react to economic difficulties; they do not create them. They may by their actions aggravate them, but, at the beginning they are reacting to economic change, and we may as well face it.
They are merely expressing through organised labour the simple demands of the housewife and her husband and children, who, after all, are making very modest demands indeed of life. They have no desire for great wealth and great possessions, or for political and economic power. They just want to lead their lives in reasonable comfort in a decent house and see their children taking advantage of the wider educational opportunities and making a contribution to our well-being. There could be nothing worthier than that, and we ought to regard it as the prime object of political, economic and social policy to foster that spirit, to encourage it, to build on it and to provide rewards for the sacrifices and labours that they make.
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Perhaps that is something that can be more successfully done by those who come from the people's homes than those who really have never understood how the general mass of the people live, work and die. That is only a personal point of view, and I do not want to pursue any purely party political line on it at this moment.
Now, the Chancellor has read his stern message and the Minister of Labour has said this afternoon that the Government are not going to give instructions to arbitrators or tribunals, and that they are not taking over control of profits or wages. They are merely saying what are the conditions under which all wage demands, arbitrations and conciliations must take place. The Chancellor finished up by saying, and I quote:
"It is our duty as a Government to see that, and it is the duty of the Government as employers to act upon it."—[OFFICIAL REPORT, 29th October, 1957; Vol. 575, c. 57]
The first question that will come to the Chancellor of the Exchequer comes from the very large public sector. What becomes of the principle of fair comparisons with industry outside? The Priestley Commission laid down two years ago—and the Chancellor of the Exchequer and the Government fully accepted it—that those employed in the public sector are entitled to rates of pay which are being paid outside for comparable work, because there is no separate measure of valuation of the services rendered by civil servants, local government officers, and so on.
Does it mean that the Chancellor will throw overboard the fair comparisons in the interests of the example of the Government which they wish to show to other employers? It is very important to clear that up; otherwise, public servants will feel that they are being made the first victims of a wage squeeze. Notwithstanding the principle of fair comparisons laid down for us as the only basis on which we can get a square deal in fixing our pay, we are to be held back by the Government because they wish to make it clear that they, as employers, are not giving any more money.
Looking at the outside field of industry, what about those who are to run the basic services of industry—the nationalised industries? A good deal of political prejudice has been imported into the attitude of hon. Members opposite to

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capital investment and other matters connected with the nationalised industries. It stands to reason, it seems to me, that coal, power and transport, to mention the three main nationalised industries, are essential as common services to industry. Without them industry wilts and dies. We must have improved efficiency and higher productivity in the nationalised industries. So why pick on them for restrictions in capital development?
Why is it that many newspapers are now saying that the railwaymen's wage claim will be the test case? Why? A test of what? And of whom? The railway worker, the engine driver, is entitled to fair comparisons just the same as is the public servant. Indeed, we shall not get the fullest value out of the nationalised industries until all the workers in them believe themselves to be public servants. They are entitled to be treated as public servants, and should not be made cat's-paws in the new policy of wage restraints.
There are three groups of workers in Britain. Those who are the spearhead of the manufacturing and the trading interests, those who earn the nation's living; those who work the common services, coal, transport, and the rest; and thirdly those in the public services, the Government and social services. However, the general trend of wages is fixed by those who are in the manufacturing industries. It is they who, in many cases, set the pattern and the pace of wage changes.
What is to be the formula by reference to which wage increases may be given to match increased productivity in future? Who is to be the mathematician to attend the wage negotiations and the tribunals to say when the balance has been struck? It seems to be that the Chancellor, speaking as he did and then leaving the trade unions and employers to get out of the mess and the muddle as best they can, is not rendering a service to industrial peace.
When employers, in response to a wage demand, say, "We can afford it; we are doing very well; our industry is flourishing in the export market; we are making big profits; there is no need for us to worry about the price level because we can get the price for our goods; but we are sorry you cannot have the wage increase because the Chancellor says that if we give you one there will probably
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have to be increases elsewhere, and there will be disaster," what are the trade unions expected to say or to do? These are problems which, more especially in present circumstances, test the most moderate and wise trade union leadership.
Wage restraint, the last time we had it in this rather stern form, was then in entirely different economic and international circumstances. We were then in another world, as it were, economically and internationally, when we were seeking to heal the deep and extensive wounds made by the war. Now, however, there are so many obvious signs of prosperity, so many obvious signs of lavish expenditure, so many obvious signs of "fiddling" all over the place, so many people boasting they are "doing" the Inland Revenue. All these are factors in the present situation.
We should not talk of a war either on wages or on the trade unions. War means the breakdown of reason. Surely reason will not break down even in this crisis? But the Chancellor must make his contribution to it. I hope that the Minister of Labour will meet the trade union leaders and expound to them this new policy and tell them what it means and assist them—and the employers, too—to get through the difficulty of wage negotiations. I hope that good reason will prevail all round and that encouragement will be given to higher production, greater efficiency, greater enthusiasm. All these are needed.
Can the Government pull all these out of the locker? If they cannot, we fail. I think they have one of the severest testing times before them, because an Election is not far away. They will have to submit their stewardship to the electorate in the not far distant future, and the next eighteen months will tell whether the country has confidence in the Conservative Government or whether it decides that an alternative is long overdue.
8.5 p.m.
Sir John Barlow: I propose to be very short tonight, as many hon. Members on both sides wish to make contributions to this most important debate. I am very glad to follow the hon. Member for Sowerby (Mr. Houghton). I often agree with him

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substantially, and I agree with him tonight a great deal more than I sometimes do because of his commonsense economics. We can go a very long way together in trying to 'solve this all-important problem. I noticed with some amusement that, apparently, the question of expenses is uppermost in his mind. He talked at the beginning and again at the end of his speech about "fiddles". I agree with him that "fiddles" with expenses for taxation purposes should be abolished.
There is one thing I should like to see and that is that motor cars carried on expense account should always bear the name of the company owning them. I think we should have some very enlightening experiences in going about London and perhaps in provincial centres in seeing who are the real owners of some of the fine motor cars. There is no reason why this should not be done. We see names on commercial vehicles. There is no reason why they should not be on passenger vehicles as well.
It is amazing to me that although this most important matter of inflation has been going on steadily since the war it has not yet been solved. We see the figures from 1947 onwards. That year is a convenient one to take after the war. We see the increases in retail prices. The figure in 1947 was 100; it is now 162. It is interesting to see that, generally speaking, the increase in the rate of inflation was twice as great during the Labour Government as during the Conservative Government.
I am very reluctant to admit that we have not substantially solved the problem in the time we have been in power. I feel strongly that our Government have not tackled the matter in a sufficiently forthright way. Two very important and enlightening figures have been given recently. In the summer, the Prime Minister said that in the last six years wages had increased 40 per cent. and prices 20 per cent. Yesterday the Chancellor of the Exchequer said incomes had risen since 1948 by 75 per cent. and output by only 38 per cent. Those figures are very significant.
It seems to me that one of the great drawbacks to civilisation and one of the difficulties in development is the great diversification of labour and the growing importance of sectional interests. In
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the oldest days the cave man when he was hungry went out and shot his beast and cooked his meat as best he could.
Mr. Robens: What with?
Sir J. Barlow: He shot it with his bow and arrow or he threw a stone at it. He skinned it and used the skin for clothing. He was largely dependent on himself. Life was comparatively easy then compared with life today, with its enormous sectional interests on every side. The greater the division of labour in a country, the more possible it is for one section of the community to hold up the rest to ransom. In any gradually developing community such as ours that is important, and can be most dangerous. We have seen repeatedly in the last few years certain sections, rightly or wrongly, able to hold the community to ransom, and doing so.
Mr. Ellis Smith: The hon. Member should give the House some examples.
Sir J. Barlow: I shall not tread on anyone's toes tonight.
Mr. Ellis Smith: The hon. Member can tread on mine.
Sir J. Barlow: I have not the least wish to tread on the hon. Member's toes.
This division of labour and the development of unions and trade union leadership as we see them today give great power and responsibility to the leaders. Some of them are very fine men. They know how to use their responsibility and their power. In other cases I question whether they are fit to hold the responsible positions which have been thrust upon them. That is something which the labour movement will have to tackle and settle as far as possible itself. The people who elect these leaders have a great responsibility because they have power, and the one without the other is most dangerous.
I have looked recently into the question of the creation of new capital and how we use the limited amount of new capital that we have available. Apparently, we have about £3,000 million of new capital each year. Nearly two-thirds of that is provided by the savings of private people and by company savings. Roughly, £650 million of that new capital are spent in capital investments in the nationalized

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industries. The Government spend about £226 million on below-the-line expenditure, atomic energy and the Post Office, and local authorities spend something over £560 million a year. Private industry, including new private housing only spends about £770 million a year, which is very little more than the whole of that spent on the nationalised industries. We are quite aware that new capital is most important to the development of the nationalised industries, as the hon. Member for Sowerby has pointed out. They are vital industries, but at the same time I suggest that the Government may be appropriating relatively far too much capital for the nationalised industries and starving private industry.
This leaves only about £210 million a year for investment in the Colonies, the Commonwealth and overseas generally. In view of the great responsibilities that we have abroad, that figure is woefully small. The question is whether we are on the whole using our new capital to the best advantage. There would be many advantages in having the capital investment in the nationalised industries supervised and appropriated by the Capital Issues Committee as it supervises ordinary civilian issues. There seems to me to be many advantages in having investments placed all together under one hand. The Capital Issues Committee would know where the money could be best spent to the advantage of the country as a whole.
Mr. Arthur Moyle: I have listened with great interest to the hon. Member's speech. Would he agree to apply the same philosophy of accountability to the British Motor Corporation as he now suggests for the nationalised industries?
Sir J. Barlow: At present, all private new issues have to go before the Capital Issues Committee, and I should put the capital required by the nationalised industries before the Committee in the same way. The Committee could then allocate capital according to the Government's general instructions and decide where it could be best disposed.
In conclusion, we have heard a great deal during the last two days about the gold and dollar reserves. We seem to hear about them annually. The same things are said and the same difficulties arise almost every year. It must be known that those difficulties will come. Surely it is
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possible to make some provision to meet the difficulties long before they arise. Our national production is about £18,000 million a year. Our imports and exports are approximately £4,000 million a year each way, and it seems to me that the gold and dollar reserves we have available are and have been for many years all too small. They have been dangerously small. If they were not so low we should not be open to the foreign speculative element which occurs annually and naturally when some people think they can make speculative profits at our expense.
Surely, it cannot be beyond the bounds of possibility for a nation such as ours, 12 years after the war, to gradually build up suitable reserves. Any company that could not do it would soon go to the wall. It seems to me that we are dangerously overtrading and it should be possible to do something to remedy that.
Whilst essentially on this side of the House we are a party which supports freedom of enterprise in every way, this question of inflation is so vital to the country as a whole that, while the Labour Party would undoubtedly impose massive controls on every side, it may be essential—and I personally would be quite willing to submit to it—to have limited control in order to surmount this great problem. Heaven knows that after the experience of the war and post-war years we do not want more controls than are necessary, but at times it is impossible to avoid them. It is much better to face that fact before we become absolutely paralysed by inflation, which could all too easily happen. People on the Continent have had experience of it. They know what they have to fear. We treat it much too complacently because we have never had inflation on such a scale.
Finally, I urge the Chancellor, as I have urged previous Chancellors, to take adequate measures. No matter how harsh or hard they might be, I think that the country is prepared for them. But one thing that the country demands is that the Government should take adequate action to stop this inflation.
Just over two years ago I spoke in an economic debate and urged the Chancellor of the Exchequer to raise the Bank Rate by 1 per cent. and avoid an autumn Election. Unfortunately, he did not take my advice.

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Some hon. Members will remember that there was an economic debate just before the House rose for the Summer Recess. Last week-end I looked up the notes of the speech I had hoped to make but did not make. I was interested to find what I had forgotten, that I had intended strongly to recommend the Chancellor to increase the Bank Rate by 2 per cent. So I must thank my right hon. Friend for the strong action he has taken. But I must also point out that unless he takes supplementary and adequate action, the very fact of increasing the Bank Rate may easily be inflationary in itself. I hope, therefore, that my right hon. Friend will take the other necessary measures so that the results which the hon. Member for Reading (Mr. Mikardo) suggested might ensue will not occur.
In conclusion, I congratulate the Chancellor on taking the action he has done, but, since that in itself is not sufficient, I hope that he will follow it with tough measures which I feel sure the country is ready to accept.
8.21 p.m.
Mr. K. Zilliacus: Unlike the hon. Baronet the Member for Middleton and Prestwich (Sir J. Barlow), I shall not keep my successor on tenterhooks by saying, "in conclusion" three times and speaking for quote a long time in between. However, I welcome very much his statement that if it was necessary to meet inflation, he was prepared to accept what he called limited control. I do so because I am deeply convinced, as I believe all of us are on this side of the House, that without considerable public controls, planning and ownership there is no way out of our thickening economic difficulties.
I want to step back a moment and look at this situation in the perspective of recent years, and in a wider context than the purely national one. The main trouble with the policy of the Government is that they keep on looking backward to conditions that have long passed away. I remember when the present Leader of the House was Chancellor and introduced his emergency Budget on 26th October, 1955, that a phrase he used struck me very much. The right hon. Gentleman said:
"In addressing ourselves to the cause and cure of our growing pains, we must reflect that we have not experienced the problems of a free
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economy for some seventeen years … "—[OFFICIAL REPORT, 26th October, 1955; Vol. 545, c. 204.]
That is nearly twenty years ago now and it means that the right hon. Gentleman was looking back to the pre-war world. That also was the case with the present Prime Minister who, when he was Chancellor, spoke in the debate on the economic situation on 20th February last year. The right hon. Gentleman first made an engaging confession of what I would call the backward-looking incompetence of the Government by saying:
"I must confess that to people of my generation, who have seen the ups and downs of our economic fortunes for more than thirty years, it is rather confusing to have to accommodate oneself to the present situation."'
I believe the Government have made confusion thrice confounded, and have totally failed to accommodate themselves to the present situation. But I will continue with what the Prime Minister said:
"I remember those terrible years when … we were unable to break through the chains of an excessive deflation … the balance of payments in those days was reasonably satisfactory … but a terrible price was paid in terms of human suffering. The cost of living was at its lowest in the years 1930 to 1935, but they were the years when unemployment was at its peak. I asked the other day for a graph to be made of the level of unemployment, on the one hand, and of retail prices on the other, and I was astonished to see how closely their movements corresponded. The cost of living rose as unemployment fell and the cost of living fell as unemployment rose."—[OFFICIAL REPORT, 20th February, 1956; Vol. 549, c. 41.]
Frankly, there is nothing astonishing in that. That is capitalism. It is a see-saw between an inflationary boom and a deflationary slump, and there is no stable ground in between. One can balance and teeter in the middle for a time, but not for very long. I believe that capitalism, free enterprise, nowadays is totally incapable of solving the problem of economic growth plus stable prices.
Indeed, I believe it is even worse off. I believe it is on the horns of a dilemma today, that it cannot avoid mass unemployment except by massive rearmament. That is a subject I will come to in a moment because I believe that is the main cause of inflation. It is one of the oddities of the situation that this has not been mentioned by a single speaker in this debate from the start, although to discuss inflation without mentioning the inflationary effects of our staggering defence budget is like trying to play Hamlet without the Prince of Denmark.

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The trouble, as I see it, with the policy of the Government is that they go back twenty or thirty years. If we take the 7 per cent. Bank Rate, they have gone back about forty years. I do not go quite so far as my right hon. Friend the Member for Huyton (Mr. H. Wilson) who said that the last precedent for a 2 per cent. jump was in 1847. But I heard a B.B.C. discussion on this subject and I remember an American economist saying that this was a drastic, orthodox financial measure such as had been seldom seen since before the First World War.
Of course, the Americans are in much the same boat. I remember when the Marshall Plan was launched that the slogan of the Marshall planners, according to the American Press, was "Back to 1911 by 1953." That, I believe, is the root fault of the policy of this Government and of the American Government. They are trying to go back in time and to restore the pre-war economy in the post-war world. The fact is that this will not work any longer. In order to have an economy that will work, I am afraid that we must go in for a good deal of controls and planning, public ownership and the rest of it.
In pursuit of this policy our economic situation is due not only to the Government's backward-looking policies, but to the fact that we are playing a subordinate part in a vast effort, under American command, to restore the old order where it has gone down and to preserve it where it still exists in the world. In the course of that policy we have heaped on ourselves a colossal defence budget, and we have subjected our trade with about 35 per cent. of the human race to a lot of unnecessary political barriers.
So much for the international context. Now I want to touch on the historical background, because although history never really repeats itself, there are occasional illuminating parallels, and I think there are in this case. After the First World War, the attempt was also made to base reconstruction on restoring the pre-war economic system.
I was in the League of Nations Secretariat at Geneva in those days. That was the centre of that effort. The moving spirit in the whole thing was the Director of the Economic and Financial
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Section of the Secretariat, Sir Arthur Salter, who later became Lord Salter, and for a time was on the Front Bench opposite. He was no theoretician, but had been a high official in the Ministry of Labour before the First World War, and then secretary of Inter-Allied Shipping Control during the war, then for a year general secretary of the Reparations Commission, after which he took on his big job in Geneva. He was right at the centre of the whole reconstruction effort, which seemed successful for about ten years and which then collapsed first in inflation and then in a slump.
He drew some very interesting conclusions. He analysed all this in his two books "World Trade and its Future" and "Recovery." He described how the whole post-war reconstruction effort had been based on trying to restore the pre-war economic system. As he said, in 1919, 1913 appeared as the "Paradise Lost" from which we had been excluded by the flaming sword of destruction and which we must regain. He wrote:
"After the first needs of urgent relief … the vast reconstruction effort of the post-war world was directed to the re-establishment of the pre-war system with the one notable addition of the League of Nations."
Today it is the United Nations—
"The removal of state control and the establishment of conditions favourable to private enterprise … the restoration of national sovereignty and the traditional social and economic system. … These were the objectives of the efforts of the first decade after the war."
In its last Report, in 1944, the Economic Section of the League of Nations Secretariat published an analysis of how this failure came about. It traced the cause directly to the defeat of the effort which was made, just after the war, to prolong the wartime inter-allied controls, internationalising them under the League of Nations and using them to carry out reconstruction. It pointed out that as a direct result of going back to free enterprise and basing the reconstruction effort on that, conditions were created which led first to inflation and then to the great slump.
Salter also drew the conclusion that what had gone wrong was attempting to rebuild on the old foundations, because, he said, the foundations should have been relaid. The mainspring of the free enterprise society had broken. The whole

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thing had collapsed and could never be restored in its pre-war form. What was needed was a stiff injection of collective control, planning and public ownership. He did not say how much in his book "Recovery." But in a broadcast in 1936 he suggested that half the industries in this country were ripe for nationalisation and the other half for public control. Remembering those remarks of his and his whole record, I used to look at him when he sat on the benches opposite and wonder what he was doing in that galère.
But more or less Socialist planning and subsidies were not the way out of the slump chosen by the capitalist world. What happened instead was uncomfortably close to what is happening today. I saw it happening in Geneva, year by year, as the reports came in of the Economic Section and Disarmament Section and from the International Labour Office. The capitalist world found its way out of the slump through the armaments race. It did not go in for it for that reason, but for political motives which at bottom were concerned with preserving the old order. But, nevertheless, that was the economic way out for capitalism. I saw it in practice and I remember the reports of Sir William Beveridge as chairman of the Unemployment Insurance Statutory Committee and his speeches at the time, saying that his calculations were that unemployment would remain at 2 million for eight years or so, but that if rearmament were to stop or to slack off, it would rise to 3 million. It was through rearmament that the capitalist world limped out of the slump. If theoretical analysis of that is wanted, it can be found in Brady's Carnegie Foundation book, "Business as a system of power", or in Paul Einzig's "The Economics of Rearmament". It will be seen from those how close the connection was.
Today we are in a somewhat different situation, but the differences are rather ominous. After the First World War, the capitalist restoration of the pre-war system went on in Europe under its own steam fairly successfully for ten years. This time from the start it has largely depended on American hand-outs. Last time it took place all over the world outside Russia, but this time 35 per cent. of the world is under Communist rule and the forces of change and anti-colonial nation-
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alism are very strong and growing stronger is large parts of the world. A third difference is that last time the capitalist restoration took place successfully for ten years without having to resort to the social drug and economic pick-me-up of rearmament.
Whereas for a long time now we have kept the show going largely owing to the greatest, most costly and deadliest arms race in history, which has made inflation uncontrollable. In spite of that, we see a depression looming ahead, a depression in which so far from our economy being balanced and resilient, as the Minister of Labour said, it is so unbalanced because of the great rearmament burden and has such slight reserves that even a small recession in the United States or the outbreak of peace could hit our overstrained economy very hard indeed.
It really is fantastic that the bearing of the defence budget on inflation has never so far been mentioned in the debate. I will read what the Defence White Paper said about the bearing of defence on inflation:
"Over the last five years, defence has on an average absorbed 10 per cent. of Britain"s gross national product. Some 7 per cent. of the working population are either in the Services or supporting them. One-eighth of the output of the metal-using industries, upon which the export trade so largely depends, is devoted to defence. An undue proportion of qualified scientists and engineers are engaged on military work. In addition, the retention of such large forces abroad gives rise to heavy charges which place a severe strain upon the balance of payments."
I say bluntly that we cannot deal with the danger of inflation and get the country out of its present economic plight unless, first, we are prepared to adopt at least the measures of selective control and planning proposed by my right hon. Friends and, secondly, we face the sheer economic necessity of cutting the defence budget by a half or two-thirds. That is something which the Government can never do because, just as at home they are tied to trying to restore the old order of a free enterprise system, at whatever cost, and whether it runs the country to the ground or not, so in trying to restore the old order abroad they have tied themselves to cold war aims which forever make any agreement on peace or disarmament impossible.
The position is different for the Labour Party. We have policies for disarmament

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and for political settlements on which I am convinced that agreement can be reached. I urge my right hon. Friends not to be bashful about pressing the point and please to face the fact that even we, with our policies, cannot stop inflation, let alone end conscription and carry out our social premises to the people, unless we are prepared either to contract out of the arms race or to end the arms race. Of the two, it is far better to end it by making peace, as we can.
We can do so not only because we have the policy but because we take a rational view of the situation, a view which was expressed by my right hon. Friend the Member for Ebbw Vale (Mr. Bevan) in New York on Monday, when he said:
"The primary threat to the West does not exist in the military field; the threat from Communism lies in the political, economic and social fields. The West has seriously misjudged what is happening in the soviet Union. I am profoundly convinced that our strategy to combat Communism is wrong."
I agree with that, and I think that the conclusion is that we should say frankly that our own solvency, the stability of our currency and of the cost of living, our capacity to pay our way, our social standards and full employment are the first line of defence, not armaments. The defence budget should be cut to whatever point is needed to enable us to achieve these social and economic ends. In that way I believe that we shall play our part in the world much more successfully than otherwise.
I agree with the Defence White Paper that "Britain's influence in the world depends first and foremost on the health of her internal economy and the success of her exports drive." We should face the relation between our inflated defence expenditure and the political aims to which it is attached as a vital factor in inflation. If we want to end inflation and to met the coming danger of the depression, we should lose no time in negotiating peace while we can still do so from solvency.
8.40 p.m.
Mr. R. P. Hornby: One remark of the hon. Member for Gorton (Mr. Zilliacus) with which I would certainly agree was that the basis of all our policy must be a sound economy. That is the root of this debate, and I wish to comment on two or three aspects
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of it. Running through the whole debate have been three themes: the need to maintain stable prices, full employment, and high investment. Almost every speaker has commented on one of these three things, sometimes changing the priorities which they attach to them. We are, I think, all agreed that all are important: it remains to be seen whether we can have all three of them at one and the same time.
Ever since the war the world has been waiting to see whether Britain can achieve a high enough efficiency without paying herself too much for it. Here at home every Government has tried to keep prices steady and, at the same time, to undertake a very heavy expenditure on defence, capital investment and social services. The decision of the Government in September was precipitated by loss of confidence abroad. They came to the conclusion, looking at the balance of payments figures, that the confidence of the world in our ability to earn our living was running out on us very fast. Unless we took rapid action then, it was doubtful whether we should have a second chance.
The Government, in my opinion, were absolutely right to put first in their priorities the need for stable prices. Unless that root problem was tackled, it would no longer be within our power to get to the other two major issues of high investment and the maintenance of full employment.
I wish to deal with one or two criticisms which have been made of the weapons used by the Government to tackle this problem, namely, the weapons of monetary control and the slowing down, or "rephasing"—whatever phrase one likes—of investment. At a time when very rapid action was needed, as was, I think, the case in September, the selective controls which have been advocated by hon. Members opposite were out of the question. I do not see how they could have come into operation quickly enough to do the job which had to be done.
On the other hand, we must beware of complacency and thinking that a Bank Rate—even of 7 per cent.—can do the job alone. I say that, first, because I do not think that a 7 per cent. Bank Rate today is the same weapon as a 7 per cent. Bank Rate would have been twenty years

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ago, simply because it is operating on a smaller sector of the economy than would then have been the case and when there was less investment susceptible to direct Government action. Therefore, I think that something more than a 7 per cent. Bank Rate is needed.
I would welcome any action which the Chancellor thought it necessary to take to supplement the measures already announced; if necessary, in the field of direct control, should my right hon. Friend think that is vital; certainly, if necessary, in the field of, shall I say, legitimate, or illegitimate, tax evasion, if he felt that that would create a better mood for negotiation between himself and the unions and also for the monetary effect it would have.
We must face the fact that Government expenditure must continue to play its full part in the economies. I do not think that those economies can always produce the results claimed for them by some Members in my party, but there is always room for examination of the whole field of Government expenditure. Regrettable, in a way, though it may be, I would certainly not exclude social policy from that. We must face the fact that if we are spending a lot on investment, on defence and on social policy, social policy must be examined for economies just as strictly as the other two sectors.
I should like next to say a word concerning the fear of unemployment, which has been expressed by hon. Members opposite. I hope that sufficient has been said from the Front Bench and from the back benches on this side to convince hon. Members opposite that nobody wants unemployment. I hope at least that they will not question the sincerity of the Government on that point and will do everything they can to convince the country of it, for this is vitally important if we are to weather the storm.
Having said that, it would be less than honest if I did not admit to some fears of transitional unemployment. This seems to me to be inevitable when cutting back plans which are already under way, and we must face it. I was glad that my right hon. Friend the Minister of Labour mentioned that aspect in his speech and said that the Ministry was ready with plans to ensure that every-
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thing possible is done to help the redeployment of labour. That is important.
I do not think that a good deal of mobile labour is necessarily a direct consequence simply of an emergency high Bank Rate. This is something we have got to live with. It is a direct consequence of an age of rapid technological change. The more that we can think about the means of tiding over movements from one job to another, the better we shall help ourselves.
My third point concerns the fear that a 7 per cent. Bank Rate is doing great damage to investment. Of course, it is a slowing down of investment, but we should not make the mistake of imagining that investment by itself is a panacea of prosperity. A high level of investment fully utilised certainly is a panacea of prosperity. One of the things on which we should concentrate now to try to tide over the temporary ill effects of the slowing down of investment is to devote all our attention to ensuring that we are making the fullest possible use of such investment as we have made—and that investment has been very high over the last few years.
In particular, I should like to mention other possibilities which have been referred to during the past two days. The Leader of the Liberal Party mentioned them yesterday. These include the importance of shift work and of making the best possible use of every single machine that can be employed; the importance of work study and of making the best possible use of every machine and every man; the need for the highest possible standards of technology and in skills in which people are trained, and better management, and the restrictive practices on both sides of industry. Certainly, we should look again at the Restrictive Trade Practices Act, passed by this House two years ago. If necessary, let us look at the restrictive practices on the other side of industry, too. If we are to get the right reaction from managements and men, we must attack these things on both fronts at one and the same time.
Most of the debate from this side has concentrated on the need for slowing down the circulation of money and the volume of money in circulation. Side by side with that, can we not also talk about supporting the measures for increasing our production and our productivity, for that is the other side of the coin?

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Today, we have talked a good deal about restrictions. Let us also remember that if we use our machines and our manpower expansion can go hand in hand with present policies. The sooner we remember the second half of that lesson the quicker we shall be able to resort once again to an expanded social programme and to a higher investment policy, which we all want.
8.50 p.m.
Mr. Alfred Robens: One of the pleasant features of this debate has been to listen to some of the speeches from hon. Members opposite similar to that which we have just heard, which has been free of anti-union bias. I do not know whether the hon. Member for Totnes (Mr. Mawby) has spoken in the debate. If he has, I am sorry that I missed his contribution, because he bears very heavy responsibility. He not only represents a hunting county and the town of Totnes but three million trade unionists whom the Minister of Labour says voted Conservative at the last Election. As the only trade unionist on the benches opposite, if the hon. Member has not made a contribution, I am sure that the House is the poorer for it.
Mr. Ray Mawby: While thanking the right hon. Gentleman for his felicitations, I should like to point out that he is in error in stating that I am the only trade unionist on this side of the House.
Mr. Robens: At least, the hon. Member can claim the credit for being a shop steward at one time. I doubt whether any of his colleagues can possibly do that.
It seems to us that the failure of the Government's free-for-all policy which they have pursued since they came into office has been underlined by the 7 per cent. Bank Rate and the cuts in investment, particularly in the basic industries, which have been the subject of the two-day debate which is now coming to an end. The Government cannot say that they have not been repeatedly warned of the consequences of the policies which they have been pursuing. In economic debates and in Budget debate after Budget debate speakers from these benches have warned them of the consequences of their failure to take any step
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to restrain dividends or profits. We have warned them of the effects of the cuts in subsidies on necessities, the increase in Health Service charges, the rent increases and, at the same time, the huge Budget concessions that have been made to the richest taxpayers.
Now that the Government are hoist with the sum total of the folly of their policy they seek a let-out. In the face of the knowledge that they have no longer the confidence of the electorate, desperately anxious to cling to office they now seek to put the whole of the responsibility for the present crisis upon the shoulders of the trade union movement. My right hon. Friend the Leader of the Opposition said at the end of September that the statements of the Chancellor and his officials in Washington sounded very like a declaration of war by the Government on the trade union movement, and I am bound to say that the violent attack by members of the Cabinet—and notably by the latest adherent of campanology, the Lord President of the Council—upon the trade unions has proved my right hon. Friend's prognostications to be about correct.
Up and down the country it is the popular theme of Conservative back benchers and Conservative speakers. Each weekend the local and national Press faithfully reports all these attacks. All I want to say to the Government is this. Is not this deliberate propaganda against the trade union movement one of the most colossal blunders that the Government could possibly make? What becomes of the Chancellor's statement at Brighton, that
"We are all in this together and must act together … the management and the workers, the public and the Government"?
What hope is there of "acting together" if he and his hon. Friends continue to utter dark threats against the workers through the trade union organisations? I think that the Chancellor is right when he says that "we are all in this together." It does not matter how much we criticise Government policy, the effects of the policy fall upon the nation as a whole and not only upon the supporters of the Government.
Yesterday, the hon. Member for Louth (Mr. Osborne) who, I am sorry to say, is not in his place, asked a very pertinent question. He said, "How are we to get

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our export prices down?" I think that the answer to that, and also as to how we beat the present crisis and build up our reserves so that we can face external blows which are bound to fall upon us from time to time, are the same. It is a simple answer. It is increased total production together with increased productivity. I think that that is the only answer for Britain and the only way in which there is any hope of doubling the standard of living in twenty-five years, to quote the Leader of the House; the only way to build up surpluses big enough so that Britain can play a major part in investment in the underdeveloped areas of the world and in expanding world economy. Without an expanding economy, there is little hope for an industrial country such as our own.
How are we to bring about increased production and productivity? Only by the 23 million gainfully employed people, from the unskilled labourer to the managing director, working as a team. The increase will not take place as the result of the speeches of politicians either in this House or outside, but only in our factories, mines and workshops.
The Government's position in all this is to create the climate or atmosphere in which trade unionists and employers can work together as a team. This is where we believe that the Government are so woefully wrong in their present policy, which is now creating conditions in which industrial unrest, arising from the struggle of the trade unions to maintain the standard of living of their members and families, could be the beginning of the bitterest industrial disputes of the postwar years. In these circumstances, production will go down and not up, and increased productivity, which is essentially based upon new methods, new machinery and industrial peace and co-operation, is not likely to come our way very quickly.
Wages and conditions of work and the worker-management relationship are very sensitive matters of which the trade unions are very much aware. The trade union movement is desperately anxious to bring about increased production and productivity. It must not be forgotten that the organised workers of Britain and their families represent half the population of these islands. Therefore, there is a great
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vested interest within the trade union movement to ensure that the country is prosperous, and it wants to help.
Indeed, the Trades Union Congress, in July of this year, after consultation with the Chancellor of the Exchequer about the council he was setting up as an independent body on productivity, prices and incomes, issued a very long and comprehensive statement. I would like to quote from it, to remind some hon. Members who may have read the whole statement of the grave position that the T.U.C. took up in this matter and of the statesmanlike approach that it is anxious to maintain. It said:
"Conscious of the consequences of this interaction of the forces affecting incomes and prices, not least upon their own members, the T.U.C. has constantly appealed to the Government to use its powers to prevent unnecessary price increases and thus to set the scene for a collective effort to control these forces and encourage greater productivity.
While the T.U.C. cannot fail to be aware from past experience of the problems of wage bargaining under conditions of full employment and the importance of maintaining a correct balance between wages and other incomes and costs and prices, it is convinced that unless national economic policy is directed towards full employment and social welfare, and the Government is demonstrably taking measures to that end, it will continue to be impossible to advocate, with any hope of success, a policy of voluntary restraint."
It seems to me that that statement fell upon deaf ears. That is proof, if proof is needed, of the constructive approach of the T.U.C. to the problems of the nation.
There are three things which the Government can do about the trade union movement. They can try to control it, they can attempt to break it, or they can co-operate with it. I suggest that any action but the latter—co-operation—would be an unmitigated disaster. Recently, the Minister of Transport and Civil Aviation said:
"The trade unions themselves have made a not inconsiderable contribution to inflation by failing in many cases to balance increased wages by increased output and efficiency."
Surely that is arrant nonsense. Literally millions of wage earners are in no position at all to influence output. They just do not happen to be in that kind of job.
If we take the workers whose earnings can be related to output, is the former Parliamentary Secretary to the Ministry of Labour saying that the question of output has nothing at all to do with

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management? Is it all a matter for the workers? Is not this where the Government have gone wrong? Does not a substantial increase in output—especially in productivity, which counts most—depend entirely upon the investment policy of management?
If the Government make it impossible for firms—of which there are thousands which cannot find the necessary money from their own resources for investment—to have the money to invest, or to have money at such a price that it is economic for them to invest, how can the workers, who do not control these things, balance their wages with increased output? I am surprised that someone who served with some distinction in the Ministry of Labour, perticularly one in a position which, I understand, is a Cabinet post, should have given voice to such a remark as that.
However, production has gone up. No one can complain that since the war we have had a 66 per cent. increase in production. No one should run away with the idea that basic rates in industry in this country are high rates. They are not high rates at all. I shall not weary the House with a whole series I got from one of the research departments of my union, giving the basic rates in industry, but I was very surprised to see them. They are very low. There is a lot of talk about miners, but the basic rate for a surface worker is £8 10s. a week and, for an underground worker, the basic rate is £9 10s. a week. They earn a lot more, but every penny over those basic rates is represented by increased output through overtime working, and so on.
Not long ago the Minister of Labour announced that for the first time in this country average earnings had exceeded £12 a week, but the average basic rate must be under £9 a week and the difference between average earnings and average basic rates must represent extra effort put in by the workers in earning those wages. It should be recognised that a great deal of work is being done. I am not saying that we are getting the best out of the working time of the 23 million people employed, but it is wrong to suggest that little or no extra effort is put in by the workers in industry.
There are good managements and bad managements and, equally, there are good workers and bad workers, but I think it
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is criminally wrong—I speak feelingly about this—for the Government to seek to put the consequences of their actions upon the shoulders of others, the organised workers of this country.
The Chancellor of the Exchequer (Mr. Peter Thorneycroft)The Chancellor of the Exchequer (Mr. Peter Thorneycroft)indicated dissent.
Mr. Robens: It is not any use the Chancellor of the Exchequer shaking his head. I have a whole bunch of newspaper cuttings of speeches by members of his party—some of them Cabinet Ministers—who have led a tirade against the trade union movement up and down the country. I wonder whether the right hon. Gentleman has given any thought to the question of where pressure for increased wages comes from. I wonder whether he has ever bothered to look at the figures published by his own Department. Does he—does the House and the country—appreciate that nearly 17 million people out of the 23 million gainfully employed have a total income, before taxation, of less than £12 a week? I wonder whether he realises that in his generous gifts to the Surtax payer in the last Budget every Cabinet Minister received, in extra spending money, half as much a week as 17 million people have to provide for them their weekly meals. I wonder whether he appreciates that, and its effects upon those people when these exhortations come from him.
Is it not clear from the figures of the distribution of personal incomes that many millions of our people can hardly be said to be living in the lap of luxury, and that the reason why the Prime Minister can say, on the racecourse, "They never had it so good," is because he was comparing today with the days of unemployment, when he was the hon. Member for Stockton, which division he left rather rapidly in 1945?
We have another reason for increased wage pressure. At the beginning of this month rents went up—and they are due to go up again in six months' time. The effect of the Rent Act upon the 17 million workers to whom I have referred is inevitably bound to cause a tremendous pressure for further wage increases. They are faced with rent increases, so I understand, of anything up to 20s. a week. It is, therefore, inevitable that when these rent increases are paid—and this is the one thing that the people cannot save

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upon; they may save upon clothes, food and smoking, but they cannot save upon the rent—pressures are bound to come upon the trade union leadership to apply for increased wages.
The Rent Act is one of the most inflationary measures that the Government could possibly have taken. Bearing in mind the statement of July last, I wonder what chance there really is of the Trades Union Congress trying to persuade its members to exercise wage restraint. Was it really necessary for the Government to proceed with the Rent Act at a time when the overall effect cannot but be very harmful to the nation and make the present situation much worse? If the Government had been wise they would have had second thoughts about the implementation of that Act.
I now turn to something which the Minister of Labour said today apropos the Chancellor's speech yesterday. The Chancellor then made some general observations about wage increases and the danger to the country, if they were, to quote his words:
"unrelated to, and going far beyond, the general growth of real wealth within the country."
Of course we recognise the problem, just as the Trades Union Congress recognised it in July, and we have frequently expressed our views in these last few years of the failure of the Government to deal with it. The difference lies not in whether or not there is a problem, but how, precisely, the problem should be handled.
That brings me to the new Government proposals in this field. As I understand—the Chancellor will probably deal with this point when he replies—what the Chancellor is now saying is that he will use the control over the supply of money to ensure that there is no rise in wage costs. He said this quite specifically about the public sector. I quote him again:
"If costs, including wage costs, go up, activity will have to be reduced and this will be the policy where the Government are looked to as the source of cash."
I presume that this is also what he is advising the private sector to do because, again to use his own words, the Government should,
"where they are themselves the employer, seek to follow policies similar to those which they urge upon others."—[OFFICIAL REPORT, 29th October, 1957; Vol. 575, col. 55–7.]
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Having got what the Chancellor has said about the public sector, about the Government as a direct employer and what, I presume, he has also said to the private sector, I want to ask him some questions as to how, precisely, it is intended to apply this doctrine. First, what exactly is the position in the public sector? It is clear from what the Chancellor and the Minister of Labour have said, taking it in its context, that they intend to use their financial power to force a certain wages policy upon the Transport Commission. They are saying to the Commission, in the words of the Chancellor, that in 1958 the Commission is to have no more money for investment or any other purposes above the ascertained deficit of 1957.
The clear implication of that is—and it is well known that the Transport Commission is the first to be met with wage applications since the announcement of this policy—that if the Commission grant a wage increase, no money will be available to finance it; or, alternatively, it must either refuse the wage increase or must finance it out of money that was intended for investment, so that it must cut back the investment.
These are the answers to the questions. [HON. MEMBERS: "No."] Certainly. The right hon. Gentleman's supporters are in the same position of bewilderment as we are. [HON. MEMBERS: "No."] Oh, yes. I have quoted exactly what the Chancellor has said, very accurately, I think. I am now drawing some conclusions, and I am asking the Chancellor whether these are the right conclusions. The Chancellor will be speaking later and will probably be able to answer them a little more accurately than the hon. Member who sits behind him.
This is the implication, as I see it. If, in fact, the Transport Commission can have no more money to meet the deficit than it had last year to grant increases in wages, they must come out of money available, and the Commission must cut back its investment policy. However, we will wait and hear what the Chancellor has to say.
The Minister of Labour went much further this afternoon, because he made it plain that this doctrine would apply even if an arbitration award was made

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in favour of a wages claim. I do not believe that any Minister of Labour has made such an amazing statement so easily as that this afternoon; and I am merely quoting these words from the Evening Standard to give an opportunity to the right hon. Gentleman to say that he did not mean those words or that he has been wrongly reported. These words are a direct quotation from what he said:
"We do intend to make clear to the British Transport Commission our continuing determination that we shall not finance inflationary awards whether these awards are secured by negotiation or arbitration."
My first comment is this. It is not possible at one and the same time for the Minister to prevent the Transport Commission from carrying out an arbitration award and to say that he is not interfering with the principles of arbitration at all. It is true that the Minister introduced the phrase "an inflationary award," but my right hon. Friend the Leader of the Opposition immediately asked the Minister who is to decide when an award is inflationary or not.
The right hon. Gentleman, contrary to his usual practice, dodged the question. He did not answer, and I hope the Chancellor will answer it, because it is a very important question, not only for us in this House and for many millions of people outside who are involved in this matter, but also for those people who make up the arbitration tribunals. We are not going to waste the time of eminent men who are sitting and listening to cases for days on end, and giving decisions objectively, merely to find the Government saying, "We are not interested in objective arbitration decisions; we have decided that this is inflationary, and nothing will be paid."
It is important that the Chancellor should be clear in his replies to some of these questions. He did not reply to that question, but dodged it. I want to ask some more questions which I hope the Chancellor will answer. Alternatively, I shall be happy at any point in asking these questions to offer him the courtesy, which his right hon. Friend would not grant me this afternoon, of giving way if he would like to intervene and answer them.
Suppose the present claim of the railwaymen goes to arbitration and suppose an award is made on the basis that the cost of living has gone up. Does the
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Government's refusal to remit any more money to the British Transport Commission still apply? Suppose the award is based on the fact that wage rates in other industries have gone up and that the railwaymen are, therefore, entitled to some increase. Is this inflationary? Does the Government's refusal to allow the Commission to borrow money still apply? Is there any answer to that? No.
Suppose the railwaymen make out their case on the basis that there has been an increase in efficiency in the industry. Is that inflationary? And who decides? The arbitrators, the British Transport Commission or the Government? Who is to determine what is an inflationary award? The possibility is, of course, that any award given by an arbitration board will have been made upon a consideration of all these things. Really, the House of Commons and, in this case, the railwaymen, are entitled to know exactly what the Government mean.
I put this final question to the right hon. Gentleman. Do the Government envisage any circumstance at all in which they would be prepared to allow the Commission to borrow more? None?
Let us take another case. The Minister of Labour was very specific today about the position of the Government as employers. The Police Federation has an application for a 10 per cent. increase. It is a little difficult, I should think, to apply the test of production and productivity to that. That is a sort of application that is decided by a board. Assuming that the body which determines the wages of the policemen decides that there should be an increase. Are the Government to regard that as inflationary and refuse to pay it? Is there no answer? I cannot get a single mutter out of the right hon. Gentleman tonight.
What we are entitled to know is what is the criterion to be applied to determine whether in these circumstances a rise in pay is inflationary or not. Secondly, does this really mean that arbitration is now a waste of time? Are the Government really saying the unions must now by-pass arbitration and make it a trial of strength? Perhaps the right hon. Gentleman or his right hon. Friend will answer some of these questions, because that is certainly the impression which will be left in the wider trade union movement.

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I should like now to turn to the private sector, where the position is much more obscure. We have been told much less about this, but we have been led to suppose that here the wage costs are to be kept down by a refusal on the part of the banks to advance more money. This is intriguing. What we now want to know is how exactly this is to work out.
We know that the Chancellor has asked the banks to freeze the level of advances, but what instructions are being issued on the basis of this request to the bank managers? Is the freezing of the advances a global one for the banks as a whole? Is it a global one for a bank as a whole, to determine for itself what the allocation of the advances shall be at each of its branches? Does each branch decide for itself? Is the overdraft position at each branch of a bank at a given date to be the frozen level? [An HON. MEMBER: "I hope not"] There will be many right hon. and hon. Members who will say a fervent, "Hear, hear" to that. Is the figure to be taken monthly or quarterly or half-yearly? Will it be different each year?
Further, how do these instructions relate to the wages situations? Are we to understand that when a firm asks for an overdraft or an increase in the present overdraft, the branch manager presumably is to inquire what is happening about wages? If he finds that the wages are going up, does he refuse the advance? Suppose that that is the case. Let us take the position of the steel industry and the building industry. If wages go up because they are tied to the cost of living by agreement, does the bank manager then refuse to advance the money necessary to pay those wages? Suppose that the wages in the private sector have gone up on an arbitration award, what does the manager do then? Does he refuse?
Are we to understand that the bank manager is to grant an overdraft when there has been an increase in productivity and not otherwise? How is the bank manager to judge whether the overdraft facilities should be granted on the basis of increased productivity or refused because the wage advances are inflationary? How do the Government control in the private sector the bank advances in this matter as they are able to control them in the public sector?
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What happens to all the service industries? If there is increased productivity in engineering and a case for increased wages is granted and overdraft allowances are made to pay for them, what happens in the service industries where productivity cannot enter into it? It is hardly necessary for me to remind the Minister of Labour that arbitration awards and wage decisions generally over the past forty years have not been made solely on the basis of productivity, but also on the basis of relative wages, the cost of living, and, to some extent, profits in a particular industry.
The more I think of this idea of using restriction on the supply of money as a method of stopping the so-called wage spiral, the more doubtful it seems to me in practice. Either bank managers are to be given an impossible task of administering policy or it does not mean anything at all in the private sector. The Minister of Labour spoke this afternoon of this policy in general terms, as though its application to the private sector was on a global basis, but he knows as well as anybody else that wage claims are made by individual industries and trades.
It is individual firms who have to meet them and raise the money to do so. If bank advances are not to be decided on individual cases, on the basis of the wage situation in a particular industry, how does the supply of money affect the wage position at all in the private sector? And if, in the private sector, individual applications for bank credit are not considered in connection with wages, is there not here a very gross discrimination against the public sector, and particularly the Transport Commission?
There are, of course, other objections to the whole idea. In some cases, higher wages will be passed on in higher prices and a call will not be made on the banks. In other cases, investment will be cut down, and in other cases higher wages will be paid and financed by a fall in material prices. There will be no control by the Chancellor of the Exchequer in any of those cases.
Our criticism of the Government is not that they are not concerned about the whole problem of the wages-prices-profits spiral. Our criticism is that they are tackling it in the wrong way, by attempting to impose a crude, arbitrary and unjust instrument from above. I do not

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believe that we shall get a solution to the problem which would satisfy the aim which we all have in mind, namely, to create full employment without inflation, except on the basis of co-operation between both sides of industry and the Government.
I believe that if the Government made a real effort to get that co-operation and adapted their policies accordingly, they would probably get the response to it which is most desirable. Unfortunately, their whole record, particularly in the last two years, suggests that they are bent on the alternative of a solution imposed from above, which they are now putting forward.
This debate was arranged because of the exchange crisis of last month and the measures announced by the Chancellor on 19th September. The crisis itself was clear evidence of the weakness and the failure of the Government's international economic policy over the past few years. It revealed all too vividly the great dangers of trying to run a world banking business on the basis of totally inadequate reserves. It also showed up the foolishness of the Government in continuing to relax foreign exchange controls, with disastrous consequences to those reserves.
The Chancellor's speech revealed something else. There never was a more trenchant indictment of the Government's policy in causing inflation at home than the Chancellor's speech of yesterday, and it is astonishing to me that the right hon. Gentleman should have the effrontery to make such a confession and retain his position as Chancellor of the Exchequer.
Now as to the right hon. Gentleman's policy. I repeat what my right hon. and hon. Friends have said: we could not object to a high Bank Rate as an emergency measure to deal with a temporary speculative attack on the £, but we cannot accept a 7 per cent. Bank Rate as a long-term measure coupled with a credit freeze and cuts in public investment. We do not believe that it is necessary or desirable. We cannot accept that the right way of handling the nation's economic problems is to cut back production and investment, especially in view of the current world situation.
What we need today is a policy which will encourage production, high productivity in industry on the basis of democratic planning and social justice. That
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is exactly what we on this side of the House demand and what the country needs. What we are getting is a policy which threatens jobs, discourages output and promotes industrial friction on the basis of a discredited Tory freedom and social reaction. Because of these things, we shall divide the House tonight.
9.27 p.m.
The Chancellor of the Exchequer (Mr. Peter Thorneycroft): I have listened to most of the speeches that have been made, and those that I missed I have read. I will try to answer some of the points that were put to me, including those raised by the right hon. Member for Blyth (Mr. Robens).
The right hon. Gentleman referred, not in an accusatory way, to the phrase "a war upon the unions." May I say this to him? We may differ about the diagnoses, and we may differ about the solutions, but in this country we know each other well enough, and respect each other well enough, for one section not to declare war upon another. Nor do I believe that anybody, least of all the right hon. Member for Blyth, thinks that this is in our minds. He stressed the importance of production, and particularly of productivity. May I also add, particularly of productivity, for I share the view of the right hon. Member for Leeds, South (Mr. Gaitskell) that production of itself is not necessarily a cure for inflation.
What we want today is what my hon. Friend the Member for Tonbridge (Mr. Hornby) was saying in the concluding stages of this debate, namely, to use the machinery that we have to the fullest possible extent, whether it is by shift work or by the abolition of restrictive practices wherever they may be found. I accept from the right hon. Gentleman that it is the desire of the trade union movement to do that, as its members have shown by their full work on the British Productivity Council and elsewhere. The key lies in the hands of the management and the unions in that matter.
The right hon. Gentleman talked about the Rent Act and how if rents went up that might incite a demand for higher wages. [HON. MEMBERS: "It will."] It may well be, but let us face the facts. In 1956–57 the increase in wages of £900 million was more than all the rents and all the rates in the country put together. We have to keep these things in some kind of proportion.

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The right hon. Gentleman went on to ask me about wages policy. He asked me to elaborate on the policy which I declared yesterday. I must say that I do not think that it could be put much more clearly than I put it yesterday and my right hon. Friend the Minister of Labour put it today, but may I remind him, as he seems to have forgotten a little, just what I said? I said:
"First, the Government should state with absolute clarity their own view of the economic situation, and where they consider the national interest to lie. Secondly, they should, by their monetary, fiscal and spending policies, create conditions and an economic climate consistent with this view. Thirdly, they should not interfere with collective bargaining, and fourthly, they should, where they are themselves the employer, seek to follow policies similar to those which they urge upon others."—[OFFICIAL REPORT, 29th October, 1957; Vol. 575, c. 56.]
I do not believe that anybody could challenge any of those propositions. Indeed, one could clearly go further.
Mr. Collick rose—
Mr. Thorneycroft: I will not give way. I am coming to the railways' case in a minute.
Several Hon. Members: Give way.
Mr. Speaker: It is disorderly for an hon. Member to remain standing if the Minister does not give way.
Mr. Thorneycroft: I was saying that one could clearly go further, for if every ounce of new production were absorbed by increased wages, nothing would be left for anybody else, nothing for the pensioners, nothing for the expansion of social services and nothing for increased investment. Moreover, events have run somewhat ahead of production. The problem of inflation is acute just because money incomes have run ahead of production. They have continued so to run ahead in the last twelve months. Weekly wage rates are up by 5 per cent. and industrial production by only 2 or 3 per cent., and wages have also been running ahead of prices.
What we need is a period in which output can catch up with this increase. If the nation can secure that, it will benefit all, and if it fails—and this is a national and not a party requirement—it will do grave damage to all concerned. We gave the advice which I stated yesterday. It was our duty to do so. It is
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erroneous to suppose that advice of that kind has got to be kept from the ears of any arbitrator. An arbitrator's job is more than to translate the cost-of-living index into a wage increase. He has to consider the interests of the public as well as of the employers and the workers. We gave that advice publicly. I gave it from this Box, which is the right place to give it, where it may be heard and publicly criticised by people democratically elected for the purpose.
We do not intervene in individual wage claims nor seek to demolish the machinery of collective bargaining, but wages have been running ahead of the nation's ability to pay them or to find the goods to match them and that is what needs to be kept firmly in everybody's mind. [HON. MEMBERS: "What about the railways?"] I shall deal with the railways now.
The right hon. Gentleman asked me about the British Transport Commission. Our position can be quite simply stated. We do not intend to find more cash than we have already found or have undertaken to find, and it is against that background that the decisions by the Transport Commission must be taken. If en award emerges from arbitration it will be for the British Transport Commission to decide upon it. That is their affair and, as the Minister of Labour said, we do not intend to usurp their functions. Our position is a much more limited one but it must be clearly and absolutely understood; we will not extend assistance to them beyond what we have already undertaken to do.
The right hon. Member for Huyton (Mr. H. Wilson) opened our discussions with a rosy picture of Socialist success.
Mr. Robens: If the right hon. Member is about to leave the question of the railways, I should like to ask him a question. He has underlined what I said previously. What I should now like to know is what possible reason there would be in the absence of an agreement between the British Transport Commission and the railway unions to go to arbitration at all.
Mr. Thorneycroft: Whether or not the transport unions and the Commission go to arbitration is a matter for them. What I am saying here is a matter for me, as Chancellor of the Exchequer.

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It may be said that there are weaknesses or flaws in certain aspects of policy, but the Exchequer can still say whether public finance is to be extended or not, and that is our decision in that matter.
The right hon. Member for Huyton painted a rosy picture of the success of the Socialist Government in the years up to 1951 and compared the reserve losses over certain periods which he personally selected. If we are to indulge in that kind of statistical analysis, let us look at the full picture and the whole period and consider current trade, long-term investment and sterling liabilities as well. I take the years 1946 to 1951 and the 5¾ subsequent years to the end of last month.
In the Labour years, if I may so describe them, the current deficit, that is, the deficit on current trade, was over £800 million. In the later period it was a surplus of £1,000 million. En 1946–51 the reserves fell by nearly 150 million dollars. In the later period they fell by more, by 500 million dollars, but in the early years there were the United States and the Canadian loans and the credit of the E.P.U. of some 5,500 million dollars. We repaid 600 million dollars of this, and this repayment alone is more than the dollar liability which we have incurred in borrowing from the International Monetary Fund, the sum of 560 million dollars. Moreover, in 1947–51 the sterling liabilities to overseas countries remained virtually unchanged. Since then they had fallen by nearly £100 million up to the middle of this year, and there has been a substantial further fall since then.
Mr. Mikardo: Then why is there a crisis?
Mr. Thorneycroft: In summary, therefore, the fall in reserves under our Administration was accompanied by a net reduction in our dollar liabilities and substantial reductions in our sterling debts, and under the Labour Administration the gold and dollar reserves fell, vast dollar borrowings were undertaken, there was virtually no repayment of sterling liabilities and the currency was devalued. I recognise that the Labour Government had to contend with post-war reconstruction, but we had to contend with the Labour Government. There is a fair comparison, as the right hon. Gentleman asked for it, for what it is worth. What
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puzzled me about the right hon. Gentleman's speech is that if we had it so good in 1951 and if Britain was so prosperous and financially so prudently run, why did they quit, and why did the right hon. Gentleman quit six months earlier?
The right hon. Member for Battersea, North (Mr. Jay) said today that the main cause of the wage-price spiral was not inflation and in the circumstances it was not surprising that he did not seek to provide a cure for inflation. He said he was prepared to adopt any measure which was inherently fair. He criticised the removal of the food subsidies and housing subsidies and the increase in the National Insurance contribution. But he did not vouchsafe to the House what he would do about it or his party would do if ever they were returned to power. He blamed foreign speculators and an absence of Government exchange controls. I would say this to the right hon. Gentleman. We really do not solve this kind of situation by the existence of exchange controls. There were plenty of exchange controls in 1951, but they did not stop the most savage losses from our reserves.
The right hon. Gentleman quoted me as saying that it would be a sorry reflection on society if we had to have substantial unemployment to stop a wage-price spiral. I do not go back from that at all. It would be a sorry reflection upon our society, and provided that we do not take more out of the economy than we put in, there is no danger in that. If we do go on taking more out of the economy than we put in, obviously there is a very great danger indeed under any dispensation. Finally, the right hon. Gentleman paid the usual tribute to Germany. I do not know why it is that only German freedom works. Surely, were it so successful there, we might be permitted to try a little of it over here from time to time. Then we had the hon. Member for Cheetham (Mr. H. Lever) ——
Mr. H. Wilson: Before the right hon. Gentleman leaves that point, since he is so opposed to the use of foreign exchange control, why was it that he imposed it to close the Kuwait gap a few weeks ago? Is he aware that his lateness and delay in imposing that control lost the country £100 million?
Mr. Thorneycroft: I did not say that I was against foreign exchange control.

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What I did say was, what folly it is to imagine that one can rely on controls of that kind without taking the steps to strengthen one's own currency at home—a very different thing.
The hon. Member for Cheetham said that provided no Government cut the money supply below the level of goods and services, no criticism could be made. He said there had been no surplus in the money supply. He is quite wrong; I wish he were right. Since 1948 money incomes have gone up by 75 per cent. and output has risen by 26 per cent., and as a result prices have gone up by 38 per cent. These are the facts of life and we must face them as the basis of our discussions. The hon. Member's line was that on the whole we might as well let inflation go on and perhaps pull a little of the extra money out of the hands or pockets of those who have got it.
I must say to the hon. Member that we do not agree with that. Quite apart from the economic aspect, there is a social side to inflation. A great deal of hardship and suffering is caused by it and I do not think it is good enough for the hon. Gentleman to say that he is prepared to allow it to go on. It might be all right for him, or for others who can contract out of it, but there are many people in this country who cannot contract out, and for them we think we have some responsibility.
The hon. Gentleman said that the trouble was not a flight from the £, it was a flight to the Deutschmark. I do not accept this argument of anybody's responsibility but our own. If we start to accept that argument, no cure is worth pursuing. Moreover, all the history of what happened contradicts the argument put forward by the hon. Gentleman. It was not simply a flight to the Deutschmark, because as soon as we announced the measures we did on 19th September, the Deutschmark was still strong, but the flow started back into the reserves.
The hon. Gentleman drew a horrid picture of someone panicking his own creditors, and I hope that nothing of that kind will happen. How fast they will panic depends a little bit upon his own credit, which is an added reason why we should look to our own internal economy.
Finally, the hon. Member said it was ridiculous to imagine that we can export
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capital and he derided what he called the "Suez group" in the Treasury. It is the Labour Party itself which is saying that we ought to put more capital into the under-developed countries of the world. It is the Labour Party which is sometimes putting up an even bigger bid than the Conservatives for pushing out the capital. The "Suez group" is on the hon. Member's own Front Bench. He has got the location wrong about this.
Then, we had my hon. Friend the Member for Aberdeenshire, East (Sir R. Boothby). We are glad to see him here in such good health and in such good heart. I always enjoy his speeches. I like to watch hon. Members opposite watching him and thinking what a magnificent leader they only just missed.
My hon. Friend advocated, certainly with eloquence equal to that of the right hon. Member for Huyton, the benefits of import restrictions and licensing restrictions and he still claimed to be an unrepentant expansionist. I did, however, agree with some of the things that my hon. Friend said. I agreed with what he said about the dollar gap. I agree when he says that the vast American economy has a great responsibility in the world today. I remind him, however, that the American economy has succeeded in acting fairly wisely in these matters. It is our hope that it will do so again.
My hon. Friend then reverted—this was where I parted company with him—to an old friend of his, flexible exchange rates. May I, therefore, make it quite plain that we stand on the policy, which I have announced on many occasions, as to the maintenance both of parities and of the margins?
Sir R. Boothby: Bretton Woods for ever.
Mr. Thorneycroft: A number of hon. Members have referred to the dangers of a world recession. Indeed, the hon. Member for Stechford (Mr. Roy Jenkins) really said that inflation had ceased to be the problem and that it was the recession which should be exercising us. I hope we will keep some sense of proportion in that. There is not a world recession yet. Do not let us start talking ourselves into one. In the United Kingdom, we have a rising production and very full employment. Production in Germany is

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high and expanding. There is a high level of output and employment in America. Primary products, it is true, are cheaper, but at one time they were very dear. No one can say that they are at a very low level, still less that they are at a disaster level, at the present time.
Nevertheless, it is right to draw attention to these problems which lie ahead of us. Indeed, I devoted a great deal of my time at the International Monetary Fund to discussing precisely this problem. I emphasised that world trade has increased since 1937 twice as much as the world's reserves and I rubbed in the dangers. I said that the outward flow of money, in one form or another and by one means or another, from the creditor countries is an absolute prerequisite to the continuation of liberal trading policies in the world outside.
As I have just said to my hon. Friend the Member for Aberdeenshire, East, the record of the United States in this matter is a good one. Until recently, the Americans have pumped the dollars out and I cannot believe that they would be so nationalistically-minded as to ignore the perils of reversing this trend.
The real remedy, however, for an international recession is not to pursue inflationary policies in a debtor country. It would lead to ruin if we were to inflate in a deflationary world. If a recession took place, the real remedy is to concert action with the other countries concerned.
There is no need to set up a new organisation for this matter. There are plenty of organisations already—for example, the 0.E.E.C., from which I have just returned, in Europe; the G.A.T.T., which my right hon. Friend the President of the Board of Trade is at present attending; the International Monetary Fund; N.A.T.O. and all the rest. Whether formally on the agenda or, as hon. Members know, more often informally and outside the agenda, most of the discussions centre upon these great problems of international illiquidity, the nature of the reserves and the levels of demand in the creditor countries.
That brings me back to our own policy. Our voice is already stronger from the measures we have taken. If we flinch from these measures, we would appear at those organisations as a debtor and as a suppliant, and not as a particularly
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deserving one, but if we push these measures through we can command a strong position and a very sympathetic hearing.
A number of hon. Members, including my hon. Friend the Member for Aberdeenshire, East and the hon. Member for Stechford, questioned the economic soundness of the policies that we have been pursuing or even the hypothesis upon which they are based, and there has been a good deal of talk about the velocity of circulation and the activation of inert balances. The idea that when money travels faster it has the same effect as if more of it is about is no startling novelty to the Treasury. These thoughts have crossed our minds from time to time. When we talk about the supply of money we mean the amount of money which is available, whether adding to the existing stock or using it more rapidly. In any event, there is a limit to the increased velocity. There already is a credit squeeze and most of the liquid reserves with which we ended the war are now in use. Moreover, the argument is self-defeating, at least from the point of view of the Opposition. If they believe that it is possible to contract out of the Government's measures by the money moving faster, they cannot really say at the same time that they are as harsh as all that and a declaration of war upon anyone. Anyway, I believe that the technical difficulties can be overstressed. Much of it turns on what men in fact believe. If they are persuaded of the Government's determination in these matters, that in itself is an important method of damping inflationary pressure.
In any event, we have not the slightest intention of being beaten by technical difficulties. There is no technical difficulty which does not have a technical solution. For my part, I believe that the measures that we have announced and the policies we have declared are adequate. We are determined to succeed, determined to hold the £, and we shall take all necessary measures for that purpose.
The only other main topic that I should like to deal with is one which the right hon. Member for Huyton, the right hon. Member for Battersea, North and others have raised—the question whether we should be more selective and use more

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controls. Incidentally, of our method of selection in the field of public investment I have heard not one word of criticism in the debate today from start to finish. I can only take it that it is broadly accepted in its priorities.
As to selective controls generally, no one can say that they have not been tried. In 1945 the Labour Party inherited the lot. It had every administrative device of fiscal control inherited from the armoury of a great war. It used the lot, first, appropriately in the aftermath of war and, later, in the control of the economy in peace—price control, building control; it had the lot. Prices rose steadily during that period. They went up 40 per cent. I emphasised that they did not deliberately put prices up, but despite price control prices steadily rose by 40 per cent. A building boom developed. Despite these controls, the Labour Party had the devaluation of the £ and a major balance of payments crisis. I cannot see that these are a very powerful argument for their reintroduction.
Nevertheless I have been thinking about the matter. I had even pondered whether one should not try to do something to meet their point of view—I have these weaknesses from time to time—in the spirit not of its importance to the economy but in a general spirit of friendliness and co-operation. I am bound to say that I cannot find one that makes any sense. That is my only difficulty.
I have no doctrinaire objection to any of it. Building control is the most popular, but it is difficult to see what we would all gain by it. What would it control? The banks control advances, the Government control the public sector, the Capital Issues Commitment controls borrowing from other people. I think that the only effect would be upon those who are spending their own money. There are some who are building in this way but if we are going to introduce it one has to recognise that it is a very big machine and has to be established on a national basis and on a regional basis. We could not always have people coming up to London. It would mean hundreds of civil servants being employed. If we did it at top level, above say £50,000, we might stop a few blocks of offices going up. If we did it on the basis that is
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usually used in political discussion we should need a vast army of control. What should we stop? Hotels? Not hotels, because we are trying to encourage the tourist industry. Should we stop shops in the new towns, or the warehouses which we are using for the export trade? We might stop a few offices, but I cannot regard offices as a mere frivolity in these days. They really serve a purpose in our economy. We should be left with a few alleged trivialities like petrol stations. Should we stop churches or recreation grounds or something of that kind?
I say that I have considered these matters. I do not reject the idea on doctrinaire lines at all. If I thought any physical controls would help in these matters I would be happy to include them. It is utterly wrong to think that we can deal with the kind of problem that confronts us by stopping someone from putting up a few petrol-filling stations.
Inflation is our enemy and it has got to be beaten. We are not going to be deflected by talk either of a slump or of the technical difficulties of action. A declining currency is an intolerable burden to this country and to the people of this country, including our housewives, who see their money constantly depreciating. On all sides of the House we tell people to go in for National Savings, but the best incentive to save is not simply the interest rates but the knowledge that the savings will retain their value.
With regard to the fixed-income groups, we do not accept that inflation does not matter. We believe that the fixed-income groups have had a very hard time, and we intend to safeguard their interests and the interests of the wage earners as well.
As to the Government, any Government with a declining currency will be increasingly faced with an almost intolerable problem of debt management and investment in the public sector. No Government could tolerate that situation for long. Outside this country are other people, above all the members of the British Commonwealth. They share our problem; our reserves serve their economics as well as they serve us. If we are interested in safeguarding the interests of the Commonwealth we should all go into the Lobby wholeheartedly behind the Government's policy.
Question put, That this House do now adjourn:—
The House divided: Ayes 258, Noes 307.

Division No. 180.]

AYES

[9.59 p.m.

Ainsley, J. W.

Grenfell, Rt. Hon. D. R.

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

Albu, A. H.

Grey, C. F.

Mort, D. L.

Allaun, Frank (Salford, E.)

Griffiths, David (Rother Valley)

Moss, R.

Allen, Arthur (Bosworth)

Griffiths, Rt. Hon. James (Llanelly)

Moyle, A.

Allen, Scholefield (Crewe)

Griffiths, William (Exchange)

Mulley, F. W.

Anderson, Frank

Grimond, J.

Neal, Harold (Bolsover)

Awbery, S. S.

Hall, Rt. Hn. Glenvil (Colne Valley)

Noel-Baker, Francis (Swindon)

Bacon, Mist Alice

Hamilton, W. W.

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

Baird, J.

Hannan, W.

O'Brien, Sir Thomas

Balfour, A.

Harrison, J. (Nottingham, N.)

Oliver, G. H.

Bellenger, Ht. Hon. F. J.

Hastings, S.

Oram, A. E.

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

Hayman, F. H.

Orbach, M.

Benn, Hn. Wedgwood (Bristol, S.E.)

Healey, Denis

Oswald, T.

Benson, G.

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

Owen, W. J.

Beswick, Frank

Herbison, Miss M.

Padley, W. E.

Blackburn, F.

Hewitson, Capt. M.

Paget, R. T.

Blenkinsop, A.

Hobson, C. R. (Keighley)

Paling, Will T. (Dewsbury)

Blyton, W. R.

Holman, P.

Palmer, A. M. F.

Boardman, H.

Holmes, Horace

Pannell, Charles (Leeds, W.)

Bottomley, Rt. Hon. A. G.

Houghton, Douglas

Pargiter, G. A.

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

Howell, Denis (All Saints)

Parker, J.

Bowen, E. R. (Cardigan)

Hoy, J. H.

Parkin, B. T.

Bowles, F. G.

Hubbard, T. F.

Paton, John

Boyd, T. C.

Hughes, Cledwyn (Anglesey)

Peart, T. F.

Braddock, Mrs. Elizabeth

Hughes, Emrys (S. Ayrshire)

Pentland, N.

Brockway, A. F.

Hughes, Hector (Aberdeen, N.)

Plummer, Sir Leslie

Broughton, Dr. A. D. D.

Hunter, A. E.

Prentice, R. E.

Brown, Rt. Hon. George (Belper)

Hynd, H. (Accrington)

Price, J. T. (Westhoughton)

Brown, Thomas (Ince)

Hynd, J. B. (Attercliffe)

Probert, A. R.

Burke, W. A.

Irvine, A. J. (Edge Hill)

Proctor, W. T.

Burton, Miss F. E.

Irving, Sydney (Dartford)

Pryde, D. J.

Butler, Herbert (Hackney, C.)

Isaacs, Rt. Hon. G. A.

Pursey, Cmdr. H.

Butler, Mrs. Joyce (Wood Green)

Janner, B.

Randall, H. E.

Callaghan, L. J.

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

Rankin, John

Carmichael, J.

Jeger, George (Goole)

Redhead, E. C.

Castle, Mrs. B. A.

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

Reeves, J.

Champion, A. J.

Jenkins, Roy (Stechford)

Reid, William

Clunie, J.

Johnston, Douglas (Paisley)

Rhodes, H.

Coldrick, W.

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

Robens, Rt. Hon. A.

Collick, P. H. (Birkenhead)

Jones, David (The Hartlepools)

Roberts, Albert (Normanton)

Collins, V. J. (Shoreditch&Finsbury)

Jones, Elwyn (W. Ham, S.)

Roberts, Goronwy (Caernarvon)

Corbel, Mrs. Freda

Jones, Jack (Rotherham)

Robinson, Kenneth (St. Pancras, N.)

Cove, W. G.

Jones, J. Idwal (Wrexham)

Rogers, George (Kensington, N.)

Craddock, George (Bradford, S.)

Jones, T. W. (Merioneth)

Ross, William

Cronin, J. D.

Kenyon, C.

Shawcross, Rt. Hon. Sir Hartley

Crossman, R. H. S.

Key, Rt. Hon. C. W.

Shinwell, Rt. Hon. E.

Cullen, Mrs. A.

King, Dr. H. M.

Short, E. W.

Darling, George (Hillsborough)

Lawson, G. M.

Shurmer, P. L. E.

Davies, Rt. Hn. Clement (Montgomery)

Lee, Frederick (Newton)

Silverman, Julius (Aston)

Davies, Ernest (Enfield, E.)

Lee, Miss Jennie (Cannock)

Silverman, Sydney (Nelson)

Davies, Harold (Leek)

Lever, Harold (Cheetham)

Simmons, C. J. (Brierley Hill)

Davies, Stephen (Merthyr)

Lever, Leslie (Ardwlck)

Skeffington, A. M.

Deer, G.

Lewis, Arthur

Slater, J. (Sedgefield)

de Freltas, Geoffrey

Lindgren, G. S.

Smith, Ellis (Stoke, S.)

Diamond, John

Lipton, Marcus

Snow, J. W.

Dodds, N. N.

Logan, D. G.

Seskice, Rt. Hon. Sir Frank

Donnelly, D. L.

Mabon, Dr. J. Dickson

Sparks, J. A.

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

MacColl, J. E.

Steele, T.

Dye, S.

MacDermot, Niall

Stewart, Michael (Fulham)

Ede, Rt. Hon. J. C.

McGhee, H. G.

Stonehouse, John

Edelman, M.

McInnes, J.

Stones, W. (Consett)

Edwards, Rt. Hon. Ness (Caerphilly)

McKay, John (Wallsend)

Strachey, Rt. Hon. J.

Edwards, Robert (Bilston)

McLeavy, Frank

Strauss, Rt. Hon. George (Vauxhall)

Edwards, W. J. (Stepney)

MacMillan, M. K. (Western Isles)

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

Evans, Albert (Islington, S.W.)

MacPherson, Malcolm (Stirling)

Summerskill, Rt. Hon. E.

Evans, Edward (Lowestoft)

Mahon, Simon

Swingler, S. T.

Fernyhough, E.

Mainwaring, W. H.

Sylvester, G. O.

Fienburgh, W.

Mallalieu, J. P. W. (Huddersfd, E.)

Taylor, Bernard (Mansfield)

Fletcher, Eric

Mann, Mrs. Jean

Taylor, John (West Lothian)

Foot, D. M.

Mason, Roy

Thomas, George (Cardiff)

Fraser, Thomas (Hamilton)

Mayhew, C. P.

Thomas, Iorwerth (Rhondda, W.)

Galtskell, Rt. Hon. H. T. N.

Mellish, R. J.

Thomson, George (Dundee, E.)

George, Lady Megan Lloyd (Car'then)

Messer, Sir F.

Thornton, E.

Gibson, C. W.

Mikardo, Ian

Timmons, J.

Gooch, E. G.

Mitchison, G. R.

Tomney, F.

Gordon Walker, Rt. Hon. P. C.

Monslow, W.

Ungoed-Thomas, Sir Lynn

Greenwood, Anthony

Moody, A. S.

Usborne, H. C.

Morris, Percy (Swansea, W.)

Viant, S. P.

Wade, D. W.

Wigg, George

Wilson, Rt. Hon. Harold (Huyton)

Watkins, T. E.

Wilcock, Group Capt. C. A. B.

Winterbottom, Richard

Weitzman, D.

Willey, Frederick

Woodburn, Rt. Hon. A.

Wells, Percy (Faversham)

Williams, David (Neath)

Woof, R. E.

Wells, William (Walsall, N.)

Williams, Rev. Llywelyn (Ab'tillery)

Yates, V. (Ladywood)

West, D. G.

Williams, Ronald (Wigan)

Younger, Rt. Hon. K.

Wheeldon, W. E.

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

Zilliacus, K.

White, Mrs. Eirene (E. Flint)

Williams, W. R. (Openshaw)

TELLERS FOR THE AYES:

White, Henry (Derbyshire, N.E.)

Willis, Eustace (Edinburgh, E.)

Mr. Popplewell and Mr. Pearson.

NOES

Agnew, Sir Peter

du Cann, E. D. L.

Hughes-Young, M. H. C.

Aitken, W. T.

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

Hulbert, Sir Norman

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

Duncan, Sir James

Hurd, A. R.

Alport, C. J. M.

Duthie, W. S.

Hutchison, Michael Clark (E'b'gh, S.)

Amery, Julian (Preston, N.)

Eccles, Rt. Hon. Sir David

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

Amory, Rt. Hn. Heathcoat (Tiverton)

Eden, J. B. (Bournemouth, West)

Hylton-Foster, Rt. Hon. Sir Harry

Anstruther-Gray, Major Sir William

Elliot, Rt. Hon. W. E. (Kelvingrove)

Iremonger, T. L.

Ashton, H.

Elliott, R.W. (N'castle upon Tyne, N.)

Irvine, Bryant Godman (Rye)

Astor, Hon. J. J.

Emmet, Hon. Mrs. Evelyn

Jenkins, Robert (Dulwich)

Atkins, H. E.

Errington, Sir Eric

Jennings, J. C. (Burton)

Baldock, Lt.-Cmdr. J. M.

Farey-Jones, F. W.

Jennings, Sir Roland (Hallam)

Baldwin, A. E.

Finlay, Graeme

Johnson, Dr. Donald (Carlisle)

Balniel, Lord

Fisher, Nigel

Johnson, Eric (Blackley)

Barber, Anthony

Ftetcher-Cooke, C.

Jones, Rt. Hon. Aubrey (Hall Green)

Barlow, Sir John

Forrest, G.

Joynson-Hicks, Hon. Sir Lancelot

Barter, John

Fort, R.

Kaberry, D.

Baxter, Sir Beverley

Foster, John

Keegan, D.

Beamish, Maj. Tufton

Fraser, Hon. Hugh (Stone)

Kerby, Capt. H. B.

Bell, Ronald (Bucks, S.)

Fraser, Sir Ian (M'cmbe & Lonsdale)

Kerr, Sir Hamilton

Bennett, F. M. (Torquay)

Freeth, Denzil

Kershaw, J. A.

Bennett, Dr. Reginald

Galbraith, Hon. T. G. D.

Kimball, M.

Bevins, J. R. (Toxteth)

Gammans, Lady

Lagden, G. W.

Bidgood, J. C.

Garner-Evans, E. H.

Lambert, Hon. G.

Biggs-Davison, J. A.

George, J. C. (Pollok)

Lambton, Viscount

Birch, Rt. Hon. Nigel

Gibson-Watt, D.

Lancaster, Col. C. G.

Bishop, F. P.

Glover, D.

Langford-Holt, J. A.

Black, C. W.

Glyn, Col. Richard H.

Leather, E. H. C.

Body, R. F.

Godber, J. B.

Leavey, J. A.

Boothby, Sir Robert

Gom Duncan, Col. Sir Alan

Leburn, W. G.

Goodhart, Philip

Bossom, Sir Alfred

Gough, C. F. H.

Legge-Bourke, Maj. E. A. H.

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

Gower, H. R.

Legh, Hon. Peter (Petersfield)

Boyle, Sir Edward

Graham, Sir Fergus

Lindsay, Hon. James (Devon, N.)

Braine, B. R.

Grant, W. (Woodside)

Lindsay, Martin (Solihull)

Braithwaite, Sir Albert (Harrow, W.)

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

Linstead, Sir H. N.

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

Green, A.

Llewellyn, D. T.

Brooke, Rt. Hon. Henry

Gresham Cooke, R.

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

Brooman-White, R. C.

Grimston, Hon. John (St. Albans)

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

Browne, J. Nixon (Craigton)

Grimston, Sir Robert (Westbury)

Lloyd, Rt. Hon. Selwyn (Wirral)

Bryan, P.

Grosvenor, Lt.-Col. R. G.

Low, Rt. Hon. Sir Toby

Bullus, Wing Commander E. E.

Gurden, Harold

Lucas, Sir Jocelyn (Portsmouth, S.)

Burden, F. F. A.

Hall, John (Wycombe)

Lucas, P. B. (Brentford & Chiswick)

Butcher, Sir Herbert

Hare, Rt. Hon. J. H.

Lucas-Tooth, Sir Hugh

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

Harris, Frederic (Croydon, N.W.)

McAdden, S. J.

Campbell, Sir David

Harris, Reader (Heston)

Macdonald, Sir Peter

Cut, Robert

Harrison, A. B. C. (Maldon)

Mackeson, Brig. Sir Harry

Cary, Sir Robert

Harrison, Col. J. H. (Eye)

McKibbin, Allan

Channon, Sir Henry

Harvey, Sir Arthur (Macclesfd)

Mackie, J. H. (Galloway)

Chichester-Clark, R.

Harvey, Ian (Harrow, E.)

McLaughlin, Mrs. P.

Churchill, Rt. Hon. Sir Winston

Harvey, John (Walthamstow, E.)

Maclay, Rt. Hon. John

Clarke, Brig, Terence (Portsmth, W.

Harvie-Watt, Sir George

McLean, Neil (Inverness)

Cole, Norman

Head, Rt. Hon. A. H.

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

Conant, Maj. Sir Roger

Heald, Rt. Hon. Sir Lionel

MacLeod, John (Ross & Cromarty)

Cooke, Robert

Henderson, John (Cathcart)

Macmillan, Rt. Hn. Harold (Bromley)

Cooper, A. E.

Henderson-Stewart, Sir James

Macmillan, Maurice (Halifax)

Cooper-Key, E. M.

Hesketh, R. F.

Macpherson, Niall (Dumfries)

Cordeaux, Lt.-Col. J. K.

Hicks-Beach, Maj. W. W.

Maddan, Martin

Corfield, Capt. F. V.

Hill, Rt. Hon. Charles (Luton)

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

Craddock, Beresford (Spelthorne)

Hill, Mrs. E. (Wythenshawe)

Maitland, Hon. Patrick (Lanark)

Crosthwaite-Eyre, Col. O. E.

Hill, John (S. Norfolk)

Manningham-Buller, Rt. Hn. Sir R.

Crowder, Sir John (Finchley)

Hirst, Geoffrey

Markham, Major Sir Frank

Crowder, Petre (Rulslip—Northwood)

Hobson, John (Warwick & Leam'gt'n)

Marlowe, A. A. H.

Currie, G. B. H.

Holland-Martin, C. J.

Marples, Rt. Hon. A. E.

Dance, J. C. G.

Hope, Lord John

Marshall, Douglas

Davidson, Viscountess

Hornby, R. P.

Mathew, R.

D'Avigdor-Goldsmid, Sir Henry

Hornsby-Smith, Miss M. P.

Maude, Angus

Deedes, W. F.

Horobin, Sir Ian

Maudling, Rt. Hon. R.

Digby, Simon Wingfield

Howard, Gerald (Cambridgeshire)

Mawby, R. L.

Dodds-Parker, A. D.

Howard, Hon. Greville (St. Ives)

Medlicott, Sir Frank

Donaldson, Cmdr. C. E. McA.

Howard, John (Test)

Milligan, Rt. Hon. W. R.

Doughty, C. J. A.

Hughes Hallett, Vice-Admiral J.

Molson, Rt. Hon. Hugh

Drayson, G. B.

Moore, Sir Thomas

352

353

Morrison, John (Salisbury)

Rees-Davies, W. R.

Summers, Sir Spencer

Mott-Radclyffe, Sir Charles

Remnant, Hon. P.

Sumner, W. D. M. (Orpington)

Nabarro, G. D. N.

Renton, D. L. M.

Taylor, Sir Charles (Eastbourne)

Nairn, D. L. S.

Ridsdale, J. E.

Taylor, William (Bradford, N.)

Neave, Airey

Rippon, A. G. F.

Teeling, W.

Nicholls, Harmar

Roberts, Sir Peter (Heeley)

Thomas, Leslie (Canterbury)

Nicholson, Godfrey (Farnham)

Robertson, Sir David

Thomas, P. J. M. (Conway)

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

Robinson, Sir Roland (Blackpool, S.)

Thompson, Kenneth (Walton)

Nugent, G. R. H.

Robson Brown, Sir William

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

Oakshott, H. D.

Rodgers, John (Sevenoaks)

Thorneycroft, Rt. Hon. P.

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

Roper, Sir Harold

Thornton- Kemsley, C. N.

Orr, Capt. L. P. S.

Ropner, Col. Sir Leonard

Tiley, A. (Bradford, W.)

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

Russell, R. S.

Turton, Rt. Hon. R. H.

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

Schofield, Lt.-Col. W.

Tweedsmuir, Lady

Osborne, C.

Scott-Miller, Cmdr. R.

Vane, W. M. F.

Page, R, G.

Sharples, R. C.

Vaughan-Morgan, J. K.

Pannell, N. A. (Kirkdale)

Shepherd, William

Vickers, Miss Joan

Partridge, E.

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

Wakefield, Edward (Derbyshire, W.)

Peyton, J. W. W.

Smithers, Peter (Winchester)

Wakefield, Sir Wavell (St. M'lebone)

Pickthorn, K. W. M.

Smyth, Brig. Sir John (Norwood)

Walker-Smith, Rt. Hon. Derek

Pike, Miss Mervyn

Soames, Christopher

Wall, Major Patrick

Pilkington, Capt. R. A.

Spearman, Sir Alexander

Ward, Rt. Hon. G. R. (Worcester)

Pitman, I. J.

Speir, R. M.

Ward, Dame Irene (Tynemouth)

Pitt, Miss E. M.

Spence, H. R. (Aberdeen, W.)

Watkinson, Rt. Hon. Harold

Pott, H. P.

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

Webbe, Sir H.

Powell, J. Enoch

Stanley, Capt. Hon. Richard

Whitelaw, W. S. I.

Price, David (Eastleigh)

Steward, Harold (Stockport, S.)

Williams, Paul (Sunderland, S.)

Price, Henry (Lewisham, W.)

Steward, Sir William (Woolwich, W.)

Williams, R. Dudley (Exeter)

Prior-Palmer, Brig. O. L.

Stoddart-Scott, Col. Sir Malcolm

Wood, Hon. R.

Profumo, J. D.

Storey, S.

Yates, William (The Wrekin)

Ralkes, Sir Victor

Stuart, Rt. Hon. James (Mo ay)

TELLERS FOR THE NOES

Rawlinson, Peter

Studholme, Sir Henry

Mr. Heath and Mr. Wills.

ORDERS OF THE DAY

  HOUSE OF COMMONS MEMBERS' FUND
  Mr. S. P. Viant: I beg to move,
  That one tenth of the sums deducted or set aside in the current year from the salaries of Members of Parliament under section one of the House of Commons Members' Fund Act, 1939, and one tenth of the contribution deter-
  354
  mined by the Treasury for the current year under section one of the House of Commons Members' Fund Act, 1957, be appropriated for the purposes of section four of the House of Commons Members' Fund Act, 1948.
  There is nothing new in this Motion. It is simply formal, and I hope that the House will accept it.
  Mr. James Griffiths: I beg to second the Motion.
  Question put and agreed to.

  ELECTRICITY SUPPLY, TORRIDON
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. E. Wakefield.]
  10.12 p.m.
  Mr. John MacLeod: I welcome this opportunity to raise a matter of some considerable importance to my own constituency, namely, the question of the supply of electricity to a community on the Western seaboard of Ross-shire. I shall try to be as brief as possible, as I hope that we shall be able to elicit something of the policy of the Hydro-Electric Board in relation to these remoter areas.
  Perhaps this is an appropriate time to raise this matter. The area about which I want to speak is Torridon, where the people have been promised a supply of electricity for some considerable time. In fact, over the last six or seven years this has been a rather troublesome question to them. I thought that this was rather an appropriate moment to raise the matter, especially in view of the reply given only yesterday by the Joint Under-Secretary of State for Scotland, who said:
  "My right hon. Friend is at present discussing the adjustment of the Board's plans to meet the Government's proposals on investments, and is not yet in a position to reply."—[OFFICIAL REPORT, 29th October, 1957; Vol. 575, c. 15.]
  That was said in reply to a Question by the hon. Member for Orkney and Shetland (Mr. Grimond) about the plans of the North of Scotland Hydro-Electric Board, and whether they were likely to be affected by the new restrictions on investment. I realise that this matter is to a certain extent involved in the subject of the debates which have been taking place over the last two days.
  Despite that, I believe that the Highlands have a lot of leeway to make up. Though cuts in capital expenditure and investment are announced, essential services in the Highlands, whether roads or electricity, for instance, should not be affected at all, because in the Highlands years of neglect have to be made up. Moreover, we must not forget the obligations of the Hydro-Electric Board under the Act of 1943. Section 2 (1) of the Act,
  356
  concerning the general powers and duties of the Board says:
  "…it shall be the duty of the Board so far as practicable…to meet the demands of ordinary consumers…(including isolated areas)…"
  Subsection (3) of that Section says:
  "The Board shall, so far as their powers and duties permit, collaborate in the carrying out of any measures for the economic development and social improvement of the North of Scotland District or any part thereof."
  That puts a fairly strong obligation upon the Board, and that was legislation passed by this House.
  I have been writing for years about this question of supplying electricity to Torridon. I have written to the officials of the Board at the regional office, and then to the Chairman of the Board, and finally to the Secretary of State for Scotland himself. I hope that the Secretary of State will acknowledge his responsibilities in this sphere. We cannot leave all to the Hydro-Electric Board in the present circumstances, and I hope that the Secretary of State will look very carefully into the matters which I am raising tonight.
  I have in my file here a petition which was drawn up by the people of this area as long as four years ago, in 1953. This is not a case of an isolated house or a farm or anything like that. We are dealing with a whole community. I recently calculated the numbers affected. Over 100 houses are involved, two large lodges, an enterprising boat building industry, a farm, a youth hostel, and four shops. For a remote area in the Highlands, it is quite a community with which we are dealing.
  The galling thing is that they have seen electricity come fairly near, within five miles on either side of them, to Sheildaig to the south and to Gairloch a little farther away to the north. When electricity was brought to the area of Applecross it was announced—by the Chairman of the Hydro-Electric Board, I think—that the supply of electricity would go to the Torridon area. Of course the inhabitants were encouraged by this news and went to some considerable expense in wiring their houses.
  I know of many instances of this and have letters about it. I shall quote only one because I want to be brief. This is a letter from the proprietor of a large lodge.

  357
  I got it just before the Recess. This is what he says:
  "In January, 1955, I wrote to the North of Scotland Hydro-Electric Board saying my battery—"
  he generates his own electricity in the lodge—
  "was showing signs of age and asking their advice as to renewing my battery or waiting for the main. They strongly advised me to wait for the main saying they hoped to commenace construction in autumn, 1955, but that we could not look for a supply at Torridon until late in 1956. They assured me that I should find their terms for a mains supply very reasonable."
  That was rather encouraging to this chap, and, being a legal man, he let everyone know.
  He goes on:
  "During the summer of 1955 the Board's representatives were here with maps…"
  I will not bother to read more, but here is the point that affects him, like so many others. He happened to be doing some plumbing in the house and, to make the thing more economical, he thought, "I will put in the wiring and adapt my house for the mains which the Board has already assured me are coming in, at the latest at the end of 1956." He spent £250 on that adaptation, on switches, and so on. Before doing so, being a sensible man, he thought it reasonable and prudent to find out just what the supply would cost. He therefore asked one of the representatives to assess the house. He was quoted a supply of current and was asked to guarantee £52 per annum. He accepted that and he asked whether the Torridon scheme was still on.
  The Hydro-Electric Board then replied, after acknowledging his letter of acceptance. The Board spoke of the recent financial crisis and said that the scheme was still on, but that completion would be delayed. I ask the Joint Under-Secretary what the delay now will be. This has gone on far too long. It it up to the Board to make a more reassuring indication. The Board has already given assurances, and that is the disturbing point about this matter. The Board has very nearly made a promise, judging from the correspondence that has taken place. Can the Board go on saying that the supply will not now come to the district because costs are rising? We know that every year the cost of these
  358
  things goes up. That is one of the main excuses made by the Board.
  But what happens now is far more serious, and this is a point which has been raised by many hon. Members. Under the appropriate Act, the Board used to bring electricity free to these areas. That was going to happen in the initial stage in Torridon. The supply was to be brought free to the gable ends of the houses, but now the Board is demanding extortionate capital charges from individuals, to such an extent that the demand amounts to a refusal to bring the electricity to the area, because these people cannot possibly afford these extortionate charges.
  Now we have a position in which the Chairman of the Board writes to me—and I have sent his letter to the Secretary of State—asking whether grants could not be given to individuals, as was done in other European countries as he puts it, to have the electricity brought in. I should like to ask the Under-Secretary whether this is a complete change of policy on the part of the Board. The Board expends vast sums of money—millions of pounds—and it is surely very strange if the Board has to call upon the Government to give individual grants to bring electricity to these areas.
  I should like to develop that further, but it would need another debate altogether. I ask the Secretary of State to make an inquiry into this case. It is similar to cases raised by the hon. Member for Orkney and Shetland and my hon. Friend the Member for Caithness and Sutherland (Sir D. Robertson) on previous occasions. After all, the Act of 1943 was introduced to deal with the remote areas, and those are the areas we are trying to develop. We are trying to deal with areas which are becoming depopulated because of the lack of amenities.
  Today, we shall not get housewives to light lamps or to use candles because young people have been away in the Services and have seen the modern appliances in other areas. The lack of amenities is one of the main reasons why they are not staying in the remote areas, yet the Government are spending vast sums of money in various ways to try to keep them there.

  359
  Shieldaig is supplied with electricity and it is only five miles away. I understand that under the distribution scheme for this area mapped out by the Board the supply will come through Kinlochewe. I will not go through all the names, but this is an area where there is only one house. Yet the area around Shieldaig is a little more populated. I think that the Board has slipped up and I would like the Secretary of State of look into this point.
  In bringing the supply of electricity to Shieldaig the Board has used lightweight poles, with only two phases. Surely that was a complete lack of foresight. They ought to have brought heavier poles, so that the distribution could be continued for the short distance of five miles into the Torridon area. I do not expect the Under-Secretary of State to tell me tonight, but I would like him to let me know how much the current has increased in this area since 1952, because there is a great deal more current now available there.
  I know that this would cost about £50,000, but it is not much in comparison with the figures we have heard bandied about in the last two days. It is galling for these people to read that the Hydro-Electric Board proposes a scheme costing £14 million.
  I will not speak longer, because I want to give the Under-Secretary of State time to reply, but one important factor also involved here, apart from the amenities to the local people, is the value of the tourist industry in this area. We have a thriving and developing tourist industry in the Highlands. We have no other industries. In this area we have our marvellous, beautiful scenery which is a raw material that costs nothing. The Tourist Board is doing all it can to encourage visitors and the crofting communities are playing their part in this development. Yet this crofting area is being denied electricity, and that is an important factor if we are to get people to take tourists into their small houses.
  This is not altogether a local matter. For the reasons I have given, and also because of the tourist industry, it is a matter of national importance. I hope, therefore, that the Secretary of State will tell the Board to get on with the job and to start immediately to bring electricity to Torridon.
  10.29 p.m.
  The Joint Under-Secretary of State for Scotland (Mr. Niall Macpherson): First, I want to congratulate my hon. Friend for Ross and Cromarty (Mr. John MacLeod) for raising this matter, because I realise how keenly interested are his constituents in it. I see from those attending the House at this late hour that this is a matter which, although limited to this place in this debate, also has repercussions and implications elsewhere.
  My hon. Friend asked how the supplies are to go, when they are to go and how they are to be paid for, but he began by referring to the position of the Secretary of State for Scotland and hoped that the Secretary of State would acknowledge his responsibilities in this matter. I want to make it clear at the outset that the Secretary of State for Scotland cannot really be expected to answer for the supply of electricity to particular consumers or to a particular area. As my hon. Friend made clear, the Hydro-Electric Development (Scotland) Act, 1943 says that the duty, so far as is practicable, to provide supplies of electricity required to meet the demands of ordinary consumers in the North of Scotland is placed on the Board itself and not on the Secretary of State. That is the Board's responsibility.
  My hon. Friend also spoke of the duty of the Board. I want to draw the attention of the House to the fact that the Board's duty to supply electricity is limited by the words:
  "so far as is practicable."
  I do not think that the Board can be expected to do more than that. It is quite clear that the only judges of what is practicable must be the persons who are actually carrying out the work, that is the Board itself.
  The second main consideration is that the Board has a duty also to secure that its revenues are not less than sufficient to meet its outgoings taking one year with another. That means that in carrying out distribution schemes or any other project the Board must have regard to the financial effect on its undertaking as a whole. It is quite right that this should be so and no one suggests for a moment that it would be a good thing for the Board to conduct its affairs without any regard for the financial consequences.

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  The present moment makes it particularly important for the Board to scrutinise the cost and economics of any scheme whether it is a comparatively small distribution scheme or a large constructional project, because for the last two consecutive years its accounts have shown a loss. At the end of 1956 there was a loss on the year's working of about £165,000 which raised the Board's debit balance to about £612,000.
  The reasons for this are well known. It is partly due to increasing costs, partly due to increasing rates of interest, partly because the Board abstained from raising its tariffs, and, by no means least, because there was a very serious drought in 1955. But the fact is that having regard to its duty to balance its books
  "taking one year with another,"
  the Board has to be careful in taking on further uneconomic work.
  At this point I should consider what is involved in bringing a supply of electricity to Torridon. It is not simply a local matter. The Board first has to complete the Grudie Bridge to Lochalsh interconnector line which is in course of construction. I know that my hon. Friend considers that it might have brought the supply of electricity by other means, but I am bound to say that the Board is the best judge of that.
  From a point near Achnasheen the Board will have to extend a 33 kilo-volt transmission line to Kerry Falls Power Station and at an intermediate point, perhaps near Kinlochewe, the line will have to be tapped for a high voltage extension to Torridon. When that has been done, it will be possible to provide the low voltage distribution mains. Construction work on the Grudie Bridge-Lochalsh interconnector has now reached a point beyond Achnasheen, but it is still necessary to complete this line before any tapping off to Kerry Falls can be made. I am told that it is technically impracticable to supply either from Gairloch or Applecross.
  Mr. MacLeod: Surely if the Board had an estimate of the cost it must have found out what the technical difficulties were.
  Mr. Macpherson: As I said, the Board considers that it is technically impossible
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  to connect either from Gairloch or from Applecross.
  There is no doubt that the supply of electricity to Torridon, as indeed to many other parts of the Board's area, cannot be expected to be economic. The cost is now estimated to be in the neighbourhood of £50,000. I am informed that the potential consumers number about 130, although the number who would take a supply is likely to be less than that. The average cost of supplying each consumer would be £390. The Board would expect the consumer to make a capital contribution to this sum, but even with the capital contribution, which my hon. Friend described as extortionate, the annual revenue from Torridon could not be expected to equal the annual charges the Board would still have to meet—that is, interest and amortisation charges on the remainder of the capital, depreciation, maintenance and the cost of the electricity.
  Unfortunately, the difficulties do not end here. Over the past few years it has been necessary because of the general financial situation of the country for the Government to impose a close limit on the amount of new capital investment. Such a limitation applies, of course, to all nationalised industries, to the Government's own spending and to the expenditure of local authorities too. The statement by the Chancellor of the Exchequer in the debate which has just ended shows that the need to continue these restrictions is still with us, and indeed some re-phasing of existing plans will be needed. I cannot say exactly what will be required. The Board will no doubt adjust its programme in order to fit these requirements, and the method by which it does it is at present under discussion between the Secretary of State and the Board.
  My hon. Friend asked what the delay was likely to be. I am afraid that in these circumstances it is not possible for me to say, and I do not think it would have been possible in any case at this stage to have given him an idea about that.
  This debate brings out the very great difficulty of allocating the sum available for rural distribution. I can well imagine what an invidious task it is for the Board to allocate throughout its district the sum available, which has been running at

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  about £1 million a year. It is one of the most difficult and, I should think, unpleasant tasks the Board has to perform. For one thing, the Board has done so much already that everyone else thinks that their own turn must come now. For another, generally speaking, the Board is left with areas where the practical difficulties of supply are great, and where the supply is bound to be expensive and indeed unremunerative. Yet people are anxious that they should have the amenity of electricity which the Board has brought to so many areas. Torridon is one of these difficult areas. Naturally, the people look to Gairloch in the north and Applecross in the south, both of which places have a supply of electricity. I hope that they will also reflect that the problems of the Board are difficult too, and that it has been meeting them satisfactorily.
  After all, in Ross and Cromarty, the mainland part of which is my hon. Friend's constituency, there were only 5,140 properties receiving a supply when the Board took over less than ten years ago. That was about 25 per cent. of the potential number. Now that figure has risen to about 19,000, which is about 90 per cent. of the potential consumers, an almost four-fold increase. So it cannot be said that the Board has not done a very great deal.
  My hon. Friend has, naturally, stressed the case for supplying his constituents in Torridon, but the difficulties are there also—the high cost, the Board's financial problems and the overall need to keep capital investment within the limits we
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  can afford. These difficulties cannot be brushed aside, but neither do I say that they are insuperable. The Board may not see its way to give a supply now, or in the immediate future, but it is anxious to complete the work it has started. I can assure my hon. Friend that it will keep this matter under review. It keeps under continuous review the needs of all the areas which have not received a supply and, with my hon. Friend, I hope that the Board will be able to satisfy them as soon as the necessary resources are available.
  Mr. J. Grimond: The hon. Gentleman has said that the Secretary of State is discussing with the Board the revising of plans. All over the Highlands there is great anxiety because people have their houses wired and have been told that the supply of electricity will come. May we expect a statement about the various plans which are known to be coming up and, if so, will that be before Christmas?
  Mr. Macpherson: We have to wait until we know what the plans are to be. When that has been reported to my right hon. Friend we can consider how best to make the information available.
  The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned accordingly at eighteen minutes to Eleven o'clock.